UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


x  QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
  For the
quarterly period ended September 30, 2008
  OR
  o  TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the
transition period from _______ to _______




Commission
file number 333-134883





CHINA TEL GROUP,
INC.


(Exact
name of small business issuer as specified in its charter)





Nevada
            98-0489800(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      No.)




8105 Irvine Center Drive,
Suite 800, Irvine, California  92618


(Address
of principal executive offices)




1-949-585-9268


(Issuer’s
telephone number)




N/A


(Former
name, former address and former fiscal year, if changed since last
report)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.xYes  oNo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definitions of “large accelerated filer”, “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.




Large accelerated
      filer   o
            Accelerated
      filer                   
       oNon-accelerated
      filer     o
            Smaller reporting
      company   x




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














APPLICABLE
ONLY TO CORPORATE ISSUERS





Indicate
the number of shares outstanding of each of the issuer’s classes of stock, as of
the latest practicable date:  As of November 5, 2008the registrant had
85,525,595 shares of its Series A common stock outstanding with a par value
of $0.001 and 66,909,088 shares of its Series B common stock outstanding with a
par value of $0.001.




2




CHINA TEL
GROUP, INC.


(A
DEVELOPMENT STAGE COMPANY)


INDEX TO
QUARTERLY REPORT ON FORM 10-Q


FOR THE
QUARTER ENDED SEPTEMBER 30, 2008




PAGEPART
      I.
            FINANCIAL
      INFORMATION
            4Item
      1.
            Financial
      Statements
            4Consolidated
      Balance Sheet as of September 30, 2008 (unaudited)
            4Consolidated
      Statement of Operations for the period
            5ending September 30, 2008
      (unaudited)Consolidated
      Statement of Shareholders’ Deficit for
            6the period ended September 30,
      2008 (unaudited)Consolidated
      Statement of Cash Flows for the period ending
            7September 30, 2008
      (unaudited)Notes
      to Consolidated Financial Statements (unaudited)
            8Item
      2.
            Management’s
      Discussion and Analysis of Plan of Operation
            16Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            21Item
      4.
            Controls
      and Procedures
            21Item
      4(T).
            Controls
      and Procedures
            22Changes
      in Internal Control
            22PART
      II.
            OTHER
      INFORMATION
            22Item
      1.
            Legal
      Proceedings
            22Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            22Item
      3.
            Defaults
      Upon Senior Securities
            22Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            22Item
      5.
            Other
      Information
            23Item
      6.
            Exhibits
            23


3




PART
I – FINANCIAL STATEMENTS




ITEM
1. FINANCIAL
STATEMENTS




CHINA TEL
GROUP, INC.


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
BALANCE SHEET


AS OF
SEPTEMBER 30, 2008


(UNAUDITED)





ASSETSCURRENT
      ASSETSCash
              
              $
              298,317Construction
      in Progress
              
              
              44,012,899Convertible
      note subscription receivable
              
              
              3,314,421Total
      current assets
              
              
              47,625,637Investment
      in Chinacomm Cayman
              
              
              5,000,000Total
      assets
              
              $
              52,625,637LIABILITIES
      AND STOCKHOLDERS’ DEFICITLIABILITIESAccounts
      payable
              
              $
              26,148,817Accrued
      expenses
              
              
              1,209,647Convertible
      notes payable, net of discount of $9,197,662
              
              
              21,231,444Beneficial
      conversion liability
              
              
              63,588,214Total
      current liabilities
              
              
              112,178,122STOCKHOLDERS’
      DEFICITCommon
      stock, $0.001 par value, 500,000,000 sharesauthorized,
      87,545,244 shares issued and outstanding
              
              
              87,545Additional
      Paid-in capital
              
              
              1,439,830Deficit
      accumulated during the development stage
              
              
              (61,079,860
              )Total
      stockholders’ deficit
              
              
              (59,552,485
              )Total
      liabilities and stockholders’ deficit
              
              $
              52,625,637See
      accompanying notes to unaudited financial statements


4


CHINA TEL
GROUP, INC.


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENT OF OPERATIONS


FOR THE
PERIOD FROM INCEPTION (APRIL 4, 2008) TO SEPTEMBER 30, 2008


(UNAUDITED)





For
      the Three
              Months
      Ended
              September
      30, 2008
            
            
            For
      the Period
              from
      Inception
              (April
      4, 2008) to
              September
      30, 2008REVENUESSales
            
            $
            
            
            $OPERATING
      EXPENSESGeneral
      & administrative expense
            
            
            1,943,302
            
            
            
            5,027,872Total
      operating expenses
            
            
            1,943,302
            
            
            
            5,027,872Loss
      from operations
            
            
            (1,943,302
            )
            
            
            (5,027,872
            )OTHER
      EXPENSESBeneficial
      conversion costs
            
            
            398,044
            
            
            
            46,406,344Amortization
      of debt discount
            
            
            8,427,330
            
            
            
            8,427,330Interest
      expense
            
            
            736,264
            
            
            
            1,218.314Total
      other expenses
            
            
            9,561,638
            
            
            
            56,051,988Loss
      before income taxes
            
            
            (11,504,940
            )
            
            
            (61,079,860
            )Income
      taxes
            
            
            -
            
            
            
            -Net
      loss
            
            $
            (11,504,940
            )
            
            $
            (61,079,860
            )Net
      loss per shareBasic
            
            $
            (0.13
            )
            
            $
            (0.82
            )Weighted
      average shares outstandingBasic
            
            
            87,439,040
            
            
            
            74,428,713See
      accompanying notes to unaudited financial statements


5


CHINA TEL
GROUP, INC.


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENT OF SHAREHOLDERS’ DEFICIT


FOR THE
PERIOD FROM INCEPTION (APRIL 4, 2008) TO SEPTEMBER 30, 2008


(UNAUDITED)




Common
      Stock
            
            Additional
            
            Deficit
              Accumulated
              During
            
            TotalNumber
      of
              Shares
            
            Amounts
            
            Paid-In
              Capital
            
            Development
              Stage
            
            Stockholders’
              DeficitBalance
      as of April 4, 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Recapitalization
      after givingeffect
      to cancellation of57,600,000
      shares for thereverse
      acquisition merger
            
            
            86,117,088
            
            $
            86,117
            
            $
            (358,611
            )
            $
            -
            
            $
            (272,494
            )Issuance
      of common stock forconversion
      of note payable
            
            
            1,428,156
            
            
            1,428
            
            
            1,798,441
            
            
            
            
            
            1,799,869Net
      Loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (61,079,860
            )
            
            (61,079,860
            )Balances
      as of September 30, 2008
            
            
            87,545,244
            
            $
            87,545
            
            $
            1,439,830
            
            $
            (61,079,860
            )
            $
            (59,552,485
            )See
      accompanying notes to unaudited financial statements


6


CHINA TEL
GROUP, INC.


(A
DEVELOPMENT STAGE COMPANY)


CONSOLIDATED
STATEMENT OF CASH FLOWS


FOR THE
PERIOD FROM INCEPTION (APRIL 4, 2008) TO SEPTEMBER 30, 2008


(UNAUDITED)





Cash
      Flows from Operating Activities:Net
      Loss
              
              $
              (61,079,860
              )Adjustment
      to reconcile net loss to net cashprovided
      by (used in) operating activities:Beneficial
      conversion costs
              
              
              46,406,344Amortization
      of debt discount
              
              
              8,427,330Changes
      in assets and liabilities, netConstruction
      in progress
              
              
              (44,012,899
              )Accounts
      payable
              
              
              26,148,817Accrued
      expenses
              
              
              1,209,647Net
      cash used in operating activities
              
              
              (22,900,621
              )Cash
      Flows from Investing Activities:Investments
      in Chinacomm Cayman
              
              
              (5,000,000
              )Net
      cash used in investing activities
              
              
              (5,000,000
              )Cash
      Flows from Financing Activities:Proceeds
      from issuance of convertible notes payable
              
              
              28,198,938Net
      cash provided by financing activities
              
              
              28,198,938Net
      (decrease) increase in cash and cash equivalents
              
              
              298,317Cash
      and cash equivalents, beginning of periodCash
      and cash equivalents, end of period
              
              $
              298,317Supplemental
      disclosure of cash flow information:Income
      taxes paid
              
              
              -Interest
      paid
              
              
              -Supplemental
      disclosure of noncash financing and investing activities:Issuance
      of common stock for conversion of notes payable
              
              $
              1,356,746Convertible
      notes subscription receivable
              
              $
              3,314,421See
      accompanying notes to unaudited financial statements


7


CHINA TEL
GROUP, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


FOR THE
PERIOD ENDED SEPTEMBER 30, 2008


(UNAUDITED)





1. NATURE OF
OPERATIONS




China Tel
Group Inc. (the “Company”) was incorporated under the laws of the State of
Nevada on September 19, 2005 under its former name, Mortlock Ventures Inc., for
the purpose of acquiring and developing mineral properties.  No
minerals were discovered on the properties.  During the quarter ended
March 31, 2008, China Tel changed its business and commenced concentrating on
the telecommunication industry.  On April 8, 2008, the Company changed
its name to China Tel Group Inc.




On May
21, 2008, the Company, Chinacomm Acquisition, Inc., a California corporation and
wholly-owned subsidiary of the Company (“the Acquisition Subsidiary”), Trussnet
USA, Inc., a Nevada corporation (“Trussnet”), and the stockholders of Trussnet
(the “Trussnet Stockholders”) entered into an agreement for the business
reorganization of Trussnet and the Acquisition Subsidiary wherein all of the
issued and outstanding shares of common stock of Trussnet were delivered to the
Acquisition Subsidiary in exchange for shares of the Company’s Series A and
Series B Common Stock.  The Acquisition Subsidiary and Trussnet
conducted a short-form merger under the laws of the State of Nevada with
Trussnet being the surviving corporation and a wholly-owned subsidiary of the
Company (the “Reorganization and Merger Agreement”).  Pursuant to the
Reorganization and Merger Agreement, the Company caused certain persons to
return to the Company for cancellation, stock certificates representing an
aggregate of 57,600,000 restricted shares of the currently issued and
outstanding shares of the Company’s common stock.  These shares were
then cancelled.




Pursuant
to the Reorganization and Merger Agreement, the Trussnet Stockholders acquired a
controlling interest in the Company. More specifically, the Trussnet
Stockholders received 66,909,088 shares of the Company’s Series A Common Stock
resulting in an approximate 77.7% interest in the Company’s total issued and
outstanding shares of Series A Common Stock.  The Trussnet
Stockholders also received 66,909,088 shares of the Company’s Series B Common
Stock.  The Company’s Series B Common Stock is a newly authorized
series of common stock with each share having the right to cast ten (10) votes
for each action for which the stockholders have a right to vote and which is
non-transferable and shall be redeemed by the Company on May 23, 2023 at a
par value of $0.0001 per share.




Trussnet
was formed in April 2008 to pursue investment opportunities in the wireless
telecommunication industry in the People’s Republic of China
(“PRC”).  Trussnet had no operations prior to entering into the
Reorganization and Merger Agreement. Pursuant to a Framework Agreement dated
April 7, 2008 with CECT-Chinacomm Communications Co, Ltd., a PRC company
(“Chinacomm”), Trussnet has the contractual right to acquire a forty-nine
percent (49%) interest in ChinaComm, Ltd., a Cayman Island corporation
(“ChinaComm Cayman”), an operating affiliate of Chinacomm, for $196,000,000
through its wholly owned subsidiary, Gulfstream Capital Ltd., a Republic of
Seychelles company (“Gulfstream”). Chinacomm intends to build and operate a 3.5G
Hz Wireless broadband system in up to twenty-nine (29) cities in the
PRC.




The
Reorganization and Merger Agreement has been accounted for as a reverse
acquisition whereby Trussnet is deemed the accounting acquirer and the Company
merely the legal acquirer.  Accordingly, the consolidated financial
statements presented are that of Trussnet as of its date of inception (April 4,
2008).




8




The
Company authorized the issuance 200,000,000 shares of Series B Common Stock,
with each share having the right to cast ten (10) votes for each stockholder
action.  These shares are non-transferable and can be redeemed by the
Company on May 23, 2023 at par value.




In
addition, the Company authorized for issuance 25,000,000 shares of Preferred
Stock with rights and preferences to be determined by the Company’s board of
directors.




In
connection with the Reorganization and Merger Agreement, the Company adopted the
accounting acquirer's year end of December 31st pursuant to SEC
rules.




2. BASIS OF PRESENTATION AND
GOING CONCERN




The
unaudited financial statements included herein have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information and with the rules and regulations promulgated by the
Securities and Exchange Commission (‘SEC”).  They do not include all
information and notes required by generally accepted accounting principles for
complete financial statements.  In the opinion of management, all
adjustments (including normal recurring accruals) considered necessary for a
fair presentation have been included.  Operating results for the
period ended September 30, 2008 are not necessarily indicative of the results
that may be expected for any other interim period or the entire
year.




These
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern, which
assumes that the Company will be able to meet its obligations and continue its
operations for the next twelve months.  Realization values may be
substantially different from carrying values as shown and these consolidated
financial statements do not give effect to adjustments that would be necessary
to the carrying values and classification of assets and liabilities should the
Company be unable to continue as a going concern.  At September 30,
2008, the Company has not yet achieved profitable operations, has total
accumulated losses of $61,079,860 since its inception.  The Company
has negative working capital of $64,552,485 and expects to incur further losses
in the development of its business, all of which casts substantial doubt about
the Company's ability to continue as a going concern.  The Company’s
ability to continue as a going concern is dependent upon its ability to generate
future profitable operations and/or to obtain the necessary financing to meet
its obligations and repay its liabilities arising from normal business
operations when they come due.




Since its
inception, the Company has funded operations through short-term borrowings and
equity investments in order to meet its strategic objectives.  The
Company’s future operations are dependent upon external funding and its ability
to execute its business plan under the Framework Agreement with Chinacomm,
complete its contemplated transaction with Runcom Technologies, Inc., and
realize sales and control expenses.  Accordingly, there can be no
assurance that the Company will be able to obtain sufficient funds to continue
the development of its business operations.




3. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES




a.           Development Stage
Company.




The
Company is currently a development stage company as defined in Statement of
Financial Accounting Standards No. 7, “Accounting and Reporting by Development
Stage Enterprises”.   The Company is devoting substantially all
of its present efforts to complete its acquisition of 49% interest in Chinacomm
to obtain spectrum licenses within the PRC and build and operate a broadband
wireless system in twenty-nine (29) cities within the PRC.




9




b.           Loss Per
Share.




In
accordance with SFAS No. 128, “Earnings Per Share”, basic loss per common share
is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding.  Diluted loss
per common share is computed similar to basic loss per common share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive.  As of September
30, 2008, the Company had approximately 33,000,000 shares of common stock
related to its issuance of debt instruments that could be converted. Diluted
loss per share is not presented because it is anti-dilutive.




c.           Use of
Estimates.




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions 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 reported periods.  Actual results could materially differ
from those estimates.




d.           Income
Taxes.




The
Company accounts for income taxes under SFAS 109, “Accounting for Income
Taxes”.  Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.  Under
SFAS 109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period the enactment occurs.  The
components of the deferred tax assets and liabilities are individually
classified as current and non-current based on their
characteristics.  A valuation allowance is provided for certain
deferred tax assets if it is more likely than not that the Company will not
realize tax assets through future operations.




e.           Convertible
Instruments.




When the
Company issues convertible debt with detachable instruments, it allocates the
proceeds received on a relative fair value basis pursuant to EITF Issue No.
98-5, "Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios".  Then, it applied the
amount allocated to the convertible instrument, and an effective conversion
price is calculated and used to measure the intrinsic value, if any, of the
embedded conversion option.  The intrinsic value of the embedded
conversion option and the relative fair value of the detachable instruments are
recorded as discounts to the convertible debt and amortized over the term of the
debt.




When the
Company issues convertible debt with non-detachable instruments, the intrinsic
value of the conversion option is computed based on a comparison of the proceeds
of the convertible instrument allocated to the common stock portion of the
conversion option and the fair value at the commitment date of the common stock
to be received by the holder upon conversion pursuant to EITF Issue No. 0027,
"Application of Issue No. 98-5 to Certain Convertible
Instruments".  The excess of the fair value of the common stock at the
commitment date over proceeds is the intrinsic value of the embedded conversion
option that is recognized by China Tel at the issuance date for the convertible
debt.  The intrinsic value of the embedded conversion option is
recorded as a beneficial conversion feature to the convertible debt and
amortized over the term of the debt.




10




f.           Comprehensive
Income.




The
Company applies Statement of Financial Accounting Standards No. 130, “Reporting
Comprehensive Income” (SFAS 130).  SFAS 130 establishes standards for
the reporting and display of comprehensive income or loss, requiring its
components to be reported in a financial statement that is displayed with the
same prominence as other financial statements.  For the period ended
September 30, 2008, the Company had no other components of comprehensive loss
other than the net loss as reported on the statement of operations.




g.           Cash
Equivalents.




For
purposes of the balance sheet and statement of cash flows, the Company considers
all highly liquid instruments purchased with maturity of three months or less to
be cash equivalents.




h.           Fair Value of Financial
Instruments.




Pursuant
to Statement of Financial Accounting Standards (SFAS) No. 107, “Disclosures
About Fair Value of Financial Instruments”, the Company is required to estimate
the fair value of all financial instruments included on its balance
sheet.  The carrying value of cash and equivalents prepaid expense,
accounts payable and accrued expenses approximate their fair value due to the
short period to maturity of these instruments.




i.           Impairment of Long-Lived
Assets.




In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” (SFAS 144), the Company estimates the future undiscounted
cash flows to be derived from the asset to assess whether or not a potential
impairment exists when events or circumstances indicate the carrying value of a
long-lived asset may be impaired.  If the carrying value exceeds the
Company’s estimate of future undiscounted cash flows, the Company then
calculates the impairment as the excess of the carrying value of the asset over
the Company’s estimate of its fair value.




j.           Recent Accounting
Pronouncements.




SFAS No.
159 – In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), The Fair
Value Option for Financial Assets and Financial Liabilities – including an
amendment of SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities, which applies to all entities with available-for sale and trading
securities.  This Statement permits entities to choose to measure many
financial instruments and certain other items at fair value.  The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions.  This Statement is effective as of the
beginning of an entity’s first fiscal year that begins after November 15,
2007.  Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements.  We plan to adopt SFAS 159 effective June 1,
2008.  We are in the process of determining the effect, if any; the
adoption of SFAS 159 will have on our financial statements.  The
Company’s adoption of SFAS 159 did not have a material effect on the
consolidated financial statements.




11




SFAS No.
141 (revised 2007) – In December 2007, the FASB issued Statement No. 141
(revised 2007), Business Combinations. This statement replaces FASB Statement
No. 141 Business Combinations.  The objective of this Statement
is to improve the relevance, representational faithfulness, and comparability of
the information that a reporting entity provides in its financial reports about
a business combination and its effects.  To accomplish that, this
Statement establishes principles and requirements for how the acquirer: 1)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquire, 2) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase, and 3) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The Company is currently
assessing the potential effect of SFAS 141 (revised 2007) on its financial
statements.




SFAS No.
160 – In December 2007, the FASB issued Statement No. 160, Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No. 51. The
objective of this Statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require 1) the ownership interests in subsidiaries held by
parties other than the parent be clearly identified, labeled, and presented in
the consolidated statement of financial position within equity, but separate
from the parent’s equity, 2) the amount of consolidated net income attributable
to the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, 3) changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, 4) when a subsidiary
is deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, and 5) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  The Company is
currently assessing the potential effect of SFAS 160 on its financial
statements.




SFAS No.
161 - In March 2008, the FASB issued Statement No. 161, “Disclosures about
Derivative Instruments and Hedging Activities—an amendment of FASB Statement No.
133.” This Statement changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows.




This
Statement is intended to enhance the current disclosure framework in Statement
133.  The Statement requires that objectives for using derivative
instruments be disclosed in terms of underlying risk and accounting
designation.  This disclosure better conveys the purpose of derivative
use in terms of the risks that the entity is intending to manage. Disclosing the
fair values of derivative instruments and their gains and losses in a tabular
format should provide a more complete picture of the location in an entity’s
financial statements of both the derivative positions existing at period end and
the effect of using derivatives during the reporting
period.  Disclosing information about credit-risk-related contingent
features should provide information on the potential effect on an entity’s
liquidity from using derivatives.




12




SFAS No.
162 - In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles (“SFAS No. 162”). SFAS 162 identifies a
consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements that are presented in conformity with
U.S. generally accepted accounting principles for nongovernmental entities (the
“Hierarchy”).  The Hierarchy within SFAS 162 is consistent with that
previously defined in the AICPA Statement on Auditing Standards No. 69, “The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles” (“SAS 69”). SFAS 162 is effective 60 days following the United
States Securities and Exchange Commission’s (the “SEC”) approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles”. The
adoption of SFAS 162 will not have a material effect on the Consolidated
Financial Statements because the Company has utilized the guidance within SAS
69.




SFAS No.
163 - In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial
Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60 (“SFAS
No. 163”). SFAS 163 requires recognition of an insurance claim liability prior
to an event of default when there is evidence that credit deterioration has
occurred in an insured financial obligation. SFAS 163 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and all
interim periods within those fiscal years. Early application is not permitted.
The Company’s adoption of SFAS 163 will not have a material effect on the
Consolidated Financial Statements




4. CONSTRUCTION IN
PROGRESS




On April
7, 2008, the Company entered into the Framework Agreement with Chinacomm whereby
the Company will provide professional services and equipment related to the
engineering, architectural design, build-out, and project management of 3.5GHz
broadband wireless network in the PRC. As of September 30, 2008, the amount of
costs incurred by the Company under the agreement was approximately
$44,000,000.




5. INVESTMENT IN
CHINACOMM




On April
7, 2008, the Company entered into the Framework Agreement whereby the Company,
through its subsidiary Gulfstream, will acquire a 49% interest in ChinaComm
Cayman for $196,000,000.  As of September 30, 2008, and pursuant to
the payment terms of the Framework Agreement, the Company had paid
$5,000,000.




6. REORGANIZATION AND
MERGER




On May
21, 2008, the Company entered into a reorganization and merger agreement with
Trussnet to acquire 100% of the outstanding common stock of Trussnet in exchange
for 66,909,088 shares of the Company’s Series A and Series B Common Stock. Due
to the previous status as a shell company, our merger with Trussnet was recorded
as a capital transaction.




7. CONVERTIBLE
NOTES




Pursuant
to an offering of convertible notes due December 31, 2008 in the aggregate
principal amount of up to $45 million dated February 12, 2008 as amended, the
Company has accepted, as of September 30, 2008, a total of approximately
$32,000,000 in subscriptions, of which approximately $28,000,000 was received as
of that date.  As of September 30, 2008, the Company had approximately
$3,000,000 of funds held by its broker.  The convertible notes bear
interest at 10%, and can be converted, together with accrued interest, into
shares of common stock of the Company at $0.95 per share pursuant to the note
agreement.  During the period ended September 30, 2008, approximately
$1,360,000 of the outstanding notes were converted for 1,428,156 shares of the
Company’s common stock.




Under
this offering, the Company has paid a commission equal to 6% of the principal
amount of the notes.




13




8. COMMON
STOCK




Pursuant
to the Reorganization and Merger Agreement, the Company canceled 57,600,000
restricted shares of its common stock and was recapitalized through the issuance
of 66,909,088 shares of its Series A and Series B common stock.




During
the period ended September 30, 2008, the Company issued 1,428,156 shares of its
Series A common stock related to the conversion of approximately $1,360,000 in
outstanding convertible notes.




9. RELATED PARTY
TRANSACTIONS




During
the period ended September 30, 2008, two of the Company directors returned
57,600,000 shares of common stock for cancellation pursuant the Reorganization
and Merger Agreement.




10. PROVISION FOR INCOME
TAXES




Deferred
income taxes are reported using the liability method. Deferred tax assets are
recognized for deductible temporary differences and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.




As of
September 30, 2008, the Company had federal net operating loss carryforwards of
approximately $5,000,000, which can be used to offset future federal income
tax.  The federal net operating loss carryforwards expire at various
dates through 2028. Deferred tax assets resulting from the net operating losses
are reduced by a valuation allowance, when, in the opinion of management,
utilization is not reasonably assured.




A summary
of deferred tax assets as of September 30, 2008 is as follows:




Net
      operating loss carryforward
              
              $
              5,000,000Effective
      tax rate
              
              
              34%Deferred
      tax asset
              
              
              1,700,000Valuation
      allowance
              
              
              (1,700,000
              )-Net
      deferred tax asset
              
              $
              -





14




11. COMMITMENTS




On
February 28, 2008, the Company entered into a one year contract for investor
relations services requiring the payment of $7,500 per month expiring on January
31, 2009.  This commitment can be terminated by either party with 90
days' written notice.  This contract was terminated during the period
ended September 30, 2008.




On March
28, 2008, the Company entered into an agreement for financial advisory and
placement agent services for a proposed offering to be determined of up to
$100,000,000.  Pursuant to the agreement, the Company paid $30,000 as
a retainer and advance during the period ended September 30, 2008.  In
connection with a future proposed offering, the advisory firm would be entitled
to 250,000 shares of the Company’s common stock, a cash fee of 1% of the gross
proceeds received by the Company, a commission of 6% of the gross proceeds and
warrants, exercisable at $2.50 per share, equal to 1% of the shares
sold.




Pursuant
to the Framework Agreement on April 7, 2008 with Chinacomm for the engineering
and design services related to the build out and operation of a wireless
broadband system in the PRC, the Company has an outstanding commitment in the
amount of $191,000,000.




12. SUBSEQUENT
EVENTS




The
Company entered into a Termination and Mutual Release Agreement with ASSAC
effective as of October 31, 2008 for the termination of the Amended and Restated
Stock Purchase Agreement dated August 6, 2008.  The termination
agreement executed by the Company and ASSAC includes a mutual release between
the parties and states that neither party shall be further obligated under the
terms of the Amended and Restated Stock Purchase Agreement and/or the Merger
Agreement.  There is no further expectation on the part of either
Party that the other Party shall perform under the terms of the Amended and
Restated Stock Purchase Agreement and/or the Merger Agreement.




The
Company entered into a Strategic Frame Agreement (the Agreement) on October 6,
2008 with Runcom Technologies, Inc. (Runcom). Runcom shall invest One Hundred
Million Dollars (USD $100,000,000) in the Company in exchange for approximately
a 28% interest in the Company Series A Common Stock on a fully diluted basis
(approximately $2.25 per share of Series A Common Stock).  Runcom
shall be the lead WiMax equipment vendor for the Company’s worldwide deployment
of WiMax technology, including the operations in the People’s Republic of
China.  Runcom will provide 50% of its investment (USD $50,000,000) on
or before November 25, 2008 and the balance within 90 days of the execution of a
definitive stock purchase agreement that is currently being
negotiated.  Up to 50% of Runcom’s investment into the Company may be
in the form of convertible debentures, the exact terms and form are the subject
of discussion between the two parties.  The balance of the investment
is in exchange for shares of the Company’s Series A common stock.




15




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


Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.




FORWARD-LOOKING
STATEMENTS




This
following information specifies certain forward-looking statements of management
of the company. Forward-looking statements are statements that estimate the
happening of future events and are not based on historical fact. Forward-looking
statements may be identified by the use of forward-looking terminology, such as
“may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”,
“probable”, “possible”, “should”, “continue”, or similar terms, variations of
those terms or the negative of those terms. The forward-looking statements
specified in the following information have been compiled by our management on
the basis of assumptions made by management and considered by management to be
reasonable. Our future operating results, however, are impossible to predict and
no representation, guaranty, or warranty is to be inferred from those
forward-looking statements.




The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. We cannot guaranty that
any of the assumptions relating to the forward-looking statements specified in
the following information are accurate, and we assume no obligation to update
any such forward-looking statements.




OVERVIEW AND PLAN OF
OPERATIONS




Our
efforts are principally focused on our Strategic Frame Agreement with Runcom
Technologies, Inc. (“Runcom”), as further detailed below.  This
agreement will allow us to fulfill our Framework Agreement with Chinacomm
Communications Co, Ltd. (“Chinacomm”) that we entered into during the period
ended September 30, 2008.  The contracts under our Framework Agreement
call for us to engineer, install and operate a next generation wireless Internet
access network to bring high-speed wireless broadband services to mainland
Chinese residents, business and government agencies.  Specifically, we
are expected to serve as exclusive contractor for the operation of a 3.5 GHz
world-wide interoperability for microwave access (“WiMAX”) and Mesh Wi-Fi
broadband network in 29 major cities throughout the People’s Republic of China
(the “WiMAX Installations”).  The consummation of our Agreement with
Runcom will allow us to finance the installation and operation of the WiMax
Installations.




PENDING STRATEGIC
TRANSACTION




On
October 6, 2008, we entered into a Strategic Frame Agreement with Runcom. The
agreement sets forth the terms and conditions to which Runcom will design,
manufacture and sell product to us and under which we will exclusively purchase
such products in a way that Runcom will be the lead hardware vendor for our
deployment of networks worldwide, including the twenty-nine cities in the
Peoples Republic of China as part of our Framework Agreement with
Chinacomm.




Under the
terms of the agreement, Runcom will invest a total of One Hundred Million
Dollars (USD $100,000,000) into the Company as a strategic investment in
consideration of the receipt of approximately 28% of the Company's issued and
outstanding Series A common stock on a fully diluted basis according to the
terms to be mutually agreed upon under a Stock Purchase Agreement. The
investment amount will be paid in two equal payments; the first fifty percent
(50%) is anticipated to occur within a period of ninety days of the effective
date and the remaining fifty (50%) is anticipated to occur within a period of
six months. Runcom has the option to invest up to fifty percent of each of the
payments of the investment amount in the form of convertible debentures in terms
to be specified in the stock purchase agreement.




16




On
November 3, 2008 we entered into an agreement for the termination of the Amended
and Restated Stock Purchase Agreement with Asia Specific Situation Acquisition
Corp. (ASSAC). The termination agreement executed includes a mutual general
release between both parties.




CRITICAL ACCOUNTING
POLICIES AND ESTIMATES




Our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations section discusses our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. On an on-going basis, management evaluates its estimates
and judgments, including those related to revenue recognition, accrued expenses,
financing operations, and contingencies and litigation. Management bases its
estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. The most
significant accounting estimates inherent in the preparation of our consolidated
financial statements include estimates as to the appropriate carrying value of
certain assets and liabilities which are not readily apparent from other
sources.




These
accounting policies are described at relevant sections in this discussion and
analysis and in the notes to the consolidated financial statements included
herein for the period ended September 30, 2008.




DEVELOPMENT STAGE
COMPANY




We are
currently in the development stage company as defined in Statement of Financial
Accounting Standards No. 7, “Accounting and Reporting by Development Stage
Enterprises”.   The Company is devoting substantially all of its
present efforts to complete its acquisition of 49% interest in Chinacomm Cayman,
an operating affiliate of Chinacomm, to obtain spectrum licenses within the PRC
and build and operate a broadband wireless system in twenty-nine (29) cities
within the PRC.




LOSS PER
SHARE




In
accordance with SFAS No. 128, “Earnings Per Share”, basic loss per common share
is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding.  Diluted loss
per common share is computed similar to basic loss per common share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive.  As of September
30, 2008, we had approximately 32,000,000 shares of common stock related to its
issuance of debt instruments that could be converted. Diluted loss per share is
not presented because it is anti-dilutive.




CONVERTIBLE
INSTRUMENTS




When we
issue convertible debt with detachable instruments, it allocates the proceeds
received on a relative fair value basis pursuant to EITF Issue No. 98-5,
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios".  Then, it applied the
amount allocated to the convertible instrument, and an effective conversion
price is calculated and used to measure the intrinsic value, if any, of the
embedded conversion option.  The intrinsic value of the embedded
conversion option and the relative fair value of the detachable instruments are
recorded as discounts to the convertible debt and amortized over the term of the
debt.




17




When we
issue convertible debt with non-detachable instruments, the intrinsic value of
the conversion option is computed based on a comparison of the proceeds of the
convertible instrument allocated to the common stock portion of the conversion
option and the fair value at the commitment date of the common stock to be
received by the holder upon conversion pursuant to EITF Issue No. 0027,
"Application of Issue No. 98-5 to Certain Convertible
Instruments".  The excess of the fair value of the common stock at the
commitment date over proceeds is the intrinsic value of the embedded conversion
option that is recognized by us at the issuance date for the convertible
debt.  The intrinsic value of the embedded conversion option is
recorded as a beneficial conversion feature to the convertible debt and
amortized over the term of the debt.




GOODWILL AND IDENTIFIABLE
INTANGIBLE ASSETS




Goodwill
consists of the excess of the purchase price over the fair value of net assets
acquired in purchase business combinations. At September 30, 2008, all goodwill
is related to the Reorganization and Merger Agreement with
Trussnet.  In accordance with SFAS No. 142, “Goodwill and Other
Intangible Assets”, goodwill and intangible assets with indefinite lives are not
amortized but instead are measured for impairment at least annually in the
fourth quarter, or when events indicate that an impairment exists.  As
required by SFAS 142, in the impairment tests for indefinite-lived intangible
assets, the Company compares the estimated fair value of the indefinite-lived
intangible assets, using a combination of discounted cash flow analysis and
market value comparisons.  If the carrying value exceeds the estimate
of fair value, we calculate the impairment as the excess of the carrying value
over the estimate of fair value and accordingly, records the loss.




Intangible
assets that are determined to have definite lives are amortized over their
useful lives and are measured for impairment only when events or circumstances
indicate the carrying value may be impaired in accordance with SFAS 144
discussed below.




IMPAIRMENT OF LONG-LIVED
ASSETS




In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” (SFAS 144), we estimate the future undiscounted cash flows to
be derived from the asset to assess whether or not a potential impairment exists
when events or circumstances indicate the carrying value of a long-lived asset
may be impaired.  If the carrying value exceeds our estimate of future
undiscounted cash flows, we then calculate the impairment as the excess of the
carrying value of the asset over our estimate of its fair value.




The
following discussion and analysis summarizes the significant factors affecting
our consolidated results of operations, financial conditions and liquidity
position for the period from inception (April 4, 2008) to September 30, 2008 and
should be read in conjunction with our consolidated financial statements and
related notes included elsewhere in this filing.




18




LIQUIDITY AND CAPITAL
RESOURCES




As of
September 30, 2008, we had cash of $298,317, construction in progress of
$44,012,899 and $3,314,421 of funds to be transferred related to our issuance on
convertible notes.  All of which represent our total current assets of
$52,625,637.




From
inception (April 4, 2008) through September 30, 2008, we raised approximately
$32,000,000, including the $3,300,000 of funds to be transferred, related to our
offering of our convertible notes.  This offering has recently been
increased to $45,000,000.




We have
utilized approximately $18,000,000 to fund advances for a major portion of our
vendors and suppliers related to our construction in progress and administrative
expenses, approximately $3,000,000 related to commissions on our convertible
notes, and $5,000,000 for our initial investment on the design and development
of the Chinese WiMax system.




We are
currently focused on closing the transaction agreement with Runcom dated October
6, 2008. Upon the consummation of the agreement Runcom will invest $100,000,000
at a price of $2.25 per share. We expect the cash proceeds from this investment
to be used primarily to consummate the agreement with ChinaComm.




Prior to
the consummation of the sale of stock transaction, we are seeking additional
debt financing. The convertible notes have been amended to increase the
aggregate principal amount to $45 million. Any additional debt financing would
increase our future financial commitments, while additional equity financing
would be dilutive to our stockholders. This additional financing may not be
available to us on favorable terms or at all. Our ability to obtain such
additional financing depends on several factors, including market conditions and
our future creditworthiness.




SOURCES AND USES OF
CASH




The
following table presents a summary of our sources and uses of cash for the
period from inception (April 4, 2008) to September 30, 2008:




Net
      cash used in operating activities:
              
              $
              (22,900,621
              )Net
      cash used in investing activities
              
              
              (5,000,000
              )Net
      cash provided by financing activities
              
              
              28,198,938Net
      cash flows
              
              $
              298,317




OPERATING
ACTIVITIES




The
increase in cash used is due to the funding of services provided for the benefit
of the deployment of Chinacomm’s WiMax system in China and the payment of
commissions on the convertible notes.




INVESTING
ACTIVITIES




Net cash
used is attributable to our initial payment of $5 million to Chinacomm as
required in the agreement  as the exclusive general contractor to
design, develop, engineer, install, and operate all of the equipment and
infrastructure constitution ChinaComm’s WiMAX Installations in 29 cities in
China.




19




FINANCING
ACTIVITIES




Net cash
provided by financing activities was due to net cash proceeds from the issuance
of convertible notes. The notes mature on December 31, 2008 and have an interest
rate of 10% per annum.




Results of Operations for
the period from inception (April 4, 2008) through June 30,
2008.




Revenues.  We
began our business within the last several months.  As such, we have
had no revenues since inception on April 4, 2008 through September 30,
2008.  We expect to generate significant revenues as we continue our
operations to effectuate our business plan for the design, development,
installation and operation of a 3.5 GHz wireless broadband network in
China.




Operating
Expenses.  For the period from inception (April 4, 2008)
through September 30, 2008 we had operating expenses of approximately
$61,000,000. These expenses were attributable to general and administrative
expenses of approximately $5,000,000, beneficial conversion costs related to our
debt of approximately $46,400,000, amortization of debt discount of
approximately $8,400,000, and interest expense accrued on our debt of
approximately $1,200,000.  These increases are further detailed as
follows:




General and Administrative
Expenses.  The $5,000,000 in general and administrative
expenses is due to the $3,000,000 in financing costs paid to various investment
advisors for the amounts raised on our convertible debt offering and $2,000,000
for operating expenses.




Beneficial Conversion
Costs.  The $46,000,000 in beneficial conversion costs is
attributable to the excess of the conversion price over the quoted stock price
pursuant to EITF 00-27.  These costs relate to an offering of
convertible notes due December 31, 2008 in the aggregate  principal
amount of up to $45 million dated February 12, 2008, as amended.  The
Company has accepted, as of September 30, 2008, a total of approximately
$32,000,000 in subscriptions.  The convertible notes bear interest at
10%, and can be converted, together with accrued interest, into shares of common
stock of the Company at $0.95 per share pursuant to the note
agreement.  During the period ended September 30, 2008,
approximately $1,360,000 of the outstanding notes were converted for 1,428,156
shares of the Company’s Series A common stock.




As of
September 30, 2008, the Company recorded a beneficial conversion liability in
the amount of approximately $64,000000 related to the excess of the conversion
price of notes over the Company’s quoted stock price, resulting in a beneficial
conversion cost of approximately $46,000,000 and an amortization of debt
discount of approximately $8,400,000.




Interest
expense.  The $1,200,000 in interest expense is related to the
accrued interest portion of the 10% convertible notes from their respective
dates of issuance.




Net
Loss.  For the period from inception (April 4, 2008) through
September 30, 2008, our net loss from continuing operations was
$61,000,000.  We expect to continue to incur net losses for the
foreseeable future related to the design, development, installation and
operation of the WiMax installations and until we generate significant revenues
from the system.




Our Plan of Operation for
the Next Twelve Months.  To effectuate our business plan and
continue operations during the next twelve months, we need to raise additional
funds.  We are anticipating additional debt and equity financing of
$200,000,000. Upon consummation of our pending strategic frame agreement with
Runcom Technologies, Inc. that will provide $100,000,000, this along with an
additional $100,000,000 note from Chinacomm will allow us to acquire a 49%
interest in Chinacomm Cayman, an operating affiliate of Chinacomm and fulfill
the contract requirements under our Framework Agreement with Chinacomm. During
the six months, our primary objective is to secure the applicable financing
necessary to acquire the 49% interest in Chinacomm Cayman for $196,000,000 and
to continue our design, development and construction services for the WiMax
system.  Chinacomm currently holds spectrum licenses for a 3.5GHz
broadband network from the Chinese government.  These licenses are due
to be renewed in December 2008 for another 3 year period.




20




During
the next six to twelve months, once the licenses are renewed, we need to
continue to build-out the broadband network and WiMax Installations through our
agreements with Chinacomm and its other affiliates.  If we are not
able to generate additional financing and revenues that cover our estimated
operating costs, our business may ultimately fail.




We have
cash of $298,317 as of September 30, 2008. In the opinion of management,
available funds will not satisfy our working capital requirements for the next
twelve months. Our forecast for the period for which our financial resources
will be adequate to support our operations involves risks and uncertainties and
actual results could fail as a result of a number of factors.  We
intend to pursue capital through public or private financing as well as
borrowings and other sources as previously detailed.




We are
not currently conducting any research and development activities. We do not
anticipate that we will purchase or sell any significant equipment other than
what may be required for the WiMax installation build-out. In the event that we
generate significant revenues and expand our operations, then we may need to
hire additional employees or independent contractors.




ITEM
3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




Market
risk is the potential loss arising from adverse changes in market rates and
prices, such as interest rates and changes in the market value of
investments.




INTEREST RATE
RISK




Our
primary interest rate risk is associated with the additional convertible debt
financing we are seeking.  The current rate of interest being offered
is 10%.  Should interest rates increase significantly, there may be a
need to increase in the interest stated on the convertible debt.




ITEM
4. CONTROLS
AND PROCEDURES.




EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES.


Based on
our evaluation as of September 30, 2008, our Chief Executive Officer and Chief
Financial Officer, have concluded that our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and
Exchange Act of 1934, as amended) were effective to ensure that the information
required to be disclosed by us in this quarterly report on Form 10-QSB was
recorded, processed and summarized within the time periods specified in the
SEC’s rules and regulations, and were also effective to ensure that information
required to be disclosed by us in this quarterly report on Form 10-QSB was
accumulated and communicated to our management, including the Chief Executive
Officer, and Chief Financial Officer, to allow timely decisions regarding
required disclosures.




Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
controls over financial reporting will prevent all errors and
fraud.  A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
controls must be considered relative to their costs.  Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, will be detected.




21




ITEM
4(T). CONTROLS
AND PROCEDURES.




CHANGES
IN INTERNAL CONTROLS.


There are
no changes in our internal control over financial reporting that occurred during
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.




PART
II – OTHER INFORMATION




ITEM
1. LEGAL
PROCEEDINGS.




None.





ITEM
1A.         RISK FACTORS




Smaller
reporting companies are not required to provide the information required by this
item.





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




On
February 12, 2008, the Company commenced an offering, as amended, of up to $45
million of convertible promissory notes (“Notes”), with a conversion price at
$0.95 per share.  The Notes have a maturity date of December 31, 2008,
are unsecured and accrue interest at an annual rate of 10%.  The Notes
are being offered to accredited investors in the United States, Mexico, Canada
and Europe.  Westmoore Securities, Inc. has served as the Company’s
financial advisor in connection with the offering on a best efforts basis and
earns a commission of 6% on all purchases of Notes.  As of
September 30, 2008, the Company has sold approximately $32 Million worth of
Notes of which $2,780,665 were sold during the report period.




On June
3, 2008, the Board of Directors approved Articles of Amendment to our Articles
of Incorporation (the “Amendment”).  The Amendment provides that: (a)
designates the Corporation’s existing class of common stock consisting of
500,000,000 authorized shares, par value $0.001, as Series A Common Stock; (b)
create a new series of common stock, designated as Series B Common Stock,
consisting of 200,000,000 shares authorized, with each share having the right to
cast ten (10) votes for each action for which the holders thereof have a right
to vote and which is non-transferable and redeemable by the Corporation, in its
sole discretion, fifteen (15) years from May 31, 2008 at a par value of $0.0001
per share; and (c) create a new class of preferred stock consisting of
25,000,000 authorized shares, with each share having the rights and preferences
as may be determined by resolution of the Company's board of
directors.  The Amendment was filed with the Nevada Secretary of State
on August 19, 2008.  66,909,088 shares of the Series B Common Stock
have been issued to the shareholders of our subsidiary Trussnet under the
Reorganization and Merger Agreement dated May 21, 2008.




ITEM
3. DEFAULTS
UPON SENIOR SECURITIES.




None.




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




None.


22
  ITEM
5. OTHER
INFORMATION.




None.


ITEM
6. EXHIBITS.




31.1
            Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200231.2
            Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232.1
            Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 200232.2
            Certification
      of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002




23




SIGNATURES




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







Dated: November 14,
      2008
            CHINA TEL GROUP,
      INC.By: /s/ George
      AlvarezGeorge
      Alvarez,

              Chief
      Executive Officer




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