Teleplus World 10QSB/A Quarterly report (small business) (amended)

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

CONSOLIDATED BALANCE SHEETS

	IN US$
	MARCH 31,
	2007
	(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,082,470
Accounts receivable, net - trade		1,089,779
Other accounts receivable		326,183
Inventory		101,424
Prepaid expenses and other current assets		395,792
Assets held from discontinued operations		1,909

Total Current Assets		2,997,557

Fixed assets, net of depreciation		727,304

Other Assets:
Intangible assets, net		6,590,164
Goodwill		9,756,002
Deferred financing fees, net of amortization		766,682
Deferred connection charges, net of amortization		184,443
Deferred income taxes		35,816

Total Other Assets		17,333,108

TOTAL ASSETS	$	21,057,969

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses	$	5,828,237
Current portion of accrued acquisition obligations		2,773,116
Current portion of convertible debentures , net of discount		842,534
Unearned revenue		771,660
Derivative liability		7,884,744
Other Loans Payable		40,000
Liabilities held from discontinued operations		34,889

Total Current Liabilities		18,175,180

Long-term Liabilities:
Convertible debentures, net of discount		3,701,435
Accrued acquisition obligations, net of current portion		2,142,051

Total Long-term Liabilities		5,843,486

Total Liabilities		24,018,665

SHAREHOLDERS' EQUITY (DEFICIT)
Class A Preferred stock, $0.001 Par Value; 10,000,000 shares
authorized and 2,000,000 shares issued and outstanding		-
Common stock, $0.001 Par Value; 600,000,000 shares authorized
and 132,090,557 shares issued and outstanding in 2007
and 122,782,419 in 2006		132,091
Additional paid-in capital		8,302,228
Accumulated deficit		(11,556,418	)
Accumulated other comprehensive income		161,402

Total Shareholders' Equity (Deficit)		(2,960,697	)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)	$	21,057,969

F-1

TELEPLUS WORLD , CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

	IN US$
	THREE MONTHS ENDED
	MARCH 31,
	2007			2006
CONTINUING OPERATIONS:				(Restated)
OPERATING REVENUES
Revenues	$	5,370,229		$	6,797,553

OPERATING COSTS AND EXPENSES
Costs of services (exclusive of depreciation and amortization)		3,662,710			4,127,263
Payroll, professional fees and related expenses		1,042,820			1,016,289
Advertising and marketing expenses		73,569			216,564
Office rent and expenses		81,648			69,443
Other general and administrative expenses		629,971			692,079
Depreciation and amortization		239,140			254,402

Total Operating Expenses		5,729,858			6,376,040

OPERATING INCOME (LOSS)		(359,629	)		421,513

OTHER INCOME (EXPENSE)

Amortization of deferred finance fees		(99,149	)		(71,412	)
Warrant expense		-			(182,418	)
Amortization of debt discount		(822,194	)		(550,166	)
Interest expense		(644,657	)		(234,490	)
Gain (loss) on derivative liability		(352,744	)		(2,059,193	)
Total Other Income (Expense)		(1,918,744	)		(3,097,679	)

NET INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES		(2,278,373	)		(2,676,166	)
Provision for Income Taxes		-			-

NET INCOME (LOSS) FROM CONTINUING OPERATIONS		(2,278,373	)		(2,676,166	)
Net loss from discontinued operations		0			(161,351	)

NET INCOME (LOSS)	$	(2,278,373	)	$	(2,837,517	)

NET INCOME (LOSS) PER BASIC SHARES
From continuing operations	$	(0.02	)	$	(0.03	)
From discontinued operations	$	0.00		$	(0.00	)
	$	(0.02	)	$	(0.03	)

NET INCOME (LOSS) PER DILUTED SHARES
From continuing operations	$	(0.02	)	$	(0.03	)
From discontinued operations	$	0.00		$	(0.00	)
	$	(0.02	)	$	(0.03	)

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC		126,007,958			86,403,786

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - DILUTED		315,917,607			166,884,241

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$	(2,278,373	)	$	(2,837,517	)
Other comprehensive income (loss)
Currency translation adjustments		85,425			(11,097	)
Accumulated other comprehensive income (loss)	$	(2,192,948	)	$	(2,848,614	)

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

F-2

TELEPLUS WORLD,CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)

	IN US$
	2007			2006
				(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from continuing operations	$	(2,278,373	)	$	(2,676,166	)

Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation and amortization		58,500			66,526
Accretion of interest expense		336,883			-
Amortization of intangible assets		180,640			187,876
Issuance of common shares for compensation		73,214			-
Employee compensation for stock options		3,279			-
Amortization of deferred finance fees		99,149			71,412
Warrants issued to raise capital		-			182,418
Amortization of convertible debt discount		822,194			550,166
Loss on derivative liability		352,744			2,059,193

Changes in assets and liabilities
(Increase) decrease in accounts receivable - trade		148,574			(210,160	)
(Increase) in other accounts receivable		(103,410	)		(196,896	)
Decrease in income tax receivable		-			31,875
Decrease in inventory		19,832			-
(Increase) decrease in prepaid expenses and other current assets		39,681			(247,263	)
Increase in accounts payable and accrued expenses		684,574			1,223,663
(Decrease) in unearned revenue		(25,333	)		(193,102	)
Total adjustments		2,690,521			3,525,708

Net cash provided by operating activities		412,148			849,542

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of business		(464,143	)		(1,426,340	)
Acquisitions of fixed assets		(8,246	)		(27,657	)
(Increase) in deferred connection charges		(22,343	)		(28,623	)

Net cash (used in) investing activities		(494,732	)		(1,482,620	)

CASH FLOWS FROM FINANCING ACTIVITES
Payments of finance fees		-			(10,999	)
Increase in other loans payable		40,000			-

Net cash provided by (used in) financing activities		40,000			(10,999	)

Effect of foreign currency		13,862			(11,097	)

NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS - CONTINUING OPERATIONS		(28,722	)		(655,174	)

CASH (USED IN) DISCONTINUED OPERATIONS		(34,201	)		(71,003	)

CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD - CONTINUING OPERATIONS		1,145,393			2,604,915

CASH AND CASH EQUIVALENTS - END OF PERIOD - CONTINUING OPERATIONS	$	1,082,470		$	1,878,738

CASH PAID DURING THE PERIOD FOR:
Interest expense	$	9,210		$	-

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

F-3

TELEPLUS WORLD,CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(UNAUDITED)

	IN US$
	2007		2006
			(Restated)

SUPPLEMENTAL NONCASH INFORMATION:
Conversion of of convertible debentures into 8,393,988 shares of common stock	$	500,000	$	-
Issued 471,150 shares of common stock for employee compensation	$	37,694	$	-
Issued 444,000 shares of common stock to a non related third party for services rendered.	$	35,520	$	-

F-4

FOR THE QUARTERS ENDED MARCH 31, 2007 AND 2006

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

F-5

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheet as of March 31, 2007 (Unaudited)		F-1

Consolidated Statements of Operations and Accumulated Other Comprehensive Income (Loss) for the Three Months Ended March 31, 2007 (Unaudited ) and 2006 (Restated) (Unaudited)		F-2

Consolidated Statement of Cash Flows for The Three Months Ended March 31, 2007 and 2006 (Restated) (Unaudited)		F-3

Notes to Consolidated Financial Statements		F-7

F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Teleplus World, Corp. (the “Company”) is a provider of wireless and telecom products and services across North America. The Company’s wholly-owned subsidiaries include TelePlus Connect, Corp., a competitive local exchange carrier (“CLEC”), which provides landline, long distance and Internet services in Canada under the “Telizon”, “Freedom” and “Avenue” brands; and TelePlus Wireless, Corp., which operates a virtual wireless network selling cellular network access to consumers and distributors in the United States.

NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION

The Company is a provider of wireless and telecommunications services in Canada and the United States of America. The Company’s products include prepaid and postpaid wireless, landline, long distance and Internet services. The Company distributes their products through their websites, third party websites, select distributors in Canada and the United States of America, and through a variety of direct marketing initiatives.

As discussed in Note 4, the Company acquired Keda Consulting Corp., a North American telecommunications industry management consulting service company on April 1, 2005; 1523813 Ontario Limited (Freedom Phone Lines), a Bell Canada reseller of landline and long distance services on April 15, 2005; Avenue Reconnect, Inc. a reseller of landline and long distance services on June 1, 2005; Telizon, Inc. and 1500536 Ontario, Inc. (One Bill, Inc.), a reseller of landline and long distance service and Internet service provider on July 15, 2005; certain assets of Star Number, Inc., a wholly-owned subsidiary of InPhonic, Inc. related to its Liberty Wireless business on December 29, 2005, effective December 31, 2005; and Maximo Impact, Inc., (“Maximo”) a Cleveland, Ohio based company specializing in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America on June 21, 2006. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations.

On January 13, 2006, Retail, filed in Canada a Notice of Intention to Make a Proposal Under the Bankruptcy and Insolvency Act (Canada) (the “Act”). This was done to divest the Company of its retail division. As a result, Retail was deemed to have made an assignment of its assets to its creditors under the Act and discontinued its operations as of February 12, 2006. The retail operations are no longer a segment of the Company’s business for the year ended December 31, 2006 (see Note 11).

On October 24, 2006, the Company changed its corporate name to Teleplus World, Corp.

F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with form 10-QSB/A and Item 310 of Regulation S-B of the Securities and Exchange Commission. Accordingly, they do not contain all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying consolidated financial statements contain all the adjustments necessary (consisting on of normal recurring accruals) to make the financial position of the Company as of March 31, 2007 and the results of operation and cash flows for the three months ended March 31 2007 and 2006 not misleading. The consolidated financial statements should be read in conjunction with the audited financial statements for the years ended December 31, 2006 contained in Form 10KSB filed on April 2, 2007.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Operating results for the three months ended March 31, 2007 are not necessarily indicative of results that would be expected for the year ending December 31, 2007.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to goodwill, intangible assets, stock-based compensation, derivative liabilities, bad debts, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

F-8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has followed Statement of Financial Accounting Standard No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets”. Accordingly, the Company recognized as discontinued operations the results from the retail division that has been abandoned. The Company has also written down the assets relating to the retail division to their respective fair values. (See Note 11).

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Discontinued Operations

Inventories

Inventories consist of wireless and telephone products and related accessories and are stated at the lower of cost, determined by the average cost method, or market.

Goodwill and Other Intangible Assets

Under SFAS No. 142, “Goodwill and Other Intangible Assets”. (“SFAS 142”), goodwill and other indefinite-lived intangible assets are no longer amortized but instead are reviewed for impairment annually and on an interim basis if events or changes in circumstances between annual tests indicate that an asset might be impaired. Under SFAS 142, indefinite-lived intangible assets are tested for impairment by comparing their fair values to their carrying values. Testing for impairment of goodwill is a two-step process. The first step requires the Company to compare the fair value of its reporting units to the carrying value of the net assets of the respective reporting units, including goodwill. If the fair value of the reporting unit is less than the carrying value, goodwill of the reporting unit is potentially impaired and the Company then completes Step 2 to measure the impairment loss, if any. The second step requires the calculation of the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit. If the implied fair value of goodwill is less then the carrying amount of goodwill, an impairment loss is recognized equal to the difference. Intangible assets that do not have indefinite lives are amortized over their useful lives.

F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Goodwill and Other Intangible Assets (Continued)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Other intangible assets consist of trade names, with an estimated useful life of 20 years and customer lists, with an estimated useful life of 2 to 8 years, of companies acquired by the Company and are reflected below:

	As of March 31, 2007
	Gross
	Carrying		Accumulated
	Amount		Amortization		Net

Amortized Intangible Assets:

Trade Names	$	3,785,708	$	308,384	$	3,477,324
Customer Lists	$	4,036,327	$	923,487	$	3,112,840

Amortization Expense:

For the three months ended March 31, 2007			$	180,640
For the three months ended March 31, 2006				187,876


Estimated Amortization Expense:

For the nine months ended December 31, 2007			$	541,920
For the year ended December 31, 2008				672,560
For the year ended December 31, 2009				672,560
For the year ended December 31, 2010				672,560
For the year ended December 31, 2011 through 2025				4,030,564

Total			$	6,590,164

The changes in goodwill is as follows:

Balance - January 1, 2007	$	9,721,975

Increases in goodwill on acquisitions made		34,027
Impairment of goodwill		-

Balance - March 31, 2007		9,756,002

F-10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company reviews the terms of convertible debt and equity securities for indications requiring bifurcation, and separate accounting, for the embedded conversion feature. Generally, embedded conversion features where the ability to physical or net-share settle the conversion option is not within the control of the Company are bifurcated and accounted for as a derivative financial instrument. (See Derivative Financial Instruments below). Bifurcation of the embedded derivative instrument requires allocation of the proceeds first to the fair value of the embedded derivative instrument with the residual allocated to the debt instrument. The resulting discount to the face value of the debt instrument is amortized through periodic charges to the amortization of debt discount using the Effective Interest Method.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Convertible Instruments

Derivative Financial Instruments

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow or market risks. However, certain other financial instruments, such as warrants or options to acquire common stock and the embedded conversion features of debt that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. These derivative financial instruments are indexed to an aggregate of 171,859,649 shares of the Company’s common stock as of March 31, 2007 and are carried at fair value of $7,884,744.

Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

Earnings (Loss) Per Share of Common Stock

Basic net earnings (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) includes additional dilution from common stock equivalents, such as stock issuable pursuant to the conversion of debentures, and exercise of stock options and warrants. Common stock equivalents will not be included in the computation of diluted earnings per share when the Company reports a loss because to do so would be antidilutive for periods presented.

F-11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following is a reconciliation of the computation for basic and diluted EPS:

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings (Loss) Per Share of Common Stock (Continued)

	March 31,			March 31,
	2007			2006
				(Restated)

Net loss	$	(2,278,373	)	$	(2,837,517	)

Weighted-average common shares
Outstanding (Basic)		126,007,958			86,403,786

Weighted-average common stock
Equivalents
Convertible debentures		171,859,649			33,545,455
Stock options		11,950,000			11,935,000
Warrants		69,100,000			35,000,000

Weighted-average common shares
Outstanding (Diluted)		378,917,607			166,884,241

Stock-Based Compensation

On January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based Payment” (“FAS 123R”) which requires recognition of stock-based compensation expense for all share-based payments based on fair value. Prior to January 1, 2006, the Company measured compensation expense for all of its share-based compensation using the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. The Company has provided pro forma disclosure amounts in accordance with FAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No. 123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to its stock-based compensation.

F-12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has elected to use the modified-prospective approach method. Under that transition method, the calculated expense is equivalent to compensation expense for all awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair values estimated in accordance with the original provisions of FAS 123. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values estimated in accordance with the provisions of FAS 123R. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual option forfeitures when estimating the forfeiture rate.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock-Based Compensation (Continued)

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. his statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of SFAS 157 is not expected to have a material impact on the consolidated financial statements.

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115”, (“FAS 159”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.

In July 2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes.” This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this standard did not have a material effect on the Company’s financial position.

F-13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2007 AND 2006 (Unauditied)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent Accounting Pronouncements (Continued)

In September 2006, the United States Securities and Exchange Commission (“SEC”) issued SAB 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the company’s financial statements and the related financial statement disclosures. SAB 108 permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose.

F-14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Fixed assets as of March 31, 2007 were as follows :

NOTE 3- FIXED ASSETS

	Estimated Useful		March 31,
	Lives (Years)		2007

Equipment		5	$	184,776
Furniture and fixtures		7		136,687
Business software		3-10		846,970
Computer hardware		5		354,840
Leasehold improvements		5		25,812

				1,549,085
Less: accumulated depreciation				821,781
Fixed assets, net			$	727,304

There was $47,532 and $66,526 charged to operations for depreciation expense for the three months ended March 31, 2007 and 2006 respectively.

F-15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On April 1, 2005, the Company acquired Keda Consulting Corp., a North American telecommunications industry management consulting service company specializing in business development, sales and marketing and operations. Keda changed its name to TelePlus Connect Corp. and their management took over the operations of the Company’s prepaid landline and long distance telephone service operations. When the Company acquired Freedom Phone Lines, Avenue Reconnect and Telizon, the acquisition price was adjusted to account for the acquisition of Keda, which was to be paid to the former shareholders of Keda on an earn-out basis. The Company recognized additional goodwill and accrued acquisition obligations for this acquisition.

NOTE 4- ACQUISITIONS

Keda Consulting Corp.

On July 28, 2006, the Company and the former shareholders of Keda negotiated an agreed purchase price and payment terms. The terms call for 60 equal monthly payments of $60,000 (CDN $) for a total note of $3,600,000 (CDN $) which is converted to $3,214,000 (US $). Goodwill and the accrued acquisition obligations were adjusted at that time.

Maximo Impact, Inc.

On June 21, 2006, the Company acquired Maximo Impact, Inc. The total purchase price of these assets were $30,000. Goodwill of $30,000 represents the excess of the purchase price over the carrying value of the net tangible assets acquired. The purchase price to be paid is up to a maximum of $1,000,000 to be earned on an earn out basis.

The results of operations have been included in the Company’s consolidated statement of operations since the completion of the acquisition in June 2006.

F-16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has recorded $4,915,166 in accrued acquisition obligations as of March 31, 2007. Included in this amount is $2,773,116 which is payable on an earn-out basis from 2006 operations based on the achievement of specific benchmarks by the 1523813 Ontario Limited, Avenue Reconnect, Inc., and Telizon Inc. and 15000536 Ontario Inc. acquisitions. During the three months ended March 31, 2007 and 2006, the Company paid out $464,143 and $1,426,340, respectively of accrued acquisition obligations.

NOTE 5- ACCRUED ACQUISITION OBLIGATIONS

F-17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On July 12, 2004, the Company secured an $11,000,000 financing commitment from Cornell. The terms of the transaction called for the Company to receive initial funding in the amount of $1,000,000 payable in three (3) installments: $450,000 payable at closing; $400,000 payable upon the filing of a registration statement and the remaining $150,000 payable upon the registration statement becoming effective, which occurred October 1, 2004.

NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY

The convertible debentures were secured by all of the Company’s assets, bearing interest at 5% per annum, repayable on their third anniversary dates of July 12, 2007, September 1, 2007, and October 1, 2007, respectively. The Company had the option of converting the principal amounts and all accrued interest before these maturity dates, and has converted the entire amount to common shares.

As part of the transaction, the Company secured a $10,000,000 Standby Equity Distribution Agreement (“SEDA”). The Company could draw these funds under the SEDA over a 24-month period upon the effective registration. The proceeds of the SEDA were used to finance existing and future acquisitions, capital expenditures, increases in inventory and general working capital. The Company issued 258,098 shares of its common stock in connection with the SEDA as financing costs.

The Company received $8,125,000 under three promissory notes. The Company received the initial promissory note of $2,000,000 in the fourth quarter of 2004; the second promissory note of $500,000 was received in the first quarter of 2005; and a third promissory note of $5,625,000 was received in July 2005. The first and second promissory notes were repaid, and the third promissory note was restructured under a new financing agreement dated December 13, 2005.

F-18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On December 13, 2005, the Company entered into a certain Securities Purchase Agreement (“SPA”) with Cornell Capital Partners (“Cornell”), pursuant to which Cornell was issued $9,225,000 in secured convertible debentures dated December 13, 2005 under the SPA. Under the SPA, the Company and Cornell entered into various agreements as described below. The convertible debentures are convertible in whole or in part, at any time and from time to time before maturity at the option of the holder at the lesser of $0.275 or ninety-five percent (95%) of the lowest volume weighted price of the common stock for the thirty trading days immediately preceding such conversion date. The convertible debentures which are secured by certain pledged assets of the Company have a term of three (3) years, have piggy-back registration rights and accrue interest at a rate of ten percent (10%) per annum. In connection with the convertible debentures, the Company issued 1,250,000 shares of common stock as financing fees. The amount funded included the restructuring of the third promissory note funded in July 2005 of $5,625,000 plus interest of $225,000 plus an additional funding of $3,375,000.

NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)

On July 28, 2006, the Company entered into a certain SPA with Cornell Capital Partners, LP (“Cornell”) pursuant to which the Company issued to Cornell $3,000,000 in secured convertible debentures dated as of July 28, 2006. The debentures were fully funded on July 28, 2006, are convertible, in whole or in part, at any time from time to time before maturity at the option of the holder at the lesser of (a) $0.20 or (b) 90% of the lowest volume weighted average price of common stock for thirty trading days immediately preceding the conversion date. Beginning on August 1, 2007, and continuing on the first trading day of each calendar month thereafter, the Company shall make mandatory redemptions (“Mandatory Redemption”) consisting of outstanding principal. The principal amount of each Mandatory Redemption shall be equal to $100,000 per calendar month, until all amounts owed under the debentures have been paid in full. These payments will be made in cash. The Company has the option to redeem a portion or all of the amounts outstanding under the debentures prior to the maturity date of the debentures. The debentures have a term of three years, piggy-back registration rights and accrue interest at a rate equal to ten percent (10%) per year. The debentures are secured by certain pledged assets of the Company. The parties have also entered into an Investor Registration Rights Agreement, pursuant to which the Company has agreed, if required by Cornell, to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations there under, and applicable state securities laws.

In connection with the SPA, the Company also issued Cornell the following warrants to purchase shares of common stock:

a)	5,000,000 at $0.11;
b)	10,000,000 at $0.13;
c)	10,000,000 at $0.15; and
d)	5,000,000 at $0.18

F-19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of March 31, 2007 and 2006, the Company has $10,175,000 and $9,225,000, respectively outstanding in convertible debentures.

NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)

Secured Convertible Debenture . The Company entered into a secured convertible debenture in the principal amount of $9,225,000 dated December 13, 2005 and due December 13, 2008. The debenture carries an interest rate of 10%. The Company has an option to redeem a portion or all amounts outstanding under the amended and restated convertible debenture upon three days advance written notice. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium of twenty percent (20%) of the principal amount being redeemed plus accrued and unpaid interest. The Company may not redeem more than $1,500,000 during any fifteen (15) consecutive trading days.

Under the terms of the convertible debenture so long as any principal amount or interest is owed, the Company cannot, without the prior consent of Cornell (i) issue or sell any common or preferred stock with or without consideration, (ii) issue or sell any preferred stock, warrant, option, right, contract or other security or instrument granting the holder thereof the right to acquire common stock with or without consideration, (iii) enter into any security instrument granting the holder of security interest in any of the Company’s assets or (iv) file any registration statement on Form S-8, except for a registration statement on Form S-8 registering up to 2,000,000 shares of common stock under an Employee Stock Option Plan. Under the terms of the convertible debenture there are a series of events of default, including failure to pay principal and interest when due, the Company’s common stock ceasing to be quoted for trading or listing on the OTCBB and shall not again be quoted or listed for trading within five days trading days of such listing, the Company being in default of any other debentures that the Company has issued to Cornell.

Investor Registration Rights Agreement . On December 13, 2005 the Company entered into an investor registration rights agreement with Cornell. Under the terms of the registration rights agreement the Company was obligated to register on Form SB-2 or any other applicable form the shares of its common stock issuable to Cornell upon conversion of at least 235,000,000 shares of common stock under the $9,225,000 convertible debenture, 1,250,000 shares of common stock issued under the SEDA and 33,000,000 shares of common stock issued upon the exercise of the warrant shares to be issued under the warrant to Cornell. The Company filed with the SEC all reports or other documents required under the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended to allow Cornell to take advantage of Rule 144 under the Securities Act of 1933 (as amended).

F-20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Amended and Restated Security Agreement . The Company entered into an amended security agreement dated December 13, 2005 with Cornell. This agreement amends the agreement entered into on July 15, 2005 between these two parties.

NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)

Amended and Restated Pledge and Escrow Agreement . The Company entered into a pledge and escrow agreement dated December 13, 2005 with Cornell, Visioneer Holding Group, Inc. and David Gonzales, Esq., acting as escrow agent. Under the terms of the pledge and escrow agreement, the Company and Visioneer pledged 30,000,000 of their shares of common stock of the Company to secure the Company’s obligations under the convertible debenture issued to Cornell. These shares are being held by David Gonzales, Esq., who is a principal with Cornell. In the event of default under the pledge and escrow agreement, that includes failure of the Company to comply with any of the agreements between themselves and Cornell, the pledged shares can be sold to cover any of the obligations owed by the Company to Cornell under the various financing agreements discussed here. The pledged shares shall be returned to the parties upon payment in full of all amounts owed to Cornell under the convertible debentures.

Warrant . The Company issued a warrant dated December 13, 2005 for 33,000,000 shares of its common stock (subject to adjustment for stock splits, stock dividends and recapitalizations) to Cornell at exercise prices ranging between $.20 and $0.38 per share. The warrant is exercisable until December 13, 2008. Cornell cannot exercise the warrant if doing so would cause it to beneficially own in excess of 4.99% of the total issued and outstanding shares of the Company’s common stock unless the exercise is made within sixty days prior to December 13, 2008. The shares issued upon excise of the warrant have piggyback and demand registration rights set forth in the registration rights agreement described above.

Securities Purchase Agreement . The Company entered into a securities purchase agreement dated December 13, 2005 with Cornell. The securities purchase agreement relates to the $9,225,000 secured convertible debenture described above. In accordance with the securities purchase agreement, the Company agreed to enter into (i) an amended and restated investor registration rights agreement to provide registration rights under the Securities Act of 1933, as amended, for shares of the Company’s common stock that could be issued upon conversion of the amounts owed for principal and interest under the convertible debentures described above, (ii) an amended and restated security agreement to provide a blanket lien against our property as described above, (iii) an amended and restated pledge and escrow agreement under which the Company and Visioneer pledged his shares of the Company’s common stock to Cornell, and (iv) an amended and restated security agreement among the Company and Cornell. Under the securities purchase agreement the Company agreed to preserve an adequate number of shares to effect any right of conversion exercised by Cornell under the warrant and the convertible debenture described above. The Company also agreed to pay Yorkville Advisors Management, LLC, a company affiliated with Cornell Capital, a fee equal to $342,500.

F-21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2007 AND 2006(UNAUDITED)

NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)

Amended and Restated Subsidiary Security Agreement . The Company entered into an amended and restated subsidiary security agreement dated December 13, 2005. The material terms of the amended and restated subsidiary security agreement are the same as the security agreement that the Company executed with Cornell.

The convertible debentures meet the definition of hybrid instruments, as defined in SFAS 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). The hybrid instruments are comprised of a i) a debt instrument, as the host contract and ii) an option to convert the debentures into common stock of the Company, as an embedded derivative. The embedded derivative derives its value based on the underlying fair value of the Company’s common stock. The Embedded Derivative is not clearly and closely related to the underlying host debt instrument since the economic characteristics and risk associated with this derivative are based on the common stock fair value. The Company has separated the embedded derivative from the hybrid instrument based on a valuation of $5,087,378 as of December 13, 2005, and $1,672,075 as of July 28, 2006 and classified the Embedded Derivative as a current liability with an offsetting debit to debt discount, which will be amortized over the term of the debenture based on the effective interest method.

The embedded derivative does not qualify as a fair value or cash flow hedge under SFAS No. 133. Accordingly, changes in the fair value of the embedded derivative are immediately recognized in earnings and classified as a gain or loss on the embedded derivative financial instrument in the accompanying statements of operations. There was a (loss) of ($352,744) and ($2,059,193) respectively recognized for the three months period ended March 31, 2007 and 2006

The allocation of the proceeds of the convertible debenture to the warrants and the recognition of the embedded derivative resulted in discounts to the convertible debenture of $7,779,174 and $3,000,000, for the $9,225,000 and $3,000,000 convertible debentures, respectively, and is being amortized to par using the effective interest method. The amortization for the three months period ended March 31, 2007 and 2006 amounted to $822,194 and $550,166, respectively.

Upon conversion of the debt to equity, any remaining unamortized discount is charged to interest expense

F-22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The derivative liability at March 31, 2007 is comprised of the following:

NOTE 6- CONVERTIBLE DEBENTURES AND DERIVATIVE LIABILITY (CONTINUED)

i) The embedded derivative associated with the $9,225,000 convertible debenture at fair value of $3,956,849; ii) the embedded derivative associated with the $3,000,000 convertible debenture at fair value of $1,792,075; iii) 33,000,000 warrants issued in conjunction with the $9,225,000 convertible debenture at fair value of $863,056; and iv) 30,000,000 warrants issued in conjunction with the $3,000,000 convertible debenture at fair value of $1,272,764.

Interest expense on the convertible debentures was $644,657 and $234,490 for the three months period ended March 31, 2007 and 2006. Accrued interest at March 31, 2007 is $1,512,589.

The summary of convertible debentures is as follows at March 31, 2007

$9,225,000 Convertible Debenture, net of discount of
$5,334,386 at 10% interest per annum due December 2008	$	3,890,614

$3,000,000 Convertible Debenture, net of discount of
$2,346,645 at 10% interest per annum due July 2009		653,355

		4,543,969

Less: Current maturities		(84,253	)

Long-term portion	$	4,459,716

Maturities over the next three years is as follows:

December 31,

2007		-
2008		7,175,000
2009		3,000,000

	$	10,175,000

F-23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has 10,000,000 shares authorized of Class A Preferred Stock with a par value of $0.001. These preferred shares entitle the holders to 10 votes each, are not convertible into shares of any other class or series of stock of the Company, are non-participating, and no dividends can be declared on them.

NOTE 7- SHAREHOLDERS’ EQUITY

Preferred Stock

On July 31, 2006, the Company’s CEO and Visioneer Holdings, Inc. (a company owned 100% by the Company’s CEO) served written notice to the Company of the exercise of the right to exchange all of the 2,000,000 shares of Class A Preferred Stock owned by Visioneer, Inc. into 20,000,000 shares of Common Stock. The right to exchange the shares became effective upon achieving certain milestones contained within the CEO’s employment contract. As a result of the conversion, there are no preferred shares issued and outstanding as of March 31, 2007

Common Stock

The Company has 600,000,000 shares authorized of common stock with a par value of $0.001. As of March 31, 2007 the Company has 132,090,557 shares of common stock issued and outstanding.

January 8, 2007 the Company issued 5,555 shares to an employee in connection with bonus earned. Shares were valued at $445.

January 8, 2007 the Company issued 11,111 shares to an employee in connection with bonus earned. Shares were valued at $890.

January 8, 2007 the Company issued 444,000 shares to a non-related third party in connection to services rendered. Shares were valued at $35,520.

January 30, 2007 the Company issued 1,345,895 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.

February 22, 2007 the Company issued 1,492,537 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.

March 5, 2007 the Company issued 3,703,704 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $200,000.

March 21, 2007 the Company issued 1,851,852 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.

March 28, 2007 the Company issued 454,485 shares in connection with bonuses earned by employees. Shares were valued at $36,359.

April 2, 2007 the Company issued 2,500,000 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $135,000.

April 11, 2007 the Company issued 175,000 shares to its directors for services rendered. Shares were valued at $10,500.

April 12, 2007 the Company issued 2,314,815 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $125,000.

April 26, 2007 the Company issued 106,351 shares to an employee as severance. Shares were valued at $5,317.

May 17, 2007 the Company issued 4,166,667 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $170,000.

May 18, 2007 the Company issued 106,351 shares to an employee as severance. Shares were valued at $4,254.

F-24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of March 31, 2007, the Company has 11,950,000 stock options issued to employees granted and outstanding. Of these options, 2,000,000 were granted in 2007, 735,000 were forfeited in 2007, 2,250,000 were granted in 2006, 3,500,000 were forfeited in 2006.

NOTE 7- SHAREHOLDERS’ EQUITY (CONTINUED)

Stock Options


Balance, January 1, 2007	10,685,000

Granted	2,000,000
Exercised	0
Forfeited	(735,000	)

Balance, March 31, 2007	11,950,000

Balance, January 1, 2006	11,935,000

Granted	2,250,000
Exercised	0
Forfeited	(3,500,000	)

Balance, December 31, 2006	10,685,000

F-25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2007 AND 2006 ( UNAUDITED)

NOTE 7- SHAREHOLDERS’ EQUITY (CONTINUED)

Stock Options (Continued)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used in the model:

	March 31			March 31
	2007			2006
Dividend yield		0.00	%		0.00	%
Expected volatility		42.90	%		47.00	%
Risk free interest rates		3.50	%		3.50	%
Expected lives (years)		3			3

Options outstanding as of March 31, 2007 are summarized as follows:

	Exercise		Date		Term		Vesting
Number of Options	Price		Issued		Date		Date
1,500,000	$	0.36		Nov-04		Dec-07		Dec-04
2,000,000	$	0.38		Nov-04		Jun-08		Jun-05
2,500,000	$	0.40		Nov-04		Jun-09		Jun-06
750,000	$	0.21		Jun-05		Sep-08		Sep-05
100,000	$	0.21		Jun-05		Dec-08		Dec-05
1,000,000	$	0.22		Jun-05		Dec-08		Dec-05
1,250,000	$	0.23		Jun-05		Dec-09		Dec-06
150,000	$	0.21		Nov-05		May-09		May-06
150,000	$	0.22		Nov-05		Nov-09		Nov-06
150,000	$	0.23		Nov-05		May-09		May-07
150,000	$	0.24		Nov-05		Nov-10		Nov-07
62,500	$	0.20		Jul-06		Jan-10		Jan-07
62,500	$	0.21		Jul-06		Jul-10		Jul-07
62,500	$	0.22		Jul-06		Jan-11		Jan-08
62,500	$	0.23		Jul-06		Jul-11		Jul-08
400,000	$	0.07		Mar-07		Sep-10		Sep-07
400,000	$	0.08		Mar-07		Mar-11		Mar-08
400,000	$	0.10		Mar-07		Mar-12		Mar-09
400,000	$	0.12		Mar-07		Mar-13		Mar-10
400,000	$	0.15		Mar-07		Mar-14		Mar-11
11,950,000	$	0.28

Stock options exerciseable - weighted average price					$	0.32

F-26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The number of stock options that are exercisable as at March 31, 2007 is 9,462,500.

NOTE 7- SHAREHOLDERS’ EQUITY (CONTINUED)

Warrants

The Company granted 33,000,000 warrants to Cornell in connection with the SPA entered into December 13, 2005. The warrants expire December 13, 2008. The Company also granted 30,000,000 warrants to Cornell in connection with the SPA entered into July 28, 2006. These warrants expire July 28, 2009. In addition, the Company issued 2,000,000 warrants for the purpose of trying to raise capital for the Company and 4,100,000 to a consultant of the Company for services rendered. The following is a breakdown of the warrants:

	Exercise		Date
Warrants	Price		Issued		Term
9,000,000	$	0.25		12/13/2005		3 years
4,000,000	$	0.20		12/13/2005		3 years
10,000,000	$	0.38		12/13/2005		3 years
10,000,000	$	0.25		12/13/2005		3 years
1,000,000	$	0.4485		1/1/2006		5 years
1,000,000	$	0.6728		1/1/2006		5 years
5,000,000	$	0.11		7/28/2006		3 years
10,000,000	$	0.13		7/28/2006		3 years
10,000,000	$	0.15		7/28/2006		3 years
5,000,000	$	0.18		7/28/2006		3 years
4,100,000	$	0.15		9/26/2006		3 years
69,100,000

F-27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 2007AND 2006 (UNAUDITED)

NOTE 8- COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The following proceedings have been instigated against the Company. The Company does not believe that the following legal proceedings have a materially adverse impact on the Company’s business or on its results of its operations.

Proposed Tax Assessment : 3577996 Canada, Inc. which the Company had acquired substantially all of their assets, is involved in proceedings with the Minister of Revenue of Quebec (“MRQ”). The MRQ has proposed an assessment for the Goods and Services Tax (“GST”) and Quebec Sales Tax (“QST”) of approximately $642,000 (CND $) and penalties of approximately $110,000 (CND $). The proposed tax assessment including penalties is for $322,000 (CND $) for QST and $320,000 (CND $) for GST. In mid to late 2006, the MRQ issued Amended Reassessments after the Company contested. These amounts were reduced (including penalties) to approximately QST $350,000 (CND $) and GST $308,000 (CND $). The Company again contested these Amended Reassessments and believes that certain deductions initially disallowed by the MRQ for the QST are deductible and is in the process of compiling the deductions to the MRQ. It is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

It is possible that cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

Wrongful Dismissal : A former employee of a subsidiary of the Company, has instigated a claim in Quebec Superior Court in the amount of $90,000 (CND $) against the Company for wrongful dismissal. The Company does not believe the claim to be founded and intends to vigorously contest such claim. The parties are in the discovery stages.

Wrongful Dismissal : There is a claim from three individuals in British Columbia in the amount of approximately $147,000 and the issuance of 510,000 shares of common stock for which a letter of demand has been served to the Company. The Company does not believe the claim to be founded and intends to vigorously contest such claim. No court proceedings have been instituted and the Company is presently in discussions with the aforementioned individuals.

Consulting Fee : On April 13, 2005, a lawsuit was filed in the United States District Court, District of New Jersey (Newark) (Case No. 05-2058) by Howard Salamon d/b/a “Salamon Brothers” (as the plaintiff) against the Company. This matter arises out of an alleged agreement between the plaintiff and the Company. The plaintiff is seeking specific performance of the alleged agreement, monetary damages and a declaratory judgment for the payment of a commission allegedly due to the plaintiff in an amount equal to 10% of all funds received by the Company from Cornell. The Company has filed a counterclaim against the plaintiff seeking rescission of the alleged agreement and a refund of $100,000 paid by the Company to the plaintiff. The Company believes that this lawsuit is without merit, that the plaintiff’s claims are unfounded and that the Company has good defenses against the claims asserted by the plaintiff. The Company also believes that it has good claims for the rescission of the alleged agreement and for the refund of the amount paid to the plaintiff and is vigorously defending the case. The parties are in the process of discovery.

F-28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31,2007 AND 2006 (UNAUDITED)

NOTE 8- COMMITMENTS AND CONTINGENCIES (CONTINUED)

Legal Proceedings (Continued)

The following claim has been instigated by the Company:

A subsidiary of the Company has instigated a claim against Wal-Mart Canada Corp. on September 23, 2004 in the Ontario Superior Court of Justice in the amount of $5,000,000 for breach of an agreement between the parties. The parties are attempting to settle the matter.

On February 1, 2007 the Company’s subsidiary, Liberty Wireless, Corp. (“Liberty”) filed a lawsuit against Mobile Technology Services, LLC (“MTS”) alleging that MTS had breached a number of provisions of the Mobile Virtual Network Enabler (“MVNE Agreement”) Services Agreement between Liberty and MTS, despite repeated attempts by Liberty requesting that MTS cure all the breaches under the MVNE Agreement. The lawsuit was filed in the U.S. District Court for the Southern District of Florida.

Operating Lease

The Company has several non-cancelable operating leases, primarily for office space and storage that expire through March 31, 2011 These leases require the Company to pay all operating costs such as insurance and maintenance.

Future minimum lease payments under the non-cancelable leases as of March 31, 2007 are:

2007	$	198,084
2008		153,000
2009		148,958
2010		84,409
2011		19,027
	$	603,478

Rent expense for the three months ended March 31, 2007 and 2006 was $81,648 and $69,443, respectively.

Support Agreement

In June 2006, Liberty Wireless and PeopleSupport, Inc. (“PSPT”) entered into a three-year customer support agreement. Under the agreement, PSPT will provide customer management, transcription and captioning, accounts receivable management and additional business process outsourcing services from its centers in the Philippines, Costa Rica and the United States of America, as its strategic provider of customer management support.

F-29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company paid management fees for the three months ended March 31, 2007 and 2006 to a company owned by a majority shareholder in the amount of $63,501 and $47,137, respectively. As at March 31, 07, there was an amount of $40,000 owing to that entity which was unsecured and non interest bearing.

On July 31, 2006, the Company’s CEO and Visioneer Holdings, Inc. (a company owned 100% by the Company’s CEO) served written notice to the Company of the exercise of the right to exchange all of the 2,000,000 shares of Class A Preferred Stock owned by Visioneer, Inc. into shares of Common Stock. The right to exchange the shares became effective upon achieving certain milestones contained within the CEO’s employment contract.

F-30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

NOTE 10- PROVISION FOR INCOME TAXES

At March 31, 2007, deferred tax assets consist of the following:

Net operating losses	$	2,629,000
Amortization of goodwill		(644,000	)
Valuation allowance		(1,985,000	)

	$	-

At March 31, 2007, the Company had a net operating loss carryforward in the approximate amount of $6,500,000, available to offset future taxable income through 2025. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

F-31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On January 13, 2006, Retail filed in Canada a Notice of Intention to Make a Proposal Under the Bankruptcy and Insolvency Act (Canada) (the “Act”). This was done to divest the Company of its retail division. As a result, Retail was deemed to have made an assignment of its assets to its creditors under the Act and discontinued its operations as of February 12, 2006. The retail operations will no longer be a segment of the Company’s business for the year ending December 31, 2006. Therefore, the Company reclassified as discontinued operations the operating results of this division.

NOTE 11- DISCONTINUED OPERATIONS

The following represents the comparative operating results of this division for the three months ended March 31, 2007 and 2006 that is reflected as discontinued operations.

F-32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31 ,2007 AND 2006 (UNAUDITED)

NOTE 11- DISCONTINUED OPERATIONS (CONTINUED)

	2007		2006

Net revenues	$	-	$	282,332

Cost of revenues		-		13,299
General, administrative and selling expenses		-		332,672
Write down of assets and liabilities		-		97,712

		-		443,683

Loss before income taxes		-		(161,351	)

Provision for income taxes		-		-

Net loss on discontinued operations	$	-	$	(161,351	)

The Company will have available loss carryforwards from the remaining business entities of the retail division that have not declared bankruptcy. The Company’s intention is to apply these losses against future profits from its remaining business operations.

F-33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31 ,2007 AND 2006 (UNAUDITED)

NOTE 11- DISCONTINUED OPERATIONS (CONTINUED)

The cash flow from Discontinued Operations consists of the following:

	2007			2006

Net (loss) from discontinued operations	$	-		$	(161,351	)

Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities

Writedown of assets and liabilities		-			97,712
Net Change in assets and liabilities		(34,201	)		(7,364	)

Net Cash provided by (used in) operating activities		(34,201	)		(71,003	)

Cash flows from investing activities
Acquisition of fixed assets		-			-

Cash provided by (used in) Discontinued Operations	$	(34,201	)	$	(71,003	)


Summary of Net Assets Remaining - Retail Division

Assets	2007			2006

Cash	$	1,909		$	746
	$	1,909		$	746

Liabilities

Accrued expenses	$	34,889		$	63,384
		34,889			63,384

Net Assets ( Liabilities ) Remaining	$	(32,980	)	$	(62,638	)

F-34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31 ,2007 AND 2006 (UNAUDITED )

NOTE 12- SEGMENT INFORMATION

The Company’s reportable operating segments include its wireless segment which was acquired on December 29, 2005, but became effective as of January 1, 2006, as well as its traditional land-line based telecommunication services. The Company also has corporate overhead expenses. The Company’s services are all being provided in North America, considered by the Company to be one geographical location. The segment data presented below details the allocation of sales, cost of sales, gross profit (loss), operating expenses, depreciation, amortization and impairment and other income (expense) on the condensed consolidated statements of operations to these segments. In addition the Company details an allocation of fixed assets and total assets to these segments. The Company has one major supplier of services in both the Wireless and Telecom segments. The supplier is not the same for each segment. The discontinued operations have not been included herein.

Operating segment data for the three months ended March 31, 2007 are as follows:

				Wireless			Telecom
	Corporate			Services			Services			Total
Revenues	$	-		$	1,503,370		$	3,866,859		$	5,370,229
Cost of revenues		-			877,393			2,785,317			3,662,710
Gross profit (loss)		-			625,977			1,081,542			1,707,519
Operating expenses		454,345			713,691			659,972			1,828,008
Depreciation and amortization		4,921			37,170			197,048			239,140
Other income (expense)		(1,910,932	)		(311	)		(7500	)		(1,918,744	)
Net income (loss)		(2,370,199	)		(125,196	)		217,022			(2,278,373	)
Segment assets		6,149,202			3,017,441			11,889,416			21,056,059
Fixed Assets, net of depreciation		45,033			82,160			600,111			727,304

Operating segment data for the three months ended March 31, 2006 are as follows:

				Wireless		Telecom
	Corporate			Services		Services		Total
Revenues	$	-		$	2,890,936		3,906,617	$	6,797,553
Cost of revenues		-			1,468,919		2,658,344		4,127,263
Gross profit (loss)		-			1,422,017		1,248,273		2,670,290
Operating expenses		681,510			707,832		787,294		2,176,636
Depreciation, amortization and impairment		2,832			28,000		223,728		254,560
Other income (expense)		(2,915,261	)		-		-		(2,915,261	)
Net income (loss)		(3,599,603	)		686,186		237,251		(2,676,166	)
Segment assets		6,287,928			3,894,935		12,440,723		22,623,586
Fixed Assets, net of depreciation		37,402			53,821		700,772		791,995

NOTE 13- SUBSEQUENT EVENTS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

F-35

Company Overview

Teleplus World, Corp. (the “Company”) is a provider of wireless and telecom products and services across North America. The Company’s wholly-owned subsidiaries include TelePlus Connect, Corp., a competitive local exchange carrier (“CLEC”), which provides landline, long distance and Internet services in Canada under the “Telizon”, “Freedom”, “Avenue” and Liberty brands; and Liberty Wireless, Corp., which operates a virtual wireless network (“MVNO”) selling cellular network access to consumers and distributors in the United States under the “Liberty Wireless” and “MX Mobile” brand names.

The Company was originally incorporated in Nevada as Terlingua Industries, Ltd. on April 16, 1999. This company was formed to engage in online marketing and distribution of organic herbal supplements internationally. Terlingua Industries, Ltd. changed its name on January 27, 2000 to HerbalOrganics.com, Inc.

In March 2003, the Company declared a 10:1 forward stock split. In October 2003, the Company declared a 2.375:1 forward stock split. The effects of the stock split have been retroactively reflected in this report unless otherwise stated.

In September 2003, the Company formed a wholly-owned foreign subsidiary, Teleplus Retail Services, Inc. (“Retail”), a Canadian corporation formed under the laws of the province of Quebec. Retail, in October 2003, acquired a significant amount of assets from, and assumed certain liabilities of, 3577996 Canada, Inc., a Canadian Business Corporation (“3577996”) relating to 3577996’s TelePlus Consumer Services business.

Immediately following the Company’s acquisition of 3577996, in October 2003, Visioneer Holdings Group, Inc. (“Visioneer”) acquired control of the Company. Visioneer and 3577996 were controlled by the same shareholders.

For accounting purposes, the transaction was treated as an acquisition of HealthOrganics.com, Inc. and a recapitalization of 3577996 with accounting treatment similar tot hat used in a reverse acquisition. 3577996 emerged as the accounting acquirer and the results of its operations carryover. The Company acquired $11,327 in cash and assumed $700 in liabilities as a result of the transaction. Additionally, the Company changed its name to TelePlus World, Corp.

Post-reverse merger, the Company is a provider of wireless and telecommunications services in Canada and the United States of America. The Company’s products include prepaid and postpaid wireless, landline, long distance and Internet services. The Company distributes their products through their websites, third party websites, select distributors in Canada and the United States of America, and through a variety of direct marketing initiatives.

The Company acquired Keda Consulting Corp., a North American telecommunications industry management consulting service company on April 1, 2005; 1523813 Ontario Limited (Freedom Phone Lines), a Bell Canada reseller of landline and long distance services on April 15, 2005; Avenue Reconnect, Inc. a reseller of landline and long distance services and Internet service provider on June 1, 2005; and Telizon, Inc. and 1500536 Ontario, Inc. (One Bill, Inc.), a reseller of landline and long distance service and Internet service provider on July 15, 2005.

On December 29, 2005 the Company purchased certain assets of Star Number, Inc., a wholly-owned subsidiary of InPhonic, Inc., related to its Liberty Wireless business, including customer lists, the "Liberty Wireless" brand and SNI's rights under certain agreements, the whole effective as of December 31, 2005. The purchased assets have been used and will continue to be used to sell pre-paid and post-paid wireless telecommunications services under the name "Liberty Wireless".

On June 21, 2006, the Company purchased all the issued and outstanding shares of Maximo Impact, Inc. (“Maximo”), a Cleveland, Ohio based company, under certain agreements, the whole effective as of that date. Maximo specializes in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations.

In February, 2006, the Company completed its transition from retail operations to wireless and telecom services reselling.

On October 24, 2006 the Company changed its corporate name to TelePlus World, Corp.

Growth in the United States of America

The Company through its wholly owned subsidiary, Liberty Wireless Corp. (“Liberty Wireless”) (f/k/a Teleplus Wireless, Corp.) is offering wireless prepaid services through its Mobile Virtual Network Operator (“MVNO”) agreement with Sprint/Nextel. Liberty Wireless services are primarily, but not exclusively, catered to the “unbanked” or “prepaid” segment of the market. “Unbanked” customers are those customers who are not able to access the carriers’ offers as they don’t qualify under the carriers’ credit policies. Nonetheless, the “unbanked” segment is the fastest growing segment in the wireless and telecom industry. This segment is currently poorly serviced by the incumbents, thus creating an opportunity for Liberty Wireless to take a substantial share of the market. This market was first developed in Europe, where more than 20 MVNO’s can be found. Virgin Mobile of England and Wireless Maingate of Sweden were among the first group of MVNO’s launched in Europe.

To facilitate the rollout of this service in the United States, the Company acquired:

Certain assets of Star Number, Inc., a wholly-owned subsidiary of InPhonic, Inc. related to its Liberty Wireless business on December 29, 2005, effective December 31, 2005, the third largest wireless reseller on the Sprint PCS network, which provided the Company with an established customer base and strong infrastructure; and

Maximo Impact, Inc., (“Maximo”) a Cleveland, Ohio based company specializing in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations.

Growth in Canada

The Company through its wholly owned subsidiary TelePlus Connect Corp. (“TelePlus Connect”) is offering landline and long distance prepaid services to selected individuals in Canada who cannot obtain basic telecom services from traditional telecom carriers. These individuals are often called the “unbanked”.

To facilitate the rollout of this service in Canada, the Company acquired:

Keda Consulting Corp., a North American telecommunications industry management consulting service company on April 1, 2005 specializing in business development, sales and marketing and operations. Following this acquisition, Keda Consulting Corp. changed its name to TelePlus Connect Corp. and their management took over the operations of the Company’s prepaid landline and long distance telephone service operations;

1523813 Ontario Limited (Freedom Phone Lines), a Bell Canada reseller of landline and long distance services on April 15, 2005 headquartered in Ontario, Canada which services over 3,300 customers in the Ontario area, generating approximately $2,500,000 in annual revenues;

Avenue Reconnect, Inc. a reseller of landline and long distance services and Internet service provider on June 1, 2005 headquartered in Windsor, Ontario which services over 2,000 residential users primarily in Ontario, generating approximately $1,100,000 in annual revenues; and

Telizon, Inc. and 1500536 Ontario, Inc. (One Bill, Inc.), a reseller of landline and long distance service and Internet service provider on July 15, 2005 headquartered in Ontario, Canada which services over 18,000 commercial and residential lines in the Ontario area, generating approximately $12,000,000 in annual revenues.

Current estimates place the “unbanked “ or “prepaid” market in North America at 9.5% of total households and the market size is estimated at over $ 1 billion.

Recent Business Developments

In June 2006, the Company acquired Maximo Impact, Inc., (“Maximo”) a Cleveland, Ohio based company specializing in marketing and distribution as a Mobile Virtual Network Operator (“MVNO”) in the United States of America. As part of this transaction, Maximo launched its own wireless brand called MX Mobile which caters to mass merchandisers, general retailers and c-channel retailers calling on convenience stores and gas stations.

Principal Products and Services

TelePlus World is a provider of wireless and telecommunications services in Canada and the United States. Our products include prepaid and postpaid wireless, landline, long distance and Internet services. To our wireless users, we also provide a full range of handsets and related accessories.

Distribution

We distribute our products through our websites, third party websites, select distributors in the United States and Canada and through a variety of direct marketing initiatives.

Competitive Overview

The wireless industry is a growing industry of the Telecommunications Sector.

As time passes, wireless phones are becoming more and more commonplace. According to EMC, a leading researcher and publisher of intelligence about wireless markets, there are now more than 1 billion wireless phone subscribers worldwide and 50% of all calls in the world will soon be wireless. IDC estimates the total sales of worldwide mobile phones increased 20% in 2004 to 658 million units. Some key trends that investors should be aware of and important in evaluating the industry’s potential growth include the following:

The cost of acquiring and maintaining a wireless plan has dropped over the years as a result of pricing pressures, promotional events by carriers, and increased customer churn (customer churn is defined as the number of clients who cancel their contracts with the carrier prior to the end of the term);

The wireless telecommunications industry is experiencing (and will continue to experience) significant technological change, which has led wireless carriers to upgrade their wireless capabilities and rollout new products and service offerings, such as photos, music, and wireless Internet (Wi-Fi);

Wireless phone manufacturers, such as Samsung, LG and Pantech, are now marketing their next generation phones with advanced features;

The image of wireless devices has changed from a luxury gadget to a business and entertainment tool. Moreover, the Yankee Group has stated that Americans are now looking at wireless services as a utility rather than a novelty; and

Wireless numbers portability, which recently took effect, provides customers with more flexibility when choosing a carrier and increases the rate of new activations, and according to J.D. Power, consumers are increasingly more satisfied with their wireless service, call quality and cost.

American Wireless Industry

The growing nature of the American wireless industry is illustrated by the following statistics:

In a January 2005 Business Week article, Gartner estimated that 2005 wireless revenues will grow 11% to $122.5 billion;

Euromonitor, in a July 2003 report, estimated that in 2003 the retail post-paid wireless industry totaled $3.8 billion, and is expected to reach $5.1 billion by 2007. Atlantic-ACM estimated in February 2003, that the pre-paid retail wireless industry will grow from $4.4 billion in 2003 to $9.5 billion in 2007;

The Yankee Group stated in an August 2004 report that 50% of 13 to 17 year olds have a wireless phone, a sizable increase from a 2003 survey in which 33% of teens were reported to have a wireless phone; and

According to First Global Research, the domestic wireless market is adding 4 to 5 million, net new subscribers each quarter.

Canadian Wireless Industry

According to industry data, by the end of 2005, more than half of all Canadians will be mobile phone customers. Canadian currently use more than 12 million wireless phones on a daily basis. According to the Canadian Radio-Television and telecommunications Commission, the wireless industry is a key driver of the Canadian Telecommunications sector, consistently posting double-digit sales gains, recently increasing 13% to over $8 billion. The Canadian Wireless Telecommunications Association estimates that in 2004 there were over 13.6 million wireless subscribers, including 10.4 million postpaid and 3.2 million pre-paid customers.

MVNO Market Overview

Mobile Virtual Network Operators (or MVNO’s), which buy mobile services from established wireless operators and resell the service under their own brand names, were first developed in Europe, where there are currently over 20 MVNO’s including Tele2 and Mobilcom of Germany, Virgin Mobile from the UK and Wireless Maingate from Sweden. The last two companies are believed to be two of the early pioneers in this space. Other companies that have or are developing MVNO offerings in North America include AT&T, Boost, ESPN, Tracfone, Qwest and TelePlus World.

The primary advantage of operating as an MVNO is that such an operation requires much less capital and overhead than the operations of a traditional wireless carrier. An MVNO simply utilizes existing networks from established carriers. However, substantial amounts of monies may be needed to build brand recognition and pay for access to a carrier’s network.

A secondary advantage to retail oriented companies, such as TelePlus, is that an MVNO offering may provide opportunity to expand its overall margins as it picks up incremental revenues at higher margins.

Intellectual Property

Teleplus holds the following trademarks:

·	In Canada: SimplySellular trademark granted January 7, 2005;

·	In the United States:

		·	Trademark Ser. No. 78/326,834 Liberty Wireless for All; Register Number 2,979,533

		·	Trademark Ser. No. 78/371,483 Liberty Wireless; Register Number 2,928,910

Need For Government Approval

Teleplus needs the following government approvals to operate:

	·	Section 214 authorization; and

	·	FCC Form 499 Registration.

Employees

Teleplus has a total of 50 employees, most of which are employed on a full-time basis.

Description of Property

TelePlus currently has four locations with its principal office (approximately 3031 square feet) located in Miami, Florida. We also have leased office space in Barrie, Canada (6410 square feet), and Westlake, Ohio. The Company pays monthly rent of $9,400 for Barire, $5,676 for Miami and $2,500 for Westlake. Miami has a lease term of 5 years, while the Barrie and Westlake locations will be end in the second half of 2007.

Results of Operations and Financial Condition

Three Months Ended March 31, 2007 versus March 31, 2006

Total Operating Revenues

The Company generated $5,370,229 of revenues for the three months ended March 31, 2007 as compared to $6,797,553 for the three months ended March 31, 2006, a decrease of $1,427,324 or (21%) of the first quarter of 2006. The decrease in revenue for the quarter ending March 31, 2007 compared to the March 31, 2006 quarter end reflects the initial loss of wireless customers post acquisition of Liberty Wireless and prior to the full integration of that business.

Total Operating Costs and Expenses

Total operating costs and expenses for the three months ended March 31, 2007 were $5,729,858 as compared to $6,376,040 for the three months ended March 31, 2006. This represented a decrease of $646,182 or 10%. Of these amounts, $3,662,710 (68% of revenues) and $4,127,263 (61% of revenues), respectively comprised of costs of services. The other operating costs and expenses includes payroll, professional fees and related expenses of $1,042,820 and $1,016,289, advertising and marketing expenses of $73,569 and $216,564 and other general and administrative expenses of $629,971 and $692,079 is comparable from 2007 to 2006.

Depreciation and amortization expenses include depreciation on the Company’s fixed assets, amortization on the Company’s intangible assets, not including goodwill, and amortization of the Company’s deferred connection charges. The Company determines the fair value of the undiscounted cash flows annually, and sooner if circumstances change and determination is required, to value any impairment on its goodwill, intangible assets and long-lived assets. As of March 31, 2007, the Company has determined that there is no impairment charge. The intangible assets, not including goodwill are currently being amortized over estimated lives ranging from 2 to 20 years.

Other Income (Expense)

Included in other income (expense) is amortization on the deferred financing fees paid to Cornell Capital Partners, LP in association with the Securities Purchase Agreement and Secured Convertible Debenture entered into with Cornell on December 13, 2005 and July 28, 2006. The amortization charge for the three months ended March 31, 2007 and 2006 was $99,149 and $71,412, respectively. The Company incurred no warrant expense in the first quarter of 2007 as compared to $182,418 for the first quarter of 2006. The Company also recognized amortization on the debt discount on the convertible debenture of $822,194 and $550,166 for the three months ended March 31, 2007 and 2006 based on the Effective Interest Method calculation, and recognized a (loss) on the valuation of its derivative liability of ($352,744) and ($2,059,193) respectively.

Interest expense was $644,657 compared to $234,490 for the three months ended March 31, 2007 and 2006, respectively. The interest expense is primarily due to the convertible debentures.

Net Income (Loss) from Continuing Operations

The Company reported net income (loss) from continuing operations of ($2,278,373), or $(0.02) per share on a basic and diluted basis for the three months ended March 31, 2007 versus ($2,676,166), or $(0.03) per share on a basic and diluted basis for three months ended March 31, 2006. The decrease is primarily attributable to the Company’s derivative charges related to its Cornell Capital financing offset by a decrease in revenues for three months ended March 31, 2007 versus 2006.

Provision for Income Taxes

There was no provision for income taxes for the three months ended March 31, 2007 and 2006 respectively. There was no provision due to the carryforward of approximately $6,500,000 of net operating losses as of March 31, 2007, that the Company has reserved in valuation allowances against this deferred tax asset.

Liquidity and Capital Resources

During the three months ended March 31, 2007, the balance in cash and cash equivalents decreased by $28,722 versus $655,174 for the three months ended March 31, 2006.

As of March 31, 2007, the Company had $2,997,557 in current assets primarily consisting of $1,082,470 in cash and cash equivalents, $1,089,779 in accounts receivable - trade, $326,183 in other accounts receivable and $395,792 in prepaid expenses and other current assets.

As of March 31, 2007, the Company had $18,175,180 in current liabilities primarily consisting of $2,773,116 in the current portion of accrued acquisition obligations, $5,828,237 in accounts payable and accrued expenses, and $7,884,744 of derivative liabilities resulting from the Securities Purchase Agreement and Secured Convertible Debenture entered into on December 13, 2005 and July 28, 2006. The derivative liability is being converted to equity upon conversion by Cornell to the Company’s common stock. The balance is adjusted based on market adjustments to fair value on a quarterly basis.

As a result, the Company as of March 31, 2007 has a working capital deficiency of $15,177,623. On July 28, 2006, the Company entered into another Securities Purchase Agreement with Cornell Capital pursuant to which the Company issued to Cornell $3,000,000 in secured convertible debentures. The $3,000,000 was utilized to pay certain obligations of the Company with respect to its accrued acquisition obligations. The Company could generate additional funds through the warrants granted to Cornell, however, with the stock price below exercise price levels, the Company cannot rely on these proceeds at this time to cure their working capital deficiency.

Cash flow generated from operating activities and proceeds from capital raises are the Company’s primary contributors in reducing the working capital deficiency and fund future operations.

The decrease in cash for the three months ended March 31, 2007 of $28,722 was attributable to operating activities $412,148, expenditures of cash used to acquire businesses of $464,143, and the use of cash for capital expenditures of $8,246.

The decrease in cash for the three months ended March 31, 2006 of $655,174 was primarily attributable to operating activities $849,542, expenditures of cash used to acquire businesses of $1,426,340, and the use of cash for capital expenditures of $27,657.

On December 13, 2005, the Company entered into a certain Securities Purchase Agreement (“SPA”) with Cornell, pursuant to which Cornell was issued $9,225,000 in secured convertible debentures dated December 13, 2005 under the SPA. Under the SPA, the Company and Cornell entered into various agreements as described below. The convertible debentures are convertible in whole or in part, at any time and from time to time before maturity at the option of the holder at the lesser of $0.275 or ninety-five percent (95%) of the lowest volume weighted price of the common stock for the thirty trading days immediately preceding such conversion date. The convertible debentures which are secured by certain pledged assets of the Company have a term of three (3) years, have piggy-back registration rights and accrue interest at a rate of ten percent (10%) per annum. In connection with the convertible debentures, the Company issued 1,250,000 shares of common stock as financing fees.

On July 28, 2006, the Company entered into a certain SPA with Cornell Capital Partners, LP (“Cornell”) pursuant to which the Company issued to Cornell $3,000,000 in secured convertible debentures dated as of July 28, 2006. The debentures were fully funded on July 28, 2006, are convertible, in whole or in part, at any time from time to time before maturity at the option of the holder at the lesser of (a) $0.20 or (b) 90% of the lowest volume weighted average price of common stock for thirty trading days immediately preceding the conversion date. Beginning on March 1, 2007, and continuing on the first trading day of each calendar month thereafter, the Company shall make mandatory redemptions (“Mandatory Redemption”) consisting of outstanding principal. The principal amount of each Mandatory Redemption shall be equal to $100,000 per calendar month, until all amounts owed under the debentures have been paid in full. The Company has the option to redeem a portion or all of the amounts outstanding under the debentures prior to the maturity date of the debentures. The debentures have a term of three years, piggy-back registration rights and accrue interest at a rate equal to ten percent (10%) per year. The debentures are secured by certain pledged assets of the Company.

In connection with the SPA, the Company also issued Cornell the following warrants to purchase shares of common stock:

a)	5,000,000 at $0.11;
b)	10,000,000 at $0.13;
c)	10,000,000 at $0.15; and
d)	5,000,000 at $0.18

Critical Accounting Policies

Critical accounting polices include the areas where we have made what we consider to be particularly subjective or complex judgments in making estimates and where these estimates can significantly impact our financial results under different assumptions and conditions.

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimate, judgments and assumptions affect the reported amounts of assets and liabilities at the date of the financial statement and the reported amounts of revenue and expenses during the periods presented. Actual results could be different than those estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

Principles of Consolidation

Goodwill and Other Intangible Assets

Revenue Recognition

The Company recognizes revenue through the resale of residential and commercial telephone lines. The resale of long distance revenues are recorded at the time of customer usage based upon minutes of use. Basic monthly charges for business and residential customers are billed in advance and recorded as unearned revenue and recognized upon the customer receiving the service.

The Company’s revenue is also generated from the sale of wireless, telephony products and accessories to end-users. The Company recognizes this revenue when the criteria for Staff Accounting Bulletin 101 (and as clarified in Staff Accounting Bulletin 104) is achieved. The criteria are as follows: when persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectibility is probable.

The Company’s suppliers generally warrant the products distributed by the Company and allow returns of defective products, including those that have been returned to the Company by its customers. The Company does not independently warrant the products that it distributes, but it does provide warranty services on behalf of the supplier.

Accounts Receivable

The Company conducts business and extends credit based on an evaluation of the customers’ financial condition, generally without requiring collateral. Exposure to losses on receivables is expected to vary by customer due to the financial condition of each customer. The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. The criteria for allowance provision are determined based on historical experience and the Company’s assessment of the general financial conditions affecting its customer base. If the Company’s actual collections experience changes, revisions to the allowance may be required.

Stock-Based Compensation

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) published Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R, as amended, are effective for small business issuers beginning as of the first interim period after December 15, 2005.

Convertible Instruments

The Company reviews the terms of convertible debt and equity securities for indications requiring bifurcation, and separate accounting, for the embedded conversion feature. Generally, embedded conversion features where the ability to physical or net-share settle the conversion option is not within the control of the Company are bifurcated and accounted for as a derivative financial instrument. (See Derivative Financial Instruments below). Bifurcation of the embedded derivative instrument requires allocation of the proceeds first to the fair value of the embedded derivative instrument with the residual allocated to the debt instrument. The resulting discount to the face value of the debt instrument is amortized through periodic charges to interest expense using the Effective Interest Method.

Derivative Financial Instruments

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow or market risks. However, certain other financial instruments, such as warrants or options to acquire common stock and the embedded conversion features of debt and preferred instruments that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.

Recent Accounting Pronouncements

In February 2006, the FASB issued Statement of Financial Accounting Standard No. 155, “Accounting for Certain Hybrid Instruments” (“SFAS 155”). FASB 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006.

In July 2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes.” This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. Management is still evaluating what effect this will have on Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of SFAS 157 is not expected to have a material impact on the consolidated financial statements.

Item 3. Controls and Procedures

The Company is responsible for maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and regulations, and that such information is accumulated and communicated to its management, including its chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the Company’s disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures and implementing controls and procedures based upon the application of management’s judgment.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective and designed to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and regulations and accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure.

In connection with the Restatements of the Company’s 2006 annual financial statements, the Audit Committee has reevaluated certain disclosure controls and procedures and internal control over financial reporting. As a result, the Audit Committee has established additional protocols for certifying officers, senior management and the Company’s accounting and finance staff to monitor closely new accounting pronouncements that impact the Company’s financial statements. This includes continuing education of its staff including review of new pronouncements and awareness of those pronouncements being discussed, and the evaluation of their impact on the financial statements and management’s discussion and analysis. The Audit Committee and the Company has also engaged an independent consultant to assist the Company in its reporting process and period-end and annual closings.

In light of the fact that the company has moved its headquarters from Montreal, Quebec to Miami, Florida, all key management positions are being transferred to Miami. The current CFO is unable to relocate to Miami. The Company and current CFO have mutually agreed that the company would hire a CFO located in Miami and an orderly transition would occur. Effective April 16, 2007, the company announced the hiring of new CFO and director which was confirmed by the board of directors.

In connection with this Form 10-QSB/A, we have evaluated our disclosure controls and procedures as of March 31, 2007 and we have concluded that, as of March 31 2007, our disclosure controls and procedures are effective.

On March 8, 2007, the Company received an SEC comment letter concerning an 8-K filed regarding the change of auditors. The Company informed in its January 9, 2007 8-K that in connection with the audit of the Company's 2005 financial statements, and in the subsequent interim period, the only issue raised by the Former Accountant (Mintz & Partners LLP) was that at the end of the quarter ended September 30, 2006, the Former Accountant advised the Company of what it believed was an accounting error, that while significant in accounting terms, was not material at the time with regards to the Company’s financial result and could, if not corrected, have an estimated negative impact on shareholder’s equity of a maximum amount of $135,000 and have caused the Former Accountant to have a disagreement at year end - which if unresolved, could have been mentioned in the Former Accountant’s report. Said error relates to the accounting treatment of conversion of convertible debentures and was discussed with the Company’s Audit Committee.

Subsequent to this disclosure, during the preparation of the Company’s 2006 Financial Statements, management changed its method in accounting for the conversion of debt to equity calculation. Our independent auditors agreed with this adjustment and such adjustments have been made in the year end results for year ending December 31, 2006 and had no impact on the prior year ended December 31, 2005. The Company has reviewed the impact on prior 2006 reporting quarters and believes such effects are not material as the adjustment did not effect operating income, which management believes is the true indicator of its operating results.

On June 21, 2007 the Company received a response from the SEC requesting an amendment to the Company’s Form 10-KSB (for year ending December 31, 2006) to further explain the change in accounting related to the conversion of debt to equity calculation and to amend Forms 10-QSB for periods ending June 30, 2006 and September 30, 2006 accordingly. Management has begun to address these matters and will timely respond.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Wrongful Dismissal : There is a claim from three individuals in British Columbia in the amount of approximately $147,000 and the issuance of 510,00 shares of common stock for which a letter of demand has been served to the Company. The Company does not believe the claim to be founded and intends to vigorously contest such claim. No court proceedings have been instituted and the Company has been in discussions with the aforementioned individuals.

The following claim has been instigated by the Company:

Item 2. Change In Securities

Changes In Securities.

2007

January 8, 2007 the Company issued 5,555 shares to an employee in connection with bonus earned. Shares were valued at $445.

January 8, 2007 the Company issued 11,111 shares to an employee in connection with bonus earned. Shares were valued at $890.

January 8, 2007 the Company issued 444,000 shares to a non-related third party in connection to services rendered. Shares were valued at $35,520.

January 30, 2007 the Company issued 1,345,895 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.

February 22, 2007 the Company issued 1,492,537 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.

March 5, 2007 the Company issued 3,703,704 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $200,000.

March 21, 2007 the Company issued 1,851,852 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $100,000.

March 28, 2007 the Company issued 454,485 shares in connection with bonuses earned by employees. Shares were valued at $36,359.

April 2, 2007 the Company issued 2,500,000 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $135,000.

April 11, 2007 the Company issued 175,000 shares to its directors for services rendered. Shares were valued at $10,500.

April 12, 2007 the Company issued 2,314,815 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $125,000.

April 26, 2007 the Company issued 106,351 shares to an employee as severance. Shares were valued at $5,317.

May 17, 2007 the Company issued 4,166,667 shares of common stock to Cornell in connection with the conversion of convertible debentures in the amount of $170,000.

May 18, 2007 the Company issued 106,351 shares to an employee as severance. Shares were valued at $4,254.

Item 3. Defaults on Senior Securities

Item 4. Submissions Of Matters To A Vote Of Security Holders

Item 5. Other Information