UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



xQUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.



FOR THE QUARTER ENDED December 31, 2015



COMMISSION FILE NO. 000-30202



FORM 10-Q



mPhase Technologies, Inc.

(Exact name of registrant as specified
in its charter)



|NEW JERSEY                               |  | 22-2287503            
|---------------------------------------- |  | ----------------------
|(State or other jurisdiction of          |  | (I.R.S. Employer      
|incorporation 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.

YESxNOo



THE NUMBER OF SHARES OUTSTANDING
OF EACH OF THE REGISTRANT’S CLASSES OF COMMON STOCK AS OF FEBRUARY 22, 2016 IS 16,573,628,048 SHARES, ALL OF ONE CLASS OF
$.001 PAR VALUE COMMON STOCK.




















mPHASE TECHNOLOGIES, INC.



INDEX



|               |                                                                                                         | PAGE      
|-------------- | ------------------------------------------------------------------------------------------------------- | ----------
|PART I         | FINANCIAL INFORMATION                                                                                   |           
|Item 1         | Consolidated Balance Sheets December 31, 2015 (Unaudited) and June 30, 2015                             | F-1       
|               | Unaudited
Consolidated Statements of Operations-Three Months Ended December 31, 2015 and 2014           | F-2       
|               | Unaudited
Consolidated Statements of Operations-Six Months Ended December 31, 2015 and 2014             | F-3       
|               | Unaudited
Consolidated Statement of Changes in Stockholders’ Deficit-Six Months Ended December 31, 2015 | F-4       
|               | Unaudited Consolidated Statements of Cash Flow-Six Months Ended December 31, 2015 and 2014              | F-5       
|               | Notes to Consolidated Financial Statements                                                              | F-6 - F-18
|Item 2         | Management’s Discussion and Analysis of Financial Condition and Results of Operations                   | 2         
|Item 3         | Quantitative and Qualitative Disclosures about Market Risk                                              | 14        
|Item 4         | Controls and Procedures                                                                                 | 14        
|PART II        | OTHER INFORMATION                                                                                       | 15        
|Item 1.        | Legal Proceedings                                                                                       | 15        
|Item 2.        | Unregistered Sales of Equity Securities and Use of Proceeds                                             | 16        
|Item 3.        | Defaults Upon Senior Securities                                                                         | 21        
|Item 4.        | (Removed and Reserved)                                                                                  | 21        
|Item 5.        | Other Information                                                                                       | 21        
|Item 6.        | Exhibits and Reports on Form 8-K                                                                        | 21        
|Signature Page | 22                                                                                                     













mPHASE
TECHNOLOGIES, INC.

Consolidated
Balance Sheets



|                                                                                                                                                                                                    |  | December 31, |              |   | June 30, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------------ | - | -------- | -
|                                                                                                                                                                                                    |  | 2015         |              |   | 2015     |  
|                                                                                                                                                                                                    |  | (unaudited)  |              |   |          |  
|ASSETS                                                                                                                                                                                              |  |              |              |   |          |  
|CURRENT ASSETS                                                                                                                                                                                      |  |              |              |   |          |  
|Cash                                                                                                                                                                                                |  | $            | 5,766        |   |          | $
|Accounts receivable, net                                                                                                                                                                            |  |              | 3,517        |   |          |  
|Inventory, net                                                                                                                                                                                      |  |              | 90,038       |   |          |  
|Prepaid and other current assets                                                                                                                                                                    |  |              | 16,119       |   |          |  
|                                                                                                                                                                                                    |  |              |              |   |          |  
|TOTAL CURRENT ASSETS                                                                                                                                                                                |  | $            | 115,440      |   |          | $
|                                                                                                                                                                                                    |  |              |              |   |          |  
|Property and equipment, net                                                                                                                                                                         |  |              | 5,172        |   |          |  
|Other Assets                                                                                                                                                                                        |  |              | 20,169       |   |          |  
|                                                                                                                                                                                                    |  |              |              |   |          |  
|TOTAL ASSETS                                                                                                                                                                                        |  | $            | 140,781      |   |          | $
|                                                                                                                                                                                                    |  |              |              |   |          |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                               |  |              |              |   |          |  
|CURRENT LIABILITIES                                                                                                                                                                                 |  |              |              |   |          |  
|Accounts payable                                                                                                                                                                                    |  | $            | 1,039,433    |   |          | $
|Accrued expenses                                                                                                                                                                                    |  |              | 580,150      |   |          |  
|Due to related parties                                                                                                                                                                              |  |              | 206,545      |   |          |  
|Customer Deposits                                                                                                                                                                                   |  |              | -            |   |          |  
|Demand note                                                                                                                                                                                         |  |              | 35,000       |   |          |  
|Notes payable, Officers'                                                                                                                                                                            |  |              | 575,053      |   |          |  
|Short term note, Director                                                                                                                                                                           |  |              | 102,032      |   |          |  
|Due to Factor                                                                                                                                                                                       |  |              | 27,005       |   |          |  
|Current Portion, Long term convertible debentures                                                                                                                                                   |  |              | 451,900      |   |          |  
|                                                                                                                                                                                                    |  |              |              |   |          |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                                           |  |              | 3,017,118    |   |          |  
|                                                                                                                                                                                                    |  |              |              |   |          |  
|OTHER OBLIGATIONS CONVERTIBLE TO EQUITY                                                                                                                                                             |  |              |              |   |          |  
|Convertible debt derivative liability                                                                                                                                                               |  |              | 726,101      |   |          |  
|Long term portion of Convertible debentures                                                                                                                                                         |  |              | 1,172,309    |   |          |  
|                                                                                                                                                                                                    |  |              |              |   |          |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                       |  |              | -            |   |          |  
|                                                                                                                                                                                                    |  |              |              |   |          |  
|STOCKHOLDERS' DEFICIT                                                                                                                                                                               |  |              |              |   |          |  
|Common stock, par value $.001, 18,000,000,000 shares authorized, 16,423,628,048 and
    15,941,988,381 shares issued and outstanding at December 31, 2015 (unaudited) & June 30, 2015, respectively |  |              | 16,423,627   |   |          |  
|Additional paid in capital                                                                                                                                                                          |  |              | 190,660,450  |   |          |  
|Accumulated Deficit                                                                                                                                                                                 |  |              | (211,858,824 | ) |          |  
|TOTAL STOCKHOLDERS' DEFICIT                                                                                                                                                                         |  | $            | (4,774,747   | ) |          | $
|                                                                                                                                                                                                    |  |              |              |   |          |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                         |  | $            | 140,781      |   |          | $



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





F-1







mPHASE
TECHNOLOGIES, INC.

Consolidated
Statements of Operations



|                                                                                                                                           |  | For the Three Months Ended |               
|------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | --------------
|                                                                                                                                           |  | December 31,               |               
|                                                                                                                                           |  | 2015                       |               
|                                                                                                                                           |  | (unaudited)                |               
|                                                                                                                                           |  |                            |               
|REVENUES                                                                                                                                   |  | $                          | 215,075       
|                                                                                                                                           |  |                            |               
|COSTS AND EXPENSES                                                                                                                         |  |                            |               
|                                                                                                                                           |  |                            |               
|Cost of Sales                                                                                                                              |  |                            | 162,666       
|                                                                                                                                           |  |                            |               
|Research and Development                                                                                                                   |  |                            | -             
|                                                                                                                                           |  |                            |               
|Selling and Marketing (including non-cash stock related charges of $3,150 and $4,081 for the three months ended December 31, 2015 & 2014). |  |                            | 52,710        
|                                                                                                                                           |  |                            |               
|General and Administrative                                                                                                                 |  |                            | 250,093       
|                                                                                                                                           |  |                            |               
|Depreciation and Amortization                                                                                                              |  |                            | 804           
|                                                                                                                                           |  |                            |               
|TOTAL COSTS AND EXPENSES                                                                                                                   |  |                            | 466,273       
|                                                                                                                                           |  |                            |               
|OPERATING LOSS                                                                                                                             |  | $                          | (251,198      
|                                                                                                                                           |  |                            |               
|OTHER INCOME (EXPENSE)                                                                                                                     |  |                            |               
|Interest (Expense)                                                                                                                         |  |                            | (92,381       
|Settlement Income (Expense)                                                                                                                |  |                            | 1,160         
|Net (Charges) Credits related to Convertible Debt                                                                                          |  |                            | (237,911      
|                                                                                                                                           |  |                            |               
|TOTAL OTHER INCOME (EXPENSE)                                                                                                               |  | $                          | (329,137      
|                                                                                                                                           |  |                            |               
|Loss From Operations, before Income Taxes                                                                                                  |  | $                          | (580,330      
|                                                                                                                                           |  |                            |               
|Income Taxes                                                                                                                               |  |                            | -             
|                                                                                                                                           |  |                            |               
|Net Loss                                                                                                                                   |  | $                          | (580,330      
|                                                                                                                                           |  |                            |               
|Basic & Diluted Net loss per share:                                                                                                        |  | $                          | (0.00         
|Weighted Average Number of Shares Outstanding;                                                                                             |  |                            |               
|Basic & Diluted                                                                                                                            |  |                            | 16,413,128,048



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





F-2









mPHASE
TECHNOLOGIES, INC.

Consolidated
Statements of Operations



|                                                                                                                                          |  | For the Six Months Ended |               
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | --------------
|                                                                                                                                          |  | December 31,             |               
|                                                                                                                                          |  | 2015                     |               
|                                                                                                                                          |  | (unaudited)              |               
|                                                                                                                                          |  |                          |               
|REVENUES                                                                                                                                  |  | $                        | 398,346       
|                                                                                                                                          |  |                          |               
|COSTS AND EXPENSES                                                                                                                        |  |                          |               
|                                                                                                                                          |  |                          |               
|Cost of Sales                                                                                                                             |  |                          | 277,559       
|                                                                                                                                          |  |                          |               
|Research and Development                                                                                                                  |  |                          | -             
|                                                                                                                                          |  |                          |               
|Selling and Marketing (including non-cash stock related charges of $5,386 and $14,614 for the six months ended December 31, 2015 & 2014). |  |                          | 94,649        
|                                                                                                                                          |  |                          |               
|General and Administrative                                                                                                                |  |                          | 485,895       
|                                                                                                                                          |  |                          |               
|Depreciation and Amortization                                                                                                             |  |                          | 1,542         
|                                                                                                                                          |  |                          |               
|TOTAL COSTS AND EXPENSES                                                                                                                  |  |                          | 859,645       
|                                                                                                                                          |  |                          |               
|OPERATING LOSS                                                                                                                            |  | $                        | (461,299      
|                                                                                                                                          |  |                          |               
|OTHER INCOME (EXPENSE)                                                                                                                    |  |                          |               
|Interest (Expense)                                                                                                                        |  |                          | (173,238      
|Settlement (Expense)                                                                                                                      |  |                          | 1,160         
|Net (Charges) Credits related to Convertible Debt                                                                                         |  |                          | (490,676      
|                                                                                                                                          |  |                          |               
|TOTAL OTHER INCOME (EXPENSE)                                                                                                              |  | $                        | (662,754      
|                                                                                                                                          |  |                          |               
|Loss From Operations, before Income Taxes                                                                                                 |  | $                        | (1,124,053    
|                                                                                                                                          |  |                          |               
|Income Taxes                                                                                                                              |  |                          | -             
|                                                                                                                                          |  |                          |               
|Net Loss                                                                                                                                  |  | $                        | (1,124,053    
|                                                                                                                                          |  |                          |               
|Basic & Diluted Net loss per share:                                                                                                       |  | $                        | (0.00         
|Weighted Average Number of Shares Outstanding;                                                                                            |  |                          |               
|Basic & Diluted                                                                                                                           |  |                          | 16,284,261,113



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



F-3







mPHASE
TECHNOLOGIES, INC.

CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

F0R
THE SIX MONTHS ENDED DECEMBER 31, 2015

(unaudited)





|                                                                                                |  | Common
    Stock |                |  | Additional    |   |            |             |  |   |             |  
|----------------------------------------------------------------------------------------------- |  | ---------------- | -------------- |  | ------------- | - | ---------- | ----------- |  | - | ----------- | -
|                                                                                                |  |                  |                |  | $.001
    Par |   |            | Paid
    in |  |   | Accumulated |  
|                                                                                                |  | Shares           |                |  | Value         |   |            | Capital     |  |   | Deficit     |  
|                                                                                                |  |                  |                |  |               |   |            |             |  |   |             |  
|Balance
    June 30, 2015                                                                       |  |                  | 15,941,988,381 |  |               | $ | 15,941,987 |             |  | $ | 190,949,919 |  
|                                                                                                |  |                  |                |  |               |   |            |             |  |   |             |  
|Issuance
    of Common Stock to accredited investors in private placements, net of $14,000 fees |  |                  | 466,666,667    |  |               |   | 466,667    |             |  |   | (340,667    | )
|                                                                                                |  |                  |                |  |               |   |            |             |  |   |             |  
|Issuance
    of Common Stock for services                                                       |  |                  | 14,973,000     |  |               |   | 14,973     |             |  |   | (9,587      | )
|                                                                                                |  |                  |                |  |               |   |            |             |  |   |             |  
|Beneficial
    Conversion Feature Interest Expense Charged to Additional Paid  in Capital       |  |                  | -              |  |               |   | -          |             |  |   | 60,785      |  
|                                                                                                |  |                  |                |  |               |   |            |             |  |   |             |  
|Net
    Loss for the Six Months Ended December 31, 2015                                         |  |                  | -              |  |               |   | -          |             |  |   | -           |  
|                                                                                                |  |                  |                |  |               |   |            |             |  |   |             |  
|Balance
    December 31, 2015                                                                   |  |                  | 16,423,628,048 |  |               | $ | 16,423,627 |             |  | $ | 190,660,450 |  



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





F-4







mPHASE
TECHNOLOGIES, INC.

Consolidated
Statements of Cash Flows



|                                                                                                                  |  | For the Six Months Ended |           
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------
|                                                                                                                  |  | December 31,             |           
|                                                                                                                  |  | 2015                     |           
|                                                                                                                  |  | (unaudited)              |           
|Cash Flow used in Operating Activities:                                                                           |  |                          |           
|Net Loss                                                                                                          |  | $                        | (1,124,053
|Adjustments to reconcile net loss to net cash used in operating activities:                                       |  |                          |           
|Depreciation and amortization                                                                                     |  |                          | 1,542     
|Non-cash charges relating to Convertible Debt Settlement                                                          |  |                          | -         
|Non-cash charges relating to issuance of common stock, common stock options and warrants                          |  |                          | 5,386     
|Derivative Value and Debt Discount charges (credits)                                                              |  |                          | 490,676   
|Other non cash charges including amortization of deferred compensation and beneficial
conversion interest expense |  |                          | 60,685    
|Changes in assets and liabilities:                                                                                |  |                          |           
|Accounts receivable                                                                                               |  |                          | 4,985     
|Inventories                                                                                                       |  |                          | 128,615   
|Prepaid expenses and Other current assets                                                                         |  |                          | 20,749    
|Other assets                                                                                                      |  |                          | 3,060     
|Accounts payable & Accrued expenses                                                                               |  |                          | 108,132   
|Customer deposits                                                                                                 |  |                          | (26,691   
|Due to/from related parties                                                                                       |  |                          |           
|Microphase & Eagle                                                                                                |  |                          | 18,500    
|Officers                                                                                                          |  |                          | 194,444   
|Net cash used in operating activities                                                                             |  | $                        | (113,970  
|                                                                                                                  |  |                          |           
|Cash Flow used in Investing Activities:                                                                           |  |                          |           
|Purchase of fixed assets                                                                                          |  |                          | -         
|Net Cash used in investing activities                                                                             |  | $                        | 0         
|                                                                                                                  |  |                          |           
|Cash Flow from Financing Activities:                                                                              |  |                          |           
|Proceeds from issuance of common stock, net of finders fees                                                       |  |                          | 126,000   
|Proceeds of demand note                                                                                           |  |                          | 35,000    
|Proceeds from factor funding                                                                                      |  |                          | 27,005    
|Issuance of Convertible Debentures                                                                                |  |                          | -         
|Repayment of Convertible Debentures                                                                               |  |                          | (83,438   
|Net Proceeds (Repayment) from notes payable related parties                                                       |  |                          | 12,300    
|Net cash provided by financing activities                                                                         |  | $                        | 116,868   
|                                                                                                                  |  |                          |           
|Net increase (decrease) in cash                                                                                   |  | $                        | 2,898     
|                                                                                                                  |  |                          |           
|CASH AND CASH EQUIVALENTS, beginning of period                                                                    |  | $                        | 2,868     
|CASH AND CASH EQUIVALENTS, end of period                                                                          |  | $                        | 5,766     



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



F-5







mPHASE TECHNOLOGIES, INC.

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 presently focused on(a) marketing its automotive battery jump starter designed for the
mass market and (b) developing new “smart surface” products through the sciences of microfluidics, microelectromechanical
systems (MEMS) and nanotechnology.



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 six months ending December
31, 2015 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, as amended,
for the year ended June 30, 2015.



Through December 31, 2015, the Company
had incurred cumulative (a) losses totaling ($211,858,824), (b) stockholders’ deficit of ($4,774,747). At December 31, 2015,
the Company had $5,766 of cash and $3,517 of trade receivables to fund short-term working capital requirements. In addition, the
Company relies on the continuation of funding through private placements of its common stock. 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.



INVENTORY



The Company uses the First In First
Out method (FIFO) to account for inventory which is carried at cost. As of June 30, 2015, inventory consisted primarily of its
various Jump products including the Jump and the mini Jump, and our remaining flashlight inventory, and was valued at $218,653.
As of December 31, 2015, (unaudited) inventory consisted primarily of the Company’s line of Jump products including the new
Jump Plus, and our remaining flashlight inventory, and was valued at $90,038. Appropriate reserves have been taken to assure that
the cost of such inventory does not exceed the expected resale value.



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



Basic income (loss) per share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings
per share is computed by dividing net loss adjusted for income or loss that would result from the assumed conversion of potential
common shares from contracts that may be settled in stock or cash by the weighted average number of shares of common stock, common
stock equivalents and potentially dilutive securities outstanding during each period. The Company had no warrants to purchase shares
of its common stock and no options to purchase shares of its common stock outstanding at December 31, 2015. The Company has convertible
securities held by third parties and convertible notes plus accrued interest thereon held by officers of the Company, subject to
availability, convertible into approximately 308,877,385 immediately, and up to 5,426,474,179 if the forbearance agreement discussed
in Note 3 is settled entirely in stock, and 1,437,632,525 shares respectively of the Company’s common stock based upon the
conversion terms at December 31, 2015. In periods reporting a loss the inclusion of warrants and potential common shares to be
issued in connection with convertible debt have an anti-dilutive effect on diluted loss per share and have been omitted in such
computation.





F-6







RECLASSIFICATIONS



Certain reclassifications have been
made in the prior period consolidated financial statements to conform to the current period presentation. The reclassified financial
statement items had no effect on Net Loss for the six months ended December 31, 2014, total Stockholders’ Deficit or total
Assets for the six months ended December, 2015 or 2014.



MATERIAL EQUITY INSTRUMENTS



The Company has material equity instruments
including convertible securities that are accounted for as derivative liabilities (SEE BELOW) that are evaluated quarterly for
potential reclassification as liabilities pursuant to by FASB Standards Codification Topic 815 (previously known as EITF 00-19).
(SEE ALSO NOTE 3 under the caption "Other Equity".)





SUPPLEMENTAL CASH FLOW INFORMATION



|                                                                                                                                                               |  | For the Six Months Ended |       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------
|                                                                                                                                                               |  | December 31,             |       
|                                                                                                                                                               |  | 2015                     |       
|                                                                                                                                                               |  |                          |       
|Statement of Operation Information:                                                                                                                            |  |                          |       
|Interest Accrued & Unpaid for period                                                                                                                           |  | $                        | 71,297
|                                                                                                                                                               |  |                          |       
|Extension & Prepayment Fees on Convertible Debt                                                                                                                |  | $                        | -     
|Interest Paid & Factor fees (net interest income)                                                                                                              |  | $                        | 41,156
|                                                                                                                                                               |  |                          |       
|Non Cash Investing and Financing Activities:                                                                                                                   |  |                          |       
|                                                                                                                                                               |  |                          |       
|Beneficial Conversion of Officers’ Notes                                                                                                                       |  | $                        | 60,785
|Issuances of Common Stock for services                                                                                                                         |  | $                        | 5,386 
|Non-cash charges relating to Convertible Debt Settlement including $118,950 increase in loan amount and $18,469 increase in corresponding Derivative Liability |  | $                        | -     
|Convertible Note payable  of $720,157 and $172,127 of accrued interest thereon merged into forbearance obligation                                              |  | $                        | -     



|3. | EQUITY TRANSACTIONS AND CONVERTIBLE DEBT
|-- | ----------------------------------------



mPhase initially authorized capital
of 50,000,000 shares of common stock with no par value. On February 23, 2000, the Board of Directors proposed, and on May 22, 2000
the shareholders approved, an increase in the authorized capital to 150,000,000 shares of common stock. On June 15, 2004, a Special
Meeting of Shareholders of the Company approved a proposal by the Company to amend the Company’s Certificate of Incorporation
under New Jersey law to increase the authorized shares of common stock from 150 million to 250 million shares and change the par
value of all shares of common stock from no par to $0.01 par stock.



Effective June 2005, June 2006, and
June 2008, the Company received authorization to increase the number of authorized shares to 500 million, 900 million and 2 billion,
respectively. On April 25, 2009, July 15, 2010, and again on November 1, 2010, the Board of Directors approved motions to further
increase, subject to shareholder approval, the authorized shares of common stock to 3 billion shares, 4 billion shares and 6 billion
shares, respectively. The latest increase in the number of authorized shares of common stock to 6 billion was approved at a Special
Meeting of Shareholders of the Company held on June 29, 2011, so that as of September 30, 2013 the Company has 6 billion authorized
shares of common stock. The Company in its annual meeting of shareholders for the fiscal year ended June 30, 2013 held on February
12, 2014 received shareholder approval to increase its authorized shares to 18 billion shares of common stock so that as of December
31, 2015 the Company has said amount of authorized shares of stock.





F-7







Private Placements



During the six months ended December
31, 2015, the Company issued 466,666,667 shares of its common stock in connection with private placements, pursuant to Rule 506
of Regulation D of the Securities Act of 1933, as amended, raising gross proceeds of $140,000 and paid finder’s fees in the
amount of $14,000. The proceeds were used by the Company as working capital.



During the six months ended December
31, 2014, the Company issued 1,080,000,000 shares of its common stock in connection with private placements pursuant to Rule 506
of Regulation D of the Securities Act of 1933, as amended, raising gross proceeds of $420,000 and incurring finder’s fees
of $27,500. The proceeds were used by the Company as working capital.



Stock Based Compensation



During the six months ended December
31, 2015, the Company issued 14,973,000 shares of common stock to an employee valued at $5,386, the entire amount of which is included
in selling and marketing expenses in the Consolidated Statements of Operations for that period. The Company during such period
did not issue any common stock, warrants or options to officers.



During the six months ended December
31, 2014, the Company issued 26,778,857 shares of common stock compensation to employees valued at $14,614. , the entire amount
of which is included in selling and marketing expenses in the Consolidated Statements of Operations for that period. The Company
during such period did not issue any common stock, warrants or options to officers.



Long Term Convertible Debentures
/ Debt Discount



The Company had 9 separate convertible
debt arrangements with independent investors that were in effect at various times during the two fiscal years ended June 30, 2015,
three of which were still active as of December 31, 2015.



During the six months ended December
31, 2015, no convertible debt was converted into any shares of common stock by holders of Convertible Notes.



During the six months ended December
31, 2014 no convertible debt was converted into any shares of common stock by holders of Convertible Notes.





F-8







These transactions are intended to provide
liquidity and capital to the Company and are summarized below.



Arrangement
#1 (JMJ Financial, Inc.)



On November
17, 2009, the Company received a total of $186,000 of proceeds in connection with a new financing agreement with JMJ Financial.
This transaction consists of the following: 1) a convertible note 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 promissory 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 holder of the convertible
note. Conversion of outstanding principal into shares of common stock is at the option of the holder. The number of shares into
which this note can be converted is equal to the dollar amount of the note divided by 75% of the lowest trade price during the
20 day trading period prior to conversion



To date the
Company has received a total of $639,500 in cash and has issued 322,187,500 shares of common stock to the holder upon conversions
of $325,440 of principle and $994,766 of conversion fees. The remaining $604,600 of cash which was to be received from the holder
plus accrued and unpaid interest was convertible into shares of common stock at the option of the holder. Upon receipt, in full,
of cash by the Company equaling the purchase price of the convertible note plus interest or any portion thereof payable through
maturity, the holder may convert such portion of the total amount of interest funded that would accrue to maturity into additional
shares of common stock. Based upon the price of the Company’s common stock on June 30, 2011 of $.0073 per share the holder
could convert the remaining principal amount plus interest of this convertible note into approximately 222,142,857 shares of common
stock at the full contract value; of which the derivative liability associated with this arrangement is calculated. At June 1,
this note was combined with arrangement #4 JMJ Financial, Inc. During the year ended June 30, 2011 the holder converted $33,750
of principal into 10,000,000 shares of common stock and amortization of debt discount amounted to $412,332, reducing the debt discount
balance to $100,000.



During the
year ended June 30, 2012, the Company reduced the note payable and debt discount by $42,000 in proportion with the amount funded
to the total original funding commitment and amortization of debt discount amounted to $27,067 reducing the balance to $30,933.
Also during the year ended June 30, 2012, the Company had incurred $994,766 of conversion fees which together with $291,690 of
principle was converted into 322,187,500 shares of common stock. At June 30, 2012 this convertible note had $372,060 outstanding
which was combined with arrangement #3 JMJ Financial, Inc.



Arrangement
#2 (JMJ Financial, Inc.)



On December
15, 2009 the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible
note issued by the Company in the amount of $1,500,000 plus a one-time interest factor of 12% ($180,000) and a maturity date of
December15, 2012 and (2) a secured promissory note in the amount of $1,400,000 plus a one-time interest rate factor of 13.2% ($180,000
) and a maturity date of December 15, 2012 due from the holder of the convertible note. To date the Company has received a total
of $300,000 cash and has issued no shares of common stock to the holder upon conversions. The remaining $1,280,000 of cash to be
received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the holder.
Upon receipt, in full, of cash by the Company equaling the purchase price of the convertible note plus interest or any portion
thereof payable through maturity, the holder may convert such portion of the total amount of interest funded that would accrue
to maturity into additional shares of common stock.



The number
of shares into which this convertible note can be converted is equal to the dollar amount of the note divided by 75% of the lowest
trade price during the 20 day trading period prior to conversion. Based upon the price of the Company’s common stock on June
30, 2011 of $.0073 per share the holder could convert the remaining principal amount plus interest of this convertible note into
approximately 285,714,286 shares of common stock at the full contract value; of which the derivative liability associated with
this arrangement is calculated.



The Company
and the holder are presently negotiating potential amendments to this agreement, and funding and conversions have not occurred
since April, 2011. For accounting purposes the note receivable has been fully reserved, and the liability is recorded, when netted
against the debt discount and cumulative conversions, at the amount funded. Based upon the price of the Company’s common
stock on June 30, 2011, the net liability of this note is convertible into approximately 38,095,238 shares of common stock. At
the commitment date, the derivative value of the embedded conversion feature of such security was $542,714 and the debt discount
was valued at $642,714. As of June 30, 2011, this value was calculated to be $607,994. During the year ended June 30, 2011, amortization
of debt discount amounted to $418,552, reducing the balance to $100,000.



During the
fiscal year ended June 30, 2012, the Company reduced the note payable and debt discount by $79,000 in proportion with the amount
funded to the total original funding commitment and amortization of debt discount amounted to $8,573 reducing the balance to $12,427.
As of June 30, 2012, this convertible note has $321,000 outstanding which was combined with arrangement #3 JMJ Financial, Inc.





F-9







Arrangement #3 (JMJ Financial,
Inc.)



On April 5,
2010, the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible note
issued by the Company in the principal amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date
of December 15, 2012, and (2) a secured promissory note from the holder of the convertible 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 December 15, 2012. To date the Company has received
a total of $100,000 cash and has issued no shares of common stock to the holder upon conversions. The remaining $1,144,000 of cash
to be received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the
holder.



Upon receipt,
in full, of cash by the Company equaling the purchase price of the convertible note plus interest or any portion thereof payable
through maturity, the holder may convert such portion of the total amount of interest funded that would accrue to maturity into
additional shares of common stock. The number of shares into which this convertible note can be converted is equal to the dollar
amount of the note divided by 75% of the lowest trade price during the 20 day trading period prior to conversion. Based upon the
price of the Company’s common stock on June 30, 2011 of $.0073 per share the holder could convert the remaining principal
amount plus interest of this convertible note into approximately 228,571,429 shares of common stock at the full contract value;
of which the derivative liability associated with this arrangement is calculated.



For accounting
purposes the note receivable has been fully reserved, and the liability is recorded, when netted against the debt discount and
cumulative conversions, at the amount funded. Based upon the price of the Company’s common stock on June 30,
2011, the net liability of this note is convertible into approximately 19,047,619 shares of common stock.



At the commitment
date, the derivative value of the embedded conversion feature of such security was $421,891 and the debt discount was valued at
$521,891. As of June 30, 2011, this value was calculated to be $486,795. During the year ended June 30, 2011, amortization of debt
discount amounted to $378,761, reducing the balance to $100,000.



During the
fiscal year ended June 30, 2012, the Company reduced the note payable and debt discount by $91,000 in proportion with the amount
funded to the total original funding commitment and amortization of debt discount amounted to $3,674 reducing the balance to $5,326.



As of June 30, 2012, this convertible
note has $109,000 outstanding, which when combined with arrangements #8 and #9 totaled $802,060, which the Company entered into
an amended agreement on June 1, 2012 whereby the Company agreed to make payments of principle and interest of $37,018 per month
commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then no conversions
into the Company’s common stock would be available to the holder. Also as of June 30, 2012 the derivative value of the embedded
conversion feature of this arrangement when combined with arrangements #2 and #3 totaled $0; which when compared to the combine
value of $1,567,512 created a non-cash credit to earnings of $1,567,512 in fiscal 2012. As of June 30, 2015 and June 30, 2014, the
combined arrangements with JMJ in this note would be convertible into 258,208,588 and 237,807,785; and as of December 31,
2015 into 269,052,385 common shares at the conversion floor price of $.004; and would be required to do so if the Company does
not make the scheduled payments pursuant to the June 1, 2012 amended agreement.



The Company
has not made any payments of the $37,018 installment payments commencing October 1, 2012 and the holder has continued to accrue
interest on the outstanding balance.



Arrangement #4 (John Fife dba St. George Investors)/Fife
Forbearance



On September 13, 2011, the Company issued
a second Convertible Note to John Fife founder and president of St. George Investments, in a Private Placement pursuant to Section
4(2) of the Securities Act of 1933. The initial principal amount of the first funded tranche of the Convertible Note was $357,500
and the Company received cash proceeds of $300,000.



A second tranche of the Convertible
Note in the amount of $200,000 cash is funded upon the filing by the Company of a Registration Statement on Form S-1 with the Securities
and Exchange Commission providing for the registration of 185,400,000 shares of common stock that may be converted into from time
to time by the holder of the Convertible Note. The instrument is convertible into the Company’s common stock at 75% of the
volume weight average price of the stock based upon the average of the three lowest trading days in the 20 day trading period immediately
preceding such conversion. Absent an effective Registration Statement, the holder of the Convertible Note may not sell any common
stock prior to 6 months from the date of funding of each of the respective tranches of such instrument under Rule 144 of the Securities
Act of 1933.



All proceeds received in connection
with the above financing have been used by the Company as working capital.





F-10







At the time of the transaction,
the embedded conversion feature of this security and the warrant was calculated to be $137,481 and the loan discount totaled $194,981
for the initial tranche and the embedded conversion feature of this security and the warrant for a second tranche of the Convertible
Note was calculated to be $46,379. On June 30, 2012, given the changes in the Company’s stock price during the 20 day look-back
period for June 30, 2012 and conversions during the period this estimated liability had increased from $183,860 to $771,079, an
increase this period of $587,219, creating a non-cash charge to earnings for the twelve months ended June 30, 2012 of that amount.
During the twelve month period ended June 30, 2012 amortization of debt discount amounted to $185,456 reducing the combined balance
to $55,903.

The company
entered into an amended agreement on June 1, 2012, when principle of $557,500 accrued interest of $66,338 and $95,611 of contractual
charges totaled $719,449; with this note holder whereby the Company agreed to make payments of principle and interest of $33,238
per month commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then
no conversions into the Company’s common stock would be available to the holder. As of September 30, 2012 this note would
be convertible into 789,645,351 shares of common stock at the original terms. The Company has not made any payments of the $33,238
installment payments commencing October 1, and the holder has continued to accrue interest on the outstanding balance (see note
4). On November 20, 2012, mPhase Technologies, Inc. (the “Company”) formally received an Event of Default and Redemption
Notice dated November 16, 2012 with respect to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George
Investments LLC and assigned to John Fife. The notice included alleged defaults with respect to payments owed by the Company under
the Convertible Note and the failure to convert the Note into shares of the Company’s common stock. The alleged amount owed
according to the notice is approximately $902,279. On June 30, 2013, given the changes in the Company’s stock price during
the 20 day look-back period for June 30, 2013, this estimated liability had decreased to $138,696, a decrease this period of $689,007,
creating a non-cash credit to earnings for the year ended June 30, 2013 of that amount. During the year ended June 30, 2013, amortization
of debt discount amounted to $55,903, reducing the combined balance to $0. As of June 30, 2013 this note would have been convertible
into 700,806,707 shares of common stock at the original terms. On June 30, 2014, given the changes in the Company’s stock
price during the 20 day look-back period for June 30, 2014, this estimated liability had increased to $548,906, an increase this
period of $410,210, creating a non-cash charge to earnings for the year ended June 30, 2014 of that amount. As of June 30, 2014
this note would have been convertible, at the original terms, into 1,392,162,326 shares of common stock.



On December 15, 2014, a Memorandum Opinion
and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of
John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”)
for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed. The Company commenced settlement
negotiations with the Plaintiff after we explored options with regard to an appeal and other alternatives, which there is no guarantee
of success. As discussed in Note 7, effective February 10, 2015, the Company entered into a Forbearance Agreement with the Holder.
The agreement provides that the Holder would forego his right to enforce its remedies pursuant to the judgment, which include demand
for immediate payment of approximately $1.6 million, provided the Company satisfy its forbearance obligation of $1,003,943, and
after accounting for a payment of $15,000 the Company paid, under the terms of the agreement.



The terms of the agreement, as amended,
provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments in cash or conversions into common stock
of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and thereafter and on or before the 15th day
of each month thereafter the Company agrees to pay to Holder the following amounts ; $30,000.00 per month on each of the following
dates: March 15, 2015, April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following
dates: August 15, 2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November
15, 2015, and December 15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and
March 15, 2016; and $50,000.00 per month thereafter until the Forbearance Amount has been paid in full. The Company has been able
to meet its monthly payment obligations through November, 2015.



The value of the forbearance debt obligation
on June 30, 2015 is $902,253. At June 30, 2015, given the changes in the Company’s stock price during the 20 day look-back
period for June 30, 2015, the estimated derivative liability had decreased to $232,423, a decrease from June 30, 2014 of $548,906
totaling $316,493, which when added to the $18,469 increase at the time the forbearance agreement resulted in a non-cash credit
to earnings of $334,962 for the year ended June 30, 2015. The Forbearance agreement requires the Company to place, and the Company
has done so, 1,000,000,000 shares in reserve with its transfer agent, to satisfy the conversion provisions for any unpaid monthly
cash payments. The agreement original agreement also provided that the Company file a Proxy statement before June 1, 2015 should
additional shares be needed for the conversion reserve. The Company has not issued any stock for conversions since entering into
the forbearance agreement and during the year ended June 30, 2015 and has made cash payments repaying $69,081 of principle and
$41,019 of interest under the agreement. During the six months ended December 31, 2015 the Company repaid $103,437 of principle
and $35,563 of interest under the agreement. The value of the forbearance debt obligation on December 31, 2015 is $818,815.





F-11







As of August 11, 2015 the Company entered
into an Amendment No. 1 with Fife to the Forbearance Agreement rescheduling the monthly payment schedules (see Form 8K filed with
the SEC on August 2, 2015)



At December 31, 2015, the derivative
liability was estimated to be $716,543, an increase of $484,120 from $232,423, the balance as of our last fiscal year end, creating
a charge to expense of a like amount during the six months then ended.



As of December 31, 2015 this forbearance
obligation would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full,
for: (i) up to 62,500,000 shares, for the satisfaction of the next required monthly payment, (ii) up to 2,674,375,000 shares, for
the satisfaction of the next 12 required monthly payments; and (iii) up to 5,117,596,794 shares of our common stock should the
entire obligation be converted.



As of January 19, 2016 the Company entered
into a Second Amendment to the Forbearance Agreement again rescheduling certain of the monthly payments. The Amendment was filed
with the SEC on Form 8k on January 22, 2016. (See Subsequent Events).



Arrangement #5 (MH Investment trust I)



On December 27, 2013, the Company issued
to the MH Investment Trust. a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 which
was executed funded with $40,000 in gross proceeds on January 7, 2014. The instrument is in the principal amount of $40,000 and
matures on October 1, 2014. Interest only is payable at the rate of 12% per annum by the Company to the holder until maturity.
The instrument is convertible into the Company’s common stock at 60% of the volume weight average price of the stock based
upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when
the trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the above financing
have been used by the Company as working capital.



At the time of the transaction, the
embedded conversion feature of this security and the warrant was calculated to be $35,556 and the company recorded no loan discount
as the quantity of shares was considered indeterminable at the date of funding. On June 30, 2014, given the changes in the Company’s
stock price during the 10 day look-back period for this estimated liability had increased to $88,637, an increase for this period
of $53,081 creating a non-cash charge to earnings of that amount. Based upon the price of the Company’s common stock on June
30, 2014 this Note is convertible into approximately 100,952,381 shares of common stock. During July of 2014 this note was repaid,
in full, together with $2,632 of accrued interest and $14,916 of prepayment fees.



Arrangement #6 (MH Investment trust
II)



On August 26, 2014, the Company issued
to the MH Investment Trust. a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 which
was executed funded with $40,000 in gross proceeds on September 1, 2014. The instrument is in the principal amount of $40,000 and
matures on May 1, 2015. Interest only is payable at the rate of 12% per annum by the Company to the holder until maturity. The
instrument is convertible into the Company’s common stock at 60% of the volume weight average price of the stock based upon
the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the
trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the above financing
have been used by the Company as working capital.



At the time of the transaction, the
embedded conversion feature of this security and the warrant was calculated to be $37,778 and the company recorded a loan discount
of the same amount. During the year ended June 30, 2015 the Company amortized $37,778 to loan discount expense and the unamortized
loan discount was reduced to $0. As of June 30, 2015, which given the changes in the Company’s stock price during the 10
day look-back period for this date the estimated liability had decreased to $3,002, a decrease for this period of $34,776 and creating
a non-cash credit to earnings of that amount. Based upon the price of the Company’s common stock and and a partial payments
during the year ended June 30, 2015 of $36,667; on June 30, 2015 this Note is convertible into approximately 25,016,667 shares
of common stock. As of December 31, 2015, which given the changes in the Company’s stock price during the 10 day look-back
period for this date the estimated liability had increased to $9,558, an increase for this period of $5,114 and creating a non-cash
charge to earnings of that amount. Based upon the price of the Company’s common stock on December 31, 2015 this Note is convertible
into approximately 39,825,000 shares of common stock.





F-12







The following table summarizes notes payable under convertible
debt and debenture agreements as of:





|                                                                    |  | December 31, |           |  | June 30, |  
|------------------------------------------------------------------- |  | ------------ | --------- |  | -------- | -
|                                                                    |  | 2015         |           |  | 2015     |  
|                                                                    |  | (unaudited)  |           |  |          |  
|                                                                    |  |              |           |  |          |  
|Arrangement #3 - JMJ Financial, Inc                                 |  | $            | 802,060   |  |          | $
|Arrangement #4 - St. George Investments/Fife Forbearance Obligation |  |              | 818,816   |  |          |  
|Arrangement #6 - MH Investment trust II                             |  |              | 3,333     |  |          |  
|Total notes payable                                                 |  | $            | 1,624,209 |  |          | $
|less: unamortized debt discount                                     |  |              | -         |  |          |  
|Convertible Notes payable, net of discount                          |  |              | 1,624,209 |  |          |  
|Convertible Notes payable-short term portion                        |  |              | 451,900   |  |          |  
|Convertible Notes payable-long term portion                         |  | $            | 1,172,309 |  |          | $







Included in accrued expenses is $275,457 and $231,944 interest accrued on these notes at December 31, 2015 (unaudited) & June 30, 2015, respectively.



DERIVATIVE LIABILITY



The Company has estimated the value
of the derivative liability associated with its convertible debt. Such estimate is based on a Black Scholes calculation at the
time the debt was issued. At each reporting period, the value of this liability is marked to market and adjusted accordingly. Such
adjustments are included in Other Income (Expense).



EQUITY LINE OF CREDIT



The Company
entered into a $10,000,000 equity line of Credit with Dutchess Opportunity Fund II, LLC in December of 2011. Under the equity line,
the Company is eligible to “PUT” to the fund, 20,000,000 shares of its common stock during any pricing period. The
Company has registered a total of 250,000,000 shares of its common stock on a Form S-1 Registration Statement with the Securities
and Exchange Commission that was declared effective on January 17, 2012 in connection with the Dutchess Equity Line.



As of December
31, 2014 and June, 2014, the Company has received $227,744 of proceeds under the Equity Line relating to the resale of 135,990,000
shares of the Company’s common stock, net of $22,920 transaction fees. The amount of proceeds to be received under the Equity
Line will depend upon the stock price of the Company at the various points in time it exercises the Put Option. As of June 30,
2014, the Company has received $145,428, $80,053 and $6,263 in Fiscal Years Ended June 30, 2012, 2013 and 2014, under the Equity
Line relating to the resale of 89,587,447, 42,412,553 and 3,990,000 shares of the Company’s common stock in Fiscal Years
Ended June 30, 2012, 2013 and 2014. The amount of proceeds to be received under the Equity Line will depend upon the stock price
of the Company at the various points in time it exercises the Put Option. As of February 13, 2015, the Equity line of Credit expired
and the Company may no longer draw any funds under such equity line.



BENEFICIAL CONVERSION FEATURE



In April 2009, the Board of Directors
authorized the right for the officers to convert into shares of the Company's common stock officers' loans discussed in Note 9,
plus accrued interest thereon, at any time for the next five years providing such shares are issued, outstanding and available,
at a conversion price of $.0075. This conversion price was amended in August 2011 to $.0040. During the fiscal year ended June
30, 2014, the officers’ were authorized by the board of directors’ to enter into agreements to convert certain officer
notes, previously convertible at $.004 from 2009 through April 2014, based upon the then concurrent terms of private placements
with accredited investors; at $.0004, representing the now current terms of private placements with accredited investors. On June
30, 2015, these Notes were convertible into approximately 1,481,210,000 shares of common stock, if available. During the six months
ended December 31, 2015 the Company recorded $60,785 beneficial conversion feature interest expense regarding the convertibility
of these notes. As of December 31, 2015 these Notes are convertible into approximately 1,437,632,525 shares of common stock if
available.





F-13







|4. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------



COMMITMENTS



Our corporate headquarters is located
at an office in Clifton, New Jersey for $4,132 per month through August 1, 2016.



The Company entered into a conditional
lease for a production facility located in Passaic, New Jersey, the commencement of which is contingent upon the Company obtaining
funding from investors pursuant to an economic development program within governmental guidelines. During the six months ended
December 31, 2015 the Company canceled this lease and received the deposit.



CONTINGENCIES



The Company had been in litigation with
John Fife with respect to a Convertible Note originally issued on September 13, 2011 in the principal amount of $557,000. Fife
sought damages on a Motion for Summary Judgment in the amount in excess of $1,300,000 attorney’s fees. On December 15, 2014
the federal district court in the North East District of Illinois found in favor of Fife on a motion for Summary Judgment. The
Company has entered into a Forbearance Agreement with Fife as a result of negotiations to settle such Judgment.



The value of the forbearance obligation
on December 31, 2015 is $818,816. At December 31, 2015, the derivative liability was estimated to be $716,543, and as such a total
of $1,535,359 liabilities have been recorded in the financial statements to reflect this obligation, $427,900 included in current
liabilities and $1,107,459 non-current. The value of the judgment totaled approximately 1.6 million as of December 31, 2014 and
bears a punitive interest rate of 16%, and would become payable in full if the Company defaults under the forbearance obligation.
The Forbearance agreement requires the Company to place, and the Company has done so, 1,000,000,000 shares in reserve with its
transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments.



As of December 31, 2015 this forbearance
obligation would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part or in full,
for: (i) up to 62,500,000 shares, for the satisfaction of the next required monthly payment, (ii) up to 2,674,375,000 shares, for
the satisfaction of the next 12 required monthly payments; and (iii) up to 5,117,596,794 shares of our common stock should the
entire obligation be converted.



F-14







|5. | 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 820-10-20 defines 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 reconciliation
for liabilities measured at fair value on a recurring basis at December 31, 2015 and 2014:



|                                                             |  | Fair Value Measurements |        
|------------------------------------------------------------ |  | ----------------------- | -------
|                                                             |  | Using Significant       |        
|                                                             |  | Unobservable Inputs     |        
|                                                             |  | (Level 3)               |        
|                                                             |  | Derivative Liability    |        
|                                                             |  | December 31,            |        
|                                                             |  | 2015                    |        
|Balance at July 1, 2015 & 2014                               |  | $                       | 235,425
|Increase (Decrease) in Derivative and associated liabilities |  |                         | 490,676
|Debt discounts                                               |  |                         | -      
|Balance at December 31, 2015 & 2014                          |  | $                       | 726,101
|                                                             |  |                         |        

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 December 31, 2015, the carrying value of the notes payable and accrued interest for convertible
agreements and officers’ notes was approximately $2.2 million. The JMJ convertible notes, which were originally due at various
times through December 31, 2012, yield an interest rate of 12%, the Fife Forbearance obligation is 9%. Refer to Note 3 of these
financial statements for more information about the Company’s notes payable.





F-15







|6. | RELATED PARTY TRANSACTIONS
|-- | --------------------------



MICROPHASE CORPORATION



mPhase’s President is also an
officer and shareholder of Microphase and mPhase’s Chief Operating Officer is also an employee of Microphase. On May 1, 1997,
the Company entered into an agreement with Microphase whereby it would 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 would reimburse 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 have been $5,000 per month and in July 2008; such fees were reduced to $3,000 per month. As of July 1, 2011, the
fees have increased to $3,630 per month. In addition, Microphase also charges fees for specific projects on a project-by-project
basis. On April 15, 2015 the Company moved its Connecticut Office and no longer shares office space with Microphase.



During the six months ended December
31, 2014 and 2015, $19,500 and $0 have been charged for rent and $11,211 and $4,500 have been charged for other expenses, respectively.
As a result of the foregoing transactions, as of December 31, 2015, the Company had a $32,545 payable to Microphase.



OTHER RELATED PARTIES



Mr. Abraham Biderman was employed until
September 30, 2003 by our former investment-banking firm Lipper & Company. On December 31, 2015, Mr. Biderman’s affiliated
firms of Palladium Capital Advisors and Eagle Strategic Advisers were owed unpaid finders’ fees in the amount of $174,000,
which is included in due to related parties. Also Mr. Biderman loaned the Company $90,000 in the fourth quarter of the fiscal year
ended June 30, 2015 and additionally, he advanced the Company $10,000 in the six months ended December 31, 2015, net of repayments,
together with $2,032 accrued interest and $102,032 remains outstanding as of December 31, 2015.



Transactions with Officers



At various points during past fiscal
years 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.





F-16







Total compensation and payables to
related parties and to officers is summarized below:





|Summary of compensation to related parties for the Six Months Ended December 31, 2015
|-------------------------------------------------------------------------------------
|                                                                                     
|                                                                                     
|Consulting / Salary                                                                  
|Interest                                                                             
|Selling & marketing                                                                  
|Finders Fees                                                                         
|Total compensation for the Six Months Ended December 31, 2015                        



|Summary of compensation to related parties for the Six Months Ended December 31, 2014
|-------------------------------------------------------------------------------------
|                                                                                     
|                                                                                     
|Consulting / Salary                                                                  
|Interest                                                                             
|Rent                                                                                 
|Selling & Marketing                                                                  
|Finders Fees                                                                         
|Total compensation for the Six Months Ended December 31, 2014                        
|                                                                                     



|Summary of payables to related parties as of December 31, 2015
|--------------------------------------------------------------
|                                                              
|                                                              
|Notes Payable Officers & Director                             
|Accrued Wages Officers/Accrued Fees                           
|Due to Affiliates                                             
|Interest Payable                                              
|                                                              
|Total Payable to Officers / Affiliates as of December 31, 2015



**
included in Due to Affiliates & Short term note, Director



|Summary of payables to related
    parties as of June 30, 2015
|--------------------------------------------------------------
|                                                              
|                                                              
|                                                              
|Notes Payable Officers & Director                             
|Accrued Wages Officers                                        
|Due to Affiliates                                             
|Interest Payable                                              
|                                                              
|Total Payable to Officers
    / Affiliates as of June 30, 2015



**
included in Due to Affiliates & Short term note, Director





F-17







|7. | SUBSEQUENT EVENTS
|-- | -----------------



From
January 1, 2016 through February 22, 2016 the Company issued 150,000,000 shares of common stock in private placements with accredited
investors, and incurred $3,000 in fees, generating $24,000 net proceeds to the Company for general working capital purposes.



On January 7, 2016 the Company entered
into another inventory financing note whereby the Company received $65,000 of funding, net of a $1,300 origination fee, with daily
payments of $596.94 for seven months, totaling $87,750.



The Company and the note holders for
arrangements 1 through 3 discussed in Note 3 have been renegotiating the settlement of these agreements, which if completed as
the negotiated modified conversion terms now stand, would require the Company to issue approximately 1,000,000,000 shares of common
stock over three (3) years commencing in July, 2016, subject to the Company completing a proxy statement to increase its authorized
shares.



On January 19, 2016, the Company revised
its Forbearance agreement with John M. Fife, an individual the (“Holder”)
as the Company and the Holder amend the terms of the payment schedule set forth in the Forbearance Agreement (the “Revised
Payment Schedule”) as follows:



“Monthly Payments.
On February 15, 2015 the Company shall pay $15,000.00 cash to Holder (the “Initial Cash Payment”), and on or
before the 15th day of each month thereafter the Company agrees to pay to Holder the following amounts (the “Monthly
Cash Payments”): $30,000.00 per month on each of the following dates: March 15, 2015, April 15, 2015, May 15, 2015, June
15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15, 2015 and September 15, 2015; $20,000.00
per month on each of the following dates: October 15, 2015, November 15, 2015, and December 15, 2015; $10,000.00 per month on each
of the following dates: January 15, 2016, February 15, 2016, and March 15, 2016; and $50,000.00 per month thereafter until the
Forbearance Amount has been paid in full.”





F-18







|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 SECURITIES LITIGATION REFORM 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 23,000 shareholders and approximately 17,463,484,203 shares of common stock
outstanding. The Company’s common stock is traded on the Over the Counter Bulletin Board under the ticker symbol XDSL. As
of April 15, 2015, we are headquartered in Clifton, New -Jersey. Previously mPhase shared 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 company specializing in
microfluidics, microelectromechanical systems (MEMS) and nanotechnology. mPhase is in the process of commercializing its first
nanotechnology-enabled product for military and commercial applications - The Smart NanoBattery providing Power On CommandTM.
The new patented and patent pending 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 a Smart
Surfacethat can potentially be designed for other product applications including medical oxygen generation, hot/cold
packs and emergency lighting.



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



Since our inception in 1996, operating
activities have related primarily to research and development, establishing third-party manufacturing relationships and developing
product brand recognition, and since July 1, 2007, we have focused primarily upon development of our smart reserve battery and
other battery and illuminator products.





2







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 hydrophilic 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 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 this 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 demonstrated control and manipulation of fluids on
superhydrophobic and superlyophobic surfaces to create a new type of battery or energy storage device 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 years
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.



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.





3







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. Prior to such time mPhase was limited to development using zinc-based batteries since Bell Labs
did not have facilities to handle lithium chemistry. mPhase continued to work with Rutgers ESRG that has facilities capable of
handing lithium battery development and 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 enabled 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 its 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 pouch package and breakable
separator (in place of the electrowettable membrane) that relies on mechanical rather than electrical activation to provide Power
On CommandTM. 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.



In fiscal years ended June 30, 2009
and June 30, 2011, the Company focused upon further development of its Smart Nano Battery under a Phase II STTR grant from the
U.S. Army as a potential reserve battery for a back-up computer memory application for a weapons system. The Company has recently
completed such Phase II Army grant. On November 12, of 2010, the Company announced that it had successfully triggered and activated
its first functional multi-cell smart nano battery. Triggering and activation of the cells of the battery were achieved by using
the technique of electrowetting or programmable triggering. Triggering was accomplished by applying a pulse of electrical energy
to a porous, smart surface membrane located inside each cell in the battery causing the electrolyte to come in contact with the
cell’s electrodes, creating the chemical reaction to produce voltage inside of the multi-cell battery. The multi-cell battery
consists of a matrix of 12 individual cells populated with an electrode stack consisting of lithium and carbon monofluoride materials
with each rated at 3.0 volts. Using a custom designed circuit board for testing, each of the cells in the battery were independently
triggered and activated without affecting any of the non-activated cells in the multi-cell configuration. Each cell in the battery
has a very long shelf-life prior to triggering.



On February 9, 2011, the Company announced
that it had signed a 3 year Cooperative Research and Development Agreement (CRADA) with the U.S. Army Armament Research, Development,
and Engineering Center (ARDEC) at Picatinny, New Jersey, to continue to cooperatively test and evaluate the mPhase Smart NanoBattery,
including new design features functionally appropriate for DoD based systems requiring portable power sources. The army researchers
are evaluating the prototypes using the Army’s testing facilities at Picatinny Arsenal in New Jersey in order to determine
applicability of the technology to gun fired munitions and potentially to incorporate the technologies into research and development
and other programs sponsored by Picatinny. The Research Agreement is supported by the Fuze & Precision Armaments Technology
Directorate.



During fiscal year ended June 30, 2011,
the Company completed work on its Phase II STTR grant for the U.S. army for a nano-reserve battery for a back-up computer memory
application. In addition the Company engaged First Principals, Inc to perform an evaluation or each of its patents in order to
identify a strategic partner whose products line will need the Company’s SmartNanoBattery as a compelling solution.





4







On March 6, 2012, the Company announced
that it is exploring the printing of its Smart NanoBattery on graphene and other new advanced materials. Graphene is a very strong
material that has been described as the most conductive material known, making it a vast improvement over silicon. Graphene has
the potential to lead to faster, cheaper and more flexible devices including power sources



On August 16, 2012, the Company announced
that it had received a notice of allowance for a patent from the U.S. patent office for a reserve battery utility patent. The techniques
described in the patent are for creating a battery system that is easily activated via a low energy mechanical force, thus allowing
the reserve battery to be used in a wide variety of consumer related and non-consumer related electrical devices. The invention
generally relates to a reserve battery, which includes a battery case having an electrolyte compartment at a first end and an electrode
compartment at a second end, a first terminal having an external button connected to the case at the first end, and a second terminal
connected to the case at the second end. A movable ampoule is movably positioned within the electrolyte compartment. A bias member
is located within the case between the external button and the ampoule, and a porous cutter is positioned within the case between
the electrodes and the ampoule and supported by an inverted U-shaped support structure. When an external force is applied to the
external button, the bias member transfers an internal force to the ampoule to cause the ampoule to engage the cutter and allow
the electrolyte to release thus activating the battery.



On August 23, 2012, the Company announced
that, subject to the availability of sufficient funding, it  will engage in further development of its SmartNanoBattery
to make  it rechargeable.



On September 13, 2012, the Company announced
that it had received a notice of allowance of a   new patent from the U.S. patent office for a modular device.
The invention generally relates to a handheld, powered device containing at least one power module having at least one battery,
wherein the power module is removable and separately connects to each of the load modules. The patent covers a modular device for
providing multiple modular components that may be interchanged as desired. A system for providing a modular device for use
in emergency or everyday applications and having a plurality of modular components that  are interchangeable with one
another depending on the particular desired use.



On October 26, 2012, the Company announced
the development of a prototype of a new product “the mPower Jump” designed by Porsche Design Studio and Porsche Engineering
as an automatic jump starter for a dead car battery. The device is portable, light in weight and small in size designed to fit
in the glove compartment of most cars.



On January 24, 2013, the Company announced
that it had received a notice of allowance from the U.S. patent office of a patent covering a device for fluid  spreading
and transport. The invention relates to a single porous substrate formed from a network of filaments wherein the network of filaments
is comprised of a first plurality of filaments and a second plurality of filaments is exposed to a surface modification treatment
and the second plurality of filaments is covered with a conformal coating. A wetting region comprised of the first plurality of
filaments extends through a first portion of the porous substrate and is permeable to fluid transport and a non-wetting region
comprised of the second plurality of filaments which is operable to switch between a wetting and non-wetting state by an electrical
source coupled to the second plurality of filaments.The invention protects a porous substrate with integrated wetting and non-wetting
regions and is a key patent win for the Company relative to the protection of its  intellectual property in the area
of microfluid dynamics.



On January 30, 2013, the Company announced
that it had received a patent from the U.S. patent  office for a reserve battery system. The invention patented
generally relates to a battery system that is easily activated via low mechanical force thus allowing a reserve battery to be used
in a wide variety of consumer related and non-consumer related electrical devices.



On February 12, 2013, the  Company
announced that it has filed a United States Letter Patent application for a novel drug delivery system based on its Smart Surface
technology.The drug delivery patent is based on mPhase's Smart Surface technology electronically or manually enabling the precise
control of a fluid on a nano-structured surface.The drug delivery system generally relates to a drug delivery system for automatically
dispensing a pre set dosage of a drug agent or medication.





5







On June 18, 2013, the Company announced
that it had received the Frost & Sullivan award for its Innovative nano  battery technology.  Frost &
Sullivan noted that the smart nanobattery is sustainable, cost-effective, easy to handle, and possesses a long shelf life, all
of which clearly differentiate it from competing battery technologies. Frost & Sullivan further noted that this positions the
technology to enhance the effectiveness of conventional batteries and encourage widespread use of reserve batteries.



On October 31, 2013, the Company
announced that it had developed a cost–reduced version of its automotive battery jump starter product designed
to appeal to the mass market.



During the remainder of fiscal year
ended June 30, 2014 the Company began to receive its first revenues from sales of the Jump and mini Jump automotive battery jump
starter from the commercial wholesale and retail markets in the United States. During the quarter ended December 31, 2014
sales of the Company Jump starter products have increased from $251,071 in the quarter ended September 30, 2014 to $540,902.



Emergency Flashlight



On December 5, 2008, mPhase Technologies,
Inc. signed a contract with Porsche Design Gesellschaft m.b.H. in Austria (“Porsche Design’ Studio”), to design
a premium version of the AlwaysReady Emergency Flashlight. A pilot program that began in March of 2010 has resulted in the sale
of approximately 84 emergency flashlights. The flashlight sold in the pilot program contained 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. The Company
maintains a small inventory of this product, which it continues to sell but does not, at this time, consider it a core product.



mPower Jump, mPower Mini Jump and
mPower Jump Plus Products



During fiscal year ended June 30, 2014,
the Company announced that it had commenced sales through its wholly-owned subsidiary mPower Technologies, Inc. of the mPower Jump,
mPower Mini Jump and mPower Jump Plus products. Each product is a rechargeable, compact device designed to jump start a dead battery
in an automobile. Each product is rechargeable in a significantly shorter period of time than other jump starters and has
a much smaller footprint enabling  them to fit in the glove compartment in most cars. The Company views these three products
as core strategic products.



The mPower Jump starts all 12V cars
including 8 cylinder engines. Its peak current is 600 Amps and weighs 1.5 pounds. It has an operating temperature range of -4 degrees
Fahrenheit to 140 degrees Fahrenheit. The mPower Mini Jump starts all 12 V vehicles and can charges smartphones, tablets and cameras
and has three charging modes. It has the same temperature operating range as the mPower Jump. The mPower Jump Plus starts up to
40 vehicles on a single charge and recharges in approximately 8 hours. It has the same operating temperature range as the mPower
Jump and also will fit into the glove compartment of most cars.



Finally, mPower Technologies, Inc. intends
to provide multiple marketing services for small businesses and campaigns wishing to establish recognizable brands. The marketing
offerings to potential clients will target improvement of their company image, assist in the growth of their service, campaign
or product brands and engage their target audience by driving purchases,establishing trust and building brand loyalty.



mPower marketing support offerings could
include a call center, web development and support, branding strategies, data management mining, ecommerces as well as 24/7 customer
support services.



We are targeting campaigns and small
businesses seeking public awareness and customer support services.



IPTV and Magnetomer



The Company has discontinued these products.





6







FINANCIAL OVERVIEW



Revenues. Since October 1, 2013,
quarterly revenue, if any, has primarily been attributable to sales of its Jump and Mini Jump Products.



Cost of revenues. Cost associated
with revenues are comprised primarily of the cost to purchase out-sourced developed and manufactured products internationally and
having them private labeled under the mPower brand name. These costs may be reduced assuming the Company moves forward with the
commercialization and distribution of its automotive battery jump starter product and other potential products associated with
its mechanically-activated reserve battery in large volumes.



Research and development. Research
and development expenses have consisted principally of direct labor and payments made to various outside vendors including Porsche
Design Studio and cost reduction vendors of the Porsche Designed products outside of the United States in connection with the Company’s
Automotive Battery Jump Starter products. The Company is continuing to seek SBIR grants and take advantage of other U.S. government
financial programs to fund continued research and development of its Smart Nano Battery.



General and administrative. General
and administrative expenses consist primarily of salaries and related expenses for personnel engaged in sales of its automotive
jump starter product line and legal and accounting personnel. In addition the Company from time to time will use outside consultants.
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.



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
losses of ($211,858,824) and has a stockholders’ deficit of ($4,774,747) through December 31, 2015. The auditors’ report
for the fiscal year ended June 30, 2015 includes the statement that "there is substantial doubt of the Company’s ability
to continue as a going concern". As of December 31, 2015, the Company had a negative net worth of ($4,774,747) compared to
a negative net worth of ($3,842,865) as of June 30, 2015 as a result of continuing net losses.



The Company raised $126,000 in net proceeds
from private placements of 466,666,667 shares of common stock during the six months ended December 31, 2015. The Company raised
$392,500 from private placements of 1,080,000,000 shares of its common stock during the six months ended December 31, 2014.



While the Company believes it will be
able to fund short term capital needs, it will from time to time need to supplement such funding. In the longer term, we estimate
that the Company will need to raise approximately $2,000,000 to $4,000,000 of additional funds through June 30, 2016 in order to
fund the continued commercialization of its products, the range effected by the how many products the Company rolls out.



The Company does not expect to derive
any material revenue from its nanotechnology product development during the current fiscal year. The Company estimates that material
revenues from its SmartNanoBattery could occur in 18 months depending upon the Company’s ability to secure federal funding
in the form of SBIR grants and adoption and custom tailoring of such product as a reserve battery to a computer memory or other
function for a specific weapons system. Revenues may be derived in fiscal year 2016 from  sales of the Company’s
jump starter products depending upon the Company’s ability to secure arrangements with major distributors of automotive parts
in the retail markets.





7







THREE MONTHS ENDED DECEMBER 31, 2015
VS. DECEMBER 31, 2014



REVENUE



Total revenues were $215,075 for the
three months ended December 31, 2015, compared to $540,902 for the three months ended December 31, 2014. The decrease in revenue
was the result of the decline in working capital that caused the Company to carry a smaller inventory and a Black Friday sale from
a major customer in the previous year that was absent in the current three month period.



RESEARCH AND DEVELOPMENT



Research and development expenses were
$0 for the three months ended December 31, 2015 as compared to $2,192 during the comparable period in 2014. The Company has curtailed
its program in research and development in order to conserve funds during the period.



Subject to available funds, the Company
expects to increase its research and development efforts throughout fiscal 2016 and 2017. Such research is expected to focus
on other applications for “smart surfaces” including the Smart Nano Battery. 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.



SELLING AND MARKETING EXPENSES



Selling and marketing expenses were
$52,710 for the three months ended December 31, 2015 as compared to $83,782 for the comparable period in 2014.



GENERAL AND ADMINISTRATIVE EXPENSES



General and administrative (G&A)
expenses were $250,093 for the three months ending December 31, 2015, down from $327,346 or a decrease of $77,253 from the comparable
period in 2014. Administrative expenses were held in check as the Company has made a concentrated effort to freeze or otherwise
reduce administrative costs while it seeks to commercialize its smartnanobattery product capabilities and secure more substantial
research funding for possible applications of its “smart surfaces” technology.



OTHER (EXPENSE) AND INCOME



Included in this category for the
three month period ended December 31, 2015 are non-cash charges and costs associated with convertible debt derivative
liabilities. Such costs include a non-cash charge for the change in derivative value of $237,911, resulting in a net loss of
$237,911 from derivative liabilities associated with the Company’s convertible debt and is not indicative of operating
results. Additionally, net interest expense of $92,381 and settlement income of $1,160 brought total other expense
to $329,132 in the current period. For the same period ended December 31, 2014, net other expense totaled $375,224,
consisting primarily of net loss of $154,359 from derivative liabilities, decreased by settlement expense of $137,419 and
interest expense of $83,446.



NET INCOME AND (LOSS)



The Company recorded net loss of $580,330
for the three months ended December 31, 2015 as compared to net loss of $567,390 for the three months ended December 31, 2014.
This represents a net loss per common share of ($0.00) and loss per share of ($0.00) for the three month periods ended December
31, 2015 and 2014 respectively. The net loss recorded in the current period as compared to the net loss reported for the same period
last year is directly attributable to the magnitude of the net gain from derivative liabilities associated with the Company’s
convertible debt recorded for the three months ended December 31, 2015 and is not indicative of operating results.





8







SIX MONTHS ENDED DECEMBER 31,
2015 VS. DECEMBER 31, 2014



REVENUE



Total revenues were $398,346 for the
six months ended December 31, 2015 compared to $794,973 for the six months ended December 31, 2014. The decrease in revenue was
the result of the decline in working capital that caused the Company to carry a smaller inventory and a Black Friday sale from
a major customer in the previous year that was absent in the current six month period.



RESEARCH
AND DEVELOPMENT



Research and
development expenses were $0 for the six months ended December 31, 2015 as compared to $4,694 during the comparable period in 2014.
The Company has curtailed its program in research and development in order to converse funds during the period.



Subject to
available funds, the Company expects to increase its research and development efforts throughout fiscal 2016 and 2017. Such research
is expected to focus on other applications for “smart surfaces” including the Smart Nano Battery. 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.



SELLING AND MARKETING EXPENSES



Selling and
marketing expenses were $94,649 for the six months ended December 31, 2015 as compared to $139,637 for the comparable period in
2014.



GENERAL
AND ADMINISTRATIVE EXPENSES



General and
administrative (G&A) expenses were $485,895 for the six months ending December 31, 2015, down from $756,199 or a decrease of
$270,304 from the comparable period in 2014. Administrative expenses were held in check as the Company has made a concentrated
effort to freeze or otherwise reduce administrative costs while it seeks to commercialize its smart nanobattery product capabilities
and secure more substantial research funding for possible applications of its “smart surfaces” technology.



OTHER (EXPENSE) AND INCOME



Included in
this category for the six months ended December 31, 2015 are non-cash charges and costs associated with convertible debt. This
includes a non-cash charge for the change in derivative value of $490,676, resulting in a net loss of $490,676 from derivative
liabilities associated with the Company’s convertible debt and is not indicative of operating results. Additionally, net
interest expense of $173,238 and settlement income of $1,160 brought total other expense to $662,754 in the period. For the same
period ended December 31, 2014, net other expense totaled $238,848, consisting primarily of net gain of $60,413 from derivative
liabilities, increased by interest expense of $161,842.



NET INCOME AND (LOSS)



The Company
recorded a net loss of $1,124,053 for the six months ended December 31, 2015 as compared to net loss of $851,680 for the six months
ended December 31, 2014. This represents a net loss per common share of ($0.00) and loss per share of ($0.00) for the six month
periods ended December 31, 2015 and December 31, 2014, respectively. The net loss recorded in the current period as compared to
the net loss reported for the same period last year is directly attributable to the magnitude of the net gain from derivative liabilities
associated with the Company’s convertible debt recorded for the six months ended December 31, 2015 and is not indicative
of operating results.





9







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
principles 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."



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 FASB Standards Codification
Topic 815 (previously known as EITF 00-19) (SEE ALSO NOTE 3 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 liabilities.



The liability was recorded at the fair
market value, which estimated value 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 of 81% and a risk-free interest rate of 2.25% . At the issuance date of the free standing warrants, which 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 fiscal year ended 2009, the estimated
value was reduced to zero. The net change in the 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 with FASB Standards Codification Topic 815 (previously known as EITF 00-19). Effective May, 2009, warrants to purchase
11,111,112 shares, and effective September, 2009, warrants to purchase 1,493,056 shares, representing all of the contracts for
warrants to purchase 12,604,168 shares that were reclassified to liabilities during the fiscal year ended June 30, 2008, were reclassified
to permanent equity.



Subsequent to September 30, 2009, the
Company has not entered into, and presently the Company does not have, any contracts for warrants or other equity instruments subject
to reclassification to liabilities as prescribed by FASB Standards Codification Topic 815 (previously known as EITF 00-19) until
August 10, 2011, when it entered into a Convertible Note for $25,000, which concurrently provided the note holder a warrant and
recorded an additional derivative liability for the warrant.



DERIVATIVE LIABILITY



The Company has estimated the value
of the derivative liability associated with its convertible debt. Such estimate is based on a Black Scholes calculation and is
initially recorded for each convertible debt agreement at the time the debt was issued. At each reporting period, the value of
this liability is marked to market and adjusted accordingly. Such adjustments are included in Other Income (Expense).



STOCK-BASED COMPENSATION



On July 1, 2005, the Company adopted
the provisions of ASC 718 "Compensation - Stock Compensation" which requires companies to measure and recognizes 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 Company adopted the "modified prospective" method, whereby fair value
of all previously-granted employee stock-based arrangements that remained unvested at July 1, 2005 and all grants made on or after
July 1, 2005 have been included in the Company’s determination of stock-based compensation expense.





10







MATERIAL RELATED PARTY TRANSACTIONS



MICROPHASE CORPORATION



mPhase’s President was also an
officer and shareholder of Microphase. Mr. Durando was Microphase’s cheif operating officer since May 1, 1995 and a director
since March 31, 2010 until his resignation from both positions on January 22, 2015. On February 9, 2015 Mr. Durando assigned all
his interests in the Capital Stock of Microphase , for a period of not less than three years, to the RCKJ Trust as the Grantor.
The beneficial owners for economic purposes are Mr. Durando’s children. Mr. Durando is presentlya strategic employee of Microphase.
On May 1, 1997, the Company entered into an agreement with Microphase whereby it would 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 would reimburse 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 have been $5,000 per month and in July 2008; such fees were reduced to $3,000 per month. As of July 1, 2011, the
fees have increased to $3,630 per month. In addition, Microphase also charges fees for specific projects on a project-by-project
basis. In April 2015 the Company moved its Connecticut office to a new location and no longer shares its office with Microphase.



During the six months ended December 31, 2015 and December
31, 2014, $4,500 and $30,711 respectively, have been charged to expense. As a result of the foregoing transactions, as of December
31, 2015, the Company had a $32,545 payable to Microphase.



OTHER RELATED PARTIES



Mr. Abraham Biderman was employed until
September 30, 2003 by our former investment-banking firm Lipper & Company. On September 30, 2015, Mr. Biderman’s affiliated
firms of Palladium Capital Advisors and Eagle Strategic Advisers were owed unpaid finders’ fees in the amount of $174,000,
which is included in due to affiliates. Also, Mr Biderman loaned the Company $90,000 in the fourth quarter of fiscal year ended
June 30, 2015 and advanced an additional $10,000 during the six months ended December 31, 2015 and together with $2,032 accrued
interest, $102,032 remains outstanding at December 31, 2015.



Transactions with Officers



At various points during past fiscal
years 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.





11







Total compensation and payables to
related parties and to officers is summarized below:







|Summary of compensation to related parties for the Six Months Ended December 31, 2015
|-------------------------------------------------------------------------------------
|                                                                                     
|                                                                                     
|Consulting / Salary                                                                  
|Interest                                                                             
|Selling & marketing                                                                  
|Finders Fees                                                                         
|Total compensation for the Six Months Ended December 31, 2015                        



|Summary of compensation to related parties for the Six Months Ended December 31, 2014
|-------------------------------------------------------------------------------------
|                                                                                     
|                                                                                     
|Consulting / Salary                                                                  
|Interest                                                                             
|Rent                                                                                 
|Selling & Marketing                                                                  
|Finders Fees                                                                         
|Total compensation for the Six Months Ended December 31, 2014                        
|                                                                                     



|Summary of payables to related parties as of December 31, 2015
|--------------------------------------------------------------
|                                                              
|                                                              
|Notes Payable Officers & Director                             
|Accrued Wages Officers/Accrued Fees                           
|Due to Affiliates                                             
|Interest Payable                                              
|                                                              
|Total Payable to Officers / Affiliates as of December 31, 2015



**
included in Due to Affiliates & Short term note, Director



|Summary
    of payables to related parties as of June 30, 2015
|--------------------------------------------------------------
|                                                              
|                                                              
|                                                              
|Notes
    Payable Officers & Director                         
|Accrued
    Wages Officers                                    
|Due to Affiliates                                             
|Interest
    Payable                                          
|                                                              
|Total
    Payable to Officers / Affiliates as of June 30, 2015



**
included in Due to Affiliates & Short term note, Director





12







LIQUIDITY AND CAPITAL RESOURCES



The Company has incurred cumulative
losses of $211,858,824 and a working capital deficit of $2,901,678 as of December 31, 2015. The auditors’ report for the
fiscal year ended June 30, 2015 includes the statement that "there is substantial doubt of the Company’s ability to
continue as a going concern". As of December 31, 2015, the Company had a negative net worth of ($4,774,747) compared to a
negative net worth of ($3,842,865) as of June 30, 2015 as a result of continuing net losses.



During the six months ended December
31, 2015, the Company issued 466,666,667 shares of its common stock in connection with private placements, pursuant to Rule 506
of Regulation D of the Securities Act of 1933, as amended, raising gross proceeds of $140,000 and accrued finder’s fees in
the amount of $14,000. The proceeds were used by the Company as working capital.



During the six months ended December
31, 2014, the Company issued 1,080,000,000 shares of its common stock in connection with private placements included 30,000,000
shares to finders, pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended, raising gross proceeds of $420,000
and paid finder’s fees in the amount of $27,500. The proceeds were used by the Company as working capital.



Also during the six months ended December
31, 2015, an unaffiliated shareholder advanced the Company $35,000, which remains outstanding and a director of the Company loaned
the Company $90,000 in the fourth quarter of fiscal year ended June 30, 2015 and additionally$10,000 net of repayments during the
six months ended December 31, 2015, $100,000 of principal and $2,032 of interest, totaling $102,032, remains outstanding at December
31, 2015.



While the Company believes that private
placements of its common stock to be issued from time to time will fund short term capital needs it will soon need to seek shareholder
approval to increase its authorized shares of common stock. The Company is seeking to access a federal government sponsored funding
programs designed to enable small business create additional job opportunities in the United States.. Such monies would be necessary
primarily to fund expenditures for commercialization and distribution of its cost reduced automotive jump starter product designed
for the mass market. The Company has been seeking distributors with which to establish licensing or distribution agreements in
order to maximize potential revenue associated with the product.



The Company does not expect to derive
any material revenue from its nanotechnology product development until after a deployment and custom tailoring of its Smart Nanobattery
takes place by the Army which the Company currently estimates could occur during the next 18 months.



MANAGEMENT’S PLANS



The Company has shifted its focus to
the development of its automotive jump starter products and its “smart surfaces” using the science of nanotechnology.
The Company believes it will continue to generate revenues with respect to its cost-reduced automotive jump starter through Fiscal
2016. The Company does not expect to derive any material revenue from its nanotechnology products under development during the
next 18 months. The Company anticipates that it will need not less than $1,000,000 of additional capital to commence cost reduction,
marketing and continued expansion of the distribution of its additional Jump Starter products.



The Company and the note holders for arrangements 1 through
3, JMJ Financial, have been renegotiating the settlement of these agreements, however no final agreement has been reached with
respect to the terms of a refinancing of such obligations.



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 our Jump products and a successful monetization of our intellectual property.





13







|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 December 31, 2015.



|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 December 31, 2015 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.





14







PART II. OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------



On February 2, 2015 the Securities and
Exchange Commission upheld the denial of a corporate action by the Financial Industry Regulatory Authority (FINRA) in connection
with the Company’s seeking to reverse split its common stock pursuant to FINRA Rule 6490 (see SEC Release No 7418 of February
2, 2015). The action was found as deficient by FINRA on the basis that two corporate officers and directors of the Company had
previously entered into a Consent Decree with the SEC in October of 2007 by them when they were previously officers of another
company named Packetport.com. The Company is considering various options in connection with this matter including its right to
appeal this decision to the Federal Circuit Court of the D.C. Circuit.



On November 20, 2012, mPhase Technologies,
Inc. (the “Company”) formally received an Event of Default and Redemption Notice dated November 16, 2012 with respect
to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George Investments LLC and assigned to John Fife.
The Triggering Events include alleged defaults with respect to payments owed by the Company under the Convertible Note and the
failure to convert the Note into shares of the Company’s common stock. The alleged amount owed according to the notice is
approximately $902,279. A lawsuit was commenced in late November in the Federal District Court, Northern District of Illinois Eastern
Division by Fife against the Company alleging breach of contract and other actions in connection with the 8% Convertible Note.



On December 15, 2014, a Memorandum Opinion
and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of
John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”)
for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed.



Effective February 10, 2015, the Company
entered into a Forbearance Agreement with the Holder. The agreement provides that the Holder would forego his right to enforce
its remedies pursuant to the judgment, which include demand for immediate payment of approximately $1.6 million, provided the Company
satisfy its forbearance obligation of $1,003,943, and after accounting for a payment of $15,000 the Company paid, under the terms
of the agreement.



The
terms of the agreement, as amended, provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments
in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and
thereafter and on or before the 15thday of each month thereafter
the Company agrees to pay to Holder the following amounts ; $30,000.00 per month on each of the following dates: March 15, 2015,
April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15,
2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December
15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00
per month thereafter until the Forbearance Amount has been paid in full. The Company has been able to meet its monthly payment
obligations through September, 2015.



The value of the forbearance obligation
on December 31, 2015 is $818,816. At December 31, 2015, the derivative liability was estimated to be $716,543, and as such a total
of $1,535,359 liabilities have been recorded in the financial statements to reflect this obligation, $427,900 included in current
liabilities and $1,107,459 in non-current liabilities. The value of the judgment totaled approximately $1.38 million as of September
30, 2015 and bears a punitive interest rate of 16%, and would become payable in full if the Company defaults under the forbearance
obligation. The Forbearance agreement requires the Company to place, and the Company has done so, 1,000,000,000 shares in reserve
with its transfer agent, to satisfy the conversion provisions for any unpaid monthly cash payments.



The Company has not issued any stock
for conversions since entering into the forbearance agreement and during the year ended June 30, 2015 the Company repaid $69,081
of principle and $41,019 of interest under the agreement. During the six months ended December 31, 2015, the Company repaid $103,437
of principle and $36,563 of interest under the agreement. As of December 31, 2015 this forbearance obligation would only be convertible
for monthly obligations the Company elects to/or does not pay in cash in part or in full, for: (i) up to 62,500,000 shares, for
the satisfaction of the next required monthly payment, (ii) up to 5,117,596,794 shares, for the satisfaction of the next 12 required
monthly payments; and (iii) up to 2,674,375,000 shares of our common stock should the entire obligation be converted.



15







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



All proceeds received from the following financings were
used by the Company for working capital needs.



Private Placements

During the six months ended December
31, 2015, the Company issued 466,666,667 shares of its common stock in connection with private placements, pursuant to Rule 506
of Regulation D of the Securities Act of 1933, as amended, raising gross proceeds of $140,000 and paid finder’s fees in the
amount of $14,000. The proceeds were used by the Company as working capital.



During the six months ended December
31, 2014, the Company issued 1,080,000,000 shares of its common stock in connection with private placements pursuant to Rule 506
of Regulation D of the Securities Act of 1933, as amended, raising gross proceeds of $420,000 and incurring finder’s fees
of $27,500. The proceeds were used by the Company as working capital.



Stock Based Compensation



During the six months ended December
31, 2015, the Company issued 14,973,000 shares of common stock to an employee valued at $5,386. The Company during such period
did not issue any common stock, warrants or options to officers.



During the six months ended December
31, 2014, the Company issued 26,778,857 shares of common stock compensation to employees valued at $14,614. The Company during
such period did not issue any common stock, warrants or options to officers.



Conversion of Debt Securities



During the six months ended December
31, 2015, no conversions were made of convertible debt and accrued interest thereon into shares of common stock.



During the six months ended December
31, 2014, no conversions were made of convertible debt and accrued interest thereon into shares of common stock.



Long Term Convertible Debentures
/ Debt Discount



The Company had nine (9) separate convertible
debt arrangements with independent investors that were in effect at various times during the two fiscal years ended June 30, 2015,
three (3) of which were still active as of December 31, 2015.



These transactions are intended to provide
liquidity and capital to the Company and are summarized below.



Arrangement #1 (JMJ Financial, Inc.)



On November
17, 2009, the Company received a total of $186,000 of proceeds in connection with a new financing agreement with JMJ Financial.
This transaction consists of the following: 1) a convertible note 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 promissory 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 holder of the convertible
note. Conversion of outstanding principal into shares of common stock is at the option of the holder. The number of shares into
which this note can be converted is equal to the dollar amount of the note divided by 75% of the lowest trade price during the
20 day trading period prior to conversion



To date the
Company has received a total of $639,500 in cash and has issued 322,187,500 shares of common stock to the holder upon conversions
of $325,440 of principle and $994,766 of conversion fees. The remaining $604,600 of cash which was to be received from the holder
plus accrued and unpaid interest was convertible into shares of common stock at the option of the holder. Upon receipt, in full,
of cash by the Company equaling the purchase price of the convertible note plus interest or any portion thereof payable through
maturity, the holder may convert such portion of the total amount of interest funded that would accrue to maturity into additional
shares of common stock. Based upon the price of the Company’s common stock on June 30, 2011 of $.0073 per share the holder
could convert the remaining principal amount plus interest of this convertible note into approximately 222,142,857 shares of common
stock at the full contract value; of which the derivative liability associated with this arrangement is calculated. At June 1,
this note was combined with arrangement #4 JMJ Financial, Inc. During the year ended June 30, 2011 the holder converted $33,750
of principal into 10,000,000 shares of common stock and amortization of debt discount amounted to $412,332, reducing the debt discount
balance to $100,000.





16







During the
year ended June 30, 2012, the Company reduced the note payable and debt discount by $42,000 in proportion with the amount funded
to the total original funding commitment and amortization of debt discount amounted to $27,067 reducing the balance to $30,933.
Also during the year ended June 30, 2012, the Company had incurred $994,766 of conversion fees which together with $291,690 of
principle was converted into 322,187,500 shares of common stock. At June 30, 2012 this convertible note had $372,060 outstanding
which was combined with arrangement #3 JMJ Financial, Inc.



Arrangement
#2 (JMJ Financial, Inc.)



On December
15, 2009 the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible
note issued by the Company in the amount of $1,500,000 plus a one-time interest factor of 12% ($180,000) and a maturity date of
December15, 2012 and (2) a secured promissory note in the amount of $1,400,000 plus a one-time interest rate factor of 13.2% ($180,000
) and a maturity date of December 15, 2012 due from the holder of the convertible note. To date the Company has received a total
of $300,000 cash and has issued no shares of common stock to the holder upon conversions. The remaining $1,280,000 of cash to be
received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the holder.
Upon receipt, in full, of cash by the Company equaling the purchase price of the convertible note plus interest or any portion
thereof payable through maturity, the holder may convert such portion of the total amount of interest funded that would accrue
to maturity into additional shares of common stock.



The number
of shares into which this convertible note can be converted is equal to the dollar amount of the note divided by 75% of the lowest
trade price during the 20 day trading period prior to conversion. Based upon the price of the Company’s common stock on June
30, 2011 of $.0073 per share the holder could convert the remaining principal amount plus interest of this convertible note into
approximately 285,714,286 shares of common stock at the full contract value; of which the derivative liability associated with
this arrangement is calculated.



The Company
and the holder are presently negotiating potential amendments to this agreement, and funding and conversions have not occurred
since April, 2011. For accounting purposes the note receivable has been fully reserved, and the liability is recorded, when netted
against the debt discount and cumulative conversions, at the amount funded. Based upon the price of the Company’s common
stock on June 30, 2011, the net liability of this note is convertible into approximately 38,095,238 shares of common stock. At
the commitment date, the derivative value of the embedded conversion feature of such security was $542,714 and the debt discount
was valued at $642,714. As of June 30, 2011, this value was calculated to be $607,994. During the year ended June 30, 2011, amortization
of debt discount amounted to $418,552, reducing the balance to $100,000.



During the
fiscal year ended June 30, 2012, the Company reduced the note payable and debt discount by $79,000 in proportion with the amount
funded to the total original funding commitment and amortization of debt discount amounted to $8,573 reducing the balance to $12,427.
As of June 30, 2012, this convertible note has $321,000 outstanding which was combined with arrangement #3 JMJ Financial, Inc.



Arrangement
#3 (JMJ Financial, Inc.)



On April 5,
2010, the Company entered into a new financing agreement with JMJ Financial that consists of the following: 1) a convertible note
issued by the Company in the principal amount of $1,200,000 plus a one-time interest factor of 12% ($144,000) and a maturity date
of December 15, 2012, and (2) a secured promissory note from the holder of the convertible 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 December 15, 2012. To date the Company has received
a total of $100,000 cash and has issued no shares of common stock to the holder upon conversions. The remaining $1,144,000 of cash
to be received from the holder plus accrued and unpaid interest is convertible into shares of common stock at the option of the
holder.



Upon receipt,
in full, of cash by the Company equaling the purchase price of the convertible note plus interest or any portion thereof payable
through maturity, the holder may convert such portion of the total amount of interest funded that would accrue to maturity into
additional shares of common stock. The number of shares into which this convertible note can be converted is equal to the dollar
amount of the note divided by 75% of the lowest trade price during the 20 day trading period prior to conversion. Based upon the
price of the Company’s common stock on June 30, 2011 of $.0073 per share the holder could convert the remaining principal
amount plus interest of this convertible note into approximately 228,571,429 shares of common stock at the full contract value;
of which the derivative liability associated with this arrangement is calculated.



For accounting
purposes the note receivable has been fully reserved, and the liability is recorded, when netted against the debt discount and
cumulative conversions, at the amount funded. Based upon the price of the Company’s common stock on June 30,
2011, the net liability of this note is convertible into approximately 19,047,619 shares of common stock. At the commitment
date, the derivative value of the embedded conversion feature of such security was $421,891 and the debt discount was valued at
$521,891. As of June 30, 2011, this value was calculated to be $486,795. During the year ended June 30, 2011, amortization of debt
discount amounted to $378,761, reducing the balance to $ 100,000.





17







During the
fiscal year ended June 30, 2012, the Company reduced the note payable and debt discount by $91,000 in proportion with the amount
funded to the total original funding commitment and amortization of debt discount amounted to $3,674 reducing the balance to $5,326.



As of June 30, 2012, this convertible
note has $109,000 outstanding, which when combined with arrangements #8 and #9 totaled $802,060, which the Company entered into
an amended agreement on June 1, 2012 whereby the Company agreed to make payments of principle and interest of $37,018 per month
commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then no conversions
into the Company’s common stock would be available to the holder. Also as of June 30, 2012 the derivative value of the embedded
conversion feature of this arrangement when combined with arrangements #2 and #3 totaled $0; which when compared to the combine
value of $1,567,512 created a non-cash credit to earnings of $1,567,512 in fiscal 2012. As of June 30, 2015 and June 30, 2014, the
combined arrangements with JMJ in this note would be convertible into 258,208,588 and 237,807,785 and as of December 31, 2015
into 269,052,385 common shares at the conversion floor price of $.004; and would be required to do so if the Company does not make
the scheduled payments pursuant to the June 1, 2012 amended agreement.



The Company has not made any payments
of the $37,018 installment payments commencing October 1, and the holder has continued to accrue interest on the outstanding balance.



Arrangement #4 (John Fife dba St. George Investors)/Fife
Forbearance



On September 13, 2011, the Company issued
a second Convertible Note to John Fife founder and president of St. George Investments, in a Private Placement pursuant to Section
4(2) of the Securities Act of 1933. The initial principal amount of the first funded tranche of the Convertible Note was $357,500
and the Company received cash proceeds of $300,000.



A second tranche of the Convertible
Note in the amount of $200,000 cash is funded upon the filing by the Company of a Registration Statement on Form S-1 with the Securities
and Exchange Commission providing for the registration of 185,400,000 shares of common stock that may be converted into from time
to time by the holder of the Convertible Note. The instrument is convertible into the Company’s common stock at 75% of the
volume weight average price of the stock based upon the average of the three lowest trading days in the 20 day trading period immediately
preceding such conversion. Absent an effective Registration Statement, the holder of the Convertible Note may not sell any common
stock prior to 6 months from the date of funding of each of the respective tranches of such instrument under Rule 144 of the Securities
Act of 1933.



All proceeds received in connection
with the above financing have been used by the Company as working capital.



At the time of the transaction, the
embedded conversion feature of this security and the warrant was calculated to be $137,481 and the loan discount totaled $194,981
for the initial tranche and the embedded conversion feature of this security and the warrant for a second tranche of the Convertible
Note was calculated to be $46,379. On June 30, 2012, given the changes in the Company’s stock price during the 20 day look-back
period for June 30, 2012 and conversions during the period this estimated liability had increased from $183,860 to $771,079, an
increase this period of $587,219, creating a non-cash charge to earnings for the twelve months ended June 30, 2012 of that amount.
During the twelve month period ended June 30, 2012 amortization of debt discount amounted to $185,456 reducing the combined balance
to $55,903.



The company
entered into an amended agreement on June 1, 2012, when principle of $557,500 accrued interest of $66,338 and $95,611 of contractual
charges totaled $719,449; with this noteholder whereby the Company agreed to make payments of principle and interest of $33,238
per month commencing October 1, 2012 through September 1, 2014 at 8% interest and so long as the payments are not in default then
no conversions into the Company’s common stock would be available to the holder. As of September 30, 2012 this note would
be convertible into 789,645,351 shares of common stock at the original terms. The Company has not made any payments of the $33,238
installment payments commencing October 1, and the holder has continued to accrue interest on the outstanding balance (see note
4). On November 20, 2012, mPhase Technologies, Inc. (the “Company”) formally received an Event of Default and Redemption
Notice dated November 16, 2012 with respect to an 8% Convertible Note dated September 13, 2011 issued by the Company to St. George
Investments LLC and assigned to John Fife. The notice included alleged defaults with respect to payments owed by the Company under
the Convertible Note and the failure to convert the Note into shares of the Company’s common stock. The alleged amount owed
according to the notice is approximately $902,279. On June 30, 2013, given the changes in the Company’s stock price during
the 20 day look-back period for June 30, 2013, this estimated liability had decreased to $138,696, a decrease this period of $689,007,
creating a non-cash credit to earnings for the year ended June 30, 2013 of that amount.



During the
year ended June 30, 2013, amortization of debt discount amounted to $55,903, reducing the combined balance to $0. As of June 30,
2013 this note would have been convertible into 700,806,707 shares of common stock at the original terms. On June 30, 2014, given
the changes in the Company’s stock price during the 20 day look-back period for June 30, 2014, this estimated liability had
increased to $548,906, an increase this period of $410,210, creating a non-cash charge to earnings for the year ended June 30,
2014 of that amount. As of June 30, 2014 this note would have been convertible, at the original terms, into 1,392,162,326 shares
of common stock.





18







On December 15, 2014, a Memorandum Opinion
and Order was issued by the United States District Court Northern District of Illinois Eastern Division granting the motion of
John Fife, plaintiff (“Plaintiff”), for summary judgment against mPhase Technologies, Inc. (the “Company”)
for breach of contract (the “Opinion”). All other claims and counterclaims were dismissed. The Company commenced settlement
negotiations with the Plaintiff after we explored options with regard to an appeal and other alternatives, which there is no guarantee
of success. As discussed in Note 7, effective February 10, 2015, the Company entered into a Forbearance Agreement with the Holder.
The agreement provides that the Holder would forego his right to enforce its remedies pursuant to the judgment, which include demand
for immediate payment of approximately $1.6 million, provided the Company satisfy its forbearance obligation of $1,003,943, and
after accounting for a payment of $15,000 the Company paid, under the terms of the agreement.



The
terms of the agreement, as amended, provide for interest to accrue on the unpaid portion at 9% per annum with monthly payments
in cash or conversions into common stock of the Company; commencing with an initial $15,000 payment due on February 15, 2015, and
thereafter and on or before the 15thday of each month thereafter
the Company agrees to pay to Holder the following amounts ; $30,000.00 per month on each of the following dates: March 15, 2015,
April 15, 2015, May 15, 2015, June 15, 2015, and July 15, 2015; $15,000.00 per month on each of the following dates: August 15,
2015 and September 15, 2015; $20,000.00 per month on each of the following dates: October 15, 2015, November 15, 2015, and December
15, 2015; $35,000.00 per month on each of the following dates: January 15, 2016 and February 15, 2016 and March 15, 2016; and $50,000.00
per month thereafter until the Forbearance Amount has been paid in full. The Company has been able to meet its monthly payment
obligations through November, 2015.



The value of the forbearance debt obligation
on June 30, 2015 is $902,253. At June 30, 2015, given the changes in the Company’s stock price during the 20 day look-back
period for June 30, 2015, the estimated derivative liability had decreased to $232,423, a decrease from June 30, 2014 of $548,906
totaling $316,493, which when added to the $18,469 increase at the time the forbearance agreement resulted in a non-cash credit
to earnings of $334,962 for the year ended June 30, 2015. The Forbearance agreement requires the Company to place, and the Company
has done so, 1,000,000,000 shares in reserve with its transfer agent, to satisfy the conversion provisions for any unpaid monthly
cash payments. The agreement original agreement also provided that the Company file a Proxy statement before June 1, 2015 should
additional shares be needed for the conversion reserve. The Company has not issued any stock for conversions since entering into
the forbearance agreement and during the year ended June 30, 2015 the Company repaid $69,081 of principle and $41,019 of interest
under the agreement. During the six months ended December 31, 2015 the Company repaid $103,437 of principle and $36,563 of interest
under the agreement. The value of the forbearance debt obligation on December 31, 2015 is $818,816. As of December 31, 2015 this
forbearance obligation would only be convertible for monthly obligations the Company elects to/or does not pay in cash in part
or in full, for: (i) up to 62,500,000 shares, for the satisfaction of the next required monthly payment, (ii) up to 2,674,375,000
shares, for the satisfaction of the next 12 required monthly payments; and (iii) up to 5,117,596,794 shares of our common stock
should the entire obligation be converted.



Arrangement #5 (MH Investment trust
I)



On December 27, 2013, the Company issued
to the MH Investment Trust. a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 which
was executed funded with $40,000 in gross proceeds on January 7, 2014. The instrument is in the principal amount of $40,000 and
matures on October 1, 2014. Interest only is payable at the rate of 12% per annum by the Company to the holder until maturity.
The instrument is convertible into the Company’s common stock at 60% of the volume weight average price of the stock based
upon the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when
the trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the above financing
have been used by the Company as working capital.



At the time of the transaction, the
embedded conversion feature of this security and the warrant was calculated to be $35,556 and the company recorded no loan discount
as the quantity of shares was considered indeterminable at the date of funding. On June 30, 2014, given the changes in the Company’s
stock price during the 10 day look-back period for this estimated liability had increased to $88,637, an increase for this period
of $53,081 creating a non-cash charge to earnings of that amount. Based upon the price of the Company’s common stock on June
30, 2014 this Note is convertible into approximately 100,952,381 shares of common stock. During July of 2014 this note was repaid,
in full, together with $2,632 of accrued interest and $14,916 of prepayment fees.



19







Arrangement #6 (MH Investment trust II)



On August 26, 2014, the Company issued
to the MH Investment Trust. a Convertible Note in a Private Placement pursuant to Section 4(2) of the Securities Act of 1933 which
was executed funded with $40,000 in gross proceeds on September 1, 2014. The instrument is in the principal amount of $40,000 and
matures on May 1, 2015. Interest only is payable at the rate of 12% per annum by the Company to the holder until maturity. The
instrument is convertible into the Company’s common stock at 60% of the volume weight average price of the stock based upon
the average of the three lowest trading days in the 10 day trading period immediately preceding such conversion, or 65 % when the
trading price exceeds $.0020 for the five days before such conversion. All proceeds received in connection with the above financing
have been used by the Company as working capital.



At the time of the transaction, the
embedded conversion feature of this security and the warrant was calculated to be $37,778 and the company recorded a loan discount
of the same amount. During the year ended June 30, 2015 the Company amortized $37,778 to loan discount expense and the unamortized
loan discount was reduced to $0. As of June 30, 2015, which given the changes in the Company’s stock price during the 10
day look-back period for this date the estimated liability had decreased to $3,002, a decrease for this period of $34,776 and creating
a non-cash credit to earnings of that amount. Based upon the price of the Company’s common stock and and
a partial payments during the year ended June 30, 2015 of $36,667; on June 30, 2015 this Note is convertible into approximately
25,016,667 shares of common stock. As of December 31, 2015, which given the changes in the Company’s stock price during the
10 day look-back period for this date the estimated liability had increased to $9,558, an increase for this period of $5,114 and
creating a non-cash charge to earnings of that amount. Based upon the price of the Company’s common stock on December 31,
2015 this Note is convertible into approximately 39,825,000 shares of common stock.





20







|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



None.



|ITEM 4. | (REMOVED AND RESERVED)
|------- | ----------------------



|ITEM 5. | OTHER INFORMATION
|------- | -----------------



None.



|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------



Form 8k dated December 22, 2015- which announced that
on December 19, 2015 mPhase Technologies, Inc. (the “Company”) received a Notice of Allowance of a Patent covering
a Drug Delivery System from the United States Patent and Trademark Office.





|EXHIBITS |  |                                                                                                          
|-------- |  | ---------------------------------------------------------------------------------------------------------
|         |  |                                                                                                          
|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.





21







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: February 22,
    2016 | By:                          
|                             |                              
|                             |                              





22