USTelematics (UTLME) 10QSB 2007 Q2 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2006

OR

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

FOR THE TRANSITION PERIOD FROM                TO                

COMMISSION FILE NUMBER: 000-52193

USTELEMATICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-3600207
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
335 Richert Drive, Wood Dale, Illinois 60191
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (630) 595-0049

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No  ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

  Large accelerated filer ¨  Accelerated filer ¨ Non-accelerated filer x

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

There were 20,024,000 shares of the registrant's common stock outstanding as of January 10, 2007.

USTELEMATICS, INC.

FORM 10-QSB FOR THE FISCAL QUARTER

ENDED NOVEMBER 30, 2006

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	F-1
Item 2. Management’s Discussion and Analysis or Plan of Operation	13
Item 3. Controls and Procedures	16
PART II - OTHER INFORMATION
	17
Item 1. Legal Proceedings	17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3. Defaults Upon Senior Securities	17
Item 4. Submission of Matters to a Vote of Security Holders	17
Item 5. Other Information	17
Item 6. Exhibits	17
SIGNATURES	18

i

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

USTelematics, Inc.

(A Development Stage Company)

Balance Sheet

(Unaudited)

November 30, 2006

Assets
Current Assets
Cash and Cash Equivalents	$	400,048
Certificate of Deposit		102,620
Prepaid Expenses		2,500
Employee Expense Advances		2,733
Due from Related Parties		6,755
Total Current Assets		514,656
Fixed Assets
Vehicles		32,885
Office, Lab and Warehouse Equipment		10,371
Less Accumulated Depreciation		(3,319	)
Total Fixed Assets		39,937
Other Assets
Deferred Financing Fees, net of accumulated amortization of $88,418		147,586
Deposits		20,735
Assets Not Placed in Service		34,487
Other Intangible Assets		1,699
Total Other Assets		204,507
Total Assets	$	759,100

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

F-1

USTelematics, Inc.

(A Development Stage Company)

Balance Sheet

(Unaudited)

November 30, 2006

Liabilities
Current Liabilities
Accounts Payable	$	22,377
Checks in Excess of Cash on Deposit		43,672
Accrued Expenses		65,432
Accrued Interest		93,889
Total Current Liabilities		225,370
Noncurrent Liabilities
Convertible Notes Payable		1,500,000
Deferred Rent Liability		1,623
Total Noncurrent Liabilities		1,501,623
Total Liabilities		1,726,993
Stockholders' Equity <Deficit>
Preferred Stock: 10,000,000 shares authorized, no shares issued		-
Common Stock: par value $.0001, 250,000,000 shares authorized
20,024,000 shares issued		2,002
Additional Paid in Capital		17,498
Additional Paid in Capital - Warrants		1,261
Deficit Accumulated During the Development Stage		(988,654	)
Total Stockholders' Deficit		(967,893	)
Total Liabilities and Stockholders' Deficit	$	759,100

 

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

F-2

USTelematics, Inc.

(A Development Stage Company)

Statements of Operations

(Unaudited)

For the Three and Six Months Ended November 30, 2006

and the Period from October 7, 2005(Inception) through November 30, 2006

	Three Months Ended November 30, 2006			Six Months Ended November 30, 2006			October 7, 2005 (Inception) through November 30, 2006
Sales	$	-		$	-		$	-
Operating Expenses		340,976			779,078			909,177
Loss from Operations		(340,976	)		(779,078	)		(909,177	)
Other Income/Expense
Interest Income		5,676			13,177			14,412
Interest Expense		(37,500	)		(75,000	)		(93,889	)
Total Other Expense		(31,824	)		(61,823	)		(79,477	)
Net Loss	$	(372,800	)	$	(840,901	)	$	(988,654	)
Net Loss Per Share
Basic	$	(0.02	)	$	(0.04	)	$	(0.09	)
Fully Diluted	$	(0.02	)	$	(0.04	)	$	(0.09	)
Weighted Average Shares (Basic)		20,024,000			20,020,721			11,389,981
Weighted Average Shares (Fully Diluted)		20,024,000			20,020,721			11,389,981

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

F-3

USTelematics, Inc.

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

For the Three and Six Months Ended November 30, 2006

and the Period from October 7, 2005(Inception) through November 30, 2006

	Three Months Ended November 30, 2006			Six Months Ended November 30, 2006			October 7, 2005 (Inception) through November 30, 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(372,800	)	$	(840,901	)	$	(988,654	)
Noncash Items Included in Net Loss
Depreciation and amortization		37,430			73,874			91,737
Expenses paid directly from note closing proceeds		-			-			1,578
Expenses paid via issuance of stock warrants		1,261			1,261			1,261
Interest accrued on certificate of deposit		(1,207	)		(2,412	)		(2,620	)
(Increase)/Decrease in Assets
Prepaid Expenses		-			45,718			1,718
Employee Expense Advances		(1,437	)		(2,733	)		(2,733	)
Due From Related Parties		(1,755	)		(1,755	)		(1,755	)
Increase/(Decrease) in Liabilities
Accounts Payable		7,297			22,143			22,377
Accrued Expenses		32,814			65,432			65,432
Accrued Payroll and Taxes		(8,886	)		(6,609	)		-
Accrued Interest		37,500			75,000			93,889
Deferred Rent Liability		8,174			13,623			13,623
Total Adjustments		111,191			283,542			284,507
Net Cash Used in Operating Activities		(261,609	)		(557,359	)		(704,147	)
CASH FLOWS FROM INVESTING ACTIVITIES
Checks Issued in Excess of Cash on Deposit		43,672			43,672			43,672
Purchase of Certificate of Deposit		-			-			(100,000	)
Purchase of Fixed Assets		-			(40,756	)		(40,756	)
Purchase of Deposits		(245	)		(20,735	)		(20,735	)
Purchase of Assets Not Placed in Service		(34,487	)		(34,487	)		(34,487	)
Purchase of Other Intangible Assets		-			(100	)		(1,699	)
Net Cash Provided by (Used in) Investing Activities		8,940			(52,406	)		(154,005	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from Sale of Convertible Notes		-			-			1,282,000
Deferred Financing Fees		(23,800	)		(23,800	)		(23,800	)
Net Cash (Used in) Provided by Financing Activities		(23,800	)		(23,800	)		1,258,200
Net (Decrease) Increase in Cash and Cash Equivalents		(276,469	)		(633,565	)		400,048
Cash and Cash Equivalents, beginning		676,517			1,033,613			-
Cash and Cash Equivalents, ending	$	400,048		$	400,048		$	400,048

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

F-4

USTelematics, Inc.

(A Development Stage Company)

Selected Information-Substantially All Disclosures Required by Generally Accepted

Accounting Principles Are Not Included

(Unaudited)

November 30, 2006

NOTE 1- SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements are unaudited. These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements and the notes hereto should be read in conjunction with the audited financial statements and notes thereto for the year ended May 31, 2006 included in the Company’s Registration Statement on Form 10SB, as amended, which was originally filed August 18, 2006 and amended on December 11, 2006. In the opinion of the Company’s management, the financial statements for the unaudited interim periods presented include all adjustments, including normal recurring adjustments necessary to fairly present the results of such interim periods and the financial position as of the end of said period. The results of operations for the interim period are not necessarily indicative of the results for the full year.

A. NATURE OF BUSINESS

The Company has been in the development stage since its inception in October, 2005. It is primarily engaged in the development of its organization, structure and business plans; recruiting qualified advisors, agents and professional counselors for financing and to place securities; transitioning the engineering designs for its mobile DBS antenna technology from prototype state to pre-production state; researching, developing and establishing sources of component supply and manufacturing services; establishing strategic alliances for marketing and distribution; designing an online e-commerce, order-taking platform for marketing and sales to end users and wholesale channels; developing plans for supplementary products, product lines and service delivery; and developing plans for sales support, installation training and technical support.

During the six months ended November 30, 2006, the Company began development of a new line of internet-connected media center PCs for use in automobiles, based on proprietary software that voices email messages to users as they travel down the road.

B. FIXED ASSETS

Fixed assets are recorded at cost. Depreciation is provided for property and equipment using the straight-line method over the following estimated useful lives:

Description	Years
Vehicles		5
Computer Equipment		5
Office, Lab and Warehouse Equipment		7

C. ESTIMATES

Preparation of financial statements in conformity with generally accepted accounting principals requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

D. ASSETS NOT PLACED IN SERVICE

Assets not placed in service represents costs associated with designing and building the Company’s website. The Company’s website is still in development and therefore these assets are not being depreciated.

F-5

USTelematics, Inc.

(A Development Stage Company)

Selected Information-Substantially All Disclosures Required by Generally Accepted

Accounting Principles Are Not Included

(Unaudited)

November 30, 2006

NOTE 2 - CASH AND CASH EQUIVALENTS

As of November 30, 2006, Cash and Cash Equivalents consisted of the following:  

Cash	$	600
Money Market Funds		399,448
	$	400,048

NOTE 3 - CONVERTIBLE NOTES

Convertible notes with a face amount of $1,500,000 were issued on April 14 and April 21, 2006 for proceeds, net of expenses and retainers to professionals, of $1,282,000, and bear interest at 10% per annum (“Bridge Financing”). The notes and accrued interest are payable in full at maturity in October, 2007. The notes are secured by substantially all assets of the Company.

The secured debentures are automatically exchangeable, upon the closing of a Qualified Offering (see below) (sale for cash by the Company of senior secured convertible notes at levels defined in the related Term Sheet) for Exchange Securities consisting of Exchange Debentures, Exchange Warrants and Exchange Bonus Warrants. Each secured debenture shall automatically represent the ownership of an Exchange Debenture in the principal amount of the outstanding principal and interest. The Exchange Debentures, at the option of the note holders, may be converted to debentures with the same rights as debentures issued in the Qualified Offering except that they shall be at 75% of the conversion price of the debentures issued in the Qualified Offering. Exchange Warrants will be issued to the holders of the secured debentures in a ratio equal to those issued to the purchasers under the Qualified Offering should the Qualified Offering consist of issuance of securities combined with warrants. Each Exchange Warrants is exchangeable for one share of common stock by holder. Holders shall also receive common stock purchase warrants, Exchange Bonus Warrants, exercisable for five years from the issue date for one share of common stock per each Exchange Bonus Warrants. Each holder will receive one Exchange Bonus Warrant for each four shares of common stock purchased with the holder having the same rights and benefits granted the holders of the Exchange Warrants. Exercise price of the Exchange Bonus Warrants is to be the same as the conversion price of the debentures issued in the Qualified Offering. The fair value of the warrants related to the secured debentures is deemed to be de minimus based on an independent appraisal.

On December 12, 2006, the Company entered into and consummated a securities purchase agreement, a Qualified Offering, with a group of accredited investors (the “Investors”) providing for the issuance to the Investors of the Company’s 9% Senior Secured Convertible Debentures in the principal amount of $3,565,000 (the “Debentures”). Interest is payable in cash or, at the option of the Company, in registered shares of common stock of the Company. Upon an event of default, the stated interest rate of the Debentures will be increased to 18%. The Debentures mature two years from the date of issuance. All amounts due under the Debentures may be converted at any time, in part or in whole, at the written election of the holder thereof, into shares of the Company’s common stock at a conversion price of $0.50 per share. No conversions may take place if it would cause a holder of the Debentures to become the beneficial owner of more than 4.99% of the outstanding shares of common stock of the Company, which limitation is subject to waiver by an Investor upon 61 days prior written notice to the Company. The Company has granted a security interest in all of its assets to secure its obligations under the Notes.

The Company also issued to the holders of the Debentures Class A Warrants to purchase 7,130,000 shares of the Company’s common stock at $0.55 per share and Class B Warrants to purchase 3,565,000 shares of Common Stock at $0.75 per share (collectively, with the Bonus Warrants, as defined below, the “Warrants”). All Warrants are exercisable for a period of five years.

In addition, the Company issued debentures (the “Exchange Debentures”) in the principal amount of approximately $1,597,000 in exchange for debentures issued to a group of investors (the “Bridge Investors”) as the Bridge Financing. The Exchange Debentures are identical to the Debentures in all respects, except that the conversion price of the Exchange Debentures is $0.375. The Company also issued to the Bridge Investors Class A Warrants to purchase 4,259,726 shares of the Company’s common stock and Class B Warrants to purchase 2,129,863 shares of Common Stock at $0.55 per share and $0.75 per share, respectively. In addition, they received five-year warrants (the “Bonus Warrants”) to purchase an aggregate of 1,064,932 shares of common stock of the Company at $0.375 per share.

F-6

USTelematics, Inc.

(A Development Stage Company)

Selected Information-Substantially All Disclosures Required by Generally Accepted

Accounting Principles Are Not Included

(Unaudited)

November 30, 2006

Axiom Capital Management, Inc. (“Axiom”) acted as exclusive placement agent in connection with the sale of the Debentures and the Warrants as well as in connection with the Bridge Financing. For its services, Axiom received a cash fee equal to 10% of the proceeds from the sale of the securities considered the Qualified Offering. In addition, it received five-year warrants to purchase 1,113,000 shares of the Company’s common stock at a price equal to cash fee paid to Axiom divided by the conversion price of the Debentures.

The Company is currently reviewing accounting literature related to convertible instruments to determine the correct balance sheet classification of these instruments.

NOTE 4 - LONG-TERM LEASES

In June 2006 the Company entered into a lease agreement to lease its new office and warehouse space under an operating lease that expires in June 2011. The monthly base rent increases 3% each year, and the lessor provided a rent concession of $12,000 in the first year in exchange for 24,000 shares of the Company’s stock. For financial statement purposes, the Company will recognize monthly base rental expense of $8,225, as the Company recognizes rent expense on a straight-line basis over the term of the lease. In addition to the monthly rent, the Company is responsible for real estate taxes and insurance. The lease also provides for an early cancellation as of June 30, 2009, at the option of the Company. The conditions for the early cancellation are that the Company not be in default, provide written notice to the lessor 6 months prior to June 30, 2009 that they wish to cancel, and vacate the premises by June 30, 2009. Future minimum rental payments under the lease described above are as follows:

12 Months Ending November 30,	Amount
2007	$	80,250
2008		100,950
2009		103,275
2010		106,375
2011		63,126
	$	453,976

Total rental expense (including base rent and other amounts due under the lease as described above) charged to operations for the three and six months ended November 30, 2006 and the period from October 7, 2005 (inception) to November 30, 2006 was $36,357, $56,274 and $56,274, respectively.

NOTE 5 - NET LOSS PER SHARE

Net loss per share (basic) is calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the three and six months ended November 30, 2006 and the period from October 7, 2005 (inception) to November 30, 2006. Net loss per share (diluted) is calculated by adjusting outstanding shares, assuming any dilutive effects of options and warrants using the treasury stock method. Such effects of the options and warrants are anti-dilutive for the periods presented and are accordingly not reflected in the per share calculations.

F-7

USTelematics, Inc.

(A Development Stage Company)

Selected Information-Substantially All Disclosures Required by Generally Accepted

Accounting Principles Are Not Included

(Unaudited)

November 30, 2006

The following reconciles the denominators of basic and fully diluted earnings per share:

Denominator - Shares	Three Months Ended November 30, 2006		Six Months Ended November 30, 2006		October 7, 2005 (Inception) through November 30, 2006
Basic Weighted-Average Shares		20,024,000		20,020,721		11,389,981
Effect of Dilutive Securities		0		0		0
Fully Diluted Weighted-Average Shares		20,024,000		20,020,721		11,389,981

NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The Company had the following non-cash transactions for the three and six months ended November 30, 2006 and for the period from October 7, 2005 (Inception) to November 30, 2006:

	Three Months Ended November 30, 2006		Six Months Ended November 30, 2006		October 7, 2005 (Inception) through November 30, 2006
Office and lab equipment exchanged for stock	$		$		$	2,500
Financing fees paid in exchange for stock						5,000
Financing fees paid out of proceeds from sale of convertible notes						207,204
Expenses paid out of proceeds from sale of convertible notes						1,578
Legal fees for related party paid out of proceeds from sale
of convertible notes						5,000
Prepaid expenses paid out of proceeds from sale of convertible notes						4,218
Rent concession exchanged for stock				12,000		12,000
Expenses paid via issuance of stock warrants		1,261		1,261		1,261

The Company paid no cash for interest or income taxes for the three and six months ended November 30, 2006 or for the period from October 7, 2005 (Inception) to November 30, 2006.

NOTE 7 - INCOME TAXES

As of November 30, 2006, the provision (benefit) for income taxes consisted of the following components:  

	Three Months Ended November 30, 2006			Six Months Ended November 30, 2006			October 7, 2005 (Inception) through November 30, 2006
Current	$	0		$	0		$	0
Deferred		(148,000	)		(334,000	)		(394,000	)
		(148,000	)		(334,000	)		(394,000	)
Adjustment of valuation allowance		148,000			334,000			394,000
	$	0		$	0		$	0

F-8

USTelematics, Inc.

(A Development Stage Company)

Selected Information-Substantially All Disclosures Required by Generally Accepted

Accounting Principles Are Not Included

(Unaudited)

November 30, 2006

The reconciliation between the U.S. federal statutory income tax rate of 35% and the Company’s effective tax rate is as follows:  

	Three Months Ended November 30, 2006			Six Months Ended November 30, 2006			October 7, 2005 (Inception) through November 30, 2006
Income tax provision (benefit) at U.S. federal statutory rates	$	(121,000	)	$	(273,000	)	$	(322,000	)
State income taxes benefit		(27,000	)		(61,000	)		(72,000	)
Adjustment of valuation allowance		148,000			334,000			394,000
	$	0		$	0		$	0

The net deferred tax asset in the accompanying balance sheet includes the following components:

Total long-term deferred tax asset:
Temporary differences related to development stage expenses	$	394,000
Deferred tax asset valuation allowance		(394,000	)
	$	0

NOTE 8 - COMMITMENTS

The Company has an agreement with a law firm to represent the Company in connection with the filing of SEC Form SB-2 Registration Statement. The agreement provides for the payment of a total of $100,000 to the law firm, of which $50,000 had been paid as of November 30, 2006, with the balance of $50,000 payable at specific points during the process of the filing of the Registration Statement. In addition to the fees, the law firm will be compensated for their services with 50,000 shares of common stock of the Company, which shall be restricted shares to be included on the SB-2. The agreement does not state when the shares are due to be issued to the law firm. However, management believes the shares should be recorded only upon completion of the services.

NOTE 9 - RELATED PARTY TRANSACTIONS

The Company had the following transactions with related parties during the three and six months ended November 30, 2006 and the period from October 7, 2005 (Inception) through November 30, 2006:

In April, 2006, $5,000 was paid out of the proceeds from the closing of the sale of the convertible notes, to the Company’s attorney. This amount satisfied an old legal bill that was owed by a majority shareholder of the Company to the Company’s attorney. As of November 30, 2006, this amount is included in the balance sheet in due from related parties. The amount is non-interest bearing and is due on demand. The loan was made to StealthMedia Labs, Inc. to secure legal services in connection with the completion of the Company’s bridge financing in April 2006. The law firm representing the Company in that financing was owed a large amount of fees for past services performed on behalf of StealthMedia Labs, Inc. and was unwilling to represent the Company in that transaction unless it was paid some back fees in connection with its previous representation of StealthMedia Labs, Inc. An additional amount is also due from a majority shareholder in the amount of $1,755 related to payroll expense.

In June, 2006, the Company purchased two used vehicles for a total cost of $32,885 from a company partially owned by two shareholders of the Company. The cost of both of the vehicles included fully functional mobile satellite antenna prototypes and other modifications to facilitate demonstrations of USTelematics’ products to the news media and prospective investors.

F-9

USTelematics, Inc.

(A Development Stage Company)

Selected Information-Substantially All Disclosures Required by Generally Accepted

Accounting Principles Are Not Included

(Unaudited)

November 30, 2006

Amounts paid to a company owned by a minority shareholder of the Company for product development and other labor services totaled $6,491, $18,397 and $28,397 for the three and six months ended November 30, 2006 and the period from October 7, 2005 (Inception) through November 30, 2006, respectively.

Amounts paid to a minority shareholder of the Company for engineering services totaled $0, $6,475 and $11,475 for the three and six months ended November 30, 2006 and the period from October 7, 2005 (Inception) through November 30, 2006, respectively.

NOTE 10 - IMPACT OF NEW ACCOUNTING STANDARDS RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, FASB issued SFAS No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS No. 157 does not require any new fair value measurements. However, for some entities, the application of SFAS 157 will change current practice. Statement 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company will adopt SFAS 157 in its fiscal year beginning June 1, 2008. The Company has not determined the impact, if any, that this statement will have on its financial position or results of operations.

In June 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Interpretation No. 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt Interpretation No. 48 in its fiscal year beginning June 1, 2007. The Company has not determined the impact, if any, that this interpretation will have on its financial position or results of operations.

F-10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Forward-Looking Statements

The information in this report contains forward-looking statements. All statements other than statements of historical fact made in report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Background

We were incorporated in October 2005 in the State of Delaware under the name Mobilier, Inc. for the purpose of engaging in the research, development, manufacturing and marketing of proprietary broadband telecommunications products for use in moving vehicles. Our initial principal hardware product is Voyager Ô , a patent-pending mobile antenna, capable of receiving DirecTV and Dish Network satellite TV broadcasts in moving vehicles. We are a development stage company and, to date, we have not sold any products or generated any revenues.

Plan of Operation and Financing Needs

To date we have not generated any revenues. We currently plan to start shipping our first products by the end of March, 2007. We may not be able to start selling our products when planned or that we will become profitable from our other operations in the future. We have incurred net losses in each fiscal period since inception of our operations.

Our initial focus during the next twelve months is the finalization of a number strategic alliances, the initialization of a PR campaign and the rolling out of our product. We also expect to hire approximately six new employees who will operate our Vehicular Systems Integration Center and ten employees to work in other areas.

On December 12, 2006, we entered into a securities purchase agreement with accredited investors providing for the issuance of the Company’s 9% Senior Secured Convertible Debentures in the principal amount of $3,565,000. This will provide adequate financing for the coming year to begin production of our product.

To the extent that funds are insufficient to meet management's business plans, we intend to operate our e-commerce website focusing upon marketing of internet-connected car PCs (which can be done without raising more capital, albeit on a basis under which profitability is difficult to foresee), and/or seek alternative business opportunities in order to generate revenue.

13

Revenue Lines

We plan to generate four distinct lines of revenue in operationally unique ways as outlined here:

· Telecommunication Hardware manufacturing;

· E-Services Re-Selling;

· Integration Services; and

· Online Retail Store

“Telecommunication Hardware” refers to high technology custom manufacturing of physical electronic hardware systems including software, most of which are built or are being built to according to our own proprietary designs. Our target gross margin in this category is 50%.

“E-Services Re-Selling” means that we will act, during the initial activation of hardware products that we sell, as an agent to market certain wireless services that are made possible or better by our hardware products. DirecTV, Dish Network, Verizon and Sprint all offer sales commissions to us under these circumstances. Income in this category goes almost directly to our bottom line, with little associated expense.

“Integration Services” means (a) services performed at our own facility to install our hardware products into vehicles; and (b) installation performed by sub-contractors whereby we purchase such services at a discounted wholesale price and re-sell them to customers who purchase our hardware products. This includes installation services, activation services, and e-system-to-vehicle technical integration processes. The Integration Services operation we are building at our headquarters facility is intended to be an ongoing, experimental-yet-profit-generating pilot business model for the eventual establishment of franchise or agency operations as “stores-within-stores” at auto, marine and RV dealerships.

“Online Retail Store” refers to the Internet presence we are establishing at ustelematics.com. This online store will offer our own products and services as well as certain items and services produced by others that are complimentary to our product line. In keeping with our plan to create a pilot operation for licensing or franchising to auto, marine and RV dealerships, we also plan to partner with a national vehicle leasing finance institution and market new vehicles fully integrated with our technology, from our retail website. While we will not be “selling cars”, we will use our website as a marketing channel for a leasing company or companies that “sells cars” to consumers, whereby these cars are outfitted with our telecommunications products prior to consumer delivery.

Results of Operations for the three months ended November 30, 2006

We account for our operations under accounting principles generally accepted in the United States of America. For the three months ended November 30, 2006, we had no sales. We incurred operating expenses of $340,976. As a result, for the three months ended November 30, 2006, we incurred a net loss of $372,800.

Of this, expenses included $37,430 in depreciation and amortization; $32,814 in accrued expenses and $37,500 in accrued interest. Net cash used in operating activities was $261,609.

Results of Operations for the six months ended November 30, 2006

We account for our operations under accounting principles generally accepted in the United States of America. For the six months ended November 30, 2006, we had no sales. We incurred operating expenses of $779,078. As a result, for the six months ended November 30, 2006, we incurred a net loss of $840,901.

Of this, expenses included $12,000 paid to our landlord with common shares in lieu of cash; $73,874 in depreciation and amortization; $45,718 in prepaid expenses; $65,432 in accrued expenses and $75,000 in accrued interest. Net cash used in operating activities was $557,359.

Liquidity and Capital Resources

As of November 30 2006, we had cash in the amount of $400,048 and a negative cash flow from operations for the three and six months ended November 30, 2006 of $261,609 and $557,359, respectively. Since inception, we have been dependent upon proceeds from capital investment to fund our continuing activities.

During April 2006, we issued 10% secured debentures in the total principal amount of approximately $1,500,000 due in October 2007 to fourteen accredited investors. The debentures were exchanged in a financing completed in December 2006 that is discussed below.

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On December 12, 2006, we entered into and consummated a securities purchase agreement with a group of accredited investors (the “Investors”) providing for the issuance to the Investors of our 9% Senior Secured Convertible Debentures in the principal amount of $3,565,000 (the “Debentures”). Interest is payable in cash or, at our option (after the effective date of the Registration Statement, as defined below), in registered shares of our common stock (at a 20% discount to the average of the lowest 3 intra-day trading prices during the 20 trading days immediately prior to the interest payment due date). Upon an event of default, the interest rate of the Debentures will be increased to 18%. The Debentures mature two years from the date of issuance.

All amounts due under the Debentures may be converted at any time, in part or in whole, at the written election of the holder thereof, into shares of our common stock at a conversion price of $0.50. No conversions may take place if it would cause a holder of the Debentures to become the beneficial owner of more than 4.99% of the outstanding shares of our common stock, which limitation is subject to waiver by an Investor upon 61 days prior written notice to us. We have granted a security interest in all of our assets to secure our obligations under the Notes.

We also issued to the holders of the Debentures Class A Warrants to purchase 7,130,000 shares of common stock at $0.55 per share and Class B Warrants to purchase 3,565,000 shares of Common Stock at $0.75 per share (collectively, with the Bonus Warrants, as defined below, the “Warrants”). All Warrants are exercisable for a period of five years.

We also issued debentures (the “Exchange Debentures”) in the principal amount of approximately $1,597,000 in exchange for debentures issued to a group of investors (the “Bridge Investors”) on or after April 14, 2006 (the “Bridge Financing”). The Exchange Debentures are identical to the Debentures in all respects, except that the conversion price of the Exchange Debentures is $0.375.

We also issued to the Bridge Investors Class A Warrants to purchase 4,259,726 shares of our common stock and Class B Warrants to purchase 2,129,863 shares of Common Stock. In addition, they received five-year warrants (the “Bonus Warrants”) to purchase an aggregate of 1,064,932 shares of common stock of the Company at $0.375 per share.

We believe the proceeds from these financing transactions will provide adequate financing for the coming year to begin production of our product.

The report of the independent registered public accounting firm on our financial statements as of May 31, 2006, contains an explanatory paragraph regarding a substantial doubt about our ability to continue as a going concern. The notes to those financial statements also disclose this issue.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

Critical Accounting Policies

Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents.

Certificates Of Deposit

Certificates of deposit with a maturity date greater than three months and less than one year have been categorized as short term investments and are carried at cost which approximates fair value.

Fixed Assets

Fixed assets are recorded at cost. Depreciation is provided for property and equipment using the straight-line method over five and seven years for both office equipment and lab equipment.

Deferred Charges

Financing fees incurred in connection with the placement of the convertible notes payable have been deferred and are being amortized over the 18-month term of the notes.

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Assets Not Placed In Service

Assets not placed in service represents costs associated with designing and building the Company’s website. The Company’s website is still in development and therefore these assets are not being depreciated.

Intangible Assets

The Company amortizes intangible assets over their estimated useful lives, and evaluates for impairment on an annual basis.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to the difference in the basis of reporting development stage expenses for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Management Information System

Our website is being built on top of NetSuite, an Oracle-based accounting system that also serves as a management information system (M.I.S.), enterprise requirements planning system, and customer relationship management system for all aspects of our business. We have hired one person who is dedicated to managing our M.I.S. Netsuite can be accessed online by our management and accountants at any time of day, from any internet access point in the world, and is protected by encrypted, password-controlled security measures.

Internal Accounting & Financial Controls

Our accounting is being provided by an outside accounting firm located in the Chicago area. That firm is training our administrative staff and website managers on fully integrating NetSuite as a financial control throughout our business. It also acts to produce quarterly and year-end financial reports for presentation to our certified auditors, Blackman Kallick Bartelstein, LLP of Chicago.

Item 3. Controls and Procedures.

As of November 30, 2006, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of that date our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Contributing to our conclusion was the recording of two journal entries to our November 30, 2006 financial statements, based upon issues identified by Blackman Kallick Bartelstein, LLP during their quarterly review, which they identified as material weaknesses. Our management agreed that the deficiencies underlying these entries constituted material weaknesses.

During the quarter ended November 30, 2006, our bookkeeping and financial accounting functions were performed by a small local CPA firm. We have since retained a large national accounting firm to manage our internal accounting and financial reporting systems. That firm has been allowed full-time, unfiltered, internal-level access to our real time electronic accounting system. It works in concert with an internal salaried employee, our Management Information System Manager, to ensure that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported promptly and accurately. As a result, we believe that we have corrected the material deficiencies that existed at November 30, 2006.

We believe that the collective institutional resources at our disposal through the current service arrangements with this outside accounting firm are preferable to those that might be found in any one individual full-time employee. As the Company matures and the volume of transactions increases, we are likely to modify this arrangement and expand our in-house bookkeeping and accounting capabilities.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

As of the date this report was filed, we were not involved in any legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

On December 12, 2006, Company entered into and consummated a securities purchase agreement with a group of accredited investors as disclosed in the Company’s Form 8K (File No 000-52193) dated December 15, 2006.

Item 6. Exhibits.

31.1*	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.2*	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1*	Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
32.2*	Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	USTELEMATICS, INC.
Date: January 12, 2007	By:	/s/ Howard Leventhal
		Howard Leventhal
		President

Date: January 12, 2007	By:	/s/ Howard Leventhal
		Howard Leventhal Chief Financial Officer

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