United States
Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period Ended November 30, 2005.

[ ] 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 0-22814
---------------
INSYNQ, INC.
---------------

(Exact name of registrant as specified in its charter)

NEVADA 22-3894506
(State or Other Jurisdiction
of Incorporation or Organization) (IRS Employer Identification No.)

1127 BROADWAY PLAZA, SUITE 202
TACOMA, WASHINGTON 98402-3519
(Address of Principal Executive Office)(Zip Code)

(253) 284-2000 (Registrant's telephone
number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

Common Stock, $0.001 Par Value 808,744,293 as of February 9, 2006.

Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]

<table>

PART I FINANCIAL INFORMATION..............................................................................4
- ------- ---------------------

ITEM 1 CONDENSED FINANCIAL STATEMENTS OF INSYNQ, INC...................................................4
------- ----------------------------------------------
CONDENSED BALANCE SHEETS........................................................................4
------------------------
CONDENSED STATEMENTS OF OPERATIONS..............................................................5
----------------------------------
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT....................................................6
--------------------------------------------
CONDENSED STATEMENTS OF CASH FLOWS..............................................................7
----------------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS.........................................................8
---------------------------------------
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........16
------- -------------------------------------------------------------------------------------
ITEM 3. CONTROLS AND PROCEDURES........................................................................27
-------- -----------------------

PART II. OTHER INFORMATION..............................................................................28
- -------- -----------------

ITEM 1. LEGAL PROCEEDINGS..............................................................................28
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS....................................28
------- -----------------------------------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................................................................28
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................28
------- ---------------------------------------------------
ITEM 5. OTHER INFORMATION..............................................................................28
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................................................28
------- --------------------------------
SIGNATURES....................................................................................................30
----------

THE REVIEW OF THE NOVEMBER 30, 2005 and 2004 CONDENSED FINANCIAL STATEMENTS THAT
ARE REQUIRED FOR FILING THE COMPANY'S FORM 10-QSB HAS NOT BEEN COMPLETED BY THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AS OF THE DATE OF THIS
FILING.

In its normal course of business, the U.S. Securities and Exchange Commission
("SEC") reviewed the Company's Form 10-KSB for the fiscal year end May 31, 2005
and the Form 10-QSB for the quarter ended August 31, 2005, and issued comments
resulting from their review. After studying the SEC's comments, Company
management concluded that it may have to amend these two filings, and possibly
earlier filings, as these issues relate to a number of accounting and disclosure
issues regarding derivatives and the related accounting treatment for the
issuances of all convertible securities and related warrants. The accompanying
condensed financial statements have not been adjusted to reflect any changes as
a result of the review by the SEC.

INSYNQ, INC.
CONDENSED BALANCE SHEETS

November 30, 2005 May 31, 2005
--------------------- --------------------
(unaudited)
Assets

Current assets

Cash ...................................................... $ 20,293 $ 703,028
Accounts receivable, net of allowance for doubtful accounts
of $35,000 at November 30, 2005 and May 31, 2005,
respectively ........................................... 119,129 59,211
------------ ------------
Total current assets .............................. 139,422 762,239
------------ ------------

Equipment, net ................................................ 77,211 33,146
------------ ------------
Other assets
Intellectual property, net ................................ 290,722 323,001
Deposits and prepaid expenses ............................. 73,227 40,350
------------ ------------
Total other assets ................................. 363,949 363,351
------------ ------------

Total assets ....................................... 580,582 $ 1,158,736
============ ============

Liabilities and Stockholders' Deficit

Current liabilities
Accounts payable .......................................... $ 610,774 $ 598,177
Accrued liabilities ....................................... 2,071,651 2,152,900
Convertible debentures .................................... 1,126,067 1,300,045
Convertible notes payable, net of unamortized discount
of $2,022,534 and $2,472,534 at November 30, 2005
and May 31, 2005, respectively ............................ 1,265,873 227,466
Notes payable ............................................. 116,500 121,234
Customer deposits and other obligations ................... 39,659 43,161
------------ ------------
Total current liabilities .......................... 5,230,524 4,442,983
------------ ------------

Commitments and contingencies

Stockholders' deficit
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, 165,000 of Series A shares issued and out-
standing at November 30, 2005 and May 31, 2005,
respectively ........................................... 165 165
Class A common stock, $0.001 par value, 10,000,000 shares
authorized, -0- shares issued and outstanding at
November 30, 2005 and May 31, 2005, respectively ....... -- --
Common stock, $0.001 par value, 2 billion shares
authorized, 444,386,293 and 87,707,271 shares issued
and outstanding at November 30, 2005 and May 31, 2005,
respectively ........................................... 444,387 87,707
Additional paid-in capital ................................ 26,083,346 26,265,708
Related party receivables, net of allowance for doubtful
accounts of $99,000 at November 30, 2005 and May 31, 2005,
respectively .............................................. (406,588) (187,050)
Unearned compensation ..................................... -- (16,667)
Accumulated deficit ....................................... (30,771,252) (29,434,110)
------------ ------------
Total stockholders' deficit ........................ (4,649,942) (3,284,247)
------------ ------------
Total liabilities and stockholders' deficit ........ $ 580,582 $ 1,158,736
============ ============

The accompanying notes are an integral part of these condensed financial
statements.
4
<page>
INSYNQ, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)

For the three months ended: For the six months ended:
-------------------------------- ---------------------------------
November November 30, November 30, November 30,
30, 2005 2004 2005 2004
-------------- -------------- -------------- --------------
Revenues

Unrelated parties .... $ 378,324 $ 252,847 $ 713,972 $ 552,556
Related parties ...... 22,386 22,548 55,848 44,376
------------- ------------- ------------- -------------
400,710 275,395 769,820 596,932
------------- ------------- ------------- -------------
Costs and expenses
Direct cost of services 300,963 182,962 595,315 396,848
Selling, general and
administrative
Non-cash compensation 340 99,300 17,007 99,300
Other ................ 431,451 340,363 762,448 660,761
------------- ------------- ------------- -------------
Total costs and expenses . 732,754 622,625 1,374,770 1,156,909
------------- ------------- ------------- -------------
Loss from operations ..... (332,044) (347,230) (604,950) (559,977)
------------- ------------- ------------- -------------

Other income (expense)
Other income ........... 1,925 5,871 2,025 6,294
Interest income ........ 2,010 -- 2,943 26
Gain on forgiveness and
settlements of debts . -- 2,267 1,604 128,073
Interest expense
Non-cash ............. (225,000) (92,705) (450,000) (160,603)
Other ................ (138,494) (121,232) (288,764) (233,588)
------------- ------------- ------------- -------------
Total other (expense) .... (359,559) (205,799) (732,192) (259,798)
------------- ------------- ------------- -------------
Net loss ................. $ (691,603) $ (553,029 $ (1,337,142) $ (819,775)
============= ============= ============= =============
Net loss per share:
Basic and diluted ..... $ (0.00) $ (0.01) $ (0.00) $ (0.03)
============= ============= ============= =============

Weighted average of common
shares: Basic and diluted 311,756,513 54,478,683 269,541,976 31,568,615
============= ============= ============= =============

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

INSYNQ, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2005
(UNAUDITED)

Preferred Stock Common Stock
Shares Amount Shares Amount
---------- ----------- -------- -----------

Balance at May 31, 2005 ........ 165,000 $ 165 87,707,271 $ 87,707

Issuance of common stock for the
conversion of debentures ....... -- -- 356,479,022 356,480

Issuance of common stock for
non-employee compensation ...... -- -- 200,000 200

Amortization of unearned
compensation ................... -- -- -- --

Amount due from related party
receivables .................... -- -- -- --

Net loss for the six months
ended November 30, 2005 ........ -- -- -- --

------------ ------------ ------------ ------------

Balance at November 30, 2005 ... 165,000 $ 165 444,386,293 $ 444,387
============ ============ ============ ============

(Continued from table above, first column repeated)

Additional Related Total
Paid-In Party Unearned Accumulated Stocksholders'
Capital Receivables Compensation Deficit Deficit
----------- ------------ ------------ ----------- --------------

Balance at May 31, 2005 ........ $ 26,265,708 $ (187,050) $ (16,667) $(29,434,110) $ (3,284,247)

Issuance of common stock for the
conversion of debentures ....... (182,502) -- -- -- 173,978

Issuance of common stock for
non-employee compensation ...... 140 -- -- -- 340

Amortization of unearned
compensation ................... -- -- 16,667 -- --

Amount due from related party
receivables .................... -- (219,538) -- -- (219,538)

Net loss for the six months
ended November 30, 2005 ........ -- -- -- (1,337,142) (1,337,142)
------------ ------------ ------------ ------------ ------------
Balance at November 30, 2005 ... $ 26,083,346 $ (406,588) $ -- $(30,771,252) $ (4,649,942)
============ ============ ============ ============ ============

The accompany notes are an integral part of this condensed financial statement.
6
<page>
INSYNQ, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

For the six months ended November 30,
----------------------------------------
2005 2004
---------------- ---------------

Cash flows from operating activities

Net loss .................................................................. $(1,337,142) $ (819,775)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ......................................... 43,457 60,381
Bad debts ............................................................. 10,203 35,179
Provision for doubtful accounts - related party ....................... -- 52,500
Gain on forgiveness and settlements of debts .......................... (1,604) (128,073)
Amortization of unearned compensation ................................. 16,667 84,300
Issuance of stock for services and compensation to non-employees ...... 340 15,000
Amortization of discounts related to convertible notes payable ........ 450,000 160,603
Changes in operating assets and liabilities:
Accounts receivable - trade ....................................... (70,121) (41,996)
Prepaid expenses and other assets ................................. (59,458) 14
Accounts payable .................................................. 12,597 8,022
Accrued liabilities ............................................... 508,761 (281,115)
Customer deposits ................................................. (3,502) (786)
Licenses held for resale and prepaid licenses ..................... -- 202,698
----------- -----------
Net cash used in operating activities .......................... (429,802) (653,048)
----------- -----------
Cash flows from investing activities
Purchase of equipment .................................................... (28,431) --
----------- -----------
Net cash used in investing activities .......................... (28,431) --
----------- -----------
Cash flows from financing activities
Increase in related party receivables ..................................... (219,538) (124,205)
Payments on bank notes payable ............................................ (4,734) (4,288)
Deposit (payment) refund .................................................. (230) 657
Proceeds from convertible notes payable ................................... -- 900,000
Proceeds from issuance of preferred stock ................................. -- 165
Increase deposit on credit cards .......................................... -- (26)
Payment on capital lease obligation ....................................... -- (1,519)
----------- -----------
Net cash (used in) provided by financing activities ............ (224,502) 770,784
----------- -----------
Net (decrease) increase in cash ............................................... (682,735) 117,736
Cash at beginning of the period ............................................... 703,028 80,359
----------- -----------
Cash at end of the period ..................................................... $ 20,293 $ 198,095
=========== ===========

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

INSYNQ, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOVEMBER 30, 2005
(UNAUDITED)

Note 1 - Business and Background

Business

Insynq, Inc. (the Company) is a Nevada corporation headquartered in Tacoma,
Washington USA. The Company is primarily an application hosting and managed
software service provider that provides server-based computing access and
services to customers who have decided to outsource all or part of their
information technology requirements. Customers pay a monthly fee for their
services and connect to the Company's server farm through an internet-enabled
workstation. As of April 30, 2005, the Company also sells its own proprietary
accounting and financial quoting software applications.

Background

On February 18, 2000, the Company merged with Xcel Management, Inc. (Xcel), a
non-reporting public shell company. The merger was accompanied by a
re-capitalization and was accounted for as a change in capital structure. On
August 3, 2000 Xcel completed a re-incorporation as a Delaware corporation and
changed its name to Insynq, Inc.

On July 25, 2002, the Board of Directors approved a re-incorporation merger of
the Company with its wholly owned subsidiary, Insynq, Inc., a Nevada
corporation, and effectuated a 100 to 1 common stock exchange of the Company's
currently issued and outstanding shares of common stock. The re-incorporation,
which was effective December 23, 2002, resulted in the exchange of 59,013,393
common shares of the terminating entity, Insynq, Inc. - Delaware, for 590,134
common shares of the surviving entity, Insynq, Inc. - Nevada.

On July 16, 2004, the Board of Directors approved a 1 for 50 reverse split of
the Company's authorized common stock. Accordingly, the date of record and the
effective date was August 2, 2004. Par value remained unchanged at $.001 per
share. The effect of the reverse split reduced the number of authorized shares
from 500,000,000 to 10,000,000 and reduced the number of outstanding and issued
shares of common stock from 445,384,987 shares to 8,907,700 shares.

In addition, at the same board meeting on July 16, 2004, the Directors adopted,
by unanimous consent, to approve the increase of the number of authorized shares
of common stock from 10 million shares to 2 billion shares. On August 2, 2004,
in lieu of a meeting of the stockholders, written consents were received from
stockholders who were entitled to vote a majority of the common stock and the
Series A Preferred Stock, which then approved the July 16, 2004 actions of the
Board of Directors.

All shares of common stock and per share amounts in the accompanying financial
statements and notes to financial statements have been retroactively restated to
reflect this August 2, 2004 transaction.

Note 2 - Basis Of Presentation And Summary Of Significant Accounting Policies

Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America, have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Annual Report on Form
10-KSB for the fiscal year ended May 31, 2005 filed by the Company on September
13, 2005.

A summary of the significant accounting policies consistently applied in the
preparation of the accompanying condensed financial statements is as follows:

Revenue Recognition

The Company has two sources of revenue, described as follows:

A. Application Service Provider

The Company's principal source of revenue is generated from application hosting,
managed software and related types of services. Application hosting and managed
services revenues are generated through a variety of contractual arrangements
directly with customers. The Company sells its services directly to customers
through annual or month-to-month subscription agreements. Subscription
arrangements include monthly subscriber fees, application hosting fees, user
setup fees and a last month deposit. Revenue is recognized when earned and over
the period of the contractual arrangement. Customer discounts, if any, are
recorded as a reduction of revenue at the time of sale.

B. Sales of Software and Licensing Fees

The Company's second source of revenue is generated from the sales of the
Company's financial and quoting software applications and from licensing fees
billed to the Company's Value Added Resellers (VARS).

Sales of the Company's quoting software products are recognized at the time of
sale to the end-user. The Company generally uses their own website or that of an
e-commerce website to procure payment by credit card.

VARS enter into a licensing agreement that allows them to resell to an end user
either: (a.) a custom suite of enterprise accounting and management software or
(b.) a standard off-the-shelf accounting software application. VARS sign an
agreement with the Company for a period, generally one year, for a predetermined
fixed licensing fee. The licensing fee revenue is recognized upon execution of
agreement. Once an agreement is executed, the VARS are then entitled to resell
or license the Company's software under their proprietary name. The VARS will
purchase the Company's software (usually at wholesale prices) and may customize
the software to the end users' specifications. The Company recognizes revenue
for the sale of its software to the VARS at the time of sale.

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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the previously reported amounts to
conform to the Company's current interim period presentation.

Fair Value of Financial Instruments

Financial instruments consist principally of cash, accounts and related party
receivables, accounts payable, accrued liabilities, and shot-term debt
obligations. The carrying amounts of such financial instruments in the
accompanying balance sheets approximate their fair values due to their
relatively short-term nature. It is management's opinion that the Company is not
exposed to any significant currency or credit risks arising from these financial
instruments.

Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 (R), Share-Based Payment, which establishes standards for transactions
in which an entity exchanges its equity instruments for goods and services. This
standard replaces SFAS No. 123 and supercedes Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock-Based Compensation. This standard
requires a public entity to measure the cost of employee services, using an
option-pricing model, such as the Black-Scholes Model, received in exchange for
an award of equity instruments based on the grant-date fair value of the award.
This eliminates the exception to account for such awards using the intrinsic
method previously allowable under APB No. 25. SFAS No. 123(R) is effective for
interim or annual reporting periods beginning on or after June 15, 2005.

Loss Per Common Share

Basic loss per common share is computed by dividing the net loss applicable to
the common stockholders by the weighted average number of shares of outstanding
common stock during the period. Diluted loss per share is computed by dividing
the net loss by the weighted average number of common shares including the
dilutive effect of common share equivalents then outstanding. For the six months
ended November 30, 2005 and 2004, common stock equivalents are not included in
the computation of diluted net loss per common share because the effect would be
anti-dilutive.

Recent Authoritative Accounting Pronouncements

In June 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 154, "Accounting Changes and
Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and
FASB Statement No. 3, Reporting Accounting Changes in Interim Financial
Statements." SFAS No. 154 changes the requirements for the accounting for and
reporting of a change in accounting principle. Previously, most voluntary
changes in accounting principles were required recognition via a cumulative
effect adjustment within net income for the period of the change. SFAS No. 154
requires retrospective application to prior periods' financial statements,
unless it is impracticable to determine either the period-specific effects or
the cumulative effect of the change. SFAS No. 154 is effective for accounting
changes made in fiscal years beginning after December 15, 2005; however, SFAS
no. 154 does not change the transition provisions of any existing accounting
pronouncements. The Company does not believe the adoption of SFAS No. 154 will
have a material impact on its financial condition or results of operations.

In March 2004, the FASB Emerging Issues Task Force ("EITF") released Issue No.
03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to
certain Investments." EITF 03-1 provides guidance for determining whether
impairment for certain debt and equity investments is other-than-temporary and
the measurement of an impaired loss. The recognition and measurement
requirements of EITF 03-1 were initially effective for reporting periods after
June 15, 2004. However, in September 2004, the FASB staff issued FASB Staff
Position ("FSP") EITF 03-1-1 that delayed the effective date for certain
measurement and recognition guidance contained in EITF 03-1. The FSP requires
that entities continue to apply previously existing "other-than-temporary"
guidance until a final consensus is reached. The Company does not anticipate
that the issuance of a final consensus will materially impact its financial
condition or results of operations.
10

Note 3 - Going Concern and Management's Plans

The Company's condensed financial statements as of and for the three and six
months ended November 30, 2005 and 2004 have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. For the six months
ended November 30, 2005, the Company had a net loss of $1,337,142 and a negative
cash flow from operations of $429,802. The Company had a working capital deficit
of $5,091,102 and a stockholders' deficit of $4,649,942 at November 30, 2005.
The Company's working capital deficit as of November 30, 2005 may not enable it
to meet certain financial objectives as presently structured. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

As of November 30, 2005 and through January 17, 2006, the Company is not in
compliance with the proper registration and licensing of certain software
applications and products critical to support the customer base and its own
internal operations.

The rate at which the Company expends its resources is variable, may be
accelerated, and will depend on many factors. The Company will need to raise
substantial capital to finance its operations and may seek such additional
funding through public or private equity or new debt. There can be no assurance
that such additional funding, if any, will be available on acceptable terms. The
Company's continued existence as a going concern is ultimately dependent upon
its ability to secure additional financing.

Note 4 - Related Party Transactions

As of November 30, 2005, the Company has extended credit and/or loaned money to
four business entities that are and/ or were related to one or more
officers/stockholders of the Company and, as such, are recorded in the
stockholders' deficit section in the accompanying condensed balance sheets. The
following discusses the activities and balances due from the respective
entities:

o Two of the businesses were related to a corporate officer, stockholder
and director. Insynq provided these two businesses monthly application
hosting services and other related management services. At November 30,
2005, the balance due from these two companies aggregated $104,577, and
an allowance for past due collections of $99,000 was set up on these
accounts. During the six months ended November 30, 2005, the Company
billed these related businesses approximately $9,044.

o The third business is partially owned by two officers of Insynq. As of
November 30, 2005, Insynq is owed $390,307. The following details the
amount due the Company:

a. Unsecured promissory note - $333,837. Issued October 31, 2005,
due October 31, 2006, with interest at 7%. (See also Note 12.)

b. Accrued interest - $1,986. Amount earned on the promissory
note discussed above in item a.

c. Account receivable - $36,969. Monthly hosting and technology
services, and rental fees, charged per agreements.

d. Open account - $17,515. This amount is comprised of expenses
paid on behalf of the third business.

In June 2005, Insynq and this related entity entered into a five year
agreement (see item c. above) whereby Insynq was awarded an application
management services agreement in exchange for supplying business
technology, IT management and communications infrastructure. Insynq
also rents equipment on a four-year agreement to this entity. For the
six months ended November 30, 2005, Insynq has, under these two
agreements, billed this entity $46,969.
11

o The fourth related entity is the business in which Insynq acquired
intellectual property on April 30, 2005. Since the acquisition date,
the related entity had certain continuing business affairs without the
resources to settle these obligations. As of November 30, 2005, Insynq
is due $10,704.

Note 5 - Notes Payable

The Company had five notes payable, one with a bank and four with private
parties. The private party notes, all of which are in default, plus the accrued
interest, were generally due within one year from the date of issuance or on
demand. The following describes the general terms and current conditions of the
notes:

November 30, 2005 May 31, 2005
------------------- -------------------

Note payable to bank, $15,000 revolving line of $ -- $ 4,734
credit, bearing interest prime plus 12.00% and
personally guaranteed by an officer. On June 7,
2005, this note, plus accrued interest, was paid off
and the account was closed.

Four notes payable to private parties, all past due,
bearing default interest ranging from 10% to 21%,
and are unsecured. 116,500 116,500
------------------- -------------------
$ 116,500 $ 121,234
=================== ===================

Note 6 - Accrued Liabilities

Accrued liabilities consist of the following at:

November 30, 2005 May 31, 2005
-------------------- -------------------

Salaries and benefits $ 306,478 $ 302,902
Taxes
Payroll 5,169 8,588
Business 39,813 33,397
Penalties and interest 204,442 215,058
Interest 704,332 1,011,503
Licenses, consulting and other 811,417 581,452
-------------------- -------------------
$ 2,071,651 $ 2,152,900
==================== ===================

On July 11, 2005 the Company entered into an installment agreement with the
Internal Revenue Service (IRS) to pay a remaining obligation that accrued during
prior periods from the non-payment of payroll taxes. The obligation, at the time
of execution of the installment agreement, was $215,058 and was made up of
unabated penalties and accrued interest. Terms require the Company to pay not
less than $5,000 per month, including interest, over a 50-month period or until
the balance is zero. As of November 30, 2005, the Company is in default on this
obligation and owes the IRS $204,442. On January 9, 2006, the IRS

issued a 30-day notice of intent to levy because of the default on the
agreement. The IRS also has a lien on Company assets.

On September 29, 2005, the Company restructured $588,407 of accrued interest
accumulated on the convertible debentures into four secured convertible
promissory notes. (See Note 7 below for details.)

A lien for approximately $28,000 was filed several years ago by a State for
prior years' income taxes assessed to the predecessor company of Insynq, Inc.
The assessment was disputed and the Company filed amended returns to correct
this deficiency. As of the date of this report, the State has not responded to
the amended returns, thereby, neither granting approval nor denying the filing
of the amended returns. This obligation is recorded under business taxes.

Note 7 - Secured Convertible Securities

Convertible Debentures

Between June 2001 and March 2003, the Company issued a total of $2,050,000 of
secured convertible debentures, under three separate private financing
transactions with four investor groups (See also Convertible Notes below). Terms
of each of the three private financing transactions, are essentially the same:
the debentures are convertible into shares of common stock at the lesser of (i)
$15 per share and (ii) the average of the lowest three intraday trading prices
in the twenty-day trading period immediately preceding the notice to convert,
discounted by sixty percent (60%). Pursuant to an amendment in June 2004, the
due date of the debentures was extended for an additional two years until June
25, 2006. As of November 30, 2005, the Company owes $1,126,067 on the
convertible debentures. Accrued interest is included in accrued liabilities in
the accompanying balance sheets. (See also Note 12.)

For the six months ended November 30, 2005, the Company issued 356,479,022
shares of common stock in redemption of $173,978 of principal on these
debentures. Because of the variable conversion formula and the discount feature
discussed above, all shares of common stock were issued below the Company's par
value of $0.001. Therefore, additional paid in capital on the accompanying
condensed statement of stockholders' deficit was reduced a total $182,502 for
the six months ended November 30, 2005.

Warrants were granted to the investors in conjunction with the convertible
debenture issuances. Investors may exercise each warrant at $12.50 per share. As
of November 30, 2005, 104,000 of these warrants were outstanding and were
unexercised with an amended expiration period until June 25, 2009.

As of November 30, 2005, the Company is in default on these securities because
of non-compliance with certain terms and conditions underlying the debentures.
Therefore, these securities are classified as a current liability.

Convertible Notes Payable

1. Secured Convertible Notes Payable - $2,700,000

On February 28, 2005, the Company entered into a Securities Purchase Agreement
for the issuance of $2,700,000 in the form of 8% secured convertible notes
payable to four investor groups, who are also the holders of the Company's
convertible debentures. The notes are due three years from the date of issuance,
bear interest at 8% per annum, and interest is payable quarterly in cash. No
interest will be charged in any month in which the reported intraday trading
price is greater than 125% of the initial market price ($0.005) or $0.0063 for
each trading day of that month. The notes or portions of these notes are
immediately
13

convertible into shares of the Company's common stock during the term. The
conversion price is equal to the lesser of: (a.) $0.0075, the fixed conversion
price, and, (b.) the average of the lowest three intraday trading prices during
the twenty days immediately prior to the conversion date multiplied by 40%, the
applicable conversion percentage.

The Company recorded a discount on the convertible notes payable totaling
$2,700,000, an amount equal to the fair value of the warrants, as determined by
applying the Black-Scholes pricing model, and the intrinsic value of the
beneficial conversion feature, which is the difference between the conversion
price and the fair market value of the common stock on the date of issuance. The
amount attributable to the beneficial conversion feature and warrants was
recorded as a discount on the debt and accretes over a thirty-six month period
as interest expense in accordance with paragraph 19 of Emerging Issues Task
Force ("EITF") No. 00-27 and APB No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants.

For the six months ended November 30, 2005, the Company recognized as interest
expense, discounts on the convertible notes payable totaling $450,000.

As a condition to the above Security Purchase Agreement, the Company granted the
investors 5,400,000 warrants at an exercise price of $0.007 per share and
exercisable from time to time until February 28, 2010.

2. Secured Convertible Notes Payable - $588,407

On September 29, 2005, the investors holding the secured convertible debentures
converted $588,407 of accrued interest into a four convertible notes payable,
bear interest at 2% per annum, interest payable quarterly. The principal and any
accrued and unpaid interest is due September 29, 2008. The other terms and the
variable conversion features and formula are similar to those discussed above in
item 1. No warrants were granted in conjunction with this debt instrument.

In the event of default under the terms of these notes, the investors have the
right to redeem the notes at 130% of the outstanding principal balance, plus
accrued and unpaid interest, plus default interest and other penalty payments
that may be due. The default interest is at 15% per annum, if any amounts due
under the notes are not paid when due. At the option of the investors, such
redemption payments may be made in shares of common stock. If certain conditions
are satisfied, the Company may elect to prepay the notes before the scheduled
maturity at a premium. The premium is 150% of the outstanding principal balance
plus accrued and unpaid interest, plus default interest and other penalty
payments due, depending on when the prepayments occurs. Because the Company is
not in compliance with certain terms and conditions underlying this agreement,
the principal amount due is reported in the balance sheet as a currently
liability.

The Company also granted the investors of the convertible securities a security
interest in all corporate assets.

Note 8 - Class A Common Stock

The Board of Directors is authorized to issue of up to 10,000,000 shares of
Class A common stock pursuant to which the holders are entitled to three votes
for each share held, on all matters submitted to stockholders, which voting
power may be used by the holders of such stock to create voting impediments or
otherwise delay or prevent a change in control or to modify the rights of
holders of the Company's common stock.

Note 9 - Preferred Stock

The Board approved and authorized in its July 16, 2004 meeting, the designation
of 1,000,000 shares of "Series A, Non-Participating Preferred Stock" as part of
the authorized 10,000,000 preferred shares. The par value of this series of
preferred stock is $0.001 per share, with each share having 1,000 votes on all
matters upon which the shareholders are entitled to vote. The Board then issued
165,000 shares of this designated preferred stock in equal portions to its three
corporate officers.
14

Note 10 - Contingencies and Commitments

Lawsuits

On July 18, 2005, the Company was served with a complaint for a material breach
of contract. The complaint was filed by the Company's former landlords for the
breach of a long-term lease for office space.

The lease term was March 2002 through July 2006. The claim is for an unspecified
amount of damages. The Company recognized an expense of $100,000 toward the
complete settlement of this claim in the quarter ended November 30, 2005. This
amount is included in accrued liabilities in the accompanying condensed balance
sheets at November 30, 2005, and in the accompanying condensed statements of
operations under selling, general and administrative expense for the three and
six months ended November 30, 2005.

The Company is also subject to other legal proceedings and business disputes
involving ordinary and routine claims. The ultimate legal and financial
liability with respect to such matters cannot be estimated with certainty and
requires the use of estimates in recording liabilities for potential litigation
settlements. Estimates for losses from litigation are made after consultation
with outside counsel. If estimates of potential losses increase or the related
facts and circumstances change in the future, the Company may be required to
record either more or less litigation related expense. It is management's
opinion that none of these open matters at November 30, 2005 and through
February 9, 2006, will have a material adverse effect on the Company's financial
condition or operations.

Licensing

The Company is operating without proper registration and a current licensing
agreement for hosting certain software. The Company has been accruing monthly an
estimated liability to cover this obligation. As of November 30, 2005, the
Company estimates it owes this vendor approximately $436,540, which is included
in accrued liabilities in the accompanying condensed balance sheets.

Consulting and Distribution Agreements

The Company is obligated on the three following agreements:

o Consulting Agreement- The Company entered into a three-month business
advisory and consulting agreement on November 5, 2005. Terms of the
agreement require the Company to compensate the consultant $59,500, of
which this amount is included in accrued liabilities on the condensed
balance sheets at November 30, 2005. On January 10, 2006, in lieu of
cash, the Company issued 85,000,000 shares of common stock, which were
originally valued, per agreement, at the close of market on November 5,
2005 at $0.0007 per share.

o Consulting Agreement - A $5,000 per month consulting agreement was
assumed on April 30, 2005 by the Company as a condition to closing an
asset purchase agreement between the seller (a related party to Insynq)
of the intellectual property and the original seller of the
intellectual property to the related party. Insynq agreed to honor the
remaining term of the consulting agreement in exchange for the original
sellers' expertise and guidance. The agreement will terminate on or
before May 2006.

o Distribution Agreement - At the time of purchase on April 30, 2005, a
distribution agreement existed between the same original selling party
as discussed above, and the related party. Insynq assumed the
responsibility for fulfilling the terms of this agreement as part of
the asset purchase agreement. This agreement stipulates that 5.5% of
gross cash receipts from the sales of certain software products will be
paid each quarter to the original selling party. This agreement is in
perpetuity. There is, however, a $1,250,000 buyout provision whereby at
any time the obligator may completely satisfy the terms underlying this
agreement.

Note 11 - Other Disclosures

Non-Cash Investing and Financing

Non-cash investing and financing activities included the following for the six
months ended:

November 30,
2005 2004
------------- --------------

Conversion of debentures into common stock $173,978 $ --
Conversion of accrued interest into notes payable 588,407 --
Deposit applied to equipment purchase 26,812 --
Record discounts on convertible notes payable issued with
warrants -- 741,640
Issuance of common stock for prepaid licenses -- 600,000
Issuance of common stock for notes receivable in conjunction
with exercise of options -- 95,000
Issuance of common stock and options recorded as unearned
compensation in conjunction with services to be rendered by
non-employees -- 515,800

Supplemental Cash Flows Information

Cash paid for interest expense for the six months ended November 30, 2005 and
2004 was $2,971 and $521, respectively.

Note 12 - Subsequent Events

Common Stock

On January 10, 2006, the Company issued 85 million shares of common stock to a
consultant. See a more detailed discussion in Note 10, Contingencies and
Commitments.

In December 2005, the Company agreed to convert its note receivable of $333,837,
due from a related party (See also Note 4.) into 333,837 shares of the related
party's common stock and one-half common stock purchase warrant, with an
exercise price of $1.50, for period of three years upon the closing. This
transaction has not been consummated and is contingent upon the timely closing
of a "Share Exchange Agreement" between the related party and another publicly
traded entity.

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

The following discussion and analysis should be read in conjunction with the
condensed financial statements, including notes thereto, appearing in this Form
10-QSB and in our May 31, 2005 Annual Report on Form 10-KSB.

Except for the historical information contained herein, this Quarterly Report
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
as amended. We believe it is important to communicate our expectations.

You can identify these statements by forward-looking words such as "may",
"will"', "believes", "anticipates", "estimates", "expects", "continues"' and/or
words of similar import. Forward-looking statements are based upon our
management's current expectations and beliefs concerning future developments and
their potential effects upon us that may involve substantial risks and
uncertainties. There may be events in the future that we are not able to
accurately predict or over which we have no control. Our
16

actual results could differ materially from those anticipated for many reasons
in these forward-looking statements. Factors that could cause or contribute to
the differences include, but are not limited to, availability of financial
resources adequate for short-, medium- and long-term needs, demand for our
products and services and market acceptance, as well as those factors discussed
in the "Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this report.

We believe it is important to communicate our expectations, however, our
management disclaims any obligation to update any forward-looking statements
whether as a result of new information, future events or otherwise.

A more detailed discussion of these factors is presented in our May 31, 2005
Annual Report of Form 10-KSB.

Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and results of operations
as of and for the three and six months ended November 30, 2005, are based upon
our condensed financial statements. As such, we are required to make certain
estimates, judgments and assumptions that management believes are reasonable
based upon the information available. We base these estimates on our historical
experience, future expectations and various other assumptions that we believe to
be reasonable under the circumstances, the results of which form the basis for
our judgments that may not be readily apparent from other sources. These
estimates and assumptions affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the dates of the
condensed financial statements and the reported amounts of revenues and expenses
during the reporting periods. These estimates and assumptions relate to
estimates of collectibility of accounts receivable, the realization of
intangible assets, the expected term of a relationship, accruals and other
factors. We evaluate these estimates on an ongoing basis. Actual results could
differ from those estimates under different assumptions or conditions, and any
differences could be material.

The condensed financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, in the opinion
of management, our condensed financial statements include all adjustments
necessary for a fair presentation of the results of operations, financial
position, changes in stockholders' deficit and cash flows for each period
presented.

A summary of the significant accounting policies which we believe are the most
critical to aid in fully understanding and evaluating the accompanying condensed
financial statements include the following:

Revenue Recognition

Application Service Provider

Our principal source of revenue is generated from application hosting, managed
software and other similar and related types of services. Application hosting
and managed services revenues are generated through a variety of contractual
arrangements directly with customers. We sell our services directly to customers
through annual service subscriptions or month-to-month subscriptions.
Subscription arrangements include monthly subscriber fees, user setup fees and a
last month deposit. New subscription service fees are prorated and invoiced
during the first month of service. Ensuing subscription services are invoiced at
the beginning of each month for that month of service. User setup fees received
are recognized at the time of the order. Any prepaid amount, regardless if it is
non-refundable, is recorded as a customer deposit and is generally applied to
the last month's service fee. Sale and promotional discounts are recorded as a
reduction of revenues.
17

Licensing Fees and Sales Of Software

On May 1, 2005, we added another source of revenue. This new source of revenue
is generated primarily from licensing fees billed to our value added reseller
(VARS) and from the sales of our accounting and quoting software applications.

Sales of the quoting software products are recognized at the time of sale to the
end-user. Our software is sold using either an e-commerce website or our own,
www.qwikquote.com, to procure payment by credit card.

VARS enter into a licensing agreement that allows them to resell to an end user
either: (a.) a custom suite of enterprise accounting and management software or
(b.) a standard off-the-shelf accounting software application. VARS sign an
agreement for a period, generally one year, for a predetermined fixed licensing
fee. The licensing fee revenue is recognized upon execution of agreement. Once
an agreement is executed, the VARS are then entitled to resell or license our
software under their proprietary name. The VARS will purchase the software
(usually at wholesale prices) and customize the software to the end users'
specifications. We recognize revenue for the sale of its software to the VARS at
the time of sale.

Fair Value of Financial Instruments

Financial instruments consist principally of cash, accounts and related party
receivables, trade and related party payables, accrued liabilities, and short
and long-term debt obligations. The carrying amounts of such financial
instruments in the accompanying condensed balance sheets approximate their fair
values due to their relatively short-term nature. It is our opinion that we are
not exposed to significant currency or credit risks arising from these financial
instruments.

Use of Estimates

The preparation of condensed 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 disclosures of contingent assets and liabilities at
the date of the condensed financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Stock-Based Compensation

Loss Per Common Share

We compute basic and diluted loss per share of common stock by dividing the net
loss by the weighted average number of common shares outstanding available to
common stockholders during the respective reporting period. However, common
stock equivalents have been excluded from the computation of diluted loss per
share of common stock for the three and six-month periods ended November 30,
2005 and 2004, respectively, because their effect would be anti-dilutive.
18

Reclassifications

Certain reclassifications have been made to the previously reported amounts to
conform to our current period presentation.

Recent Authoritative Accounting Pronouncements

In June 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 154,"Accounting Changes and Error
Corrections, a replacement of Accounting Principles Board ("APB") Opinion No.
20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes
in Interim Financial Statements." SFAS No. 154 changes the requirements for the
accounting for and reporting of a change in accounting principle. Previously,
most voluntary changes in accounting principles were required recognition via a
cumulative effect adjustment within net income for the period of the change.
SFAS No. 154 requires retrospective application to prior periods' financial
statements, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. SFAS No. 154 is effective for
accounting changes made in fiscal years beginning after December 15, 2005;
however, SFAS no. 154 does not change the transition provisions of any existing
accounting pronouncements. We do not believe the adoption of SFAS No. 154 will
have a material impact on our financial condition or results of operations.

In March 2004, the FASB Emerging Issues Task Force ("EITF") released Issue No.
03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to
certain Investments." EITF 03-1 provides guidance for determining whether
impairment for certain debt and equity investments is other-than-temporary and
the measurement of an impaired loss. The recognition and measurement
requirements of EITF 03-1 were initially effective for reporting periods after
June 15, 2004. However, in September 2004, the FASB staff issued FASB Staff
Position ("FSP") EITF 03-1-1 that delayed the effective date for certain
measurement and recognition guidance contained in EITF 03-1. The FSP requires
that entities continue to apply previously existing "other-than-temporary"
guidance until a final consensus is reached. We do not anticipate that the
issuance of a final consensus will materially impact our financial condition or
results of operations.

Overview

On July 16, 2004, our Board of Directors approved a 50 for 1 reverse split of
our authorized common stock. Accordingly, the date of record and the effective
date was August 2, 2004. Par value remained unchanged at $.001 per share. The
effect of the reverse split reduced the number of authorized shares from
500,000,000 to 10,000,000 and reduced the number of outstanding and issued
shares of common stock from 445,384,987 at August 2, 2004 shares to 8,907,700.
Upon the conversion, all resulting fractional shares were rounded up to nearest
whole share. In addition, we cancelled all of the shareholders holding nine or
less shares of post-split stock.

For comparative purposes, all shares of common stock and per share amounts in
the Form 10-KSB, and the accompanying financial statements and notes to
financial statements have been retroactively restated to reflect this August 2,
2004 transaction.

In addition, our Board approved in its July 16, 2004 meeting, the authorization
of 1,000,000 shares of its 10,000,000 shares of preferred stock to be
specifically designated as, "Series A Non-Participating Preferred Stock", with a
par value at $0.001 per share. Also, each share has 1,000 votes on all matters
upon which the shareholders are entitled to vote. Our Board then issued 165,000
shares of this stock in equal amounts to its three corporate officers. As a
result of the reverse split on August 2, 2004 and the July 16, 2004 issuance of
the 165,000 shares of Series A, Non-Participating Preferred Stock, our three
corporate officers have the ability to control the outcome of any item coming to
a vote before the stockholders.
19

Also at the July 16, 2004 Board Meeting, our Board of Directors adopted, by
unanimous consent, to approve the increase of the number of authorized shares of
common stock from 10 million to 2 billion shares. On August 2, 2004, we received
the written consent in lieu of a meeting of stockholders from our stockholders
who were entitled to vote a majority of the common stock and Series A Preferred
Stock, which approved the July 16, 2004 action of our Board of Directors.

Our Business

Our Company has been operating since 1998, primarily as an application service
provider ("ASP"). On April 30, 2005 we purchased certain assets, namely
intellectual property, from Aptus Corp., a related party. We now own the
licensing rights, the code and the trademarks of intellectual property allowing
us to sell and license our own proprietary software applications to end users as
further explained below. Therefore, our Company now has two principal revenue
sources:

(I.) hosting of software applications and related services commonly
referred to ASP's, and,

(II.) licensing and sales of our proprietary software applications.

The following discussion more fully describes these complimentary services and
products:

I. An ASP offers the infrastructure, servers and data center(s) and the
technical expertise to host software business solutions distributed over
Internet ready computers. The hosted customer uses a web browser to access
software and data products, anywhere at anytime, without the need to download or
install a software application. We manage and host software applications and
data, Web hosting services, Web-based local and wide area networks, and access
to Internet marketing assistance and other related equipment and services. These
products and services are offered as components or as an integrated whole,
either sold directly or on a fee or a subscription basis.

We target small and medium enterprises and the high-end segment of the small
office and home office market for the sale of hardware and hosted software and
access to internet-related services. We provide products and services to our
customer subscriber base, which allows our customers to adopt "web-based"
computing that serves as an alternative to both traditional local or wide area
networks and traditional client-server implementations. Generally, we market
ourselves as an Internet utility company that can provide the entire computer
networking needs for its customers on a cost effective basis.

II. As of May 1, 2005, we sell a proprietary family of accounting and management
software applications known as "Appgen Custom Suite" and "MyBooks Professional"
and a quoting software application known as "QwikQuote".

We primarily promote the sale of our Appgen software through value added
resellers, commonly referred to as VARs. A VAR will participate in one of four
reseller programs. Each reseller program offers an incremental level of
benefits, and the fees for each program is structured accordingly. These
resellers often develop their own applications around the Appgen Custom Suite
and open up entirely new vertical markets for themselves while integrating the
new packages or modules and customizations with the accounting software. MyBooks
Professional is, essentially, "canned software", designed to accommodate the
accounting and financial reporting needs of a small to medium sized business.

We sell our QwikQuote software, through our website and through a web-based,
on-line e-commerce site. QwikQuote is a sales quotation and product management
software product designed to assist a company's sales force in calculating and
recalculating pricing arrangements, products' margins and commissions and to
interact with leading contact management software.

RESULTS OF OPERATIONS

We reported a net loss of $691,603 and $553,029 for the three months ended
November 30, 2005 and 2004, respectively. The current quarter's net loss
increased $138,574 over the same period one year ago. For the six months ended
November 30, 2005 and 2004, we reported net losses of $1,337,142 and $819,775, a
current period increase of $517,367. Approximately 91.3% or $472,394, of this
period's increase is attributable to interest expense.

Net sales of our software products were approximately $112,100, or 27.9% of
total revenues for the three-month period ended November 30, 2005. This division
also reported approximately net sales of $96,800 in the prior quarter ended
August 31, 2005, which was approximately 26.2% of total revenues.

Revenues generated from our traditional hosting services ASP division for the
six months ended was approximately $560,800, down from the comparable period one
year ago by $36,100. In early fiscal 2005, we lost a few key enterprise
customers who had a low number of seats but high revenues per seat. As result,
we have good seat counts but relatively flat or lower than desirable earnings
per seat. For the six months ended November 30, 2005, we accounted for billings
of 8,985 seats or approximately $560,800. Our seat count and revenues for the
six months ended November 30, 2004 was 8,082 and approximately $596,900,
respectively. Current period seat count has increased 11.1% over the same
comparable period one year ago.

In order to provide competitive pricing to our customers, and to encourage new
customers to use our service and products, we have traditionally offered
short-term discounts and, for limited periods, free product usage through
various promotional offerings. Discounted offerings will continue into fiscal
2006 as part of our promotional efforts to be competitive in pricing our
services, with the intent to gain, and retain, market share. Discounts and
promotional adjustments related to our ASP services for six months ended
November 30, 2005 and 2004 were $68,872 and $47,685 respectively, or 10.9% and
7.5% of gross revenues. Discounts recognized this six-month period related to
our software sales and licensing division was $74,500, or 26.3% of this
division's gross revenue.

In the beginning of our existence, we had to demonstrate and educate consumers
of the value and simplicity of operations, whereby encouraging signups by
offering discounts on selected products and services. As a business practice, we
do not advocate, nor promote the use of long-term discounts to attract potential
customers and maintain positive relationships with existing customers. Discounts
will continue to be offered if it means we will attract and keep a valued and
credit worthy customer. There are many criteria to meet before we can justify
discounting our pricing structure for a customer. We also consider pricing
adjustments, similar to a discount, to a customer, if the business model and
pricing structure means a mutually long-term business relationship.

We have intensified our marketing and sales efforts via the Internet, enhanced
and improved our website and now offer more professional products, such as the
Appgen Custom Suite, MyBooks Professional and QwikQuote applications. Our
management believes we will grow the revenues of our business principally
through web-based contacts, our VARs and selected e-commerce sites selling our
products.

We believe our marketing campaign, our improved website and our links to other
notable partner websites, will substantially increase consumer understanding and
awareness of our "host on demand" technology and our software products. Our main
priorities relating to the generation of new customers and revenues are:

o Increase market awareness of our products and services through our
strategic marketing plan,
o Increase the number of seats and applications per customer,
o Increase the number of VAR's and software installations to end-users,
o Continue to accomplish technological economies of scale, and
o Continue to streamline and maximize efficiencies in our system
implementation model.
21

As a result of these efforts, we believe we will sustain a reasonable and
controlled growth rate of new customers. Even though we have experienced a
decrease in our "host-on-demand" revenue this fiscal quarter over our comparable
fiscal quarter, our customer base is growing. The decline in quarter ended
November 30 "host-on-demand" revenues, as compared to prior period revenues,
should not be considered necessarily indicative as the trend to forecast our
future revenues.

COSTS AND EXPENSES

Direct Costs of Revenues

For the three months ended November 30, 2005 and 2004, we incurred direct costs
of services totaling $300,963 or 75.1% of revenues as compared to $182,962 or
66.4% of revenues for the same quarter one year ago. This category of expense
increased primarily due to the addition of new staff directly supporting the
software and licensing division. Overall, we estimate these new charges added
approximately $113,600 of expense to our base of traditional hosting direct
costs. Other expenses that impact the comparable amounts reported for this
quarter ended November 30, 2005 are: a.) Reduction in depreciation expense of
approximately $13,000, and, b.)An increase in technical wages and burden of
approximately $17,400 due to the addition of a full-time software application
developer.

For the six-months ended November 30, 2005, we are reporting a net increase of
$198,467 of direct expenses over the same period one year ago. The primary
reason for the increase is also attributed to the same factors as discussed
above; a.) Costs associated with the new staff and overhead burden directly
supporting the software and licensing division was approximately $226,200, b.)
Depreciation decreased $49,200, c.) One full-time software application developer
was added this fiscal period that cost approximately $35,300, d.) Sales
commission program was re-instituted and this increased costs by $9,200. e.)
Decrease in software and small technology and computing equipment purchases of
approximately $27,700, and, f.) Other miscellaneous expense items in this
classification increased a nominal $4,667.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $431,791 and $439,663 for the
quarters ended November 30, 2005 and 2004, respectively, and, $779,455 and $
760,061 for the six-months ended November 30, 2005 and 2004, respectively. These
expenses are allocated between non-cash and other compensation. Non-cash
compensation is generally representative of the fair value of common stock,
options and warrants issued to certain non-employees for services rendered and
the amortization of unearned compensation.

The expense totals in this classification reports an net increase of $19,394 for
the six months ended November 30, 2005 over the same period one-year ago. The
following items are noteworthy:

a.) On November 30, 2005 we accrued $100,000 as a settlement expense for a
lawsuit in which we are defending a claim for the breach of a five-year
commercial space lease agreement. We recognized the $100,000 as the
maximum potential financial exposure Insynq may have on this claim
which would include any legal fees,
b.) Bad debts were reduced by approximately $77,000,
c.) Professional, legal, accounting and consulting fees decreased by
$78,900, d.) Travel expense increased $14,000, e.) Salaries and burden
increased approximately $31,000, f.) Advertising and marketing expenses
increased approximately $25,800, and g.) All other non-identified items
above aggregating an overall net increase of $4,494.

Under the circumstances, we believe our costs are under control, as planned,
and, within proximate range of management's forecasts.
22

The primary components of our interest expense are:

For the six months ended November
30,
------------------------------------
2005 2004
-------------- --------------

o Amortization of discounts on
convertible securities $ 450,000 $ 160,603
o Interest on convertible 265,983 197,857
securities
o Interest on other obligations
and notes payable 22,781 35,731
-------------- --------------
$ 738,764 $ 394,191
Total
============== ==============
o Non-cash interest $ 450,000 $ 160,603
o Other Interest 288,764 233,588
-------------- --------------
Total $ 738,764 $ 394,191
============== ==============

LIQUIDITY AND CAPITAL RESOURCES

Our condensed financial statements as of and for the six months ended November
30,2005 have been prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. For the six months ended November 30, 2005, we had a
net loss of $1,337,142 and negative cash flows from operations of $429,802. Also
at November 30,2005, we had a working capital deficit of $5,091,102 and a
stockholders' deficit of $4,649,942. Our working capital deficit at November 30,
2005 and as of January 17, 2006 may not enable us to meet certain financial
objectives as presently structured.

We had a cash balance of $20,293 at November 30, 2005. We finance our operations
and capital requirements primarily through private debt and equity offerings.

As of November 30, 2005, we classified all our convertible security debts as
current liabilities because of non-compliance with the underlying terms,
conditions and covenants governing these debt instruments. We consider
non-compliance with any major term of a debt instrument to be in violation of
the agreement; therefore, the debt automatically becomes a current liability.
Our condensed balance sheet at November 30, 2005 reports current liabilities of
$5,230,524; however, this amount is net of an unamortized discount of
$2,022,534. Total current debt actually totals $7,253,058, thereby, increasing
our working capital deficit to $7,113,636. Unless we are able to pay a
significant portion of our debt from future profits or from new equity
financing, our negative working capital is expected to continue to increase
throughout fiscal 2006.

In June 2005, we have entered into a five-year hosting and management services
agreement with Gotaplay Interactive, Inc. ("Gotaplay"), a related party, whereby
we will supply business technology, IT management and communications
infrastructure and other services as needed. For the six months ended November
30, 2005 we have billed Gotaplay $46,969 for hosting services and rental of
infrastructure and technology equipment. As well, as of November 30, 2005
Gotaplay owes us for:

o An unsecured promissory note - $333,837. Executed on October 31, 2005,
due October 31, 2006, bearing interest at 7%. In December 2005, we
agreed to convert our note receivable of $333,837 in exchange for
333,837 shares of Gotaplay's common stock and one-half common stock
purchase warrant, with each warrant exercisable to purchase one share
of Gotaplay's common stock at an exercise price of $1.50 per share for
a period of three years from the date of closing a certain "Share
Exchange Agreement" between Gotaplay and another public entity. As of
the date of this filing, the "Share Exchange Agreement" has not closed.

o Accrued interest - $1,986. Amount earned on the promissory note
discussed above in item a.
23

o An account receivable - $36,969. Monthly hosting and technology
services, and rental fees, charged per agreements. o An open account -
$17,515. This amount is comprised of expenses paid on behalf of
Gotaplay since the execution of the promissory note in item a. above.

Our relationship stems from the fact that two of our officers, are also
officers, directors and stockholders of Gotaplay.

Convertible Debentures

Between June 2001 and March 2003, we sold to four investor groups a total
$2,050,000 in the form of three private financing transactions for 12% secured
convertible debentures. At various times, we have been in default on these
instruments and, accordingly, have classified the balances due on these
debentures as a current liability. However, on June 25, 2004, we were able to
negotiate an extension of the past due maturity dates for an additional two
years, until June 25, 2006. However, because of our non-compliance with certain
provisions of these securities, we have classified the entire balance of
$1,126,067 as a current liability on our condensed balance sheets.

Amended terms, due to the extension discussed above, for all three private
financing transactions are essentially the same: the debentures are convertible
into shares of common stock at the lesser of (i) $15.00 per share and (ii) the
average of the lowest three intraday trading prices in the twenty-day trading
period immediately preceding the notice to convert, discounted by 60%. Interest
accrues at 12% and default rate of interest is 15%.

We granted 104,400 warrants to purchase common stock to the investors in
conjunction with each convertible debenture transaction. Investors may exercise
each warrant at $12.50 per share and the warrants carry an expiration date of
June 25, 2009.

On September 29, 2005, we restructured approximately $588,400 of accrued
interest related to these convertible debentures into four callable secured
convertible promissory notes, bearing interest at 2% per annum. These notes will
mature on September 29, 2008. These notes are subject to conversion features
similar to those outlined directly below under the discussion of our convertible
notes payable.

Convertible Notes Payable

On February 28, 2005, we entered into a $2,700,000 Securities Purchase Agreement
with four investor groups, who are also holders of our convertible debentures.
Under terms of the agreement, we:

(a.) issued four 8% callable secured convertible notes that
aggregated $2,700,000, and,

(b.) granted 5,400,000 warrants with an exercise price of $0.007
and are exercisable from time to time until February 28, 2010.

The notes are due three years from the date of issuance, bear interest at 8% per
annum, payable quarterly in cash. No interest will be charged in any month in
which the reported intraday trading price is greater than 125% of the initial
market price ($0.005) or $0.0063 for each trading day of that month. The notes
or portions of these notes are immediately convertible into shares of our common
stock during the term. The conversion price is equal to the lesser of:

(a.) $0.0075, the fixed conversion price, and,

(b.) the average of the lowest three intraday trading prices during
the twenty days immediately prior to the conversion date
discounted by 60%.
24

We also recorded a $2.7 million dollar discount on the convertible notes
payable, an amount equal to the fair value of the warrants, as determined by
applying the Black-Scholes pricing model, and the intrinsic value of the
beneficial conversion feature, which is the difference between the conversion
price and the fair market value of the common stock on the date of issuance. The
amount attributable to the beneficial conversion feature and the warrants was
recorded as a discount on the debt and accretes over a thirty -six month period
as interest expense in accordance with paragraph 19 of Emerging Issues Task
Force ("EITF") No. 00-27. For the six months ended November 30, 2005, we have
recognized $450,000 of discounts as non-cash interest expense in the condensed
statements of operations.

In the event of default under the terms of these Notes, the investors have the
right to redeem the Notes at 130% of the outstanding principal balance, plus
accrued and unpaid interest, plus default interest and other penalty payments
that may be due. The default interest is at 15% per annum, if any amounts due
under the Notes are not paid when due. At the option of the investors, such
redemption payments may be made in shares of common stock. If certain conditions
are satisfied, we may elect to prepay the Notes before the scheduled maturity at
a premium. The premium is 150% of the outstanding principal balance plus accrued
and unpaid interest, plus default interest and other penalty payments due,
depending on when the prepayments occur.

The conversion price of the convertible securities and the exercise price of the
warrants may be adjusted in certain circumstances such as if we pay a stock
dividend, subdivide or combine outstanding shares of common stock into a greater
or lesser number of shares, or take such other actions as would otherwise result
in dilution of the investor's position. We have also granted the above holders
of our convertible securities a security interest in all our assets. If we
should default under any of the terms of our convertible securities, the
outstanding principal balance on the convertible debentures and convertible
notes is due, plus the accrued interest. The fair market values of our warrants
are estimated on the grant date using the Black-Scholes option pricing method as
required under SFAS 123. As of November 30, 2005, a total of 5,558,000 warrants
have been granted to the holders of our convertible securities, and as of the
date of this report, these warrants are unexercised.

On September 29, 2005, the investors holding our secured convertible debentures
converted $588,407 of accrued interest due on the convertible debentures into a
four convertible notes payable. These notes bear interest at 2% per annum and
the interest is payable quarterly. The principal, and any accrued and unpaid
interest, is due September 29, 2008. The underlying terms and the variable
conversion formula are similar to those discussed above in the convertible notes
issued in February 28, 2005. No warrants were granted in conjunction with these
debt instruments.

We have granted a security interest in all assets to the investors of the
convertible securities.

As of November 30, 2005, we are not in compliance with the proper registration
and licensing of certain software applications and products critical to support
the customer base and our own internal operations.

On July 11, 2005 we entered into an installment agreement with the Internal
Revenue Service to pay the remaining obligation of unabated penalties and
interest of $215,058 that accrued from our unpaid taxes in 2000 and 2001. All
payroll taxes related to this obligation were fully off in August 2004. Terms of
this agreement require us to pay no less than $5,000 per month, including
interest, over the next 50 months or until the balance is zero. Since the
execution of this installment agreement, we have made three payments totaling
$15,000 against this obligation. As of November 30, 2005, we are in default on
this obligation and currently owe the IRS approximately $204,500. On January 9,
2006, the IRS issued a 30-day notice of intent to levy because of our default on
the agreement. The IRS also has a lien on our Company's assets.

A lien for approximately $28,000 was filed several years ago by the State of
Utah for prior years' income taxes assessed to the predecessor company of
Insynq, Inc. The assessment was disputed and we filed amended returns to correct
this deficiency. As of the date of this report, the State has not responded to
the amended returns, thereby, neither granting approval nor denying the filing
of the amended returns. This obligation is recorded under accrued liabilities
(business taxes) in the accompanying condensed financial statements.
25

On July 18, 2005, we were served with a complaint for a material breach of
contract. The complaint was filed by our former landlords for the breach of a
long-term lease for office space. On November 30, 2005, we accrued $100,000 of
expense toward the complete settlement of this claim. We believe this amount is
reasonable and our offer to settle will be accepted by the claimant.

We are also subject to other legal proceedings and business disputes involving
ordinary and routine claims. The ultimate legal and financial liability with
respect to such matters cannot be estimated with certainty and requires the use
of estimates in recording liabilities for potential litigation settlements.
Estimates for losses from litigation are made after consultation with outside
counsel. If estimates of potential losses increase or the related facts and
circumstances change in the future, we may be required to record either more or
less litigation related expense.

Pursuant to the asset purchase agreement to purchase the intellectual property
from a related party dated April 30, 2005, whereby we acquired certain
intellectual property, we assumed certain other long-term obligations. The
following describes these obligations:

o Consulting Agreement - A $5,000 per month consulting agreement
existed at the time of sale (April 30, 2005) between the
related party (seller) to Insynq (Company) and the original
seller of the intellectual property to the related party. We
agreed to honor the remaining term of the monthly consulting
agreement in exchange for the original consultants' expertise
and guidance. This agreement terminates on or before May 2006.

o Distribution Agreement - At the time of purchase, a
distribution agreement existed between the same original
selling party, as discussed above, and the related party. We
assumed the responsibility for fulfilling the terms of this
agreement as a part of the asset purchase agreement. This
agreement stipulates that 5.5% of gross cash receipts from the
sales of certain software products will be paid each quarter
to the original selling party. This agreement is in
perpetuity. There is, however, a buyout provision whereby at
any time the obligator may completely satisfy the terms
underlying this agreement for $1,250,000.

Our continuation as a going concern is dependent on our ability to grow
revenues, obtain additional financing, and, generate sufficient cash flow from
operations to meet our obligations on a timely basis. Our ability to raise
capital in the future will be difficult because our securities purchase
agreements with our investors prohibit us from entering into any financial
arrangement, which would involve the issuance of common stock for a period of
two years without offering a right of first refusal to the debenture investors.
Moreover, our ability to raise capital would also be difficult because our
convertible securities have floating conversion features which, when converted,
would cause purchasers of our common stock to experience a substantial dilution
of their investment.

We currently have no material commitments for capital requirements. If we were
forced to purchase new equipment to replace the equipment we currently lease,
any new leases would constitute a material capital commitment; however, we are
currently unable to quantify such amounts. If this occurs, we will attempt to
raise the necessary finances to make such purchases, but there is no assurance
that we will be able to do so. Without the ability to quantify these amounts, we
nonetheless believe that it would have a material impact on our business and our
ability to maintain our operations.

We have developed a brand of business solutions called e-Accounting, which has
been designed to assist the accounting professional manage and expand their
business. Our e-Accounting Center portal is located at WWW.CPAASP.COM. It
includes resources for marketing, promotion, professional education, and web
design, as well as, step-by-step tips for transforming a traditional accounting
business into an e-Accounting practice. In addition, we host many popular
accounting software applications, such as QuickBooks, in our secure data centers
for accounting professional firms throughout the country. By centrally hosting
the application and data in our data centers, we give the professional secure
central access remotely to their client's' data. This gives the accounting
professional the ability to manage more their clients with fewer staff, and
thereby, we believe, generating greater profitability for their accounting or
bookkeeping firm.
26

We also offer for sale:

o Appgen Custom Suite. This is a comprehensive and customizable
family of accounting and management software, to meet the
needs of mid-sized enterprises. This product is a collection
of collaborative commerce modules that may be assembled and
customized in any way that suits the needs of the business,
and

o MyBooks Professional. This is a collaborative accounting
system marketed to the small to mid-sized businesses and is
designed to simplify the approach to accounting with
jargon-free menus, making it easy to use and manage a user's
business accounting and reporting requirements, and

o QwikQuote Software. This software allows the user to generate
customized sales quotations and assists sales people by
managing inventory or products.

We also intend to target regional Internet service providers and
telecommunication companies and create similar product offerings for them. We
would gain access to their customer base to sell our products and services, and
depending on their relative size, our services could then be private labeled and
re-sold through their own sales infrastructure.

Other services include business functions such as e-commerce, sales force
automation, customer support, human resource and financial management, messaging
and collaboration, and professional services automation. We believe that
technology outsourcing, focused on these business fundamentals, will be the
primary adopters of application service providers and managed service solutions
in the next year. We are focusing all possible resources in developing our
domain expertise in these areas to gain additional leverage and build broader
service offerings that complement our current services already being delivered
to those markets. There can be no assurances, however, that we will
substantially increase our monthly recurring revenues.

We are continually developing and refining our acquisition and expansion
strategy. If we expand more rapidly than currently anticipated, if our working
capital needs exceed our current expectations, or if we consummate acquisitions,
we will need to raise additional capital from equity or debt sources. We cannot
be sure that we will be able to obtain the additional financings to satisfy our
cash requirements or to implement our growth strategy on acceptable terms or at
all. Our ability to raise capital in the future will be difficult because our
securities purchase agreements prohibit us from entering into any financial
arrangement which would involve the issuance of common stock for a period of two
years without offering a right of first refusal to the holders of our
securities. If we cannot obtain such financings on terms acceptable to us, our
ability to fund our planned business expansion and to fund our on-going
operations will be materially adversely affected. If we incur debt, the risks
associated with our business and with owning our common stock could increase. If
we raise capital through the sale of equity securities, the percentage ownership
of our stockholders will be diluted. In addition, any new equity securities may
have rights, preferences, or privileges senior to those of our common stock.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

The Company maintains disclosure controls and procedures (as defined in Rule
13a-14(c) and Rule 15d-14(c) of the Exchange Act) designed to ensure that
information required to be disclosed in the reports of the Company filed under
the Exchange Act is recorded, processed, summarized, and reported within the
required time periods. The Company's Chief Executive Officer and Principal
Accounting Officer has concluded, based upon their evaluation of these
disclosure controls and procedures as of the date of this report, that, as of
the date of their evaluation, these disclosure controls and procedures were
effective at ensuring that the required information will be disclosed on a
timely basis in the reports of the Company filed under the Exchange Act.
27

(b) Changes in Internal Controls.

The Company maintains a system of internal controls that is designed to provide
reasonable assurance that the books and records of the Company accurately
reflect the Company's transactions and that the established policies and
procedures of the Company are followed. There were no significant changes to the
internal controls of the Company or in other factors that could significantly
affect such internal controls subsequent to the date of the evaluation of such
internal controls by the Chief Executive Officer and Principal Accounting
Officer, including any corrective actions with regard to significant
deficiencies and material weaknesses.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 18, 2005, were served with a complaint for a material breach of
contract. The complaint was filed by the Company's former landlords for
the breach of a long-term lease for office space. The lease term was
March 2002 through July 2006. On November 30, 2005, we accrued $100,000
of expense in anticipation of completely settling this claim.

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

As of November 30, 2005, we have considered $1,126,067 of principal
due on our secured convertible debentures to be in default because we
are not in compliance with certain provisions underlying these security
instruments. Also, we have considered our secured convertible notes, in
the amount of $3,288,407 to be in default because we are not in
compliance with certain provisions underlying these security
instruments.

We are in contact with the holders of these security instruments with
the intention of restructuring the terms and conditions of these
instruments. However, we have not reached an agreement on our proposals
and there is no assurance that a mutual agreement will be reached.

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

None

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

(b) Reports on Form 8-K

None.

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form 10-QSB and has duly caused this Quarterly
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Tacoma, State of Washington, on February 10 2006.

INSYNQ, INC.

By: /s/ JOHN P. GORST
John P. Gorst
Chief Executive Officer

By: /s/ M. CARROLL BENTON
M. Carroll Benton
Chief Administrative Officer,
Principal Accounting Officer and
Principal Financial Officer