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<HTML><HEAD><TITLE>mPhase Technologies Inc.: Form S-1 - Prepared by TNT Filings Inc.</TITLE>
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<P
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align=center><B>As filed with the Securities and Exchange Commission on July 12,
2007</B><BR></P>
<P
style="FONT-SIZE: 10pt; COLOR: #000000; "
align=right>Registration No. 333- ________<BR></P>
<P
style="padding:0pt; FONT-SIZE: 18pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>SECURITIES AND EXCHANGE COMMISSION</B><BR><B><font size="2">Washington, D.C. 20549</font></B></P>
<P
style="padding:0pt; FONT-SIZE: 18pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>FORM S-1</B><BR></P>
<P
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align=center><B>REGISTRATION STATEMENT<br>
UNDER THE SECURITIES ACT OF 1933</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 18pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
</B><font size="2">(Exact name of registrant as specified in its charter)</font></P>
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      align=center><B>New Jersey</B></P></TD>
    <TD
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    vAlign=bottom align=left width="34%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>7385</B></P></TD>
    <TD
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    vAlign=bottom align=left width="33%">
      <P
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      align=center><B>&nbsp;22-2287503</B></P></TD></TR>
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      <P
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      align=center>(State or other jurisdiction</P></TD>
    <TD
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    vAlign=bottom align=left width="34%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;(Primary Standard Industrial</P></TD>
    <TD
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    vAlign=bottom align=left width="33%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(I.R.S. Employer</P></TD></TR>
  <TR>
    <TD
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    vAlign=bottom align=left width="33%">
      <P
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      align=center>of incorporation or organization)</P></TD>
    <TD
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    vAlign=bottom align=left width="34%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Classification Code Number)</P></TD>
    <TD
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    vAlign=bottom align=left width="33%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Identification Number)</P></TD></TR></TABLE>
<P
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align=center><B>587 Connecticut Avenue<br>
Norwalk, Connecticut 06854-1711</B><BR><B>Telephone: (203) 831-2242</B><BR>(Address, including zip code, and telephone number, including area
code, of registrant&#146;s principal executive offices)<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>Martin S. Smiley</B><BR><B>Chief Financial Officer</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>mPHASE TECHNOLOGIES, INC.</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>587 Connecticut Avenue</B><BR><B>Norwalk, Connecticut 06854-1711</B><BR><B>Telephone: (203) 831-2242</B><BR><B>
Telecopy: (203) 853-3304</B><BR>(Name, address, including zip code, and telephone number, including
area code, of agent for service)<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; ">
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; ">If
any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; ">If
this form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; ">If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
1</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box.</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0" height="227">

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      align=center><B>CALCULATION OF REGISTRATION FEE</B></P></TD></TR>
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    vAlign=bottom align=left width="20%" height="17">
      <P
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      align=center></P></TD>
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    style="border-style:none; border-width:medium; padding-left:4; padding-right:4; padding-top:1; padding-bottom:1"
    vAlign=bottom align=left width="20%" height="17">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD>
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    style="border-style:none; border-width:medium; padding-left:4; padding-right:4; padding-top:1; padding-bottom:1"
    vAlign=bottom align=left width="20%" height="17">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD>
    <TD
    style="border-style:none; border-width:medium; padding-left:4; padding-right:4; padding-top:1; padding-bottom:1"
    vAlign=bottom align=left width="20%" height="17">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD></TR>
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    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"></P></TD>
    <TD
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    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Proposed</P></TD>
    <TD
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    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Proposed</P></TD>
    <TD
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    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>maximum</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>maximum</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;offering</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;aggregate</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Amount of</P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Title of each class of</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Amount to be</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>price per</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;offering</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Registration</P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;securities to be registered</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Registered</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;share(1)</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;price(1)</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>fee</P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt" align="center"></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt" align="center"></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt" align="center"></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt" align="center"></P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Common
      Stock,$.01 par value</B></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>185,914,911</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$ .095</B></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>17,661,916</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$ 542.23</P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="45">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Common
      Stock $.01 par value issuable upon exercise of warrants</B> &nbsp;</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="45">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;33,010,306</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="45">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$ .095</B></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="45">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$&nbsp;&nbsp; 3,135,979</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="45">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$&nbsp;&nbsp; 96.27</P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Common
      Stock $.01 par value issuable upon exercise of options</B></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>42,535,500</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$ .095</B></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$&nbsp;&nbsp; 4,040,872</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$ 124.05</P></TD></TR>
  <TR>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;&nbsp;</P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total</B></P></TD>
    <TD
    style="border-style:none; border-width:medium; "
    vAlign=bottom align=left width="20%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$ 762.55</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">(1)
Estimated solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended, on the basis of the
average of the bid and ask prices per share of our common stock, as reported on
the OTC Bulletin Board, on June 29, 2007.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION
8(A), MAY DETERMINE.</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>2</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center>July 12, 2007<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center>PROSPECTUS<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center>mPHASE TECHNOLOGIES, INC.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>&nbsp;Shares of Common Stock</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">This
prospectus relates to the resale of up to 261,460,717 shares of common stock, of
which 185,914,911 shares are issued and outstanding, and up to 75,545,806 shares
that may be issued upon the exercise of warrants and options held by the selling
stockholders. The selling stockholders listed on pages 51-56 may sell the shares
from time to time.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">
Our common stock is listed on the Over-the-Counter Bulletin Board under the
symbol &#147;XDSL.OB&#148; The last reported sales price of our common stock on June 29, 2007 was
$.095 per share.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">THESE
SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. PLEASE REFER TO &#147;RISK FACTORS&#148; BEGINNING ON PAGE 10.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Our
principal executive offices are located at 587 Connecticut Avenue, Norwalk,
Connecticut 06854-1711. Our phone number is (203) 838-2741.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED ANY OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
date of this prospectus is July 12, 2007.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>TABLE OF CONTENTS</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" border="0" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>Page</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Prospectus
      Summary</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>The
      Offering</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Forward-Looking
      Statements</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Summary
      Financial Data</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Risk
      Factors</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8-11</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Use
      of Proceeds</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>11</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Price
      Range of Common Stock</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>12</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Selected
      Financial Data</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>13</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Selected
      Quarterly Financial Data</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>15-17</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Company
      Operations</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>17</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Business</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>32</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Legal
      Proceedings</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>41</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Our
      Management</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>41</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Stock
      Options</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>44</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Security
      Ownership of Certain Beneficial Owners and Management</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>46</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Certain
      Relationships and Related Transactions</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>47</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Selling
      Stockholders</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <p style="font-size: 10pt; color: #000000; margin-left: 0pt; margin-right: 0pt; padding-right: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="right">
      56</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Plan
      of Distribution</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <p style="font-size: 10pt; color: #000000; margin-left: 0pt; margin-right: 0pt; padding-right: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="right">
      57</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Description
      of Securities</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>58</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Legal
      Matters</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <p style="font-size: 10pt; color: #000000; margin-left: 0pt; margin-right: 0pt; padding-right: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="right">
      59</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Experts</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <p style="font-size: 10pt; color: #000000; margin-left: 0pt; margin-right: 0pt; padding-right: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="right">
      59</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Where
      You Can Find Additional Information</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <p style="font-size: 10pt; color: #000000; margin-left: 0pt; margin-right: 0pt; padding-right: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="right">
      59</TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THOSE
DOCUMENTS TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED
WHERE IT IS LEGAL TO SELL THESE SECURITIES.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">THE
DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING SALE DOES NOT IMPLY THAT: (1)
THERE HAVE BEEN NO CHANGES IN OUR AFFAIRS AFTER THE DATE OF THIS PROSPECTUS; OR
(2) THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
3</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>PROSPECTUS SUMMARY &nbsp;</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">You
should read this Prospectus Summary together with the more detailed information
contained in this prospectus, including the risk factors and financial
statements and the notes to the financial statements. This prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those discussed in the forward-looking
statements. Factors that might cause such a difference include those discussed
in the Risk Factors section and elsewhere in this prospectus.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">From
inception (October 2, 1996), through March 31, 2007 the Company had incurred
(unaudited) development stage losses of $162,520,429 and a stockholders&#146; deficit
of approximately $2,634,400. Cumulatively, through June 30, 2006 and March 31,
2007, (unaudited) the Company had negative cash flows from operations of
approximately $67,257,660 and $73,398,128 respectively. The
auditors report for the fiscal year ended June 30, 2006 is qualified as to the
Company&#146;s ability to continue as a going concern. Management estimates the
Company either directly or through its newly formed operating subsidiaries (see
page 5) needs to raise between $5 million and $10 million during the next 12
months to sustain its current level of operations.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify><B>mPHASE TECHNOLOGIES, INC.</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
Technologies, Inc. (mPhase, the Company, we or us), a New Jersey corporation,
founded in 1996 is a publicly-held company with approximately 17 thousand
shareholders and approximately 388,000,000 million shares of common stock
outstanding as of &nbsp;June 29, 2007. The Company&#146;s common stock is traded on
the NASDAQ Over the Counter Bulletin Board under the ticker symbol XDSL. We are
headquartered in Norwalk, Connecticut with offices in Little Falls, New Jersey
and New York, N.Y. mPhase shares common office space and common management with
Microphase Corporation, a privately-held company. Microphase sells radio
frequency and filtering technologies to the defense and telecommunications
industry. Microphase has been in operation for over 50 years and supports mPhase
with engineering, administrative and financial resources, as needed.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
is a developer and seller of broadband communications products for telephone
service providers. &nbsp;The Company&#146;s TV+ solution is the middleware/software
necessary for the delivery by telephone service providers of broadcast quality
television, video on demand, high speed internet and voice utilizing internet
protocol (IPTV). mPhase believes that its IPTV solution &nbsp;is the most
cost-effective, standards based, scalable solution with carrier class quality
and security available for telecommunications service providers around the
world. mPhase believes that telecommunication service providers will find the
cost-effective, scalable architecture of the TV+ middleware will result in
significant cost savings in the number of servers and routers necessary &nbsp;to
deploy IPTV to its customers on a significant scale. This is especially true for
telephone service providers outside of the United States that face substantial
hardware costs to upgrade their existing backbone and infrastructure necessary
for the delivery of broadcast television. &nbsp;Since such hardware costs
constitute up to 95% of the capital expenditures in deploying IPTV, the savings
are often a key financial ingredient enabling a telecommunications service
provider to deploy IPTV. Thus the Company believes its software can be a
compelling solution for such deployments. The deployment of a full range of
converged broadband services is critical for many telecommunications service
providers to retain traditional telephone customers by offering a full package
of services. &nbsp;Our TV+ solution enables a telephone service provider to
provided a &#147;triple play&#148; of voice, broadcast television and high speed internet
over any existing infrastructure including copper, fiber or coax. Our current
release of the TV+ solution is a culmination of years of development of a
world-class television delivery solution for telecommunication service
providers.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Our
TV+ solution is currently part of a test deployment of IPTV by Comstar/Odessa, a
major telecommunications service provider in the Ukraine. The Company faces
significant technical and financial challenges in order to achieve the
successful completion of acceptance testing criteria. However, upon &nbsp;the
TV+ solution successfully meeting the technical and features criteria of the
acceptance test &nbsp;Comstar/Odessa has indicated that it will &nbsp;commence
deployment of IPTV to 6,000 customers. Such a deployment would, constitute the
first major deployment of its TV+solution and could constitute a significant
breakthrough for additional deployments of its IPTV solution in the Ukraine and
Russia. The Company has also recently established a significant reseller
relationship with Net Dialogue, a major integrator and reseller of
telecommunications products and services for several large telephone service
providers in Russia.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Since
our inception in 1996 we have been a development-stage company. During the past
three years, mPhase has transformed itself from a developer of closed end
proprietary technology for the delivery of broadcast television over DSL to a
Company that has developed a carrier class middleware/software solution for the
delivery of IPTV. mPhase&#146;s IPTV solution is designed for operation with any
transport mechanism using IP protocol including multicast routers, digital
subscriber line access multiplexers and set top boxes of all major vendors.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>In February of 2004, the Company entered into the field of
nanotechnology research and development of micro power cell batteries of various
voltages. The purpose of this initiative is consistent with the Company&#146;s
strategy of establishing a product portfolio of cutting edge, innovative high
technology products for new and emerging areas of high growth. The initial goal
is to develop batteries for military applications having significantly longer
shelf life prior to activation. The batteries would have instant on capabilities
due to their extremely small internal size, and power management capabilities to
significantly extend their duty cycle periods than are currently available in
the market. The Company believes that such development is consistent with its
strategy of being a pioneer in areas of high growth technology and potentially
diversifies its mix of products. In March of 2005, the Company announced that it
had expanded its nanotechnology research and efforts to develop extremely
sensitive uncooled magnetic sensors, commonly known as a magnetometer,&nbsp;as a
new product line.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>4</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>On April 17, 2007, the Company announced that it had formed
AlwaysReady, Inc., a New Jersey Corporation, as a new wholly-owned subsidiary.
The Company plans to transfer all
of its nanotechnology assets and appropriate liabilities to such company as a
first step in the separation of its nanotechnology product line from its IPTV
product. The Company plans to staff AlwaysReady, Inc with a new management team
experienced in the nanotechnology area in order to unlock and maximize overall
shareholder value. On May 29, 2007, AlwaysReady, Inc announced the hiring of
Source Capital Group, an investment banking firm specializing in the raising of
private equity, to raise a minimum of $1.5 million in a Private Placement in
which the Company would sell up to a 10% interest in AlwaysReady, Inc to institutional
and accredited investors. In addition the Company announced that it planned to
eventually transform AlwaysReady, Inc. into a publicly traded company. mPhase
plans to retain a 90% interest in Always Ready, Inc. and the shares of common
stock of Always Ready, Inc. will be registered on appropriate filings with the
SEC under the Securities Act of 1933, as amended, as well as the Securities
Exchange Act of 1934, as amended, and listed for trading on the over the counter
bulletin board.</P>
<p><font size="2">On June 20, 2007, the Company announced that it is forming a
new subsidiary, Granita Media, Inc (&#147;Granita&#148;), a Delaware corporation, that
will provide targeted advertising to users of the TV+ middleware solution. Through the use of
specific viewer demographics such as age, gender and defined consumer
preferences, the Company believes that a new form of broadcast television
advertising could develop that is more powerful and focused than is currently
being used by broadcasters. It is believed that targeted&nbsp; advertising
software to be developed by Granita will enhance mPhase&#146;s middleware by offering
a source of additional revenues for a telephone service provider deploying IPTV.
mPhase plans to fund the new company initially through up to $500,000 of equity
to be provided by employees and additional outside institutional financing which will
involve the sale of up to 10% of the common stock of Granita with mPhase
retaining 90% of the stock of Granita.</font></p>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>THE OFFERING</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Common
stock offered: &nbsp;Up to 261,460,717 shares of common stock, of which
185,914,911 shares are issued and outstanding and up to 75,545,806 shares may be
issued upon exercise of warrants and options held by the selling
stockholders.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Common
Stock to be outstanding after this offering: Approximately 391 million shares of
common stock. This does not include an aggregate of&nbsp;approximately 209
million shares that are reserved for issuance pursuant to outstanding employee
stock options, non-employee stock options and warrants.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Use of proceeds: We will not receive any proceeds from the sale
and issuance of the common stock included in this offering. However, we will
receive approximately&nbsp;$47 million upon the exercise of all of the warrants
and options by the selling stockholders.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Risk Factors: An investment in our common stock is subject to
significant risks. You should carefully consider the information set forth in
the &#147;Risk Factors&#148; section of this prospectus as well as other information set
forth in this prospectus, including our financial statements and related
notes.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Dividend
policy: We do not expect to pay dividends on our common stock in the foreseeable
future. We anticipate that all future earnings, if any, generated from
operations will be retained to develop and expand our business.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Plan
of Distribution: The shares of common stock (OTC Bulletin Board symbol: XDSL.OB)
offered for resale may be sold by the selling stockholders pursuant to this
prospectus in the manner described under &#147;Plan of Distribution.&#148;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
have applied for trademarks on certain marks which relate to our products. This
prospectus also contains product names, trade names and trademarks of ours as
well as those of other organizations. All other brand names and trademarks
appearing in this prospectus are the property of their respective holders.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>&nbsp;FORWARD-LOOKING STATEMENTS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
addition to the other information contained in this prospectus, investors should
carefully consider the risk factors disclosed in this prospectus in evaluating
an investment in our common stock. This prospectus includes &#147;forward-looking
statements&#148;. All statements other than statements of historical fact are &#147;forward-looking statements&#148; for purposes of these provisions, including any
projections of earnings, revenues or other financial items, any statements of
the plans and objectives of management for future operations, any statements
concerning proposed new products or services, any statements regarding future
economic conditions or performance, and any statement of assumptions underlying
any of the foregoing. In some cases, forward-looking statements can be
identified by the use of terminology such as &#147;may&#148;, &#147;will&#148;, &#147;expects&#148;, &#147;plans&#148;,
&#147;anticipates&#148;, &#147;estimates&#148;, &#147;potential&#148;, or &#147;continue&#148; or the negative thereof
or other comparable terminology.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Although
we believe that the expectations reflected in the forward-looking statements
contained herein and in such incorporated documents are reasonable, there can be
no assurance that such expectations or any of the forward-looking statements
will prove to be correct, and actual results could differ materially from those
projected or assumed in the forward-looking statements. Our future financial
condition and results of operations, as well as any forward-looking statements,
are subject to inherent risks and uncertainties, including but not limited to
the risk factors set forth above and for the reasons described elsewhere in this
prospectus. All forward-looking statements and reasons why results may differ
included in this prospectus are made as of the date hereof, and we assume no
obligation to update any such forward-looking statement or reason why actual
results might differ.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
5</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>SUMMARY FINANCIAL DATA</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;The
selected financial data set forth below is derived from and should be read in
conjunction with historical financial statements and notes included in this
prospectus. Financial information for the years ended June 30, 1999, 2000 and
2001, are derived from financial statements that have been audited by Arthur
Andersen LLP. Financial information relating to years ended June 30, 2002, 2003
and 2004, 2005 and 2006 are derived from financial statements that have been
audited by Rosenberg, Rich, Baker, Berman &amp; Company, independent auditors,
and are included in this prospectus. &nbsp;Quarterly information and balances as
of March 31, 2007 includes all adjustments and material disclosures that
management considers necessary for a fair presentation. Such information has not
been audited are not necessarily indicative of the operating results to be
expected in the future. </P>
<P
style="FONT-SIZE: 10pt; COLOR: #000000; " align="center">SUMMARY
OPERATING DATA<br>
Year Ended June 30,<br>
(in thousands except per share data)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0" height="216">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="45">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="45">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2002</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="45">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2003</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="45">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="45">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="45">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="45">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>Cumulative from inception October&nbsp;2, 1996 to
      June&nbsp;30, 2006</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Total
      revenues </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$2,582 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$1,582 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$4,641 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$1,711 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$975 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$22,296 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cost
      of sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>2,415</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>1,493</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>4,068</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>1,446</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>974</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>16,335</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>3,820</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>3,538</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>4,070</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>5,127</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>8,035</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>51,579</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>7,039</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>2,684</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>4,178</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>6,580</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>11,121</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>96,756</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>670</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>515</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>123</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>63</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>79</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>3,031</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(11,361)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(6,649)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(7,798)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(11,505)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(19,234)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(145,405)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Other
      income (expense), net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>142</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>50</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>150</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>382</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(5,182)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(5,905)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Interest
      income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(26)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(51)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(111)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(111)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(35)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(150)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($11,245)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($6,650)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($7,759)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($11,234)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($24,451)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($151,460)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($.23)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($.12)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%" height="17">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Shares
      used in basic and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="17">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>49,617,280</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="17">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>65,217,088</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="17">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>77,677,120</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="17">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>108,657,578</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="17">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>199,610,372</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="17">
    <p style="margin-right: 4"></TD></TR></TABLE>
<P
style="FONT-SIZE: 10pt; COLOR: #000000; "
align=center>BALANCE
SHEET DATA<br>
As of June 30<br>
(in thousands)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2002</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2003</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>March 31, 2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cash
      and cash equivalents</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>$47</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>$397</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>$90</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>$351</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>$1,360</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>$315</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Working
      capital (deficit)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(94)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,405)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(2,112)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,674)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,093)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,011)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>6,942</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>3,782</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>2,591</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>2,232</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>2,182</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>1,666</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Long-term
      obligations, net of current portion</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>2,891</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>2,608</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>1,038</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>315</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-right:4"
      align=right>0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      stockholders&#146; (deficit)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$ (42)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$ (3,229)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$ (2,918)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$ (1,618)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$ (606)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(2,634)</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>6</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center>mPHASE TECHNOLOGIES, INC.<br>
&nbsp;(A Development Stage Company)<br>
<B>&nbsp;Consolidated Statements of Operations<br>
</B>&nbsp;(Unaudited)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>(Date of</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>Nine Months Ended</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Inception) to</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>March 31,</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;March 31,</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><U>2006</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><U>2007</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><U>2007</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">REVENUES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$832,999 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$135,743 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$22,431,350 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">COSTS
      AND EXPENSES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cost
      of Sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>729,475 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>88,207 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>16,422,148 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Research
      and Development ( including non-cash stock related charges of $200,850, $0
      and $2,318,519, for 2006, 2007 and inception to date respectively)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>6,120,253 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>4,964,404 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>56,543,605 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">General
      and Administrative (including non-cash stock related charges of,
      $4,510,350, $1,124,647 and $58,319,301 for 2006, 2007 and inception to
      date respectively)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>8,002,079 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>5,012,073 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>101,768,166 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Depreciation
      and Amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>57,644 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>66,314 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>3,097,316 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">TOTAL
      COSTS AND EXPENSES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$14,909,451 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$10,130,998 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$177,831,235 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">LOSS
      FROM OPERATIONS</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($14,076,452)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($9,995,255)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($155,399,885)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">OTHER
      INCOME</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Interest
      Income (Expense), net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(25,498)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(10,930)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(161,071)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Other
      Income (Expense) net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(4,902,302)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(1,054,187)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(6,959,473)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">TOTAL
      OTHER INCOME (EXPENSE)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($4,927,800)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($1,065,117)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($7,120,544)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">NET
      LOSS</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($19,004,252)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($11,060,372)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($162,520,429)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">LOSS
      PER COMMON SHARE, basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.09)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.04)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING, basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>211,186,500 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>309,018,261</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  </TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
7</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>RISK FACTORS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">An
investment in the common stock offered by this prospectus involves a high degree
of risk. In addition to the other information in this prospectus and any
supplements to this prospectus, you should carefully consider the following
risks before making an investment decision.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>CAUTIONARY STATEMENT</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>In
addition to the Risk Factors set forth below it is important for you to consider
the following:</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify><B>mPhase was advised in April 2002 that following an
investigation by the staff of the Securities and Exchange Commission, the staff
intended to recommend that the Commission file a civil injunctive action against
Packetport.com, Inc. (&#147;Packetport&#148;) and its Officer&#146;s and Directors. Such
recommendation related to alleged civil violations by Packetport and such
Officers and Directors of various sections of the Federal Securities Laws. The
staff has alleged civil violations of Sections 5 and 17(a) of the Securities Act
of 1933 and Sections 10(b) and 13(d) of the Securities Exchanges Act of 1934. As
noted in other public filings of mPhase, the Chief Executive Officer and Chief
Operating Officer of mPhase also serve as Directors and Officers of Packetport.
At that time these persons advised mPhase that they deny any violation of law on
their part and intend to vigorously contest such recommendation or action, if
any.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>On
November 15, 2005, the Commission filed a civil enforcement action against 6
individuals and 4 companies as a result of its investigation in federal district
court in the State of Connecticut alleging various violations of the Securities
Act of 1933 including Sections 5, Section 17(a) and the Securities Exchange Act
of 1934 including Sections 10b, Rule 10b-5, Sections, 12,Section 13, Section 16
in connection with the purchase and sale of stock of Packetport in the
period on or about December 14, 1999 into February of 2000. The defendants
include the Chief Executive Officer and Chief Operating Officer of mPase as well
as Microphase Corporation, a privately held Connecticut corporation that shares
common management with mPhase. mPhase Technologies, Inc. is not named as a party
in the enforcement action. The Chief Executive Officer and Chief Operating
Officer of mPhase, and Microphase Corporation, each deny any violation of the
law by each or any of them and intend to vigorously contest all charges set
forth in such enforcement action by the Commission.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify><B>In a ruling (3:05 CV 1747 (PCD)), dated March 21, 2007, the
Honorable Peter C. Dorsey, Senior U.S. District Court Judge for the United
States District Court&nbsp; For The District Of Connecticut, granted a motion by
defendants, Ronald A. Durando and Packetport Inc. joined by defendants Gustave
T. Dotoli , Microphase Corporation and Packetport.com, Inc. to dismiss under
Federal Rule 41(b) of the Federal Rules of Civil Procedure the civil lawsuit
filed on November 15, 2005 by the Securities and Exchange Commission against
Packetport.com, Inc. et. al for lack of prosecution.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify><B>On April 4, 2007, the Securities and Exchange Commission filed
a motion with the United States District Court requesting a reconsideration of
the motion to dismiss granted by the Court &nbsp;in favor of the defendants.
</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify><B>In a ruling dated May 23, 2007, the Judge Peter C. Dorsey
granted the motion for reconsideration filed by the Securities and Exchange
Commission and reversed his earlier ruling of March 21, 2007 and reinstated the
case on the judicial calendar to proceed to trial. </B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Risks
Related to Financial Aspects of Our Business</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>The
Company engages in the new and emerging business of developing products using
the science of Nanotechnology which entails significant exploratory development
and commercial risk.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company has expended over $3.6 million from February of 2004 through the date
hereof pursuant to 12 month contracts with the Bell Labs division of Lucent
Technologies, Inc. during such period to develop longer life battery cells for
military applications as well as commercial applications such as RFID (Radio
Fequency Identification) tags. The Company expects to continue exploratory
research with Lucent Technologies, Inc. and is currently in negotiations for an
extension of such contract for &nbsp;an additional 12 months at the rate of
$100,000 per month . Even though a feasibility prototype product has been
successfully developed, pure research involves a high degree of risk with
significant uncertainty as to whether a commercially viable product will
result</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">From
March 10, 2005 through the date hereof, the Company has spent over $2.4 million
with the Bell Labs division of Lucent Technologies, Inc for new research and
development of uncooled magnetic ultra sensors using the science of
Nanotechnology. &nbsp;The Company is currently negotiating to extend its
Development Agreement with Bell Labs for the Magnetometer research for another
12 months through June of 2008 at $100,000 per month each. The Company does not
expect significant revenues from either product for at least 2 years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
8</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>
mPhase&#146;s
stock price has suffered significant declines during the past seven years and
remains volatile</B>.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
market price of our common stock closed at $7.88 on July 26, 2000 and closed at
$.095 on June 29, 2007. During such period the number of shares outstanding of
the Company increased from approximately 30 million shares to 388 million
shares. Such increase was the result of periodic private placements by the
Company in order to finance company operations. Stocks in telecommunications
equipment providers of DSL products have been very volatile during such period.
Our common stock is a highly speculative investment and is suitable only for
such investors with financial resources that enable them to sustain the loss of
their entire investment in such stock. Because the price of our common stock is
less than $5.00 per share and is not traded on the NASDAQ National or NASDAQ
Small Cap exchanges, it is considered to be a &#147;penny stock&#148; limiting the type of
customers that broker/dealers can sell to. Such customers consist only of &#147;established customers&#148; and
&#147;Accredited Investors&#148; (within the meaning of Rule
501 of Regulation D of the Securities Act of 1933, as amended-generally
individuals and entities of substantial net worth) thereby limiting the
liquidity of our common stock.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>We
have reported net losses for each of our fiscal years from our inception in 1996
and for the nine months (unaudited) ended March 31, 2007 respectively and may
not be able to operate profitability in the future.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
have had substantial losses since our inception in 1996 (including $24,450,650
and $11,234,324 for the fiscal years ended June 30, 2006 and &nbsp;June 30,
2005, respectively and (unaudited) $11,060,372 and $19,004,252 for the nine
month period ending March 31, 2007 and March 31, 2006 respectively) and cannot
be certain when or if we will ever be profitable. We expect to continue to have
net losses for the foreseeable future and have a need to raise not less than
$5-10 million in additional cash in the next 12 months through further offerings
to continue operations. We have never been profitable from our inception in
October, 1996 through March 31, 2007 (unaudited) and we have incurred (a)
accumulated losses of $162,520,429 and a stockholder&#146;s deficit of $2,634,400 and
(b) cumulative negative operating cash flow of $73,398,128 and negative working
capital of $3,011,440.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Our
independent auditor&#146;s report express doubt about our ability to continue as a
going concern</B>.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
reports of the Company&#146;s outside auditors&#146; Rosenberg, Rich, Baker, Berman &amp;
Company with respect to its latest audited 10K for the fiscal years ended
&nbsp;&nbsp;June 30, 2006, 2005, 2004, June 30, 2003 and June 30, 2002 stated
that there is substantial doubt of the Company&#146;s ability to continue as a going
concern. &nbsp;Such opinion from our outside auditors makes it significantly
more difficult and expensive for the Company to raise additional capital
necessary to continue our operations.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>&nbsp;Our
common stock is subject to significant dilution upon issuance of shares we have
reserved issuance.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">As
of June 29, 2007, we have warrants, options outstanding convertible into
approximately 215 million total shares of mPhase common stock which, upon
conversion, may adversely affect the future price of our common stock. As of
June 29, 2007 we have warrants and options convertible into approximately 112
million shares of our common stock at $.20 per share or less that, upon
exercise, will result in significant dilution to many of our current
shareholders and may adversely affect the future price of our common stock. We
may be forced to raise additional cash for operations by selling additional
shares of our common stock at depressed prices causing further dilution to our
shareholders.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Risks
Related to Our Operations</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>We
have been a development-stage company since our inception in 1996 and have not
to date had a significant or successful deployment of any of our solutions for
the delivery of broadcast television, high-speed internet and voice by a major
telephone service provider.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
have had to date no material revenues derived from sales of our TV+ solution.
There has been to date only one sale of our IPTV solution for 1000 customers of
a telecommunications service provider in Russia which has discontinued
deployment of our TV+ solution. In addition a lab test trial by a major
telecommunications service provider in the Ukraine currently faces significant
financial and technical challenges in order to pass a technical acceptance test
that requires many product features currently &nbsp;still in development by the
Company. There are no other deployments of &nbsp;our TV+ Solution by telephone
service providers globally and there currently is uncertainty as to the extent,
if at all, that deployments of IPTV will occur in the future.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>We
depend upon outsourcing of our research and product development of our
Nanotechnology products to the Bell Labs division of Lucent Technologies
Inc.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">
We depend upon Lucent Technologies Inc. for the successful development of our
Nanotechnology products and our business would be materially adversely affected
if Lucent Technologies Inc. were to terminate our relationship or fail to renew
our Development Agreement for the Magnetometer that is currently being
negotiated.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>The
loss of key personnel could adversely affect our business.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;Management
and employment contracts with all of our officers have expired and no assurances
can be given that such executives will remain with the Company or that the
Company will be able to successfully enter into agreements with such key
executives. All of our officers and other key employees have been granted stock
options that are intended to represent a key component of their compensation.
Such options may not provide the intended incentives to such persons if our
stock price declines or experiences significant volatility.</P>
<p style="font-size: 10pt; color: #000000; text-indent: 0pt; margin-left: 0pt; padding: 0pt" align="right">
9</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>Risks Related to Our Targeted Markets</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Economic
support from affiliated companies has been significant.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;During
the downturn in the telecommunications industry beginning in 2001, both
Microphase Corporation, and Janifast Ltd. provided significant financial support
to mPhase in the form of either cash infusions or conversions of related party
debt. Such companies, which share common management with mPhase, are under no
legal obligation to and may not be able to sustain such economic support of
mPhase in the future should such support be necessary.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>We
may incur substantial expenditures in the future in order to protect our
intellectual property.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;We
have recently filed a provisional patent with respect to our TV+ solution in
order to protect our product, however a final patent has not yet been applied
for or granted. Even if a patent is ultimately granted ,the telecommunications
industry, in general, is characterized by a large number of patents and frequent
patent litigation based upon claims of patent infringement when compared to
other industries.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Historically
the sale of infrastructure products to telecommunication providers in the
international markets has a long lead-time and a multiplicity of risks.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;&nbsp;We
expect initially that revenues from our TV+ solution to be derived from
international emerging markets and our success depends upon our ability to sell
our flagship television platform outside of the United States where political,
currency and regulatory risks are significantly greater. As a result of their
distance from the United States, different time zones, culture, management and
language differences, these operations pose greater risk than selling in the
United States. Our sales cycle for our TV + solution is lengthy (since it
involves a major strategic decision by an international telecommunications
service provider) and we may incur significant marketing expenses with no
guarantee of future sales. A significant market for our legacy Traverser DVDDS
never developed and may never develop for our TV +solution if international
telephone service providers fail to successfully deploy broadband services
including high speed data and television. &nbsp;Increased consolidation of
telephone service providers worldwide have significantly limited &nbsp;the
current recovery of capital expenditures for broadband and other deployment from
the economic downturn that began in 2001in the industry. Future market demand
that will cause telephone service providers to aggressively roll out IPTV, in
general, is highly unpredictable especially in markets outside of the United
States. Certain telephone companies (especially in developing international
economies) may have infrastructure that is not of sufficient quality to
accommodate the mPhaseTV+ solution. Changes in foreign taxes and import duties
and economic and political instability in international markets pose a greater
risk to our operations than U.S. markets.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Our
television platform may not achieve compliance with regulatory requirements in
foreign countries.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;Our
mPhaseTV+ solution may fail to meet foreign regulatory standards. Since
initially we are &nbsp;targeting markets for our television platform involves
countries outside of the United States, such product is subject to greater
regulatory risks since it must comply with different standards of different
countries than can vary widely in the telecommunications industry. The failure
to meet such regulatory standards would result in potential customers in
countries outside of the United States not deploying of our TV+ solution.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>The
telecommunications industry is subject to intense competition characterized by
swift changes in technology.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
telecommunications equipment industry is subject to swift and continuing
innovation and technological changes that could render our TV+ solution obsolete
and intense competition in the industry could prevent our ever becoming
profitable. Our competitors that sell IPTV solutions that compete with and
mPhase TV+ middleware include much larger and better known and capitalized
companies with significantly greater selling and marketing experience and
financial resources. Such competitors include for middleware a joint venture
between Microsoft and Alcatel, as well as Minverva, Orca Interactive, Siemens,
VBrick Systems and Video Furnance. End to end solutions competitors for IPTV
include UTStarcom, mxWare and Industrial. Telephone service providers that are
our targeted customers face competition from cable-based technologies, fixed
wireless technologies and satellite technologies that may cause them not to
deploy our TV+ product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Deployment
of our television platform requires significant additional investments by
telecommunications service providers.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;Our
Customers may need to build a digital head-end to download television content
from satellites involving a significant additional capital expenditure to
utilize the digital Television capabilities of our TV+ solution. For customers
desiring feature rich solutions such as video on demand, the installation of
additional routers and servers may be required to upgrade the internet backbone
capabilities of such customer. Such additional capital costs may cause a number
of potential customers not to deploy our TV+ solution.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
10</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="center"><B>Risk Factors Related to Our Targeted Markets</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>We
may not be able to evolve our technology, products and services or develop new
technology, products and services that are acceptable to our customers</B>.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 36; COLOR: #000000; text-indent:-36" align="justify">The
market for our IPTV middleware is characterized by:<br>
Rapid
technology change;<br>
New
and improved product introductions;<br>
Changing
customer demands; and<br>
Evolving
industry standards and product obsolescence.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Our
future success will depend upon our ability to continually enhance our IPTV
solution to deliver feature rich, open standards, carrier class television on
the most scaleable cost efficient platform custom tailored to the rigorous and
varied demands of telecommunications service providers. The development of
enhanced and new technology, products and services is a complex and uncertain
process requiring high levels of innovation, highly-skilled engineering and
development personnel, and the accurate anticipation of technological and market
trends. We may not be able to identify, develop, market or support new or
enhanced technology, products, or services on a timely basis, if at all owing to
our size and limited financial resources.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Telecommunications
service providers outside of the United States must be able to access sources
for broadcast television content in order to deploy our TV+ Solution.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
order to have an incentive to deploy&nbsp;the IPTV solution, an international
telecommunications service provider must have access, to multiple channels of
Television programming from content providers at prices that enable such
provider to earn a profit from the deployment of television programming. In
certain of our key target markets, such as Brazil, only cable companies are
permitted under current law to provide such content and therefore a local
service provider must establish a working relationship with such a cable
provider to have an incentive to utilize our products.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>USE OF PROCEEDS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
selling stockholders will receive the proceeds from the resale of the shares of
common stock. We will not receive any proceeds from the resale of the shares of
common stock by the selling stockholders. However, we will receive approximately
$47 million if all of the warrants and options are converted to purchase shares
of common stock registered under this prospectus which would be used for general
working capital.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
11</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>PRICE RANGE OF COMMON STOCK</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>The primary market for our common stock is the OTC Bulletin Board,
where it trades under the symbol &#147;XDSL.OB&#148;. The following table sets forth the
high and low closing bid prices for the shares for the periods indicated as
provided by the National Quotation Bureau, Inc. The quotations shown reflect
inter-dealer prices, without retail mark-up, mark-down, or commission and may
not represent actual transactions.</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Year/Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>High</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>Low</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      year ended June 30, 1999</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$4.25</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$0.75</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>3.65</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1.56</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>5.63</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1.88</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>8.75</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>2.91</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      year ended June 30, 2000</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$9.25</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$2.96</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>6.18</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>2.50</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>19.12</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>6.50</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>14.12</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>6.00</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      year ended June 30, 2001</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$9.25</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$3.00</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>5.93</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1.46</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>3.38</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1.22</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>2.61</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1.03</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      year ended June 30, 2002</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$1.67</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.31</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.86</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.31</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.62</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.27</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.50</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.23</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      year ended June 30, 2003</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.32</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.15</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.31</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.15</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.36</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.19</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.42</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>.28</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      Year ended June 30, 2004</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.42</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.29</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.61</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.26</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.69</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.41</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.46</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.29</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      Year ended June 30, 2005</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.31</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.21</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.35</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.23</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.59</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.30</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.41</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.24</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      Year ended June 30, 2006</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 8pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.28</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.22</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.30</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.16</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.42</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.21</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fourth
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.32</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.19</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Fiscal
      Year ended June 30, 2007</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>First
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.21</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.16</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Second
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.20</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.15</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="60%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Third
      Quarter</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.24</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$.15</B></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">As
of June 29, 2007 (unaudited), we had approximately 388 million shares of common
stock outstanding and approximately 17 thousand stockholders. The last reported
sales price of our common stock on June 29, 2007 was $.095 per share.</P>
<p style="font-size: 10pt; color: #000000; text-indent: 0pt; margin-left: 0pt; padding: 0pt" align="right">
12</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>&nbsp;DIVIDEND POLICY</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
have never declared or paid any cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and expand our
business. Any future determination to pay cash dividends will be at the
discretion of the board of directors and will be based upon our financial
condition, operating results, capital requirements, plans for expansion,
restrictions imposed by any financing arrangements and any other factors that
the board of directors deems are relevant.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>SELECTED FINANCIAL DATA</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
selected financial data set forth below is derived from and should be read in
conjunction with historical financial statements and notes included in this
prospectus. Financial information for the years ended June 30, 1999, 2000 and
2001, are derived from financial statements that have been audited by Arthur
Andersen LLP. Financial information relating to years ended June 30, 2002, 2003
and 2004, 2005 and 2006 are derived from financial statements that have been
audited by Rosenberg, Rich, Baker, Berman &amp; Company, independent auditors,
and are included in this prospectus. &nbsp;Quarterly information includes all
adjustments and material disclosures that management considers necessary for a
fair presentation. Such information has not been audited are not necessarily
indicative of the operating results to be expected in the future. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center>SELECTED OPERATING DATA<br>
Year Ended June 30,<br>
(in thousands except per share data)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2002</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2003</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B>Cumulative from inception October&nbsp;2, 1996 to
      June&nbsp;30<U>, 2006</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Total
      revenues:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$2,582 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$1,582 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$4,641 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$1,711 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$975 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>$22,296 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cost
      of sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>2,415</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>1,493</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>4,068</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>1,446</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>974</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>16,335</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>3,820</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>3,538</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>4,070</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>5,127</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>8,035</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>51,579</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>7,039</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>2,684</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>4,178</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>6,580</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>11,121</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>96,756</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>670</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>515</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>123</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>63</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>79</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>3,031</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(11,361)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(6,649)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(7,798)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(11,505)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(19,234)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(145,405)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Other
      income (expense), net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>142 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>50 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>150 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>382 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(5,182)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(5,905)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Interest
      income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(26)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(51)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(111)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(111)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(35)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(150)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($11,245)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($6,650)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($7,759)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($11,234)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($24,451)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($151,460)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.23)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.12)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
    <p style="margin-right: 4">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Shares
      used in basic and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>49,617,280</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>65,217,088</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>77,677,120</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>108,657,578</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-right:4"
      align=right>199,610,372</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
    <p style="margin-right: 4">&nbsp;</TD></TR></TABLE>
<ul>
  <li>
<P
style="FONT-SIZE: 10pt; COLOR: #000000; ">Does
not include any common stock equivalents since their effect would be
anti-dilutive.</P>
  </li>
</ul>
<div style="padding-left: 0pt">
<P
style="PADDING-RIGHT: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; PADDING-TOP: 0pt" align="right">
13</P>
</div>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center>mPHASE TECHNOLOGIES, INC.<br>
&nbsp;(A Development Stage Company)<br>
<B>&nbsp;Consolidated Statements of Operations<br>
</B>&nbsp;(Unaudited)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>(Date of</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%" colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>Nine Months Ended</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Inception) to</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%" colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>March 31,</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;March 31,</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><U>2006</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><U>2007</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><U>2007</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">REVENUES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$832,999 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$135,743 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$22,431,350 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">COSTS
      AND EXPENSES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cost
      of Sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>729,475 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>88,207 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>16,422,148 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Research
      and Development ( including non-cash stock related charges of $200,850, $0
      and $2,318,519, for 2006, 2007 and inception to date respectively)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>6,120,253 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>4,964,404 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>56,543,605 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">General
      and Administrative (including non-cash stock related charges of,
      $4,510,350, $1,124,647 and $58,319,301 for 2006, 2007 and inception to
      date respectively)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>8,002,079 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>5,012,073 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>101,768,166 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Depreciation
      and Amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>57,644 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>66,314 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,097,316 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">TOTAL
      COSTS AND EXPENSES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$14,909,451 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$10,130,998 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$177,831,235 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">LOSS
      FROM OPERATIONS</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($14,076,452)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($9,995,255)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($155,399,885)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">OTHER
      INCOME</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Interest
      Income (Expense), net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(25,498)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(10,930)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(161,071)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Other
      Income (Expense) net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(4,902,302)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(1,054,187)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(6,959,473)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">TOTAL
      OTHER INCOME (EXPENSE)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($4,927,800)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($1,065,117)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: 3px double #000000; "
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($7,120,544)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">NET
      LOSS</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($19,004,252)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($11,060,372)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($162,520,429)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">LOSS
      PER COMMON SHARE, basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.09)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>($0.04)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING, basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>211,186,500 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>309,018,261</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width="15%">&nbsp;</TD></TR>
  </TABLE>
<p style="font-size: 10pt; color: #000000; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt; padding: 0pt" align="left">
The accompanying notes are an integral part of these consolidated financial
statements. </p>
<p style="font-size: 10pt; color: #000000; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt; padding: 0pt" align="right">
14</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="FONT-SIZE: 10pt; COLOR: #000000; " align="center">SELECTED
BALANCE SHEET DATA:<B><br>
As of June 30,<br>
</B>(in
thousands except per share data)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2002</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2003</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>March 31, 2007 (unaudited)</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cash
      and cash equivalents</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$47 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$397 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$90 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$351 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,360 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$315</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Working
      capital (deficit)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(94)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(1,405)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(2,112)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(1,674)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(1,093)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>(3,011)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Total
      assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>6,942 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,782 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>2,591 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>2,232 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>2,182 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>1,666</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Long-term
      obligations, net of current portion</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>2,891 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>2,608 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>1,038 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;315</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Total
      stockholders&#146; (deficit)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$(42)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$(3,229)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$(2,918)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$(1,618)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$(606)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$(2,634)</P></TD></TR></TABLE>
<P
style="FONT-SIZE: 10pt; COLOR: #000000; "
align=center>SELECTED QUARTERLY DATA</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>FISCAL
      2007 QUARTERLY</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4>
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Three Months Ended</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>STATEMENT
      OF OPERATIONS DATA:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>&nbsp;September 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>&nbsp;December 31</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>March 31,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      revenues</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$105,846</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$14,742</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$15,155</P>
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Costs
      and Expenses:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>85,390</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,817</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,990,313</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,723,411</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,250,680</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,961,832</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,405,347</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,644,895</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>21,899</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>21,739</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>22,676</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,953,588</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,135,755</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,905,912</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      expense, Net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,414)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7,734)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,218</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(695,352)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(358,835)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,958,002)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($3,838,841)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($3,263,529)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><BR></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(.01)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($.01)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($.01)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Shares
      used in basic and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>282,306,237</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>300,483,022</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>327,195,047</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "><BR></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;<B>FISCAL
      2006 QUARTERLY</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4 height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Three Months Ended</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>STATEMENT
      OF OPERATIONS DATA:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>&nbsp;September 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>&nbsp;December 31</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>March 31,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>June 30,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4 height="19">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>(in thousands, except share amounts)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      revenues</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$381</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$168</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$284</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$142</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Costs
      and Expenses:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="19">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="19">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="19">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>338</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>135</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>256</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>246</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,861</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,961</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,298</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,915</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,092</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,090</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,820</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,119</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>21</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>20</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>17</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>22</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(2,931)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,038)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7,107)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(5,160)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      expense, Net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(14)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(6)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(5)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(10)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(13)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,270)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(498)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(402)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(2,958)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(8,314)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7,610)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(5,572)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.02)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(.05)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(.03)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(.03)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Shares
      used in basic and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>152,291,645</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>174,998,048</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>262,539,165</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>270,387,574</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
15</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<br><TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>FISCAL
      2005 QUARTERLY</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4 height="19">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Three Months Ended</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>STATEMENT
      OF OPERATIONS DATA:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">September 30,</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">&nbsp;December 31</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">March 31,</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">June 30,</font></B></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=center width="60%" colSpan=4 height="15">
      <B><font size="2">(in thousands, except share amounts)</font></B></TD>
    </TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      revenues</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$179</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$295</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$564</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$673</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Costs
      and Expenses:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>130</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>245</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>448</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>623</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,101</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,055</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,664</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,307</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>709</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,071</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,636</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,164</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>127</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>65</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(130)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,762)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,203)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,249)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(2,291)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      expense, Net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(29)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(66)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(37)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>21</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(41)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(37)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(60)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>520</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,832)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,306)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(4,346)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,750)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.02)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(.04)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.04)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.01)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Shares
      used in basic and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;89,719,962</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;93,388,584</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>120,015,504</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="30">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>137,719,500</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>&nbsp;</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>FISCAL
      2004 QUARTERLY</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <B><font size="2">Three Months Ended</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD></TR>
  <tr>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>STATEMENT
      OF OPERATIONS DATA:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">September 30,</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">&nbsp;December 31</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">March 31,</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">June 30,</font></B></TD>
  </tr>
  <tr>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=center width="60%" colSpan=4 height="15">
      <B><font size="2">(in thousands, except share amounts)</font></B></TD>
    </tr>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      revenues</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,489</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,291</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$555</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$306</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Costs
      and Expenses:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,099</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,191</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>484</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>294</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>611</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>843</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,404</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,212</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>605</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>914</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>803</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,856</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>46</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>28</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>27</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>22</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(872)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,685)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(2,162)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,078)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      expense, Net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(16)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(16)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(20)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(59)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>23</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(152)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>279</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(865)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,701)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(2,334)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(2,858)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.01)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.02)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.03)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.03)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Shares
      used in basic and dilute net loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>71,725,318</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>72,814,272</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>81,564,405</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>84,885,017</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">per
      share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      </TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>FISCAL
      2003 QUARTERLY</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4 height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Three Months Ended</B></P>
      </TD></TR>
  <tr>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>STATEMENT
      OF OPERATIONS DATA:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">September 30,</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">&nbsp;December 31</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">March 31,</font></B></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <p align="right"><B><font size="2">June 30,</font></B></TD>
  </tr>
  <tr>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=center width="60%" colSpan=4 height="15">
      <B><font size="2">(in thousands, except share amounts)</font></B></TD>
    </tr>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      revenues</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$210</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$562</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$210</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$600</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Costs
      and Expenses:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>197</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>547</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>205</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>544</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>803</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>753</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>906</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,076</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>893</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>731</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>544</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>516</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>131</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>129</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>129</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>127</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,814)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,598)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,574)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,662)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      expense, Net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(18)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(15)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(11)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>41</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>9</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>11</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Gain
      (Loss) on investments</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(16)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(12)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>17</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,791)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,629)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,588)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,641)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.03)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.07)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.02)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.02)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Shares
      used in basic and diluted net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>60,881,131</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>65,914,466</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>65,956,810</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>68,164,160</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">loss
      per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" height="15">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD></TR>
  </TABLE>
<p style="font-size: 10pt; color: #000000; text-indent: 0pt; margin-left: 0pt; padding: 0pt" align="right">
16</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right"><BR></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0" height="240">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>FISCAL
      2002 QUARTERLY</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4>
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Three Months Ended</B></P>
      </TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>STATEMENT
      OF OPERATIONS DATA:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>&nbsp;September 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>&nbsp;December 31</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>March 31,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>June 30,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><BR></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=4>
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>(in thousands, except share amounts)</B></P>
      </TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      revenues</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$537</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$545</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$866</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$634</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Costs
      and Expenses:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of Sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>457</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>530</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>724</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>704</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,111</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,257</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>539</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>913</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,862</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,641</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,355</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,181</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>193</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>209</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>136</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>132</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Operating
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,086)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,092)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,888)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(2,296)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      expense, Net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(5)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(10)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (expense)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>33</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>85</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>19</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(4,063)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(3,088)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(1,808)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(2,287)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted net loss per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.07)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.03)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.04)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Shares
      used in basic and diluted net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;42,037,506</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;44,645,458</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>55,606,168</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>56,459,167</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">loss
      per share</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>COMPANY OPERATIONS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
following is management&#146;s discussion and analysis of the operations of mPhase,
since its inception in 1996 which should be read in conjunction with the
accompanying financial statements, financial data, and the related notes.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>CAUTIONARY
STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE LITIGATION REFORM
ACT OF 1995:</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Some
of the statements contained in or incorporated by reference in this Prospectus
discuss the Company&#146;s plans and strategies for its business or state other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act of 1995. The words &#147;anticipate,&#148; &#147;believe,&#148; &#147;estimate,&#148;
&#147;expect,&#148; &#147;plan,&#148; &#147;intend,&#148; &#147;should,&#148; &#147;seek,&#148; &#147;will,&#148; and similar expressions
are intended to identify these forward-looking statements, but are not the
exclusive means of identifying them. These forward-looking statements include,
among others, statements concerning the Company&#146;s expectations regarding its
working capital requirements, gross margins, results of operations, business,
growth prospects, competition and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. Any
forward-looking statements contained in this Prospectus are subject to risks and
uncertainties that could cause actual results to differ materially from those
results expressed in or implied by the statements contained herein.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>OVERVIEW</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
Technologies, Inc. (mPhase, the Company, we or us), a New Jersey corporation,
founded in 1996 is a publicly-held company with approximately 17,000
shareholders and approximately 391 million shares of common stock outstanding as
of July 9, 2007.
The Company&#146;s common stock is traded on the NASDAQ Over the Counter Bulletin
Board under the ticker symbol XDSL.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
is a developer of broadband communications products, specifically, IPTV plus
digital subscriber line (DSL) products for telecommunications service providers
around the world. In February of 2004 mPhase entered into the new and emerging
area of NanoTechnology. Since our inception in 1996 we have been a
development-stage company and operating activities have related primarily to
research and development, establishing third-party manufacturing relationships
and developing product brand recognition among telecommunications service
providers.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
are headquartered in Norwalk, Connecticut with offices in Little Falls, New
Jersey and New York, New York. mPhase shares common office space and common
management with Microphase Corporation, a privately-held company. Microphase is
a seller of radio frequency and filtering technologies to the defense industry.
Microphase has been in operation for over 50 years and supports mPhase with
engineering, administrative and financial resources, as needed.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; ">&nbsp;&nbsp;<B>Description
of Operations</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
Technologies, Inc. (&#147;mPhase&#148; or the &#147;Company&#148;) is a development stage technology
company. The Company is a developer and seller of broadband communications
products for telephone service providers. The Company&#146;s TV+ solution is an
open-standards, carrier class solution of middleware/software enabling telephone
service providers to deliver broadcast television using internet protocol
(IPTV), video on demand, voice and high-speed internet over such providers
existing infrastructure. The Company also&nbsp;provides systems integration
solutions for delivery of broadcast television (IPTV),&nbsp;video on demand,
high-speed internet and voice using internet protocol over the existing
infrastructure of a telephone service provider. The Company&#146;s TV+ solution is
highly scalable (compared to other middleware requires less routers and servers)
with significant cost savings and &nbsp;is reliable middleware designed to
operate with any IP based network. In addition the Company designs,
manufacturers and sells DSL component products including its new customer
premises VDSL splitter. In fiscal year 2004, the Company entered into the field
of nanotechnology research and development of micro power cell batteries of
various voltages. In 2005, the Company expanded its products in the field of
nanotechnology research and development into electronic sensors or magnetometers
using micro electrical mechanical systems.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
17</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "><B>IPTV
and TV+ Solutions </B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
introduced its first TV over DSL platform, the Traverser&#153; Digital Video and Data
Delivery System (&#147;DVDDS&#148;), in 1998. The DVDDS is a patented end to end system
that enables a telecommunications service provider to deliver up to several
hundred channels of motion picture experts group two (&#147;MPEG-2&#148;) standard
broadcast digital television, high speed internet and voice over copper
telephone lines between a central office facility of the provider and a
customer&#146;s premise. mPhase has not, as yet, derived any material revenues from
sales of the DVDDS. The DVDDS is a proprietary technology developed in
conjunction with Georgia Tech Research Corporation (GTRC) and is one of the
first systems of its kind developed. The system is the only system on the market
that utilizes non- Internet Protocol (&#147;IP&#148;) transmission over ADSL. &nbsp;The
legacy DVDDS platform has been replaced by the Company&#146;s TV+ solution.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Our
current TV+ solution, utilizes a communications framework based upon Internet
Protocol (IP) instead of Asynchronous Transfer Mode (ATM) that is utilized by
earlier versions of the product. ATM is an industry standard for transportation
of data based upon a packaging of information into a fixed-size cell format for
transportation across networks. Many telecommunications service providers
currently deploy equipment that handles this protocol because it can support
voice, video, data and multimedia applications simultaneously with a high degree
of reliability. IP is another transport protocol that maintains network
information and routes packets across networks. IP packets are larger and can
hold more data than ATM cells. Historically, there have been concerns that
service providers would be unable to provide the same quality of service with IP
because it is not optimized for time-sensitive signals such as broadcast
television and voice. Nevertheless, there is a greater demand by
telecommunication service providers for IP systems for delivery of television,
voice and high-speed data because such systems are significantly more cost
effective to deploy based upon greater scalability.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;Our
TV+ solution is an open standards-based carrier class technology that may be
used over any infrastructure such as fiber, coax, or copper. The TV+ solution
may be used in combination with the set top box of any vendor and will operate
with any DSLAM or multicast routers transport equipment used for delivery of
IPTV. &nbsp;We believe the system&#146;s architecture is the most reliable and highly
scalable solution available for IPTV. Our solution enables a telecommunications
service provider to custom tailor the deployment of feature rich IP television,
video on demand, high-speed internet and voice. The solution allows a service
provider to start small and test its take rate among customers with a maximum of
flexibility of design, features and cost allowing it to enter the market for
converged services to its customers on an optimal basis.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>mPhase
DSL Component Products.</B> </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
continues to design and market a line of DSL component products. mPhase is
currently developing and marketing a new VDSL customer premises splitter
designed to meet the current migration of deployments by telephone service
providers from ADSL to VDSL.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
18</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "><B>&nbsp;Nanotechnology</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Effective
February 3, 2004, mPhase entered into a Development Agreement with Lucent
Technologies, Inc. to commercialize the use of nano power cell technology. The
initial agreement was for a 12 month period of exploratory development at the
cost of $100,000 per month of a new form of power cell having a shelf life far
in excess of conventional battery technology. In March of 2005 the Company
extended such Agreement for another 12 months at the cost of $100,000 per month
to continue development of the nano power cell product and the Company in
currently negotiating with Lucent to extend the Agreement upon the same terms
through March of 2006 and in May of 2006 extended such Agreement through
February of 2007. We have extended such Agreement through April 27, 2007. We
believe that this arrangement with the Bell Labs division of Lucent will give
mPhase the opportunity to develop and offer breakthrough battery technology and
other potential applications, initially to the government market for defense and
homeland security and ultimately to the commercial market. It is anticipated
that the initial applications for nano power cells will address the need to
supply emergency and reserve power to a broad range of products for the defense
department.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company believes that its entry into this new field of high technology growth
will provide product diversification without negatively affecting its focus upon
its traditional products aimed at delivery of Television over DSL. The Company
developed a lab prototype of its first nano power cell product that was
completed in the second quarter of fiscal year 2005. The Company is unable, at
this time, to predict when significant commercialization and material revenues
will be derived from its entry into the NanoTechnology business. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
March 10, 2005 the Company announced and agreement with the Bell Labs research
and development arm of Lucent Technologies, Inc. to co develop using the science
of nanotechnology and commercialize uncooled magnetic ultra-sensitive sensors
for a host of defense and civilian applications. The agreement with Bell Labs is
for a 12 month period at a cost of $100,000 per month to the Company and was
renewed in May of 2006 through March of 2007 upon the same terms. The sensors,
technically referred to as magnetometers, are based upon Micro Electro
Mechanical Systems (MEMS) using designs based upon fundamental breakthroughs
made in the past few years at Bell Labs as part of the New Jersey Nanotechnology
Consortium. Initial tests of theses MEMS magnetometers indicate sensitivities
1000 times those achieved in presently available uncooled magnetometers. Such
devices are designed to create a new generation of &nbsp;magnetometers suitable
for navigation based applications as well as ultra sensitive magnetic field
sensors that will enable military combatants to detect with greater accuracy and
range hostile military forces. Commercial applications may include inexpensive
navigational components for mobile phones to sensing devices for identification
used in homeland security products, as well as sensors used in diagnostic
systems for detection of metal fatigue for numerous industrial applications.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
June 8, 2007, the Company and Bell Labs extended at a cost of $100,000 per month
for 12 months the Development Agreement with respect to the nano power cell
technology that had expired on April 27 of 2007. The Company is currently in
discussions with Bell Labs to renew for an additional twelve months the
Development Agreement for the Magnetometer product that expired in March of 2007
on similar terms.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Nano
Battery</B>:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>mPhase Technologies along with its partner Alcatel Lucent/Bell
Labs has been jointly conducting research since February 2004 that demonstrates
control and manipulation of fluids on superhydrophobic surfaces to create power
cells by controlling wetting behavior of electrolyte on nanostructured electrode
surfaces. The scientific research conducted this year has set the groundwork for
continued exploration in the development of intelligent nanotechnology power
cells (nano-batteries), and forms a path to commercialization of the technology
for a broad range of market opportunities. During the first half of calendar
year 2005 the battery team has been testing modifications and enhancements to
the internal design of the battery to optimize its power and energy density
characteristics, as well as making engineering improvements that will assist in
making the battery easier to manufacture when the project research that level of
maturity. In the second half of calendar year 2005, the technical team has
improved the robustness and manufacturability of the prototype battery by
designing a porous membrane structure with honeycomb features. A successful
demonstration of this working prototype battery using these new modifications
was demonstrated in January of 2006 and subsequently highlighted in the February
2006 issue of Scientific American magazine. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>In June of 2005 the battery project was expanded to include a
joint technical development effort through December 2005 between mPhase and
Rutgers University to potentially incorporate a Lithium based design. This work
program has initially started as a modest technology effort to help characterize
and test the nano battery design using Lithium chemistry and determine if the
current design is capable of supporting the lithium based chemistry.&nbsp;The
Company continued its work with&nbsp;Rutgers University in 2006 where a number
of important scientific tests were conducted. Based upon the results of these on
going tests, the Company may decide to accelerate the work effort beyond its
current level of funding.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>19</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Magnetomete</B>r:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
February 2005 mPhase and Lucent Technologies&#146; Bell Laboratories entered into a
joint effort to develop a family of magnetometer designs suitable for both low
sensitivity applications, to extremely sensitive designs used for more complex
applications. &nbsp;Magnetometers can be used in a wide range of applications
that include military surveillance, securing the retail environment, automotive
sensors and actuators, industrial processing, medical imaging, scientific
measurements, detection of mineral deposits and even air and space exploration.
In sensor networks ultra-sensitive magnetometers can be used, for example, to
detect and accurately pinpoint battlefield objects or they might also be used to
study the workings of the human brain.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Magnetometers
work by sensing changes in magnetic fields due to the motion of magnetic objects
or changes in electrical currents generated by those objects. The magnetometer
detects these objects by measuring time-varying magnetic signals that are
superimposed on the combination of earth&#146;s background field (used to orient
compasses) and static magnetic fields due to nearby magnetic objects.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Highly
Sensitive Magnetometers</B> - The enhanced sensitivity of these devices results
from two scientific advances recently made researchers at Alchaetel / Lucent
Bell Labs. Presently, the highest sensitivity magnetometers commercially
available require cooling to cryogenic temperatures. Called SQUIDs (for
Superconducting Quantum Interference Devices) these devices only work at the
temperature where liquid helium boils, -455 degrees below zero Fahrenheit,
making such magnetometers expensive and bulky and therefore ill-suited for
remote-sensing applications. Room temperature magnetometers, on the other hand,
are less sensitive, and use technology that was developed in World War II for
detecting submarines.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
new technology being developed by Bell Labs and mPhase employs a number of
different designs based on Micro-Mechanical Systems (MEMS). These designs use
the very high &#147;Quality Factor (Q)&#148; of the mechanical resonance in single
crystals of silicon. A resonance is similar to the fundamental frequency of a
tuning fork. When tapped, a tuning fork will vibrate for a length of time
inversely proportional to the internal friction of vibration within the metal of
the tuning fork. A comparable tuning fork made from single crystal silicon,
which has less internal friction than the hardest metal, will vibrate almost a
thousand times longer. Based on this principal, a device employing a high Q
resonator will have enhanced amplitude of vibration at the resonance frequency,
and hence will display a greater sensitivity to external perturbations that
affect its resonance frequency. By coupling the mechanical motion of a bar or a
paddle constructed from silicon to the ambient magnetic field, this high
mechanical sensitivity can be converted to high magnetic field sensitivity. The
technical approach that the team is developing can be achieved either statically
with an integrated magnetic film, or dynamically through motion of the silicon
bar or paddle.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;<B>The
Benefits of MEMS</B> - Commercial magnetometers using purely electronic
detection, such as Hall, magneto-resistance or flux-gate devices, have
sensitivities limited by their<I> electronic</I> Q-factor. This Q-factor depends
on the natural electrical resistance, or electronic friction, of the metal in
the circuit. For room-temperature operations it is therefore difficult to reduce
the electrical Q-factor. Mechanical resonators made from semiconductor-grade
silicon, on the other hand, exhibit mechanical Q-factors, approaching 100,000 at
room temperature. These new, smaller and less costly magnetometers should be
100-1000 times more sensitive than existing commercial devices in terms of size
and power consumption, thus enabling the creation of a new class of sensor
systems that mPhase plans on commercializing.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>The mPhase and Lucent magnetometer team has successfully reached
an early milestone and have produced a number MEM based sensor samples from the
clean room facilities and are working on integrating them into the surrounding
electronic circuitry so that measurement, characterization and sensitivity
testing can be conducted. We are currently able to achieve sensitivities at room
temperature of better than .1 micro gauss per root hertz squared and with
additional development the goal is improvement of at least one order of
magnitude. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>The Company is currently negotiating the extension through June of
2008 with Bell Labs of its Magnetometer Development Agreement and its Battery
Development Agreement each at a cost of $100,000 per month.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>20</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>NOTES ON OPERATIONS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Revenues</I>.
To date, all material revenues have been generated from sales of the POTS
Splitter Shelves and other DSL component products to a small number of
telecommunications companies. mPhase believes that future revenues are difficult
to predict because of &nbsp;the length and variability of the commercial
roll-out of the IPTV to various telecommunications service providers and
&nbsp;the Company&#146;s recent entry into the NanoTechnology business that is
essentially exploratory research both with respect to the potential battery and
magnetometer applications. Since the Company believes that there may be a
significant international market for its TV+ IPTV solution involving many
different countries, with different regulations, certifications and commercial
practices than the United States, future revenues are highly subject to the
changing variables and uncertainties. The Company is negotiating a &nbsp;royalty
on gross revenues received by Janifast Ltd. in connection with sales of the new
VDSL customer premises splitter product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Cost
of revenues</I>. The costs necessary to generate revenues from the sale of POTS
Splitter Shelves and other related DSL component products include direct
material, labor and manufacturing. mPhase paid these costs to Janifast Ltd.,
which has facilities in the People&#146;s Republic of China and is owned by and
managed by certain senior executives of the Company. The cost of revenues also
includes certain royalties paid to Microphase Corporation, a privately held
corporation organized in 1955, which shares certain common management with the
Company and is majority-owned by a director of mPhase. Costs for future
production of the TV + solution will consist primarily of payments to selected
software vendors and developers for the development of custom features required
by a particular purchaser of the IPTV middleware. Such major vendors include
Espial Group and Magpie Telecom Insiders, Inc and systems integration by
Velankani Systems. mPhase is currently negotiating a payment in shares of stock
to Microphase in connection with the design of its new VDSL customer premises
splitter product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Research
and development</I>. Research and development expenses consist principally of
the payments made to &nbsp;Magpie Telecom Insiders, Inc., Espial, Bitband and
Velankani , for development of the &nbsp;TV+ IPTV solution and the Bell Labs
division of Alcatel/Lucent for development of our nanotechnology products
respectively. The IPTV+ solution consists primarily of middleware/software
designed for the delivery of feature rich, carrier class, broadcast TV, high
speed internet and voice by telecommunications service providers open using
standards based equipment and transport configurations. &nbsp;There are a number
of potential military and commercial applications for our nanotechnology
products. All research and development costs are expensed as incurred.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>General
and administrative</I>. Selling, general and administrative expenses consist
primarily of salaries and related expenses for personnel engaged in direct
marketing of the TV+ solution for IPTV and &nbsp;DSL component products
including our new VDSL customer premises splitter, as well as support functions
including executive, legal and accounting personnel. Certain administrative
activities are outsourced on a monthly fee basis to Microphase and mPhase leases
its principal office in Norwalk, Connecticut from Microphase.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Non-Cash
compensation charges</I>. The Company makes extensive use of common stock
grants, options and warrants as a form of compensation to employees, directors
and outside consultants. We incurred non-cash compensation charges totaling
$59,071,377 from inception (October 2, 1996) through June 30, 2006, of which
$2,318,519 was included in research and development expenses and $56,752,858 was
included in general and administrative expenses. We incurred non-cash
compensation charges of $60,196,024 from inception (October 2, 1996) through
March 31, 2007 (unaudited), of which $2,318,519 was included in research and
development expenses and $58,319,301 was included in general and administrative
expenses.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
21</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B><I>TWELVE MONTHS ENDED JUNE 30, 2006 VS. JUNE 30,
2005</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">
Revenues. Total revenues for the year ended June 30, 2006 decreased to $975,482
from $1,711,085 for the year ended June 30, 2005. The decrease was primarily
attributable to decreased sales of the Company&#146;s POTS Splitter product line
caused by a downturn of orders from one customer that orders component products
from the Company. The Company also recognized $280,000 of revenue in connection
with the first sale of 1000 ports of Release 2.0 its TV+ solution to a major
telecommunications service provider in Russia in fiscal year 2005 but received
no additional orders for Version 3.0 of its TV+ solution in fiscal year 2006.
The Company cannot predict when the demand for telecommunication equipment will
resume, however we do expect certain added revenue in fiscal year 2007 from
deployments of our TV+ solution.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Cost
of revenues. Cost of sales was $974,583 for the year ended June 30, 2006 as
compared to $1,446,151 in the year ended June 30, 2005. Cost of revenues
decreased for the twelve months ended June 30, 2006 compared to the prior period
ending June 30, 2005 primarily because of decreased sales. Gross margins for the
period ended June 30, 2006 were 1.0%. The gross margins have varied dramatically
as spending among telecommunication providers has contracted, coupled with
downward pressures related to the supply and demand of telecommunications
products. The single most significant reason the margins decreased dramatically
was due to the reduced selling price of our POTS Splitter product. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Research
and Development. Research and development expenses were $8,034,964 for the year
ended June 30, 2006 as compared to $5,127,438 in the year ended June 30, 2005,
an increase of $2,907,526. Such expenditures included $4,384,749 incurred with
Lucent Technologies, Inc. for the year ended June 30, 2006 as compared to
$3,319,280 during the comparable period in 2005. In addition we incurred
$2,346,875 with Microphase and other strategic vendors for the year ended June
30, 2006 as compared to $919,937 during the comparable period in 2005.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
significant increase in research and development expenses with Lucent
Technologies, Inc. is due to the $1.2 million per month Development Agreement
for the battery and power pack product utilizing nanotechnology. In addition,
the Company has extended its research with Lucent Technologies related to the
ultra electronic sensor devices for 12 months at a total cost of $1.2
million.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
elimination in research expenditures incurred with GTRC is due to the Company&#146;s
refocus in development from its legacy Traverser DVDDS television delivery
platform to its TV+ product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Research
expenditures incurred with Microphase sharply declined as the Company reexamined
the viability of it Broadband Loop Watch product during the second half of
fiscal year 2006. Expenditures that were incurred in fiscal year 2006 were
related to the continuing development of the Company&#146;s DSL component products,
including the Company&#146;s line of POTS Splitters and Microfilters and the
Company&#146;s the Broadband Loop Watch.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">General
and Administrative Expenses. Selling, general and administrative expenses were
$11,121,235 for the year ended June 30, 2006 up from $6,579,761 for the
comparable period in 2005, an increase of $4,541,474.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;Included
is an increase of non-cash charges relating to the issuance of common stock and
options to consultants, and employees which totaled $6,276,423 for the year
ended June 30, 2006 as compared to $3,336,064 during the comparable period in
2005. Other components of the increase in selling, general and administrative
expenses were increases in payroll of approximately $128,000 to $1,603,000,
&nbsp;an increase in the use of outside consultants of approximately $399,000 to
$1,103,000, marketing expenses such as trade shows of $104,000 to $372,000.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">
Other Income and Expense for the year ended June 30, 2006 reflects a non
recurring charge of $5,530,504 for the value of shares issued to investors to
reflect market changes in the common stock.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Net
loss. mPhase recorded a net loss of $24,450,650 for the year ended June 30, 2006
as compared to a loss of $11,234,324 for the same period ended June 30, 2005.
This represents a loss per common share of &nbsp;$(.12) in 2006 as compared to
$(.10) in 2005, based upon weighted average common shares outstanding of
199,610,372 and 108,657,578 during the periods ending June 30, 2006 and June 30,
2005 respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
22</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>NINE MONTHS ENDED MARCH 31, 2007 VS. MARCH 31, 2006</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>REVENUE</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Total revenues were $135,743 for the nine months ended March 31,
2007 compared to $832,999 for the nine months ended March 31, 2006. The decrease
was attributable primarily to the phasing out of the Company&#146;s ADSL POTS
Splitter line of products and its emphasis on developing a new VDSL customer
premises POTS Splitter product to meet market advancements in technology.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>COST
OF SALES</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Cost of sales was $88,207 for the nine months ended March 31, 2007
as compared to $729,475 in the comparable prior period. The decrease is a direct
result of the aforementioned phasing out of the POTS Splitter line of
business.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>RESEARCH
AND DEVELOPMENT</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Research and development expenses were $4,964,404 for the nine
months ended March 31, 2007 as compared to $6,120,253 during the comparable
period in 2006; or a decrease of $1,155,849. The Company incurred most of its
research and development expenses with vendors including Lucent, Microphase,
Magpie Insiders, Inc., Bitband, Espial, Velankani and other strategic vendors.
In the nine month period ended March 31, 2007 such charges totaled approximately
$4.4 million as compared to $5.3 million during the comparable period in 2006.
During the nine month period ended March 31, 2007, expenses incurred to third
party vendors amounted to $1.6 million and $2.8 million for services related to
Nanotechnology and IPTV, respectively. During the nine month period ended March
31, 2006, expenses incurred to third party vendors amounted to $2.0 million and
$3.3 million for services related to Nanotechnology and IPTV, respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>GENERAL
AND ADMINISTRATIVE EXPENSES</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Selling, general and administrative expenses were $5,012,073 for
the nine months ended March 31, 2007 down from $8,002,079 or an decrease of
$2,990,006 from the comparable period in 2006. Included in selling, general and
administrative costs are non-cash charges relating to the issuance of common
stock and options to employees and consultants, which totaled $1,124,647 for the
nine months ended March 31, 2007 as compared to $4,510,350 for the comparable
period ended March 31, 2006 resulting in a decrease of $3,385,703. This decrease
was offset by increases in payroll related costs which increased by
approximately $383,304, investor relations and marketing which increased by
$130,115 and legal and professional which increased by approximately
$296,456.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>OTHER
INCOME AND (EXPENSE)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Other Income and (Expense) amounted to net expense of $1,065,117
for the nine months ended March 31, 2007 compared to a net expense of $4,927,800
for the comparable period ended March 31, 2006. This decrease is primarily owing
to reparation expense which declined from $5,167,740 in 2006 versus $1,202,730
in 2007.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>NET
LOSS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>The Company recorded a net loss of $11,060,372 for the nine months
ended March 31, 2007 as compared to a loss of $19,004,252 for the nine months
ended March 31, 2006. This represents a loss per common share of $.04 for the
nine month period ended March 31, 2007 as compared to a loss per common share of
$.09 for the nine months ending March 31, 2006; based upon weighted average
common shares outstanding of 309,018,261 and 211,186,500 during the periods
ending March 31, 2007 and 2006, respectively. Approximately $4.0 million of the
decrease in the Company&#146;s net loss was the result of reparation cost in
connection with the reduction in the strike price of certain warrants and
issuance of additional shares in connection with private placements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B><I>TWELVE MONTHS ENDED JUNE 30, 2005 VS. JUNE 30,
2004</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">
Revenues. Total revenues for the year ended June 30, 2005 decreased to
$1,711,085 from $4,641,346&nbsp;for the year ended June 30, 2004. The decrease was
primarily attributable to decreased sales of the Company&#146;s POTS Splitter product
line especially during the first quarter of fiscal year 2004, caused by a
downturn of orders from one customer that orders component products from the
Company. The Company recognized $280,000 of revenue in connection with the first
sale of 1000 ports of Release 2.0 its TV+ solution to a major telecommunications
service provider in Russia. The Company continues to believe that its line of
POTS Splitter products is positioned to be competitively priced with high
reliability and connectivity, and as such has the potential to be significant
part of DSL deployment. The Company cannot predict when the demand for
telecommunication equipment will resume, however we do expect certain added
revenue in fiscal year 2006 from the completion of Release 3.0 of our TV+
solution and Broadband Loop Watch Products.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
23</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Cost
of revenues. Cost of sales was $1,446,151 for the year ended June 30, 2005 as
compared to $4,068,255 in the year ended June 30, 2004. Cost of revenues
decreased for the twelve months ended June 30, 2005 compared to the prior period
ending June 30, 2004 primarily because of decreased sales. Gross margins for the
period ended June 30, 2005 were 15.5%. The gross margins have varied
dramatically as spending among telecommunication providers has contracted,
coupled with downward pressures related to the supply and demand of
telecommunications products. The single most significant reason the margins
decreased dramatically was due to the reduced selling price of our POTS Splitter
product. Discounts, consisting of a 2% discount from the amount invoiced if paid
within 10 days were offered during fiscal year 2005<I>.</I> &nbsp;Such discounts
amounted to $1,447 for the period ended June 30, 2005, and were offered to Covad
Communication our leading telecommunications service provider customer<I>.</I>
&nbsp;Discounts were offered in fiscal 2004 to Covad Communications amounting to
2% from the amount invoiced if paid within 10 days were offered to Covad
Communications and amounted to $71,425.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Research
and Development. Research and development expenses were $5,127,438 for the year
ended June 30, 2005 as compared to $4,069,721 in the year ended June 30, 2004,
an increase of $1,057,717. Such expenditures included $3,319,280 incurred with
Lucent Technologies, Inc. for the year ended June 30, 2005 as compared to
$2,328,602 during the comparable period in 2004. In addition we incurred
$919,937 with Microphase and other strategic vendors for the year ended June 30,
2005 as compared to $99,494 during the comparable period in 2004.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;The
significant increase in research and development expenses with Lucent
Technologies, Inc. is due to the continued and accelerated development of the
TV+ product together with the extension of the $1.2 million month Development
Agreement for an additional 12 months related to the battery and power pack
product development utilizing nanotechnology and the entering into a second one
year $1.2 million Development Agreement with Lucent to develop magnetic sensor
devices also using nanotechnology. Such expenditures may increase in fiscal year
2006 since the Company&#146;s strategy is to further enhance the features and cost
reduce its TV+ and expand its product line in the Nanotechnology area.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
elimination in research expenditures incurred with GTRC is due to the Company&#146;s
refocus in development from its legacy Traverser DVDDS television delivery
platform to its TV+ product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Research
expenditures incurred with Microphase were related to the continuing development
of the Company&#146;s DSL component products, including the Company&#146;s line of POTS
Splitters and Microfilters and the Company&#146;s newest products, the Broadband
Watch.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">General
and Administrative Expenses. Selling, general and administrative expenses were
$6,579,761 for the year ended June 30, 2005 up from $4,177,961 for the
comparable period in 2004, a decrease of $2,401,800.&nbsp; The increase in the
selling, general and administrative costs was primarily the result of the
addition of a number of new employees critical to the Company&#146;s needs in
developing, marketing and selling the TV+ and NanoTechnology product lines with
Lucent.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Included
is an increase of non-cash charges relating to the issuance of common stock and
options to consultants, which totaled $2,948,083 for the year ended June 30,
2005 as compared to $1,242,793 during the comparable period in 2004. Other
components of the increase in selling, general and administrative expenses were
increases in payroll of approximately $503,000 to $1,456,000, increase in the
use of outside consultants of approximately $284,000 to $704,002, marketing
expenses such as trade shows of $118,000 to $158,000, and advertising expenses
of $68,000 to $90,000.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Depreciation
and amortization. Total depreciation for the year ended June 30, 2005 was
$227,629 of which $218,911 was charged against research and development. In
2004, total depreciation for the year ended June 30, 2004 was $649,704 of which
$613,221 was charged against research and development. As a result, depreciation
and amortization expense was $62,679 for the year ended June 30, 2005 compared
to $122,878 for the year ended June 30, 2004. This decrease of depreciation and
amortization expense totaled $60,199 is the result of reduced outlays for
capital expenditures by the Company in its two most recent fiscal years. We
expect to increase capital expenditures in connection with the deployment of
equipment at test sites with various telecommunications service providers
globally as deployment of our TV+ product progresses.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Net
loss. mPhase recorded a net loss of $11,234,324 for the year ended June 30, 2005
as compared to a loss of $7,758,586 for the same period ended June 30, 2004.
This represents a loss per common share of &nbsp;$(.10) in 2005 as compared to
$(.10) in 2004, based upon weighted average common shares outstanding of
108,657,578 and 77,677,120 during the periods ending June 30, 2005 and June 30,
2004 respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
24</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B><I>TWELVE MONTHS ENDED JUNE 30, 2004 VS. JUNE 30,
2003</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Revenues. Total revenues for the year ended June 30, 2004
increased to $4,641,346 from $1,581,639 for the year ended June 30, 2003. The
increase was primarily attributable to increased sales of the Company&#146;s POTS
Splitter product line especially during the first quarter of fiscal year ended
June 30, 2004, caused by an upturn in July and August of 2004 of orders from one
customer that orders component products from the Company. The Company continues
to believe that its line of POTS Splitter products is positioned to be
competitively priced with high reliability and connectivity, and as such has the
potential to be significant part of DSL deployment. The Company cannot predict
when the demand for telecommunication equipment will resume, however we do not
expect significant sales in the first two quarters of fiscal 2005.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Cost of revenues. Cost of sales was $4,068,255 for the year ended
June 30, 2004 as compared to $1,493,394 in the year ended 30, 2003. Cost of
revenues increased for the twelve months ended June 30, 2004 compared to the
prior period ending June 30, 2003 primarily because of increased sales. Gross
margins for the period ended June 30, 2004 were 12%. The gross margins have
varied dramatically as spending among telecommunication providers has
contracted, coupled with downward pressures related to the supply and demand of
telecommunications products. The single most significant reason the margins
decreased dramatically was due to the reduced selling price of our POTS Splitter
product. Discounts, consisting of a 2% discount from the amount invoiced if paid
within 10 days were offered during fiscal year 2004<I> .</I> &nbsp;Such
discounts amounted to $71,425 for the period ended June 30, 2004, and were
offered to Covad Communication our leading telecommunications service provider
customer<I>.</I> &nbsp;Discounts were offered in fiscal 2003 to an existing
customer to accelerate collections in connection with an order of our POTS
Splitter product and was treated as a purchase discount to each of customers,
and the reduction to net sales lowered the gross margins in the period.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Research and Development. Research and development expenses were
$4,069,721 for the year ended June 30, 2004 as compared to $3,538,305 in the
year ended June 30, 2003, an increase of $531,416. Such expenditures included
$2,328,602 incurred with Lucent Technologies, Inc. for the year ended June 30,
2004 as compared to $1,112,500 during the comparable period in 2003. In addition
we incurred $99,494 with Microphase and other strategic vendors for the year
ended June 30, 2004 as compared to $528,434 during the comparable period in
2003.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>The significant increase in research and development expenses with
Lucent Technologies, Inc. is due to the continued and accelerated development of
the TV+ product together with the entry into a $1.2 million 12 month Development
Agreement for battery and power pack product development utilizing
Nanotechnology. Such expenditures are expected to increase in fiscal year 2005
since the Company&#146;s strategy is to further enhance the features and cost reduce
its TV+ and expand its product line in the Nanotechnology area. The elimination
in research expenditures incurred with GTRC is due to the Company&#146;s refocus in
development from its legacy Traverser DVDDS television delivery platform to its
TV+ product. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Research expenditures incurred with Microphase were related to the
continuing development of the Company&#146;s DSL component products, including the
Company&#146;s line of POTS Splitters and Microfilters and the Company&#146;s newest
products, the iPOTS3.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>General and Administrative Expenses. Selling, general and
administrative expenses were $4,177,961 for the year ended June 30, 2004 up from
$2,683,534 for the comparable period in 2003, an increase of $1,494,427. The
increase in the selling, general and administrative costs was primarily the
result of the addition of a number of new employees critical to the Company&#146;s
needs in developing, marketing and selling the TV+ and NanoTechnology product
lines with Lucent.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Included is an increase of non-cash charges relating to the
issuance of common stock and options to consultants, which totaled $1,242,793
for the year ended June 30, 2004 as compared to $748,840 during the comparable
period in 2003. Other components of the increase in selling, general and
administrative expenses were increases in payroll of approximately $461,226 to
$953,602, increase in the use of outside consultants of approximately $251,103
to $987,720, marketing expenses such as trade shows of $30,148 to $40,347, and
advertising expenses of $20,439 to $21,948, all of which approximated $1,295,975
or 87% of the increase in spending.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Depreciation and amortization. Total depreciation for the year
ended June 30, 2004 was $649,704 of which $613,221 was charged against research
and development. In 2003, total depreciation for the year ended June 30, 2003
was $957, 457 of which $442, 040 was charged against research and development.
As a result, depreciation and amortization expense was $122, 878 for the year
ended June 30, 2004 compared to $515,417 for the year ended June 30 2003. This
decrease of depreciation and amortization expense totaled $392,539 and is the
result of reduced outlays for capital expenditures by the Company in its two
most recent fiscal years. We expect to increase capital expenditures in
connection with the deployment of equipment at test sites with various
telecommunications service providers globally as deployment of our TV+ product
progress.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Net loss. mPhase recorded a net loss of $7,758,586 for the year
ended June 30, 2004 as compared to a loss of $6,650,211 for the same period
ended June 30, 2003. This represents a loss per common share of $(.10) in 2004
as compared to $(.10) in 2003, based upon weighted average common shares
outstanding of 77,677,120 and 65,217,088 during the periods ending June 30, 2004
and June 30, 2003 respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>25</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify><B><I>The Outlook for the Company&#146;s Flagship Product</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company believes significant deployments and resultant revenues of its &nbsp;TV+
&nbsp;solution are not expected until the second quarter of fiscal year 2008,
which, if accompanied by a material upturn in spending in the telephone
industry, could lead to increased sales, improve the Company&#146;s margins and
provide the Company with the opportunity to become profitable.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>&nbsp;</I><B><I>Research
and Development Activities</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;mPhase
throughout its history has outsourced its research and development activity with
respect to its IPTV solution as well as its POTS splitter products. GTARC
conducted a significant amount of research and development for mPhase for the
&nbsp;DVDDS legacy product. Microphase has performed research and development
for mPhase with respect to certain component DSL products including the
Company&#146;s current new VDSL customer premises splitter, low pass filters and POTS
Splitters and the legacy DVDDS product. &nbsp;mPhase &nbsp;engaged Lucent for
initial development of &nbsp;its TV+ solution and for development of two new
products using the science of nanotechnology. Currently mPhase has transferred
development work for the TV systems software development from Lucent to
Velankani and has also engaged Magpie Insiders, Inc and Espial as significant
vendors in the development of its TV+ solution. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">For
the year ended June 30, 2006, the Company spent $1,776,800 with Lucent
Technologies, Inc. for its TV+ solution, compared to $1,584,800 for the period
ended June 30, 2005. For the fiscal 2007, the Company has shifted its
development work for the TV+ from Lucent Technologies, Inc. and Velankani
Communications System, Inc. and has also engaged Magpie Insiders, Inc. and
Espial for significant software development for the TV+ solution. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company expects to expand its research and development efforts with Lucent
Technologies with respect to its NanoTechnology business segment. For fiscal
years ended June 30, 2006, June 30, 2005 and June 30, 2004, the Company incurred
research and development expenses of $8,034,964, $5,127,438 and $4,069,721,
respectively, of which $2,500,000, $1,500,000 and $500,000, respectively,
related to its nanotechnology product line. &nbsp;&nbsp;&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B><I>Strategic
Alliances Implemented</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company has entered into Systems Integration Agreements with UKRCOM and
NetDialogue, major systems integrators and resellers in the Ukraine and Russia,
respectively, that are two key markets for the Company&#146;s IPTV solution. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Critical
Accounting Policies </B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Revenue
Recognition</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">As
required, mPhase has adopted the Securities and Exchange Commission (&#147;SEC&#148;)
Staff Accounting Bulletin (&#147;SAB&#148;) No. 101, &#147;Revenue Recognition in Financial
Statements&#148;, which provides guidelines on applying generally accepted accounting
principals to revenue recognition based upon the interpretations and practices
of the SEC. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>
Research and Development</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">
&nbsp;Research and development costs are charged to operations as incurred in
accordance with Statement of Financial Accounting Standards (&#147;SFAS&#148;), No.2,
&#147;Accounting for Research and Development Cost.&#148;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Income
Taxes</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
accounts for income taxes using the asset and liability method in accordance
with SFAS No.109 &#147;Accounting for Income Taxes.&#148; Because of the uncertainty as to
their future realizability of net operating loss carry forwards, no income tax
benefit has been recorded in the accompanying financial statements. Utilization
of net operating losses generated through March 31, 2007&nbsp;may be limited due
to &#147;changes in control&#148; of our common stock that occurred.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Stock-based
Compensation</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Financial
Accounting Statement No. 123, Accounting for Stock Based Compensation,
encourages, but does not require companies to record compensation cost for
stock-based employee compensation plans at fair value. For the periods prior to
October 1, 2005, the Company had chosen to continue to account for stock-based
compensation for grants to employees using the intrinsic method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company&#146;s stock at the date of the grant over the amount an employee must pay to
acquire the stock. The Company had adopted the &#147;disclosure only&#148; alternative
described in SFAS 123 and SFAS 148, which require pro forma disclosures of net
income and earnings per share as if the fair value method of accounting had been
applied.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
October 1, 2005, the Company adopted the provisions of Financial Accounting
Standards Board Statement No. 123R, &#147;Share-Based Payment&#148; (SFAS 123R).&nbsp;
SFAS 123R revised SFAS 123, &#147;Accounting for Stock Based Compensation&#148; and
supersedes APB Opinion No. 25, &#147;Accounting for Stock Issued to Employees.&#148; SFAS
123R requires companies to measure and recognize compensation expense for all
employee stock-based payments at fair value over the service period underlying
the arrangement.&nbsp; Therefore, the Company is now required to record the
grant-date fair value of its stock-based payments (i.e., stock options and other
equity-based compensation) in the statement of operations,&nbsp; The Company
adopted FAS 123R using the &#147;modified prospective&#148; method, whereby fair value of
all previously-granted employee stock-based arrangements that remained unvested
at October 1, 2005 and all grants made on or after October 1, 2005 have been
included in the Company&#146;s determination of stock-based compensation
expense.&nbsp;The Company accounts for non-employee stock based awards in which
goods or services are the consideration received for the equity instruments
issued based on the fair value of the consideration received or the fair value
of the equity instrument issued, whichever is more readily determinable.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
26</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Inventory
Reserve and Valuation Allowance</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company carries its inventory at the lower of cost, determined on a first-in,
first-out basis, or market. Historically, inventory consisted mainly of the
Company&#146;s POTS Splitter Shelf and Filters. As of March 31,2007 inventory consist
primarily of equipment necessary for deployment of its IPTV product line to
specifically identified customers.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Material
Related Party Transactions</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company incurs costs for engineering, design and production of prototypes and
certain administrative functions from Microphase Corporation and the purchase of
product components and finished goods, primarily consisting of DSL splitter
shelves and filters, from Janifast Limited. Directors that are significant
shareholders of Janifast Limited include Messrs Ronald A. Durando, Gustave T.
Dotoli, and Necdet F. Ergul.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Mr.
Abraham Biderman is a Managing Director or Eagle Advisers, an investment banking
firm, which has earned finder&#146;s fees equal to approximately 10% of funds raised.
During the 12 months ended June 30, 2006 and the nine months ended March 31,
2007 such fees amounted to approximately $780,000 and $465,000 respectively.
</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Mr.
Biderman beneficially owns a total of 1,587,733 shares of common stock, warrants
and options and Mr. Anthony Guerino own a relatively small amount of stock,
warrants and options in mPhase Technologies, Inc.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Mr.
Durando, the President and CEO of mPhase, owns a controlling interest and is a
director and COO of Janifast Limited. Mr. Durando and Mr. Dotoli are also
officers of Microphase Corporation. Mr. Dotoli is also a shareholder of Janifast
Limited. Mr. Ergul, the chairman of the board of mPhase, owns a controlling
interest and is a director of Microphase Corporation and is a director and
shareholder of Janifast Limited. Microphase, Janifast, Hart Telephone and Lintel
Corporation are significant shareholders of mPhase. Since inception, Microphase,
Janifast and Hart Telephone have converted significant liabilities to equity.
Management believes the amounts charged to the Company by Microphase, Janifast,
mPhase Television.Net and Hart Telephone are commensurate to amounts that would
be incurred if outside parties were used. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Since
inception, the Messers Durando, Dotoli and Smiley have periodically advanced to
the Company funds to meet short term working capital needs. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;Mr.
Durando&#146;s June 30, 2004 note payable balance of $300,000 was repaid by the
Company during fiscal year 2005. Additionally, during fiscal year 2005, Mr.
Durando made additional bridge loans to the Company evidenced by various 12%
demand notes in the aggregate of $525,000. Mr. Durando was repaid a total of
$450,000 of such loans in January of 2005. &nbsp;In addition, Mr. Durando
converted $13,954 of the principal amount of a $75,000 promissory note leaving
unpaid principal of $61,046 outstanding. Mr. Durando converted $13,000 of
accrued and unpaid interest on various promissory notes of the Company into
65,000 shares of common stock and a 5 year warrant to purchase a like amount of
common stock at $.25 per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;On
July 25, 2005, Mr. Smiley extended his 12% Promissory Note for $100,000 for an
additional year. during August of 2005 Mr. Dotoli and Mr. Smiley, the COO and
CFO and General Counsel of the Company respectively, each lent the Company
$75,000. Mr. Dotoli was repaid the principal amount of such loan, in cash, in
January of 2005 and Mr. Smiley converted his $75,000 loan into 375,000 shares of
common stock of the Company plus a 5 year warrant to purchase a like amount of
shares at $.25 per share. In January of 2005, Mr. Smiley received 425,000 shares
of common stock of the Company as additional compensation for services
performed. In June of 2005 Mr. Smiley converted his $100,0000 12% Promissory
Note plus accrued interest &nbsp;into 520,000 shares of common stock plus a 5
year warrant to purchase 520,0000 shares of common stock at $.25 per share. In
addition, Mr. Smiley converted $9,975 of accrued interest into 49,875 shares of
common stock plus a 5 year warrant to purchase a like amount of shares at $.25
per share. Finally Mr. Smiley received 25,000 additional shares of common stock
as a market adjustment to his equity investment of $25,000 on August 30, 2004.
</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">During
the nine month period ended March 31, 2006 Mr. Durando, Mr. Dotoli and Mr.
Smiley advanced $50,000, $100,000 and $150,000 respectively in the form of
Bridge Loans to the Company. Mr. Durando and Mr. Smiley&#146;s loans were repaid in
full without any interest and Mr. Dotoli&#146;s loan was repaid, in full, with 12%
accrued interest during the third quarter of fiscal year 2006. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
addition, at various points during the nine months ended March 31, 2007, Messrs,
Durando, Dotoli and Smiley provided $490,000 in bridge loans to the Company
which was evidenced by individual promissory notes. During December 2006, Messrs
Durando and Dotoli agreed to convert their notes, in the amounts of $130,000 and
$200,000 respectively, to a deferred compensation arrangement, the repayment
terms of which have not been specified. Mr. Smiley has extended bridge loans to
the Company of $160,000, evidenced by promissory notes for $101,000 and a
$60,000 note with a 12% rate of interest. Both of the foregoing promissory notes
are payable on demand.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
27</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>Significant charges from related parties are summarized for the
periods enumerated as follows:</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=center width="60%" colspan="5">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Year Ended June 30,</B></P></TD>
    </TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2002</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2003</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2006</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Charges
      incurred with Janifast Ltd. included in:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cost
      of sales and ending inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;$1,759,308</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$178,959 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$2,771,925 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,536,494 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$895,991</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Total
      Janifast</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;$1,759,308</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$178,959 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$2,771,925 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,536,494</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$895,991</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Charges
      incurred with Microphase Corp included in:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cost
      of sales and ending inventory (Including Royalties) </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$200,440 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$86,468 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$140,123 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$94,740 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$32,014</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>876,074</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>428,434</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>84,494</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>60,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>197,639</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>136,080</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>133,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>231,068</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>304,030</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>302,167</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Total
      Microphase Corp.</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;$1,212,594</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$648,102 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$455,685 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$458,770 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$531,820</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Total
      Charges with Related Parties included in:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Cost
      of sales and ending inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;$1,959,748</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$265,427 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$2,912,048 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,631,234 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$928,005</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>940,113</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>428,434</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>84,494</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>60,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>197,639</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>136,080</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>133,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>231,068</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>304,030</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>302,167</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">Total
      Charges with Related Parties Included in Cost of Sales in the Consolidated
      Statement of Operations (including changes in inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;$3,035,941</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$827,061 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$3,227,610 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,995,264 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,427,811</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Liquidity
and Capital Resources</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">From
inception (October 2, 1996) through March 31, 2007 and June 30, 2006 the Company
has incurred cumulative (a) development stage losses and has an accumulated
deficit of $162,520,429 and $151,460,057 respectively and (b) negative cash flow
from operations of $73,398,128 and $67,257,660 respectively. The auditors report
for the fiscal year ended June 30, 2006 includes the statement that there is
substantial doubt of the Company&#146;s ability to continue as a going concern.
Management estimates that the Company needs to raise approximately $5-10 million
during the next 12 months to continue operations. As of March 31, 2007, June 30,
2006, and June 30, 2005, the Company had a negative net worth of $2,634,400,
$606,085 and $1,617,735 respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">At
June 30, 2006 mPhase had working capital deficit of $1,093,784 as compared to a
working capital deficit of $1,674,419 at June 30, 2005. At June 30, 2006, the
Company had $1,359,925 of cash and cash equivalents and $106,237 of net accounts
receivables to fund short-term working capital requirements. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;At
March 31, 2007, the Company had a working capital deficit of $3,011,440, and
$315,055 of cash and cash equivalents to fund short- term working capital
requirements. Cash used in operating activities was $6,730,469 during the nine
months ending March 31, 2007. The cash used by operating activities principally
consists of the net loss of $11,060,372, offset in part by changes in assets and
liabilities, including an increase in accounts payable of $1,049,017, conversion
of debt to equity of $909,294, non-cash charges of $1,124,647 for common stock,
options and warrants issued for services and non-cash reparation charges of
$1,202,730. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company&#146;s ability to continue as a going concern and its future success is
dependent upon its ability to raise capital in the near term to: (1) satisfy its
current obligations, (2) continue its research and development efforts, and (3)
the successful wide scale development, deployment and marketing of its products.
Historically, mPhase has funded its operations and capital expenditures
primarily through private placements of common stock and warrants.
&nbsp;&nbsp;Management expects that its near term financial needs will be
provided by similar financing activities supplemented by sales of its IPTV
products during the last half of calendar year end 2007.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
28</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Significant
Contracts, Debt Conversions and Contingencies</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company had entered into various agreements with GTARC, pursuant to which the
Company received technical assistance in developing the Digital Video and Data
Delivery System. The Company has incurred expenses in connection with technical
assistance from GTARC totaling approximately $13,539,932 from the period from
inception through June 30, 2006. This arrangement has since been terminated.
</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
February of 2004, the Company and GTRC entered into a final agreement to convert
approximately $1.8 million in payables outstanding to GTRC and exchange mutual
releases in consideration for the issuance to GTRC of a Warrant (which has been
exercised on a cashless basis in February of 2005) resulting in the issuance of
4,949,684 shares of the Company&#146;s common stock valued at $.35 per share. In
addition the Company was obligated to pay GTRC a total of $100,000 in quarterly
installments payments commencing at the end of March of 2004. The Company has
discontinued its efforts with respect to the Traverser DVDDS product line and is
evaluating the need to protect patents. mPhase is the sole, worldwide licensee
of the technology developed by GTARC and should a viable commercial product ever
be developed , GTRC may receive a royalty of up to 5% of product sales. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">During
the fiscal year ended June 30, 2002 certain strategic vendors and related
parties converted approximately $2.7 million of accounts payable and accrued
expenses into 7,492,996 shares of the Company&#146;s common stock and 5,953,490
warrants. Such vendors include Microphase Corporation, Janifast, Ltd., and Piper
Rudnick LLP, mPhase&#146;s outside counsel.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">During
the twelve months ending June 30, 2003, certain strategic vendors and related
parties converted approximately $1.9 million of accounts payable and accrued
expenses into 5,923,333 shares of the Company&#146;s common stock and warrants to
purchase 3,706,800 shares of common stock of mPhase.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;During
the twelve months ending June 30, 2004, certain strategic vendors and related
parties converted approximately $1.9 million of accounts payable and accrued
expenses into 110,467 shares of the Company&#146;s common stock and warrants to
purchase 5,069,242 shares of common stock of mPhase.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the twelve months ending June 30, 2005, certain strategic
vendors and related parties converted approximately $1.2 million of accounts
payable and accrued expenses into 3,895,171 shares of the Company&#146; s common
stock and warrants to purchase 4,616,571shares of the Company&#146;s common stock.
&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;During
the twelve months ended June 30, 2006 certain strategic vendors and related
parties converted approximately $590,000 of accounts payable and accrued
expenses into 3,336,864 shares of the Company&#146;s common stock and&nbsp;warrants
to purchase 3,277,778 shares of common stock of mPhase.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the nine months ended March 31, 2007, the Company converted
accounts payable of $909,294 into 5,617,062 shares of common stock.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>As of March 31, 2007, mPhase was obligated to pay Lucent
Technologies, Inc. $200,000 for work performed in connection with the
development of its Nanotechnology product line. The Company has incurred expense
relative to such research with Lucent totaling &nbsp;&nbsp;a approximately
$1,600,000 in the nine month period ended March 31, 2007. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Other significant contractual obligations require the Company to
pay Magpie Telecom Insiders Inc, $265,000 related to the development of its TV+
product. This contract expired in January 2007 and involved total research
expense of $910,000 for the nine months ended March, 31 2007 of which $415,000
was paid by the issuance of 2,441,176 shares of common stock valued at $.17 per
share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>In addition, the Company had an agreement with Velankani
Information Systems to further develop its TV+ product. During the nine months
ended March 31, 2007, the Company incurred research expense of $896,957 of which
$239,294 was paid by the issuance of 1,407,617 shares of common stock valued at
$.17 per share. The Company owed Velankani $342,802 as of March 31, 2007. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Finally, the Company has a support, licensing and upgrade
agreement with Espial Group relating to the TV+ system, extending to December
31, 2008. This contract involves payments totaling $1,172,000 of which $514,000
will be due after March 31, 2007 in calendar year 2007, and $250,000 is due in
2008.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company has no commitments from affiliates or related parties to provide
additional financing. The Company has, from time to time, been able to obtain
financing from affiliates when conditions in the capital markets make third
party financing difficult to obtain or when external financing is available only
upon very unattractive terms to the Company, and when such capital has been
available from the affiliates. As a result, conversions of Debt with related
parties and strategic vendors during the periods enumerated is a follows:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
29</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right"><BR></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0" height="317">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" colSpan=2 height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B>For the Nine Months</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" colSpan=2 height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B>Ended March 31,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" colSpan=3 height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B>For the Years Ended June 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" colSpan=2 height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B>(Unaudited)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Related
      Party Conversions</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,259,879</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>830,769</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Number
      of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,259,879</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Amount
      converted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$651,976</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$540,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$540,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$108,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Strategic
      Vendor Conversions</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>110,467</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>635,296</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>331,864</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>331,864</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>4,786,293</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Number
      of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>5,069,242</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>1,356,696</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>277,778</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>277,778</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Amount
      converted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,963,202</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$926,894</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$50,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$50,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$801,294</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Totals</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>110,467</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,895,175</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,331,864</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,331,864</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>5,617,062</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Number
      of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>5,069,242</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>4,616,575</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,277,778</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>3,277,778</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Amount
      converted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,963,202</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$1,578,870</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$590,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$590,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$909,294</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="19">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="19">
      &nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"><B>Gain
      on extinguishment of Debt</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$150,058</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$418,696</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$30,608</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$30,608</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="12%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Effective
March 10, 2005, the Company entered into a Development Agreement with Lucent
Technologies, representing a total obligation of $1.2 million payable in 12
monthly installments of $100,000 each through March of 2006 for development of
an ultra cool magnetometer sensor utilizing the science of nanotechnology. This
agreement was also renewed in May of 2006 through March of 2007 upon the same
terms. The Company is currently in negotiations with the Bell Labs division of
Lucent to extend this agreement for an additional 12 months.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Effective
November 28, 2004 and September 2, 2004, the Company entered into software
development agreements with Espial and Magpie respectively calling for the
payments of $95,000 and $312,000 in connection with development of Version 3.0
of its TV+ system. Effective September 2, 2004, the Company became obligated to
pay Lucent Technologies Inc. a total amount of $1.2 million for development of
Version 3.0 of its TV+ product. Such amount is payable in 8 installments of
$158,600 each against 7 project milestones all of which are expected to be
completed during fiscal year 2005.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Effective
February 3, 2004, the Company became obligated to pay a total of $1.2 million to
Lucent Technologies Inc. under a new Development Agreement in installments of
$100,000 per month for a period of 12 months to develop a micro power source
array using nanotextured superhydrophobic materials This Agreement was extended
in February of 2005 for an additional 12 months for a total of $1.2 million to
Lucent Technologies, Inc. payable in installments of $100,000 per month. An
interim Agreement, on similar terms extended such Development Agreement through
April 27, 2006. On June 8, 2007, the Company entered into a new 12 month
Development Agreement through May of 2008 with Bell Labs that obligates the
Company to pay a total of $1.2 million.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Effective
August 30, 2004, the Company successfully renegotiated its payment agreement
originally entered into in March of 2002 with Piper&amp;Rudnick LLC, its outside
counsel to cure all past arrearages owed under the original payment agreement.
On August 30, 2004, the Company paid Piper &amp; Rudnick LLC the sum of $100,000
cash and agreed to make future payments of $25,000 each on December 1, 2004,
March 1, 2005, June 1, 2005, September 1, 2005 with a payment of $50,000 on
December 1, 2005 and payments of $25,000 each on March 1, 2006, June 1, 2006,
September 1, 2006 and a final payment of $75,000 on December 1, 2006. The
Company is current with respect to its payments under this agreement. In
addition, the Company issued a 5 year cashless warrant for 750,000 shares of its
common stock valued at $.25 per share. The common stock in which such warrant is
convertible into is being registered hereunder on this Form S-1 (See Selling
Shareholders list) and could be sold in the open market (see Risk Factor on Page
8 hereof). In addition, Piper Rudnick LLC holds a cashless warrant covering
2,833,490 shares of its common stock that was originally issued as part of its
original payment agreement in March of 2002 which shares are being registered as
part of this Registration Statement filed on form S-1 by t;he Company (see
Selling Shareholders).</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Effective February 18, 2004 of fiscal year ended June 30, 2004,
GTRC agreed to convert approximately $1.8 million of aggregate invoices for work
performed for the Company in development of its TraverserDVDDS product into a 5
year cashless warrant to purchase 5,069,200 shares of the Company&#146;s common stock
or stock valued at $.35 per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the fiscal years ended June 30, 2002 and 2003 the Company
was able to negotiate extended payment terms for overdue accounts payable with
strategic vendors. These obligations are now classified as notes payable and
included in current and long-term portions of notes payable in the accompanying
balance sheets, based upon the revised payment terms. The Company believes they
can maintain its present repayment schedule, or otherwise renegotiate such terms
that are satisfactory to the Company and these vendors.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>30</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
have evaluated our cash requirements for fiscal year 2007 and beyond based upon
certain assumptions, including our ability to raise additional working capital
from equity financing and increased sales of our POTS Splitter. The Company
anticipated that it would need to raise, at a minimum, approximately $10 million
primarily in private placement of its common stock with accredited investors, in
the next year. As of March 31, 2007, the Company has raised during the current
fiscal year approximately $3,632,534 through the issuance of 25,643,608 shares
of common stock through private placements and the exercise of warrants </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>RECENT TRANSACTIONS AFFECTING EQUITY </B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "><B>Private
Placements</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the quarter ended September 30, 2006, the Company issued
6,780,716 shares of its common stock together with 5,555,556 of &nbsp;5 year
warrants to purchase one share each of the Company&#146;s common stock, with an
exercise price of $.18 per share in private placements generating net proceeds
of $1,104,000.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the quarter ended December 31, 2006, the Company issued
6,622,223 shares of its common stock together with 5 year warrants to purchase
1,388,889 of &nbsp;&nbsp;the Company&#146;s common stock, with an exercise price of
$.18 per share in private placements generating net proceeds of $833, 866.
Included in these amounts are finders fees paid in cash and 566,667 additional
shares of common stock.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the quarter ended March 31, 2007, the Company issued
14,973,083 shares of its common stock. Private placements generating net
proceeds of $1,787,850; included in this amount is an estimate of finders fees
to be paid of $198,650.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Warrant
Exercise</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the quarter ended September 30, 2006, the Company issued
138,889 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $25,000 to the Company.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the quarter ended December 31, 2006, the Company issued
12,101,780 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $1,669,668 to the Company. In addition, the Company
issued to certain investors new 5 year&nbsp;warrants to purchase
11,111,112 of the Company&#146;s common stock, with exercise prices ranging from $.15
- $.18 per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the quarter ended March 31, 2007, the Company issued
2,500,000 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $375,000 to the Company. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Stock
Options and Warrants Issued for Services.</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the nine months ended March 31, 2007, the Company
authorized the issuance of 4,015,000 in options and warrants of 2,044,440 to
employees, officers, and consultants granting the right to purchase a like
amount of common shares. Pursuant to the adoption of FAS 123(R), the Company
recognized an expense in the amount of $785,259, all of which has been included
in general and administrative expense. The fair value of options granted was
estimated as of the date of grant using the Black-Scholes stock option pricing
model, based on the following weighted average assumptions: annual expected
return of 0%, annual volatility of approximately 80%, based on a risk-free
interest rate of 4.8% and expected option life of 5 years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the nine months ended March 31, 2007, the Board of
Directors authorized the issuance of 1,822,933 shares of common stock, with an
aggregate value of $339,388 as compensation to consultants and employees. The
stock value ranged in price from $.17 to $.20 per share, the fair value on the
date of the awards.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Other
Equity Transactions</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>During the nine months ended March 31, 2007, the Company converted
accounts payable of $909,294 into 5,617,062 shares of common stock.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>In addition, during the nine month period ended March 31, 2007,
the Company became obligated to issue 11,007,819 of its common stock as
reparation to affect revised pricing on previous private placements. This
additional consideration was afforded to past investors who agreed to make an
additional cash investment as part of a new private placement. The cost of such
consideration was estimated to be the fair value of such shares at the time of
the investment $1,202,730. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>31</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="center"><B>Subsequent
Events</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company&#146;s current low levels of liquidity have required that payments of
accounts payable to vendors, including research partners, be extended beyond
terms. &nbsp;The Company is actively engaged in negotiations with several
vendors to work out an equitable restructure of payment terms and/or conversion
of such debt into equity. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">
Subsequent to March 31, 2007, the Company has sustained operations primarily
through the issuance of common stock in Private Placement Agreements pursuant to
Regulation D of Rule 506 of the Securities Act of 1933, as amended with
Accredited Investors. Since March 31, 2007 the Company has raised approximately
$2.5 million under such agreements and issued in excess of 19.4 million shares
of its common stock. In addition, pursuant to the terms of these agreements, the
Company issued approximately 22.5 million shares to certain investors as
reparation shares so as to reduce investors past cost per share and encourage
additional investment. The proceeds of the Private Placement will be used for
research and Development payments to vender and working capital. On June 26,
2007 Messrs. Dotoli and Durando provided temporary working capital in the amount
of $160,000 which was repaid on July 5, 2007.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company also approved various incentive compensation arrangements with employees
and consultants involving the issuance of common stock and the granting of
options to purchase such stock. In total, 12,150,000 of common shares with an
estimated value of $1,822,000 and 2,600,000 options with an estimated value
$230,000 of were issued under such program. Included in this amount were grants
to the Messer&#146;s Durando, Dotoli and Smiley of 4,000,000, 3,000,000 and
1,750,000 of restricted shares of common shares respectively for which an
expense has been incurred of approximately $1,312,000. The exercise price of
options granted ranged from $.20 to $.25 cents per share.
<font FACE="Times New Roman" size="2">In addition, the Company has incurred
since March 31, 2007, and additional $172,541 in legal expenses in connection
with the civil suit filed by the SEC on November 15, 2005 against Packetport.com,
Inc and others (See Page 41 &quot;Legal Proceedings&quot;). </P>
</font>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">
<font size="2">On July 6, 2007, the Company announced that it had executed with
Double U Master Fund, L.P, a limited partnership organized under the laws of the
British Virgin Islands, a Private Equity Credit Agreement for an aggregate of up
to $6 million in financing through the sale, from time to time of the common
stock of mPhase at a 14% discount to its market value (determined as a set forth
in the Private Equity Credit Agreement). The terms of the agreement provide that
mPhase will have the option to &nbsp;&#147;PUT&#148; up to $300,000 of its common stock to the
Partnership per month upon the effectiveness of a Form S-1 Registration
Statement covering such shared of common stock to be filed by the company in the
near future. mPhase is not obligated to draw any minimum amount of money under
the Private Equity Credit Agreement.</font></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center><B>BUSINESS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=center>Overview</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
develop market and sell innovative IPTV and DSL broadband telecommunications
solutions. Our main focus is developing the most cost effective products to
enable telecommunications service providers to deliver &nbsp;using internet
protocol digital quality television (together with data and voice) over its
existing infrastructure that may consist of copper, fiber, coax or some
combination thereof. The primary markets for mPhase&#146;s television delivery
products are regions of the world outside of the United State that do not have
coaxial fiber infrastructure capable of delivering a large number of digital
broadcast television channels. Therefore our television products are targeted
primarily for International markets outside of the United States.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
February 3, 2004, mPhase entered into the emerging area of NanoTechnology as a
new and second line of business with its execution of a new Research and
Development Agreement with the Bell Labs division of Lucent Technologies, Inc.
NanoTechnology involves the synthetic assembly of new structures and materials
at the molecular level. NanoTechnology has many potential applications including
in industries such as biotechnology, semi conductors and power cells and
sensors. The Company is initially focusing its efforts in developing new power
cells and sensors NanoTechnology products designed for military
applications.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Outsourcing</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company practices an outsourcing model whereby it contracts with third party
vendors to perform certain functions rather than performing those functions
internally. For instance, mPhase out sources its research of &nbsp;its TV+
product to several major vendors including Velankani Telecommunications,
Bitband, Magpie Insiders, Inc and Espial. The Company also outsources
exploratory research of micro electro mechanical systems development and its
exploratory development of power source array fabrication using nanotextured
superhydrophobic materials to the Bell Labs division of Alcahtel Lucent . It
also out sources analog engineering development and certain administrative
functions to Microphase Corporation and manufacturing of its new VDSL customer
premises splitter product to Janifast Ltd.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
currently have no contracts in place for the manufacturing of our products with
either Microphase Corporation or Janifast Ltd. or any other non-affiliated third
party manufacturers. It is anticipated that we will &nbsp;receive a royalty
&nbsp;that is presently being negotiated as a percentage of gross revenues based
upon the sales of quantities of the new VDSL customer premises splitter product
that will be made by Janifast Ltd.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">With
respect to manufacturing of its IPTV TV+ solution, mPhase has contracted with
outside software vendors for product development with which it can establish
long-term relationships. By using outside vendors, mPhase believes it can
accelerate its time to market as well as avoid the substantial hiring of
internal personnel required for internal production. With respect to its
Nanotechnology product line, mPhase utilizes the extensive research and
development facilities of bell labs which would otherwise not be available to
mPhase owing to the high capital cost as well as long lead time necessary to
establish such facilities.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company has entered into various Project Development Agreements during fiscal
year 2007 with Velankani, Espial and Magpie Telecom Insiders, Inc. for
development of portions of its TV+ middleware .</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Industry
Background</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company believes there is a significant market for its latest TV+ solution for
the delivery of IPTV. Telephone companies worldwide need to deliver a
combination of services (i.e., voice, television and data) in order to reverse
negative economic trends of reduced margins and customers. The multichannel
television business is a growing industry. Much of the world is largely
underserved, with little access to digital television programming. Cable,
outside the US and pockets of Europe, is in the early stages of deployment. The
mPhaseTV+ solution empowers telecommunications service providers to (a)
capitalize upon this growing revenue-generating segment and (b) be able to
compete more effectively with other technologies, such as cable where installed,
and direct broadcast satellite (DBS) services.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
32</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>We believe the incentive for telephone companies to deploy
advanced digital services is significant. The traditional revenue model for
telecommunications service providers is shifting as fixed line calling revenues
are continuing to decline with the advent of wireless telephony and voice
delivered over the Internet. Traditional telephone companies can no longer rely
on a captured market and need to offer new, revenue-generating services in order
to maintain or increase profitability and by offering new services to their
customers.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Cable
television providers are also beginning to offer cable telephony and cable
modems for high-speed Internet service, in addition to their traditional
multichannel television services. Additionally, in the U.S., direct broadcast
satellites providers (DBS) are upgrading to two-way satellite communication to
provide data services. In more advanced markets, these technologies have
converged, leaving telephone, cable and direct satellite television providers
competing for the same customers and the same dollars.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">
mPhase&#146;s
flagship TV+ solution enables telephone companies and other communications
service providers utilizing twisted pair telephone wires or any other existing
infrastructure to respond to these competitive threats and immediately offer
fully integrated broadband service packages to their subscribers. Importantly,
with mPhase&#146;s products, telecommunications service providers are able to compete
with cable and satellite providers in the high-margin multichannel digital
television market. mPhase&#146;s product solution do not require a capital-intensive
fiber nor cable build- out, long lead times, or a technically challenging
deployment. Instead, utilizing their already installed telephone line
infrastructure, telephone companies can increase their per subscriber revenue,
capture additional market share, stave off competition and ultimately increase
their overall market valuation by becoming full-service communications providers
today.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Incumbent
telecommunications service providers will have an opportunity to preempt wide
digital cable or satellite adoption that deploy mPhase&#146;s IPTV solution and
become market leaders in providing data and video services. Most
telecommunications companies and industry analysts currently understand that
data-only solutions are not sufficient to attract new customers, retain existing
ones, and maintain or achieve profitability.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Our
IP Television Solution</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
markets and sells its innovative IPTV delivery middleware/software as part of
its TV+ solutions. The Company has refocused its efforts on IPTV
software/middleware based upon carrier class open standards. Originally the
Company&#146;s development of solutions for delivery of broadcast TV for telephone
service providers was &nbsp;an end to end &nbsp;DSL proprietary
hardware/software &nbsp;product line or our legacy Traverser DVDDS product. Our
current TV+ solution is middleware necessary for &nbsp;the delivery of IPTV,
voice and high-speed interned over any type of infrastructure of a
telecommunications service provider. mPhase has &nbsp;initially developed its
TV+ solution for telephone companies in parts of the world where access to
multi-channel television is limited. As additional robust features required by
major U.S. carriers are added through additional development work on the IPTV,
the Company plans to target such carriers as strategic partners and
customers.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
introduced its first TV over DSL product, the Traverser Digital Video and Data
Delivery System, (DVDDS) in 1998. The DVDDS, is an end-to-end system based upon
proprietary technology developed in conjunction with Georgia Tech Research
Corporation. Because it is an end-to-end video-over-ADSL (asymmetric digital
subscriber line) equipment. The proprietary transport method utilized in the
Traverser System is patent protected. The intellectual property embodied by the
DVDDS System includes the ability to deliver a plurality of channels to a
plurality of users, ensuring that all channels are available to all users at all
times. The Company has replaced this legacy product with its newer TV+
solution.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">As
of December 30, 2006. the Company is testing for deployment in Ukraine, its IPTV
solution or Release 6.0 of its TV+ solution. Over the years, the Company has
spent over $30 million on research and development culminating in the IPTV
product and believes it has significant experience and market knowledge in the
field as a result of over 7 years of development efforts, changing market
conditions and new technology developments in connection with Internet Protocol
delivery of video.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Bell Labs and mPhase initially commenced research on the TV+
solution in December of 2002 as a compliment to and enhancement of the software
and set top boxes needed to delivery television over DSL using the Lucent
Stinger DSLAM. Bell Labs had previously been working in a contract engineering
capacity helping mPhase to cost-reduce its digital set top box. In May of 2006,
the Company transferred the systems integration and development work for its
IPTV middleware to Velakani and expanded the work of Magpie Telecom Insiders,
Inc and Espial in connection with such development.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
believe that the TV+ solution is now &nbsp;the most reliable, scaleable and
cost-effective system for the delivery of television services over copper
telephone wires. For mPhase, the TV+ solution marks a shift in strategy from
selling a complete, proprietary platform to providing an industry-standard,
carrier class middleware for the deployment of IPTV by telecommunications
service providers.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Releases
1.0 and 2.0 of the TV+ solution were designed by Bell Labs &nbsp;as ATM
(asynchronous transfer mode) solutions then targeted to the traditional
reliability and use of such protocol by the majority of telecommunications
service providers. Subsequent releases of the TV+ solution marks the final
evolution of the IP based solution ideally suited for large-scale deployments,
and in parts of the world that cannot afford the cost of upgrading to cable
infrastructure.</P>
<p style="font-size: 10pt; color: #000000; text-indent: 0pt; margin-left: 0pt; padding: 0pt" align="right">
33</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>NanoTechnology</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
has recently entered the business of NanoTechnology which represents the latest
scientific area involving the disciplines of molecular engineering, quantum
physics and electrochemistry, amongst others to create new advances in products.
mPhase is currently focusing primarily upon exploratory research for the
development of advanced battery and power cell products and Electro Mechanical
Sensor for a new generation of sensors for military applications.<BR><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Business
Development, Organization, and Acquisition Activities</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
were incorporated in New Jersey in 1979 under the name Tecma Laboratory, Inc. In
1987, we changed our name to Tecma Laboratories, Inc. As Tecma Laboratories,
Inc., the Company has primarily engaged in the research, development and
exploitation of products in the skin care field. On February 17, 1997, we
acquired Lightpaths, Inc., a Delaware corporation, which was engaged in the
development of telecommunications products incorporating DSL technology, and we
changed our name to Lightpaths TP Technologies, Inc.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>On January 29, 1997, we formed another wholly-owned subsidiary
called TLI Industries, Inc. The shares of TLI were spun off to our stockholders
on March 31, 1997 after we transferred the assets and liabilities, including
primarily fixed assets, patents and shareholder loans related to the prior
business of Tecma Laboratories. As a consequence of these transactions, we
became the holding company of our wholly owned subsidiary, Lightpaths, Inc. on
February 17, 1997.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
June 2, 1997, we completed a reverse merger with Lightpaths TP Technologies,
Inc. and changed our name to mPhase Technologies, Inc.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
June 25, 1998, we acquired Microphase Telecommunications, Inc., a Delaware
corporation, by issuing 2,500,000 shares of our common stock. Microphase
Telecommunications&#146; principal assets were patents and patent applications
utilized in the development of our proprietary Traverser technology (as
discussed in related footnote 11 of financial statements on P F-35). See also
&#147;Material Related Party Transactions,&#148; contained with &#147;Critical Accounts
Policies&#148; on P 27 and &#147;Certain Relationships and Related Transaction&#148; P 51.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>In March 2000, we entered into a joint venture with Alphastar
International, Inc. to form a company called mPhase Television.net, Inc.,
(mPhaseTV) in which we held a 50% interest. On May 1, 2000, we acquired an
additional 6.5% interest in mPhaseTV, and made it one of our consolidated
subsidiaries.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
March 14, 2000, we entered into an agreement with BMW Manufacturing Corp.,
located in South Carolina. Under the agreement, we installed version 1.0 of the
Traverser for BMW&#146;s telephone transmission network. BMW has agreed that, upon
its notice and consent, we will be able to demonstrate to potential customers
the functioning system at BMW&#146;s facilities. BMW has made two (2) subsequent
purchases increasing the size of its deployment to 48 unique units.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Our flagship installation, Hart Telephone, has completed the build
and development of its digital headend during fourth quarter of 2001. The
completion of their digital headend marks the move from beta to commercial
deployment of the Traverser platform. Hart currently has approximately 70
customers receiving about 80 channels of television services.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
May of 2002 mPhase initiated discussions for development of a cost-reduced
intelligent network interface (INI) set top box with the Bell Laboratories
division of Lucent Technologies, Inc.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Effective
December 1, 2002, mPhase entered into a Development Agreement with the Bell
Laboratories division of Lucent<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Technologies,
Inc. for the development of mPhase&#146;s broadcast television switch (BTS) as an
integrated platform with the Lucent Stinger DSL Access Concentrator.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
December 9, 2002, pursuant to a Statement of Work, Lucent commenced development
of the BTS for mPhase.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
December 15, 2003, mPhase engaged Lucent for the cost-reduction of its Traverser
INI set top box.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
January 21, 2003, mPhase entered into a Co-Branding Agreement with Lucent under
which mPhase&#146;s INI set top box will be co-branded with the Lucent Technologies,
Inc. name and logo.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
34</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">On
April 4, 2003, mPhase entered into a Systems Integration Agreement with Lucent.
Under the terms of the agreement, mPhase has been given the exclusive right to
sell worldwide a &#147;bundled&#148; solution consisting of mPhase BTS and the Lucent
Stinger.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
May of 2003, mPhase has announced development of the mPhaseTV+ Platform with
Lucent Technologies&#146; Bell Labs. This modular product, as described in the &#147;Our
Solutions&#148; section earlier, utilizes the industry-standard Lucent Stinger for
transport. Bell Labs has been design contracted to design the mPhase BTS and
Traverser CPE to be used in conjunction with the Lucent Stinger. A redesigned
cost reduced second generation set top box CPE equipment has been completed. A
prototype version of the BTS is also completed and has been successfully tested
with 3 customers at Hart telephone in July of 2003. The first version of our TV+
product is scheduled to be completed during the second quarter of fiscal year
2004.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
November of 2003, mPhase announced that it had entered into a $1.0 million
Project Development contract with Lucent Technologies&#146; Bell Labs division to
complete development of Version 1.0 of its TV+ solution by the summer of
2004.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
February of 2004, mPhase announced that it had entered into a $1.2 million
Project Development contract with Lucent Technologies&#146; Bell Labs division to
perform exploratory research and development of micro power source arrays
fabricated using nanotextured, superhydrophobic materials.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
September of 2004, mPhase announced that it had entered into a new $1.2 million
Project Development contract with Lucent Technologies&#146; Bell Labs division to
develop Version 3.0 of the TV+ solution centered around a new &#147;Video Soft
Switch&#148; enabling the delivery of broadcast television, high speed internet and
voice over an new IP based system with an open standards architecture.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
November of 2004, mPhase announced the selection by Lucent Russia to deploy
1,000 ports of mPhase&#146;s TV+ solution to a telecom services company in the far
eastern region of Russia that is one of 7 regional mega communications service
providers.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
February of 2005 and March of 2005 respectively, mPhase extended its Project
Development Agreement with the Bell Labs division of Lucent Technologies Inc.
covering its power cell product for an additional 12 months at a cost of $1.2
million and also entered into a new 12 month Project Development Agreement for
development of its new MEMS based Magnetometer sensor product. Such contracts
are in the process of being extended of an additional 12 months.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Our
revenue, historically, has been derived from sales of component telephone
equipment parts, the majority of which has come from our sales of POTS Splitter
Shelves. In our fiscal years ended June 30, 2004, 2005 and 2006 respectively, we
generated $4,641,346, &nbsp;$1,711,085 and $975,482 in revenue, respectively,
and losses of $7,797,469, $11,504,944, and $19,233,716, respectively, from the
commercial sale of our component products. Our other component products,
including Filters and Central Office POTS Filter Shelves, are marketed to other
DSL equipment vendors. We do not believe that the sales of our TV+ feature
product will be materially impaired by the sale of these component products to
these potential competitors.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
is in the process of evaluating a full range of contract manufacturers,
including manufacturers outside of the U.S. We believe that there are many
qualified manufacturers around the world. mPhase is likely to contract with
multiple companies depending on which countries the TV+ product is deployed and
depending upon cost-competitiveness.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Our
Products &amp; Services</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">To
date mPhase&#146;s revenue has been derived almost exclusively from sales of DSL
component telephone equipment parts, the majority of which has come from our
sales of POTS Splitter Shelves. We received an order for a test of our TV+
solution from a major telecommunications service provider in Ukraine, that
subject to an acceptance test expected to be completed in June or July of 2007
may result in the deployment of approximately 6,000 customers by a major
telecommunications provider in the Ukraine.mPhase supplies the
telecommunications industry with products designed to enable, enhance or support
broadband DSL services such as its new VDSL customer premises splitter. The
Company is currently focused upon sales of its flagship TV+ middleware solution
in connection with deployments by telecommunications service providers globally
of IPTV.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>History
of the IPTV+ Solution</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;Our
IPTV solution has been developed by the Company and various outsourcing
&nbsp;institutions and companies over a period in excess of 8 years. Our legacy
DVDDS system was developed by Georgia Tech Research Institute which was a
proprietary end to end system of software and hardware designed to delivery over
copper telephone lines broadcast quality television, high-speed internet and
voice. The system consisted of equipment located at &nbsp;central offices of
telecommunications service providers, customer premises (a set top box). The
system downloaded television content from a head end and compressed such content
into native MPEG-2 digital format for transmission over fiber to various central
office of a telecommunications service provider. The system enabled the provider
to transmit over existing copper telephone lines from the central office to the
home broadcast television, voice and high-speed internet. In fiscal year 2003
the Company engaged the Bell Labs division of Lucent Technologies to cost reduce
the set top box portion of the DVDDS. &nbsp;The Company together with Bell Labs
teamed together to create an industry-standard, high quality and cost effective
television over DSL platform known as the mPhaseTV+ solution. Releases 1.0 and
2.1 of this solution consists of three key elements: &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
35</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; PADDING-TOP: 0pt" align="justify"><BR></P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">1.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">The
mPhase BTS (broadcast television switch) layer interfacing the video headend and
the DSLAM (Digital Subscriber Line Access Multiplexer);</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">2.
</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">The
Lucent&#146;s Stinger DSL Access Concentrator, a field-tested central office (CO)
piece of equipment which provides DSL connections to individual customers;
and</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">3.
</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">mPhase
CPE (Customer Premises Equipment), a highly integrated set top box to deliver
video in the home environment from the DSL link.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Together
with a digital video headend &nbsp;and the Lucent Stinger, the Versions 1.0 and
2.0 of the TV+ solution provide an ATM (asynchronous transfer mode) based
end-to-end solution for customers wanting to provide television and high-speed
data services over their existing copper infrastructure. Based on a streamlined,
modular architecture, future upgrade, additional features and ancillary services
can be implemented without major modifications to the entire system.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;In
2004 and 2005, it became evident that the market for delivery of broadcast
television by telecommunications service requirements required a system that
utilized internet protocol (IPTV) that is carrier class and with open standards
instead of ATM protocol in order to achieve the lowest cost for delivery of
broadcast television to the largest number of customers. In 2006, the Company
announced the development of Release 3.0 of its TV+ product that was the first
solution developed by the Company that utilized internet protocol to deliver
broadcast television, high-speed internet and voice by a telecommunications
service provider. This released marked a migration of the Company from the
original DVDDS hardware/software end to end proprietary system to an open
standards carrier class software/middleware IPTV solution designed to deliver
television, voice and high-speed internet over copper, fiber or any other
existing infrastructure that a telephone service provider may have. The
middleware solution is part of the overall system which consist of head end and
various system hardware components and set top box at a customer premises
required for the delivery to broadcast television using IP protocol.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;As
noted above, the Company&#146;s current IPTV solution utilizes a communications
framework based upon Internet Protocol (IP) instead of Asynchronous Transfer
Mode (ATM) that was utilized in earlier releases of the product. ATM is an
industry standard for transportation of data based upon a packaging of
information into a fixed-size cell format for transportation across networks.
Many telecommunications service providers currently deploy equipment that
handles this protocol because it can support voice, video, data and multimedia
applications simultaneously with a high degree of reliability. IP is another
transport protocol that maintains network information and routes packets across
networks. IP packets are larger and can hold more data than ATM cells.
Historically, there have been concerns that service providers would be unable to
provide the same quality of service with IP because it is not optimized for
time-sensitive signals such as broadcast television and voice. Nevertheless,
there is a greater demand by telecommunication service providers for IP systems
for delivery of television, voice and high-speed data because such systems are
significantly more cost effective to deploy based upon greater scalability.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Release
6.0 or the IP based TV+ platform is designed for customers planning to support
large scale deployments, delivering both high speed data and television
services. Such system is designed for maximum flexibility, cost effectiveness,
and is highly scaleable for large deployments by telephone service providers.
Since most telecommunications providers require an IP rather than ATM mode for
deploying digital broadcast television and video on demand, all releases of our
IPTV middleware, commencing with release 3.0, have utilized internet
protocol.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company believes the initial major deployments and any revenues from sales of
its flagship IPTV solution are not expected until the third quarter of fiscal
year 2006. An upturn of spending in the telephone industry should also increase
sales and improve the Company&#146;s margins and provide the Company with the
opportunity to attain profitability.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>DSL
Components</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>Although the Company has repositioned itself mainly as a
software/middleware provider of IPTV solutions, mPhase also designs and markets
a line of DSL component products that now consists of a new VDSL customer
premises splitter designed to facilitate the roll-out of broadband services by
telecommunications service providers such as AT&amp;T that are using a
combination of fiber to the curb and VDSL over existing copper lines to the home
to solve the &#147;last mile&#148; for delivery of such services.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Research
and Development Activities</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">As
of June 30, 2006, we had been billed approximately $13,539,952 for research and
development conducted by Georgia Tech Research Institute (GTRC) in connection
with the development, over 5 years of the legacy Traverser DVDDS system .On
March 26, 1998, we entered into a license agreement with Georgia Tech which owns
the Digital Video and Data System technology. GTRC and its affiliates have
granted us the exclusive license to use and re-sell Traverser DVDDS worldwide.
We are obligated to pay Georgia Tech royalties of up to 5% on future sales of
the Traverser&#153; The license agreement expires automatically when the patents
covering the invention expire.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
36</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company has paid Lucent Technologies, Inc, through March 31, 2007 a total of
$4,819,502 for development of Versions 1.0 through Versions 3.0 its TV+ or IPTV
solution which commenced as of September 15, 2002. In May of 2006, mPhase a
transferred development of the IPTV middleware form the Bell Labs division of
Lucent Technologies Inc to Velankani, as primary systems integrator of the
project. &nbsp;The Company is obligated to pay a total of approximately $1
million primarily to Magpie Telecom Insiders, Inc., and Espial, and Velankani
Software &nbsp;in remaining payments in order to complete Release 6.0 of the TV+
product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">In
February of 2005 mPhase announced that it had entered into a new 12 month
extension of its February 2004 $1.2 million Project Development contract with
the Bell Labs division of Lucent Technology Inc. for the exploratory research of
micro power cell arrays using superhydrophobic nanotextured materials with the
first commercial application expected to be a new miniature power cell with a
very long shelf life for military and commercial applications. Under the terms
of such agreement the Company has paid Lucent $100,000 per month commencing in
February of 2005 for a 12 month period for a total of $1.2 million. The Company
and Lucent plan to extend such contract for another 12 months on similar terms
to continue development of the miniature power cell product. In addition in
March of 2005, the Company announced a 12 month agreement with Lucent
Technologies, Inc. for development of an electromagnetic sensor or Magnetometer
product using the science of Nanotechnology at a cost of $1.2 million payable in
12 installments of $100,000 per month through March of 2006. The Company renewed
both contracts in May of 2006 through February and March of 2007 respectively
and is currently in negotiations with Bell Labs to extend each of the contracts
for an additional 12 months.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Market</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Currently,
mPhase&#146;s target market for its IPTV solution includes telephone companies and
telecommunications service providers worldwide. By deploying converged voice,
video and data over their existing telephone infrastructure, telecommunications
service providers can increase revenue and profitability and retain valuable
market share. In most parts of the world, the telephone company is strongly
positioned to be first to market with an integrated bundle of communications
services. IPTV subscriptions are forecasted to reach around 40 million
subscriptions by 2010. &nbsp;This number has increased significantly since 2004
at about 1.3 million.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">IPTV
can and most likely will become a catalyst of pay TV and broadband growth for
key emerging markets such as Russia. &nbsp;In today&#146;s competitive
telecommunications landscape, the mPhaseTV+ solution for delivery of IP TV has
now become a compelling solution for many large international telecommunications
service providers to compete effectively in today&#146;s marketplace.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
estimate that on average, a typical telecommunications service provider using
mPhase&#146;s IP TV+ solution can generate significant revenue with a payback on its
initial investment in either system within 2-3 years depending on the size and
scope of the deployment. Importantly, this relatively short payback period is
still applicable in countries where the average cost of a basic cable television
package is well below the US average. The economics of mPhase&#146;s IPTV+ solution
are such that, for example, when charging as little as $10 per month per
subscriber for a basic television package, the system operator can expect a full
return on investment within a three-year period of time. Furthermore, over 5
years a telecommunications service provider can achieve a significantly higher
rate of return on its investment in our IPTV solution than would be possible
with deploying voice and data alone. mPhase has developed a detailed and highly
customizable return on investment model to assist the telco in assessing its
rates of return and profitability based on additional revenue generated by the
new services.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
expects to derive the majority of its revenue from the sale of its TV+ solution
developed in conjunction with Lucent Technologies, for a number of reasons:</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -19.8pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">1.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">The
platform has been designed to achieve maximum cost efficiencies by maximizing
scalability using IPTV.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -19.8pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">2.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">Version
6.0 of the TV+ solution is a market driven IP based solution and is a powerful
software/middleware enabling tool providing complete standards-based flexibility
for any combination of transport hardware including all major DSLAM&#146;s, set top
boxes and other features necessary to optimize a solution by a telephone service
provider for the delivery of broadcast television, voice and high-speed
internet.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; PADDING-TOP: 0pt"><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
is currently targeting international incumbent telephone companies. &nbsp;The
Company expects to derive the majority of its system sales abroad, specifically
from telephone service providers in the Ukraine, &nbsp;Russia and Turkey. mPhase
believes that foreign markets will adopt its IPTV solution more rapidly than
domestic service providers since there is not generally intense competition from
cable television. Therefore, the Company has placed much of its initial emphasis
on targeting the international market.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Russia
the Ukraine and Turkey are markets with minimal pay-TV and broadband penetration
levels. &nbsp;These markets offer the possibility that IPTV will be come the
main catalyst for broadband adoption. &nbsp;There has been little success in
these markets thus far, but we believe we have created a product that will trump
the past failures. &nbsp;The demand for IPTV is higher now that it has ever
been. The markets mPhase is targeting possess pockets of moderate to high-income
households willing and able to purchase advanced digital services, but very few,
if any, alternatives exist.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Cable
television and digital broadcast satellite (DBS) services are less competitive
internationally than in North America. Because of the limited expansion of
cable, especially two-way digital cable and satellite networks abroad, access to
advanced communications services such as high-speed Internet and digital
television in many areas is limited to copper-based delivery methods.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
37</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Competition
in the worldwide telecommunications market is becoming increasingly aggressive
due to changing telecommunications regulation, heightened competitive threats
from alternative technologies, such as cable and digital broadcast satellite,
and price declines in local and long distance telephony services. &nbsp;Over the
past decade, the distinction between local and long distance services has gone
extinct. &nbsp;Now operators have introduced all-distance calling for one rate.
&nbsp;This is why more and more operators are beginning to look into VoIP and
other sources of revenue such as IPTV.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">To
date, there are several significant deployments of IPTV worldwide including
Fastweb in Italy, Imagenio, operated by Telefonica in Spain, Yahoo BB/Softbank
in Japan, SuperSun in China in Hong Kong, PCCW in Hong Kong, Free Telecom in
France, Yahoo BB in Japan and Media on Demand in the Republic of China operated
by Chunghwa Telecom. mPhase believes that the deployment of IPTV worldwide is in
the beginning stages but we have begun initial deployments in Russia with
Svyazinvest Companies. The market has been slower to develop than many
commentators have predicted owing to the technical complexity of the systems
software and hardware to deliver feature rich television and video on demand
where many international telecommunications operators have varied topologies,
existing infrastructure, and complex regulations to comply with in order to
successfully deploy such a system. Nevertheless, mPhase believes that
telecommunications service providers around the world have the incentive to
deploy.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Sales
Strategy</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;<I>IPTV</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
will pursue sales opportunities through a variety of channels, including direct
sales by the Company&#146;s internal sales team, distributors and in conjunction with
systems integrators and strategic partners in Turkey, the Ukraine and
Russia.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Joint
Venture Opportunities</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;There
also exist opportunities for mPhase to capture recurring revenue from the sale
and deployment of its IPTV middleware through a joint venture business model.
Under &nbsp;this scenario, mPhase would sell its middleware to a joint venture
company, of which mPhase retains a minority position. This company would
negotiate either a line leasing or revenue share program with the incumbent
telephone company and subsequently deploy and operate one of mPhase&#146;s IPTV
solution. mPhase believes a JV may provide additional opportunities for sales to
international telephone carriers that may not have the funds to procure mPhase&#146;s
IP TV solution, yet recognize the potential business opportunity in deploying
our product especially with respect to potential incremental revenues from
targeted advertising. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Funding
of the equipment and operation of the system would be the responsibility of the
JV. Member companies of the JV would include entities interested in controlling
television services such as the government and large media groups. For example,
mPhase has established a JV in Turkey with Beyaz Holdings a significant provider
of Turkish Television content. Although a JV requires greater involvement from
mPhase in terms of organizing and coordinating the appropriate parties, the
long- term potential benefits to mPhase are great. mPhase would not only secure
sales of its TV+ solution, but would benefit from the recurring revenues from a
JV engaged in being a broadcast television service provider.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>DSL
Component Products</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
continues to develop its new a line of VDSL component products such as its
customer premises splitter. Potential customers for the DSL component products
include other DSL equipment manufacturers, re-sellers, network integrators and
telecommunications service providers deploying DSL worldwide. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">To
date, mPhase has deployed over 250,000 POTS Splitter ports. The mPhase DSL
component products are sold both by mPhase directly as well as through
established distribution agreements. With the migration of telecommunications
service providers to VDSL in combination with fiber from ADSL the Company
believes that its future revenues from DSL component products will depend upon
the rapid development and successful marketing of its new VDSL customer premises
splitter. The Company has phased out its legacy ADSL POTS splitter product owing
to advancements in DSL technology and VDSL standards and overall market demand.
We are continuously in discussions with various original equipment manufacturers
of telecommunications equipment to identify opportunities for joint bids for
infrastructure deployment with major domestic and international
telecommunications service providers. We also continue to market our component
products directly.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Intellectual
Property, Patents and Licenses</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company has entered into software development and licensing agreements with
Magpie Telecom Insiders, Inc. and Espial with respect to certain software used
in connection with its TV+ product. Under such development and licensing
Agreement the Company has made aggregate payments of approximately $2 million
and $789,000 respectively as of April 18th, 2007. In addition the Company will
pay a licensing fee per set top box sold as part of the TV product to Espial of
$5.05 per set top box. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
38</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>We have filed and intend to file United States patent and/or
copyright applications relating to some of our proposed products and
technologies, either with our collaborators, strategic partners or on our own.
There can be no assurance; however, that any of the patents obtained will be
adequate to protect our technologies or that we will have sufficient resources
to enforce our patents.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Because
we may license our technology and products in foreign markets, we may also seek
foreign patent protection. With respect to foreign patents, the patent laws of
other countries may differ significantly from those of the United States
regarding patent protection of our products or technology. In addition, it is
possible that competitors in both the United States and foreign countries, many
of which have substantially greater resources and have made substantial
investments in competing technologies, may have applied for, or may in the
future apply for and obtain, patents that will have an adverse impact on our
ability to make and sell our products. There can also be no assurance that
competitors will not infringe our patents or will not claim that we are
infringing on their patents. Defense and prosecution of patent suits, even if
successful, are both costly and time consuming. An adverse outcome in the
defense of a patent suit could subject us to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require us
to cease our operations. &nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Company has filed 7 patents that consist of a combination of (a) patents granted
to mPhase from the bell labs division of Lucent Technologies, Inc. and (b) joint
patents developed by mPhase and employees of bell labs with respect to the
nanotechnology products currently under development. In addition, on June 13,
2007, the Company filed a provisional patent covering its TV+ product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Regulation</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
Federal Communication Commission, or FCC, and various state public utility and
service commissions, regulate most of our potential domestic customers. Changes
to FCC regulatory policies may affect the accessibility of communications
services, and otherwise affect how telecommunications providers conduct their
business. These regulations may adversely affect our potential penetration into
certain markets. In addition, our business and results of operations may also be
adversely affected by the imposition of certain tariffs, duties and other import
restrictions on components, which we obtain from non-domestic component
suppliers. Changes in current or future laws or regulations, in the U.S. or
elsewhere, could materially adversely affect our business.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Competition</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
competes with broadband equipment manufacturers including cable and digital
broadcast satellite equipment manufacturers, as well as other equipment vendors
manufacturing IP TV middleware solutions and set top boxes. The global telco
customer base has the ability to adopt other forms of content distribution if it
chooses to compete in the multi-channel home entertainment market. However,
mPhase believes its IPTV solution is attractive to a broader range of customers
of telecommunication service providers. The following sections outline the
competitive landscape for mPhase.&nbsp;Cable Television Network Operators:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">Cable
Television is our indirect competitor. &nbsp;This is mainly because where we are
focusing our attention there are no known cable television providers.
&nbsp;mPhase believes that the TV+ solution is the most cost effective and
robust video delivery technology deployable by our primary target market of
international telecommunications service providers. Cable Television providers
around the world are seeking to preempt the IPTV value proposition of
transforming and personalizing the end-user experience. &nbsp;New services are
rapidly being provided to a larger customer base than previously with more
emphasis on on-demand capabilities. &nbsp;The cable industry in the United
States has invested more than $85 billion in its networks to combine traditional
coaxial cable with fiber optic to create hybrid fiber coaxial. &nbsp;This allows
operators to transmit digital signals, expand programming capacity and enable
interactive services. &nbsp;Cable operators will also move to IP, this is
inevitable, but many markets do not have the cable infrastructure needed to
deploy such a product.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Direct
Broadcast Satellite Services</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;In
the US, direct broadcast satellite (DBS) providers have experienced increased
market penetration over the past few years. DBS service is the only alternative
television delivery method in rural areas where cable has not been deployed, or
antiquated analog cable is predominant. However, in some cases, DBS service does
not include local off-air channels and most DBS operators are not able to
provide competitively-priced wireless high-speed Internet service. Technology
enabling two-way, high-speed Internet access over DBS is relatively new and we
expect it will take time to reach broad market acceptance as a cost-effective,
reliable data delivery method.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Other
IP TV Vendors</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">mPhase
competes with &nbsp;vendors of middleware. and set top boxes. Companies that
supply middleware for IPTV include a joint venture of Microsoft and Alcatel,
Minerva, Orca Interactive, Siemens, VBrick Systems, and Video Furnance. &nbsp;IP
end to end systems competitors include UTStarcom, mxWare and Industria.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Differentiating
Factors</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">&nbsp;mPhase
believes that its IPTV product offers the most reliable, scaleable and cost
effective solution for delivery of broadcast television programming on a
cost-effective basis. Our solution is carrier class with open standards.
mPhase&#146;s unique systems architecture &nbsp;for its TV+ is a streamlined solution
is designed to be the most cost-effective scaleable solution in emerging
international markets as well as flexible enough to be upgraded with enhanced
features of more robust systems for high end customers.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="right">
39</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><I>Headend
and Set Top Box Equipment Providers &nbsp;</I></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>mPhase does not manufacturer either set top boxes or digital head
end gear. All customers interested in deploying an mPhase IPTV+ solution must
build a digital headend to receive, digitize and groom the television signals
and provide set top boxes to their customers from other vendors. Through
extensive lab and field testing, mPhase has established an approved vendor list
of several headend providers and has tested its IPTV middleware with set top
boxes manufactured by a number of vendors.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Nanotechnology</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">The
science of nanotechnology is very new and evolving. There has been significant
venture capital fundings of start up companies during calendar year 2005-2007
focusing upon development of a wide range of potential products and
applications. mPhase believes that its power cell and magnetometer products may
be the earliest products commercialized using the science of nanotechnology.
Nevertheless, the Company does not expect any material revenues from such
product for 3 years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Employees</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify">We
presently have approximately twenty three (23) full-time employees and
consultants, two (2) of whom are also employed by Microphase Corporation. See
the description in the section entitled &#147;Certain Relationships and Related
Transactions.&#148;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; " align="justify"><B>Properties</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=justify>We maintain our corporate headquarters at 587 Connecticut Avenue,
Norwalk, Connecticut 06854, under a facilities agreement with Microphase. The
agreement with Microphase provides that we lease office space, lab facilities
and administrative staff on a month-to-month basis. We also maintain offices in
New York, N.Y and Little Falls, New Jersey.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; "
align=right>40</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>LEGAL PROCEEDINGS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>The Company has previously been advised that, following an investigation by
the staff of the Securities and Exchange Commission, the staff intends to
recommend that the Commission file a civil injunctive action against Packetport,
Inc. and its Officers and Directors. Such recommendation relates to alleged
civil violations by Packetport and such Officers and Directors of various
sections of the Federal Securities Laws. The staff has alleged civil violations
of Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and
13(d) of the Securities Exchanges Act of 1934. As noted in other public filings
of mPhase, the CEO and COO of mPhase also serve as Directors and Officers of
Packetport. Such persons have advised mPhase that they deny any violation of law
on their part and intend to vigorously contest such recommendation.  </b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>On November
15, 2005, the Commission filed a Civil Enforcement Action arising out of such
investigation in Federal District Court in the District of Connecticut against
Packetport.com, Inc, its officers and directors and others. mPhase was not named in such civil action as a party defendant, however both the
CEO and COO of the Company were  named as defendants. The Commission has
alleged that such defendants have violated various sections of the Securities
Act of 1933, as amended (the &#147;Securities Act&#148;), the Securities Exchange Act of
1934, as amended (the &#147;Exchange Act&#148;), including the anti-fraud provisions of
Section 10 and Rule 10b-5 as well as Sections 17 of the Exchange Act and Section
5 of the Securities Act. In addition Microphase Corporation is also named as a
defendant in the civil action in connection with its sale of the stock of
Packeport.com in early 2000. All defendants to the suit continue to deny any
wrongdoing and intend to vigorously defend all allegations contained in such
action.</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>In a ruling (3:05 CV 1747 (PCD)), dated March 21, 2007, the Honorable Peter
C. Dorsey, Senior U.S. District Court Judge for the United States District
Court&nbsp; For The District Of Connecticut, granted a motion by defendants, Ronald
A. Durando and Packetport Inc. joined by defendants Gustave T. Dotoli ,
Microphase Corporation and Packetport.com, Inc. to dismiss under Federal Rule
41(b) of the Federal Rules of Civil Procedure the civil lawsuit filed on
November 15, 2005 by the Securities and Exchange Commission against
Packetport.com, Inc. et. al for lack of prosecution.</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>On April 4, 2007, the Securities and Exchange Commission filed a motion with
the United States District Court requesting a reconsideration of the motion to
dismiss granted by the Court &nbsp;in favor of the defendants. </b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>In a ruling dated May 23, 2007, the Judge Peter C. Dorsey granted the motion
for reconsideration filed by the Securities and Exchange Commission and reversed
his earlier ruling of March 21, 2007 and reinstated the case on the judicial
calendar to proceed to trial. </b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
From time to time we may be involved in various legal proceedings and other
matters arising in the normal course of business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>OUR MANAGEMENT</b></p>
<table style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%">
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Executive Officers and Directors</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="966" colSpan="3">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Our officers and directors, and their ages, as of March 31, 2007, are as
    follows:</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Name</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Age</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Position(s)</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Necdet F. Ergul</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>84</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Chairman of the Board and Director</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Ronald A. Durando</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>50</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>President, Chief Executive Officer And Director</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Gustave T. Dotoli (2)</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>71</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Chief Operating Officer and Director</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Martin S. Smiley</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>59</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Executive Vice President, Chief Financial Officer,</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>General Counsel and Director</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Outside Directors</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Anthony H. Guerino, Esq. (1)(2)</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>59</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Director</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Abraham Biderman (1)(2)</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>59</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Director</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="273">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Victor Lawrence</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="156">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>60</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="497">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Director</b></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
(1) Member of Audit Committee. (2) Member of Compensation Committee.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
The following is biographical information about each of our Officers and
Directors.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<i>Necdet F. Ergul</i> has served as our Chairman of the Board since October
1996 with the exception of a three-month period in 2000 when he temporarily
resigned. Mr. Ergul also currently serves as the President and Chief Executive
Officer of Microphase Corporation, a leading developer of military electronic
defense and telecommunications technology, which he founded in 1955. He is also
a Director of Janifast Ltd. In addition to his management responsibilities at
Microphase, he is active in engineering design and related research and
development. Mr. Ergul holds a Masters Degree in Electrical Engineering from the
Polytechnic Institute of Brooklyn, New York.</p>
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41</p>
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&nbsp;<i>Ronald A. Durando</i> is the founder of mPhase Technologies, Inc. and has
served as our President, Chief Executive Officer and a Director since its
inception in October 1996. In addition, Mr. Durando has been the Chief Operating
Officer of Microphase Corporation since 1994. From 1986 to 1994, he was
President and Chief Executive Officer of Nutley Securities, Inc., a registered
broker-dealer. He is also Chairman of the Board of Janifast Ltd., a Hong Kong
corporation for operational and manufacturing companies in China. Mr. Durando is
also President and Chief Executive Officer and Director of PacketPort.com, Inc.</p>
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<i>Gustave T. Dotoli</i> has served as our Chief Operating Officer and a
Director since our inception in October 1996. In addition, Mr. Dotoli has been
the Vice President of Corporate Development of Microphase Corporation since
December of 1996. Mr. Dotoli is also a Director and Vice President Corporate
Secretary of PacketPort.com, Inc. He formerly was the President and Chief
Executive Officer of the following corporations: Imperial Electro-Plating, Inc.,
World Imports USA, Industrial Chemical Supply, Inc., SISCO Beverage, Inc. and
Met Pack, Inc. Mr. Dotoli received a B.S. in Industrial Engineering from
Fairleigh Dickinson University in 1959.</p>
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<i>Martin Smiley</i> joined us as Executive Vice President, Chief Financial
Officer and General Counsel on August 20, 2000. In 2006 he was elected to the
Board of &nbsp;Directors of the Company. With over twenty years experience as a
corporate finance and securities attorney and as an investment banker, Mr.
Smiley serves as mPhase&#146;s strategic financial leader. Prior to joining the
Company, Mr. Smiley served as a Principal at Morrison &amp; Kibbey, Ltd., a mergers
and acquisitions and investment banking firm from 1998 to 2000, and as a
Managing Director for CIBC Oppenheimer Securities from 1994 to 1998. He served
as a Vice President of Investment Banking at Chase Manhattan Bank from 1989 to
1994, and as a Vice President and Associate General Counsel for Chrysler Capital
Corporation from 1984 to 1989. Mr. Smiley graduated with a B.A. in Mathematics
from the University of Pennsylvania and earned his law degree from the
University of Virginia School of Law.</p>
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<i>Anthony H. Guerino</i> has been a member of the Board since February 23,
2000. Since December 1997, Mr. Guerino has been an attorney in private practice
in New Jersey. Prior thereto, Mr. Guerino served as a judge of the Newark
Municipal Courts for over twenty (20) years, periodically sitting in the Essex
County Central Judicial Processing Court at the Essex County Courthouse. Mr.
Guerino has been a chairperson for and member of several judicial committees and
associations in New Jersey, and has been an instructor for the Seton Hall School
of Law&#146;s Trial Moot Court Program.</p>
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<i>Abraham Biderman</i> has been a member of our board since August 3, 2000. Mr.
Biderman is Executive Vice President of Lipper &amp; Company; Executive Vice
President, Secretary and Treasurer of The Lipper Funds; and Co-Manager of Lipper
Convertibles, L.P. Prior to joining Lipper &amp; Company in 1990, Mr. Biderman was
Commissioner of the New York City Department of Housing, Preservation and
Development from 1988 to 1989 and Commissioner of the New York City Department
of Finance from 1986 to 1987. He was Chairman of the New York City Retirement
System from 1986 to 1989. Mr. Biderman was Special Advisor to former Mayor
Edward I. Koch from 1985 to 1986 and assistant to former Deputy Mayor Kenneth
Lipper from 1983 to 1985. Mr. Biderman is a Director of the Municipal Assistance
Corporation for the City of New York. Mr. Biderman graduated from Brooklyn
College and is a certified public accountant.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<i>Dr Victor Lawrence</i> is bachelor Chair professor of Electrical Engineering
and Associate Dean for Special Programs, in the Charles V Schafer, Jr. School of
Engineering, at Steven Institute of Technology. Dr. Victor Lawrence is a member
of the National Academy of Engineering and has worked in the information
technology and communications field for over thirty years. He is an industry
leader in digital communications R&amp;D and services, an entrepreneur, an active
member of engineering professional organizations, an author, and a teacher who
has extensive international experience. Prior to joining Steven Institute of
Technology Dr. Lawrence was Vice President, Advanced Communications Technology,
Bell Laboratories, Lucent Technologies. He led the development of technologies
that go into the most innovative, reliable, and cost-effective communications
networks for the leading telecommunications service providers. He has supported
Lucent&#146;s businesses with a staff of about 500 leading technologists and a budget
of about $100M. Major projects included gigabit, photonic, and wireless
networking developments and services. He was responsible for a team of engineers
that worked on performance analysis, simulations and development of broadband
access and backbone networks for many national and international service
providers. All of Lucent&#146;s R&amp;D organizations relied on his high-technology
support of computer-aided hardware design, physical and thermal design, systems
compliance testing and certification, and design for high performance network
control, signaling, and management. Earlier, he was Director, Advanced
Multimedia Communications at Bell Labs, where he was responsible for systems
engineering, exploratory development of multimedia signal processing,
transmission, and switching, including speech and audio coding, modems,
broadband transmission, ATM switching and protocols, and wireless communication
and signal processing. He held a variety of leadership positions in data
communications research, digital techniques, and information systems. His
application of digital signal processing to data communications in the late
1980s and early 1990s led to many significant advances in high-speed
transmission over copper lines (e.g., voice band modems and DSL), which helped
create a global industry that leverages the public switched telephone network.
Dr. Lawrence played a significant role in the development of every major
international voiceband modem standard, making high-speed data communication
over international networks possible. The universal availability of high-speed
data connectivity stimulated the growth and widespread use of the Internet. He
led the development of high-speed modem/fax chip sets that are used in data
terminals, computers, and voice terminals for secure communications worldwide.
His work on high-speed transceivers for local loop and for premises applications
led to the development of a variety of DSL technologies, many of which are
deployed today for broadband services. Entrepreneurship Dr. Lawrence spun off
several ventures internal and external to Lucent to maximize the impact of
technology developed in his organization.</p>
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42</p>
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<br>
&nbsp;</p>
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<font size="2">Globespan, whose core team came from Dr. Lawrence&#146;s organization
and created the silicon for DSL. Globespan later merged with Virata and is now
part of Conexant.</font></p>
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<font size="2">Lucent Digital Video, a Lucent internal venture, which developed
MPEG-2 video encoders that have been deployed in over 150 television stations
and in many broadband networks worldwide. The entire R&amp;D team came from Dr.
Lawrence&#146;s organization.</font></p>
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<i><font size="2">elemedia</font></i><font size="2">, which developed software
for VoIP communications.</font></p>
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<font size="2">Lucent Digital Radio (now Ubiquity), which developed VLSI for
encoding/decoding and modulation/demodulation of digital audio broadcast (DAB).
This technology is now used for both terrestrial and satellite radio. In
addition, he led the systems engineering efforts that designed the architecture
for the Sirius Satellite System and developed the Studio Encoder and the ASIC
for the receiver system.</font></p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Dr. Lawrence is a member of the National Academy of Engineering and a Fellow of
both the Institute of Electrical and Electronics Engineers (IEEE) and AT&amp;T Bell
Labs. For his scientific achievements, Dr<b> .</b> Lawrence has received
numerous awards, including the 2004 IEEE Award in International Communication
and a 1997 Emmy Award for the HDTV Grand Alliance Standard. He was also the
co-recipient of the 1984 J. Harry Karp Best Paper Award and the 1981
Gullemin-Cauer Prize Award.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
He served as the Chairman, IEEE Awards Board in 1994-1995, was Editor-In-Chief,
IEEE Transactions on Communications from 1987 to 1991, and a member of the Board
of Governors of the IEEE Communications Society from 1990 to 1992. He was also
Special Rapporteur on Coding (1982-1984) and on Transmission Impairments (1984)
for CCITT (now ITU).Dr. Lawrence has been a key proponent of R&amp;D globalization
and is championing the effort to bring fiber optic connectivity to Africa. Over
the past several years at Bell Labs, he managed a worldwide R&amp;D organization,
with branches in Beijing and Shanghai in China and in Hilversum and Twente in
the Netherlands, as well as four states in the US. Before joining Bell Labs in
1974, he taught at Kumasi University of Science and Technology in Ghana, and was
employed as a research engineer at the General Electric Company in the UK. Dr.
Lawrence is the co-author of five books<i> : &#147;Introduction to Digital Filters,&#148;
&#147;Tutorials on Modem Communications,&#148; &#147;Intelligent Broadband Multimedia
Networks,&#148; &#147;Design and Engineering of Intelligent Communications Systems,&#148; and
&#147;The Art of Scientific Innovation.&#148;</i> He holds over 20 U.S. and international
patents and has over 45 papers in referenced journals and conference
proceedings, covering digital signal processing and data communications. Dr.
Lawrence has taught Signal Processing and Data Networking courses at the
University of Pennsylvania, Rutgers University, Princeton University, Columbia
University, and Fairleigh Dickinson University, and delivered the Chancellor&#146;s
Distinguished Lecture Series at the University of California at Berkeley in
1986. He has also taught Technology Management and Technology Incubation courses
at Bell Labs to new engineers.</p>
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<br>
&nbsp;</p>
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<font size="2">Since 1996, Dr. Lawrence has taught a short-course each year at
the US Industrial College of the Armed Forces.</font></p>
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<font size="2">From 1997-2001, Dr. Lawrence and his staff supported Senator
First and the US Sub-Committee on Science and Technology.</font></p>
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<br>
&nbsp;</p>
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&nbsp;Dr. Lawrence received his undergraduate, masters, and doctorate degrees from
the University of London in the United Kingdom.</p>
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<b>Board Committees</b></p>
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Our Board of Directors has an audit committee and a compensation committee. The
audit committee approves of our independent accountants and determines the
appropriateness of their fees, reviews the scope and results of the audit plans
of the independent accountants, oversees the scope and adequacy of our internal
accounting control and record-keeping systems and confers independently with the
independent accountants. The audit committee consists of Messrs. Biderman, and
Guerino. Consistent with NASD regulations, an audit charter was developed and
adopted by the Board and the audit committee on August 2, 2000.</p>
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The compensation committee makes recommendations to our Board of Directors
regarding our stock incentive plans and all matters of compensation. The
compensation committee consists of three (3) Directors, Messrs. Biderman, Dotoli
and Guerino.</p>
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<b>Director Compensation</b></p>
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For their attendance of Board and Committee meetings, we compensate the
Directors in cash as well as in the form of stock options granted under our
Stock Incentive Plan, which grants are included in the table &#147;Security Ownership
of Certain Beneficial Owners and Management&#148; and the notes thereto.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Compensation of Directors</b></p>
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During fiscal year 2006 mPhase compensated each of the inside directors with
Options to purchase 25,000 shares of common stock at a price of $.25 per share
for services both as officers and directors. The outside directors were each
compensated with 25,000 of Options to purchase common stock at a price of $.25.
The Messrs Durando, Dotoli and Guerino were each paid a $7,500 cash stipend. No
such payment was made during fiscal year 2005.</p>
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43</p>
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<b>Executive Compensation</b></p>
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The following table sets forth, for the fiscal year ended June 30, 2006 and the
two previous fiscal years, the compensation paid by us to, as well as any other
compensation paid to or earned by, our Chief Executive Officer, and our four
most highly compensated executive officers, other than the Chief Executive
Officer, whose compensation during the fiscal year ended June 30, 2006 was
greater than $100,000 for services rendered to us in all capacities during such
year.</p>
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<b>&nbsp;&nbsp;SUMMARY COMPENSATION TABLE</b></p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="30%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="14%"><font size="2"><b>RESTRICTED</b></font></td>
    <td align="middle" width="14%"><font size="2"><b>SECURITIES</b></font></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="30%" colSpan="2"><font size="2"><b><u>ANNUAL
    COMPENSATION</u></b></font></td>
    <td align="middle" width="14%"><font size="2"><b>STOCK</b></font></td>
    <td align="middle" width="14%"><font size="2"><b>UNDERLYING</b></font></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="14%"><font size="2"><b><u>AWARDS</u></b></font></td>
    <td align="middle" width="14%"><font size="2"><b><u>OPTIONS</u></b></font></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td align="middle" width="14%"><font size="2"><b><u>YEAR</u></b></font></td>
    <td align="middle" width="14%"><font size="2"><b><u>SALARY</u></b></font></td>
    <td align="middle" width="14%"><font size="2"><b><u>BONUS</u></b></font></td>
    <td align="middle" width="14%">&nbsp;</td>
    <td align="middle" width="14%">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%"><font size="2">Ronald A. Durando</font></td>
    <td align="middle" width="14%"><font size="2">2006</font></td>
    <td align="middle" width="14%"><font size="2">$393,600</font></td>
    <td align="middle" width="14%"><font size="2">$250,000</font></td>
    <td align="middle" width="14%"><font size="2">6,000,000</font></td>
    <td align="middle" width="14%"><font size="2">9,775,000</font></td>
  </tr>
  <tr>
    <td width="30%"><font size="2">(Chief Executive Officer and President)</font></td>
    <td align="middle" width="14%"><font size="2">2005</font></td>
    <td align="middle" width="14%"><font size="2">$305,000</font></td>
    <td align="middle" width="14%"><font size="2">-</font></td>
    <td align="middle" width="14%"><font size="2">-</font></td>
    <td align="middle" width="14%"><font size="2">2,500,000</font></td>
  </tr>
  <tr>
    <td style="BORDER-BOTTOM: 1px solid" width="30%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">2004</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">$285,000</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">1,500,000</font></td>
  </tr>
  <tr>
    <td style="BORDER-TOP: 1px solid" width="30%"><font size="2">Gustave Dotoli</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    2006</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    $282,000</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    $75,000</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    2,500,000</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    4,875,000</font></td>
  </tr>
  <tr>
    <td width="30%"><font size="2">(Chief Operating Officer)</font></td>
    <td align="middle" width="14%"><font size="2">2005</font></td>
    <td align="middle" width="14%"><font size="2">$215,000</font></td>
    <td align="middle" width="14%"><font size="2">-</font></td>
    <td align="middle" width="14%"><font size="2">-</font></td>
    <td align="middle" width="14%"><font size="2">1,500,000</font></td>
  </tr>
  <tr>
    <td style="BORDER-BOTTOM: 1px solid" width="30%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">2004</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">$225,000</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">
    <font size="2">750,000</font></td>
  </tr>
  <tr>
    <td style="BORDER-TOP: 1px solid" width="30%"><font size="2">Martin Smiley</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    2006</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    $175,000</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    -</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    1,577,206</font></td>
    <td style="BORDER-TOP: 1px solid" align="middle" width="14%"><font size="2">
    1,300,000</font></td>
  </tr>
  <tr>
    <td width="30%"><font size="2">(Executive Vice President</font></td>
    <td align="middle" width="14%"><font size="2">2005</font></td>
    <td align="middle" width="14%"><font size="2">$125,000</font></td>
    <td align="middle" width="14%"><font size="2">-</font></td>
    <td align="middle" width="14%"><font size="2">425,000</font></td>
    <td align="middle" width="14%">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%"><font size="2">Chief Financial Officer and General</font></td>
    <td align="middle" width="14%"><font size="2">2004</font></td>
    <td align="middle" width="14%"><font size="2">$103,958</font></td>
    <td align="middle" width="14%"><font size="2">-</font></td>
    <td align="middle" width="14%"><font size="2">-</font></td>
    <td align="middle" width="14%">&nbsp;</td>
  </tr>
  <tr>
    <td style="BORDER-BOTTOM: 1px solid" width="30%"><font size="2">Counsel)</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="14%">&nbsp;</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>STOCK OPTIONS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table contains information regarding options granted in the fiscal
year ended June 30, 2006 to the executive officers named in the summary
compensation table above. For the fiscal year ended June 30, 2006, mPhase
granted options and compensatory warrants to acquire up to an aggregate of
23,595,000 shares to employees and directors.</p>
<table style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%">
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%" colSpan="3">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Name</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="middle" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Number of Options Granted</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="middle" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Exercise Price per Share</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="middle" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Market Price on Grant dates</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="middle" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Expiration Dates</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%" colSpan="3">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Potential Realizable Value <br>
    of Assumed Annual Return</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b><u>0%</u></b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b><u>5%</u></b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b><u>10%</u></b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Ronald Durando</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    4,000,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.18</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.18</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    2/23/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    40,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $249,974</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $503,988</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    4,000,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    2/23/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $129,974</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $383,988</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    1,000,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.25</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.25</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    3/28/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $0</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $55,997</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    775,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    6/14/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $25,182</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $74,398</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Gustave Dotoli</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    1,800,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.18</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.18</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    2/23/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    18,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $112,488</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $226,794</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    1,800,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    2/23/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $58,488</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $172,794</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    750,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.25</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.25</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    3/25/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $0</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $41,998</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    525,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    6/14/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $17,059</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $50,398</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Martin Smiley</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    550,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.18</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.18</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    2/23/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    5,500</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $34,371</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $69,298</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    500,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    2/23/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $16,247</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $47,998</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    250,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    0.21</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    6/14/2011</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $0</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="12%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $13,999</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table sets forth information with respect to the number and value
of outstanding options held by executive officers named in the summary
compensation table above at June 30, 2006. During the fiscal year ended June 30,
2006, no options were exercised. The value realized is the difference between
the closing price on the date of exercise and the exercise price. The value of
unexercised in-the-money options is based upon the difference between the
closing price of mPhase&#146;s common stock on June 30, 2006, and the exercise price
of the options.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
44</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>Fiscal Year-End Option Values</b></p>
<table style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%">
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Name</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%" colSpan="2">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Value of unexercised In-The-Money Options</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Exercisable</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Unexercisable</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Exercisable</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Unexercisable</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Ronald Durando</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    14,200,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    $40,000&nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Gustave Dotoli</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    6,925,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    18,000&nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Martin Smiley</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    1,440,000&nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    5,500&nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    <b>-</b></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>Employment Agreements</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
All employment agreements with our current management have expired and are in
the process of being renegotiated subject to approval of the Board of Directors
of the Company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>Long-Term Stock Incentive Plan</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We have a Long-Term Stock Incentive Plan, under which we have reserved for
issuance 15,000,000 shares of common stock. Our shareholders approved our 2001
Stock Incentive Plan at our annual meeting of shareholders on May 30, 2001. The
plan provides for grants of incentive stock options and nonqualified stock
options to our key employees and consultants and those key employees and
consultants of our subsidiaries.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
With respect to our current plan, the compensation committee of the Board of
Directors administers and interprets our current plan. The exercise price of
common stock underlying an option may be greater, less than or equal to fair
market value. However, the exercise price of an incentive stock option must be
equal to or greater than the fair market value of a share of common stock on the
date such incentive stock option is granted. The maximum term of an option is
five years from the date of grant. In the event of a dissolution, liquidation or
change in control transaction, we may require option holders to either exercise
their options within 30 days or surrender such options (or unexercised portion
thereof).</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Upon stockholder approval, the Board of Directors merged our prior Long-Term
Stock Incentive Plan into the 2001 Plan.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The purpose of the 2001 Plan is to promote our long-term growth and
profitability by providing key people with incentives to improve stockholder
value and contribute to our growth and financial success and by enabling us to
attract, retain and reward the best available people.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The maximum number of shares of common stock that we may issue with respect to
awards under the 2001 Plan is 20,000,000 shares, in addition to the shares
previously authorized for issuance under our Company plan, but which are not
issued before our current plan is merged into the 2001 Plan.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The maximum number of shares of common stock subject to awards of any
combination that may be granted under the 2001 Plan during any fiscal year to
any one individual is limited to 2,500,000 subject to the exceptions made by the
Board of Directors. These limits will be adjusted to reflect any stock
dividends, split-ups and reverse stock split, unless the Board determines
otherwise. If any award, or portion of an award, under the 2001 Plan expires or
terminates unexercised, becomes unexercisable or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, or if any shares of common
stock are surrendered to us in connection with any award (whether or not such
surrendered shares were acquired pursuant to any award), or if any shares are
withheld by us, the shares subject to such award and the surrendered or withheld
shares will thereafter be available for further awards under the 2001 Plan.
Those shares that are surrendered to or withheld by us, or that are forfeited
after issuance, however, will not be available for incentive stock options.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The 2001 Plan is administered by our Board of Directors or by a committee or
committees as the Board of Directors may appoint from time to time. The
administrator has full power and authority to take all actions necessary to
carry out the purpose and intent of the 2001 Plan, including, but not limited
to, the authority to: (i) determine who is eligible for awards, and the time or
times at which such awards will be granted; (ii) determine the types of awards
to be granted; (iii) determine the number of shares covered by or used for
reference purposes for each award; (iv) impose such terms, limitations,
restrictions and conditions upon any such award as the administrator deems
appropriate; (v) modify, amend, extend or renew outstanding awards, or accept
the surrender of outstanding awards and substitute new awards (provided however,
that, except as noted below, any modification that would materially adversely
affect any outstanding award may not be made without the consent of the holder);
(vi) accelerate or otherwise change the time in which an award may be exercised
or becomes payable and to waive or accelerate the lapse, in whole or in part, of
any restriction or condition with respect to such award, including, but not
limited to, any restriction or condition with respect to the vesting or
exercisability of an award following termination of any grantee&#146;s employment or
consulting relationship; and (vii) establish objectives and conditions, if any,
for earning awards and determining whether awards will be paid after the end of
a performance period.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
45</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In the event of changes in our common stock by reason of any stock dividend,
split-up, recapitalization, merger, consolidation, business combination or
exchange of shares and the like, the administrator may make adjustments to the
number and kind of shares reserved for issuance or with respect to which awards
may be granted under the 2001 Plan, in the aggregate or per individual per year,
and to the number, kind and price of shares covered by outstanding award.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Without the consent of holders of awards, the administrator in its discretion is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, awards in recognition of unusual or nonrecurring events affecting
us, or our financial statements or those of any of our affiliates, or of changes
in applicable laws, regulations, or accounting principles, whenever the
administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the 2001 Plan.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Participation in the 2001 Plan will be open to all of our employees, officers,
directors and other individuals providing bona fide services to us or any of our
affiliates, as the administrator may select from time to time. All two (2)
non-employee directors and approximately nineteen (19) employees will be
eligible to participate in the 2001 Plan.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The 2001 Plan allows for the grant of stock options, stock appreciation rights,
stock awards, phantom stock awards and performance awards. The administrator may
grant these awards separately or in tandem with other awards. The administrator
will also determine the prices, expiration dates and other material conditions
governing the exercise of the awards. We, or any of our affiliates, may make or
guarantee loans to assist grantees in exercising awards and satisfying any
withholding tax obligations arising from awards.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Because participation and the types of awards available for grant under the 2001
Plan are subject to the discretion of the administrator, the benefits or amounts
that any participant or groups of participants may receive if the 2001 Plan is
approved are not currently determinable. For this purpose, the benefits or
amounts that participants may receive if the 2001 Plan is approved do not
include awards granted under the Prior Plan that are amended and restated to
become awards covering the same number of shares under the terms of the 2001
Plan. These amended and restated awards are not contingent on stockholder
approval since the Prior Plan was previously approved by the stockholders.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our Board of Directors may terminate, amend or modify all or any provision of
the 2001 Plan at any time.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The members of the Compensation Committee are Messrs. Dotoli, Mr. Biderman and
Guerino. Mr. Dotoli is our Chief Operating Officer. Neither Messrs Guerino nor
Biderman is not one of our officers or employees. None of our directors or
executive officers served as a member of the compensation committee (or other
board committee performing equivalent functions or, in the absence of such
committee, the entire board of directors) of another entity during fiscal 2004
that has a director or executive officer serving on our Board of Directors
except that Mr. Dotoli is also a member of the Board of Directors of
PacketPort.com, Inc., a company in which Mr. Durando serves as Chief Executive
Officer. Mr. Ergul is a controlling shareholder and Director of Microphase
corporation (which provides certain administrative services to mPhase) and Mr.
Dotoli and Mr. Durando are Officers of Microphase., Mr. Dotoli, together with
Mr. Durando and Mr. Ergul, are controlling shareholders, officers and directors
of Janifast Ltd. Janifast Ltd. has produced components for the TV+ product and
is expected to produce a material amount of DSL components for us in the future.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>&nbsp;SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
The following table sets forth as of June 30, 2006 certain information regarding
the beneficial ownership of our shares:</p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
1.&nbsp;&nbsp;&nbsp;&nbsp; by each person who is known by us to be the beneficial owner of more than
five percent (5%) of its outstanding common stock;</p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
2.&nbsp;&nbsp;&nbsp;&nbsp; each of our directors;</p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
3.&nbsp;&nbsp;&nbsp;&nbsp; by each executive officer named in the Summary Compensation Table; and,
&nbsp;by all of our directors and executive officers as a </p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;group.</p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<br>
&nbsp;</p>
<table style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%">
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="center">
    <b>Name and Address of Beneficial Owner(1)</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="center">
    <b>Number of &#147;Shares&#148; of Common Stock Beneficially Owned</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="center">
    <b>Percentage Ownership of Common Stock(2)</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Necdet F. Ergul(4)</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    &nbsp;&nbsp;&nbsp;5,050,750</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    1.8%</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Ronald A. Durando(3)</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    &nbsp;25,264,849</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    8.8%</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Gustave T. Dotoli</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    13,330,267</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    4.7%</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Abraham Biderman</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    &nbsp;&nbsp;1,527,733</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    0.5%</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Anthony Guerino</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;777,500</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    0.3%</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Martin Smiley</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    &nbsp;&nbsp;8,598,198</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    3.0%</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Microphase Corporation</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    24,832,241</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    8.4%</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Janifast</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    <u>18,127,778</u></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    <u>6.2%</u></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="60%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    All executive Officers Directors, and beneficial owners</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    97,509,316</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 7.7pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    &nbsp;33.7%</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
46</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
&nbsp;</p>
<table style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%">
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    <b>Warrants</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    <b>Options</b></td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    <b>&nbsp;Total</b></td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Necdet F. Ergul</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    200,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    2,448,750</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    2,648,750</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Ronald A. Durando</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    581,667</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    14,200,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    14,781,667</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Gustave Dotoli</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    1,138,067</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    6,925,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    8,063,067</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Martin Smiley</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    2,545,569</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    1,440,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    3,985,569</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Abraham Biderman</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    35,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    982,500</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    1,017,500</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Anthony Guerino</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    35,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    742,500</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    777,500</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Microphase Corporation</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    8,772,222</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    0</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    8,772,222</td>
  </tr>
  <tr>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="55%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt">
    Janifast Ltd.</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    3,150,000</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    0</td>
    <td style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="15%">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="right">
    3,150,000</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(1) Unless otherwise indicated, the address of each beneficial owner is 587
Connecticut Avenue, Norwalk, Connecticut 06854-1711.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(2) Unless otherwise indicated, mPhase believes that all persons named in the
table have sole voting and investment power with respect to all shares of the
Company shares beneficially owned by them. The percentage for each beneficial
owner listed above is based on 278,235,984 shares outstanding on June 30, 2006,
and, with respect to each person holding options or warrants to purchase shares
that are exercisable within 60 days after June 30, 2006, the number of options
and warrants are deemed to be outstanding and beneficially owned by the person
for the purpose of computing such person&#146;s percentage ownership, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person. The number of shares indicated in the table include the
following number of shares issuable upon the exercise of warrants or options:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(3) Includes 1,396,148 shares held by Durando Investment LLC, Shares held by
Janifast which Mr. Durando controls are stated separately.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(4) Includes 277,000 shares owned by Berrin Snyder, his daughter and 275,000
owned by Eda Peterson, his daughter. Shares held by Microphase which Mr. Ergul
controls are stated separately.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS &nbsp;</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
Material Related Party Transactions</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company has material related party transactions. The Company incurs costs
for engineering, design and production of prototypes and certain administrative
functions from Microphase Corporation and the purchase of finished goods,
primarily consisting of DSL splitter shelves and filters, from Janifast Limited.
The Company has incurred costs for obtaining transmission rights. This enabled
the Company to obtain re-transmission accreditation to proprietary television
content that the Company plans to provide with its flagship product, the TV+
within its incorporated joint venture mPhase Television.Net, in which the
Company owns a 56.5% interest.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Mr. Durando, the President and CEO of mPhase, owns a controlling interest and is
a director and COB of Janifast Limited. Mr. Durando and Mr. Dotoli are officers
of Microphase Corporation. Mr. Dotoli is also a shareholder of Janifast Limited.
Mr. Ergul, the chairman of the board of mPhase, owns a controlling interest and
is a director of Microphase Corporation and is a director and shareholder of
Janifast Limited. Microphase, Janifast, are significant shareholders of mPhase.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Management believes the amounts charged to the Company by Microphase, Janifast,
mPhase Television.Net and Hart Telephone are commensurate to amounts that would
be incurred if outside parties were used. The Company believes Microphase, and
Janifast Limited has the ability to fulfill their obligations to the Company
without further support from the Company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Transactions with Officers, Directors and their Affiliates</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Directors that are significant shareholders of Janifast Limited include Messrs
Ronald A. Durando, Gustave T. Dotoli, and Necdet F. Ergul.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the 12 month period ended June 30, 2006 Eagle Advisers, an investment
banking firm founded by Mr. Abraham Biderman, a member of the Board of Directors
of the Company, earned fees and reimbursement expenses of approximately $782,568
in connection with services in regard to private placements of the Company&#146;s
common stock and warrants and raised a total of $5,820,652 net of such fees for
the Company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the 12 month period ended June 30, 2005 Eagle Advisers, earned fees and
reimbursement expenses of approximately $633,000 in connection with services in
connection with private placements of the Company&#146;s common stock and warrants
and raised a total of $6,117,000 net of such fees for the Company. &nbsp;&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Additionally at June 30, 2004, Mr. Durando was owed $300,000 and Mr. Smiley was
owed $100,000 by the Company as evidenced by a non-interest bearing promissory
note that was repaid in July 2004. As of June 30, 2004 a total of $55,000 in the
aggregate was due to Mr. Durando and Mr. Dotoli for unpaid compensation.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Mr. Durando&#146;s June 30, 2004 note payable balance of $300,000 was repaid by the
Company during fiscal year 2005. During the first and second quarters of fiscal
year 2005, Mr. Durando made additional bridge loans to the Company evidenced by
various 12% demand notes in the aggregate of $525,000. Mr. Durando was repaid a
total of $450,000 of such loans in January of 2005. In addition, Mr. Durando
converted $13,954 of the principal amount of a $75,000 promissory note leaving
unpaid principal of $61,046 outstanding. Mr. Durando converted $13,000 of
accrued and unpaid interest on various promissory notes of the Company into
65,000 shares of common stock and a 5 year warrant to purchase a like amount of
common stock at $.25 per share.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
47</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the twelve month period ended June 30, 2005 Mr. Dotoli and Mr. Smiley,
the COO, and CFO and General Counsel of the Company respectively, each lent the
Company $75,000. Mr. Dotoli was repaid, the principal amount of such loan, in
cash in January, 2005 and Mr. Smiley converted his $75,000 loan into 375,000
shares of common stock of the Company plus a 5 year warrant to purchase a like
amount of shares at $.25 per share. In addition, Mr. Smiley converted $9,975 of
accrued interest into 49,875 shares of common stock plus a 5 year warrant to
purchase a like amount of shares at $.25 per share. Finally Mr. Smiley received
25,000 additional shares of common stock as a market adjustment to his equity
investment of $25,000 on August 30, 2004. Mr. Dotoli cancelled $3,750 of accrued
and unpaid interest from August 15, 2004 through January 15, 2004 into 375,000
shares of common stock pursuant to the terms of a portion of a warrant that was
exercised at $.01 per share previously given by the Company to Mr. Dotoli in
exchange for and cancellation of unpaid compensation. On January 15, 2004, Mr.
Smiley was awarded 425,000 shares of common stock as additional compensation.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the six months ending December 31, 2004, accounts payable in the amount
of $250,000 owed by mPhase to Microphase Corporation was cancelled in exchange
for the 1,250,000 shares of common stock and a 5 year warrant to purchase a like
amount of shares at $.25.In addition for such period, Janifast Ltd. cancelled
$200,000 of accounts payable owed by mPhase in exchange for 1,000,000 shares of
common stock and a 5 year warrant to purchase a like amount of shares at $.25
per share.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In late February and early March of 2005, the various vendors converted
approximately $173,898 in accounts payable due from the Company into 535,296
shares of Common stock aggregating $183,310 in full settlement of those
obligations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Mr. Ronald A. Durando converted $13,000 of accrued and unpaid interest on
various demand notes issued by the Company for loans by Mr. Durando during the
six month period ended December 31, 2004 into 65,000 shares of common stock plus
a 5 year warrant to purchase a like amount of shares at $.25 per share. In
addition Mr. Durando converted $13,954 of principal of a $75,000 promissory note
into the exercise, in full, of a warrant to purchase 1,395,400 shares of common
stock at $.01 previously granted to Mr. Durando in exchange for cancellation of
unpaid compensation.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In June of 2005, Mr. Smiley converted the his 12% &nbsp;$100,000 note converted plus
accrued interest thereon to 520,000 shares of common stock of mPhase at the rate
of $.20 cents per share plus a 5 year warrant for an additional 520,000 shares
of common stock at $.25 per share.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In addition a demand note payable to Martin Smiley, CFO and General Counsel of
mPhase, in the amount of $75,000 was converted into 375,000 shares of common
stock plus a 5 year warrant to purchase a like amount of shares at $.25 per
share and Mr. Smiley extended from July 25, 2004 to July 25, 2005 a $100,000
promissory note carrying 12% interest. In addition Mr. Smiley converted accrued
and unpaid interest on his various promissory notes of $ 9,975 through December
31, 2004 into 49,875 shares of common stock plus a 5 year warrant to purchase a
like amount of common stock at $.25 per share. Mr. Smiley&#146;s remaining $100,000
note is convertible into Common Stock of mPhase at the rate of $.25 cents per
share through July 25, 2009. Upon conversion, the note holder will be granted
warrants to purchase an equivalent amount of mPhase Common Stock at $.25 cents
per share for a period of five years from the date of conversion plus a 5 year
warrant for a like amount of shares at $.25 per share. Mr. Ronald A. Durando
converted $13,000 of accrued and unpaid interest on various demand notes issued
by the Company for loans by Mr. Durando during the six month period ended
December 31, 2004 into 65,000 shares of common stock plus a 5 year warrant to
purchase a like amount of shares at $.25 per share. In addition Mr. Durando
converted $13,954 of principal of a $75,000 promissory note into the exercise,
in full, of a warrant to purchase 1,395,400 shares of common stock at $.01
previously granted to Mr. Durando in exchange for cancellation of unpaid
compensation. Finally, Mr. Gustave Dotoli, Chief Operating Officer of the
Company converted $ 3,750 of accrued and unpaid interest on a $75,000 promissory
note into 375,000 shares of common stock at $.01 pursuant to a portion of a
warrant previously granted to Mr. Dotoli for unpaid compensation.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During fiscal year end June 30, 2006, Mr. Edward Suozzo, a consultant of the
Company, converted $50,000 of accounts payable owed by the Company into 331,864
shares of common stock plus a 5 year warrant to purchase 277,778 shares of
common stock at $.18 per share. During fiscal year end June 30, 2005, Mr. Suozzo
converted $20,000 of accounts payable owed by the Company into 100,000 shares of
common stock plus a 5 year warrant to purchase 100,000 shares of common stock at
$.25 per share.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During fiscal year end June 30, 2006, Microphase Corporation and Janifast Corp,
both related parties respectively converted $369,000 and $171,000 of accounts
payable owed by the Company into 2,050,000 and 950,000 shares of common stock
plus a 5 year warrant to purchase 2,050,000 and 950,000 shares of common stock
at $.18 per share.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the three months ending September 30, 2004, a note payable in the amount
of $180,000 to Microphase Corporation, Such note was extended by Microphase from
July 25, 2004 and now matures on July 25, 2005. Additionally, a note payable to
Martin Smiley, CFO and General Counsel of mPhase, in the amount of $100,000 was
extended from July 25, 2004 to July 25, 2005. Both liabilities carry an interest
rate of 12% payable quarterly in arrears and were extended effective June 30,
2004. Each note is convertible into Common Stock of mPhase at the rate of $.25
cents per share plus a 5 year warrant for a like amount of common stock at $.25
per share through July 25, 2005 and a second 5 year warrant at $.50 per share
convertible into a like amount of shares.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
48</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On August 30, 2004, the Company paid $100,000 to Piper&amp;Rudnick, LLP, its outside
counsel, in connection with the renegotiation of a Payment Agreement effective
June 30, 2004. Under the terms of the renegotiated Payment Agreement, the
Company agreed to payments of $25,000 each on December 1, 2004, March 1, 2005,
June 1, 2005 and September 1, 2005 and a payment of $50,000 on December 1, 2006
plus $25,000 payments on March 1, 2006, June 1, 2006, September 1, 2006 and a
final payment of $75,000 payment on December 1, 2007. In addition, Piper&amp;Rudnick
LLP agreed to convert $150,000 of such payable into a 5 year cashless warrant to
purchase the Company&#146;s common stock at $.25 per share.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On August 30, 2004 the Company issued two demand promissory notes each in the
principal amount of $75,000 at 12% interest in consideration of loans of $75,000
to the Company from each of Mr. Dotoli, its COO and Mr. Smiley, its CFO and
General Counsel. In addition on September 30, 2004, the Company issued a demand
promissory note to Microphase Corporation, a related party, for a loan of
$175,000 to the Company with a 12% interest rate. Finally, the Company issued
demand promissory notes with an interest rate of 12% to Mr. Ronald Durando, CEO
of the Company for loans made to the Company dated August 30, 2004, as well as
demand promissory notes to Mr. Durando, its CEO, for loans to the Company of
$200,000 on August 30, 2004, $75,000 on September 28, 2004 and $175,000 on
September 30, 2004 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Necdet F. Ergul, Ronald A. Durando and Gustave T. Dotoli, our Chairman, Chief
Executive Officer and Chief Operating Officer, respectively, are executive
officers and shareholders of Microphase and Ronald Durando and Gustave T. Dotoli
are president and vice- president of PacketPort.com., respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On November 26, 1999, Mr. Durando acquired, via a 100% ownership of PacketPort,
Inc., a controlling interest in Linkon Corporation, now known as PacketPort.com,
Inc. On November 26, 1999, PacketPort, Inc., a company owned 100% by Mr.
Durando, acquired controlling interest in Linkon Corp., which subsequently
changed its name to PacketPort.com, Inc. In connection with this transaction,
Mr. Durando transferred 350,000 shares of our common stock to PacketPort, Inc.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Transactions with Microphase Corporation</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
mPhase&#146;s President and Chairman of the Board of the Company are also employees
of Microphase. On May 1, 1997, the Company entered into an agreement with
Microphase, whereby it will use office space as well as the administrative
services of Microphase, including the use of accounting personnel. This
agreement for fiscal year 2006 required mPhase to pay Micophase $10,000 per
month. Microphase also charges fees for specific projects on a
project-by-project basis. During the year ended June 30, 2006 and for the period
of time from mPhase&#146;s inception (October 2, 1996) to June 30, 2006, $531,820 and
$8,670,776, respectively, have been charged to expense or inventory under these
Agreements and is included in operating expenses in the accompanying
consolidated statements of operations. Management believes that amounts charged
to the Company by Microphase are commensurate to amounts that would be incurred
if outside third parties were used.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company is obligated to pay a 3% royalty to Microphase on revenues from its
proprietary Traverser Digital Video and Data Delivery System and DSL component
products.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Transactions with Janifast</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Janifast Ltd., a Hong Kong corporation manufacturer, which has produced
components for our prototype Traverser_ DVDDS product, and may produce such
components for us in the future. Necdet F. Ergul, Ronald A. Durando and Gustave
T. Dotoli are controlling shareholders of Janifast Ltd. with an aggregate
ownership interest of greater than 75% of Janifast Ltd. Mr. Durando is Chairman
of the Board of Directors and Mr. Ergul is a Director of Janifast.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Transactions with Other Related Parties</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In March 2000, mPhase acquired a 50% interest in mPhaseTelevision.Net (formerly
Telco Television Network, Inc.), an incorporated joint venture. This percentage
was increased to approximately 57% in fiscal year 2001. Alpha Star
International, Inc currently owns the remaining joint venture interest.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Transactions with Strategic Vendors</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Effective June 30, 2004, the Company was $473,787 in arrears with respect to a
Promissory Note issued to Piper Rudnick LLP plus other legal fees of
$118,773.36.&nbsp; It should be noted that Piper &amp; Rudnick received such Promissory
Note plus two warrants received in March of 2002 in exchange for cancellation of
certain payables. Such warrants have conversion rights into our common stock for
a total of 2,233,490 shares that have been registered under a recently effective
Form S-1 Registration Statement, and are cashless. On September 3, 2003, the
Company paid $10,000 in cash to Piper in exchange for reducing the total payable
to $550,000 plus the issuance of additional cashless warrant for $150,000 worth
of the Company&#146;s common stock valued at $.25 per share. The remaining $300,000
payable has the following future payment schedule<i> &nbsp;:</i></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
49</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
1. Payments of $25,000 each on December 1, 2004, March 1, 2005, June 1, 2005,
September 1, 2005, March 1, 2006, June 1, 2006 and September 1, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
2. A payment of $50,000 on December 1, 2005</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
3. A payment of $75,000 due on December 1, 2006</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Related Party Indemnification</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On July 24, 2006, the Board of Directors of mPhase Technologies, Inc. with
Messrs. Durando and Dotoli abstaining voted 5-0 to approve the payment of up to
$225,000 of legal expenses incurred in the aggregate for Messrs. Durando and
Dotoli in connection with the Civil Law suit brought by the Securities and
Exchange Commission No. 19465 filed November 15, 2005 against Packetport.com et
al. which included Messrs Durando and Dotoli as officers of Packetport .com. The
Board based its approval upon (a) the denial of any wrong doing by Messrs.
Durando and Dotoli, (b) the key strategic role played by Messrs. Durando and
Dotoli as CEO and COO respectively of mPhase and (c) the current product
ingredient with the IPTV solution or voice over IP has part of the triple play
of services that are part of mPhase&#146;s TV+ solution. As of March 31,2007, the
Company has paid a total of $864,571 in legal fees , from inception in April of
2002 of  the Packetport litigation. For the period commencing April 1, 2007
through the date hereof the Company has incurred and additional $172,641 in
legal fees in connection with the Packetport litigation. The foregoing legal
fees were approved and ratified by the Board
of Directors by a 4-0 vote on May 14, 2007 with Messrs. Durando and Dotoli not
voting.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;Effective June 30, 2001 the Company converted $2,420,039 of liabilities due to
directors and related parties into 4,840,077 shares of the Company&#146;s common
stock pursuant to debt conversion agreements. During the fiscal year ended June
30, 2002 certain strategic vendors and related parties converted approximately
$2.7 million of accounts payable and accrued expenses into 7,492,996 shares of
the Company&#146;s common stock and 5,953,490 warrants. During the twelve months
ending June 30, 2003, certain strategic vendors and related parties converted
approximately $1.9 million of accounts payable and accrued expenses into
5,923,333 shares of the Company&#146;s common stock and warrants to purchase
3,706,800 shares of common stock of mPhase.&nbsp; Such vendors include Microphase
Corporation, Janifast, Ltd., and Strategic Vendors including Piper Rudnick LLP,
mPhase&#146;s outside counsel. Conversions with related parties only consisted of the
following during fiscal years ended June 30, 2004, June 30, 2005 and June 30,
2006 respectively and for the six month period ended March 31, 2007.</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="40%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="middle" width="12%" colSpan="2"><font size="2"><b>For the Nine
    Months</b></font></td>
  </tr>
  <tr>
    <td width="40%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="middle" width="12%" colSpan="2"><font size="2"><b>Ended March 31,</b></font></td>
  </tr>
  <tr>
    <td width="40%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><font size="2"><b>For the Years Ended June
    30,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b></font></td>
    <td align="middle" width="12%" colSpan="2"><font size="2"><b>(Unaudited)</b></font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><i><b>Equity Conversions of</b></i></font></td>
    <td align="right" width="12%"><u><font size="2"><b>2004</b></font></u></td>
    <td align="right" width="12%"><font size="2"><b><u>2005</u></b></font></td>
    <td align="right" width="12%"><font size="2"><b><u>2006</u></b></font></td>
    <td align="right" width="12%"><font size="2"><b><u>2006</u></b></font></td>
    <td align="right" width="12%"><font size="2"><b><u>2007</u></b></font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><i><b>Debt and Other</b></i></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><i><b>Financial Instruments</b></i></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><i><b>with Related Parties</b></i></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><b>Janifast</b></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of shares</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">1,000,000</font></td>
    <td align="right" width="12%"><font size="2">950,000</font></td>
    <td align="right" width="12%"><font size="2">2,050,000</font></td>
    <td align="right" width="12%"><font size="2">837,769</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of warrants</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">1,000,000</font></td>
    <td align="right" width="12%"><font size="2">950,000</font></td>
    <td align="right" width="12%"><font size="2">2,050,000</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Amount converted to equity</font></td>
    <td align="right" width="12%"><font size="2">$0</font></td>
    <td align="right" width="12%"><font size="2">$200,000</font></td>
    <td align="right" width="12%"><font size="2">$171,000</font></td>
    <td align="right" width="12%"><font size="2">$369,000</font></td>
    <td align="right" width="12%"><font size="2">$108,000</font></td>
  </tr>
  <tr>
    <td width="40%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><b>Microphase</b></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><b>Corporation</b></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of shares</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">1,250,000</font></td>
    <td align="right" width="12%"><font size="2">2,050,000</font></td>
    <td align="right" width="12%"><font size="2">950,000</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of warrants</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">1,250,000</font></td>
    <td align="right" width="12%"><font size="2">2,050,000</font></td>
    <td align="right" width="12%"><font size="2">950,000</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">0Amount converted to equity</font></td>
    <td align="right" width="12%"><font size="2">$0</font></td>
    <td align="right" width="12%"><font size="2">$250,000</font></td>
    <td align="right" width="12%"><font size="2">$369,000</font></td>
    <td align="right" width="12%"><font size="2">$171,000</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><b>Officers</b></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of shares</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">1,009,875</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of warrants</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">1,009,875</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Amount converted to equity</font></td>
    <td align="right" width="12%"><font size="2">$0</font></td>
    <td align="right" width="12%"><font size="2">$201,975</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">$0</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><b>Strategic Vendors</b></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of shares</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of warrants</font></td>
    <td align="right" width="12%"><font size="2">1,100,467</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">331,864</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">4,786,293</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Amount converted to equity</font></td>
    <td align="right" width="12%"><font size="2">5,069,242</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">277,778</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">$1,963,202</font></td>
    <td align="right" width="12%"><font size="2">$0</font></td>
    <td align="right" width="12%"><font size="2">$50,000</font></td>
    <td align="right" width="12%"><font size="2">$0</font></td>
    <td align="right" width="12%"><font size="2">$801,294</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2"><b>Total Conversions</b></font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of shares</font></td>
    <td align="right" width="12%"><font size="2">1,100,467</font></td>
    <td align="right" width="12%"><font size="2">3,259,875</font></td>
    <td align="right" width="12%"><font size="2">3,331,864</font></td>
    <td align="right" width="12%"><font size="2">3,000,000</font></td>
    <td align="right" width="12%"><font size="2">5,617,062</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Number of warrants</font></td>
    <td align="right" width="12%"><font size="2">5,069,242</font></td>
    <td align="right" width="12%"><font size="2">3,259,875</font></td>
    <td align="right" width="12%"><font size="2">3,277,778</font></td>
    <td align="right" width="12%"><font size="2">3,000,000</font></td>
    <td align="right" width="12%"><font size="2">0</font></td>
  </tr>
  <tr>
    <td width="40%"><font size="2">Amount converted to equity</font></td>
    <td align="right" width="12%"><font size="2">$1,963,202</font></td>
    <td align="right" width="12%"><font size="2">$651,975</font></td>
    <td align="right" width="12%"><font size="2">$590,000</font></td>
    <td align="right" width="12%"><font size="2">$540,061</font></td>
    <td align="right" width="12%"><font size="2">$909,194</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
50</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>SELLING STOCKHOLDERS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table sets forth information regarding the beneficial ownership of
shares of common stock by the selling stockholders as of the date of this
prospectus, and the number of shares of common stock covered by this prospectus.
Except as otherwise noted below, none of the selling stockholders has held any
position or office, or has had any other material relationship with us or any of
our affiliates within the past three years.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The number of shares of common stock that may be actually purchased by certain
selling stockholders under the warrants and the number of shares of common stock
that may be actually sold by each selling stockholder will be determined by such
selling stockholder. Because certain selling stockholder may purchase all, some
or none of the shares of common stock which can be purchased under the warrants
and each selling stockholder may sell all, some or none of the shares of common
stock which each holds, and because the offering contemplated by this prospectus
is not currently being underwritten, no estimate can be given as to the number
of shares of common stock that will be held by the selling stockholders upon
termination of the offering. The information set forth in the following table
regarding the beneficial ownership after resale of shares is based on the basis
that each selling stockholder will purchase the maximum number of shares of
common stock provided for by the warrants owned by the selling stockholder and
each selling stockholder will sell all of the shares of common stock owned by
that selling stockholder and covered by this prospectus.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>Selling Shareholders List</b></p>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2"><u>Common</u></font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2"><u>Total Beneficial</u></font></td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2"><u>Names</u></font></td>
    <td WIDTH="16%" align="right"><font SIZE="2"><u>Stock</u></font></td>
    <td WIDTH="16%" align="right"><font SIZE="2"><u>Options</u></font></td>
    <td WIDTH="16%" align="right"><font SIZE="2"><u>Warrants</u></font></td>
    <td WIDTH="17%" align="right"><font SIZE="2"><u>Shares</u></font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Abikhzer, Chaim</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">280,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">280,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Abikhzer, Elieyhau</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">93,333</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">93,333</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Abikhzer, Moshe</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">466,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">466,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Abikhzer, Naftoli</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">280,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">280,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Abikhzer, Simon</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">300,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">300,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Abraham Abikhzer Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">280,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">280,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Abraham Zirsha Rausman Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">186,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">186,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Ace Foundation</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,538,889</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,538,889</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">ADMK LLC</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">75,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">75,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Alexander Hasenfeld, Inc.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">333,653</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">333,653</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Aspiotes, Nicholas &amp; Aspiotes, Nancy</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,863,898</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,863,898</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Ateres Mochoel Inc</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">121,871</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">121,871</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Audiostocks, Inc</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">38,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">38,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Barry Rausman Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">186,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">186,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Baum, Mark L.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">59,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">59,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Beth Mayer Associates</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">3,350,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">3,450,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Biderman, Abraham</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,835,898</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,087,500</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">35,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,958,398</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Bolletteri, Angela</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">20,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">212,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">232,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Br Charitable Trust</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,500,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,500,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Calhoun, Wesley R. &amp; Calhoun, Brenda</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">25,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">25,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Camealjon Family LTD Partnership</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">70,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">70,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Capasso, Stephen</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">142,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">142,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Chabad, Colel</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,007,691</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,007,691</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Chaim, Reb Ephraim &amp; Miriam Rachel Klein</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">300,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">300,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Chaim, Sholom &amp; Babad, Sarah R.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Cheng, Tommy</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,600,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,281,250</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,881,250</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
51</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="35%"><font SIZE="2">Clemensen, Timothy</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">CMS Capital</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,500,001</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,500,001</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Congregation Acheinu Bnei Yisroel</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">50,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">50,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Congregation Irgun Shirurai Torah</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">884,615</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">410,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,294,615</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Congregation of New Square</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">266,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">266,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Congregation of Sharei Chaim</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">578,916</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">578,916</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Congregation Usher Madanei</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">102,778</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">102,778</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Cusick, Michael F.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">350,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">350,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Devlin, Michael</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">125,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">125,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Donnelly, Harriet</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">59,375</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">59,375</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Dotoli, Gustave</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">6,793,033</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">7,650,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,138,067</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">15,581,100</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Double U Master Fund L.P.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">16,946,154</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">16,946,154</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Durando Investment LLC</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">420,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">420,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Durando, Ronald</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">14,597,017</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">15,375,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">581,667</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">30,553,684</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Ergul, Necdet</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,850,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,748,750</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">200,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">5,798,750</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">F&amp;N Associates</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">660,803</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">660,803</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Farber, David</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,327,444</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,327,444</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Friedman, Steven</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">75,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">75,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Gasparini, Peter</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">97,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">122,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">219,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Gavrity, Camille</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">20,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">20,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Gemilas Chesed Ach Tov</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">372,797</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">372,797</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Gluck, David</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">12,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">12,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Gluck, Leah</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">120,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">120,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Goittesman, Bella</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">38,888</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">38,888</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Goldenberg, Leon</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">250,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">250,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Gronner, Sam</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">46,875</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">50,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">96,875</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Guardino, Torry</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">77,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">77,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Guerino, Anthony</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">787,500</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">35,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">822,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Hannen, Charles</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">25,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">25,000</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
52</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="35%"><font SIZE="2">Hannen, Scott K. Dr. / Hannen, Aneesa</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">25,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">25,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Hasenfeld Stein</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">150,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">150,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Hasenfeld Stein, Inc. Pension Trust</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,533,669</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,533,669</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Highgate Equities, LLC.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">200,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">200,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">HSI Partnership</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,345,279</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,345,279</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Hsu, Eddie</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">6,916,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">6,916,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Iber International, Ltd.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">4,937,632</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">4,937,632</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Isaacs, Yisroel</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">300,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">300,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Janifast Ltd.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">8,227,778</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,950,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">10,177,778</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Kahn, Paul</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">135,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">135,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Kelly, Eugene L.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">25,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">25,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Kentucky National Insurance Company</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">533,928</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">533,928</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Klein, Mervyn</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">175,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">200,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">933,334</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,308,334</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Lalapet, Suren</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">50,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">50,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Langa, Alex</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">200,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">200,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">LaSalle, Danielle</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">75,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">75,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Lawrence, Victor</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Lebed Biz, LLC</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,000,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,000,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Lebed, Jonathan</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">400,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">175,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">575,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Leibovich, Izzy</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">75,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">75,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Leung, Luis</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">8,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">8,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Leval Trading</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,270,745</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,270,745</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Levin, Channa</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">50,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">50,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Levitanski, Moshe</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">123,624</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">25,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">148,624</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Levitanski, Rivkah</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,266,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,266,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Liba Miriam Rausman Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">186,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">186,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Lifshitz, David</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">25,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">25,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Lifton, Victor</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">400,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">400,000</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
53</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="35%"><font SIZE="2">Magpie Telecom</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,441,176</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,441,176</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Mark Value Partners LLC</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">400,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">400,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Mary Park Properties</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,913,703</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,913,703</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">McCarthy, Timothy</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,688,056</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,688,056</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Menboku</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">59,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">59,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Merit Investments</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">41,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">41,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Microphase Corporation</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">16,060,019</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">6,572,222</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">22,632,241</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Mohs, Lawrence</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,365,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">400,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,765,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Morgan, Philip</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">35,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">35,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Mosdos Ohr Hatorah</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Moshel, Avorhom</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">513,334</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">200,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">700,001</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,413,335</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Naomi Rausman Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">186,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">186,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">New Square Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">933,333</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">933,333</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Pensack, Harvey</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">166,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">166,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Peterkin, Teresa L.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">20,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">113,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">133,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">PJT Family Trust</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">30,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">30,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Platinum Partners Value Arbitrage Fund</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">11,111,112</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">11,111,112</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Raab, Samuel</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">115,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">115,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Randazzo, John</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">47,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">47,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rappaport, Elliott</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rausman, Chaya Etta</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">15,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">15,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rausman, Herbert &amp; Rausman, Rifka</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">746,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">746,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rausman, Shimon</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">166,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">166,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Reickman, Rebecca</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">120,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">120,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rieder, Gary</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">455,556</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">455,556</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rieder, George</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">7,369,111</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">7,369,111</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rieder, Jeremy</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">120,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">120,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rieder, Leslie</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">500,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">500,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rieder, Mark</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">150,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">150,000</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
54</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rokowsky, Tyitzchok</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rosenberg, David</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">170,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">170,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rosenthal, Eliezer M.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,897,186</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,897,186</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rosenthal, Judy</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">250,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">250,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rubinstein Investor Relations Inc</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">300,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">300,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rutgers Caualty Insurance Company</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,215,278</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,215,278</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Rutgers Enhanced Insurance Company</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">148,808</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">148,808</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Samuel, Connon</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Santoriello, Anthony</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,050,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,050,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Scari, Steven</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,106,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,106,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Schuhalter, Coughlin &amp; Suozzo, P.C.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">75,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">345,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">420,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Siciliano, Anthony</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">17,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">262,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">279,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Silber, Brian</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">50,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">50,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Silsby, Charles</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">275,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">275,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Sima Rausman Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">186,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">186,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Simon, Steve</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">125,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,750,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,875,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Singaliese, Michael</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">252,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">252,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Smiley, Martin</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">6,352,629</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,830,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,545,569</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">10,728,198</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Spielman, Mark</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">162,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">162,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Spitzer, Michael</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">50,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">50,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Stefansky, Chaim</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">13,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">13,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Stein, Nachum</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,676,756</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,676,756</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Stein, Yakov</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">250,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">250,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Sternfeld, Murray</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">603,973</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">603,973</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Stockhamer, Lynn</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">50,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">50,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Suozzo, Edward John</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">150,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">350,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">277,778</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">777,778</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Swalm, William</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Tatra Sheep Cheese Co Inc.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">150,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">150,000</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
55</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<table CELLSPACING="0" BORDER="0" WIDTH="100%" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="35%"><font SIZE="2">Thomas, Drew</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">87,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">87,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Thompson, Phillip</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">125,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,050,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,175,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Totten, Jackie</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">52,083</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">150,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">202,083</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Trane Rausman Trust 2002</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">186,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">186,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Traut, Fred</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">952,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">952,500</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Trupia, Paul</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">200,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">125,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">325,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Vac Sales USA, LLC</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">800,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">800,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Velankani Telecommunications Inc</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,407,617</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,407,617</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Waldhuber, Elena</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">31,250</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">162,500</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">193,750</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Watkins, Patricia</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Weinberger, George</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">17,238,753</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">17,238,753</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Werdiger Family Foundation Inc.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">3,470,833</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">3,470,833</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Werdiger, Solomon</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">2,761,667</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">2,761,667</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Wesco, Inc.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">993,591</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">993,591</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Whelan, Mary K.</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">125,000</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">1,500,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">1,625,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Wolfson Equities</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">5,705,556</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">5,555,556</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">11,261,112</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Wolfson, Aaron</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">-</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right"><font SIZE="2">375,000</font></td>
    <td WIDTH="17%" align="right"><font SIZE="2">375,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Wolfson, Abraham</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">933,333</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">933,333</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Wolmark, Rivka</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">120,888</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">120,888</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Zahler, Wanna</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">120,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">120,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Zeitman, Joshua</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">200,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">200,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%"><font SIZE="2">Zeldes, Shraga</font></td>
    <td WIDTH="16%" align="right"><font SIZE="2">100,000</font></td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="16%" align="right">&nbsp;</td>
    <td WIDTH="17%" align="right"><font SIZE="2">100,000</font></td>
  </tr>
  <tr>
    <td WIDTH="35%">&nbsp;</td>
    <td WIDTH="16%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="16%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="16%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
    <td WIDTH="17%" align="right" style="border-bottom-style: solid; border-bottom-width: 1">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="35%" style="border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">Total</font></td>
    <td WIDTH="16%" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">185,914,911</font></td>
    <td WIDTH="16%" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">42,535,500</font></td>
    <td WIDTH="16%" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <font SIZE="2">33,010,306</font></td>
    <td WIDTH="17%" align="right" style="border-top-style: solid; border-top-width: 1; border-bottom-style: solid; border-bottom-width: 1">
    <font size="2">261,460,717</font></td>
  </tr>
</table>
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56</p>
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&nbsp;PLAN OF DISTRIBUTION</p>
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&nbsp;We are registering for resale by the selling stockholders and certain
transferees a total of shares of common stock, of which shares are issued and
outstanding and up to shares are issuable upon exercise of warrants. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of common stock, although we may receive up to approximately $57 million
upon &nbsp;the exercise of all of the warrants and options by the selling
stockholders. We will bear all fees and expenses incident to our obligation to
register the shares of common stock. If the shares of common stock are sold
through broker-dealers or agents, the selling stockholder will be responsible
for any compensation to such broker-dealers or agents.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;The selling stockholders may pledge or grant a security interest in some or all
of the shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to this
prospectus.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The selling stockholders also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;The selling stockholders will sell their shares of common stock subject to the
following:</p>
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1.&nbsp;&nbsp;&nbsp;&nbsp;all or a portion of the shares of common stock beneficially owned by the
selling stockholders or their respective pledgees, donees, transferees or
successors in interest, may be sold on the OTC Bulletin Board Market, any
national securities exchange or quotation service on which the shares of our
common stock may be listed or quoted at the time of sale, in the
over-the-counter market, in privately negotiated transactions, through the
writing of options, whether such options are listed on an options exchange or
otherwise, short sales or in a combination of such transactions;</p>
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&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;each sale may be made at market prices prevailing at the time of such
sale, at negotiated prices, at fixed prices, or at varying prices determined at
the time of sale;</p>
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&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;some or all of the shares of common stock may be sold through one or
more broker-dealers or agents and may involve crosses, block transactions, or
hedging transactions. The selling stockholders may enter into hedging
transactions with broker-dealers or agents, which may in turn engage in short
sales of the common stock in the course of hedging in positions they assume. The
selling stockholders may also sell shares of common stock short and deliver
shares of common stock to close out short positions, or loan or pledge shares of
common stock to broker-dealers or agent that in turn may sell such shares; and</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in connection with such sales through one or more broker-dealers or
agents, such broker-dealers or agents may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and may
receive commissions from the purchasers of the shares of common stock for whom
they act as broker-dealer or agent or to whom they sell as principal (which
discounts, concessions or commissions as to particular broker-dealers or agents
may be in excess of those customary in the types of transactions involved). Any
broker-dealer or agent participating in any such sale may be deemed to be an &#147;underwriter&#148; within the meaning of the Securities Act and will be required to
deliver a copy of this prospectus to any person who purchases any share of
common stock from or through such broker-dealer or agent. We have been advised
that, as of the date hereof, none of the selling stockholders have made any
arrangements with any broker-dealer or agent for the sale of their shares of
common stock.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be &#147;underwriters&#148;.
In addition, any shares of common stock covered by this prospectus which qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this prospectus.&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;If required at the time a particular offering of the shares of common stock is
made, a prospectus supplement or, if appropriate, a post-effective amendment to
the shelf registration statement of which this prospectus is a part, will be
distributed which will set forth the aggregate amount of shares of common stock
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholder and any discounts,
commissions or concessions allowed or re-allowed or paid to broker-dealers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with. There can
be no assurance that any selling stockholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.</p>
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57</p>
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The selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Exchange Act and the rules and
regulations there under, including, without limitation, Regulation M of the
Exchange Act, which may limit the timing of purchases and sales of any of the
shares of common stock by the selling stockholders and any other participating
person. Regulation M may also restrict the ability of any person engaged in the
distribution of the shares of common stock to engage in market-making activities
with respect to the shares of common stock. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We will bear all expenses of the registration of the shares of common stock
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with state securities or &#147;blue sky&#148; laws. The selling
stockholders will pay all underwriting discounts and selling commissions and
expenses, brokerage fees and transfer taxes, as well as the fees and
disbursements of counsel to and experts for the selling stockholders, if any. We
will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreement or the selling stockholders will be entitled to contribution. We will
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act that may arise from any written information
furnished to us by the selling stockholders for use in this prospectus, in
accordance with the related registration rights agreement or will be entitled to
contribution. Once sold under this shelf registration statement, of which this
prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
&nbsp;<b>DESCRIPTION OF SECURITIES</b></p>
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Our authorized capital stock consists of 900,000,000&nbsp;shares of common stock,
$.01 par value as of June 28, 2006 the date of our most recent annual meeting.
As of July 9, 2007, approximately 391 million shares of our common stock are
issued and outstanding and held by approximately 17,000 stockholders of record.
Of&nbsp;the shares of our issued and outstanding common stock, 185,914,911 shares are
covered by this prospectus. In addition shares of our common stock authorized
but unissued as of the date of this prospectus will be issued on exercise of
warrants held by certain selling stockholders.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following description of our capital stock is a summary of the material
terms of such stock. It does not purport to be complete and is subject in all
respects to the provisions of our Certificate of Incorporation and our Bylaws,
copies of which have been filed as exhibits to the registration statement of
which this prospectus is a part and to applicable New Jersey law.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Common Stock</p>
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Each holder of our common stock is entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Cumulative voting for
the election of Directors is not provided for in our Certificate of
Incorporation, which means that the holders of a majority of the shares of
common stock voted elects the Directors then standing for election. The holders
of outstanding shares of common stock are entitled to receive dividends out of
assets legally available for dividends, at such appropriate times and in such
amounts as our Board of Directors decides. The common stock is not entitled to
preemptive rights or other subscription rights and is not subject to conversion
or redemption. Upon liquidation, dissolution or winding up of our affairs, the
holders of common stock will be entitled to share ratably in all assets
remaining after the payment of liabilities. Shares of common stock shall be
transferred only on our books upon surrender to us or a duly appointed transfer
agent of the certificate or certificates properly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer.</p>
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Common Stock Warrants</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;This prospectus also covers shares of common stock purchasable pursuant to
newly issued warrants and options. The exercise price of these warrants and
options range from $.13&nbsp;to $.25 and have an expiration term of 5 years.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Filling Vacancies on the Board</p>
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&nbsp;The Certificate of Incorporation provides that any vacancy on the Board that
results from an increase in the number of Directors during the interim between
annual meetings or special meetings of shareholders may be filled by the Board.
These provisions could temporarily prevent any shareholder from obtaining
majority representation on the Board by enlarging the Board and filling the new
directorships with its own nominees.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
New Jersey Shareholders Protection Act</p>
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&nbsp;There are provisions of New Jersey law, and our Certificate of Incorporation
and Bylaws, that may have an anti-takeover effect. These provisions are designed
to protect shareholders against coercive, unfair or inadequate tender offers and
other abusive tactics and to encourage any person contemplating a business
combination with us to negotiate with our Board of Directors for the fair and
equitable treatment of all shareholders.</p>
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New Jersey has adopted a type of anti-takeover statute known as the New Jersey
Shareholders Protection Act. Subject to numerous qualifications and exceptions,
the statute prohibits an interested shareholder of a corporation from effecting
a business combination with the corporation for a period of five years unless
the corporation&#146;s board approved the combination prior to the shareholder
becoming an interested shareholder. In addition, but not in limitation of the
five-year restriction, if applicable, corporations covered by the New Jersey
statute may not engage at any time in a business combination with any interested
shareholder of that corporation unless the combination is approved by the board
prior to the interested shareholder&#146;s stock acquisition date, the combination
receives the approval of two-thirds of the voting stock of the corporation not
beneficially owned by the interested shareholder, or the combination meets
minimum financial terms specified by the statute. An &#147;interested shareholder&#148; is
defined to include any beneficial owner of 10% or more of the voting power of
the outstanding voting stock of the corporation and any affiliate or associate
of the corporation who within the prior five year period has at any time owned
10% or more of the voting power. The term &#147;business combination&#148; is defined
broadly to include, among other things: The merger or consolidation of the
corporation with the interested shareholder or any corporation that after the
merger or consolidation would be an affiliate or associate of the interested
shareholder, the sale, lease, exchange, mortgage, pledge, transfer or other
disposition to an interested shareholder or any affiliate or associate of the
interested shareholder of 10% or more of the corporation&#146;s assets, or the
issuance or transfer to an interested shareholder or any affiliate or associate
of the interested shareholder of 5% or more of the aggregate market value of the
stock of the corporation.</p>
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58</p>
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The effect of the statute is to protect non-tendering, post-acquisition minority
shareholders from mergers in which they will be &#147;squeezed out&#148; after the merger,
by prohibiting transactions in which an acquirer could favor itself at the
expense of minority shareholders. The New Jersey statute generally applies to
corporations that are organized under New Jersey law, have either their
principal executive offices or significant business operations located in New
Jersey, and have a class of stock registered or traded on a national securities
exchange or registered with the Securities and Exchange Commission pursuant to
Section 12(g) of the Securities Exchange Act of 1934.</p>
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<b>LEGAL MATTERS</b></p>
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The validity of the common stock we are offering pursuant to this prospectus
will be passed upon by Martin S. Smiley General Counsel to the Company. Mr.
Smiley beneficially owns an aggregate of 10,728,198 shares of common stock of
the Company.&nbsp;&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
EXPERTS</p>
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The financial statements and schedules included in this prospectus and elsewhere
in the registration statement, to the extent and for the periods indicated in
their reports, have been audited or reviewed, as the case may be, by Rosenberg,
Rich ,Baker, Berman &amp; Company and audited or reviewed, as the case may be, by
Arthur Andersen, LLP and Schuhalter, Coughlin &amp; Suozzo, PC, independent public
accountants, and are included in reliance upon the authority of said firms as
experts in giving said reports. Prior to the date of this prospectus, Arthur
Andersen was indicted in connection with its rendering of services to another
company. Therefore, Arthur Andersen withdrew from practice before the SEC
effective prior to the date hereof and many of the accountants at Arthur
Andersen have left their current jobs or have been searching for a new place of
employment. Based on these factors, after reasonable efforts, including numerous
phone calls, we were unable to contact our former audit partner at Arthur
Andersen and therefore were unable to obtain Arthur Andersen&#146;s consent to the
inclusion of their report dated October 12, 2001. Accordingly, we have dispensed
with the requirement to file their consent in reliance upon Rule 437a of the
securities act. Because Arthur Andersen has not consented to the inclusion of
their report in this prospectus, you will not be able to recover against Arthur
Andersen under Section 11 of the securities act for any untrue statements of a
material fact contained in the financial statements audited by Arthur Andersen
or any omissions to state a material fact required to be stated therein. As of
March 31, 2006, Schuhalter, Coughlin &amp; Suozzo, PC, owns approximately 829,098
shares of common stock directly and indirectly; options to purchase 875,000
shares of common stock and warrants to purchase 472,778 shares of common stock,
all of which are being registered pursuant to this prospectus. All of such
securities owned by Schuhalter, Coughlin &amp; Suozzo, PC and Edward P. Suozzo,
individual and in trust for family members were issued to Schuhalter, Coughlin &amp;
Suozzo, PC in consideration for non-audit consulting services and/or
satisfaction of payables related to non-audit consulting services and were
issued after Schuhalter, Coughlin &amp; Suozzo, PC was no longer our independent
public accounting firm.<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
WHERE YOU CAN FIND ADDITIONAL INFORMATION</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We are subject to the information requirements of the Securities Exchange Act of
1934, as amended (the &#147;Exchange Act&#148;). In accordance with the Exchange Act, we
file reports, proxy statements and other information with the Securities and
Exchange Commission. Our reports, proxy statements and other information filed
with the SEC may be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. Copies of such material also may be obtained at prescribed rates from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549-1004. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. The SEC maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
59</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
You may request a copy of these filings, at no cost by writing or telephoning us
at the following address:<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
mPhase Technologies, Inc.<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
587 Connecticut Avenue<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Norwalk, Connecticut 06854-0566<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Attention: General Counsel<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
(203) 831-2242<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
You should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone else
to provide you with different information. The selling security holders will not
make an offer of the shares of our common stock in any state where the offer is
not permitted. You should not assume that the information in this prospectus or
any prospectus supplement is accurate as of any date other than the date on the
front of those documents.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="right">
60</p>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>mPHASE TECHNOLOGIES, INC.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Report
      of Rosenberg Rich Baker Berman &amp; Company</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-1</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Report
      of Arthur Andersen LLP</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-2</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Report
      of Schuhalter, Coughlin &amp; Suozzo, PC</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-3</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Consolidated
      Balance Sheets as of June 30, 2005, June 30, 2006 and March 31, 2007
      (Unaudited)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-4</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Consolidated
      Statements of Operations for the years ended June 30, 2004, 2005, 2006 and
      for the&nbsp; period from inception (October 2, 1996) through June 30,
      2005</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-5</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Unaudited
      Consolidated Statements of Operations for the Six months ended March 31,
      2007 and for the period from inception (October 2, 1996) through March 31,
      2007</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-6</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Consolidated
      Statements of Changes in Stockholders&#146; Equity (Deficit) for the period
      from inception (October 2, 1996) to June 30, 1997 and for each of the nine
      years in the period ended June 30, 2006</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-7-12</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Unaudited
      Consolidated Statement of Changes in Shareholders&#146; (Deficit) for the Six
      months ended March 31, 2007</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-13</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Consolidated
      Statements of Cash Flows for the years ended June 30, 2004 and 2005, 2006
      and for the period from inception (October 2, 1996) through June 30,
      2006</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-14</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Unaudited
      Consolidated Statements of Cash Flows for the Three months ended March 31,
      2006 and 2006, and for the period from inception (October 2, 1996) through
      March 31, 2007</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-15</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Notes
      to Consolidated Financial Statements</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>F-16</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>61</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">To
the Board of Directors and Stockholders of mPhase Technologies, Inc.:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>We have audited the accompanying consolidated balance sheets of
mPhase Technologies, Inc. (a New Jersey corporation in the development stage)
and subsidiaries as of June 30, 2006 and June 30, 2005, and the related
consolidated statements of operations, changes in stockholders&#146; equity
(deficit), cash flows and Schedule II (Valuation and Qualifying Accounts, Item
14B) for each of the three years in the period ended June 30, 2006 and for the
period from inception (October 2, 1996) to June 30, 2006. These financial
statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of mPhase Technologies,
Inc. for the period from inception to June 30, 2001. Those statements were
audited by other auditors whose report has been furnished to us and our opinion,
insofar as it relates to amounts for the period from inception to June 30, 2001,
included in the cumulative totals, is based solely upon the report of the other
auditors.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material accounting misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits and the report of other auditors provide a reasonable basis for our
opinion.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>In our opinion, based on our audits and the report of other
auditors, the financial statements referred to above present fairly, in all
material respects, the financial position of mPhase Technologies, Inc. and
subsidiaries as of June 30, 2006 and 2005 and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2006 and for the period from inception to June 30, 2006, in conformity with
accounting principles generally accepted in the United States.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and is in a working capital deficit position that raises
substantial doubt about its ability to continue as a going concern. Management&#146;s
plans concerning these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">
Rosenberg Rich Baker Berman &amp; Company <br>
Bridgewater, NJ</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">September
27, 2006</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>62</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">To
the Board of Directors and Stockholders of mPhase Technologies, Inc.:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">We
have audited the accompanying consolidated balance sheets of mPhase
Technologies, Inc. (a New Jersey corporation in the development stage) and
subsidiaries as of June 30, 2001 and 2000, and the related consolidated
statements of operations, changes in stockholders&#146; equity and cash flows for
each of the three years in the period ended June 30, 2001 and for the period
from inception (October 2, 1996) to June 30, 2001. These financial statements
are the responsibility of the Company&#146;s management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the financial statements of mPhase Technologies, Inc. for the period from
inception to June 30, 1998. Such amounts are included in the cumulative from
inception to June 30, 2001 totals of the statements of operations, changes in
stockholders&#146; equity and cash flows and reflect total net loss of 6 percent of
the related cumulative totals. Those statements were audited by other auditors
whose report has been furnished to us and our opinion, insofar as it relates to
amounts for the period from inception to June 30, 1998, included in the
cumulative totals, is based solely upon the report of the other auditors.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">We
conducted our audits in accordance with auditing standards generally accepted in
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
our opinion, based on our audits and the report of other auditors, the financial
statements referred to above present fairly, in all material respects, the
financial position of mPhase Technologies, Inc. and subsidiaries as of June 30,
2001 and 2000, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2001 and for the period from
inception to June 30, 2001, in conformity with accounting principles generally
accepted in the United States.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has suffered recurring losses from operations
and is in a working capital deficit position that raises substantial doubt about
its ability to continue as a going concern. Management&#146;s plans concerning these
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">Arthur
Andersen LLP<br>
Stamford,
Connecticut</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">
October
12, 2001</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">PURSUANT
TO SEC RELEASE NO. 33-8070 AND RULE 437A UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, mPHASE TECHNOLOGIES, INC. HAS NOT RECEIVED WRITTEN CONSENT AFTER
REASONABLE EFFORT TO USE THIS REPORT. THIS REPORT IS A COPY OF A PREVIOUSLY
ISSUED ARTHUR ANDERSEN LLP REPORT. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP. WITH RESPECT TO THIS INSTANT 10K/A, YOU WILL NOT BE ABLE TO
RECOVER AGAINST ARTHUR ANDERSEN LLP UNDER SECTION 11 OF THE SECURITIES ACT FOR
ANY UNTRUE STATEMENTS OF A MATERIAL FACT CONTAINED IN THE FINANCIAL STATEMENTS
AUDITED BY ARTHUR ANDERSEN LLP OR ANY OMISSIONS TO STATE A MATERIAL FACT
REQUIRED TO BE STATED THEREIN.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>63</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">To
the Board of Directors and Stockholders of mPhase Technologies, Inc.:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">We
have audited the statements of operations, changes in stockholders&#146;s equity, and
cash flows for the period October 2, 1996 (date of inception) through June 30,
1998 of mPhase Technologies, Inc. (a development stage company). These financial
statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on the financial statements based on our
audit.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">We
conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
our opinion, such financial statements present fairly, in all material respects,
the results of its operations and its cash flows for the period of October 2,
1996 (date of inception) through June 30, 1998 in conformity with generally
accepted accounting principles.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">Schuhalter,
Coughlin &amp; Suozzo, PC<br>
Raritan,
New Jersey&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">January
28, 1999</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>64</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
CONSOLIDATED BALANCE SHEETS</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>JUNE 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>JUNE 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>March 31,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>ASSETS</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>(Unaudited)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Current
      Assets:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Cash
      and cash equivalents</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$351,185</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,359,925</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$315,055 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Accounts
      receivable, net of bad debt reserve of $0, $20,207 and $0 in 2005, 2006
      and March 31, 2007 respectively</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>533,841</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>106,237</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,770 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Stock
      subscription receivable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>460,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Inventory,
      net of reserve of $205,642, $0 and $0 in 2005, &nbsp;2006 and March 31,
      2007 respectively</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>490,142</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>161,270</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>476,534 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Prepaid
      expenses and other current assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>25,622</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>66,777</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>494,430 </U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Total
      current assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,860,790</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,694,209</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,288,789 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Property
      and equipment, net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>162,692</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>350,120</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>268,973 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Patents
      and licenses, net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>141,451</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>87,579</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>58,067 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Other
      assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>67,250</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>50,000</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>50,000 </U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Total
      assets</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$2,232,183</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$2,181,908</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$1,665,829 </U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>LIABILITIES
      AND STOCKHOLDERS&#146; EQUITY (DEFICIT)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Current
      Liabilities:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Accounts
      payable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,691,338</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,638,322</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,687,339 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Accrued
      expense</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>431,765</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>557,342</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>535,920 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Due
      to related party</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>721,569</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>274,271</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>776,397 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Note
      payable, related party</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>277,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>161,000 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Current
      portion of long term debt</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>413,537</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>318,058</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>101,640 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Deferred
      revenue</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>37,933 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Total
      current liabilities</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,535,209</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$2,787,993</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$4,300,229 </U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Other
      liabilities</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>214,709</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Long-term
      debt, net of current portion</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>100,000</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Total
      liabilities </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,849,918</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,787,993</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$4,300,229 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">COMMITMENTS
      AND CONTINGENCIES (Note 11)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">STOCKHOLDERS&#146; (DEFICIT):</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Common
      Stock, par value $.01 (900,000,000 shares authorized, 145,048,832,
      278,235,984 and 339,800,539 issued and outstanding in 2005, 2006 and March
      31, 2007 respectively. Note 8) &nbsp;&nbsp;&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,450,489</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,782,360</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,398,005 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Additional
      paid-in capital</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>123,949,156</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>148,079,585</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>156,495,997 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Deficit
      accumulated during development stage</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(127,009,407)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(151,460,057)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(162,520,429)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Less-treasury
      stock, 13,750 shares, at cost</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(7,973)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(7,973)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(7,973)</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Total
      stockholders&#146; (deficit)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>($1,617,735)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>($606,085)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>($2,634,400)</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Total
      liabilities and stockholders&#146; deficit</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$2,232,183</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$2,181,908</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$1,665,829 </U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">&nbsp;The
accompanying notes are an integral part of these Consolidated Financial
Statements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>65</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>&nbsp;&nbsp;&nbsp;&nbsp;<B>&nbsp;mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
CONSOLIDATED STATEMENT OF OPERATIONS</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=285 colSpan=2>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=139>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=146>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>From Inception</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>For the Years</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>(October 2, 1996)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Ended June 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>to June 30,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">TOTAL
      NET REVENUES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$4,641,346</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,711,085</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$975,482</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$22,295,607</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">COSTS
      AND EXPENSES:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of Sales (Including $3,647,599, $1,370,700 and $802,455 incurred with
      related parties in 2004, 2005, and 2006, respectively as discussed in Note
      9)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,068,255</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,446,151</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>974,583</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>16,333,941</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development (including non-cash stock related charges of $72,000, $0,
      and $200,850 in 2004, 2005 and 2006 respectively, see also note Note 9
      Related Party Transactions)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,069,721</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,127,438</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8,034,964</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>51,579,202</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and Administrative (including non-cash stock related charges of
      $1,242,793, $2,948,083, $6,075,573 in years 2004, 2005 and
      2006&nbsp;respectively, see notes 8 &amp; 9 Stockholders Equity and
      Related Party Transactions)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,177,961</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,579,761</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>11,121,235</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>96,756,092</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and Amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>122,878</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>62,679</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>78,416</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>3,031,002</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      costs and expenses</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>12,438,815</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>13,216,029</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>20,209,198</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>167,700,237</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Loss
      from operations<BR></P>
      </TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(7,797,469)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(11,504,944)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(19,233,716)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(145,404,630)</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">OTHER
      INCOME (EXPENSE):</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      income (expense), net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(111,175)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(110,469)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(34,569)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(150,141)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (expense) including non cash reparation expense of &nbsp;$5,530,504
      in 2006 (see Note 8 Stockholders Equity)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>150,058</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>381,089</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(5,182,365)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(5,905,286)</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      &nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>NET
      LOSS</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$(7,758,586)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$ (11,234,324)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$ (24,450,650)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$ (151,460,057)</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">LOSS
      PER COMMON SHARE, basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>($.10)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>($.10)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>($.12)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">WEIGHTED
      AVERAGE COMMON SHARES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">OUTSTANDING,
      basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>77,677,120</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>108,657,578</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>199,610,372</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">The
accompanying notes are an integral part of these Consolidated Financial
Statements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>66</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>mPHASE TECHNOLOGIES, INC.<br>
(A Development Stage Company)<br>
<B>&nbsp;Consolidated Statements of Operations<br>
</B>&nbsp;(Unaudited)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=156>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=169>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=160>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(Date of</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=345 colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Nine Months Ended</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=160>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;Inception) to</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=345 colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>March 31,</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=160>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;March 31,</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>2006</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>2007</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>2007</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">REVENUES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$832,999 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$135,743 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$22,431,350 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">COSTS
      AND EXPENSES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of Sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>729,475 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>88,207 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>16,422,148 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Research
      and Development ( including non-cash stock related charges of $200,850, $0
      and $2,318,519, for 2006, 2007 and inception to date respectively)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,120,253 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,964,404 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>56,543,605 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">General
      and Administrative (including non-cash stock related charges of,
      $4,510,350, $1,124,647 and $58,319,301 for 2006, 2007 and inception to
      date respectively)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8,002,079 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,012,073 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>101,768,166 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and Amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>57,644 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>66,314 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,097,316 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">TOTAL
      COSTS AND EXPENSES</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$14,909,451 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$10,130,998 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$177,831,235 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">LOSS
      FROM OPERATIONS</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($14,076,452)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($9,995,255)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($155,399,885)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">OTHER
      INCOME</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Interest
      Income (Expense), net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(25,498)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(10,930)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(161,071)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Other
      Income (Expense) net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,902,302)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,054,187)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 0.5pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(6,959,473)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">TOTAL
      OTHER INCOME (EXPENSE)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($4,927,800)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($1,065,117)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($7,120,544)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">NET
      LOSS</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($19,004,252)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($11,060,372)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($162,520,429)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">LOSS
      PER COMMON SHARE, basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($0.09)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($0.04)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING, basic and diluted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>211,186,500 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>309,018,261</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=958 colSpan=4>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">The
      accompanying notes are an integral part of these consolidated financial
      statements.</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>67</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>&nbsp;&nbsp;<B>CONSOLIDATED STATEMENTS OF CHANGES IN<br>
STOCKHOLDERS&#146; EQUITY (DEFICIT)<br>
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)<br>
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS<br>
IN THE PERIOD ENDED JUNE 30, 2006</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Common Stock Shares</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Par Value &nbsp;0.01 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Treasury Stock</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Additional Paid-In Capital</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Deferred Compensation</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Accumulated Deficit</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total Stockholders Equity (Deficit)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      OCTOBER 2, 1996 </B>(date of inception).</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1,140,427</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$11,404</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$459,753</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($537,707)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($66,550)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock of Tecma Laboratories, Inc., for 100% of the
    Company.</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,600,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>66,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(537,157)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>537,707</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>66,550</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock, in private placement, net of offering costs of
      $138,931</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>594,270</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,943</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>752,531</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>758,474</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(781,246)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(781,246)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      JUNE 30, 1997</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>8,334,697</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$83,347</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$675,127</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($781,246)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($22,772)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants, in private placement, net of offering costs
      of $84,065</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>999,502</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>9,995</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>791,874</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>801,869</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>300,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>147,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>150,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock in connection with investment in unconsolidated
      subsidiary</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>250,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>122,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>125,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Repurchase
      of 13,750 shares of common stock</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7,973)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7,973)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants in private placement, net of offering costs
      of $121,138</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,095,512</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>10,955</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>659,191</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>670,146</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for financing services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>100,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,000)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock in consideration for 100% of the common stock of
      Microphase Telecommunications, Inc.</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,500,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>25,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,685,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,710,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,341,059)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(4,341,059)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      JUNE 30, 1998</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>13,579,711</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$135,797</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$4,079,692</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($5,122,305)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($914,789)</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=961 colSpan=8>
      &nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=961 colSpan=8>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;The
      accompanying notes are an integral part of these Consolidated Financial
      Statements.</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>68</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>CONSOLIDATED STATEMENTS OF CHANGES IN<br>
STOCKHOLDERS&#146; EQUITY (DEFICIT)<br>
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)<br>
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS<br>
IN THE PERIOD ENDED JUNE 30, 2006</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Common Stock Shares</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Par Value &nbsp;0.01 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Treasury Stock</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Additional Paid-In Capital</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Deferred Compensation</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Accumulated Deficit</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total Stockholders Equity (Deficit)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      JUNE 30, 1998</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>13,579,711</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$135,797</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($7,973)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$4,079,692</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($5,122,305)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($914,789)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants in private placements, net of offering costs
      of $107,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,120,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>31,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,981,800</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,013,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,599,332</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>15,993</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8,744,873</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8,760,866</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants in private placement, net of offering costs
      of $45,353</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>642,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,420</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,553,227</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,559,647</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock in private placement, net of offering costs of
    $679,311</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,426,698</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>44,267</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>10,343,167</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>10,387,434</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of stock options for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>7,129,890</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>7,129,890</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of warrants for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>16,302</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>16,302</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Deferred
      employee stock option compensation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(140,000)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(140,000)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(22,838,344)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(22,838,344)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      JUNE 30, 1999</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>23,367,741</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$233,677</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($7,973)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$34,848,951</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($140,000)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($27,960,649)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$6,974,006</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock and options in settlement</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>75,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>750</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>971,711</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>972,461</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock upon exercise of warrants and options</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,632,084</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>46,321</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,406,938</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,453,259</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock in private placement, net of cash offering costs of
      $200,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>10,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,790,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,800,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock in private placement, net of cash offering costs of
      $466,480</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,165,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>11,655</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>9,654,951</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>9,666,606</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,164,215</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>11,642</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8,612,265</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8,623,907</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of options for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>9,448,100</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>9,448,100</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Deferred
      employee stock option compensation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,637,375</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(1,637,375)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Amortization
      of deferred employee stock option compensation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>551,707</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>551,707</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(38,161,542)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(38,161,542)</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      JUNE 30, 2000</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>31,404,540</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$314,045</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$74,370,291</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($1,225,668)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($66,122,191)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$7,328,504</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=511 colSpan=6>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      &nbsp;The accompanying notes are an integral part of these Consolidated
      Financial Statements.</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=78>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=90>&nbsp;</TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>69</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>CONSOLIDATED STATEMENTS OF CHANGES IN<br>
STOCKHOLDERS&#146; EQUITY (DEFICIT)<br>
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)<br>
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS<br>
IN THE PERIOD ENDED JUNE 30, 2006</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellpadding="0" width="100%" bordercolor="#111111" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Common Stock Shares</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Par Value &nbsp;0.01 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Treasury Stock</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Additional Paid-In Capital</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Deferred Compensation</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Accumulated Deficit</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total Stockholders Equity (Deficit)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      JUNE 30, 2000</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>31,404,540</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$ 314,045</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>($7,973)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$74,370,291</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>($1,225,668)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>($66,122,191)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$7,328,504</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock upon exercise of options</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>320,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>3,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>324,300</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>327,500</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants in private placements, net of cash offering
      costs of $512,195</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>4,329,850</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>43,298</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>7,766,547</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>7,809,845</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>450,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>4,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,003,125</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,007,625</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of options and warrants for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>5,849,585</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>5,849,585</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Deferred
      employee stock option compensation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>607,885</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(607,885)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Amortization
      of deferred employee stock option compensation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,120,278</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,120,278</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock in settlement of debt to directors and related
    parties</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>4,840,077</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>48,402</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,371,637</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,420,039</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>-</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>-</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>-</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>-</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>-</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>(23,998,734)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><U>(23,998,734)</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>BALANCE,
      JUNE 30, 2001</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>41,344,467</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$ 413,445</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$92,293,370</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($713,275)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($90,120,925)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$1,864,642</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of Common stock with warrants in private placement</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>6,980,643</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>69,807</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,903,943</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,973,750</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of Common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,976,068</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>29,760</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,169,241</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,199,001</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of options and warrants for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,877,937</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,877,937</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Cancellation
      of unearned options to former employees</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(140,802)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>140,802</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Amortization
      of deferred employee stock option compensation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>548,550</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>548,550</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock and warrants in settlement of debt to related parties and
      strategic vendors</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>7,492,996</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>74,930</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,663,728</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,738,658</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Sale
      of Common stock to certain Officers and Directors in private
    placement</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>20,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>980,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,000,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of Common stock upon exercise of options</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>13,334</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>133</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>204</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>337</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(11,245,361)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(11,245,361)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance,
      June 30, 2002</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>60,807,508</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$608,075</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$100,747,621</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($23,923)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$(101,366,286)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$ (42,486)</B></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; ">The
accompanying notes are an integral part of these Consolidated Financial
Statements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>70</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>CONSOLIDATED STATEMENTS OF CHANGES IN<br>
STOCKHOLDERS&#146; EQUITY (DEFICIT)<br>
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)<br>
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS<br>
IN THE PERIOD ENDED JUNE 30, 2006</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Common Stock Shares</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Par Value &nbsp;0.01 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Treasury Stock</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Additional Paid-In Capital</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Deferred Compensation</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Accumulated Deficit</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total Stockholders Equity (Deficit)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance,
      June 30, 2002</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>60,807,508</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$608,075</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$100,747,621</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($23,923)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$(101,366,286)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$ (42,486)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of Common stock with warrants in private placement, net of Cash offering
      costs of $124,687</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,296,680</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>42,967</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,125,014</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,167,981</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of Common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>426,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,260</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>107,985</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>112,245</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of options and warrants for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>274,100</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>274,100</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Amortization
      of deferred employee stock option compensations</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>23,923</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>23,923</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock and warrants in settlement of debt to related parties and
      strategic vendors</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,923,333</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>59,233</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,826,329</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,885,562</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(6,650,211)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(6,650,211)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance,
      June 30, 2003</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>71,453,521</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$714,535</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$104,081,049</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
    <p align="right"><u><b><font size="2">$0</font></b></u></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><u><b>$108,016,497</b></u></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$ (3,228,886)</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants in private placement, net of cash offering
      costs of $313,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>15,177,973</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>151,779</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,322,934</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,474,713</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>924,667</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>9,247</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>238,153</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>247,400</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of options and warrants for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,067,393</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,067,393</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock pursuant to exercise of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,233,334</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>12,333</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>304,467</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>316,800</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock and warrants in settlement of debt to related parties and
      strategic vendors</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>110,467</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,105</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,962,099</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,963,204</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(7,758,586)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(7,758,586)</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance,
      June 30, 2004</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>88,899,962</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$888,899</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$111,976,095</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$(115,775,083)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>$ (2,917,962)</U></B></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">The
accompanying notes are an integral part of these Consolidated Financial
Statements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>71</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>CONSOLIDATED STATEMENTS OF CHANGES IN<br>
STOCKHOLDERS&#146; EQUITY (DEFICIT)<br>
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)<br>
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS<br>
IN THE PERIOD ENDED JUNE 30, 2006</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Common Stock Shares</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Par Value &nbsp;0.01 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Treasury Stock</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Additional Paid-In Capital</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Accumulated Deficit</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total Stockholders Equity (Deficit)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance,
      June 30, 2004</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>88,899,962</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$888,999</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$111,976,095</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($115,775,083)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>($2,917,962)</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of Shares in Private Placement</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>39,853,661</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>398,535</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>6,888,553</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>7,287,088</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of in connection with exercise of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>3,637,954</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>36,380</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>644,229</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>680,609</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Conversion
      of Debt to Common stock and warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>3,895,171</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>36,952</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,174,134</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,213,086</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Options
      Awarded to Consultants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,191,043</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,191,043</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Options
      Awarded to Officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>625,290</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>625,290</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of shares to Officers and consultants for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,151,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>11,510</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>322,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>334,010</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Exercise
      of cashless warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>4,949,684</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>49,499</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(49,499)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Exercise
      of warrants by officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>1,770,400</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>17,704</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>17,704</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Reparation
      of Private Placement Offering</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>891,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>8,910</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>176,811</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>185,721</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(11,234,324)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(11,234,324)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance
      June 30, 2005</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>145,048,832</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$1,450,489</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$(7,973)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$123.949,156</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$(127,009,407)</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>$(1,617,735)</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock pursuant to the exercise of warrants, net of cash expenses
      of $108,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>15,720,120</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>157,201</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,850,523</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>3,007,724</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants in private placements, net of cash expenses
      of $674,567</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>72,786,897</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>727,868</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>9,329,781</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>10,057,649</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>11,500,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>115,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,324,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>2,439,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Conversion
      of related party and strategic vendor debts to common stock and
      warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>3,331,864</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>33,319</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>556,681</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>590,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Stock
      options awarded to consultants, employees and officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>3,837,423</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>3,837,423</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of additional shares and warrants to effect revised pricing on previous
      private offering charged to expense</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>29,848,271</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>298,483</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>5,232,021</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>5,530,504</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(24,450,650)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>(24,450,650)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance,
      June 30, 2006</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>278,235,984</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$2,782,360</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>($7,973)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$148,079,585</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>($151,460,057)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 1pt solid"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>($606,085)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=523 colSpan=6>
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=108>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=523 colSpan=6>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">The
      accompanying notes are an integral part of these Consolidated Financial
      Statements.</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=108>&nbsp;</TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>72</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>mPHASE TECHNOLOGIES, INC.<br>
(A Development Stage Company)<br>
<B>Consolidated Statement of Changes in<br>
Shareholders&#146; Deficit <br>
(unaudited)</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellpadding="0" width="100%" bordercolor="#111111" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Shares</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>$.01 Stated Value</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Treasury Stock</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Additional Paid Capital</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Accumulated Deficit</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total Shareholders (Deficit) Equity</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Balance June 30, 2006</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>278,235,984</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$2,782,360 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($7,973)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$148,079,585 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($151,460,057)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($606,085)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock pursuant to the exercise of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>14,740,669</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$147,406 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,922,262 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,069,668 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock with warrants in private placements, net of cash expenses
      of $414,783</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>28,376,022</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$283,760 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,441,958 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,725,718 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of common stock for services</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,822,983</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$18,230 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$321,158 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$339,388 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Conversion
      of vendor debt</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,617,062</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$56,171 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$853,123 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$909,294 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Issuance
      of additional shares and warrants to effect repricing</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>11,007,819</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$110,078 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,092,652 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,202,730 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=344 colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Stock
      options awarded to employees and officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$785,259 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$785,259 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Net
      Loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($11,060,372)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($11,060,372)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="37%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Balance March 31, 2007</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>339,800,539</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$3,398,005 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($7,973)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$156,495,997 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($162,520,429)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="9%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($2,634,400)</B></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">The
accompanying notes are an integral part of these Consolidated Financial
Statements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>73</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>For the Years Ended June 30, </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Inception (October 2, 1996) to June 30,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>CASH
      FLOWS FROM OPERATING ACTIVITIES</B>:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(7,758,586)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(11,234,324)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(24,450,650)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(151,460,057)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Adjustments
      to reconcile net loss to net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cash
      used in operating activities:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>730,099</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>280,590</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$206,935</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,817,764</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Book
      value of fixed assets disposed</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>74,272</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Loss
      on unconsolidated subsidiary</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,466,467</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Provision
      for doubtful accounts</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>32,124</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Impairment
      of note receivable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>232,750</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Loss
      on securities</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>37,411</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>48,669</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Gain
      on Extinguishments</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(150,058)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(418,696)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(772,216)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Common
      stock, options and warrants for purchase of common stock granted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,314,793</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,336,064</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,276,423</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>59,071,377</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Reparation
      Cost</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,530,504</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,530,504</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Changes
      in operating assets and liabilities:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Accounts
      receivable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>223,035</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(469,741)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>887,604</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>321,639</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>865,355</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>533,030</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>328,872</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(165,831)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Prepaid
      expenses and other current assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>19,267</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>55,439</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(41,155)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>14,284</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(50,000)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>17,250</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(609,932)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Accounts
      payable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>171,712</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(85,579)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>69,429</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,312,957</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Accrued
      expenses</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(32,702)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(111,589)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>125,577</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,793,857</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Deferred
      revenue</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(214,180)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Due
      to related parties:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Receivable
      from Subsidiary</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(150,000)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Microphase</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>83,762</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>257,348</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(60,787)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,576,272</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Janifast</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>422,905</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>254,063</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(485,556)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,471,412</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(90,583)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>34,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(23,400)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>479,556</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Lintel</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>477,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Due
      to Others</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(32,500)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>179,472</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Net
      cash used in operating activities</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(4,227,501)</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(7,795,964)</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(11,618,954)</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(67,257,660)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>CASH
      FLOWS FROM INVESTING ACTIVITIES:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Investment
      in patents and licensing rights</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(40,893)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(34,167)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(450,780)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Purchase
      of property and equipment</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(104,001)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(121,476)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(340,493)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,103,075)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Net
      cash used in investing activities</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(144,894)</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(155,643)</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(340,493)</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(3,553,855)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>CASH
      FLOWS FROM FINANCING ACTIVITIES:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      proceeds from private placement of common stock and exercise of options
      and warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,964,558</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>8,393,717</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>13,065,375</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>71,931,568</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Repurchase
      of treasury stock at cost</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7,973)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;Conversion
      of debt to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>590,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>590,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Advances
      from/repayment to Microphase</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(180,000)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>347,840</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Proceeds
      from notes payable officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>300,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>535,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>965,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Repayment
      of notes payable - officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(650,000)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(314,709)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(994,709)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Repayment
      of notes payable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(18,978)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(65,970)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(372,479)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(660,286)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      cash provided by financing activities</P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>4,065,580</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>8,212,747</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>12,968,187</B></P></TD>
    <TD
    style="BORDER-TOP: #ffffff 0.75pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>72,171,440</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Net
      increase (decrease) in cash</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>(306,815)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>261,140</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1,008,740</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>1,359,925</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>CASH
      AND CASH EQUIVALENTS, beginning of period</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>396,860</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>90,145</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>351,185</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="40%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>CASH
      AND CASH EQUIVALENTS, end of period</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$ 90,045</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$ 351,185</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$ 1,359,925</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$ 1,359,925</B></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">The
accompanying notes are an integral part of these Consolidated Financial
Statements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>74</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>mPHASE TECHNOLOGIES<br>
&nbsp;(A Development Stage Company)<br>
<B>Consolidated Statements of Cash Flow<br>
</B>(Unaudited)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=center width=201 colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Nine Months Ended</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=270>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(Date of Inception)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=center width=201 colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>March 31,</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=270>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;To &nbsp;March 31,</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>2006</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>2007</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>2007</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Cash
      Flow From Operating Activities:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;Net
      Loss </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($19,004,252)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($11,060,372)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>($162,520,429)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Adjustments
      to reconcile net loss to net cash used in operating activities:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Depreciation
      and amortization</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>140,862 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;165,028
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,982,792 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">(Gain)
      loss on debt extinguishments</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(265,468)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(772,216)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Loss
      on unconsolidated subsidiary</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,466,467 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Non-cash
      charges relating to issuance of common stock, common stock options and
      warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,795,200 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,124,647</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>60,196,024 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Reparations
      charges</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,167,740</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,202,730
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>6,733,235 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Other
      non cash charges to income</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>17,250 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>387,815 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Changes
      in assets and liabilities:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Accounts
      receivable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>357,683 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;103,467
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>425,106 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Inventories</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>37,047 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(315,264)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(481,095)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Prepaid
      expenses and other current assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(47,132)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(427,653)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(413,369)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Other
      non-current assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      &nbsp;&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(609,932)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Accounts
      payable </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(914,257)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,049,017</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,361,974 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Conversion
      of Debt to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;909,294
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,499,294 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Accrued
      expenses </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>806,025 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(21,422)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,772,435 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Due
      to/from related parties</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">-</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Microphase</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(150,034)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;230,645
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,806,917 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Janifast</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(231,698)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,752
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,482,164 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(73,600)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;260,729
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>740,285 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Lintel
      and others</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>477,000 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Deferred
      revenue</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37,933
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>217,405 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Receivables
      from Subsidiary</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(150,000)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Net
      cash used in operating activities</B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($9,364,634)</B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($6,730,469)</B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($73,398,128)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Cash
      Flow from Investing Activities:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Payments
      related to patents and licensing rights</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(450,780)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Purchase
      of fixed assets</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(271,535)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(54,369)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(3,157,444)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Net
      Cash (used) in investing activities</B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($271,535)</B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($54,369)</B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($3,608,224)</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Cash
      Flow from Financing Activities:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Proceeds
      from issuance of common stock and</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">exercises
      of options and warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$13,877,057 </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$5,795,386</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$77,726,953</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Payments
      of notes payable</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(174,919)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(216,418)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(876,704)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Advances
      from Microphase</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>347,840 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Proceeds
      from notes payable - officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(97,000)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;161,000
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,126,000 </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Repayments
      of notes payable - officers</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(994,709)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Repurchase
      of treasury stock at cost</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>-</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(7,973)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Net
      cash provided by financing activities</B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$13,605,138 </B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$5,739,968 </B></P></TD>
    <TD
    style="BORDER-TOP: #000000 0.5pt solid; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1pt solid"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$77,321,407 </B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Net
      increase (decrease) in cash</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$3,968,969 </B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>($1,044,870)</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$315,055 </B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">CASH
      AND CASH EQUIVALENTS, beginning&nbsp; of period</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$351,185</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,359,925</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">CASH
      AND CASH EQUIVALENTS, end of&nbsp; period</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$4,320,154</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$315,055</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$315,055</B></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">The
accompanying notes are an integral part of these Consolidated Financial
Statements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>75</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>ORGANIZATION
AND NATURE OF BUSINESS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">mPhase
Technologies, Inc. (&#147;mPhase&#148; or the &#147;Company&#148;) was organized on October 2, 1996.
The primary business of mPhase is to design, develop, manufacture and market
high-bandwidth telecommunications products incorporating digital subscriber line
(&#147;DSL&#148;) technology. The present activities of the Company are focused on the
deployment of its TV+ System, which delivers MPEG2 digital television,
high-speed internet and voice over copper wire. Additionally, the Company sells
a line of DSL component products. In February of 2004, the Company entered the
field of Nanotechnology focused upon the development of batteries and power
cells with military applications as an additional product line.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
February 17, 1997, mPhase acquired Tecma Laboratories, Inc., (&#147;Tecma&#148;) in a
transaction accounted for as a reverse merger.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
June 25, 1998, the Company acquired Microphase Telecommunications, Inc. (&#147;MicroTel&#148;) a Delaware corporation, through the issuance of 2,500,000 shares of
its common stock in exchange for all the issued and outstanding shares of MicroTel (Note 4). The assets acquired in this acquisition were patents and
patent applications utilized in the Company&#146;s proprietary Traverser Digital
Video and Data Deliver System (&#147;Traverser&#148;).</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
August 21, 1998, the Company incorporated a 100% wholly-owned subsidiary called
mPhaseTV.net, Inc., a Delaware corporation, to market interactive television and
e-commerce revenue opportunities. This subsidiary is dissolved.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
March 2, 2000 the Company acquired a 50% interest in mPhaseTelevision.Net, Inc.,
an incorporated joint venture with AlphaStar International, Inc. (Note 8) for
$20,000. The Company acquired an additional interest in the joint venture of
6.5% in April of 2000 for $1.5 million. Based on its controlling interest in
mPhaseTelevision.Net, the operating results of mPhaseTelevision.Net are included
in the consolidated results of the Company since March 2, 2000.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company is in the development stage and its present activities are focused on
the commercial deployment of its TV+ products for delivery of broadcast IPTV,
Broadband Watch loop diagnostic system and dsl component products which include
POTS splitters and a line of intelligent POTS splitter products and a new line
of power cell batteries being developed through the use of Nanotechnology. Since
mPhase is in the development stage, the accompanying consolidated financial
statements should not be regarded as typical for normal operating periods.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>2.
LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT&#146;S PLANS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Through
June 30, 2006, the Company had incurred development stage losses totaling
$151,460,057, and at June 30, 2006 had a stockholders&#146; deficit of $606,085. At
June 30, 2006, the Company had $1,359,925 of cash and $106,237 of trade
receivables. Through March 31, 2007, the Company had incurred cumulative (a)
development stage losses totaling ($162,520,429), (b) a stockholders&#146; equity
(deficit) of ($1,665,829), and (c) negative cash flow from operations equal to
($73,398,128). &nbsp;At March 31, 2007, the Company had $315,055 of cash and
cash equivalents and $2,770 of trade receivables to fund short-term working
capital requirements.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company&#146;s ability to continue as a going concern and its future success is
dependent upon its ability to raise capital in the near term to: (1) satisfy its
current obligations, (2) continue its research and development efforts, and (3)
the successful wide scale development, deployment and marketing of its
products.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company believes that it will be able to complete the necessary steps in order
to meet its cash flow requirements throughout fiscal 2007 and continue its
development and commercialization efforts. In addition to the above financing
activities, the following business initiatives are also ongoing and are expected
to provide additional working capital to the Company.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company is currently negotiating with several organizations for the commencement
of field trials that would lead to commercial sales of its broadcast television
platform products. The Company has had a downturn in sales of its POTS splitter
products for its fiscal year ended June 30, 2006 to $975,482, which included
sales to two customers of approximately $497,496 during such period.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Management
believes that actions presently being taken to complete the Company&#146;s
development stage through the commercial roll-out of its broadcast television
platforms will be successful. However, there can be no assurance that mPhase
will generate sufficient revenues to provide positive cash flows from operations
or that sufficient capital will be available, when required, to permit the
Company to realize its plans. The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>76</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>3.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">PRINCIPLES
OF CONSOLIDATION</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
consolidated financial statements include the accounts of mPhase, its
wholly-owned and majority owned subsidiaries. Significant intercompany accounts
and transactions have been eliminated in consolidation.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">USE
OF ESTIMATES</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">RECLASSIFICATIONS</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Certain
reclassifications have been made in the prior period consolidated financial
statements to conform to the current period presentation.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">CASH
AND CASH EQUIVALENTS</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">mPhase
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">STOCK
BASED COMPENSATION</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">SFAS
No. 123 (R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statements based on their
fair values.&nbsp; The Company adopted the provisions of Statement No. 123(R) in
the current fiscal year.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">PROPERTY
AND EQUIPMENT</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Property
and equipment is recorded at cost. Depreciation is provided on the straight-line
method over the estimated useful lives of three to five years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">REVENUE
RECOGNITION</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">All
revenue included in the accompanying consolidated statements of operations for
all periods presented relates to sales of mPhase&#146;s POTS Splitter Shelves and DSL
component products.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">As
required, mPhase has adopted the Securities and Exchange Commission (&#147;SEC&#148;)
Staff Accounting Bulletin (&#147;SAB&#148;) No. 101, &#147;Revenue Recognition in Financial
Statements,&#148; which provides guidelines on applying generally accepted accounting
principles to revenue recognition based on the interpretations and practices of
the SEC. The Company recognizes revenue for its POTS Splitter Shelf and other
DSL component products at the time of shipment, at which time, no other
significant obligations of the Company exist, other than normal warranty
support.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">SHIPPING
AND HANDLING CHARGES</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company includes costs of shipping and handling billed to customers in revenue
and the related expense of shipping and handling costs is included in cost of
sales.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">BUSINESS
CONCENTRATIONS AND CREDIT RISK</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">To
date the Company&#146;s products have been sold to a limited number of customers,
primarily in the telecommunications industry.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company had revenue from two customers of 36% and 16% during the fiscal year
ended June 30, 2006. The Company had revenue from two customers of 35.1% and
28.9% during the fiscal year ended June 30, 2005.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Throughout
the year, cash may exceed FDIC insured limits. The Company maintains cash
balances at financial institutions.&nbsp; The balances are insured by the
Federal Deposit Insurance Corporation up to $100,000.&nbsp; Cash balances
exceeded FDIC insured limits at June 30, 2006 and June 30, 2005 and at times
throughout the year for the years then ended.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">RESEARCH
AND DEVELOPMENT</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Research
and Development cost are charged to operations when incurred. The amounts
charged to expense for the years ended 2004, 2005 and 2006, were $4,069,721,
$5,127,438 and $8,034,964 respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>77</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>3.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
(Continued)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">ADVERTISING
COSTS</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Advertising
costs are expensed as incurred.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">PATENTS
AND LICENSES</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Patents
and licenses are capitalized when mPhase determines there will be a future
benefit derived from such assets, and are stated at cost. Amortization is
computed using the straight-line method over the estimated useful life of the
asset, generally five years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Amortization
expense was $86,395, $54,321, and $55,987 for the years ended June 30, 2004,
2005, and 2006, respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
impairment test for the Company&#146;s patents and license rights resulted in the
Company concluding that no impairment in addition to amortization previously
recorded was necessary during the year ended June 30, 2006.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">INVENTORIES</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company uses the First In First Out method (FIFO) to account for inventory which
is carried at cost &nbsp;Inventory consists mainly of the Company&#146;s POTS
Splitter Shelf, Filters, and Servers. Inventory is comprised of the following:
&nbsp;</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="30%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>June 30</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>March 31</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Raw
      materials</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$376,776</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Work
      in Progress</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$77,830</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Finished
      goods</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$241,178</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$161,270</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$476,534</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$695,784</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$161,270</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$476,534</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Less:
      Reserve for obsolescence</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$(205,642)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      Inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$490,142</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$161,270</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$476,534</U></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">LONG-LIVED
ASSETS</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
August 2001, the FASB issued Statement No.&nbsp;144 &#147;Accounting for the
Impairment or Disposal of Long-Lived Assets,&#148; which became effective for the
Company July&nbsp;1, 2002 for the fiscal years ended June&nbsp;30, 2004, June
30, 2005 and June 30, 2006. The Company assesses long-term assets for impairment
under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. Under SFAS No.&nbsp;144, the Company reviews long-term assets for
impairment whenever events or circumstances indicate that the carrying amount of
those assets may not be recoverable. The Company also assesses these assets for
impairment based on their estimated future cash flows.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">INCOME
TAXES</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company accounts for income taxes using the liability method. &nbsp;Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using tax rates and laws expected to be in effect when the differences
are expected to reverse. &nbsp;Valuation allowances are provided against
deferred tax assets for which it has been determined the assets will not be
realized.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">FAIR
VALUE OF FINANCIAL INSTRUMENTS</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
carrying amounts reported in the consolidated balance sheets for mPhase&#146;s cash,
accounts receivable, accounts payable, and accrued expenses approximate their
fair values due to the short maturities of these financial instruments.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
carrying amounts reported in the consolidated balance sheets for mPhase&#146;s notes
payable, long-term debt, amounts due to related parties approximate their fair
values and the amounts recorded as other liabilities and other liabilities -
related parties approximate their fair values based on current rates at which
the Company could borrow funds with similar maturities.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">LOSS
PER COMMON SHARE, BASIC AND DILUTED</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">mPhase
accounts for net loss per common share in accordance with the provisions of SFAS
No. 128, &#147;Earnings per Share&#148; (&#147;EPS&#148;). SFAS No. 128 requires the disclosure of
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Common equivalent shares have been excluded from the computation of diluted EPS
since their effect is anti-dilutive.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>78</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>3.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES &nbsp;-
(Continued)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">WARRANTY
RESERVE</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company warrants that all equipment manufactured by it will be free from defects
in material and workmanship under normal use for a period of one year from the
date of shipment. Through June 30, 2006, substantially all sales by the Company
have been from component telephone equipment parts, primarily the Company&#146;s POTS
Splitter Shelves. The Company&#146;s actual experience for cost and expenses incurred
in connection with such warranties have been insignificant. Warranty expense for
the fiscal year ended June 30, 2006 was nominal. Reserve is considered efficient
to provide for future warranty costs on fiscal 2006 sales.&nbsp; The Company&#146;s
aggregate accrued liability is $25,000 at this time.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">RECENT
ACCOUNTING PRONOUNCEMENTS</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">FASB
153 - Exchange of Nonmonetary Assets</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
December 2004, the FASB issued FASB Statement No. 153.&nbsp; This Statement
addresses the measurement of exchanges of nonmonetary assets.&nbsp; The guidance
in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged.&nbsp; The guidance in that Opinion, however,
included certain exceptions to that principle.&nbsp; This Statement amends
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance.&nbsp; A nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.&nbsp; This
Statement is effective for financial statements for fiscal years beginning after
June 15, 2005.&nbsp; Earlier application is permitted for nonmonetary asset
exchanges incurred during fiscal years beginning after the date of this
Statement is issued.&nbsp; Management believes this Statement will have no
impact on the financial statements of the Company once adopted.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">FASB
123 (revised 2004) - Share-Based Payments</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">
In December, 2004, the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS
No. 123(R), &#147;Share-Based Payment&#148;.&nbsp; Among other things, SFAS No. 123 (R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statements based on their fair
values.&nbsp; The Company adopted the provisions of Statement No. 123(R) in the
current fiscal year.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;STATEMENT
OF CASH FLOW SUPPLEMENTAL INFORMATION</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=421 colSpan=3>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cash
      Flow Schedule</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><u><B>2005</B></u></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><u><B>2006</B></u></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B><U>2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Interest
      Paid</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$48,090</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,104</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$25,498</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$10,930</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Taxes
      Paid</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$550</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,216</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Non
      Cash Transactions from Financing and investing Activities</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Conversion
      of accounts payable to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$590,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$590,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$909,294</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Conversion
      of Accounts payable to Notes</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$79,680</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Reparation
      Cost</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$5,530,504</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$4,434,294</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,202,730</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Options
      Issued</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,837,423</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$785,259</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Share
      based Compensation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=127>
    <p align="right">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,439,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=128>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,351,125</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=125>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$339,388</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Work
      in process transferred to R&amp;D</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=right width=127>
      <P
      style="PADDING-RIGHT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$214,800</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=421 colSpan=3>
    <p align="right">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=374>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Additions
      to Patents and Licenses</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=right width=127>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$38,750</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #ffffff 0.75pt solid"
    vAlign=bottom align=left width=421 colSpan=3>
    <p align="right">&nbsp;</TD></TR>
  </TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>79</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>4.
PROPERTY AND EQUIPMENT</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Property
and equipment, at cost, consist of the following:</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="30%" colspan="3">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>June 30</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>March 31</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      Equipment</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,426,605</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$481,337</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$461,567</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Office
      and Marketing Equipment</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>514,895</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>73,255</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$101,653</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>2,941,500</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>554,592</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$563,220</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Less-Accumulated
      Depreciation</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>(2,778,808)</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>204,472</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$292,516</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Property
      and Equipment net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$162,692</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$350,120</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$270,704</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Depreciation
expense for the years ended June 30, 2004, 2005, and 2006 was $649,704, 227,269,
and $150,948 respectively, of which $613,221, $218,911 and $128,519
respectively, relates to research laboratory and testing equipment included in
research and development expense.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the Fiscal Year Ended June 30, 2006, the Company disposed of or otherwise
abandoned in excess of $3 million of fully depreciated property and research
equipment. Appropriate adjustments were made to the original cost and
accumulated depreciation of such assets.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>
5. ACCRUED EXPENSES</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">Accrued
expenses consist of the following:</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>June 30</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>June 30</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>March 31</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Lucent
      Projects (Note 11)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$100,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Other
      General Expenses</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$431,765</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$457,342</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$332,966</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%" colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$431,765</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$557,342</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$332,966</U></P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>&nbsp;6.
JOINT VENTURE</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
March 2000, mPhase acquired a 50% interest in mPhaseTelevision.Net (formerly
Telco Television Network, Inc.), an incorporated joint venture, for $20,000. The
agreement provided for the grant of warrants to the joint venture partner in
consideration of the execution of the Joint Venture Agreement, to purchase
200,000 shares of the Company&#146;s common stock for $4.00 per share (valued at
$2,633,400). This non-cash charge is included in general and administrative
expenses in the accompanying statement of operations for the year ended June 30,
2000. The fair value of the warrants granted to the joint venture partner as of
the date of grant was based on the Black-Scholes stock option pricing model,
using the following weighted average assumptions: annual expected rate of return
of 0%, annual volatility of 115%, risk free interest rate of 5.85% and an
expected option life of 3 years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
agreement stipulates for mPhase&#146;s joint venture partner, AlphaStar
International, Inc., (&#147;Alphastar&#148;), to provide mPhaseTelevision.Net right of
first transmission for its transmissions of MPEG-2 digital satellite television.
In addition, in March 2000, mPhase loaned the joint venture $1,000,000 at 8%
interest per annum. The loan is repayable to the Company from equity
&nbsp;infusions to the subsidiary, no later than such time that
mPhaseTelevision.Net qualifies for a NASDAQ Small Cap Market Listing. During
April 2000, the Company acquired an additional 6.5% interest in
mPhaseTelevision.Net for $1,500,000.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">As
of June 30, 2006 mPhase owns a 56.5% interest in mPhaseTelevision.net. The
Company terminated the lease of the earth station for business reasons, and
there was no material impact on mPhase Television.net&#146;s operating
activities.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>80</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>&nbsp;7.
LONG TERM DEBT</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Long-term
      debt is comprised of the following:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>June 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>June 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>March 31,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2007</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;Settlement
      Agreements&nbsp; Accounts payable originally expected to be converted to a
      $150,000 Note payable to GTRearing 7% in GTRC bearing 7%interest, amended
      in March 2004, and reduced to $100,000, to be amortized in equal Quarterly
      installments $ 16,667 plus interest at 7% through March 2005 &nbsp;(see
      also-Note 13-Commitments and Contingencies)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$50,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;&nbsp;&nbsp;Note
      payable to law firm bearing 8% interest, originally monthly installments
      of $5,000 per month commencing in June 2002 and continuing through
      December 1, 2003 with a final payment of principal plus accrued interest
      originally due at maturity on December 31, 2003, this note was in arrears
      as of June 30, 2004 and the company negotiated a new settlement
      arrangement as of August 31, 2004. Under such settlement agreement, which
      the Company made a $100,000 cash payment and gave a cashless warrant to
      purchase $150,000 worth of common stock valued at $.25 per share. In
      addition the Company agreed to pay $25,000 on each of December 1, 2004,
      March 1, 2005, June 1, 2005, September 1, 2005 and $50,000 shall be
      payable on December 1, 2005. Thereafter the Company is obligated to pay
      $25,000 on each of March 1, 2006, June 1, 2006, September 1, 2006 with a
      final payment of $75,000 on December 1, 2006. &nbsp;(See also Note 8,
      Stockholders Equity)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$225,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$125,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$100,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;&nbsp;&nbsp;Note
      payable to vendor bearing 8% interest due in weekly payments of $5,000
      including accrued interest. These payments commenced in January 2002 and
      originally were scheduled to continue until June 2004.&nbsp; This note is
      presently in arrears and is included in current portion of long term
      debt.</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$198,057</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$193,058</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;&nbsp;&nbsp;&nbsp;Settlement
      payable, effective interest rate at 5% with vendor for 12 payments of
      $6,640 through March 31, 2006</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$40,480</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$0</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$1,640</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Total</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$513,537</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$318,058</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$101,640</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Less:
      Current portion</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$413,537</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$318,058</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$101,640</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Long-term
      Debt, non-current portion</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$100,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>8.
STOCKHOLDERS&#146; EQUITY</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">mPhase
initially authorized capital of 50,000,000 shares of common stock with no par
value. On February 23, 2000, the Board of Directors proposed and on May 22, 2000
the shareholders approved an increase in the authorized capital to 150,000,000
shares of common stock. On June 15, 2004, a Special Meeting of Shareholders of
the Company approved a proposal by the Company to amend the Company&#146;s
Certificate of Incorporation under New Jersey law to increase the authorized
shares of common stock from 150 million to 250 million shares and change the par
value of all shares of common stock from no par to $0.01 par stock. Effective,
June 30, 2005 and June 2006, the Company received authorization to increase the
number of authorized shares to 500 million and 900 million respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the Fiscal Year Ending June 30, 2005 the following transactions impacted
stockholders equity.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
July of 2004, the Company issued 622,000 shares of its common stock together
with a like amount of callable warrants at $.35 and $.50 respectively in a
private placement. In August and September of 2004, the Company issued 1,050,000
shares of its common stock together with a like amount of callable warrants at
$.25 and $.50 per share in private placements, which after cash outlays of
approximately $15,900, generated net proceeds of $247,500. The aggregate net
proceeds of such private placements of $402,100 were collected during the three
month period ended September 30, 2004. On December 7, 2004, the Company issued
an additional 891,000 shares to the investors in the foregoing private
placements due to a market value adjustment. These shares were valued at
$185,721 which is included in general and administrative expenses in the
accompanying statement of operations for the period ended December 31, 2004.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the three months ending December 31, 2004, the Company granted 134,500 shares of
its common stock to consultants for services performed valued at $26,900.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Additionally,
the Company issued 2,817,914 shares of its common stock pursuant to the exercise
of previously outstanding warrants, generating net proceeds intended to be used
for general corporate purpose of $563,590.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the quarter ended December 31 of 2004, the Company issued equity units
consisting of 10,717,700 shares of its common stock together with a like amount
of warrants, with an exercise price of $.25, in a private placement generating
net proceeds intended to be used for working capital and general corporate
purposes, of $2,116,600 of which $2,066,600 was collected through December 31,
2004 and $50,000 was collected in January of 2005. A consultant who assisted the
Company with this transaction also received 100,000 shares of the Company&#146;s
common stock.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Additionally,
a separate December 2004 private placement was closed out in January of 2005
with the placement of 3,600,000 equity units at $.20 per unit consisting of one
share of common stock plus 5 year warrants for a like amount of shares with a
strike price of $.25 per share generating net proceeds of $720,000 to the
Company. The December 31, 2004 and outstanding subscriptions receivable balance
of $ 50,000 was fully collected in January of 2005.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>81</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>8.
STOCKHOLDERS&#146; EQUITY - (Continued)</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
January 2005, Private Placement realized net proceeds of $357,250 upon issuance
of 1,793,750 shares of Common Stock at $.20
per share plus 5 year warrants to purchase 1,793,750 shares of Common Stock at
$.25 per share. A later Private Placement realized net proceeds of $1,351,000
upon issuance of 4,920,000 shares of Common Stock plus 5 year warrants to
purchase 4,920,000 shares of Common Stock at $.25 per share. A March Private
Placement resulted in the realization of net proceeds of $1,217,000 upon
issuance of 4,396,667 shares of Common Stock at $.30 per share plus 5 year
warrants to purchase 4,396,667 shares of Common Stock at $.30 per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
January of 2005 there were stock option awards issued to two consultants for
services performed. The company granted 250,000 options to a consultant for
professional services, these options provide for the right of stock purchase at
an exercise price of $.25; these options have a five year life and expire in
January of 2010. A second award issued a like number of options to another
service provider under similar terms, except that the options associated with
this second award offer a call feature, available to the company, for redemption
of such options at a call price of $.45 at any time during their five year life.
In aggregate, 400,000 options were issued in connection with these awards and
will result in a charge to General and Administrative non-cash expense in the
amount of $ 133,990 in the third quarter of fiscal 2005. The valuation of this
charge was made on the basis of the fair market value of the Company&#146;s common
stock on the date of grant using the Black-Scholes option premium model.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
February of 2005, GTARC tendered 5,069,242 of cashless warrants which they held
in connection with a previous debt settlement in exchange for 4,949,684 if the
company&#146;s shares of common stock, the balance of the 119,558 warrants were
effectively cancelled as a result of certain warrant exercise exchange
provisions adjusting the exchange rate based on specified stock pricing
experience as per the original debt settlement agreement.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
February 17 of 2005, the Company granted 2,600,000 warrants and 400,000 options
to consultants for services performed valued at $ 1,328,600 and $ 204,400,
respectively. The warrants and options provide the right to purchase a share of
mPhase common stock at an exercise price $.45 and $.30 per share, respectively,
over their 5 year life expiring in February of 2010. These warrant and option
awards were valued on the basis of the fair market value of the Company&#146;s common
stock on the date of grant using the Black-Scholes option premium model and the
value of the award will be expensed to General and Administrative non-cash
expenses in the third quarter of fiscal 2005.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
January 15, 2005, the company converted a $100, 000 convertible note payable to
Martin Smiley in exchange for 400,000 shares and a like number of warrants that
were price at $.25 per unit or $100,000 in aggregate.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Also
in January of 2005, Martin Smiley was awarded additional compensation of 425,000
shares of common stock. . This award will result in a charge to General and
Administrative non-cash expense in the amount of $ 131,750 in the third quarter
of fiscal 2005, representing an expense recognition consistent with the market
price of that stock of $.35 on the date of that award.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the nine months ending March 31, 2005, accounts payable in the amount of
$250,000 owed by mPhase to Microphase Corporation was cancelled in exchange for
the 1,250,000 shares of common stock and a 5 year warrant to purchase a like
amount of shares at $.25.In addition for such period, Janifast Ltd. cancelled
$200,000 of accounts payable owed by mPhase in exchange for 1,000,000 shares of
common stock and a 5 year warrant to purchase a like amount of shares at $.25
per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Mr.
Ronald A. Durando converted $13,000 of accrued and unpaid interest on various
demand notes issued by the Company for loans by Mr. Durando during the nine
month period ended March 31, 2005 into 65,000 shares of common stock plus a 5
year warrant to purchase a like amount of shares at $.25 per share. In addition
Mr. Durando converted $13,954 of principal of a $75,000 promissory note into the
exercise, in full, of a warrant to purchase 1,395,400 shares of common stock at
$.01 previously granted to Mr. Durando in exchange for cancellation of unpaid
compensation.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Mr.
Gustave Dotoli, Chief Operating Officer of the Company converted $ 3,750 of
accrued and unpaid interest on a $75,000 promissory note into 375,000 shares of
common stock at $.01 pursuant to a portion of a warrant previously granted to
Mr. Dotoli for unpaid compensation. A consultant of the Company converted
$20,000 of accounts payable owed by the Company to 100,000 shares of common
stock plus a 5 year warrant to purchase 100,000 shares of common stock at $.25
per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
addition a demand note payable to Martin Smiley, CFO and General Counsel of
mPhase, in the amount of $75,000 was converted into 375,000 shares of common
stock plus a 5 year warrant to purchase a like amount of shares at $.25 per
share and Mr. Smiley extended from July 25, 2004 to July 25, 2005 a $100,000
promissory note carrying 12% interest. In addition Mr. Smiley converted accrued
and unpaid interest on his various promissory notes of $ 9,975 into 49,875
shares of common stock plus a 5 year warrant to purchase a like amount of common
stock at $.25 per share. Mr. Smiley&#146;s remaining $100,000 note is convertible
into Common Stock of mPhase at the rate of $.25 cents per share through July 25,
2009. Upon conversion, the note holder will be granted warrants to purchase an
equivalent amount of mPhase Common Stock at $.25 cents per share for a period of
five years from the date of conversion plus a 5 year warrant for a like amount
of shares at $.25 per share.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>82</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>8.
STOCKHOLDERS&#146; EQUITY - (Continued)</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>During
the Fiscal Year Ending June 30, 2006 and for the nine months ending March 31,
2007 the following transactions impacted stockholders equity.</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>Private
Placements:</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the first fiscal quarter ended September 30, 2005, the Company issued 4,648,625
unregistered shares together with 5 year warrants to purchase 4,648,625 shares
at $.25 per share in a private placement pursuant to Rule 506 of Regulation D of
the Securities Act of 1933 generating $920,000 of gross proceeds. Also during
the quarter, the Company issued 9,877,000 shares of its common stock together
with 5 year warrants to purchase a like amount of shares at $.20 per share in
two private placement pursuant to Rule 506 of Regulation D of the Securities Act
of 1933 generating $2,167,400 of gross proceeds.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the second fiscal quarter ended March 31, 2006 the Company
issued 1,702,900 shares together with of 5 year warrants to purchase 1,702,900
shares of the Company&#146;s common stock to accredited investors at $.20 per share
in a private placement generating pursuant to Rule 506 of Regulation D of the
Securities Act of 1933 generating $340,580 of gross proceeds Also during the
quarter, the Company issued 11,477,785 shares together with of 5 year warrants
to purchase 11,477,785 shares of the Company&#146;s common stock to accredited
investors at $.18 per share in a private placement pursuant to Rule 506 of
Regulation D of the Securities Act of 1933 generating $2,238,973 of gross
proceeds.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the third fiscal quarter ended March 31, 2006, the Company
issued 29,861,772 shares together with of 5 year warrants to purchase 29,861,772
shares of the Company&#146;s common stock to accredited investors at $.18 per share
in a private placement generating pursuant to Rule 506 of Regulation D of the
Securities Act of 1933 generating $5,065,265 of gross proceeds.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>In addition, the Company issues approximately 2,426,698 shares as
finders fees as part of the private placements during the year. (See also
comments regarding 12,792,117 shares explained under Reparations below)</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the quarter ended September 30, 2006, the Company issued
6,780,716 shares of its common stock together with 5,555,556 of &nbsp;5 year
warrants to purchase one share each of the Company&#146;s common stock, with an
exercise price of $.18 per share in private placements generating net proceeds
of $1,104,000.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the quarter ended December 31, 2006, the Company issued
6,622,223 shares of its common stock together with 5 year warrants to purchase
1,388,889 of &nbsp;&nbsp;the Company&#146;s common stock, with an exercise price of
$.18 per share in private placements generating net proceeds of $833, 866.
Included in these amounts are finders fees paid in cash and 566,667 additional
shares of common stock.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the quarter ended March 31, 2007, the Company issued
14,973,083 shares of its common stock. Private placements generating net
proceeds of $1,787,850; included in this amount is an estimate of finders fees
to be paid of $198,650.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>Warrants
Exercised:</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the first fiscal quarter ended September 30, 2005 the Company issued 225,000
shares of common stock pursuant to the exercise of warrants issued prior to the
3 month period generating net cash proceeds of $45,000.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the second fiscal quarter March 31, 2006, the Company issued 1,714,286 shares of
its common stock pursuant to the exercise of warrants, generating net proceeds
of $294,857.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the third fiscal quarter ended March 31, 2006 , the Company
issued 12,530,834 shares of its common stock pursuant to the exercise of
warrants, generating net proceeds of $2,525,867.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>The Company issued 1,250,000 shares of its common stock pursuant
to the exercise of warrants, generating net proceeds of $250,000 to the
Company.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the quarter ended September 30, 2006, the Company issued
138,889 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $25,000 to the Company.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the quarter ended December 31, 2006, the Company issued
12,101,780 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $1,669,668 to the Company. In addition, the Company
issued to certain investors new 5 year &nbsp;&nbsp;warrants to purchase
11,111,112 of the Company&#146;s common stock, with exercise prices ranging from $.15
- $.18 per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the quarter ended March 31, 2007, the Company issued
2,500,000 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $375,000 to the Company. <BR><BR> </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>83</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>8.
STOCKHOLDERS&#146; EQUITY - (Continued)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>Options
and Stock Based Compensation:</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>At various points during the fiscal year ended June 30, 2006, the
Company issued stock options to employees and officers for the right to purchase
23,595,000 shares. Pursuant to the adoption of FAS 123(R), the Company
recognized an expense in the amount of $3,837,423, all of which has been
included in general and administrative expense. The fair value of options
granted in 2006 were estimated as of the date of grant using the Black-Scholes
stock option pricing model, based on the following weighted average assumptions:
annual expected return of 0%, annual volatility of 108.5%, based on a risk-free
interest rate of 4.4% and expected option life of 3 years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the fiscal year the Company issued to key employees and
consultants common stock shares in the aggregate amount of 11,500,000 for
services rendered. The value of such shares was determined based on the fair
market value of the Company&#146;s stock on the date that such transaction was
authorized. Accordingly, the Company, recorded a charge to earnings in the
aggregate amount of $2,439,000</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the nine months ended March 31, 2007, the Company
authorized the issuance of 4,015,000 in options and warrants of 2,044,440 to
employees, officers, and consultants granting the right to purchase a like
amount of common shares. Pursuant to the adoption of FAS 123(R), the Company
recognized an expense in the amount of $785,259, all of which has been included
in general and administrative expense. The fair value of options granted was
estimated as of the date of grant using the Black-Scholes stock option pricing
model, based on the following weighted average assumptions: annual expected
return of 0%, annual volatility of approximately 80%, based on a risk-free
interest rate of 4.8% and expected option life of 5 years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the nine months ended March 31, 2007, the Board of
Directors authorized the issuance of 1,822,933 shares of common stock, with an
aggregate value of $339,388 as compensation to consultants and employees. The
stock value ranged in price from $.17 to $.20 per share, the fair value on the
date of the awards.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>Debt
Conversions</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the second fiscal quarter ended March 31, 2006 the Company converted $369,000
and $171,000 of liabilities due to Microphase Corporation, and Janifast Ltd into
2,050,000 shares and 950,000 shares of stock and warrants, respectively. In
addition the Company converted $50,000 of liabilities due to a strategic vendor
into 331,864 shares of stock plus warrants of 277,778. The value attributable to
the shares was based upon the market price of the Company&#146;s common stock on the
measurement date.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the nine months ended March 31, 2007, the Company converted
accounts payable of $909,294 into 5,617,062 shares of common stock.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>Reparations</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">At
various times during the second and third fiscal quarters of fiscal year end
June 30, 2006, the Company issued shares of its common stock together with a
like amount of warrants as reparation to affect revised pricing on previous
private offerings. This additional consideration was afforded to stockholders
who participated in the private placement of equity units and invested a minimum
of 30% of their original investment. Each unit consisted of one share of stock
and a warrant to purchase and equal amount of shares at $.18 per share. As
addition consideration, each investor received the amount of shares that were
required to bring the average cost of the total investment down to $.18 per
share (range of original investment $.25 - $.35). A total of 29,848,271 of such
shares were issued as reparation under such a program and the Company recorded a
charge to earnings (Other Expense ) in the amount of $5,530,504. In addition,
shares in the amount of 12,792,117 were issued and charged to &#147;Additional Paid
In Capital&#148; as an appropriate incentive for the additional cash investment.
Conversions, Settlements and Gain on Extinguishments</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>In addition, during the nine month period ended March 31, 2007,
the Company became obligated to issue 11,007,819 of its common stock as
reparation to affect revised pricing on previous private placements. This
additional consideration was afforded to past investors who agreed to make an
additional cash investment as part of a new private placement. The cost of such
consideration was estimated to be the fair value of such shares at the time of
the investment $1,202,730.<BR><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>84</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>8.
STOCKHOLDERS&#146; EQUITY - (Continued)</B><BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">As
a result of the preceding, during the three years ended June 30, 2006,
extinguishments, cancellations and conversions of debt for issuance of the
Company&#146;s common stock to related parties is summarized in Note 11 and amounts
relating to strategic investors is summarized as follows:</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=369 colSpan=3>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>For the Years Ended June 30,</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Equity
      Conversions of Debt with Strategic Vendors</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>2004</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>2005</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>2006</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of Shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>110,467</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>635,296</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,331,864</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of Warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,069,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,356,696</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,277,778</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amount
      Converted to Equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,963,202</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$426,894</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$590,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Gain
      on Extinguishments of Debt</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$ 150,058</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$418,696</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$30,608</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><BR></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the year ended June 30, 2006, the Company recorded non-cash gain from
settlements of $369,675</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company has no commitments from affiliates or related parties to provide
additional financings. The Company has, from time to time, been able to obtain
financings from affiliates when conditions in the capital markets make third
party financing difficult to obtain or when external financing is available only
upon very unattractive terms to the Company, and when such capital has been
available from the affiliates. (See also-Note 9 Related Party Transactions)</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;STOCK
INCENTIVE PLANS</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">A
summary of the stock option activity for the years ended June 30, 2005, 2006
pursuant to the terms of both plans, which include incentive stock options and
non-qualified stock options, is set forth on the below:</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>NUMBER OF</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>WEIGHTED</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>OPTIONS</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>AVERAGE</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>EXERCISE PRICE</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Outstanding
      at June 30, 2004</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>17,725,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$.87</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Granted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>7,775,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>.35</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Exercised</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Canceled
      /Expired</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,240,167</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(2.05)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Outstanding
      at June 30, 2005</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>24,259,833</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>.78</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Granted</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>23,595,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>.19</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Exercised</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Canceled/Expired</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>4,381,833</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>.87</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Outstanding
      at June 30, 2006</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>43,473,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>.26</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Exercisable
      at June 30, 2006</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>43,473,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$.26</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
fair value of options granted in fiscal year ended June 30, 2006 was estimated
as of the date of grant using the Black-Scholes stock option pricing model,
based on the following weighted average assumptions: annual expected return of
0%, annual volatility of, 145.3% in 2005, and 108.5% in 2006, a 4.4% a risk-free
interest rate and expected option life of 3 years.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
per share weighted average fair value of stock options granted during 2004, 2005
and 2006 was $.35, $.35 and $.16 respectively. The per share weighted average
remaining life of the options outstanding at June 30, 2004, 2005, and 2006 is
2.88, 3.02 and 3.58 years, respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;During
fiscal 2006 the Company adopted the fair value recognition provisions of FASB
Statement No. 123,<I> Accounting for Stock-Based Compensation</I>, for
stock-based employee compensation, effective as of the beginning of the fiscal
year</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Prior
to Fiscal year end 2006 mPhase has elected to continue to account for
stock-based compensation under APB Opinion No. 25, under which no compensation
expense has been recognized for stock options and certain compensating warrants
granted to employees at fair market value. Had compensation expense for stock
options granted under the Plan and certain warrants granted to employees in
2005, been determined based on fair value at the grant dates, mPhase&#146;s net loss
for, 2004 and 2005 would have been increased to the pro forma amounts shown
below.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>85</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>8.
STOCKHOLDERS&#146; EQUITY - (Continued)</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=309 colSpan=2>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Twelve months ended June 30,</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Net
      loss, as reported</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(7,758,586)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(11,234,324)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Add:
      Stock-based employee compensation expense net</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>72,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>131,750</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">included
      in report of net income, net of related tax effects</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Deduct:
      Total stock-based employee compensation expense</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(810,080)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>(444,396)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">determined
      under fair</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">value
      based method for all awards, net of related tax effects</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Pro
      forma net loss</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(8,486,666)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(11,546,970)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Loss
      per share:</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted-as reported</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.10)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.10)</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="70%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Basic
      and diluted-pro forma</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.11)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$(.11)</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;&nbsp;&nbsp;&nbsp;For
the year ended June 30, 2004 the Company recorded non-cash charges and deferred
compensation totaling $833,100 and $0 respectively, in connection with the grant
of options covering 4,370,000 shares of common stock to employees and
consultants and the Company recorded non-cash charges of $170,451 in connection
with the grant of 500,000 compensating warrants to employees and consultants for
services rendered or to be rendered. Such charges are the result of the
differences between the quoted market value of the Company&#146;s common stock on the
date of grant and the exercise price for option and warrants issued to employees
and Black-Scholes stock option pricing calculations for options and warrants
issued to consultants.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">For
the year ended June 30, 2005, the Company recorded non-cash charges totaling
$2,816,333 in connection with the grant of 7,775,000 options to employees and
options to consultants for services rendered or to be rendered. For the year
ended June 30, 2006, the Company recorded non-cash charges totaling
$3,837,423&nbsp;in connection with the grant of 23,595,000 options to employees
and consultants. &nbsp;Such charges are the result of the differences between
the quoted market value of the Company&#146;s common stock on the date of grant and
the exercise price for option and warrants issued to employees and Black-Scholes
stock option pricing calculations for options and warrants issued to
consultants.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;The
following summarizes information about stock options outstanding at June 30,
2006:</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;<B>RANGE OF</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>NUMBER</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>WEIGHTED</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>WEIGHTED</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>NUMBER</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=165>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>WEIGHTED</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>EXERCISE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>OUTSTANDING</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>AVERAGE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>AVERAGE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>EXERCISABLE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=165>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>AVERAGE</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>PRICE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>REMAINING</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>EXERCISE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=165>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>EXERCISE</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>CONTRACTUAL</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>PRICE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=165>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>PRICE</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>LIFE</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=165>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$0 - $.50</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>43,473,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>43 months</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$.26</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>43,473,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=165>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>$.26</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=164>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=165>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>&nbsp;</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>WARRANTS
&nbsp;&nbsp;&nbsp;</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the nine months ended March 31, 2005, in connection with the private placements
discussed above the Company issued 27,200,117 of warrants to investors and
finders and when combined with warrants previously outstanding and exercised,
expired or canceled, during the period result in the Company now having
75,428,473 with a weighted average price of $.48.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
May 2005 the Company adjusted the exercise price of $.45 per share of an
investor&#146;s 5 year warrant to purchase 714,296 shares of common stock. The
warrant was originally issued in January 2005, to $.225 in July of 2005. In July
of 2005 such investor exercised a portion of such warrant, as adjusted, to
purchase 200,000 shares of the Company&#146;s common stock generating $45,000 of net
proceeds to the Company.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
July 20, 2005, at the Company&#146;s annual meeting of Shareholders, the
Shareholders&#146; ratified an amendment to its Certificate of Incorporation to
increase the number of authorized shares of common stock from 250,000,000 to
500,000,000 shares.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
June and July 2005 the Company completed a private placement of equity units
pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended.
Each unit consists of one share of the Company&#146;s common stock at $0.20 per share
plus a five (5) year warrant to purchase one share of the Company&#146;s common stock
at $.25 per share. Such placement generated an aggregate of $3,488,000 of
proceeds to the Company, to be used primarily to pay for research and
development expenses and for general corporate purposes. A total of 14,140,000
shares of the Company&#146;s common stock together with five (5) year warrants to
purchase 14,140,000shares of the Company&#146;s common stock at $.25 per share were
issued in such private placement. In connection with such private placement,
consultants and advisors received $253,500 of fees paid in cash and 476,500
shares of the Company&#146;s common stock and five (5) year warrants to purchase
476,500 shares of the Company&#146;s commons stock at $.25 per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>86</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>8.
STOCKHOLDERS&#146; EQUITY - (Continued)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the year ended June 30, 2005, the Company issued warrants to purchase 40,609,586
shares of common stock to investors and warrants to purchase 729,075 shares of
common stock to finders, consultants and investment banking firms. Of such
warrants, 39,124,586 shares of the Company&#146;s common stock may be purchased for 5
years at $.25 shares and may be purchased at $.35 and 1,485,003shares may be
purchased at $.50 in connection with private placements. Also, during the year
ended June 30, 2005, the Company granted 5 year warrants to purchase 2,600,000
shares to consultants for services performed with an exercise price of $.25 to
$.35 per share of common stock and warrants to purchase 4,616,571 shares to
creditors, including related parties (see Note 11), in connection with the
conversion of outstanding liabilities. Additionally, warrants cover 3,637,954 of
common stock were exercised during the fiscal year ended June 30, 2005,
generating net proceeds to the Company of $680,609. Also during the fiscal year
ended June 30, 2005 a cashless exercise of warrants previously issued resulted
in the issuance of 4,949,684 shares of the Company&#146;s common stock. Additionally,
during the fiscal year ended June 30, 2005, warrants covering 5,331,144 shares
were cancelled or expired.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">As
of June 30, 2005, warrants covering 89,054,406 shares remain outstanding with a
weighted average exercise price of $.36.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
The fiscal year ended June 30, 2006 the company issued 105,468,248 of warrants
at exercises prices ranging from $.17 to $.25.and 21,694,335 expired or were
cancelled. Such warrants were issued as part of investment units offerered in
private placements and as reparation to reduce the exercise price. Included in
this amount is 950,000 and 4,322,222 issued to Janifast and Microphase
respectively at $.18. In addition Mr. Smiley received 1,647,877 and 697,692
warrants to purchase common stock at $.21 and $.18 respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the first fiscal quarter the Company issued 225,000 shares of common stock
pursuant to the exercise of warrants issued prior to the 3 month period
generating net cash proceeds of $45,000.&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the second fiscal quarter, the Company issued 1,714,286 shares of its common
stock pursuant to the exercise of warrants, generating net proceeds of
$294,857.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the third fiscal quarter, the Company issued 12,530,834
shares of its common stock pursuant to the exercise of warrants, generating net
proceeds of $2,525,867. The Company issued 1,250,000 shares of its common stock
pursuant to the exercise of warrants, generating net proceeds of $250,000 to the
Company.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">As
of June 30, 2006, warrants covering 157,108,199 shares remain outstanding with a
weighted average exercise price of $.23.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>9.
RELATED PARTY TRANSACTIONS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Mr.
Durando, the President and CEO of mPhase, and together with Mr. Ergul owns a
controlling interest and is a director of Janifast Limited. Mr. Durando and Mr.
Dotoli are officers of Microphase Corporation. Mr. Ergul, the chairman of the
board of mPhase, owns a controlling interest and is a director of Microphase
Corporation. mPhase, and Janifast.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Mr.
Abraham Biderman was employed until September 30, 2003 by our former
investment-banking firm Lipper &amp; Company. During the fiscal year ended June
30 2006, Mr. Biderman&#146;s current firm Eagle Advisers, Inc. has acted as a finder
of money in connection with finder&#146;s fees of $782,567, as well as addition
administrative and occupancy charges of $75,000</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the six month period ended March 31, 2006, Mr. Durando, Mr.
Dotoli and Mr. Smiley made bridge loans to the Company in the aggregate amounts
of $50,000, $100,000 and $150,000. The loans due Mr. Dotoli and Mr. Smiley are
outstanding at March 31, 2006. All of the loans have since been repaid. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
addition, at various points during the six months ended March 31, 2007, Messrs,
Durando, Dotoli and Smiley provided $490,000 in bridge loans to the Company
which was evidenced by individual promissory notes. During December 2006, Messrs
Durando and Dotoli agreed to convert their notes, in the amounts of $130,000 and
$200,000 respectively, to a deferred compensation arrangement, the repayment
terms of which have not been specified. Mr. Smiley has extended bridge loans to
the Company of $160,000, evidenced by promissory notes for $101,000 and a
$60,000 note with a 12% rate of interest. Both of the foregoing promissory notes
are payable on demand.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;JANIFAST</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the year ended June 30, 2000, mPhase advanced money to Janifast Limited, which
is owned by U.S. Janifast Holdings, Ltd, a related party of which three
directors of mPhase are significant shareholders, in connection with the
manufacturing of POTS Splitter shelves and DSL component products. As of June
30, 2000 the amount advanced to Janifast was approximately $1,106,000, which is
included in production advances-related parties on the accompanying balance
sheet. There were no such advances during the years ended June 30, 2002 and
2003. Pursuant to debt conversion agreements between the Company and Janifast,
for the year ended June 30, 2001 Janifast received 1,200,000 shares of mPhase
common stock canceling liabilities of $600,000, and for the year ended June 30,
2002 Janifast received 3,450,000 shares of mPhase common stock and 1,200,000
warrants to purchase mPhase common stock for the cancellation of $720,000 of
liabilities, as discussed in Note 10. During the year ended June 30, 2003
Janifast was issued 1,500,000 shares of mPhase common stock in connection with
the cancellation of $360,000 of outstanding liabilities of mPhase, the value of
which was based upon the price of the Company&#146;s common stock on the effective
date of settlement. No gain or loss was recognized in </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>87</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>9.
RELATED PARTY TRANSACTIONS &#150; (Continued)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">connection
with conversions by Janifast for fiscal 2003. During the years ended June 30,
2003, 2004 and 2005 and the period from inception (October 2, 1996) to June 30,
2005, there has been $174,959, $2,771,925, 1,536,494 and $15,001,105,
respectively, of invoices for products and services have been charged to
inventory or expense and is included in operating expenses in the accompanying
statements of operations. Effective December 30, 2004, Janifast Ltd. agreed to
convert $200,000 of accounts payable into common stock of the Company at $.20
per share plus a 5 year warrant for a like amount of shares at $.25 per share.
At June 30, 2005 the Company had $491,098 current accounts payable, which are
included in due to related parties and additionally, at June 30, 2005,
approximately $298,000 of undelivered purchase orders remain outstanding with
Janifast.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>During the six months ended March 31, 2006 and 2006 and the period
from inception (October 2, 1996) to March 31, 2007, $544,449, $134,715 and
$16,031,811 respectively have been charged by Janifast to inventory or is
included in operating expenses in the accompanying statements of operations.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>As a result of the foregoing transactions as of March 31, 2007,
the Company had $132,151 payable to Janifast, which is included in amounts due
to related parties in the accompanying balance sheet. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">MICROPHASE</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
company leases office space from Microphase at both its Norwalk and Little Falls
location. Current rental expense is $5,000 and $13,800 per month at Norwalk and
Little Falls respectively. In addition, Microphase provides certain&nbsp;
research and development services and shares administrative personnel from time
to time. (SEE RELATED CHARTS BELOW)</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Year Ended June 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Charges
      and Expenses with Related Parties</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Charges
      incurred with Janifast Ltd. included in:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales and ending inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,771,925</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,536,494</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>895,991</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      Janifast</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,771,925</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,536,494</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>895,991</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Charges
      incurred with Microphase Corp included in:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales and ending inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">(Including
      Royalties)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$140,123</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$94,740</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>32,014</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>84,494</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>60,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>197,639</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>231,068</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>304,030</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>302,167</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      Microphase Corp.</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$455,685</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$458,770</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>531,820</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Total
      Charges with Related Parties included in:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of sales and ending inventory</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,912,048</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,631,234</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>928,005</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Research
      and development</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>84,494</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>60,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>197,639</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">General
      and administrative</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>231,068</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>304,030</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>302,167</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      Charges with Related Parties</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,227,610</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,995,264</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,427,811</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Included
      in Cost of Sales in the Consolidated Statements of Operations</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">(including
      changes in inventory)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Janifast</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,507,476</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,275,960</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>770,441</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Microphase
      (including royalties)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>140,123</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>94,740</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>32,014</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Total
      Related Expense Included in Cost of Sales</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,647,599</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,370,700</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>802,455</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>Beginning July 1, 2006, billings for all administrative services
has been $5,000 per month. In addition, Microphase also charges fees for
specific projects on a project-by-project basis. During the six months ended
March 31, 2006 and 2006 and from inception (October 2, 1996) to March 31, 2007,
$90,000, $142,250 and $8,869,365 respectively, have been charged to expense. As
a result of the foregoing transactions as of March 31, 2007, the Company had a
$204,131 payable to Microphase.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">On
August 30, 2004, the Company paid $100,000 in cash to Piper Rudnick LLP, outside
legal counsel in the Company as part of a renegotiated settlement agreement that
was originally effective as of March 31, 2002. The Company was in arrears with
respect to payments due under the original settlement agreement and as part of
the renegotiated agreement agreed to make the following payments:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>88</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>9.
RELATED PARTY TRANSACTIONS &#150; (Continued)</B></P>
<P
style="PADDING-RIGHT: 0pt; PADDING-LEFT: 30.8pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -30.8pt; PADDING-TOP: 0pt" align="justify">a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
$25,000 on each of December 1, 2004, March 2005, June 1, 2005, September 1, 2005
and a $50,000 payment on December 1, 2005. Thereafter the Company is obligated
to pay $25,000 on each of March 1, 2006, June 1 2006, and September 1, 2006 with
a final payment of $75,000 of December 1, 2006.</P>
<P
style="PADDING-RIGHT: 0pt; PADDING-LEFT: 30.8pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -30.8pt; PADDING-TOP: 0pt" align="justify">b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also delivered a 5 year cashless warrant to purchase $150,000 worth
of common stock at $.25 per share.</P>
<P
style="PADDING-RIGHT: 0pt; PADDING-LEFT: 29.25pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">The
warrant was valued pursuant to EITF 96-18, the ascribed value of the warrant
minus the debt cancelled resulting loss of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$40,500.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>As of March 31, 2007, the Company has made each payment owed to
Piper Rudnick LLP, with the exception of the $25,000 payment due September 1,
2006 and the $75,000 payment due December 1, 2006.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">As
of June 30, 2004, Mr. Smiley and Microphase each agreed to extend to July 25,
2005, the maturity on their 12% convertible promissory notes in the principal
amount of $100,000 and $180,000 respectively.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=justify>Additionally at June 30, 2004, Mr. Durando was owed $300,000 by
the Company as evidenced by a non-interest bearing promissory note that was
repaid in July 2004. As of June 30, 2004 a total of $55,000 in the aggregate was
due to Mr. Durando and Mr. Dotoli for unpaid compensation.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Mr.
Durando&#146;s June 30, 2004 note payable balance of $300,000 was repaid by the
Company during the nine month period ended March 31, 2005. During the first and
second quarters of fiscal year 2005, Mr. Durando made additional bridge loans to
the Company evidenced by various 12% demand notes in the aggregate of $525,000.
Mr. Durando was repaid a total of $450,000 of such loans in January of 2005. In
addition, Mr. Durando converted $13,954 of the principal amount of a $75,000
promissory note leaving unpaid principal of $61,046 outstanding. Mr. Durando
converted $13,000 of accrued and unpaid interest on various promissory notes of
the Company into 65,000 shares of common stock and a 5 year warrant to purchase
a like amount of common stock at $.25 per share.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">During
the fiscal year ended June 30, 2005 Mr. Dotoli and Mr. Smiley, the COO, and CFO
and General Counsel of the Company respectively, each lent the Company $75,000.
Mr. Dotoli was repaid, the principal amount of such loan, in cash in January,
2005 and Mr. Smiley converted his $75,000 loan into 375,000 shares of common
stock of the Company plus a 5 year warrant to purchase a like amount of shares
at $.25 per share. In addition, Mr. Smiley converted $9,975 of accrued interest
into 49,875 shares of common stock plus a 5 year warrant to purchase a like
amount of shares at $.25 per share. Finally Mr. Smiley received 25,000
additional shares of common stock as a market adjustment to his equity
investment of $25,000 on August 30, 2004. Mr. Dotoli cancelled $3,750 of accrued
and unpaid interest from August 15, 2004 through January 15, 2004 into 375,000
shares of common stock pursuant to the terms of a portion of a warrant that was
exercised at $.01 per share previously given by the Company to Mr. Dotoli in
exchange for and cancellation of unpaid compensation. On January 15, 2004, Mr.
Smiley was awarded 425,000 shares of common stock as additional
compensation.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">In
July of 2005, Mr. Smiley was repaid a loan of $35,000, without interest made to
the Company in June of 2005. In the three month period ended September 30, 2005,
Mr. Durando and Mr. Smiley lent the Company $50,000 and $100,000 respectively
which was repaid by the Company, without interest in October of 2005.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;<B>The
Following Summaries Compensation to Related Parties for the Fiscal Year Ended
June 30, 2006</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Generally,
as summarized below, the Company has offered conversion of debts to related
parties on substantially the same terms as concurrent private placements
(typically in $.30 units, such units including both shares of common stock and
warrants to purchase a like amount of common stock) in addition to conversion of
debts pursuant to terms of concurrent private placements and financial
instruments which, pursuant to EITF 00-19 have been settled with the Company&#146;s
common stock as conditioned by benchmarks, generally coinciding with the
Company&#146;s negotiations to settle any and all obligations with Georgia Tech
Research and its affiliate (see also Note 11) as follows:</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>89</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>9.
RELATED PARTY TRANSACTIONS &#150; (Continued)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">The
following summarizes compensation to related parties for the fiscal year ended
June 30, 2006:</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Durando</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Dotoli</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Ergul</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Biderman</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Smiley</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Guerino</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Janifast</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Microphase</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>Total</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Consulting/Salary</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$643,600</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$357,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$39,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$175,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,214,600</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Directors
      Stipend</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$7,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$7,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$7,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$22,500</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Rent</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$36,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$204,444</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$240,444</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of Sales/Royalty</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$770,441</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$32,014</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$802,455</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Loan
      Interest</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$10,800</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$10,800</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">R&amp;D</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$197,639</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$197,639</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">SG&amp;A</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$86,923</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$86,923</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Estimated
      Value of Stock Issued</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,260,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$525,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$210,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$105,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$331,213</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$2,431,213</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Estimated
      Value of Options Issued</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,596,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$836,400</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$273,740</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$85,890</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$213,850</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$56,990</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,063,070</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Reparations
      Shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$834,633</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$728,434</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,563,067</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Totals</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$3,507,300</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$1,725,900</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$483,740</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$265,890</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$720,063</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$64,490</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$1,605,074</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$1,260,254</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$9,632,711</B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="28%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>&nbsp;</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">The
following summarizes compensation to related parties for the nine months ended
March 31, 2007:<BR></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Durando</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Dotoli</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Ergul</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Biderman</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Smiley</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Guerino</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Lawrence</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Janifast</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>Microphase</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=center>TOTAL</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Consulting
      / Salary</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$295,200</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$211,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$150,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$656,700</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Directors
      Stipend</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$7,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$7,500</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,750</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,750</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,750</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,750</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$3,750</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$33,750</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Rent</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$45,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$45,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">R&amp;D
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$165,035</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$165,035</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Finders
      Fees (including common shares)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$468,650</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$468,650</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=172 colSpan=2>
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Cost
      of Sales and SG&amp;A</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$134,715</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$33,064</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$167,779</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">Shares
      and Options</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$196,000</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$126,000</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$63,000</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$8,400</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$56,000</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$0</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$0</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$96,923</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$0</U></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><U>$546,323</U></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="20%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>Totals</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$498,700</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$345,000</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$66,750</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$480,800</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$209,750</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$3,750</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$3,750</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$231,638</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$243,099</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="8%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"
      align=right><B>$2,083,237</B></P></TD></TR></TABLE>
<font FACE="Times New Roman" size="2">
<p>In addition to the above, the Company has paid a portion of the legal
expenses of its officers and directors named in the Civil case filed by the SEC
against Packetport.com, Inc. and others on November 15, 2005 (See page 41 &quot;Legal
Proceedings&quot;). Such expenses amounted to approximately $433,000 in the nine
months ended March 31,2007 and in the aggregate have totaled approximately
$1,037,000 since May of 2002. (See also &quot;Subsequent Events&quot; on P32 of the
prospectus). </p>
</font>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>90</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>9.
RELATED PARTY TRANSACTIONS -<I> (continued)</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "><B>Equity
Conversions of Debt and Other Financial Instruments with Related Parties</B></P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B>June 30,</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2004</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2005</U></B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=center><B><U>2006</U></B></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Janifast:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>950,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,000,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>950,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amount
      converted to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$200,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$171,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Microphase
      Corporation:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,250,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,050,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,250,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>2,050,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amount
      converted to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$250,000</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$369,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Strategic
      Vendor Conversions:</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,100,467</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>331,864</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,069,242</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>277,778</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amount
      converted to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,963,202</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$50,000</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"><B>Officers</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,009,875</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of warrants (A)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,009,875</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amount
      converted to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$201,975</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$0</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt"><B>&nbsp;&nbsp;&nbsp;Total
      Related Party Conversions</B></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of shares</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>1,100,467</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,259,875</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,331,864</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number
      of warrants</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>5,069,242</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,259,875</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>3,277,778</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="55%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amount
      converted to equity</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$1,963,202</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$651,975</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="15%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt"
      align=right>$590,000</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>10.
INCOME TAXES</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">No
provision has been made for corporate income taxes due to cumulative losses
incurred. At June 30, 2006, mPhase has operating loss carryforwards of
approximately $89.3 million and $88.7 million to offset future federal and state
income taxes respectively, which expire at various times from 2016 through 2024.
Certain changes in stock ownership can result in a limitation in the amount of
net operating loss and tax credit carryovers that can be utilized each year.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">At
June 30, 2006 the Company has net deferred income tax assets of approximately
$34.15 million comprised principally of the future tax benefit of net operating
loss carryforwards, which represents an increase of $6.9 million for the fiscal
year ended June 30, 2006. A full valuation reserve has been recorded against
such assets due to the uncertainty as to their future realizability.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>11.
COMMITMENTS AND CONTINGENCIES</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>COMMITMENTS</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">mPhase
has entered into various agreements with Georgia Tech Research (&#147;GTRC&#148;) and its
affiliate, Georgia Tech Applied Research Corporation, (&#147;GTARC&#148;), pursuant to
which the Company receives technical assistance in developing the
commercialization of its Digital Video and Data Delivery System. The amount
incurred by the Company for GTRC technical assistance with respect to its
research and development activities during the years ended, 2004, 2005 and 2006
totaled &nbsp;$0, $0 and $0 respectively, and $13,539,952 from the period from
inception through June 30, 2006.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">If
and when sales commence utilizing its legacy DVDDS digital broadcast television
platform, mPhase will be obligated to pay to GTRC a royalty up to 5% of product
sales, as defined.</P>
<P
style="PADDING-RIGHT: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">As
of June 30, 2006, mPhase is obligated to pay Lucent Technologies, Inc. $200,000
per month through and including the first of each month from July 1, 2005
through and including March 1, 2006 in connection with the development of its
Nanotechnology product line. Additionally, the Company engages Lucent on a
project-by-project basis for research and development of technical product
related enhancements for its TV+ product. The Company owed Lucent $613,600 in
accounts payable and accrued expenses through June 30, 2006. The amount incurred
by the Company with Lucent for assistance with respect to its research and
development activities during
the years ended 2004, 2005 and 2006 totaled&nbsp;$2,328,602, 3,424,800, and
$4,384,749 respectively, and $11,406,651 from the period from inception through
June 30, 2006.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>91</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center><B>mPHASE TECHNOLOGIES, INC.<br>
(A DEVELOPMENT STAGE COMPANY)<br>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
JUNE 30, 2006<br>
(Unaudited for the Period Ended March 31, 2007)</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>11.
COMMITMENTS AND CONTINGENCIES -<I> (continued)</I></B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">From
time to time, mPhase may be involved in various legal proceedings and other
matters arising in the normal course of business. &nbsp;On November 15, 2005 a
civil enforcement action (c.v. action no. 3:05 cv1747) was filed in Federal
District Court in the State of Connecticut against Packetport.com, Inc. and
others including Messrs. Durando and Dotoli in their individual capacity for
alleged violations of the federal securities laws in connection with their
activities as Officer&#146;s and Director&#146;s of Packetport.com during the year
1999-2000. &nbsp;A summary of the Complaint is contained in SEC Litigation
Release No. 19465 dated November 15, 2005. &nbsp;The original complaint may be
accessed on the SEC web site under<U> http://www.sec.gov/litigation</U> .
&nbsp;As noted in other public filings with the SEC, mPhase Technologies, Inc.
is not named as a party to the civil action. &nbsp;Both Messrs. Durando and
Dotoli continue to deny any wrongdoing and will vigorously defend all
allegations in the complaint.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify"><B>12.
SUBSEQUENT EVENTS &nbsp;</B></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">The
Company&#146;s current low levels of liquidity have required that payments of
accounts payable to vendors, including research partners, be extended beyond
terms. &nbsp;The Company is actively engaged in negotiations with several
vendors to work out an equitable restructure of payment terms and/or conversion
of such debt into equity. </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">
Subsequent to March 31, 2007, the Company has sustained operations primarily
through the issuance of common stock in Private Placement Agreements pursuant to
Regulation D of Rule 506 of the Securities Act of 1933, as amended with
Accredited Investors. Since March 31, 2007 the Company has raised approximately
$2.5 million under such agreements and issued in excess of 19.4 million shares
of its common stock. In addition, pursuant to the terms of these agreements, the
Company issued approximately 22.5 million shares to certain investors as
reparation shares so as to reduce investors past cost per share and encourage
additional investment. The proceeds of the Private Placement will be used for
research and Development payments to vender and working capital. On June 26,
2007 massers Dotoli and Durando provided temporary working capital in the amount
of $160,000 which was repaid on July 5, 2007.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">
The
Company also approved various incentive compensation arrangements with employees
and consultants involving the issuance of common stock and the granting of
options to purchase such stock. In total, 12,150,000 of common shares with an
estimated value of $1,822,000 and 2,600,000 options with an estimated value
$230,000 of were issued under such program. Included in this amount were grants
to the Messer&#146;s Durando, Dotoli and Smiley of 4,000,000, 3,000,000 and
1,750,000 of restricted shares of common shares respectively for which an
expense has been incurred of approximately $1,312,000. The exercise price of
options granted ranged from $.20 to $.25 cents per share.<font FACE="Times New Roman" size="2">
In addition, the Company has incurred since March 31, 2007, and additional $172,541 in legal expenses in connection with the civil suit filed by the SEC on
November 15, 2005 against Packetport.com, Inc and others (See Page 41 &quot;Legal
Proceedings&quot;). </P>
</font>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">
<font size="2"><font face="Times New Roman">On July 6, 2007, the Company announced that it had executed with
Double U Master Fund, L.P, a limited partnership organized under the laws of the
British Virgin Islands, a Private Equity Credit Agreement for an aggregate of up
to $6 million in financing through the sale, from time to time of the common
stock of mPhase at a 14% disc</font>ount to its market value (determined as a set forth
in the Private Equity Credit Agreement). The terms of the agreement provide that
mPhase will have the option to &nbsp;&#147;PUT&#148; up to $300,000 of its common stock to the
Partnership per month upon the effectiveness of a Form S-1 Registration
Statement covering such shared of common stock to be filed by the company in the
near future. mPhase is not obligated to draw any minimum amount of money under
the Private Equity Credit Agreement.</font><BR> </P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>92</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; ">Item
16. Exhibits and Financial Statements</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Exhibit</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Number</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Description</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">2.1*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Exchange
      of Stock Agreement and Plan of Reorganization dated January 15,
  1997 (incorporated
      by reference to Exhibit 2(a) to our registration statement on
  Form 10SB-12G
      filed on October 16, 1998 (file no. 000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">2.2*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Exchange
      of Stock Agreement and Plan of Reorganization dated June 25,
1998 (incorporated
      by reference to Exhibit 2(b) to our registration statement on
  Form 10SB-12G
      filed on May 6, 1999 (file no. 000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3.1*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Certificate
      of Incorporation of Tecma Laboratory, Inc. filed December 20,
  1979 (incorporated
      by reference to Exhibit 3(a) to our registration statement on
  Form 10SB-12G
      filed on October 16, 1998 (file no. 000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3.2*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Certificate
      of Correction to Certificate of Incorporation of Tecma Laboratory,
    Inc. dated
      June 19, 1987 (incorporated by reference to Exhibit 3(b) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3.3*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Certificate
      of Amendment of Certificate of Incorporation of Tecma Laboratory,
    Inc. filed August 28, 1987 (incorporated by reference to Exhibit 3(c) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3.4*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Certificate
      of Amendment of Certificate of Incorporation of Tecma Laboratories,
      Inc. filed
      April 7, 1997 (incorporated by reference to Exhibit 3(d) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3.5*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Certificate
      of Amendment of Certificate of Incorporation of Lightpaths TP Technologies,
      Inc. filed June 2, 1997 (incorporated by reference to Exhibit 3(e)
    to our
      registration statement on Form 10SB-12G filed on October 16, 1998 (file
      no. 000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3.6*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Certificate
      of Amendment of Certificate of Incorporation of mPhase
  Technologies, Inc.
      filed September 15, 2000 (incorporated by reference to Exhibit 3i to
      our quarterly
      report on Form 10Q filed on November 13, 2000 (file no.
  000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3.7*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Bylaws
      of the Company (incorporated by reference to Exhibit 3(g) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">4.1*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Form
      of Registration Rights Agreement, dated January 26, 2001, by and among
      the Company
      and the purchasers listed on Schedule A attached thereto (incorporated
      by reference
      to Exhibit 4.1 to our registration statement on Form S-1 filed on June
      18, 2001
      (file no. 33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">4.2*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Form
      of Registration Rights Agreement, dated February 9, 2001, by and among
      the Company
      and the purchasers listed on Schedule A attached thereto (incorporated
      by reference
      to Exhibit 4.2 to our registration statement on Form S-1 filed on June
      18, 2001
      (file no. 33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">4.3**</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Form
      of Warrant.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">4.4**</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Warrant
      issued to Piper Rudnick LLP.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">4.5**</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Warrant
      issued to Piper Rudnick LLP.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">4.6**</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Form
      of Subscription Agreement, dated December 15, 2001.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">4.7</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Form
      of Agreement with Dutchess Equity Limited Partnership II, L.P. dated as of
      December 20, 2005, governing the terms of the Put Options.</P></TD></TR>
  </TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>93</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      &nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh51.htm" style="text-decoration: none">&nbsp;5.1</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh51.htm" style="text-decoration: none">Opinion
      of Martin S. Smiley, General Counsel to the Company.</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.1*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">License
      Agreement, dated March 26, 1998, between the Company and Georgia
    Tech Research
      Corporation (incorporated by reference to Exhibit 10(e) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.2*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">First
      Amendment to the License Agreement, dated January 8, 2001, between
    the Company
      and Georgia Tech Research Corporation (incorporated by reference
  to Exhibit
      10.2 to our registration statement on Form S-1 filed on June 18, 2001
      (file no.
      33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.3*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Employment
      Agreement between Ronald A. Durando and the Company (incorporated
      by reference to Exhibit 10.8 to our registration statement on Form
    SB-2 filed
      on August 13, 1999 (file no. 333-85147)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.4*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Employment
      Agreement between Gustave T. Dotoli and the Company
(incorporated by
      reference to Exhibit 10.9 to our registration statement on Form SB-2 filed
      on August
      13, 1999 (file no. 333-85147)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.5*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Employment
      Agreement between Martin S. Smiley and the Company, dated as of August
      15, 2000 (incorporated by reference to Exhibit 10.5 to our
    registration statement
      on Form S-1 filed on June 18, 2001 (file no. 33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.6*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Employment
      Agreement between David C. Klimek and the Company, dated as of April
      1, 2001 (incorporated by reference to Exhibit 10.6 to our registration
      statement on
      Form S-1 filed on June 18, 2001 (file no. 33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.7*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Manufacturing
      Services Agreement, dated March 14, 2001, by and between the Company
      and Flextronics International USA, Inc (incorporated by reference
  to Exhibit
      10.7 to our registration statement on Form S-1 filed on June 18, 2001
      (file no.
      33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.8*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Supply
      Agreement by and between the Company and Hart Telephone Company,
    Inc., date
      of August 19, 1998 (incorporated by reference to Exhibit 10.8 to our
      registration statement
      on Form S-1 filed on June 18, 2001 (file no. 33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.9*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Facilities/Services
      Agreement between the Company and Microphase Corporation, dated
      as of July 1, 1998. (incorporated by reference to Exhibit 10.9 to
    our registration
      statement on Form S-1 filed on June 18, 2001 (file no.
  33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.10*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Company&#146;s
      2001 Stock Incentive (incorporated by reference to Exhibit C to
  our preliminary
      proxy statement on Form Pre 14A filed on March 21, 2001 (file
    no.000-30202)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.11*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">License
      Agreement, dated July 31, 1996, by and between AT&amp;T Paradyne Corporation
      and Microphase Corporation. (incorporated by reference to Exhibit
    10.11 to
      our registration statement on Form S-1 filed on June 18, 2001 (file no.
      33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.12(a)*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Assignment
      Agreement, dated February 17, 1997, by and between the Company
  and Microphase
      Corporation. (incorporated by reference to Exhibit 10.12 to our registration
      statement on Form S-1 filed on June 18, 2001 (file no. 33-
  63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.12(b)*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Distribution
      Agreement effective May 15, 2002 by and between Corning Cable System
      and the Company.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.13*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Development
      Agreement between Lucent Technologies, Inc. and mPhase Technologies,
      Inc., effective as of December 1, 2002, relating to Video
  Services Switch
      and Statement of Work, dated December 9, 2002.***</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.14*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Purchase
      Order between the Company and Lucent Technologies, Inc., dated December
      15, 2002, for cost reduction of the mPhase Traverser INI set
  box.***</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.15*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Co-Branding
      Agreement, dated as of January 21, 2003, between the Company and Lucent
      Technologies, Inc.</P></TD></TR>
  </TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>94</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111" height="456">
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="19">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="19">
      &nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.16*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Systems
      Integrator Agreement, dated as of April 4, 2003, between the Company
      and Lucent
      Technologies, Inc.***</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.17*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Development
      Agreement between Lucent Technologies, Inc. and mPhase Technologies,
      Inc., relating to Broadcast Television Switch (BTS) effective as
  of September
      15, 2003.***</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.18*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Development
      Agreement effective February 3, 2004 between Lucent
Technologies, Inc.
      and mPhase Technologies, Inc. for development of micro fuel cell NanoTechnology.***</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.19***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Software
      License Agreement between Espial Group, Inc, a Canadian Corporation
    and mPhase
      Technologies entered into November 28, 2004</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.20***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Software
      Development Agreement between Magpie Telecom Insiders, Inc, and mPhase
      Technologies, dated September 2, 2004 and Work Order dated January
    3, 2005</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.21***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Development
      Agreement effective March 11, 2005 between Lucent Technologies
  Inc and
      mPhase Technologies relating to development of Magnetometers</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.22*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amendment
      No. 2 to Development Agreement dated as of March 9, 2005 relating
  to Micro
      Power Source Cells between mPhase Technologies, Inc and Lucent Technologies
      Inc.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.23***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amendment
      No. 2 to Development Agreement between Lucent Technologies, Inc. and
      mPhase Technologies, Inc. dated as September 15, 2003</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.24***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amendment
      No. 3 to Development Agreement between Lucent Technologies, Inc.
      and mPhase Technologies, Inc. dated as of September 15, 2003.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.25***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Amendment
      No.4 to Development Agreement between Lucent Technologies, Inc.
      and mPhase Technologies, In. dated as of September 12, 2003.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.26***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Annexure
      B Statement of Work dated August 22, 2005, to Development Agreement,
      dated September 1, 2004 between Magpie Insiders, Inc. and mPhase
      Technologies, Inc.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.27***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Annexure
      C Statement of Work dated January 25, 2006 to Development Development
      Agreement dated September 1, 2004 between Magpie Insiders, Inc.
      and mPhase Technologies, Inc.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="17">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">10.28***</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="17">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">3<SUP>rd</SUP>
      Amendment to Software License dated March 10, 2006 between Espial
    and mPhase
      Technologies, Inc.</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1029.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.29</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1029.htm" style="text-decoration: none">Amendment
      to the November 23rd 2004 Mutual NDA dated November 10, 2006</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1030.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.30</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1030.htm" style="text-decoration: none">Common
      Amendment to Statement of Work Velankani and mPhase Technologies, Inc dated
      November 14, 2006</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1031.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.31</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1031.htm" style="text-decoration: none">Content
      License and Service Agreement between Accedo Broadband a Swedish Corp and
      mPhase Technologies, Inc dated December 15, 2006</a></P></TD></TR>
  <tr>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1032a.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.32A</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1032a.htm" style="text-decoration: none">Agreement
      between Rubenstein Investor Relations, Inc and mPhase Technologies, Inc
      dated January 16, 2007</a></P></TD>
  </tr>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1032b.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.32B</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1032b.htm" style="text-decoration: none">Services Agreement
      between Rubenstein Associates, Inc and mPhase Technologies, Inc
      dated January 22, 2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1033.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.33</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1033.htm" style="text-decoration: none">Memorandum
      of Understanding between Latens and mPhase Technologies, Inc dated January
      23, 2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1034.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.34</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1034.htm" style="text-decoration: none">Amendment
      #4 between Lucent Technologies and mPhase Technologies, Inc dated February
      3, 2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1035.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.35</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1035.htm" style="text-decoration: none">First
      Amendment to the Master Work Agreement between Velankani and mPhase
      Technologies, Inc dated February 6, 2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1036.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.36</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1036.htm" style="text-decoration: none">Cooperative
      Research Agreement between Rutgers and mPhase Technologies, Inc dated
      February 5, 2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1037.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.37</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1037.htm" style="text-decoration: none">Statement
      of Work Espial and mPhase Technologies, Inc dated February 22,
  2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1038.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.38</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1038.htm" style="text-decoration: none">Payment
      Agreement between Espial and mPhase Technologies, Inc dated February 22,
      2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1039.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.39</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1039.htm" style="text-decoration: none">Reseller Agreement
      between Steeleye Technologies and mPhase Technologies, Inc dated March 28,
      2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1040.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.40</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1040.htm" style="text-decoration: none">Consulting
      Agreement between CT Nanobusiness Alliance and mPhase Technologies, Inc.
      &nbsp;dated May 10, 2007</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1041.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.41</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1041.htm" style="text-decoration: none">Escrow Agreement
      &nbsp;between Wilson Sonsini Goodrich &amp; Rosati and mPhase
      Technologies, Inc
      dated May 2007 </a> </P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1042.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.42</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1042.htm" style="text-decoration: none">Non-Exclusive
      Distribution Agreement between Netdialogue and mPhase Technologies, Inc.
      dated December 13, 2006</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh1043.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.43
      </a>
      </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%" height="15">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1043.htm" style="text-decoration: none">Cooperative
      Research and Development Agreement between US Army Picatinny and mPhase
      Technologies, Inc dated December 20, 2006</a></P></TD></TR>
  </TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>95</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" cellspacing="0" cellpadding="0" width="100%" bordercolor="#111111">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      &nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      &nbsp;</TD></TR>
  <tr>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <font size="2"><a href="exh1044.htm" style="text-decoration: none">&nbsp;&nbsp;&nbsp;10.44</a></font></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="padding:0pt; FONT-SIZE: 10pt; COLOR: #000000; TEXT-INDENT: 0pt; margin-left:7.7pt; margin-right:0pt">
      <a href="exh1044.htm" style="text-decoration: none">Amendment
      # 5 between Lucent Technologies Inc and mPhase Technologies, Inc</a>.</P></TD>
  </tr>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <font size="2"><a style="text-decoration: none" href="exh1045.htm">
      &nbsp;&nbsp;&nbsp;10.45</a></font></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <p style="font-size: 10pt; color: #000000; text-indent: 0pt; margin-left: 7.7pt; margin-right: 0pt; padding: 0pt">
      <a style="text-decoration: none" href="exh1045.htm">Private Equity Credit
      Agreement by and between mPhase Technologies, Inc. and Double U Master
      Fund LP. Dated as of June 27, 2007.</a></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">21*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">List
      of Subsidiaries (incorporated by reference to Exhibit 21 to our
      registration statement
      on Form S-1 filed on June 18, 2001 (file no. 33-63262)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">23.1*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Consents
      of Schuhalter, Coughlin &amp; Suozzo, LLC dated August 31, 1998
  and reference
      to Exhibit 23 to our registration statement on Form 10SB-12G filed
    on October
      16, 1998 (file no. 000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">23.2*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Consents
      of Schuhalter, Coughlin &amp; Suozzo, LLC dated April 23, 1999
  and Mauriello,
      Franklin &amp; LoBrace, P.C. dated April 23, 1999 (incorporated by
      reference to
      Exhibit 23 to our registration statement on Form 10SB-12G filed on May 6,
      1999 (file
      no. 000-24969)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">23.3*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Consent
      of Schuhalter, Coughlin &amp; Suozzo, LLC dated August 13, 1999 (incorporated
      by reference to Exhibit 23.1 to our registration statement on Form
    SB-2 filed
      on August 13, 1999 (file no. 333-85147)).</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh234.htm" style="text-decoration: none">23.4</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh234.htm" style="text-decoration: none">Consent
      of Schuhalter, Coughlin &amp; Suozzo, LLC.</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh235.htm" style="text-decoration: none">23.5</a></P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">
      <a href="exh235.htm" style="text-decoration: none">Consent
      of Rosenberg Rich Baker Berman and Company.</a></P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">24.1**</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Power
      of Attorney (included as a part of the signature page of the initial
      filing of this</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="10%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width="90%">
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt; margin-left:0pt; margin-right:0pt">Registration
      Statement).</P></TD></TR></TABLE>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">*
Incorporated by reference. <br>
** Previously filed.<br>
***
Portions of such documents have been omitted pursuant to Rule 406 of the
Securities Act of 1933, or Rule 24(b-2) of the Securities Exchange Act of 1934.
Omitted portions of documents have been separately filed with the Securities and
Exchange Commission.</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>96</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Item
17. Undertakings.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">
1. The undersigned registrant hereby undertakes:</P>
<P
style="PADDING-RIGHT: 0pt; PADDING-LEFT: 19.8pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">1.
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:<BR></P>
<P
style="PADDING-RIGHT: 0pt; PADDING-LEFT: 19.8pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">2.
&nbsp;To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;<BR></P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -16.2pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">3.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">To
reflect in the prospectus any facts or events arising after the effective date
of this registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) promulgated under the Securities Act of 1933
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the Calculation
of Registration Fee&#148; table in this Registration Statement;</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify"><BR></P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -16.2pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">4.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 36pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">To
include any material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material change to
such information in this Registration Statement.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify"><BR></P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">Provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify"><BR></P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -19.8pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">1.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify"><BR></P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -19.8pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">2.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify"><BR></P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: -12pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -19.8pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">3.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 39.6pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt" align="justify">Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of each issue.</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>97</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=center>&nbsp;SIGNATURES</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Norwalk, State of
Connecticut, on the 10th day of July 2007.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">mPHASE
TECHNOLOGIES, INC.<BR></P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">&nbsp;/s/
Ronald A. Durando<BR>By:
Ronald A. Durando<BR>President
and Chief Executive Officer</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">&nbsp;</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">&nbsp;</P>
<P
style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">&nbsp;</P>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; "
align=right>98</P>
<hr color="#000000" size="5"><p style='page-break-before:always'>
<P
style="padding:0pt; FONT-SIZE: 10pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="justify">Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.</P>
<TABLE style="MARGIN-LEFT: 0pt; border-collapse:collapse" width="100%" bordercolor="#111111" cellpadding="0" cellspacing="0">

  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>&nbsp;Signature</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Title</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Date</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Necdet F. Ergul</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>&nbsp;Chairman of the Board of Directors</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>July 12, 2007</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Ronald A. Durando</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>&nbsp;President, Chief Executive Officer</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <p style="font-size: 10pt; color: #000000; text-indent: 0pt; line-height: 12pt; margin: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="center">
      July 12, 2007</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>and Director (Principal Executive Officer)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>/s/ Martin S. Smiley</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>&nbsp;Executive Vice President, Director</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <p style="font-size: 10pt; color: #000000; text-indent: 0pt; line-height: 12pt; margin: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="center">
      July 12, 2007</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Chief Financial Officer, and General Counsel</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>&nbsp;(Principal Financial and Accounting </P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>&nbsp;</TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Officer)</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Anthony H. Guerino</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>&nbsp;Director</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <p style="font-size: 10pt; color: #000000; text-indent: 0pt; line-height: 12pt; margin: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="center">
      July 12, 2007</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Gustave T. Dotoli</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>&nbsp;Director and Chief Operating Officer</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <p style="font-size: 10pt; color: #000000; text-indent: 0pt; line-height: 12pt; margin: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="center">
      July 12, 2007</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>*</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt"
      align=center>&nbsp;</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>&nbsp;</TD></TR>
  <TR>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Victor Lawrence</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=328>
      <P
      style="FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; LINE-HEIGHT: 12pt; PADDING-TOP: 0pt"
      align=center>Director</P></TD>
    <TD
    style="PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt"
    vAlign=bottom align=left width=329>
      <p style="font-size: 10pt; color: #000000; text-indent: 0pt; line-height: 12pt; margin: 0pt; padding-top: 0pt; padding-bottom: 0pt" align="center">
      July 12, 2007</TD></TR>
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      align=center>&nbsp;</P></TD>
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      align=center>Abraham Biderman</P></TD>
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      align=center>&nbsp;Director</P></TD>
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      July 12, 2007</TD></TR>
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<P
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/s/ Martin S. Smiley<br>
Martin
S. Smiley<br>
Attorney-in-fact</P>
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[{"type": "S-1", "sequence": "1", "filename": "mphase070507fs1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1614655}]
{"company-data": {"conformed-name": "MPHASE TECHNOLOGIES INC", "cik": "0000825322", "assigned-sic": "7385", "irs-number": "222287503", "state-of-incorporation": "NJ", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-144527", "film-number": "07977187"}, "business-address": {"street1": "587 CONNECTICUT AVE", "street2": "PO BOX 566", "city": "NORWALK", "state": "CT", "zip": "06854", "phone": "2038312212"}, "mail-address": {"street1": "587 CONNECTICUT AVE", "street2": "PO BOX 566", "city": "NORWALK", "state": "CT", "zip": "06854"}, "former-company": {"former-conformed-name": "TECMA LABORATORIES INC", "date-changed": "19980915"}}
mPhase Technologies Inc.: Form S-1 - Prepared by TNT Filings Inc.
As filed with the Securities and Exchange Commission on July 12,
2007
Registration No. 333- ________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
mPHASE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
New Jersey
7385
22-2287503
(State or other jurisdiction
(Primary Standard Industrial
(I.R.S. Employer
of incorporation or organization)
Classification Code Number)
Identification Number)
587 Connecticut Avenue
Norwalk, Connecticut 06854-1711
Telephone: (203) 831-2242
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Martin S. Smiley
Chief Financial Officer
mPHASE TECHNOLOGIES, INC.
587 Connecticut Avenue
Norwalk, Connecticut 06854-1711
Telephone: (203) 831-2242
Telecopy: (203) 853-3304
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If
any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.
If
this form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
1
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box.
CALCULATION OF REGISTRATION FEE
Proposed
Proposed
maximum
maximum
offering
aggregate
Amount of
Title of each class of
Amount to be
price per
offering
Registration
securities to be registered
Registered
share(1)
price(1)
fee
Common
      Stock,$.01 par value
185,914,911
$ .095
17,661,916
$ 542.23
Common
      Stock $.01 par value issuable upon exercise of warrants
33,010,306
$ .095
$   3,135,979
$   96.27
Common
      Stock $.01 par value issuable upon exercise of options
42,535,500
$ .095
$   4,040,872
$ 124.05
Total
$ 762.55
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended, on the basis of the
average of the bid and ask prices per share of our common stock, as reported on
the OTC Bulletin Board, on June 29, 2007.
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION
8(A), MAY DETERMINE.
2
July 12, 2007
PROSPECTUS
mPHASE TECHNOLOGIES, INC.
Shares of Common Stock
This
prospectus relates to the resale of up to 261,460,717 shares of common stock, of
which 185,914,911 shares are issued and outstanding, and up to 75,545,806 shares
that may be issued upon the exercise of warrants and options held by the selling
stockholders. The selling stockholders listed on pages 51-56 may sell the shares
from time to time.
Our common stock is listed on the Over-the-Counter Bulletin Board under the
symbol "XDSL.OB" The last reported sales price of our common stock on June 29, 2007 was
$.095 per share.
THESE
SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 10.
Our
principal executive offices are located at 587 Connecticut Avenue, Norwalk,
Connecticut 06854-1711. Our phone number is (203) 838-2741.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED ANY OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The
date of this prospectus is July 12, 2007.
TABLE OF CONTENTS
Page
Prospectus
      Summary
4
The
      Offering
5
Forward-Looking
      Statements
5
Summary
      Financial Data
6
Risk
      Factors
8-11
Use
      of Proceeds
11
Price
      Range of Common Stock
12
Selected
      Financial Data
13
Selected
      Quarterly Financial Data
15-17
Company
      Operations
17
Business
32
Legal
      Proceedings
41
Our
      Management
41
Stock
      Options
44
Security
      Ownership of Certain Beneficial Owners and Management
46
Certain
      Relationships and Related Transactions
47
Selling
      Stockholders
56
Plan
      of Distribution
57
Description
      of Securities
58
Legal
      Matters
59
Experts
59
Where
      You Can Find Additional Information
59
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THOSE
DOCUMENTS TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED
WHERE IT IS LEGAL TO SELL THESE SECURITIES.
THE
DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING SALE DOES NOT IMPLY THAT: (1)
THERE HAVE BEEN NO CHANGES IN OUR AFFAIRS AFTER THE DATE OF THIS PROSPECTUS; OR
(2) THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS.
3
PROSPECTUS SUMMARY
You
should read this Prospectus Summary together with the more detailed information
contained in this prospectus, including the risk factors and financial
statements and the notes to the financial statements. This prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those discussed in the forward-looking
statements. Factors that might cause such a difference include those discussed
in the Risk Factors section and elsewhere in this prospectus.
From
inception (October 2, 1996), through March 31, 2007 the Company had incurred
(unaudited) development stage losses of $162,520,429 and a stockholders' deficit
of approximately $2,634,400. Cumulatively, through June 30, 2006 and March 31,
2007, (unaudited) the Company had negative cash flows from operations of
approximately $67,257,660 and $73,398,128 respectively. The
auditors report for the fiscal year ended June 30, 2006 is qualified as to the
Company's ability to continue as a going concern. Management estimates the
Company either directly or through its newly formed operating subsidiaries (see
page 5) needs to raise between $5 million and $10 million during the next 12
months to sustain its current level of operations.
mPHASE TECHNOLOGIES, INC.
mPhase
Technologies, Inc. (mPhase, the Company, we or us), a New Jersey corporation,
founded in 1996 is a publicly-held company with approximately 17 thousand
shareholders and approximately 388,000,000 million shares of common stock
outstanding as of  June 29, 2007. The Company's common stock is traded on
the NASDAQ Over the Counter Bulletin Board under the ticker symbol XDSL. We are
headquartered in Norwalk, Connecticut with offices in Little Falls, New Jersey
and New York, N.Y. mPhase shares common office space and common management with
Microphase Corporation, a privately-held company. Microphase sells radio
frequency and filtering technologies to the defense and telecommunications
industry. Microphase has been in operation for over 50 years and supports mPhase
with engineering, administrative and financial resources, as needed.
mPhase
is a developer and seller of broadband communications products for telephone
service providers.  The Company's TV+ solution is the middleware/software
necessary for the delivery by telephone service providers of broadcast quality
television, video on demand, high speed internet and voice utilizing internet
protocol (IPTV). mPhase believes that its IPTV solution  is the most
cost-effective, standards based, scalable solution with carrier class quality
and security available for telecommunications service providers around the
world. mPhase believes that telecommunication service providers will find the
cost-effective, scalable architecture of the TV+ middleware will result in
significant cost savings in the number of servers and routers necessary  to
deploy IPTV to its customers on a significant scale. This is especially true for
telephone service providers outside of the United States that face substantial
hardware costs to upgrade their existing backbone and infrastructure necessary
for the delivery of broadcast television.  Since such hardware costs
constitute up to 95% of the capital expenditures in deploying IPTV, the savings
are often a key financial ingredient enabling a telecommunications service
provider to deploy IPTV. Thus the Company believes its software can be a
compelling solution for such deployments. The deployment of a full range of
converged broadband services is critical for many telecommunications service
providers to retain traditional telephone customers by offering a full package
of services.  Our TV+ solution enables a telephone service provider to
provided a "triple play" of voice, broadcast television and high speed internet
over any existing infrastructure including copper, fiber or coax. Our current
release of the TV+ solution is a culmination of years of development of a
world-class television delivery solution for telecommunication service
providers.
Our
TV+ solution is currently part of a test deployment of IPTV by Comstar/Odessa, a
major telecommunications service provider in the Ukraine. The Company faces
significant technical and financial challenges in order to achieve the
successful completion of acceptance testing criteria. However, upon  the
TV+ solution successfully meeting the technical and features criteria of the
acceptance test  Comstar/Odessa has indicated that it will  commence
deployment of IPTV to 6,000 customers. Such a deployment would, constitute the
first major deployment of its TV+solution and could constitute a significant
breakthrough for additional deployments of its IPTV solution in the Ukraine and
Russia. The Company has also recently established a significant reseller
relationship with Net Dialogue, a major integrator and reseller of
telecommunications products and services for several large telephone service
providers in Russia.
Since
our inception in 1996 we have been a development-stage company. During the past
three years, mPhase has transformed itself from a developer of closed end
proprietary technology for the delivery of broadcast television over DSL to a
Company that has developed a carrier class middleware/software solution for the
delivery of IPTV. mPhase's IPTV solution is designed for operation with any
transport mechanism using IP protocol including multicast routers, digital
subscriber line access multiplexers and set top boxes of all major vendors.
In February of 2004, the Company entered into the field of
nanotechnology research and development of micro power cell batteries of various
voltages. The purpose of this initiative is consistent with the Company's
strategy of establishing a product portfolio of cutting edge, innovative high
technology products for new and emerging areas of high growth. The initial goal
is to develop batteries for military applications having significantly longer
shelf life prior to activation. The batteries would have instant on capabilities
due to their extremely small internal size, and power management capabilities to
significantly extend their duty cycle periods than are currently available in
the market. The Company believes that such development is consistent with its
strategy of being a pioneer in areas of high growth technology and potentially
diversifies its mix of products. In March of 2005, the Company announced that it
had expanded its nanotechnology research and efforts to develop extremely
sensitive uncooled magnetic sensors, commonly known as a magnetometer, as a
new product line.
4
On April 17, 2007, the Company announced that it had formed
AlwaysReady, Inc., a New Jersey Corporation, as a new wholly-owned subsidiary.
The Company plans to transfer all
of its nanotechnology assets and appropriate liabilities to such company as a
first step in the separation of its nanotechnology product line from its IPTV
product. The Company plans to staff AlwaysReady, Inc with a new management team
experienced in the nanotechnology area in order to unlock and maximize overall
shareholder value. On May 29, 2007, AlwaysReady, Inc announced the hiring of
Source Capital Group, an investment banking firm specializing in the raising of
private equity, to raise a minimum of $1.5 million in a Private Placement in
which the Company would sell up to a 10% interest in AlwaysReady, Inc to institutional
and accredited investors. In addition the Company announced that it planned to
eventually transform AlwaysReady, Inc. into a publicly traded company. mPhase
plans to retain a 90% interest in Always Ready, Inc. and the shares of common
stock of Always Ready, Inc. will be registered on appropriate filings with the
SEC under the Securities Act of 1933, as amended, as well as the Securities
Exchange Act of 1934, as amended, and listed for trading on the over the counter
bulletin board.
On June 20, 2007, the Company announced that it is forming a
new subsidiary, Granita Media, Inc ("Granita"), a Delaware corporation, that
will provide targeted advertising to users of the TV+ middleware solution. Through the use of
specific viewer demographics such as age, gender and defined consumer
preferences, the Company believes that a new form of broadcast television
advertising could develop that is more powerful and focused than is currently
being used by broadcasters. It is believed that targeted  advertising
software to be developed by Granita will enhance mPhase's middleware by offering
a source of additional revenues for a telephone service provider deploying IPTV.
mPhase plans to fund the new company initially through up to $500,000 of equity
to be provided by employees and additional outside institutional financing which will
involve the sale of up to 10% of the common stock of Granita with mPhase
retaining 90% of the stock of Granita.
THE OFFERING
Common
stock offered:  Up to 261,460,717 shares of common stock, of which
185,914,911 shares are issued and outstanding and up to 75,545,806 shares may be
issued upon exercise of warrants and options held by the selling
stockholders.
Common
Stock to be outstanding after this offering: Approximately 391 million shares of
common stock. This does not include an aggregate of approximately 209
million shares that are reserved for issuance pursuant to outstanding employee
stock options, non-employee stock options and warrants.
Use of proceeds: We will not receive any proceeds from the sale
and issuance of the common stock included in this offering. However, we will
receive approximately $47 million upon the exercise of all of the warrants
and options by the selling stockholders.
Risk Factors: An investment in our common stock is subject to
significant risks. You should carefully consider the information set forth in
the "Risk Factors" section of this prospectus as well as other information set
forth in this prospectus, including our financial statements and related
notes.
Dividend
policy: We do not expect to pay dividends on our common stock in the foreseeable
future. We anticipate that all future earnings, if any, generated from
operations will be retained to develop and expand our business.
Plan
of Distribution: The shares of common stock (OTC Bulletin Board symbol: XDSL.OB)
offered for resale may be sold by the selling stockholders pursuant to this
prospectus in the manner described under "Plan of Distribution."
We
have applied for trademarks on certain marks which relate to our products. This
prospectus also contains product names, trade names and trademarks of ours as
well as those of other organizations. All other brand names and trademarks
appearing in this prospectus are the property of their respective holders.
FORWARD-LOOKING STATEMENTS
In
addition to the other information contained in this prospectus, investors should
carefully consider the risk factors disclosed in this prospectus in evaluating
an investment in our common stock. This prospectus includes "forward-looking
statements". All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any
projections of earnings, revenues or other financial items, any statements of
the plans and objectives of management for future operations, any statements
concerning proposed new products or services, any statements regarding future
economic conditions or performance, and any statement of assumptions underlying
any of the foregoing. In some cases, forward-looking statements can be
identified by the use of terminology such as "may", "will", "expects", "plans",
"anticipates", "estimates", "potential", or "continue" or the negative thereof
or other comparable terminology.
Although
we believe that the expectations reflected in the forward-looking statements
contained herein and in such incorporated documents are reasonable, there can be
no assurance that such expectations or any of the forward-looking statements
will prove to be correct, and actual results could differ materially from those
projected or assumed in the forward-looking statements. Our future financial
condition and results of operations, as well as any forward-looking statements,
are subject to inherent risks and uncertainties, including but not limited to
the risk factors set forth above and for the reasons described elsewhere in this
prospectus. All forward-looking statements and reasons why results may differ
included in this prospectus are made as of the date hereof, and we assume no
obligation to update any such forward-looking statement or reason why actual
results might differ.
5
SUMMARY FINANCIAL DATA
The
selected financial data set forth below is derived from and should be read in
conjunction with historical financial statements and notes included in this
prospectus. Financial information for the years ended June 30, 1999, 2000 and
2001, are derived from financial statements that have been audited by Arthur
Andersen LLP. Financial information relating to years ended June 30, 2002, 2003
and 2004, 2005 and 2006 are derived from financial statements that have been
audited by Rosenberg, Rich, Baker, Berman & Company, independent auditors,
and are included in this prospectus.  Quarterly information and balances as
of March 31, 2007 includes all adjustments and material disclosures that
management considers necessary for a fair presentation. Such information has not
been audited are not necessarily indicative of the operating results to be
expected in the future.
SUMMARY
OPERATING DATA
Year Ended June 30,
(in thousands except per share data)
2002
2003
2004
2005
2006
Cumulative from inception October 2, 1996 to
      June 30, 2006
Total
      revenues
$2,582
$1,582
$4,641
$1,711
$975
$22,296
Cost
      of sales
2,415
1,493
4,068
1,446
974
16,335
Research
      and development
3,820
3,538
4,070
5,127
8,035
51,579
General
      and administrative
7,039
2,684
4,178
6,580
11,121
96,756
Depreciation
      and amortization
670
515
123
63
79
3,031
Operating
      loss
(11,361)
(6,649)
(7,798)
(11,505)
(19,234)
(145,405)
Other
      income (expense), net
142
50
150
382
(5,182)
(5,905)
Interest
      income (expense)
(26)
(51)
(111)
(111)
(35)
(150)
Net
      loss
($11,245)
($6,650)
($7,759)
($11,234)
($24,451)
($151,460)
Basic
      and diluted net loss per share
($.23)
($.10)
($.10)
($.10)
($.12)
Shares
      used in basic and diluted net loss per share
49,617,280
65,217,088
77,677,120
108,657,578
199,610,372
BALANCE
SHEET DATA
As of June 30
(in thousands)
2002
2003
2004
2005
2006
March 31, 2007
Cash
      and cash equivalents
$47
$397
$90
$351
$1,360
$315
Working
      capital (deficit)
(94)
(1,405)
(2,112)
(1,674)
(1,093)
(3,011)
Total
      assets
6,942
3,782
2,591
2,232
2,182
1,666
Long-term
      obligations, net of current portion
2,891
2,608
1,038
315
0
0
Total
      stockholders' (deficit)
$ (42)
$ (3,229)
$ (2,918)
$ (1,618)
$ (606)
$(2,634)
6
mPHASE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
(Date of
Nine Months Ended
Inception) to
March 31,
March 31,
2006
2007
2007
REVENUES
$832,999
$135,743
$22,431,350
COSTS
      AND EXPENSES
Cost
      of Sales
729,475
88,207
16,422,148
Research
      and Development ( including non-cash stock related charges of $200,850, $0
      and $2,318,519, for 2006, 2007 and inception to date respectively)
6,120,253
4,964,404
56,543,605
General
      and Administrative (including non-cash stock related charges of,
      $4,510,350, $1,124,647 and $58,319,301 for 2006, 2007 and inception to
      date respectively)
8,002,079
5,012,073
101,768,166
Depreciation
      and Amortization
57,644
66,314
3,097,316
TOTAL
      COSTS AND EXPENSES
$14,909,451
$10,130,998
$177,831,235
LOSS
      FROM OPERATIONS
($14,076,452)
($9,995,255)
($155,399,885)
OTHER
      INCOME
Interest
      Income (Expense), net
(25,498)
(10,930)
(161,071)
Other
      Income (Expense) net
(4,902,302)
(1,054,187)
(6,959,473)
TOTAL
      OTHER INCOME (EXPENSE)
($4,927,800)
($1,065,117)
($7,120,544)
NET
      LOSS
($19,004,252)
($11,060,372)
($162,520,429)
LOSS
      PER COMMON SHARE, basic and diluted
($0.09)
($0.04)
WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING, basic and diluted
211,186,500
309,018,261
7
RISK FACTORS
An
investment in the common stock offered by this prospectus involves a high degree
of risk. In addition to the other information in this prospectus and any
supplements to this prospectus, you should carefully consider the following
risks before making an investment decision.
CAUTIONARY STATEMENT
In
addition to the Risk Factors set forth below it is important for you to consider
the following:
mPhase was advised in April 2002 that following an
investigation by the staff of the Securities and Exchange Commission, the staff
intended to recommend that the Commission file a civil injunctive action against
Packetport.com, Inc. ("Packetport") and its Officer's and Directors. Such
recommendation related to alleged civil violations by Packetport and such
Officers and Directors of various sections of the Federal Securities Laws. The
staff has alleged civil violations of Sections 5 and 17(a) of the Securities Act
of 1933 and Sections 10(b) and 13(d) of the Securities Exchanges Act of 1934. As
noted in other public filings of mPhase, the Chief Executive Officer and Chief
Operating Officer of mPhase also serve as Directors and Officers of Packetport.
At that time these persons advised mPhase that they deny any violation of law on
their part and intend to vigorously contest such recommendation or action, if
any.
On
November 15, 2005, the Commission filed a civil enforcement action against 6
individuals and 4 companies as a result of its investigation in federal district
court in the State of Connecticut alleging various violations of the Securities
Act of 1933 including Sections 5, Section 17(a) and the Securities Exchange Act
of 1934 including Sections 10b, Rule 10b-5, Sections, 12,Section 13, Section 16
in connection with the purchase and sale of stock of Packetport in the
period on or about December 14, 1999 into February of 2000. The defendants
include the Chief Executive Officer and Chief Operating Officer of mPase as well
as Microphase Corporation, a privately held Connecticut corporation that shares
common management with mPhase. mPhase Technologies, Inc. is not named as a party
in the enforcement action. The Chief Executive Officer and Chief Operating
Officer of mPhase, and Microphase Corporation, each deny any violation of the
law by each or any of them and intend to vigorously contest all charges set
forth in such enforcement action by the Commission.
In a ruling (3:05 CV 1747 (PCD)), dated March 21, 2007, the
Honorable Peter C. Dorsey, Senior U.S. District Court Judge for the United
States District Court  For The District Of Connecticut, granted a motion by
defendants, Ronald A. Durando and Packetport Inc. joined by defendants Gustave
T. Dotoli , Microphase Corporation and Packetport.com, Inc. to dismiss under
Federal Rule 41(b) of the Federal Rules of Civil Procedure the civil lawsuit
filed on November 15, 2005 by the Securities and Exchange Commission against
Packetport.com, Inc. et. al for lack of prosecution.
On April 4, 2007, the Securities and Exchange Commission filed
a motion with the United States District Court requesting a reconsideration of
the motion to dismiss granted by the Court  in favor of the defendants.
In a ruling dated May 23, 2007, the Judge Peter C. Dorsey
granted the motion for reconsideration filed by the Securities and Exchange
Commission and reversed his earlier ruling of March 21, 2007 and reinstated the
case on the judicial calendar to proceed to trial.
Risks
Related to Financial Aspects of Our Business
The
Company engages in the new and emerging business of developing products using
the science of Nanotechnology which entails significant exploratory development
and commercial risk.
The
Company has expended over $3.6 million from February of 2004 through the date
hereof pursuant to 12 month contracts with the Bell Labs division of Lucent
Technologies, Inc. during such period to develop longer life battery cells for
military applications as well as commercial applications such as RFID (Radio
Fequency Identification) tags. The Company expects to continue exploratory
research with Lucent Technologies, Inc. and is currently in negotiations for an
extension of such contract for  an additional 12 months at the rate of
$100,000 per month . Even though a feasibility prototype product has been
successfully developed, pure research involves a high degree of risk with
significant uncertainty as to whether a commercially viable product will
result
From
March 10, 2005 through the date hereof, the Company has spent over $2.4 million
with the Bell Labs division of Lucent Technologies, Inc for new research and
development of uncooled magnetic ultra sensors using the science of
Nanotechnology.  The Company is currently negotiating to extend its
Development Agreement with Bell Labs for the Magnetometer research for another
12 months through June of 2008 at $100,000 per month each. The Company does not
expect significant revenues from either product for at least 2 years.
8
mPhase's
stock price has suffered significant declines during the past seven years and
remains volatile
.
The
market price of our common stock closed at $7.88 on July 26, 2000 and closed at
$.095 on June 29, 2007. During such period the number of shares outstanding of
the Company increased from approximately 30 million shares to 388 million
shares. Such increase was the result of periodic private placements by the
Company in order to finance company operations. Stocks in telecommunications
equipment providers of DSL products have been very volatile during such period.
Our common stock is a highly speculative investment and is suitable only for
such investors with financial resources that enable them to sustain the loss of
their entire investment in such stock. Because the price of our common stock is
less than $5.00 per share and is not traded on the NASDAQ National or NASDAQ
Small Cap exchanges, it is considered to be a "penny stock" limiting the type of
customers that broker/dealers can sell to. Such customers consist only of "established customers" and
"Accredited Investors" (within the meaning of Rule
501 of Regulation D of the Securities Act of 1933, as amended-generally
individuals and entities of substantial net worth) thereby limiting the
liquidity of our common stock.
We
have reported net losses for each of our fiscal years from our inception in 1996
and for the nine months (unaudited) ended March 31, 2007 respectively and may
not be able to operate profitability in the future.
We
have had substantial losses since our inception in 1996 (including $24,450,650
and $11,234,324 for the fiscal years ended June 30, 2006 and  June 30,
2005, respectively and (unaudited) $11,060,372 and $19,004,252 for the nine
month period ending March 31, 2007 and March 31, 2006 respectively) and cannot
be certain when or if we will ever be profitable. We expect to continue to have
net losses for the foreseeable future and have a need to raise not less than
$5-10 million in additional cash in the next 12 months through further offerings
to continue operations. We have never been profitable from our inception in
October, 1996 through March 31, 2007 (unaudited) and we have incurred (a)
accumulated losses of $162,520,429 and a stockholder's deficit of $2,634,400 and
(b) cumulative negative operating cash flow of $73,398,128 and negative working
capital of $3,011,440.
Our
independent auditor's report express doubt about our ability to continue as a
going concern
.
The
reports of the Company's outside auditors' Rosenberg, Rich, Baker, Berman &
Company with respect to its latest audited 10K for the fiscal years ended
  June 30, 2006, 2005, 2004, June 30, 2003 and June 30, 2002 stated
that there is substantial doubt of the Company's ability to continue as a going
concern.  Such opinion from our outside auditors makes it significantly
more difficult and expensive for the Company to raise additional capital
necessary to continue our operations.
Our
common stock is subject to significant dilution upon issuance of shares we have
reserved issuance.
As
of June 29, 2007, we have warrants, options outstanding convertible into
approximately 215 million total shares of mPhase common stock which, upon
conversion, may adversely affect the future price of our common stock. As of
June 29, 2007 we have warrants and options convertible into approximately 112
million shares of our common stock at $.20 per share or less that, upon
exercise, will result in significant dilution to many of our current
shareholders and may adversely affect the future price of our common stock. We
may be forced to raise additional cash for operations by selling additional
shares of our common stock at depressed prices causing further dilution to our
shareholders.
Risks
Related to Our Operations
We
have been a development-stage company since our inception in 1996 and have not
to date had a significant or successful deployment of any of our solutions for
the delivery of broadcast television, high-speed internet and voice by a major
telephone service provider.
We
have had to date no material revenues derived from sales of our TV+ solution.
There has been to date only one sale of our IPTV solution for 1000 customers of
a telecommunications service provider in Russia which has discontinued
deployment of our TV+ solution. In addition a lab test trial by a major
telecommunications service provider in the Ukraine currently faces significant
financial and technical challenges in order to pass a technical acceptance test
that requires many product features currently  still in development by the
Company. There are no other deployments of  our TV+ Solution by telephone
service providers globally and there currently is uncertainty as to the extent,
if at all, that deployments of IPTV will occur in the future.
We
depend upon outsourcing of our research and product development of our
Nanotechnology products to the Bell Labs division of Lucent Technologies
Inc.
We depend upon Lucent Technologies Inc. for the successful development of our
Nanotechnology products and our business would be materially adversely affected
if Lucent Technologies Inc. were to terminate our relationship or fail to renew
our Development Agreement for the Magnetometer that is currently being
negotiated.
The
loss of key personnel could adversely affect our business.
Management
and employment contracts with all of our officers have expired and no assurances
can be given that such executives will remain with the Company or that the
Company will be able to successfully enter into agreements with such key
executives. All of our officers and other key employees have been granted stock
options that are intended to represent a key component of their compensation.
Such options may not provide the intended incentives to such persons if our
stock price declines or experiences significant volatility.
9
Risks Related to Our Targeted Markets
Economic
support from affiliated companies has been significant.
During
the downturn in the telecommunications industry beginning in 2001, both
Microphase Corporation, and Janifast Ltd. provided significant financial support
to mPhase in the form of either cash infusions or conversions of related party
debt. Such companies, which share common management with mPhase, are under no
legal obligation to and may not be able to sustain such economic support of
mPhase in the future should such support be necessary.
We
may incur substantial expenditures in the future in order to protect our
intellectual property.
We
have recently filed a provisional patent with respect to our TV+ solution in
order to protect our product, however a final patent has not yet been applied
for or granted. Even if a patent is ultimately granted ,the telecommunications
industry, in general, is characterized by a large number of patents and frequent
patent litigation based upon claims of patent infringement when compared to
other industries.
Historically
the sale of infrastructure products to telecommunication providers in the
international markets has a long lead-time and a multiplicity of risks.
We
expect initially that revenues from our TV+ solution to be derived from
international emerging markets and our success depends upon our ability to sell
our flagship television platform outside of the United States where political,
currency and regulatory risks are significantly greater. As a result of their
distance from the United States, different time zones, culture, management and
language differences, these operations pose greater risk than selling in the
United States. Our sales cycle for our TV + solution is lengthy (since it
involves a major strategic decision by an international telecommunications
service provider) and we may incur significant marketing expenses with no
guarantee of future sales. A significant market for our legacy Traverser DVDDS
never developed and may never develop for our TV +solution if international
telephone service providers fail to successfully deploy broadband services
including high speed data and television.  Increased consolidation of
telephone service providers worldwide have significantly limited  the
current recovery of capital expenditures for broadband and other deployment from
the economic downturn that began in 2001in the industry. Future market demand
that will cause telephone service providers to aggressively roll out IPTV, in
general, is highly unpredictable especially in markets outside of the United
States. Certain telephone companies (especially in developing international
economies) may have infrastructure that is not of sufficient quality to
accommodate the mPhaseTV+ solution. Changes in foreign taxes and import duties
and economic and political instability in international markets pose a greater
risk to our operations than U.S. markets.
Our
television platform may not achieve compliance with regulatory requirements in
foreign countries.
Our
mPhaseTV+ solution may fail to meet foreign regulatory standards. Since
initially we are  targeting markets for our television platform involves
countries outside of the United States, such product is subject to greater
regulatory risks since it must comply with different standards of different
countries than can vary widely in the telecommunications industry. The failure
to meet such regulatory standards would result in potential customers in
countries outside of the United States not deploying of our TV+ solution.
The
telecommunications industry is subject to intense competition characterized by
swift changes in technology.
The
telecommunications equipment industry is subject to swift and continuing
innovation and technological changes that could render our TV+ solution obsolete
and intense competition in the industry could prevent our ever becoming
profitable. Our competitors that sell IPTV solutions that compete with and
mPhase TV+ middleware include much larger and better known and capitalized
companies with significantly greater selling and marketing experience and
financial resources. Such competitors include for middleware a joint venture
between Microsoft and Alcatel, as well as Minverva, Orca Interactive, Siemens,
VBrick Systems and Video Furnance. End to end solutions competitors for IPTV
include UTStarcom, mxWare and Industrial. Telephone service providers that are
our targeted customers face competition from cable-based technologies, fixed
wireless technologies and satellite technologies that may cause them not to
deploy our TV+ product.
Deployment
of our television platform requires significant additional investments by
telecommunications service providers.
Our
Customers may need to build a digital head-end to download television content
from satellites involving a significant additional capital expenditure to
utilize the digital Television capabilities of our TV+ solution. For customers
desiring feature rich solutions such as video on demand, the installation of
additional routers and servers may be required to upgrade the internet backbone
capabilities of such customer. Such additional capital costs may cause a number
of potential customers not to deploy our TV+ solution.
10
Risk Factors Related to Our Targeted Markets
We
may not be able to evolve our technology, products and services or develop new
technology, products and services that are acceptable to our customers
.
The
market for our IPTV middleware is characterized by:
Rapid
technology change;
New
and improved product introductions;
Changing
customer demands; and
Evolving
industry standards and product obsolescence.
Our
future success will depend upon our ability to continually enhance our IPTV
solution to deliver feature rich, open standards, carrier class television on
the most scaleable cost efficient platform custom tailored to the rigorous and
varied demands of telecommunications service providers. The development of
enhanced and new technology, products and services is a complex and uncertain
process requiring high levels of innovation, highly-skilled engineering and
development personnel, and the accurate anticipation of technological and market
trends. We may not be able to identify, develop, market or support new or
enhanced technology, products, or services on a timely basis, if at all owing to
our size and limited financial resources.
Telecommunications
service providers outside of the United States must be able to access sources
for broadcast television content in order to deploy our TV+ Solution.
In
order to have an incentive to deploy the IPTV solution, an international
telecommunications service provider must have access, to multiple channels of
Television programming from content providers at prices that enable such
provider to earn a profit from the deployment of television programming. In
certain of our key target markets, such as Brazil, only cable companies are
permitted under current law to provide such content and therefore a local
service provider must establish a working relationship with such a cable
provider to have an incentive to utilize our products.
USE OF PROCEEDS
The
selling stockholders will receive the proceeds from the resale of the shares of
common stock. We will not receive any proceeds from the resale of the shares of
common stock by the selling stockholders. However, we will receive approximately
$47 million if all of the warrants and options are converted to purchase shares
of common stock registered under this prospectus which would be used for general
working capital.
11
PRICE RANGE OF COMMON STOCK
The primary market for our common stock is the OTC Bulletin Board,
where it trades under the symbol "XDSL.OB". The following table sets forth the
high and low closing bid prices for the shares for the periods indicated as
provided by the National Quotation Bureau, Inc. The quotations shown reflect
inter-dealer prices, without retail mark-up, mark-down, or commission and may
not represent actual transactions.
Year/Quarter
High
Low
Fiscal
      year ended June 30, 1999
First
      Quarter
$4.25
$0.75
Second
      Quarter
3.65
1.56
Third
      Quarter
5.63
1.88
Fourth
      Quarter
8.75
2.91
Fiscal
      year ended June 30, 2000
First
      Quarter
$9.25
$2.96
Second
      Quarter
6.18
2.50
Third
      Quarter
19.12
6.50
Fourth
      Quarter
14.12
6.00
Fiscal
      year ended June 30, 2001
First
      Quarter
$9.25
$3.00
Second
      Quarter
5.93
1.46
Third
      Quarter
3.38
1.22
Fourth
      Quarter
2.61
1.03
Fiscal
      year ended June 30, 2002
First
      Quarter
$1.67
$.31
Second
      Quarter
.86
.31
Third
      Quarter
.62
.27
Fourth
      Quarter
.50
.23
Fiscal
      year ended June 30, 2003
First
      Quarter
$.32
$.15
Second
      Quarter
.31
.15
Third
      Quarter
.36
.19
Fourth
      Quarter
.42
.28
Fiscal
      Year ended June 30, 2004
First
      Quarter
$.42
$.29
Second
      Quarter
$.61
$.26
Third
      Quarter
$.69
$.41
Fourth
      Quarter
$.46
$.29
Fiscal
      Year ended June 30, 2005
First
      Quarter
$.31
$.21
Second
      Quarter
$.35
$.23
Third
      Quarter
$.59
$.30
Fourth
      Quarter
$.41
$.24
Fiscal
      Year ended June 30, 2006
First
      Quarter
$.28
$.22
Second
      Quarter
$.30
$.16
Third
      Quarter
$.42
$.21
Fourth
      Quarter
$.32
$.19
Fiscal
      Year ended June 30, 2007
First
      Quarter
$.21
$.16
Second
      Quarter
$.20
$.15
Third
      Quarter
$.24
$.15
As
of June 29, 2007 (unaudited), we had approximately 388 million shares of common
stock outstanding and approximately 17 thousand stockholders. The last reported
sales price of our common stock on June 29, 2007 was $.095 per share.
12
DIVIDEND POLICY
We
have never declared or paid any cash dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and expand our
business. Any future determination to pay cash dividends will be at the
discretion of the board of directors and will be based upon our financial
condition, operating results, capital requirements, plans for expansion,
restrictions imposed by any financing arrangements and any other factors that
the board of directors deems are relevant.
SELECTED FINANCIAL DATA
The
selected financial data set forth below is derived from and should be read in
conjunction with historical financial statements and notes included in this
prospectus. Financial information for the years ended June 30, 1999, 2000 and
2001, are derived from financial statements that have been audited by Arthur
Andersen LLP. Financial information relating to years ended June 30, 2002, 2003
and 2004, 2005 and 2006 are derived from financial statements that have been
audited by Rosenberg, Rich, Baker, Berman & Company, independent auditors,
and are included in this prospectus.  Quarterly information includes all
adjustments and material disclosures that management considers necessary for a
fair presentation. Such information has not been audited are not necessarily
indicative of the operating results to be expected in the future.
SELECTED OPERATING DATA
Year Ended June 30,
(in thousands except per share data)
2002
2003
2004
2005
2006
Cumulative from inception October 2, 1996 to
      June 30
, 2006
Total
      revenues:
$2,582
$1,582
$4,641
$1,711
$975
$22,296
Cost
      of sales
2,415
1,493
4,068
1,446
974
16,335
Research
      and development
3,820
3,538
4,070
5,127
8,035
51,579
General
      and administrative
7,039
2,684
4,178
6,580
11,121
96,756
Depreciation
      and amortization
670
515
123
63
79
3,031
Operating
      loss
(11,361)
(6,649)
(7,798)
(11,505)
(19,234)
(145,405)
Other
      income (expense), net
142
50
150
382
(5,182)
(5,905)
Interest
      income (expense)
(26)
(51)
(111)
(111)
(35)
(150)
Net
      loss
($11,245)
($6,650)
($7,759)
($11,234)
($24,451)
($151,460)
Basic
      and diluted net loss per share
($0.23)
($0.10)
($0.10)
($0.10)
($0.12)
Shares
      used in basic and diluted net loss per share
49,617,280
65,217,088
77,677,120
108,657,578
199,610,372
Does
not include any common stock equivalents since their effect would be
anti-dilutive.
13
mPHASE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
(Date of
Nine Months Ended
Inception) to
March 31,
March 31,
2006
2007
2007
REVENUES
$832,999
$135,743
$22,431,350
COSTS
      AND EXPENSES
Cost
      of Sales
729,475
88,207
16,422,148
Research
      and Development ( including non-cash stock related charges of $200,850, $0
      and $2,318,519, for 2006, 2007 and inception to date respectively)
6,120,253
4,964,404
56,543,605
General
      and Administrative (including non-cash stock related charges of,
      $4,510,350, $1,124,647 and $58,319,301 for 2006, 2007 and inception to
      date respectively)
8,002,079
5,012,073
101,768,166
Depreciation
      and Amortization
57,644
66,314
3,097,316
TOTAL
      COSTS AND EXPENSES
$14,909,451
$10,130,998
$177,831,235
LOSS
      FROM OPERATIONS
($14,076,452)
($9,995,255)
($155,399,885)
OTHER
      INCOME
Interest
      Income (Expense), net
(25,498)
(10,930)
(161,071)
Other
      Income (Expense) net
(4,902,302)
(1,054,187)
(6,959,473)
TOTAL
      OTHER INCOME (EXPENSE)
($4,927,800)
($1,065,117)
($7,120,544)
NET
      LOSS
($19,004,252)
($11,060,372)
($162,520,429)
LOSS
      PER COMMON SHARE, basic and diluted
($0.09)
($0.04)
WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING, basic and diluted
211,186,500
309,018,261
The accompanying notes are an integral part of these consolidated financial
statements.
14
SELECTED
BALANCE SHEET DATA:
As of June 30,
(in
thousands except per share data)
2002
2003
2004
2005
2006
March 31, 2007 (unaudited)
Cash
      and cash equivalents
$47
$397
$90
$351
$1,360
$315
Working
      capital (deficit)
(94)
(1,405)
(2,112)
(1,674)
(1,093)
(3,011)
Total
      assets
6,942
3,782
2,591
2,232
2,182
1,666
Long-term
      obligations, net of current portion
2,891
2,608
1,038
315
0
0
Total
      stockholders' (deficit)
$(42)
$(3,229)
$(2,918)
$(1,618)
$(606)
$(2,634)
SELECTED QUARTERLY DATA
FISCAL
      2007 QUARTERLY
Three Months Ended
STATEMENT
      OF OPERATIONS DATA:
September 30,
December 31
March 31,
Total
      revenues
$105,846
$14,742
$15,155
Costs
      and Expenses:
Cost
      of sales
85,390
2,817
Research
      and development
1,990,313
1,723,411
1,250,680
General
      and administrative
1,961,832
1,405,347
1,644,895
Depreciation
      and amortization
21,899
21,739
22,676
Operating
      loss
3,953,588
3,135,755
2,905,912
Interest
      expense, Net
(4,414)
(7,734)
1,218
Other
      Income (expense)
(695,352)
(358,835)
Net
      Loss
(3,958,002)
($3,838,841)
($3,263,529)
Basic
      and diluted net loss per share
(.01)
($.01)
($.01)
Shares
      used in basic and diluted net loss per share
282,306,237
300,483,022
327,195,047
FISCAL
      2006 QUARTERLY
Three Months Ended
STATEMENT
      OF OPERATIONS DATA:
September 30,
December 31
March 31,
June 30,
(in thousands, except share amounts)
Total
      revenues
$381
$168
$284
$142
Costs
      and Expenses:
Cost
      of sales
338
135
256
246
Research
      and development
1,861
1,961
2,298
1,915
General
      and administrative
1,092
2,090
4,820
3,119
Depreciation
      and amortization
21
20
17
22
Operating
      loss
(2,931)
(4,038)
(7,107)
(5,160)
Interest
      expense, Net
(14)
(6)
(5)
(10)
Other
      Income (expense)
(13)
(4,270)
(498)
(402)
Net
      Loss
$(2,958)
(8,314)
(7,610)
(5,572)
Basic
      and diluted net loss per share
$(.02)
(.05)
(.03)
(.03)
Shares
      used in basic and diluted net loss per share
152,291,645
174,998,048
262,539,165
270,387,574
15
FISCAL
      2005 QUARTERLY
Three Months Ended
STATEMENT
      OF OPERATIONS DATA:
September 30,
December 31
March 31,
June 30,
(in thousands, except share amounts)
Total
      revenues
$179
$295
$564
$673
Costs
      and Expenses:
Cost
      of sales
130
245
448
623
Research
      and development
1,101
1,055
1,664
1,307
General
      and administrative
709
2,071
2,636
1,164
Depreciation
      and amortization
1
127
65
(130)
Operating
      loss
(1,762)
(3,203)
(4,249)
(2,291)
Interest
      expense, Net
(29)
(66)
(37)
21
Other
      Income (expense)
(41)
(37)
(60)
520
Net
      Loss
$(1,832)
(3,306)
$(4,346)
$(1,750)
Basic
      and diluted net loss per share
$(.02)
(.04)
$(.04)
$(.01)
Shares
      used in basic and diluted net loss per share
89,719,962
93,388,584
120,015,504
137,719,500
FISCAL
      2004 QUARTERLY
Three Months Ended
STATEMENT
      OF OPERATIONS DATA:
September 30,
December 31
March 31,
June 30,
(in thousands, except share amounts)
Total
      revenues
$2,489
$1,291
$555
$306
Costs
      and Expenses:
Cost
      of sales
2,099
1,191
484
294
Research
      and development
611
843
1,404
1,212
General
      and administrative
605
914
803
1,856
Depreciation
      and amortization
46
28
27
22
Operating
      loss
(872)
(1,685)
(2,162)
(3,078)
Interest
      expense, Net
(16)
(16)
(20)
(59)
Other
      Income (expense)
23
-
(152)
279
Net
      Loss
$(865)
$(1,701)
$(2,334)
$(2,858)
Basic
      and diluted net loss per share
$(.01)
$(.02)
$(.03)
$(.03)
Shares
      used in basic and dilute net loss
71,725,318
72,814,272
81,564,405
84,885,017
per
      share
FISCAL
      2003 QUARTERLY
Three Months Ended
STATEMENT
      OF OPERATIONS DATA:
September 30,
December 31
March 31,
June 30,
(in thousands, except share amounts)
Total
      revenues
$210
$562
$210
$600
Costs
      and Expenses:
Cost
      of sales
197
547
205
544
Research
      and development
803
753
906
1,076
General
      and administrative
893
731
544
516
Depreciation
      and amortization
131
129
129
127
Operating
      loss
(1,814)
(1,598)
(1,574)
(1,662)
Interest
      expense, Net
(18)
(15)
(11)
(7)
Other
      Income (expense)
41
-
9
11
Gain
      (Loss) on investments
-
(16)
(12)
17
Net
      Loss
$(1,791)
$(1,629)
$(1,588)
$(1,641)
Basic
      and diluted net loss per share
$(.03)
$(.07)
$(.02)
$(.02)
Shares
      used in basic and diluted net
60,881,131
65,914,466
65,956,810
68,164,160
loss
      per share
16
FISCAL
      2002 QUARTERLY
Three Months Ended
STATEMENT
      OF OPERATIONS DATA:
September 30,
December 31
March 31,
June 30,
(in thousands, except share amounts)
Total
      revenues
$537
$545
$866
$634
Costs
      and Expenses:
Cost
      of Sales
457
530
724
704
Research
      and development
1,111
1,257
539
913
General
      and administrative
2,862
1,641
1,355
1,181
Depreciation
      and amortization
193
209
136
132
Operating
      loss
(4,086)
(3,092)
(1,888)
(2,296)
Interest
      expense, Net
(10)
(1)
(5)
(10)
Other
      Income (expense)
33
5
85
19
Net
      Loss
$(4,063)
$(3,088)
$(1,808)
$(2,287)
Basic
      and diluted net loss per share
$(.10)
$(.07)
$(.03)
$(.04)
Shares
      used in basic and diluted net
42,037,506
44,645,458
55,606,168
56,459,167
loss
      per share
COMPANY OPERATIONS
The
following is management's discussion and analysis of the operations of mPhase,
since its inception in 1996 which should be read in conjunction with the
accompanying financial statements, financial data, and the related notes.
CAUTIONARY
STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE LITIGATION REFORM
ACT OF 1995:
Some
of the statements contained in or incorporated by reference in this Prospectus
discuss the Company's plans and strategies for its business or state other
forward-looking statements, as this term is defined in the Private Securities
Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate,"
"expect," "plan," "intend," "should," "seek," "will," and similar expressions
are intended to identify these forward-looking statements, but are not the
exclusive means of identifying them. These forward-looking statements include,
among others, statements concerning the Company's expectations regarding its
working capital requirements, gross margins, results of operations, business,
growth prospects, competition and other statements of expectations, beliefs,
future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. Any
forward-looking statements contained in this Prospectus are subject to risks and
uncertainties that could cause actual results to differ materially from those
results expressed in or implied by the statements contained herein.
OVERVIEW
mPhase
Technologies, Inc. (mPhase, the Company, we or us), a New Jersey corporation,
founded in 1996 is a publicly-held company with approximately 17,000
shareholders and approximately 391 million shares of common stock outstanding as
of July 9, 2007.
The Company's common stock is traded on the NASDAQ Over the Counter Bulletin
Board under the ticker symbol XDSL.
mPhase
is a developer of broadband communications products, specifically, IPTV plus
digital subscriber line (DSL) products for telecommunications service providers
around the world. In February of 2004 mPhase entered into the new and emerging
area of NanoTechnology. Since our inception in 1996 we have been a
development-stage company and operating activities have related primarily to
research and development, establishing third-party manufacturing relationships
and developing product brand recognition among telecommunications service
providers.
We
are headquartered in Norwalk, Connecticut with offices in Little Falls, New
Jersey and New York, New York. mPhase shares common office space and common
management with Microphase Corporation, a privately-held company. Microphase is
a seller of radio frequency and filtering technologies to the defense industry.
Microphase has been in operation for over 50 years and supports mPhase with
engineering, administrative and financial resources, as needed.
Description
of Operations
mPhase
Technologies, Inc. ("mPhase" or the "Company") is a development stage technology
company. The Company is a developer and seller of broadband communications
products for telephone service providers. The Company's TV+ solution is an
open-standards, carrier class solution of middleware/software enabling telephone
service providers to deliver broadcast television using internet protocol
(IPTV), video on demand, voice and high-speed internet over such providers
existing infrastructure. The Company also provides systems integration
solutions for delivery of broadcast television (IPTV), video on demand,
high-speed internet and voice using internet protocol over the existing
infrastructure of a telephone service provider. The Company's TV+ solution is
highly scalable (compared to other middleware requires less routers and servers)
with significant cost savings and  is reliable middleware designed to
operate with any IP based network. In addition the Company designs,
manufacturers and sells DSL component products including its new customer
premises VDSL splitter. In fiscal year 2004, the Company entered into the field
of nanotechnology research and development of micro power cell batteries of
various voltages. In 2005, the Company expanded its products in the field of
nanotechnology research and development into electronic sensors or magnetometers
using micro electrical mechanical systems.
17
IPTV
and TV+ Solutions
mPhase
introduced its first TV over DSL platform, the Traverser™ Digital Video and Data
Delivery System ("DVDDS"), in 1998. The DVDDS is a patented end to end system
that enables a telecommunications service provider to deliver up to several
hundred channels of motion picture experts group two ("MPEG-2") standard
broadcast digital television, high speed internet and voice over copper
telephone lines between a central office facility of the provider and a
customer's premise. mPhase has not, as yet, derived any material revenues from
sales of the DVDDS. The DVDDS is a proprietary technology developed in
conjunction with Georgia Tech Research Corporation (GTRC) and is one of the
first systems of its kind developed. The system is the only system on the market
that utilizes non- Internet Protocol ("IP") transmission over ADSL.  The
legacy DVDDS platform has been replaced by the Company's TV+ solution.
Our
current TV+ solution, utilizes a communications framework based upon Internet
Protocol (IP) instead of Asynchronous Transfer Mode (ATM) that is utilized by
earlier versions of the product. ATM is an industry standard for transportation
of data based upon a packaging of information into a fixed-size cell format for
transportation across networks. Many telecommunications service providers
currently deploy equipment that handles this protocol because it can support
voice, video, data and multimedia applications simultaneously with a high degree
of reliability. IP is another transport protocol that maintains network
information and routes packets across networks. IP packets are larger and can
hold more data than ATM cells. Historically, there have been concerns that
service providers would be unable to provide the same quality of service with IP
because it is not optimized for time-sensitive signals such as broadcast
television and voice. Nevertheless, there is a greater demand by
telecommunication service providers for IP systems for delivery of television,
voice and high-speed data because such systems are significantly more cost
effective to deploy based upon greater scalability.
Our
TV+ solution is an open standards-based carrier class technology that may be
used over any infrastructure such as fiber, coax, or copper. The TV+ solution
may be used in combination with the set top box of any vendor and will operate
with any DSLAM or multicast routers transport equipment used for delivery of
IPTV.  We believe the system's architecture is the most reliable and highly
scalable solution available for IPTV. Our solution enables a telecommunications
service provider to custom tailor the deployment of feature rich IP television,
video on demand, high-speed internet and voice. The solution allows a service
provider to start small and test its take rate among customers with a maximum of
flexibility of design, features and cost allowing it to enter the market for
converged services to its customers on an optimal basis.
mPhase
DSL Component Products.
mPhase
continues to design and market a line of DSL component products. mPhase is
currently developing and marketing a new VDSL customer premises splitter
designed to meet the current migration of deployments by telephone service
providers from ADSL to VDSL.
18
Nanotechnology
Effective
February 3, 2004, mPhase entered into a Development Agreement with Lucent
Technologies, Inc. to commercialize the use of nano power cell technology. The
initial agreement was for a 12 month period of exploratory development at the
cost of $100,000 per month of a new form of power cell having a shelf life far
in excess of conventional battery technology. In March of 2005 the Company
extended such Agreement for another 12 months at the cost of $100,000 per month
to continue development of the nano power cell product and the Company in
currently negotiating with Lucent to extend the Agreement upon the same terms
through March of 2006 and in May of 2006 extended such Agreement through
February of 2007. We have extended such Agreement through April 27, 2007. We
believe that this arrangement with the Bell Labs division of Lucent will give
mPhase the opportunity to develop and offer breakthrough battery technology and
other potential applications, initially to the government market for defense and
homeland security and ultimately to the commercial market. It is anticipated
that the initial applications for nano power cells will address the need to
supply emergency and reserve power to a broad range of products for the defense
department.
The
Company believes that its entry into this new field of high technology growth
will provide product diversification without negatively affecting its focus upon
its traditional products aimed at delivery of Television over DSL. The Company
developed a lab prototype of its first nano power cell product that was
completed in the second quarter of fiscal year 2005. The Company is unable, at
this time, to predict when significant commercialization and material revenues
will be derived from its entry into the NanoTechnology business.
On
March 10, 2005 the Company announced and agreement with the Bell Labs research
and development arm of Lucent Technologies, Inc. to co develop using the science
of nanotechnology and commercialize uncooled magnetic ultra-sensitive sensors
for a host of defense and civilian applications. The agreement with Bell Labs is
for a 12 month period at a cost of $100,000 per month to the Company and was
renewed in May of 2006 through March of 2007 upon the same terms. The sensors,
technically referred to as magnetometers, are based upon Micro Electro
Mechanical Systems (MEMS) using designs based upon fundamental breakthroughs
made in the past few years at Bell Labs as part of the New Jersey Nanotechnology
Consortium. Initial tests of theses MEMS magnetometers indicate sensitivities
1000 times those achieved in presently available uncooled magnetometers. Such
devices are designed to create a new generation of  magnetometers suitable
for navigation based applications as well as ultra sensitive magnetic field
sensors that will enable military combatants to detect with greater accuracy and
range hostile military forces. Commercial applications may include inexpensive
navigational components for mobile phones to sensing devices for identification
used in homeland security products, as well as sensors used in diagnostic
systems for detection of metal fatigue for numerous industrial applications.
On
June 8, 2007, the Company and Bell Labs extended at a cost of $100,000 per month
for 12 months the Development Agreement with respect to the nano power cell
technology that had expired on April 27 of 2007. The Company is currently in
discussions with Bell Labs to renew for an additional twelve months the
Development Agreement for the Magnetometer product that expired in March of 2007
on similar terms.
Nano
Battery
:
mPhase Technologies along with its partner Alcatel Lucent/Bell
Labs has been jointly conducting research since February 2004 that demonstrates
control and manipulation of fluids on superhydrophobic surfaces to create power
cells by controlling wetting behavior of electrolyte on nanostructured electrode
surfaces. The scientific research conducted this year has set the groundwork for
continued exploration in the development of intelligent nanotechnology power
cells (nano-batteries), and forms a path to commercialization of the technology
for a broad range of market opportunities. During the first half of calendar
year 2005 the battery team has been testing modifications and enhancements to
the internal design of the battery to optimize its power and energy density
characteristics, as well as making engineering improvements that will assist in
making the battery easier to manufacture when the project research that level of
maturity. In the second half of calendar year 2005, the technical team has
improved the robustness and manufacturability of the prototype battery by
designing a porous membrane structure with honeycomb features. A successful
demonstration of this working prototype battery using these new modifications
was demonstrated in January of 2006 and subsequently highlighted in the February
2006 issue of Scientific American magazine.
In June of 2005 the battery project was expanded to include a
joint technical development effort through December 2005 between mPhase and
Rutgers University to potentially incorporate a Lithium based design. This work
program has initially started as a modest technology effort to help characterize
and test the nano battery design using Lithium chemistry and determine if the
current design is capable of supporting the lithium based chemistry. The
Company continued its work with Rutgers University in 2006 where a number
of important scientific tests were conducted. Based upon the results of these on
going tests, the Company may decide to accelerate the work effort beyond its
current level of funding.
19
Magnetomete
r:
In
February 2005 mPhase and Lucent Technologies' Bell Laboratories entered into a
joint effort to develop a family of magnetometer designs suitable for both low
sensitivity applications, to extremely sensitive designs used for more complex
applications.  Magnetometers can be used in a wide range of applications
that include military surveillance, securing the retail environment, automotive
sensors and actuators, industrial processing, medical imaging, scientific
measurements, detection of mineral deposits and even air and space exploration.
In sensor networks ultra-sensitive magnetometers can be used, for example, to
detect and accurately pinpoint battlefield objects or they might also be used to
study the workings of the human brain.
Magnetometers
work by sensing changes in magnetic fields due to the motion of magnetic objects
or changes in electrical currents generated by those objects. The magnetometer
detects these objects by measuring time-varying magnetic signals that are
superimposed on the combination of earth's background field (used to orient
compasses) and static magnetic fields due to nearby magnetic objects.
Highly
Sensitive Magnetometers
- The enhanced sensitivity of these devices results
from two scientific advances recently made researchers at Alchaetel / Lucent
Bell Labs. Presently, the highest sensitivity magnetometers commercially
available require cooling to cryogenic temperatures. Called SQUIDs (for
Superconducting Quantum Interference Devices) these devices only work at the
temperature where liquid helium boils, -455 degrees below zero Fahrenheit,
making such magnetometers expensive and bulky and therefore ill-suited for
remote-sensing applications. Room temperature magnetometers, on the other hand,
are less sensitive, and use technology that was developed in World War II for
detecting submarines.
The
new technology being developed by Bell Labs and mPhase employs a number of
different designs based on Micro-Mechanical Systems (MEMS). These designs use
the very high "Quality Factor (Q)" of the mechanical resonance in single
crystals of silicon. A resonance is similar to the fundamental frequency of a
tuning fork. When tapped, a tuning fork will vibrate for a length of time
inversely proportional to the internal friction of vibration within the metal of
the tuning fork. A comparable tuning fork made from single crystal silicon,
which has less internal friction than the hardest metal, will vibrate almost a
thousand times longer. Based on this principal, a device employing a high Q
resonator will have enhanced amplitude of vibration at the resonance frequency,
and hence will display a greater sensitivity to external perturbations that
affect its resonance frequency. By coupling the mechanical motion of a bar or a
paddle constructed from silicon to the ambient magnetic field, this high
mechanical sensitivity can be converted to high magnetic field sensitivity. The
technical approach that the team is developing can be achieved either statically
with an integrated magnetic film, or dynamically through motion of the silicon
bar or paddle.
The
Benefits of MEMS
- Commercial magnetometers using purely electronic
detection, such as Hall, magneto-resistance or flux-gate devices, have
sensitivities limited by their
electronic
Q-factor. This Q-factor depends
on the natural electrical resistance, or electronic friction, of the metal in
the circuit. For room-temperature operations it is therefore difficult to reduce
the electrical Q-factor. Mechanical resonators made from semiconductor-grade
silicon, on the other hand, exhibit mechanical Q-factors, approaching 100,000 at
room temperature. These new, smaller and less costly magnetometers should be
100-1000 times more sensitive than existing commercial devices in terms of size
and power consumption, thus enabling the creation of a new class of sensor
systems that mPhase plans on commercializing.
The mPhase and Lucent magnetometer team has successfully reached
an early milestone and have produced a number MEM based sensor samples from the
clean room facilities and are working on integrating them into the surrounding
electronic circuitry so that measurement, characterization and sensitivity
testing can be conducted. We are currently able to achieve sensitivities at room
temperature of better than .1 micro gauss per root hertz squared and with
additional development the goal is improvement of at least one order of
magnitude.
The Company is currently negotiating the extension through June of
2008 with Bell Labs of its Magnetometer Development Agreement and its Battery
Development Agreement each at a cost of $100,000 per month.
20
NOTES ON OPERATIONS
Revenues
.
To date, all material revenues have been generated from sales of the POTS
Splitter Shelves and other DSL component products to a small number of
telecommunications companies. mPhase believes that future revenues are difficult
to predict because of  the length and variability of the commercial
roll-out of the IPTV to various telecommunications service providers and
 the Company's recent entry into the NanoTechnology business that is
essentially exploratory research both with respect to the potential battery and
magnetometer applications. Since the Company believes that there may be a
significant international market for its TV+ IPTV solution involving many
different countries, with different regulations, certifications and commercial
practices than the United States, future revenues are highly subject to the
changing variables and uncertainties. The Company is negotiating a  royalty
on gross revenues received by Janifast Ltd. in connection with sales of the new
VDSL customer premises splitter product.
Cost
of revenues
. The costs necessary to generate revenues from the sale of POTS
Splitter Shelves and other related DSL component products include direct
material, labor and manufacturing. mPhase paid these costs to Janifast Ltd.,
which has facilities in the People's Republic of China and is owned by and
managed by certain senior executives of the Company. The cost of revenues also
includes certain royalties paid to Microphase Corporation, a privately held
corporation organized in 1955, which shares certain common management with the
Company and is majority-owned by a director of mPhase. Costs for future
production of the TV + solution will consist primarily of payments to selected
software vendors and developers for the development of custom features required
by a particular purchaser of the IPTV middleware. Such major vendors include
Espial Group and Magpie Telecom Insiders, Inc and systems integration by
Velankani Systems. mPhase is currently negotiating a payment in shares of stock
to Microphase in connection with the design of its new VDSL customer premises
splitter product.
Research
and development
. Research and development expenses consist principally of
the payments made to  Magpie Telecom Insiders, Inc., Espial, Bitband and
Velankani , for development of the  TV+ IPTV solution and the Bell Labs
division of Alcatel/Lucent for development of our nanotechnology products
respectively. The IPTV+ solution consists primarily of middleware/software
designed for the delivery of feature rich, carrier class, broadcast TV, high
speed internet and voice by telecommunications service providers open using
standards based equipment and transport configurations.  There are a number
of potential military and commercial applications for our nanotechnology
products. All research and development costs are expensed as incurred.
General
and administrative
. Selling, general and administrative expenses consist
primarily of salaries and related expenses for personnel engaged in direct
marketing of the TV+ solution for IPTV and  DSL component products
including our new VDSL customer premises splitter, as well as support functions
including executive, legal and accounting personnel. Certain administrative
activities are outsourced on a monthly fee basis to Microphase and mPhase leases
its principal office in Norwalk, Connecticut from Microphase.
Non-Cash
compensation charges
. The Company makes extensive use of common stock
grants, options and warrants as a form of compensation to employees, directors
and outside consultants. We incurred non-cash compensation charges totaling
$59,071,377 from inception (October 2, 1996) through June 30, 2006, of which
$2,318,519 was included in research and development expenses and $56,752,858 was
included in general and administrative expenses. We incurred non-cash
compensation charges of $60,196,024 from inception (October 2, 1996) through
March 31, 2007 (unaudited), of which $2,318,519 was included in research and
development expenses and $58,319,301 was included in general and administrative
expenses.
21
TWELVE MONTHS ENDED JUNE 30, 2006 VS. JUNE 30,
2005
Revenues. Total revenues for the year ended June 30, 2006 decreased to $975,482
from $1,711,085 for the year ended June 30, 2005. The decrease was primarily
attributable to decreased sales of the Company's POTS Splitter product line
caused by a downturn of orders from one customer that orders component products
from the Company. The Company also recognized $280,000 of revenue in connection
with the first sale of 1000 ports of Release 2.0 its TV+ solution to a major
telecommunications service provider in Russia in fiscal year 2005 but received
no additional orders for Version 3.0 of its TV+ solution in fiscal year 2006.
The Company cannot predict when the demand for telecommunication equipment will
resume, however we do expect certain added revenue in fiscal year 2007 from
deployments of our TV+ solution.
Cost
of revenues. Cost of sales was $974,583 for the year ended June 30, 2006 as
compared to $1,446,151 in the year ended June 30, 2005. Cost of revenues
decreased for the twelve months ended June 30, 2006 compared to the prior period
ending June 30, 2005 primarily because of decreased sales. Gross margins for the
period ended June 30, 2006 were 1.0%. The gross margins have varied dramatically
as spending among telecommunication providers has contracted, coupled with
downward pressures related to the supply and demand of telecommunications
products. The single most significant reason the margins decreased dramatically
was due to the reduced selling price of our POTS Splitter product.
Research
and Development. Research and development expenses were $8,034,964 for the year
ended June 30, 2006 as compared to $5,127,438 in the year ended June 30, 2005,
an increase of $2,907,526. Such expenditures included $4,384,749 incurred with
Lucent Technologies, Inc. for the year ended June 30, 2006 as compared to
$3,319,280 during the comparable period in 2005. In addition we incurred
$2,346,875 with Microphase and other strategic vendors for the year ended June
30, 2006 as compared to $919,937 during the comparable period in 2005.
The
significant increase in research and development expenses with Lucent
Technologies, Inc. is due to the $1.2 million per month Development Agreement
for the battery and power pack product utilizing nanotechnology. In addition,
the Company has extended its research with Lucent Technologies related to the
ultra electronic sensor devices for 12 months at a total cost of $1.2
million.
The
elimination in research expenditures incurred with GTRC is due to the Company's
refocus in development from its legacy Traverser DVDDS television delivery
platform to its TV+ product.
Research
expenditures incurred with Microphase sharply declined as the Company reexamined
the viability of it Broadband Loop Watch product during the second half of
fiscal year 2006. Expenditures that were incurred in fiscal year 2006 were
related to the continuing development of the Company's DSL component products,
including the Company's line of POTS Splitters and Microfilters and the
Company's the Broadband Loop Watch.
General
and Administrative Expenses. Selling, general and administrative expenses were
$11,121,235 for the year ended June 30, 2006 up from $6,579,761 for the
comparable period in 2005, an increase of $4,541,474.
Included
is an increase of non-cash charges relating to the issuance of common stock and
options to consultants, and employees which totaled $6,276,423 for the year
ended June 30, 2006 as compared to $3,336,064 during the comparable period in
2005. Other components of the increase in selling, general and administrative
expenses were increases in payroll of approximately $128,000 to $1,603,000,
 an increase in the use of outside consultants of approximately $399,000 to
$1,103,000, marketing expenses such as trade shows of $104,000 to $372,000.
Other Income and Expense for the year ended June 30, 2006 reflects a non
recurring charge of $5,530,504 for the value of shares issued to investors to
reflect market changes in the common stock.
Net
loss. mPhase recorded a net loss of $24,450,650 for the year ended June 30, 2006
as compared to a loss of $11,234,324 for the same period ended June 30, 2005.
This represents a loss per common share of  $(.12) in 2006 as compared to
$(.10) in 2005, based upon weighted average common shares outstanding of
199,610,372 and 108,657,578 during the periods ending June 30, 2006 and June 30,
2005 respectively.
22
NINE MONTHS ENDED MARCH 31, 2007 VS. MARCH 31, 2006
REVENUE
Total revenues were $135,743 for the nine months ended March 31,
2007 compared to $832,999 for the nine months ended March 31, 2006. The decrease
was attributable primarily to the phasing out of the Company's ADSL POTS
Splitter line of products and its emphasis on developing a new VDSL customer
premises POTS Splitter product to meet market advancements in technology.
COST
OF SALES
Cost of sales was $88,207 for the nine months ended March 31, 2007
as compared to $729,475 in the comparable prior period. The decrease is a direct
result of the aforementioned phasing out of the POTS Splitter line of
business.
RESEARCH
AND DEVELOPMENT
Research and development expenses were $4,964,404 for the nine
months ended March 31, 2007 as compared to $6,120,253 during the comparable
period in 2006; or a decrease of $1,155,849. The Company incurred most of its
research and development expenses with vendors including Lucent, Microphase,
Magpie Insiders, Inc., Bitband, Espial, Velankani and other strategic vendors.
In the nine month period ended March 31, 2007 such charges totaled approximately
$4.4 million as compared to $5.3 million during the comparable period in 2006.
During the nine month period ended March 31, 2007, expenses incurred to third
party vendors amounted to $1.6 million and $2.8 million for services related to
Nanotechnology and IPTV, respectively. During the nine month period ended March
31, 2006, expenses incurred to third party vendors amounted to $2.0 million and
$3.3 million for services related to Nanotechnology and IPTV, respectively.
GENERAL
AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $5,012,073 for
the nine months ended March 31, 2007 down from $8,002,079 or an decrease of
$2,990,006 from the comparable period in 2006. Included in selling, general and
administrative costs are non-cash charges relating to the issuance of common
stock and options to employees and consultants, which totaled $1,124,647 for the
nine months ended March 31, 2007 as compared to $4,510,350 for the comparable
period ended March 31, 2006 resulting in a decrease of $3,385,703. This decrease
was offset by increases in payroll related costs which increased by
approximately $383,304, investor relations and marketing which increased by
$130,115 and legal and professional which increased by approximately
$296,456.
OTHER
INCOME AND (EXPENSE)
Other Income and (Expense) amounted to net expense of $1,065,117
for the nine months ended March 31, 2007 compared to a net expense of $4,927,800
for the comparable period ended March 31, 2006. This decrease is primarily owing
to reparation expense which declined from $5,167,740 in 2006 versus $1,202,730
in 2007.
NET
LOSS
The Company recorded a net loss of $11,060,372 for the nine months
ended March 31, 2007 as compared to a loss of $19,004,252 for the nine months
ended March 31, 2006. This represents a loss per common share of $.04 for the
nine month period ended March 31, 2007 as compared to a loss per common share of
$.09 for the nine months ending March 31, 2006; based upon weighted average
common shares outstanding of 309,018,261 and 211,186,500 during the periods
ending March 31, 2007 and 2006, respectively. Approximately $4.0 million of the
decrease in the Company's net loss was the result of reparation cost in
connection with the reduction in the strike price of certain warrants and
issuance of additional shares in connection with private placements.
TWELVE MONTHS ENDED JUNE 30, 2005 VS. JUNE 30,
2004
Revenues. Total revenues for the year ended June 30, 2005 decreased to
$1,711,085 from $4,641,346 for the year ended June 30, 2004. The decrease was
primarily attributable to decreased sales of the Company's POTS Splitter product
line especially during the first quarter of fiscal year 2004, caused by a
downturn of orders from one customer that orders component products from the
Company. The Company recognized $280,000 of revenue in connection with the first
sale of 1000 ports of Release 2.0 its TV+ solution to a major telecommunications
service provider in Russia. The Company continues to believe that its line of
POTS Splitter products is positioned to be competitively priced with high
reliability and connectivity, and as such has the potential to be significant
part of DSL deployment. The Company cannot predict when the demand for
telecommunication equipment will resume, however we do expect certain added
revenue in fiscal year 2006 from the completion of Release 3.0 of our TV+
solution and Broadband Loop Watch Products.
23
Cost
of revenues. Cost of sales was $1,446,151 for the year ended June 30, 2005 as
compared to $4,068,255 in the year ended June 30, 2004. Cost of revenues
decreased for the twelve months ended June 30, 2005 compared to the prior period
ending June 30, 2004 primarily because of decreased sales. Gross margins for the
period ended June 30, 2005 were 15.5%. The gross margins have varied
dramatically as spending among telecommunication providers has contracted,
coupled with downward pressures related to the supply and demand of
telecommunications products. The single most significant reason the margins
decreased dramatically was due to the reduced selling price of our POTS Splitter
product. Discounts, consisting of a 2% discount from the amount invoiced if paid
within 10 days were offered during fiscal year 2005
.
Such discounts
amounted to $1,447 for the period ended June 30, 2005, and were offered to Covad
Communication our leading telecommunications service provider customer
.
Discounts were offered in fiscal 2004 to Covad Communications amounting to
2% from the amount invoiced if paid within 10 days were offered to Covad
Communications and amounted to $71,425.
Research
and Development. Research and development expenses were $5,127,438 for the year
ended June 30, 2005 as compared to $4,069,721 in the year ended June 30, 2004,
an increase of $1,057,717. Such expenditures included $3,319,280 incurred with
Lucent Technologies, Inc. for the year ended June 30, 2005 as compared to
$2,328,602 during the comparable period in 2004. In addition we incurred
$919,937 with Microphase and other strategic vendors for the year ended June 30,
2005 as compared to $99,494 during the comparable period in 2004.
The
significant increase in research and development expenses with Lucent
Technologies, Inc. is due to the continued and accelerated development of the
TV+ product together with the extension of the $1.2 million month Development
Agreement for an additional 12 months related to the battery and power pack
product development utilizing nanotechnology and the entering into a second one
year $1.2 million Development Agreement with Lucent to develop magnetic sensor
devices also using nanotechnology. Such expenditures may increase in fiscal year
2006 since the Company's strategy is to further enhance the features and cost
reduce its TV+ and expand its product line in the Nanotechnology area.
The
elimination in research expenditures incurred with GTRC is due to the Company's
refocus in development from its legacy Traverser DVDDS television delivery
platform to its TV+ product.
Research
expenditures incurred with Microphase were related to the continuing development
of the Company's DSL component products, including the Company's line of POTS
Splitters and Microfilters and the Company's newest products, the Broadband
Watch.
General
and Administrative Expenses. Selling, general and administrative expenses were
$6,579,761 for the year ended June 30, 2005 up from $4,177,961 for the
comparable period in 2004, a decrease of $2,401,800.  The increase in the
selling, general and administrative costs was primarily the result of the
addition of a number of new employees critical to the Company's needs in
developing, marketing and selling the TV+ and NanoTechnology product lines with
Lucent.
Included
is an increase of non-cash charges relating to the issuance of common stock and
options to consultants, which totaled $2,948,083 for the year ended June 30,
2005 as compared to $1,242,793 during the comparable period in 2004. Other
components of the increase in selling, general and administrative expenses were
increases in payroll of approximately $503,000 to $1,456,000, increase in the
use of outside consultants of approximately $284,000 to $704,002, marketing
expenses such as trade shows of $118,000 to $158,000, and advertising expenses
of $68,000 to $90,000.
Depreciation
and amortization. Total depreciation for the year ended June 30, 2005 was
$227,629 of which $218,911 was charged against research and development. In
2004, total depreciation for the year ended June 30, 2004 was $649,704 of which
$613,221 was charged against research and development. As a result, depreciation
and amortization expense was $62,679 for the year ended June 30, 2005 compared
to $122,878 for the year ended June 30, 2004. This decrease of depreciation and
amortization expense totaled $60,199 is the result of reduced outlays for
capital expenditures by the Company in its two most recent fiscal years. We
expect to increase capital expenditures in connection with the deployment of
equipment at test sites with various telecommunications service providers
globally as deployment of our TV+ product progresses.
Net
loss. mPhase recorded a net loss of $11,234,324 for the year ended June 30, 2005
as compared to a loss of $7,758,586 for the same period ended June 30, 2004.
This represents a loss per common share of  $(.10) in 2005 as compared to
$(.10) in 2004, based upon weighted average common shares outstanding of
108,657,578 and 77,677,120 during the periods ending June 30, 2005 and June 30,
2004 respectively.
24
TWELVE MONTHS ENDED JUNE 30, 2004 VS. JUNE 30,
2003
Revenues. Total revenues for the year ended June 30, 2004
increased to $4,641,346 from $1,581,639 for the year ended June 30, 2003. The
increase was primarily attributable to increased sales of the Company's POTS
Splitter product line especially during the first quarter of fiscal year ended
June 30, 2004, caused by an upturn in July and August of 2004 of orders from one
customer that orders component products from the Company. The Company continues
to believe that its line of POTS Splitter products is positioned to be
competitively priced with high reliability and connectivity, and as such has the
potential to be significant part of DSL deployment. The Company cannot predict
when the demand for telecommunication equipment will resume, however we do not
expect significant sales in the first two quarters of fiscal 2005.
Cost of revenues. Cost of sales was $4,068,255 for the year ended
June 30, 2004 as compared to $1,493,394 in the year ended 30, 2003. Cost of
revenues increased for the twelve months ended June 30, 2004 compared to the
prior period ending June 30, 2003 primarily because of increased sales. Gross
margins for the period ended June 30, 2004 were 12%. The gross margins have
varied dramatically as spending among telecommunication providers has
contracted, coupled with downward pressures related to the supply and demand of
telecommunications products. The single most significant reason the margins
decreased dramatically was due to the reduced selling price of our POTS Splitter
product. Discounts, consisting of a 2% discount from the amount invoiced if paid
within 10 days were offered during fiscal year 2004
.
Such
discounts amounted to $71,425 for the period ended June 30, 2004, and were
offered to Covad Communication our leading telecommunications service provider
customer
.
Discounts were offered in fiscal 2003 to an existing
customer to accelerate collections in connection with an order of our POTS
Splitter product and was treated as a purchase discount to each of customers,
and the reduction to net sales lowered the gross margins in the period.
Research and Development. Research and development expenses were
$4,069,721 for the year ended June 30, 2004 as compared to $3,538,305 in the
year ended June 30, 2003, an increase of $531,416. Such expenditures included
$2,328,602 incurred with Lucent Technologies, Inc. for the year ended June 30,
2004 as compared to $1,112,500 during the comparable period in 2003. In addition
we incurred $99,494 with Microphase and other strategic vendors for the year
ended June 30, 2004 as compared to $528,434 during the comparable period in
2003.
The significant increase in research and development expenses with
Lucent Technologies, Inc. is due to the continued and accelerated development of
the TV+ product together with the entry into a $1.2 million 12 month Development
Agreement for battery and power pack product development utilizing
Nanotechnology. Such expenditures are expected to increase in fiscal year 2005
since the Company's strategy is to further enhance the features and cost reduce
its TV+ and expand its product line in the Nanotechnology area. The elimination
in research expenditures incurred with GTRC is due to the Company's refocus in
development from its legacy Traverser DVDDS television delivery platform to its
TV+ product.
Research expenditures incurred with Microphase were related to the
continuing development of the Company's DSL component products, including the
Company's line of POTS Splitters and Microfilters and the Company's newest
products, the iPOTS3.
General and Administrative Expenses. Selling, general and
administrative expenses were $4,177,961 for the year ended June 30, 2004 up from
$2,683,534 for the comparable period in 2003, an increase of $1,494,427. The
increase in the selling, general and administrative costs was primarily the
result of the addition of a number of new employees critical to the Company's
needs in developing, marketing and selling the TV+ and NanoTechnology product
lines with Lucent.
Included is an increase of non-cash charges relating to the
issuance of common stock and options to consultants, which totaled $1,242,793
for the year ended June 30, 2004 as compared to $748,840 during the comparable
period in 2003. Other components of the increase in selling, general and
administrative expenses were increases in payroll of approximately $461,226 to
$953,602, increase in the use of outside consultants of approximately $251,103
to $987,720, marketing expenses such as trade shows of $30,148 to $40,347, and
advertising expenses of $20,439 to $21,948, all of which approximated $1,295,975
or 87% of the increase in spending.
Depreciation and amortization. Total depreciation for the year
ended June 30, 2004 was $649,704 of which $613,221 was charged against research
and development. In 2003, total depreciation for the year ended June 30, 2003
was $957, 457 of which $442, 040 was charged against research and development.
As a result, depreciation and amortization expense was $122, 878 for the year
ended June 30, 2004 compared to $515,417 for the year ended June 30 2003. This
decrease of depreciation and amortization expense totaled $392,539 and is the
result of reduced outlays for capital expenditures by the Company in its two
most recent fiscal years. We expect to increase capital expenditures in
connection with the deployment of equipment at test sites with various
telecommunications service providers globally as deployment of our TV+ product
progress.
Net loss. mPhase recorded a net loss of $7,758,586 for the year
ended June 30, 2004 as compared to a loss of $6,650,211 for the same period
ended June 30, 2003. This represents a loss per common share of $(.10) in 2004
as compared to $(.10) in 2003, based upon weighted average common shares
outstanding of 77,677,120 and 65,217,088 during the periods ending June 30, 2004
and June 30, 2003 respectively.
25
The Outlook for the Company's Flagship Product
The
Company believes significant deployments and resultant revenues of its  TV+
 solution are not expected until the second quarter of fiscal year 2008,
which, if accompanied by a material upturn in spending in the telephone
industry, could lead to increased sales, improve the Company's margins and
provide the Company with the opportunity to become profitable.
Research
and Development Activities
mPhase
throughout its history has outsourced its research and development activity with
respect to its IPTV solution as well as its POTS splitter products. GTARC
conducted a significant amount of research and development for mPhase for the
 DVDDS legacy product. Microphase has performed research and development
for mPhase with respect to certain component DSL products including the
Company's current new VDSL customer premises splitter, low pass filters and POTS
Splitters and the legacy DVDDS product.  mPhase  engaged Lucent for
initial development of  its TV+ solution and for development of two new
products using the science of nanotechnology. Currently mPhase has transferred
development work for the TV systems software development from Lucent to
Velankani and has also engaged Magpie Insiders, Inc and Espial as significant
vendors in the development of its TV+ solution.
For
the year ended June 30, 2006, the Company spent $1,776,800 with Lucent
Technologies, Inc. for its TV+ solution, compared to $1,584,800 for the period
ended June 30, 2005. For the fiscal 2007, the Company has shifted its
development work for the TV+ from Lucent Technologies, Inc. and Velankani
Communications System, Inc. and has also engaged Magpie Insiders, Inc. and
Espial for significant software development for the TV+ solution.
The
Company expects to expand its research and development efforts with Lucent
Technologies with respect to its NanoTechnology business segment. For fiscal
years ended June 30, 2006, June 30, 2005 and June 30, 2004, the Company incurred
research and development expenses of $8,034,964, $5,127,438 and $4,069,721,
respectively, of which $2,500,000, $1,500,000 and $500,000, respectively,
related to its nanotechnology product line.
Strategic
Alliances Implemented
The
Company has entered into Systems Integration Agreements with UKRCOM and
NetDialogue, major systems integrators and resellers in the Ukraine and Russia,
respectively, that are two key markets for the Company's IPTV solution.
Critical
Accounting Policies
Revenue
Recognition
As
required, mPhase has adopted the Securities and Exchange Commission ("SEC")
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements", which provides guidelines on applying generally accepted accounting
principals to revenue recognition based upon the interpretations and practices
of the SEC.
Research and Development
Research and development costs are charged to operations as incurred in
accordance with Statement of Financial Accounting Standards ("SFAS"), No.2,
"Accounting for Research and Development Cost."
Income
Taxes
mPhase
accounts for income taxes using the asset and liability method in accordance
with SFAS No.109 "Accounting for Income Taxes." Because of the uncertainty as to
their future realizability of net operating loss carry forwards, no income tax
benefit has been recorded in the accompanying financial statements. Utilization
of net operating losses generated through March 31, 2007 may be limited due
to "changes in control" of our common stock that occurred.
Stock-based
Compensation
Financial
Accounting Statement No. 123, Accounting for Stock Based Compensation,
encourages, but does not require companies to record compensation cost for
stock-based employee compensation plans at fair value. For the periods prior to
October 1, 2005, the Company had chosen to continue to account for stock-based
compensation for grants to employees using the intrinsic method prescribed in
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must pay to
acquire the stock. The Company had adopted the "disclosure only" alternative
described in SFAS 123 and SFAS 148, which require pro forma disclosures of net
income and earnings per share as if the fair value method of accounting had been
applied.
On
October 1, 2005, the Company adopted the provisions of Financial Accounting
Standards Board Statement No. 123R, "Share-Based Payment" (SFAS 123R). 
SFAS 123R revised SFAS 123, "Accounting for Stock Based Compensation" and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS
123R requires companies to measure and recognize compensation expense for all
employee stock-based payments at fair value over the service period underlying
the arrangement.  Therefore, the Company is now required to record the
grant-date fair value of its stock-based payments (i.e., stock options and other
equity-based compensation) in the statement of operations,  The Company
adopted FAS 123R using the "modified prospective" method, whereby fair value of
all previously-granted employee stock-based arrangements that remained unvested
at October 1, 2005 and all grants made on or after October 1, 2005 have been
included in the Company's determination of stock-based compensation
expense. The Company accounts for non-employee stock based awards in which
goods or services are the consideration received for the equity instruments
issued based on the fair value of the consideration received or the fair value
of the equity instrument issued, whichever is more readily determinable.
26
Inventory
Reserve and Valuation Allowance
The
Company carries its inventory at the lower of cost, determined on a first-in,
first-out basis, or market. Historically, inventory consisted mainly of the
Company's POTS Splitter Shelf and Filters. As of March 31,2007 inventory consist
primarily of equipment necessary for deployment of its IPTV product line to
specifically identified customers.
Material
Related Party Transactions
The
Company incurs costs for engineering, design and production of prototypes and
certain administrative functions from Microphase Corporation and the purchase of
product components and finished goods, primarily consisting of DSL splitter
shelves and filters, from Janifast Limited. Directors that are significant
shareholders of Janifast Limited include Messrs Ronald A. Durando, Gustave T.
Dotoli, and Necdet F. Ergul.
Mr.
Abraham Biderman is a Managing Director or Eagle Advisers, an investment banking
firm, which has earned finder's fees equal to approximately 10% of funds raised.
During the 12 months ended June 30, 2006 and the nine months ended March 31,
2007 such fees amounted to approximately $780,000 and $465,000 respectively.
Mr.
Biderman beneficially owns a total of 1,587,733 shares of common stock, warrants
and options and Mr. Anthony Guerino own a relatively small amount of stock,
warrants and options in mPhase Technologies, Inc.
Mr.
Durando, the President and CEO of mPhase, owns a controlling interest and is a
director and COO of Janifast Limited. Mr. Durando and Mr. Dotoli are also
officers of Microphase Corporation. Mr. Dotoli is also a shareholder of Janifast
Limited. Mr. Ergul, the chairman of the board of mPhase, owns a controlling
interest and is a director of Microphase Corporation and is a director and
shareholder of Janifast Limited. Microphase, Janifast, Hart Telephone and Lintel
Corporation are significant shareholders of mPhase. Since inception, Microphase,
Janifast and Hart Telephone have converted significant liabilities to equity.
Management believes the amounts charged to the Company by Microphase, Janifast,
mPhase Television.Net and Hart Telephone are commensurate to amounts that would
be incurred if outside parties were used.
Since
inception, the Messers Durando, Dotoli and Smiley have periodically advanced to
the Company funds to meet short term working capital needs.
Mr.
Durando's June 30, 2004 note payable balance of $300,000 was repaid by the
Company during fiscal year 2005. Additionally, during fiscal year 2005, Mr.
Durando made additional bridge loans to the Company evidenced by various 12%
demand notes in the aggregate of $525,000. Mr. Durando was repaid a total of
$450,000 of such loans in January of 2005.  In addition, Mr. Durando
converted $13,954 of the principal amount of a $75,000 promissory note leaving
unpaid principal of $61,046 outstanding. Mr. Durando converted $13,000 of
accrued and unpaid interest on various promissory notes of the Company into
65,000 shares of common stock and a 5 year warrant to purchase a like amount of
common stock at $.25 per share.
On
July 25, 2005, Mr. Smiley extended his 12% Promissory Note for $100,000 for an
additional year. during August of 2005 Mr. Dotoli and Mr. Smiley, the COO and
CFO and General Counsel of the Company respectively, each lent the Company
$75,000. Mr. Dotoli was repaid the principal amount of such loan, in cash, in
January of 2005 and Mr. Smiley converted his $75,000 loan into 375,000 shares of
common stock of the Company plus a 5 year warrant to purchase a like amount of
shares at $.25 per share. In January of 2005, Mr. Smiley received 425,000 shares
of common stock of the Company as additional compensation for services
performed. In June of 2005 Mr. Smiley converted his $100,0000 12% Promissory
Note plus accrued interest  into 520,000 shares of common stock plus a 5
year warrant to purchase 520,0000 shares of common stock at $.25 per share. In
addition, Mr. Smiley converted $9,975 of accrued interest into 49,875 shares of
common stock plus a 5 year warrant to purchase a like amount of shares at $.25
per share. Finally Mr. Smiley received 25,000 additional shares of common stock
as a market adjustment to his equity investment of $25,000 on August 30, 2004.
During
the nine month period ended March 31, 2006 Mr. Durando, Mr. Dotoli and Mr.
Smiley advanced $50,000, $100,000 and $150,000 respectively in the form of
Bridge Loans to the Company. Mr. Durando and Mr. Smiley's loans were repaid in
full without any interest and Mr. Dotoli's loan was repaid, in full, with 12%
accrued interest during the third quarter of fiscal year 2006.
In
addition, at various points during the nine months ended March 31, 2007, Messrs,
Durando, Dotoli and Smiley provided $490,000 in bridge loans to the Company
which was evidenced by individual promissory notes. During December 2006, Messrs
Durando and Dotoli agreed to convert their notes, in the amounts of $130,000 and
$200,000 respectively, to a deferred compensation arrangement, the repayment
terms of which have not been specified. Mr. Smiley has extended bridge loans to
the Company of $160,000, evidenced by promissory notes for $101,000 and a
$60,000 note with a 12% rate of interest. Both of the foregoing promissory notes
are payable on demand.
27
Significant charges from related parties are summarized for the
periods enumerated as follows:
Year Ended June 30,
2002
2003
2004
2005
2006
Charges
      incurred with Janifast Ltd. included in:
Cost
      of sales and ending inventory
$1,759,308
$178,959
$2,771,925
$1,536,494
$895,991
Total
      Janifast
$1,759,308
$178,959
$2,771,925
$1,536,494
$895,991
Charges
      incurred with Microphase Corp included in:
Cost
      of sales and ending inventory (Including Royalties)
$200,440
$86,468
$140,123
$94,740
$32,014
Research
      and development
876,074
428,434
84,494
60,000
197,639
General
      and administrative
136,080
133,200
231,068
304,030
302,167
Total
      Microphase Corp.
$1,212,594
$648,102
$455,685
$458,770
$531,820
Total
      Charges with Related Parties included in:
Cost
      of sales and ending inventory
$1,959,748
$265,427
$2,912,048
$1,631,234
$928,005
Research
      and development
940,113
428,434
84,494
60,000
197,639
General
      and administrative
136,080
133,200
231,068
304,030
302,167
Total
      Charges with Related Parties Included in Cost of Sales in the Consolidated
      Statement of Operations (including changes in inventory
$3,035,941
$827,061
$3,227,610
$1,995,264
$1,427,811
Liquidity
and Capital Resources
From
inception (October 2, 1996) through March 31, 2007 and June 30, 2006 the Company
has incurred cumulative (a) development stage losses and has an accumulated
deficit of $162,520,429 and $151,460,057 respectively and (b) negative cash flow
from operations of $73,398,128 and $67,257,660 respectively. The auditors report
for the fiscal year ended June 30, 2006 includes the statement that there is
substantial doubt of the Company's ability to continue as a going concern.
Management estimates that the Company needs to raise approximately $5-10 million
during the next 12 months to continue operations. As of March 31, 2007, June 30,
2006, and June 30, 2005, the Company had a negative net worth of $2,634,400,
$606,085 and $1,617,735 respectively.
At
June 30, 2006 mPhase had working capital deficit of $1,093,784 as compared to a
working capital deficit of $1,674,419 at June 30, 2005. At June 30, 2006, the
Company had $1,359,925 of cash and cash equivalents and $106,237 of net accounts
receivables to fund short-term working capital requirements.
At
March 31, 2007, the Company had a working capital deficit of $3,011,440, and
$315,055 of cash and cash equivalents to fund short- term working capital
requirements. Cash used in operating activities was $6,730,469 during the nine
months ending March 31, 2007. The cash used by operating activities principally
consists of the net loss of $11,060,372, offset in part by changes in assets and
liabilities, including an increase in accounts payable of $1,049,017, conversion
of debt to equity of $909,294, non-cash charges of $1,124,647 for common stock,
options and warrants issued for services and non-cash reparation charges of
$1,202,730.
The
Company's ability to continue as a going concern and its future success is
dependent upon its ability to raise capital in the near term to: (1) satisfy its
current obligations, (2) continue its research and development efforts, and (3)
the successful wide scale development, deployment and marketing of its products.
Historically, mPhase has funded its operations and capital expenditures
primarily through private placements of common stock and warrants.
  Management expects that its near term financial needs will be
provided by similar financing activities supplemented by sales of its IPTV
products during the last half of calendar year end 2007.
28
Significant
Contracts, Debt Conversions and Contingencies
The
Company had entered into various agreements with GTARC, pursuant to which the
Company received technical assistance in developing the Digital Video and Data
Delivery System. The Company has incurred expenses in connection with technical
assistance from GTARC totaling approximately $13,539,932 from the period from
inception through June 30, 2006. This arrangement has since been terminated.
In
February of 2004, the Company and GTRC entered into a final agreement to convert
approximately $1.8 million in payables outstanding to GTRC and exchange mutual
releases in consideration for the issuance to GTRC of a Warrant (which has been
exercised on a cashless basis in February of 2005) resulting in the issuance of
4,949,684 shares of the Company's common stock valued at $.35 per share. In
addition the Company was obligated to pay GTRC a total of $100,000 in quarterly
installments payments commencing at the end of March of 2004. The Company has
discontinued its efforts with respect to the Traverser DVDDS product line and is
evaluating the need to protect patents. mPhase is the sole, worldwide licensee
of the technology developed by GTARC and should a viable commercial product ever
be developed , GTRC may receive a royalty of up to 5% of product sales.
During
the fiscal year ended June 30, 2002 certain strategic vendors and related
parties converted approximately $2.7 million of accounts payable and accrued
expenses into 7,492,996 shares of the Company's common stock and 5,953,490
warrants. Such vendors include Microphase Corporation, Janifast, Ltd., and Piper
Rudnick LLP, mPhase's outside counsel.
During
the twelve months ending June 30, 2003, certain strategic vendors and related
parties converted approximately $1.9 million of accounts payable and accrued
expenses into 5,923,333 shares of the Company's common stock and warrants to
purchase 3,706,800 shares of common stock of mPhase.
During
the twelve months ending June 30, 2004, certain strategic vendors and related
parties converted approximately $1.9 million of accounts payable and accrued
expenses into 110,467 shares of the Company's common stock and warrants to
purchase 5,069,242 shares of common stock of mPhase.
During the twelve months ending June 30, 2005, certain strategic
vendors and related parties converted approximately $1.2 million of accounts
payable and accrued expenses into 3,895,171 shares of the Company' s common
stock and warrants to purchase 4,616,571shares of the Company's common stock.
During
the twelve months ended June 30, 2006 certain strategic vendors and related
parties converted approximately $590,000 of accounts payable and accrued
expenses into 3,336,864 shares of the Company's common stock and warrants
to purchase 3,277,778 shares of common stock of mPhase.
During the nine months ended March 31, 2007, the Company converted
accounts payable of $909,294 into 5,617,062 shares of common stock.
As of March 31, 2007, mPhase was obligated to pay Lucent
Technologies, Inc. $200,000 for work performed in connection with the
development of its Nanotechnology product line. The Company has incurred expense
relative to such research with Lucent totaling   a approximately
$1,600,000 in the nine month period ended March 31, 2007.
Other significant contractual obligations require the Company to
pay Magpie Telecom Insiders Inc, $265,000 related to the development of its TV+
product. This contract expired in January 2007 and involved total research
expense of $910,000 for the nine months ended March, 31 2007 of which $415,000
was paid by the issuance of 2,441,176 shares of common stock valued at $.17 per
share.
In addition, the Company had an agreement with Velankani
Information Systems to further develop its TV+ product. During the nine months
ended March 31, 2007, the Company incurred research expense of $896,957 of which
$239,294 was paid by the issuance of 1,407,617 shares of common stock valued at
$.17 per share. The Company owed Velankani $342,802 as of March 31, 2007.
Finally, the Company has a support, licensing and upgrade
agreement with Espial Group relating to the TV+ system, extending to December
31, 2008. This contract involves payments totaling $1,172,000 of which $514,000
will be due after March 31, 2007 in calendar year 2007, and $250,000 is due in
2008.
The
Company has no commitments from affiliates or related parties to provide
additional financing. The Company has, from time to time, been able to obtain
financing from affiliates when conditions in the capital markets make third
party financing difficult to obtain or when external financing is available only
upon very unattractive terms to the Company, and when such capital has been
available from the affiliates. As a result, conversions of Debt with related
parties and strategic vendors during the periods enumerated is a follows:
29
For the Nine Months
Ended March 31,
For the Years Ended June 30,
(Unaudited)
Related
      Party Conversions
2004
2005
2006
2006
2007
Number
      of shares
0
3,259,879
3,000,000
3,000,000
830,769
Number
      of warrants
0
3,259,879
3,000,000
3,000,000
0
Amount
      converted
0
$651,976
$540,000
$540,000
$108,000
Strategic
      Vendor Conversions
Number
      of shares
110,467
635,296
331,864
331,864
4,786,293
Number
      of warrants
5,069,242
1,356,696
277,778
277,778
0
Amount
      converted
$1,963,202
$926,894
$50,000
$50,000
$801,294
Totals
Number
      of shares
110,467
3,895,175
3,331,864
3,331,864
5,617,062
Number
      of warrants
5,069,242
4,616,575
3,277,778
3,277,778
0
Amount
      converted
$1,963,202
$1,578,870
$590,000
$590,000
$909,294
Gain
      on extinguishment of Debt
$150,058
$418,696
$30,608
$30,608
$0
Effective
March 10, 2005, the Company entered into a Development Agreement with Lucent
Technologies, representing a total obligation of $1.2 million payable in 12
monthly installments of $100,000 each through March of 2006 for development of
an ultra cool magnetometer sensor utilizing the science of nanotechnology. This
agreement was also renewed in May of 2006 through March of 2007 upon the same
terms. The Company is currently in negotiations with the Bell Labs division of
Lucent to extend this agreement for an additional 12 months.
Effective
November 28, 2004 and September 2, 2004, the Company entered into software
development agreements with Espial and Magpie respectively calling for the
payments of $95,000 and $312,000 in connection with development of Version 3.0
of its TV+ system. Effective September 2, 2004, the Company became obligated to
pay Lucent Technologies Inc. a total amount of $1.2 million for development of
Version 3.0 of its TV+ product. Such amount is payable in 8 installments of
$158,600 each against 7 project milestones all of which are expected to be
completed during fiscal year 2005.
Effective
February 3, 2004, the Company became obligated to pay a total of $1.2 million to
Lucent Technologies Inc. under a new Development Agreement in installments of
$100,000 per month for a period of 12 months to develop a micro power source
array using nanotextured superhydrophobic materials This Agreement was extended
in February of 2005 for an additional 12 months for a total of $1.2 million to
Lucent Technologies, Inc. payable in installments of $100,000 per month. An
interim Agreement, on similar terms extended such Development Agreement through
April 27, 2006. On June 8, 2007, the Company entered into a new 12 month
Development Agreement through May of 2008 with Bell Labs that obligates the
Company to pay a total of $1.2 million.
Effective
August 30, 2004, the Company successfully renegotiated its payment agreement
originally entered into in March of 2002 with Piper&Rudnick LLC, its outside
counsel to cure all past arrearages owed under the original payment agreement.
On August 30, 2004, the Company paid Piper & Rudnick LLC the sum of $100,000
cash and agreed to make future payments of $25,000 each on December 1, 2004,
March 1, 2005, June 1, 2005, September 1, 2005 with a payment of $50,000 on
December 1, 2005 and payments of $25,000 each on March 1, 2006, June 1, 2006,
September 1, 2006 and a final payment of $75,000 on December 1, 2006. The
Company is current with respect to its payments under this agreement. In
addition, the Company issued a 5 year cashless warrant for 750,000 shares of its
common stock valued at $.25 per share. The common stock in which such warrant is
convertible into is being registered hereunder on this Form S-1 (See Selling
Shareholders list) and could be sold in the open market (see Risk Factor on Page
8 hereof). In addition, Piper Rudnick LLC holds a cashless warrant covering
2,833,490 shares of its common stock that was originally issued as part of its
original payment agreement in March of 2002 which shares are being registered as
part of this Registration Statement filed on form S-1 by t;he Company (see
Selling Shareholders).
Effective February 18, 2004 of fiscal year ended June 30, 2004,
GTRC agreed to convert approximately $1.8 million of aggregate invoices for work
performed for the Company in development of its TraverserDVDDS product into a 5
year cashless warrant to purchase 5,069,200 shares of the Company's common stock
or stock valued at $.35 per share.
During the fiscal years ended June 30, 2002 and 2003 the Company
was able to negotiate extended payment terms for overdue accounts payable with
strategic vendors. These obligations are now classified as notes payable and
included in current and long-term portions of notes payable in the accompanying
balance sheets, based upon the revised payment terms. The Company believes they
can maintain its present repayment schedule, or otherwise renegotiate such terms
that are satisfactory to the Company and these vendors.
30
We
have evaluated our cash requirements for fiscal year 2007 and beyond based upon
certain assumptions, including our ability to raise additional working capital
from equity financing and increased sales of our POTS Splitter. The Company
anticipated that it would need to raise, at a minimum, approximately $10 million
primarily in private placement of its common stock with accredited investors, in
the next year. As of March 31, 2007, the Company has raised during the current
fiscal year approximately $3,632,534 through the issuance of 25,643,608 shares
of common stock through private placements and the exercise of warrants
RECENT TRANSACTIONS AFFECTING EQUITY
Private
Placements
During the quarter ended September 30, 2006, the Company issued
6,780,716 shares of its common stock together with 5,555,556 of  5 year
warrants to purchase one share each of the Company's common stock, with an
exercise price of $.18 per share in private placements generating net proceeds
of $1,104,000.
During the quarter ended December 31, 2006, the Company issued
6,622,223 shares of its common stock together with 5 year warrants to purchase
1,388,889 of   the Company's common stock, with an exercise price of
$.18 per share in private placements generating net proceeds of $833, 866.
Included in these amounts are finders fees paid in cash and 566,667 additional
shares of common stock.
During the quarter ended March 31, 2007, the Company issued
14,973,083 shares of its common stock. Private placements generating net
proceeds of $1,787,850; included in this amount is an estimate of finders fees
to be paid of $198,650.
Warrant
Exercise
During the quarter ended September 30, 2006, the Company issued
138,889 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $25,000 to the Company.
During the quarter ended December 31, 2006, the Company issued
12,101,780 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $1,669,668 to the Company. In addition, the Company
issued to certain investors new 5 year warrants to purchase
11,111,112 of the Company's common stock, with exercise prices ranging from $.15
- $.18 per share.
During the quarter ended March 31, 2007, the Company issued
2,500,000 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $375,000 to the Company.
Stock
Options and Warrants Issued for Services.
During the nine months ended March 31, 2007, the Company
authorized the issuance of 4,015,000 in options and warrants of 2,044,440 to
employees, officers, and consultants granting the right to purchase a like
amount of common shares. Pursuant to the adoption of FAS 123(R), the Company
recognized an expense in the amount of $785,259, all of which has been included
in general and administrative expense. The fair value of options granted was
estimated as of the date of grant using the Black-Scholes stock option pricing
model, based on the following weighted average assumptions: annual expected
return of 0%, annual volatility of approximately 80%, based on a risk-free
interest rate of 4.8% and expected option life of 5 years.
During the nine months ended March 31, 2007, the Board of
Directors authorized the issuance of 1,822,933 shares of common stock, with an
aggregate value of $339,388 as compensation to consultants and employees. The
stock value ranged in price from $.17 to $.20 per share, the fair value on the
date of the awards.
Other
Equity Transactions
During the nine months ended March 31, 2007, the Company converted
accounts payable of $909,294 into 5,617,062 shares of common stock.
In addition, during the nine month period ended March 31, 2007,
the Company became obligated to issue 11,007,819 of its common stock as
reparation to affect revised pricing on previous private placements. This
additional consideration was afforded to past investors who agreed to make an
additional cash investment as part of a new private placement. The cost of such
consideration was estimated to be the fair value of such shares at the time of
the investment $1,202,730.
31
Subsequent
Events
The
Company's current low levels of liquidity have required that payments of
accounts payable to vendors, including research partners, be extended beyond
terms.  The Company is actively engaged in negotiations with several
vendors to work out an equitable restructure of payment terms and/or conversion
of such debt into equity.
Subsequent to March 31, 2007, the Company has sustained operations primarily
through the issuance of common stock in Private Placement Agreements pursuant to
Regulation D of Rule 506 of the Securities Act of 1933, as amended with
Accredited Investors. Since March 31, 2007 the Company has raised approximately
$2.5 million under such agreements and issued in excess of 19.4 million shares
of its common stock. In addition, pursuant to the terms of these agreements, the
Company issued approximately 22.5 million shares to certain investors as
reparation shares so as to reduce investors past cost per share and encourage
additional investment. The proceeds of the Private Placement will be used for
research and Development payments to vender and working capital. On June 26,
2007 Messrs. Dotoli and Durando provided temporary working capital in the amount
of $160,000 which was repaid on July 5, 2007.
The
Company also approved various incentive compensation arrangements with employees
and consultants involving the issuance of common stock and the granting of
options to purchase such stock. In total, 12,150,000 of common shares with an
estimated value of $1,822,000 and 2,600,000 options with an estimated value
$230,000 of were issued under such program. Included in this amount were grants
to the Messer's Durando, Dotoli and Smiley of 4,000,000, 3,000,000 and
1,750,000 of restricted shares of common shares respectively for which an
expense has been incurred of approximately $1,312,000. The exercise price of
options granted ranged from $.20 to $.25 cents per share.
In addition, the Company has incurred
since March 31, 2007, and additional $172,541 in legal expenses in connection
with the civil suit filed by the SEC on November 15, 2005 against Packetport.com,
Inc and others (See Page 41 "Legal Proceedings").
On July 6, 2007, the Company announced that it had executed with
Double U Master Fund, L.P, a limited partnership organized under the laws of the
British Virgin Islands, a Private Equity Credit Agreement for an aggregate of up
to $6 million in financing through the sale, from time to time of the common
stock of mPhase at a 14% discount to its market value (determined as a set forth
in the Private Equity Credit Agreement). The terms of the agreement provide that
mPhase will have the option to  "PUT" up to $300,000 of its common stock to the
Partnership per month upon the effectiveness of a Form S-1 Registration
Statement covering such shared of common stock to be filed by the company in the
near future. mPhase is not obligated to draw any minimum amount of money under
the Private Equity Credit Agreement.
BUSINESS
Overview
We
develop market and sell innovative IPTV and DSL broadband telecommunications
solutions. Our main focus is developing the most cost effective products to
enable telecommunications service providers to deliver  using internet
protocol digital quality television (together with data and voice) over its
existing infrastructure that may consist of copper, fiber, coax or some
combination thereof. The primary markets for mPhase's television delivery
products are regions of the world outside of the United State that do not have
coaxial fiber infrastructure capable of delivering a large number of digital
broadcast television channels. Therefore our television products are targeted
primarily for International markets outside of the United States.
On
February 3, 2004, mPhase entered into the emerging area of NanoTechnology as a
new and second line of business with its execution of a new Research and
Development Agreement with the Bell Labs division of Lucent Technologies, Inc.
NanoTechnology involves the synthetic assembly of new structures and materials
at the molecular level. NanoTechnology has many potential applications including
in industries such as biotechnology, semi conductors and power cells and
sensors. The Company is initially focusing its efforts in developing new power
cells and sensors NanoTechnology products designed for military
applications.
Outsourcing
The
Company practices an outsourcing model whereby it contracts with third party
vendors to perform certain functions rather than performing those functions
internally. For instance, mPhase out sources its research of  its TV+
product to several major vendors including Velankani Telecommunications,
Bitband, Magpie Insiders, Inc and Espial. The Company also outsources
exploratory research of micro electro mechanical systems development and its
exploratory development of power source array fabrication using nanotextured
superhydrophobic materials to the Bell Labs division of Alcahtel Lucent . It
also out sources analog engineering development and certain administrative
functions to Microphase Corporation and manufacturing of its new VDSL customer
premises splitter product to Janifast Ltd.
We
currently have no contracts in place for the manufacturing of our products with
either Microphase Corporation or Janifast Ltd. or any other non-affiliated third
party manufacturers. It is anticipated that we will  receive a royalty
 that is presently being negotiated as a percentage of gross revenues based
upon the sales of quantities of the new VDSL customer premises splitter product
that will be made by Janifast Ltd.
With
respect to manufacturing of its IPTV TV+ solution, mPhase has contracted with
outside software vendors for product development with which it can establish
long-term relationships. By using outside vendors, mPhase believes it can
accelerate its time to market as well as avoid the substantial hiring of
internal personnel required for internal production. With respect to its
Nanotechnology product line, mPhase utilizes the extensive research and
development facilities of bell labs which would otherwise not be available to
mPhase owing to the high capital cost as well as long lead time necessary to
establish such facilities.
The
Company has entered into various Project Development Agreements during fiscal
year 2007 with Velankani, Espial and Magpie Telecom Insiders, Inc. for
development of portions of its TV+ middleware .
Industry
Background
The
Company believes there is a significant market for its latest TV+ solution for
the delivery of IPTV. Telephone companies worldwide need to deliver a
combination of services (i.e., voice, television and data) in order to reverse
negative economic trends of reduced margins and customers. The multichannel
television business is a growing industry. Much of the world is largely
underserved, with little access to digital television programming. Cable,
outside the US and pockets of Europe, is in the early stages of deployment. The
mPhaseTV+ solution empowers telecommunications service providers to (a)
capitalize upon this growing revenue-generating segment and (b) be able to
compete more effectively with other technologies, such as cable where installed,
and direct broadcast satellite (DBS) services.
32
We believe the incentive for telephone companies to deploy
advanced digital services is significant. The traditional revenue model for
telecommunications service providers is shifting as fixed line calling revenues
are continuing to decline with the advent of wireless telephony and voice
delivered over the Internet. Traditional telephone companies can no longer rely
on a captured market and need to offer new, revenue-generating services in order
to maintain or increase profitability and by offering new services to their
customers.
Cable
television providers are also beginning to offer cable telephony and cable
modems for high-speed Internet service, in addition to their traditional
multichannel television services. Additionally, in the U.S., direct broadcast
satellites providers (DBS) are upgrading to two-way satellite communication to
provide data services. In more advanced markets, these technologies have
converged, leaving telephone, cable and direct satellite television providers
competing for the same customers and the same dollars.
mPhase's
flagship TV+ solution enables telephone companies and other communications
service providers utilizing twisted pair telephone wires or any other existing
infrastructure to respond to these competitive threats and immediately offer
fully integrated broadband service packages to their subscribers. Importantly,
with mPhase's products, telecommunications service providers are able to compete
with cable and satellite providers in the high-margin multichannel digital
television market. mPhase's product solution do not require a capital-intensive
fiber nor cable build- out, long lead times, or a technically challenging
deployment. Instead, utilizing their already installed telephone line
infrastructure, telephone companies can increase their per subscriber revenue,
capture additional market share, stave off competition and ultimately increase
their overall market valuation by becoming full-service communications providers
today.
Incumbent
telecommunications service providers will have an opportunity to preempt wide
digital cable or satellite adoption that deploy mPhase's IPTV solution and
become market leaders in providing data and video services. Most
telecommunications companies and industry analysts currently understand that
data-only solutions are not sufficient to attract new customers, retain existing
ones, and maintain or achieve profitability.
Our
IP Television Solution
mPhase
markets and sells its innovative IPTV delivery middleware/software as part of
its TV+ solutions. The Company has refocused its efforts on IPTV
software/middleware based upon carrier class open standards. Originally the
Company's development of solutions for delivery of broadcast TV for telephone
service providers was  an end to end  DSL proprietary
hardware/software  product line or our legacy Traverser DVDDS product. Our
current TV+ solution is middleware necessary for  the delivery of IPTV,
voice and high-speed interned over any type of infrastructure of a
telecommunications service provider. mPhase has  initially developed its
TV+ solution for telephone companies in parts of the world where access to
multi-channel television is limited. As additional robust features required by
major U.S. carriers are added through additional development work on the IPTV,
the Company plans to target such carriers as strategic partners and
customers.
mPhase
introduced its first TV over DSL product, the Traverser Digital Video and Data
Delivery System, (DVDDS) in 1998. The DVDDS, is an end-to-end system based upon
proprietary technology developed in conjunction with Georgia Tech Research
Corporation. Because it is an end-to-end video-over-ADSL (asymmetric digital
subscriber line) equipment. The proprietary transport method utilized in the
Traverser System is patent protected. The intellectual property embodied by the
DVDDS System includes the ability to deliver a plurality of channels to a
plurality of users, ensuring that all channels are available to all users at all
times. The Company has replaced this legacy product with its newer TV+
solution.
As
of December 30, 2006. the Company is testing for deployment in Ukraine, its IPTV
solution or Release 6.0 of its TV+ solution. Over the years, the Company has
spent over $30 million on research and development culminating in the IPTV
product and believes it has significant experience and market knowledge in the
field as a result of over 7 years of development efforts, changing market
conditions and new technology developments in connection with Internet Protocol
delivery of video.
Bell Labs and mPhase initially commenced research on the TV+
solution in December of 2002 as a compliment to and enhancement of the software
and set top boxes needed to delivery television over DSL using the Lucent
Stinger DSLAM. Bell Labs had previously been working in a contract engineering
capacity helping mPhase to cost-reduce its digital set top box. In May of 2006,
the Company transferred the systems integration and development work for its
IPTV middleware to Velakani and expanded the work of Magpie Telecom Insiders,
Inc and Espial in connection with such development.
We
believe that the TV+ solution is now  the most reliable, scaleable and
cost-effective system for the delivery of television services over copper
telephone wires. For mPhase, the TV+ solution marks a shift in strategy from
selling a complete, proprietary platform to providing an industry-standard,
carrier class middleware for the deployment of IPTV by telecommunications
service providers.
Releases
1.0 and 2.0 of the TV+ solution were designed by Bell Labs  as ATM
(asynchronous transfer mode) solutions then targeted to the traditional
reliability and use of such protocol by the majority of telecommunications
service providers. Subsequent releases of the TV+ solution marks the final
evolution of the IP based solution ideally suited for large-scale deployments,
and in parts of the world that cannot afford the cost of upgrading to cable
infrastructure.
33
NanoTechnology
mPhase
has recently entered the business of NanoTechnology which represents the latest
scientific area involving the disciplines of molecular engineering, quantum
physics and electrochemistry, amongst others to create new advances in products.
mPhase is currently focusing primarily upon exploratory research for the
development of advanced battery and power cell products and Electro Mechanical
Sensor for a new generation of sensors for military applications.
Business
Development, Organization, and Acquisition Activities
We
were incorporated in New Jersey in 1979 under the name Tecma Laboratory, Inc. In
1987, we changed our name to Tecma Laboratories, Inc. As Tecma Laboratories,
Inc., the Company has primarily engaged in the research, development and
exploitation of products in the skin care field. On February 17, 1997, we
acquired Lightpaths, Inc., a Delaware corporation, which was engaged in the
development of telecommunications products incorporating DSL technology, and we
changed our name to Lightpaths TP Technologies, Inc.
On January 29, 1997, we formed another wholly-owned subsidiary
called TLI Industries, Inc. The shares of TLI were spun off to our stockholders
on March 31, 1997 after we transferred the assets and liabilities, including
primarily fixed assets, patents and shareholder loans related to the prior
business of Tecma Laboratories. As a consequence of these transactions, we
became the holding company of our wholly owned subsidiary, Lightpaths, Inc. on
February 17, 1997.
On
June 2, 1997, we completed a reverse merger with Lightpaths TP Technologies,
Inc. and changed our name to mPhase Technologies, Inc.
On
June 25, 1998, we acquired Microphase Telecommunications, Inc., a Delaware
corporation, by issuing 2,500,000 shares of our common stock. Microphase
Telecommunications' principal assets were patents and patent applications
utilized in the development of our proprietary Traverser technology (as
discussed in related footnote 11 of financial statements on P F-35). See also
"Material Related Party Transactions," contained with "Critical Accounts
Policies" on P 27 and "Certain Relationships and Related Transaction" P 51.
In March 2000, we entered into a joint venture with Alphastar
International, Inc. to form a company called mPhase Television.net, Inc.,
(mPhaseTV) in which we held a 50% interest. On May 1, 2000, we acquired an
additional 6.5% interest in mPhaseTV, and made it one of our consolidated
subsidiaries.
On
March 14, 2000, we entered into an agreement with BMW Manufacturing Corp.,
located in South Carolina. Under the agreement, we installed version 1.0 of the
Traverser for BMW's telephone transmission network. BMW has agreed that, upon
its notice and consent, we will be able to demonstrate to potential customers
the functioning system at BMW's facilities. BMW has made two (2) subsequent
purchases increasing the size of its deployment to 48 unique units.
Our flagship installation, Hart Telephone, has completed the build
and development of its digital headend during fourth quarter of 2001. The
completion of their digital headend marks the move from beta to commercial
deployment of the Traverser platform. Hart currently has approximately 70
customers receiving about 80 channels of television services.
In
May of 2002 mPhase initiated discussions for development of a cost-reduced
intelligent network interface (INI) set top box with the Bell Laboratories
division of Lucent Technologies, Inc.
Effective
December 1, 2002, mPhase entered into a Development Agreement with the Bell
Laboratories division of Lucent
Technologies,
Inc. for the development of mPhase's broadcast television switch (BTS) as an
integrated platform with the Lucent Stinger DSL Access Concentrator.
On
December 9, 2002, pursuant to a Statement of Work, Lucent commenced development
of the BTS for mPhase.
On
December 15, 2003, mPhase engaged Lucent for the cost-reduction of its Traverser
INI set top box.
On
January 21, 2003, mPhase entered into a Co-Branding Agreement with Lucent under
which mPhase's INI set top box will be co-branded with the Lucent Technologies,
Inc. name and logo.
34
On
April 4, 2003, mPhase entered into a Systems Integration Agreement with Lucent.
Under the terms of the agreement, mPhase has been given the exclusive right to
sell worldwide a "bundled" solution consisting of mPhase BTS and the Lucent
Stinger.
In
May of 2003, mPhase has announced development of the mPhaseTV+ Platform with
Lucent Technologies' Bell Labs. This modular product, as described in the "Our
Solutions" section earlier, utilizes the industry-standard Lucent Stinger for
transport. Bell Labs has been design contracted to design the mPhase BTS and
Traverser CPE to be used in conjunction with the Lucent Stinger. A redesigned
cost reduced second generation set top box CPE equipment has been completed. A
prototype version of the BTS is also completed and has been successfully tested
with 3 customers at Hart telephone in July of 2003. The first version of our TV+
product is scheduled to be completed during the second quarter of fiscal year
2004.
In
November of 2003, mPhase announced that it had entered into a $1.0 million
Project Development contract with Lucent Technologies' Bell Labs division to
complete development of Version 1.0 of its TV+ solution by the summer of
2004.
In
February of 2004, mPhase announced that it had entered into a $1.2 million
Project Development contract with Lucent Technologies' Bell Labs division to
perform exploratory research and development of micro power source arrays
fabricated using nanotextured, superhydrophobic materials.
In
September of 2004, mPhase announced that it had entered into a new $1.2 million
Project Development contract with Lucent Technologies' Bell Labs division to
develop Version 3.0 of the TV+ solution centered around a new "Video Soft
Switch" enabling the delivery of broadcast television, high speed internet and
voice over an new IP based system with an open standards architecture.
In
November of 2004, mPhase announced the selection by Lucent Russia to deploy
1,000 ports of mPhase's TV+ solution to a telecom services company in the far
eastern region of Russia that is one of 7 regional mega communications service
providers.
In
February of 2005 and March of 2005 respectively, mPhase extended its Project
Development Agreement with the Bell Labs division of Lucent Technologies Inc.
covering its power cell product for an additional 12 months at a cost of $1.2
million and also entered into a new 12 month Project Development Agreement for
development of its new MEMS based Magnetometer sensor product. Such contracts
are in the process of being extended of an additional 12 months.
Our
revenue, historically, has been derived from sales of component telephone
equipment parts, the majority of which has come from our sales of POTS Splitter
Shelves. In our fiscal years ended June 30, 2004, 2005 and 2006 respectively, we
generated $4,641,346,  $1,711,085 and $975,482 in revenue, respectively,
and losses of $7,797,469, $11,504,944, and $19,233,716, respectively, from the
commercial sale of our component products. Our other component products,
including Filters and Central Office POTS Filter Shelves, are marketed to other
DSL equipment vendors. We do not believe that the sales of our TV+ feature
product will be materially impaired by the sale of these component products to
these potential competitors.
mPhase
is in the process of evaluating a full range of contract manufacturers,
including manufacturers outside of the U.S. We believe that there are many
qualified manufacturers around the world. mPhase is likely to contract with
multiple companies depending on which countries the TV+ product is deployed and
depending upon cost-competitiveness.
Our
Products & Services
To
date mPhase's revenue has been derived almost exclusively from sales of DSL
component telephone equipment parts, the majority of which has come from our
sales of POTS Splitter Shelves. We received an order for a test of our TV+
solution from a major telecommunications service provider in Ukraine, that
subject to an acceptance test expected to be completed in June or July of 2007
may result in the deployment of approximately 6,000 customers by a major
telecommunications provider in the Ukraine.mPhase supplies the
telecommunications industry with products designed to enable, enhance or support
broadband DSL services such as its new VDSL customer premises splitter. The
Company is currently focused upon sales of its flagship TV+ middleware solution
in connection with deployments by telecommunications service providers globally
of IPTV.
History
of the IPTV+ Solution
Our
IPTV solution has been developed by the Company and various outsourcing
 institutions and companies over a period in excess of 8 years. Our legacy
DVDDS system was developed by Georgia Tech Research Institute which was a
proprietary end to end system of software and hardware designed to delivery over
copper telephone lines broadcast quality television, high-speed internet and
voice. The system consisted of equipment located at  central offices of
telecommunications service providers, customer premises (a set top box). The
system downloaded television content from a head end and compressed such content
into native MPEG-2 digital format for transmission over fiber to various central
office of a telecommunications service provider. The system enabled the provider
to transmit over existing copper telephone lines from the central office to the
home broadcast television, voice and high-speed internet. In fiscal year 2003
the Company engaged the Bell Labs division of Lucent Technologies to cost reduce
the set top box portion of the DVDDS.  The Company together with Bell Labs
teamed together to create an industry-standard, high quality and cost effective
television over DSL platform known as the mPhaseTV+ solution. Releases 1.0 and
2.1 of this solution consists of three key elements:
35
1.
The
mPhase BTS (broadcast television switch) layer interfacing the video headend and
the DSLAM (Digital Subscriber Line Access Multiplexer);
2.
The
Lucent's Stinger DSL Access Concentrator, a field-tested central office (CO)
piece of equipment which provides DSL connections to individual customers;
and
3.
mPhase
CPE (Customer Premises Equipment), a highly integrated set top box to deliver
video in the home environment from the DSL link.
Together
with a digital video headend  and the Lucent Stinger, the Versions 1.0 and
2.0 of the TV+ solution provide an ATM (asynchronous transfer mode) based
end-to-end solution for customers wanting to provide television and high-speed
data services over their existing copper infrastructure. Based on a streamlined,
modular architecture, future upgrade, additional features and ancillary services
can be implemented without major modifications to the entire system.
In
2004 and 2005, it became evident that the market for delivery of broadcast
television by telecommunications service requirements required a system that
utilized internet protocol (IPTV) that is carrier class and with open standards
instead of ATM protocol in order to achieve the lowest cost for delivery of
broadcast television to the largest number of customers. In 2006, the Company
announced the development of Release 3.0 of its TV+ product that was the first
solution developed by the Company that utilized internet protocol to deliver
broadcast television, high-speed internet and voice by a telecommunications
service provider. This released marked a migration of the Company from the
original DVDDS hardware/software end to end proprietary system to an open
standards carrier class software/middleware IPTV solution designed to deliver
television, voice and high-speed internet over copper, fiber or any other
existing infrastructure that a telephone service provider may have. The
middleware solution is part of the overall system which consist of head end and
various system hardware components and set top box at a customer premises
required for the delivery to broadcast television using IP protocol.
As
noted above, the Company's current IPTV solution utilizes a communications
framework based upon Internet Protocol (IP) instead of Asynchronous Transfer
Mode (ATM) that was utilized in earlier releases of the product. ATM is an
industry standard for transportation of data based upon a packaging of
information into a fixed-size cell format for transportation across networks.
Many telecommunications service providers currently deploy equipment that
handles this protocol because it can support voice, video, data and multimedia
applications simultaneously with a high degree of reliability. IP is another
transport protocol that maintains network information and routes packets across
networks. IP packets are larger and can hold more data than ATM cells.
Historically, there have been concerns that service providers would be unable to
provide the same quality of service with IP because it is not optimized for
time-sensitive signals such as broadcast television and voice. Nevertheless,
there is a greater demand by telecommunication service providers for IP systems
for delivery of television, voice and high-speed data because such systems are
significantly more cost effective to deploy based upon greater scalability.
Release
6.0 or the IP based TV+ platform is designed for customers planning to support
large scale deployments, delivering both high speed data and television
services. Such system is designed for maximum flexibility, cost effectiveness,
and is highly scaleable for large deployments by telephone service providers.
Since most telecommunications providers require an IP rather than ATM mode for
deploying digital broadcast television and video on demand, all releases of our
IPTV middleware, commencing with release 3.0, have utilized internet
protocol.
The
Company believes the initial major deployments and any revenues from sales of
its flagship IPTV solution are not expected until the third quarter of fiscal
year 2006. An upturn of spending in the telephone industry should also increase
sales and improve the Company's margins and provide the Company with the
opportunity to attain profitability.
DSL
Components
Although the Company has repositioned itself mainly as a
software/middleware provider of IPTV solutions, mPhase also designs and markets
a line of DSL component products that now consists of a new VDSL customer
premises splitter designed to facilitate the roll-out of broadband services by
telecommunications service providers such as AT&T that are using a
combination of fiber to the curb and VDSL over existing copper lines to the home
to solve the "last mile" for delivery of such services.
Research
and Development Activities
As
of June 30, 2006, we had been billed approximately $13,539,952 for research and
development conducted by Georgia Tech Research Institute (GTRC) in connection
with the development, over 5 years of the legacy Traverser DVDDS system .On
March 26, 1998, we entered into a license agreement with Georgia Tech which owns
the Digital Video and Data System technology. GTRC and its affiliates have
granted us the exclusive license to use and re-sell Traverser DVDDS worldwide.
We are obligated to pay Georgia Tech royalties of up to 5% on future sales of
the Traverser™ The license agreement expires automatically when the patents
covering the invention expire.
36
The
Company has paid Lucent Technologies, Inc, through March 31, 2007 a total of
$4,819,502 for development of Versions 1.0 through Versions 3.0 its TV+ or IPTV
solution which commenced as of September 15, 2002. In May of 2006, mPhase a
transferred development of the IPTV middleware form the Bell Labs division of
Lucent Technologies Inc to Velankani, as primary systems integrator of the
project.  The Company is obligated to pay a total of approximately $1
million primarily to Magpie Telecom Insiders, Inc., and Espial, and Velankani
Software  in remaining payments in order to complete Release 6.0 of the TV+
product.
In
February of 2005 mPhase announced that it had entered into a new 12 month
extension of its February 2004 $1.2 million Project Development contract with
the Bell Labs division of Lucent Technology Inc. for the exploratory research of
micro power cell arrays using superhydrophobic nanotextured materials with the
first commercial application expected to be a new miniature power cell with a
very long shelf life for military and commercial applications. Under the terms
of such agreement the Company has paid Lucent $100,000 per month commencing in
February of 2005 for a 12 month period for a total of $1.2 million. The Company
and Lucent plan to extend such contract for another 12 months on similar terms
to continue development of the miniature power cell product. In addition in
March of 2005, the Company announced a 12 month agreement with Lucent
Technologies, Inc. for development of an electromagnetic sensor or Magnetometer
product using the science of Nanotechnology at a cost of $1.2 million payable in
12 installments of $100,000 per month through March of 2006. The Company renewed
both contracts in May of 2006 through February and March of 2007 respectively
and is currently in negotiations with Bell Labs to extend each of the contracts
for an additional 12 months.
Market
Currently,
mPhase's target market for its IPTV solution includes telephone companies and
telecommunications service providers worldwide. By deploying converged voice,
video and data over their existing telephone infrastructure, telecommunications
service providers can increase revenue and profitability and retain valuable
market share. In most parts of the world, the telephone company is strongly
positioned to be first to market with an integrated bundle of communications
services. IPTV subscriptions are forecasted to reach around 40 million
subscriptions by 2010.  This number has increased significantly since 2004
at about 1.3 million.
IPTV
can and most likely will become a catalyst of pay TV and broadband growth for
key emerging markets such as Russia.  In today's competitive
telecommunications landscape, the mPhaseTV+ solution for delivery of IP TV has
now become a compelling solution for many large international telecommunications
service providers to compete effectively in today's marketplace.
We
estimate that on average, a typical telecommunications service provider using
mPhase's IP TV+ solution can generate significant revenue with a payback on its
initial investment in either system within 2-3 years depending on the size and
scope of the deployment. Importantly, this relatively short payback period is
still applicable in countries where the average cost of a basic cable television
package is well below the US average. The economics of mPhase's IPTV+ solution
are such that, for example, when charging as little as $10 per month per
subscriber for a basic television package, the system operator can expect a full
return on investment within a three-year period of time. Furthermore, over 5
years a telecommunications service provider can achieve a significantly higher
rate of return on its investment in our IPTV solution than would be possible
with deploying voice and data alone. mPhase has developed a detailed and highly
customizable return on investment model to assist the telco in assessing its
rates of return and profitability based on additional revenue generated by the
new services.
mPhase
expects to derive the majority of its revenue from the sale of its TV+ solution
developed in conjunction with Lucent Technologies, for a number of reasons:
1.
The
platform has been designed to achieve maximum cost efficiencies by maximizing
scalability using IPTV.
2.
Version
6.0 of the TV+ solution is a market driven IP based solution and is a powerful
software/middleware enabling tool providing complete standards-based flexibility
for any combination of transport hardware including all major DSLAM's, set top
boxes and other features necessary to optimize a solution by a telephone service
provider for the delivery of broadcast television, voice and high-speed
internet.
mPhase
is currently targeting international incumbent telephone companies.  The
Company expects to derive the majority of its system sales abroad, specifically
from telephone service providers in the Ukraine,  Russia and Turkey. mPhase
believes that foreign markets will adopt its IPTV solution more rapidly than
domestic service providers since there is not generally intense competition from
cable television. Therefore, the Company has placed much of its initial emphasis
on targeting the international market.
Russia
the Ukraine and Turkey are markets with minimal pay-TV and broadband penetration
levels.  These markets offer the possibility that IPTV will be come the
main catalyst for broadband adoption.  There has been little success in
these markets thus far, but we believe we have created a product that will trump
the past failures.  The demand for IPTV is higher now that it has ever
been. The markets mPhase is targeting possess pockets of moderate to high-income
households willing and able to purchase advanced digital services, but very few,
if any, alternatives exist.
Cable
television and digital broadcast satellite (DBS) services are less competitive
internationally than in North America. Because of the limited expansion of
cable, especially two-way digital cable and satellite networks abroad, access to
advanced communications services such as high-speed Internet and digital
television in many areas is limited to copper-based delivery methods.
37
Competition
in the worldwide telecommunications market is becoming increasingly aggressive
due to changing telecommunications regulation, heightened competitive threats
from alternative technologies, such as cable and digital broadcast satellite,
and price declines in local and long distance telephony services.  Over the
past decade, the distinction between local and long distance services has gone
extinct.  Now operators have introduced all-distance calling for one rate.
 This is why more and more operators are beginning to look into VoIP and
other sources of revenue such as IPTV.
To
date, there are several significant deployments of IPTV worldwide including
Fastweb in Italy, Imagenio, operated by Telefonica in Spain, Yahoo BB/Softbank
in Japan, SuperSun in China in Hong Kong, PCCW in Hong Kong, Free Telecom in
France, Yahoo BB in Japan and Media on Demand in the Republic of China operated
by Chunghwa Telecom. mPhase believes that the deployment of IPTV worldwide is in
the beginning stages but we have begun initial deployments in Russia with
Svyazinvest Companies. The market has been slower to develop than many
commentators have predicted owing to the technical complexity of the systems
software and hardware to deliver feature rich television and video on demand
where many international telecommunications operators have varied topologies,
existing infrastructure, and complex regulations to comply with in order to
successfully deploy such a system. Nevertheless, mPhase believes that
telecommunications service providers around the world have the incentive to
deploy.
Sales
Strategy
IPTV
mPhase
will pursue sales opportunities through a variety of channels, including direct
sales by the Company's internal sales team, distributors and in conjunction with
systems integrators and strategic partners in Turkey, the Ukraine and
Russia.
Joint
Venture Opportunities
There
also exist opportunities for mPhase to capture recurring revenue from the sale
and deployment of its IPTV middleware through a joint venture business model.
Under  this scenario, mPhase would sell its middleware to a joint venture
company, of which mPhase retains a minority position. This company would
negotiate either a line leasing or revenue share program with the incumbent
telephone company and subsequently deploy and operate one of mPhase's IPTV
solution. mPhase believes a JV may provide additional opportunities for sales to
international telephone carriers that may not have the funds to procure mPhase's
IP TV solution, yet recognize the potential business opportunity in deploying
our product especially with respect to potential incremental revenues from
targeted advertising.
Funding
of the equipment and operation of the system would be the responsibility of the
JV. Member companies of the JV would include entities interested in controlling
television services such as the government and large media groups. For example,
mPhase has established a JV in Turkey with Beyaz Holdings a significant provider
of Turkish Television content. Although a JV requires greater involvement from
mPhase in terms of organizing and coordinating the appropriate parties, the
long- term potential benefits to mPhase are great. mPhase would not only secure
sales of its TV+ solution, but would benefit from the recurring revenues from a
JV engaged in being a broadcast television service provider.
DSL
Component Products
mPhase
continues to develop its new a line of VDSL component products such as its
customer premises splitter. Potential customers for the DSL component products
include other DSL equipment manufacturers, re-sellers, network integrators and
telecommunications service providers deploying DSL worldwide.
To
date, mPhase has deployed over 250,000 POTS Splitter ports. The mPhase DSL
component products are sold both by mPhase directly as well as through
established distribution agreements. With the migration of telecommunications
service providers to VDSL in combination with fiber from ADSL the Company
believes that its future revenues from DSL component products will depend upon
the rapid development and successful marketing of its new VDSL customer premises
splitter. The Company has phased out its legacy ADSL POTS splitter product owing
to advancements in DSL technology and VDSL standards and overall market demand.
We are continuously in discussions with various original equipment manufacturers
of telecommunications equipment to identify opportunities for joint bids for
infrastructure deployment with major domestic and international
telecommunications service providers. We also continue to market our component
products directly.
Intellectual
Property, Patents and Licenses
The
Company has entered into software development and licensing agreements with
Magpie Telecom Insiders, Inc. and Espial with respect to certain software used
in connection with its TV+ product. Under such development and licensing
Agreement the Company has made aggregate payments of approximately $2 million
and $789,000 respectively as of April 18th, 2007. In addition the Company will
pay a licensing fee per set top box sold as part of the TV product to Espial of
$5.05 per set top box.
38
We have filed and intend to file United States patent and/or
copyright applications relating to some of our proposed products and
technologies, either with our collaborators, strategic partners or on our own.
There can be no assurance; however, that any of the patents obtained will be
adequate to protect our technologies or that we will have sufficient resources
to enforce our patents.
Because
we may license our technology and products in foreign markets, we may also seek
foreign patent protection. With respect to foreign patents, the patent laws of
other countries may differ significantly from those of the United States
regarding patent protection of our products or technology. In addition, it is
possible that competitors in both the United States and foreign countries, many
of which have substantially greater resources and have made substantial
investments in competing technologies, may have applied for, or may in the
future apply for and obtain, patents that will have an adverse impact on our
ability to make and sell our products. There can also be no assurance that
competitors will not infringe our patents or will not claim that we are
infringing on their patents. Defense and prosecution of patent suits, even if
successful, are both costly and time consuming. An adverse outcome in the
defense of a patent suit could subject us to significant liabilities to third
parties, require disputed rights to be licensed from third parties or require us
to cease our operations.
The
Company has filed 7 patents that consist of a combination of (a) patents granted
to mPhase from the bell labs division of Lucent Technologies, Inc. and (b) joint
patents developed by mPhase and employees of bell labs with respect to the
nanotechnology products currently under development. In addition, on June 13,
2007, the Company filed a provisional patent covering its TV+ product.
Regulation
The
Federal Communication Commission, or FCC, and various state public utility and
service commissions, regulate most of our potential domestic customers. Changes
to FCC regulatory policies may affect the accessibility of communications
services, and otherwise affect how telecommunications providers conduct their
business. These regulations may adversely affect our potential penetration into
certain markets. In addition, our business and results of operations may also be
adversely affected by the imposition of certain tariffs, duties and other import
restrictions on components, which we obtain from non-domestic component
suppliers. Changes in current or future laws or regulations, in the U.S. or
elsewhere, could materially adversely affect our business.
Competition
mPhase
competes with broadband equipment manufacturers including cable and digital
broadcast satellite equipment manufacturers, as well as other equipment vendors
manufacturing IP TV middleware solutions and set top boxes. The global telco
customer base has the ability to adopt other forms of content distribution if it
chooses to compete in the multi-channel home entertainment market. However,
mPhase believes its IPTV solution is attractive to a broader range of customers
of telecommunication service providers. The following sections outline the
competitive landscape for mPhase. Cable Television Network Operators:
Cable
Television is our indirect competitor.  This is mainly because where we are
focusing our attention there are no known cable television providers.
 mPhase believes that the TV+ solution is the most cost effective and
robust video delivery technology deployable by our primary target market of
international telecommunications service providers. Cable Television providers
around the world are seeking to preempt the IPTV value proposition of
transforming and personalizing the end-user experience.  New services are
rapidly being provided to a larger customer base than previously with more
emphasis on on-demand capabilities.  The cable industry in the United
States has invested more than $85 billion in its networks to combine traditional
coaxial cable with fiber optic to create hybrid fiber coaxial.  This allows
operators to transmit digital signals, expand programming capacity and enable
interactive services.  Cable operators will also move to IP, this is
inevitable, but many markets do not have the cable infrastructure needed to
deploy such a product.
Direct
Broadcast Satellite Services
In
the US, direct broadcast satellite (DBS) providers have experienced increased
market penetration over the past few years. DBS service is the only alternative
television delivery method in rural areas where cable has not been deployed, or
antiquated analog cable is predominant. However, in some cases, DBS service does
not include local off-air channels and most DBS operators are not able to
provide competitively-priced wireless high-speed Internet service. Technology
enabling two-way, high-speed Internet access over DBS is relatively new and we
expect it will take time to reach broad market acceptance as a cost-effective,
reliable data delivery method.
Other
IP TV Vendors
mPhase
competes with  vendors of middleware. and set top boxes. Companies that
supply middleware for IPTV include a joint venture of Microsoft and Alcatel,
Minerva, Orca Interactive, Siemens, VBrick Systems, and Video Furnance.  IP
end to end systems competitors include UTStarcom, mxWare and Industria.
Differentiating
Factors
mPhase
believes that its IPTV product offers the most reliable, scaleable and cost
effective solution for delivery of broadcast television programming on a
cost-effective basis. Our solution is carrier class with open standards.
mPhase's unique systems architecture  for its TV+ is a streamlined solution
is designed to be the most cost-effective scaleable solution in emerging
international markets as well as flexible enough to be upgraded with enhanced
features of more robust systems for high end customers.
39
Headend
and Set Top Box Equipment Providers
mPhase does not manufacturer either set top boxes or digital head
end gear. All customers interested in deploying an mPhase IPTV+ solution must
build a digital headend to receive, digitize and groom the television signals
and provide set top boxes to their customers from other vendors. Through
extensive lab and field testing, mPhase has established an approved vendor list
of several headend providers and has tested its IPTV middleware with set top
boxes manufactured by a number of vendors.
Nanotechnology
The
science of nanotechnology is very new and evolving. There has been significant
venture capital fundings of start up companies during calendar year 2005-2007
focusing upon development of a wide range of potential products and
applications. mPhase believes that its power cell and magnetometer products may
be the earliest products commercialized using the science of nanotechnology.
Nevertheless, the Company does not expect any material revenues from such
product for 3 years.
Employees
We
presently have approximately twenty three (23) full-time employees and
consultants, two (2) of whom are also employed by Microphase Corporation. See
the description in the section entitled "Certain Relationships and Related
Transactions."
Properties
We maintain our corporate headquarters at 587 Connecticut Avenue,
Norwalk, Connecticut 06854, under a facilities agreement with Microphase. The
agreement with Microphase provides that we lease office space, lab facilities
and administrative staff on a month-to-month basis. We also maintain offices in
New York, N.Y and Little Falls, New Jersey.
40
LEGAL PROCEEDINGS
The Company has previously been advised that, following an investigation by
the staff of the Securities and Exchange Commission, the staff intends to
recommend that the Commission file a civil injunctive action against Packetport,
Inc. and its Officers and Directors. Such recommendation relates to alleged
civil violations by Packetport and such Officers and Directors of various
sections of the Federal Securities Laws. The staff has alleged civil violations
of Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and
13(d) of the Securities Exchanges Act of 1934. As noted in other public filings
of mPhase, the CEO and COO of mPhase also serve as Directors and Officers of
Packetport. Such persons have advised mPhase that they deny any violation of law
on their part and intend to vigorously contest such recommendation.
On November
15, 2005, the Commission filed a Civil Enforcement Action arising out of such
investigation in Federal District Court in the District of Connecticut against
Packetport.com, Inc, its officers and directors and others. mPhase was not named in such civil action as a party defendant, however both the
CEO and COO of the Company were  named as defendants. The Commission has
alleged that such defendants have violated various sections of the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including the anti-fraud provisions of
Section 10 and Rule 10b-5 as well as Sections 17 of the Exchange Act and Section
5 of the Securities Act. In addition Microphase Corporation is also named as a
defendant in the civil action in connection with its sale of the stock of
Packeport.com in early 2000. All defendants to the suit continue to deny any
wrongdoing and intend to vigorously defend all allegations contained in such
action.
In a ruling (3:05 CV 1747 (PCD)), dated March 21, 2007, the Honorable Peter
C. Dorsey, Senior U.S. District Court Judge for the United States District
Court  For The District Of Connecticut, granted a motion by defendants, Ronald
A. Durando and Packetport Inc. joined by defendants Gustave T. Dotoli ,
Microphase Corporation and Packetport.com, Inc. to dismiss under Federal Rule
41(b) of the Federal Rules of Civil Procedure the civil lawsuit filed on
November 15, 2005 by the Securities and Exchange Commission against
Packetport.com, Inc. et. al for lack of prosecution.
On April 4, 2007, the Securities and Exchange Commission filed a motion with
the United States District Court requesting a reconsideration of the motion to
dismiss granted by the Court  in favor of the defendants.
In a ruling dated May 23, 2007, the Judge Peter C. Dorsey granted the motion
for reconsideration filed by the Securities and Exchange Commission and reversed
his earlier ruling of March 21, 2007 and reinstated the case on the judicial
calendar to proceed to trial.
From time to time we may be involved in various legal proceedings and other
matters arising in the normal course of business.
OUR MANAGEMENT
Executive Officers and Directors
Our officers and directors, and their ages, as of March 31, 2007, are as
    follows:
Name
Age
Position(s)
Necdet F. Ergul
84
Chairman of the Board and Director
Ronald A. Durando
50
President, Chief Executive Officer And Director
Gustave T. Dotoli (2)
71
Chief Operating Officer and Director
Martin S. Smiley
59
Executive Vice President, Chief Financial Officer,
General Counsel and Director
Outside Directors
Anthony H. Guerino, Esq. (1)(2)
59
Director
Abraham Biderman (1)(2)
59
Director
Victor Lawrence
60
Director
(1) Member of Audit Committee. (2) Member of Compensation Committee.
The following is biographical information about each of our Officers and
Directors.
Necdet F. Ergul
has served as our Chairman of the Board since October
1996 with the exception of a three-month period in 2000 when he temporarily
resigned. Mr. Ergul also currently serves as the President and Chief Executive
Officer of Microphase Corporation, a leading developer of military electronic
defense and telecommunications technology, which he founded in 1955. He is also
a Director of Janifast Ltd. In addition to his management responsibilities at
Microphase, he is active in engineering design and related research and
development. Mr. Ergul holds a Masters Degree in Electrical Engineering from the
Polytechnic Institute of Brooklyn, New York.
41
Ronald A. Durando
is the founder of mPhase Technologies, Inc. and has
served as our President, Chief Executive Officer and a Director since its
inception in October 1996. In addition, Mr. Durando has been the Chief Operating
Officer of Microphase Corporation since 1994. From 1986 to 1994, he was
President and Chief Executive Officer of Nutley Securities, Inc., a registered
broker-dealer. He is also Chairman of the Board of Janifast Ltd., a Hong Kong
corporation for operational and manufacturing companies in China. Mr. Durando is
also President and Chief Executive Officer and Director of PacketPort.com, Inc.
Gustave T. Dotoli
has served as our Chief Operating Officer and a
Director since our inception in October 1996. In addition, Mr. Dotoli has been
the Vice President of Corporate Development of Microphase Corporation since
December of 1996. Mr. Dotoli is also a Director and Vice President Corporate
Secretary of PacketPort.com, Inc. He formerly was the President and Chief
Executive Officer of the following corporations: Imperial Electro-Plating, Inc.,
World Imports USA, Industrial Chemical Supply, Inc., SISCO Beverage, Inc. and
Met Pack, Inc. Mr. Dotoli received a B.S. in Industrial Engineering from
Fairleigh Dickinson University in 1959.
Martin Smiley
joined us as Executive Vice President, Chief Financial
Officer and General Counsel on August 20, 2000. In 2006 he was elected to the
Board of  Directors of the Company. With over twenty years experience as a
corporate finance and securities attorney and as an investment banker, Mr.
Smiley serves as mPhase's strategic financial leader. Prior to joining the
Company, Mr. Smiley served as a Principal at Morrison & Kibbey, Ltd., a mergers
and acquisitions and investment banking firm from 1998 to 2000, and as a
Managing Director for CIBC Oppenheimer Securities from 1994 to 1998. He served
as a Vice President of Investment Banking at Chase Manhattan Bank from 1989 to
1994, and as a Vice President and Associate General Counsel for Chrysler Capital
Corporation from 1984 to 1989. Mr. Smiley graduated with a B.A. in Mathematics
from the University of Pennsylvania and earned his law degree from the
University of Virginia School of Law.
Anthony H. Guerino
has been a member of the Board since February 23,
2000. Since December 1997, Mr. Guerino has been an attorney in private practice
in New Jersey. Prior thereto, Mr. Guerino served as a judge of the Newark
Municipal Courts for over twenty (20) years, periodically sitting in the Essex
County Central Judicial Processing Court at the Essex County Courthouse. Mr.
Guerino has been a chairperson for and member of several judicial committees and
associations in New Jersey, and has been an instructor for the Seton Hall School
of Law's Trial Moot Court Program.
Abraham Biderman
has been a member of our board since August 3, 2000. Mr.
Biderman is Executive Vice President of Lipper & Company; Executive Vice
President, Secretary and Treasurer of The Lipper Funds; and Co-Manager of Lipper
Convertibles, L.P. Prior to joining Lipper & Company in 1990, Mr. Biderman was
Commissioner of the New York City Department of Housing, Preservation and
Development from 1988 to 1989 and Commissioner of the New York City Department
of Finance from 1986 to 1987. He was Chairman of the New York City Retirement
System from 1986 to 1989. Mr. Biderman was Special Advisor to former Mayor
Edward I. Koch from 1985 to 1986 and assistant to former Deputy Mayor Kenneth
Lipper from 1983 to 1985. Mr. Biderman is a Director of the Municipal Assistance
Corporation for the City of New York. Mr. Biderman graduated from Brooklyn
College and is a certified public accountant.
Dr Victor Lawrence
is bachelor Chair professor of Electrical Engineering
and Associate Dean for Special Programs, in the Charles V Schafer, Jr. School of
Engineering, at Steven Institute of Technology. Dr. Victor Lawrence is a member
of the National Academy of Engineering and has worked in the information
technology and communications field for over thirty years. He is an industry
leader in digital communications R&D and services, an entrepreneur, an active
member of engineering professional organizations, an author, and a teacher who
has extensive international experience. Prior to joining Steven Institute of
Technology Dr. Lawrence was Vice President, Advanced Communications Technology,
Bell Laboratories, Lucent Technologies. He led the development of technologies
that go into the most innovative, reliable, and cost-effective communications
networks for the leading telecommunications service providers. He has supported
Lucent's businesses with a staff of about 500 leading technologists and a budget
of about $100M. Major projects included gigabit, photonic, and wireless
networking developments and services. He was responsible for a team of engineers
that worked on performance analysis, simulations and development of broadband
access and backbone networks for many national and international service
providers. All of Lucent's R&D organizations relied on his high-technology
support of computer-aided hardware design, physical and thermal design, systems
compliance testing and certification, and design for high performance network
control, signaling, and management. Earlier, he was Director, Advanced
Multimedia Communications at Bell Labs, where he was responsible for systems
engineering, exploratory development of multimedia signal processing,
transmission, and switching, including speech and audio coding, modems,
broadband transmission, ATM switching and protocols, and wireless communication
and signal processing. He held a variety of leadership positions in data
communications research, digital techniques, and information systems. His
application of digital signal processing to data communications in the late
1980s and early 1990s led to many significant advances in high-speed
transmission over copper lines (e.g., voice band modems and DSL), which helped
create a global industry that leverages the public switched telephone network.
Dr. Lawrence played a significant role in the development of every major
international voiceband modem standard, making high-speed data communication
over international networks possible. The universal availability of high-speed
data connectivity stimulated the growth and widespread use of the Internet. He
led the development of high-speed modem/fax chip sets that are used in data
terminals, computers, and voice terminals for secure communications worldwide.
His work on high-speed transceivers for local loop and for premises applications
led to the development of a variety of DSL technologies, many of which are
deployed today for broadband services. Entrepreneurship Dr. Lawrence spun off
several ventures internal and external to Lucent to maximize the impact of
technology developed in his organization.
42
•
Globespan, whose core team came from Dr. Lawrence's organization
and created the silicon for DSL. Globespan later merged with Virata and is now
part of Conexant.
•
Lucent Digital Video, a Lucent internal venture, which developed
MPEG-2 video encoders that have been deployed in over 150 television stations
and in many broadband networks worldwide. The entire R&D team came from Dr.
Lawrence's organization.
•
elemedia
, which developed software
for VoIP communications.
•
Lucent Digital Radio (now Ubiquity), which developed VLSI for
encoding/decoding and modulation/demodulation of digital audio broadcast (DAB).
This technology is now used for both terrestrial and satellite radio. In
addition, he led the systems engineering efforts that designed the architecture
for the Sirius Satellite System and developed the Studio Encoder and the ASIC
for the receiver system.
Dr. Lawrence is a member of the National Academy of Engineering and a Fellow of
both the Institute of Electrical and Electronics Engineers (IEEE) and AT&T Bell
Labs. For his scientific achievements, Dr
.
Lawrence has received
numerous awards, including the 2004 IEEE Award in International Communication
and a 1997 Emmy Award for the HDTV Grand Alliance Standard. He was also the
co-recipient of the 1984 J. Harry Karp Best Paper Award and the 1981
Gullemin-Cauer Prize Award.
He served as the Chairman, IEEE Awards Board in 1994-1995, was Editor-In-Chief,
IEEE Transactions on Communications from 1987 to 1991, and a member of the Board
of Governors of the IEEE Communications Society from 1990 to 1992. He was also
Special Rapporteur on Coding (1982-1984) and on Transmission Impairments (1984)
for CCITT (now ITU).Dr. Lawrence has been a key proponent of R&D globalization
and is championing the effort to bring fiber optic connectivity to Africa. Over
the past several years at Bell Labs, he managed a worldwide R&D organization,
with branches in Beijing and Shanghai in China and in Hilversum and Twente in
the Netherlands, as well as four states in the US. Before joining Bell Labs in
1974, he taught at Kumasi University of Science and Technology in Ghana, and was
employed as a research engineer at the General Electric Company in the UK. Dr.
Lawrence is the co-author of five books
: "Introduction to Digital Filters,"
"Tutorials on Modem Communications," "Intelligent Broadband Multimedia
Networks," "Design and Engineering of Intelligent Communications Systems," and
"The Art of Scientific Innovation."
He holds over 20 U.S. and international
patents and has over 45 papers in referenced journals and conference
proceedings, covering digital signal processing and data communications. Dr.
Lawrence has taught Signal Processing and Data Networking courses at the
University of Pennsylvania, Rutgers University, Princeton University, Columbia
University, and Fairleigh Dickinson University, and delivered the Chancellor's
Distinguished Lecture Series at the University of California at Berkeley in
1986. He has also taught Technology Management and Technology Incubation courses
at Bell Labs to new engineers.
•
Since 1996, Dr. Lawrence has taught a short-course each year at
the US Industrial College of the Armed Forces.
•
From 1997-2001, Dr. Lawrence and his staff supported Senator
First and the US Sub-Committee on Science and Technology.
Dr. Lawrence received his undergraduate, masters, and doctorate degrees from
the University of London in the United Kingdom.
Board Committees
Our Board of Directors has an audit committee and a compensation committee. The
audit committee approves of our independent accountants and determines the
appropriateness of their fees, reviews the scope and results of the audit plans
of the independent accountants, oversees the scope and adequacy of our internal
accounting control and record-keeping systems and confers independently with the
independent accountants. The audit committee consists of Messrs. Biderman, and
Guerino. Consistent with NASD regulations, an audit charter was developed and
adopted by the Board and the audit committee on August 2, 2000.
The compensation committee makes recommendations to our Board of Directors
regarding our stock incentive plans and all matters of compensation. The
compensation committee consists of three (3) Directors, Messrs. Biderman, Dotoli
and Guerino.
Director Compensation
For their attendance of Board and Committee meetings, we compensate the
Directors in cash as well as in the form of stock options granted under our
Stock Incentive Plan, which grants are included in the table "Security Ownership
of Certain Beneficial Owners and Management" and the notes thereto.
Compensation of Directors
During fiscal year 2006 mPhase compensated each of the inside directors with
Options to purchase 25,000 shares of common stock at a price of $.25 per share
for services both as officers and directors. The outside directors were each
compensated with 25,000 of Options to purchase common stock at a price of $.25.
The Messrs Durando, Dotoli and Guerino were each paid a $7,500 cash stipend. No
such payment was made during fiscal year 2005.
43
Executive Compensation
The following table sets forth, for the fiscal year ended June 30, 2006 and the
two previous fiscal years, the compensation paid by us to, as well as any other
compensation paid to or earned by, our Chief Executive Officer, and our four
most highly compensated executive officers, other than the Chief Executive
Officer, whose compensation during the fiscal year ended June 30, 2006 was
greater than $100,000 for services rendered to us in all capacities during such
year.
SUMMARY COMPENSATION TABLE
RESTRICTED
SECURITIES
ANNUAL
    COMPENSATION
STOCK
UNDERLYING
AWARDS
OPTIONS
YEAR
SALARY
BONUS
Ronald A. Durando
2006
$393,600
$250,000
6,000,000
9,775,000
(Chief Executive Officer and President)
2005
$305,000
-
-
2,500,000
2004
$285,000
-
-
1,500,000
Gustave Dotoli
2006
$282,000
$75,000
2,500,000
4,875,000
(Chief Operating Officer)
2005
$215,000
-
-
1,500,000
2004
$225,000
-
750,000
Martin Smiley
2006
$175,000
-
1,577,206
1,300,000
(Executive Vice President
2005
$125,000
-
425,000
Chief Financial Officer and General
2004
$103,958
-
-
Counsel)
STOCK OPTIONS
The following table contains information regarding options granted in the fiscal
year ended June 30, 2006 to the executive officers named in the summary
compensation table above. For the fiscal year ended June 30, 2006, mPhase
granted options and compensatory warrants to acquire up to an aggregate of
23,595,000 shares to employees and directors.
Name
Number of Options Granted
Exercise Price per Share
Market Price on Grant dates
Expiration Dates
Potential Realizable Value
of Assumed Annual Return
0%
5%
10%
Ronald Durando
4,000,000
0.18
0.18
2/23/2011
40,000
$249,974
$503,988
4,000,000
0.21
0.21
2/23/2011
$129,974
$383,988
1,000,000
0.25
0.25
3/28/2011
$0
$55,997
775,000
0.21
0.21
6/14/2011
$25,182
$74,398
Gustave Dotoli
1,800,000
0.18
0.18
2/23/2011
18,000
$112,488
$226,794
1,800,000
0.21
0.21
2/23/2011
$58,488
$172,794
750,000
0.25
0.25
3/25/2011
$0
$41,998
525,000
0.21
0.21
6/14/2011
$17,059
$50,398
Martin Smiley
550,000
0.18
0.18
2/23/2011
5,500
$34,371
$69,298
500,000
0.21
0.21
2/23/2011
$16,247
$47,998
250,000
0.21
0.21
6/14/2011
$0
$13,999
The following table sets forth information with respect to the number and value
of outstanding options held by executive officers named in the summary
compensation table above at June 30, 2006. During the fiscal year ended June 30,
2006, no options were exercised. The value realized is the difference between
the closing price on the date of exercise and the exercise price. The value of
unexercised in-the-money options is based upon the difference between the
closing price of mPhase's common stock on June 30, 2006, and the exercise price
of the options.
44
Fiscal Year-End Option Values
Name
Value of unexercised In-The-Money Options
Exercisable
Unexercisable
Exercisable
Unexercisable
Ronald Durando
14,200,000
-
$40,000
-
-
Gustave Dotoli
6,925,000
-
18,000
-
-
Martin Smiley
1,440,000
-
5,500
-
Employment Agreements
All employment agreements with our current management have expired and are in
the process of being renegotiated subject to approval of the Board of Directors
of the Company.
Long-Term Stock Incentive Plan
We have a Long-Term Stock Incentive Plan, under which we have reserved for
issuance 15,000,000 shares of common stock. Our shareholders approved our 2001
Stock Incentive Plan at our annual meeting of shareholders on May 30, 2001. The
plan provides for grants of incentive stock options and nonqualified stock
options to our key employees and consultants and those key employees and
consultants of our subsidiaries.
With respect to our current plan, the compensation committee of the Board of
Directors administers and interprets our current plan. The exercise price of
common stock underlying an option may be greater, less than or equal to fair
market value. However, the exercise price of an incentive stock option must be
equal to or greater than the fair market value of a share of common stock on the
date such incentive stock option is granted. The maximum term of an option is
five years from the date of grant. In the event of a dissolution, liquidation or
change in control transaction, we may require option holders to either exercise
their options within 30 days or surrender such options (or unexercised portion
thereof).
Upon stockholder approval, the Board of Directors merged our prior Long-Term
Stock Incentive Plan into the 2001 Plan.
The purpose of the 2001 Plan is to promote our long-term growth and
profitability by providing key people with incentives to improve stockholder
value and contribute to our growth and financial success and by enabling us to
attract, retain and reward the best available people.
The maximum number of shares of common stock that we may issue with respect to
awards under the 2001 Plan is 20,000,000 shares, in addition to the shares
previously authorized for issuance under our Company plan, but which are not
issued before our current plan is merged into the 2001 Plan.
The maximum number of shares of common stock subject to awards of any
combination that may be granted under the 2001 Plan during any fiscal year to
any one individual is limited to 2,500,000 subject to the exceptions made by the
Board of Directors. These limits will be adjusted to reflect any stock
dividends, split-ups and reverse stock split, unless the Board determines
otherwise. If any award, or portion of an award, under the 2001 Plan expires or
terminates unexercised, becomes unexercisable or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, or if any shares of common
stock are surrendered to us in connection with any award (whether or not such
surrendered shares were acquired pursuant to any award), or if any shares are
withheld by us, the shares subject to such award and the surrendered or withheld
shares will thereafter be available for further awards under the 2001 Plan.
Those shares that are surrendered to or withheld by us, or that are forfeited
after issuance, however, will not be available for incentive stock options.
The 2001 Plan is administered by our Board of Directors or by a committee or
committees as the Board of Directors may appoint from time to time. The
administrator has full power and authority to take all actions necessary to
carry out the purpose and intent of the 2001 Plan, including, but not limited
to, the authority to: (i) determine who is eligible for awards, and the time or
times at which such awards will be granted; (ii) determine the types of awards
to be granted; (iii) determine the number of shares covered by or used for
reference purposes for each award; (iv) impose such terms, limitations,
restrictions and conditions upon any such award as the administrator deems
appropriate; (v) modify, amend, extend or renew outstanding awards, or accept
the surrender of outstanding awards and substitute new awards (provided however,
that, except as noted below, any modification that would materially adversely
affect any outstanding award may not be made without the consent of the holder);
(vi) accelerate or otherwise change the time in which an award may be exercised
or becomes payable and to waive or accelerate the lapse, in whole or in part, of
any restriction or condition with respect to such award, including, but not
limited to, any restriction or condition with respect to the vesting or
exercisability of an award following termination of any grantee's employment or
consulting relationship; and (vii) establish objectives and conditions, if any,
for earning awards and determining whether awards will be paid after the end of
a performance period.
45
In the event of changes in our common stock by reason of any stock dividend,
split-up, recapitalization, merger, consolidation, business combination or
exchange of shares and the like, the administrator may make adjustments to the
number and kind of shares reserved for issuance or with respect to which awards
may be granted under the 2001 Plan, in the aggregate or per individual per year,
and to the number, kind and price of shares covered by outstanding award.
Without the consent of holders of awards, the administrator in its discretion is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, awards in recognition of unusual or nonrecurring events affecting
us, or our financial statements or those of any of our affiliates, or of changes
in applicable laws, regulations, or accounting principles, whenever the
administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the 2001 Plan.
Participation in the 2001 Plan will be open to all of our employees, officers,
directors and other individuals providing bona fide services to us or any of our
affiliates, as the administrator may select from time to time. All two (2)
non-employee directors and approximately nineteen (19) employees will be
eligible to participate in the 2001 Plan.
The 2001 Plan allows for the grant of stock options, stock appreciation rights,
stock awards, phantom stock awards and performance awards. The administrator may
grant these awards separately or in tandem with other awards. The administrator
will also determine the prices, expiration dates and other material conditions
governing the exercise of the awards. We, or any of our affiliates, may make or
guarantee loans to assist grantees in exercising awards and satisfying any
withholding tax obligations arising from awards.
Because participation and the types of awards available for grant under the 2001
Plan are subject to the discretion of the administrator, the benefits or amounts
that any participant or groups of participants may receive if the 2001 Plan is
approved are not currently determinable. For this purpose, the benefits or
amounts that participants may receive if the 2001 Plan is approved do not
include awards granted under the Prior Plan that are amended and restated to
become awards covering the same number of shares under the terms of the 2001
Plan. These amended and restated awards are not contingent on stockholder
approval since the Prior Plan was previously approved by the stockholders.
Our Board of Directors may terminate, amend or modify all or any provision of
the 2001 Plan at any time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Dotoli, Mr. Biderman and
Guerino. Mr. Dotoli is our Chief Operating Officer. Neither Messrs Guerino nor
Biderman is not one of our officers or employees. None of our directors or
executive officers served as a member of the compensation committee (or other
board committee performing equivalent functions or, in the absence of such
committee, the entire board of directors) of another entity during fiscal 2004
that has a director or executive officer serving on our Board of Directors
except that Mr. Dotoli is also a member of the Board of Directors of
PacketPort.com, Inc., a company in which Mr. Durando serves as Chief Executive
Officer. Mr. Ergul is a controlling shareholder and Director of Microphase
corporation (which provides certain administrative services to mPhase) and Mr.
Dotoli and Mr. Durando are Officers of Microphase., Mr. Dotoli, together with
Mr. Durando and Mr. Ergul, are controlling shareholders, officers and directors
of Janifast Ltd. Janifast Ltd. has produced components for the TV+ product and
is expected to produce a material amount of DSL components for us in the future.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 30, 2006 certain information regarding
the beneficial ownership of our shares:
1.     by each person who is known by us to be the beneficial owner of more than
five percent (5%) of its outstanding common stock;
2.     each of our directors;
3.     by each executive officer named in the Summary Compensation Table; and,
 by all of our directors and executive officers as a
group.
Name and Address of Beneficial Owner(1)
Number of "Shares" of Common Stock Beneficially Owned
Percentage Ownership of Common Stock(2)
Necdet F. Ergul(4)
5,050,750
1.8%
Ronald A. Durando(3)
25,264,849
8.8%
Gustave T. Dotoli
13,330,267
4.7%
Abraham Biderman
1,527,733
0.5%
Anthony Guerino
777,500
0.3%
Martin Smiley
8,598,198
3.0%
Microphase Corporation
24,832,241
8.4%
Janifast
18,127,778
6.2%
All executive Officers Directors, and beneficial owners
97,509,316
33.7%
46
Warrants
Options
Total
Necdet F. Ergul
200,000
2,448,750
2,648,750
Ronald A. Durando
581,667
14,200,000
14,781,667
Gustave Dotoli
1,138,067
6,925,000
8,063,067
Martin Smiley
2,545,569
1,440,000
3,985,569
Abraham Biderman
35,000
982,500
1,017,500
Anthony Guerino
35,000
742,500
777,500
Microphase Corporation
8,772,222
0
8,772,222
Janifast Ltd.
3,150,000
0
3,150,000
(1) Unless otherwise indicated, the address of each beneficial owner is 587
Connecticut Avenue, Norwalk, Connecticut 06854-1711.
(2) Unless otherwise indicated, mPhase believes that all persons named in the
table have sole voting and investment power with respect to all shares of the
Company shares beneficially owned by them. The percentage for each beneficial
owner listed above is based on 278,235,984 shares outstanding on June 30, 2006,
and, with respect to each person holding options or warrants to purchase shares
that are exercisable within 60 days after June 30, 2006, the number of options
and warrants are deemed to be outstanding and beneficially owned by the person
for the purpose of computing such person's percentage ownership, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person. The number of shares indicated in the table include the
following number of shares issuable upon the exercise of warrants or options:
(3) Includes 1,396,148 shares held by Durando Investment LLC, Shares held by
Janifast which Mr. Durando controls are stated separately.
(4) Includes 277,000 shares owned by Berrin Snyder, his daughter and 275,000
owned by Eda Peterson, his daughter. Shares held by Microphase which Mr. Ergul
controls are stated separately.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Material Related Party Transactions
The Company has material related party transactions. The Company incurs costs
for engineering, design and production of prototypes and certain administrative
functions from Microphase Corporation and the purchase of finished goods,
primarily consisting of DSL splitter shelves and filters, from Janifast Limited.
The Company has incurred costs for obtaining transmission rights. This enabled
the Company to obtain re-transmission accreditation to proprietary television
content that the Company plans to provide with its flagship product, the TV+
within its incorporated joint venture mPhase Television.Net, in which the
Company owns a 56.5% interest.
Mr. Durando, the President and CEO of mPhase, owns a controlling interest and is
a director and COB of Janifast Limited. Mr. Durando and Mr. Dotoli are officers
of Microphase Corporation. Mr. Dotoli is also a shareholder of Janifast Limited.
Mr. Ergul, the chairman of the board of mPhase, owns a controlling interest and
is a director of Microphase Corporation and is a director and shareholder of
Janifast Limited. Microphase, Janifast, are significant shareholders of mPhase.
Management believes the amounts charged to the Company by Microphase, Janifast,
mPhase Television.Net and Hart Telephone are commensurate to amounts that would
be incurred if outside parties were used. The Company believes Microphase, and
Janifast Limited has the ability to fulfill their obligations to the Company
without further support from the Company.
Transactions with Officers, Directors and their Affiliates
Directors that are significant shareholders of Janifast Limited include Messrs
Ronald A. Durando, Gustave T. Dotoli, and Necdet F. Ergul.
During the 12 month period ended June 30, 2006 Eagle Advisers, an investment
banking firm founded by Mr. Abraham Biderman, a member of the Board of Directors
of the Company, earned fees and reimbursement expenses of approximately $782,568
in connection with services in regard to private placements of the Company's
common stock and warrants and raised a total of $5,820,652 net of such fees for
the Company.
During the 12 month period ended June 30, 2005 Eagle Advisers, earned fees and
reimbursement expenses of approximately $633,000 in connection with services in
connection with private placements of the Company's common stock and warrants
and raised a total of $6,117,000 net of such fees for the Company.
Additionally at June 30, 2004, Mr. Durando was owed $300,000 and Mr. Smiley was
owed $100,000 by the Company as evidenced by a non-interest bearing promissory
note that was repaid in July 2004. As of June 30, 2004 a total of $55,000 in the
aggregate was due to Mr. Durando and Mr. Dotoli for unpaid compensation.
Mr. Durando's June 30, 2004 note payable balance of $300,000 was repaid by the
Company during fiscal year 2005. During the first and second quarters of fiscal
year 2005, Mr. Durando made additional bridge loans to the Company evidenced by
various 12% demand notes in the aggregate of $525,000. Mr. Durando was repaid a
total of $450,000 of such loans in January of 2005. In addition, Mr. Durando
converted $13,954 of the principal amount of a $75,000 promissory note leaving
unpaid principal of $61,046 outstanding. Mr. Durando converted $13,000 of
accrued and unpaid interest on various promissory notes of the Company into
65,000 shares of common stock and a 5 year warrant to purchase a like amount of
common stock at $.25 per share.
47
During the twelve month period ended June 30, 2005 Mr. Dotoli and Mr. Smiley,
the COO, and CFO and General Counsel of the Company respectively, each lent the
Company $75,000. Mr. Dotoli was repaid, the principal amount of such loan, in
cash in January, 2005 and Mr. Smiley converted his $75,000 loan into 375,000
shares of common stock of the Company plus a 5 year warrant to purchase a like
amount of shares at $.25 per share. In addition, Mr. Smiley converted $9,975 of
accrued interest into 49,875 shares of common stock plus a 5 year warrant to
purchase a like amount of shares at $.25 per share. Finally Mr. Smiley received
25,000 additional shares of common stock as a market adjustment to his equity
investment of $25,000 on August 30, 2004. Mr. Dotoli cancelled $3,750 of accrued
and unpaid interest from August 15, 2004 through January 15, 2004 into 375,000
shares of common stock pursuant to the terms of a portion of a warrant that was
exercised at $.01 per share previously given by the Company to Mr. Dotoli in
exchange for and cancellation of unpaid compensation. On January 15, 2004, Mr.
Smiley was awarded 425,000 shares of common stock as additional compensation.
During the six months ending December 31, 2004, accounts payable in the amount
of $250,000 owed by mPhase to Microphase Corporation was cancelled in exchange
for the 1,250,000 shares of common stock and a 5 year warrant to purchase a like
amount of shares at $.25.In addition for such period, Janifast Ltd. cancelled
$200,000 of accounts payable owed by mPhase in exchange for 1,000,000 shares of
common stock and a 5 year warrant to purchase a like amount of shares at $.25
per share.
In late February and early March of 2005, the various vendors converted
approximately $173,898 in accounts payable due from the Company into 535,296
shares of Common stock aggregating $183,310 in full settlement of those
obligations.
Mr. Ronald A. Durando converted $13,000 of accrued and unpaid interest on
various demand notes issued by the Company for loans by Mr. Durando during the
six month period ended December 31, 2004 into 65,000 shares of common stock plus
a 5 year warrant to purchase a like amount of shares at $.25 per share. In
addition Mr. Durando converted $13,954 of principal of a $75,000 promissory note
into the exercise, in full, of a warrant to purchase 1,395,400 shares of common
stock at $.01 previously granted to Mr. Durando in exchange for cancellation of
unpaid compensation.
In June of 2005, Mr. Smiley converted the his 12%  $100,000 note converted plus
accrued interest thereon to 520,000 shares of common stock of mPhase at the rate
of $.20 cents per share plus a 5 year warrant for an additional 520,000 shares
of common stock at $.25 per share.
In addition a demand note payable to Martin Smiley, CFO and General Counsel of
mPhase, in the amount of $75,000 was converted into 375,000 shares of common
stock plus a 5 year warrant to purchase a like amount of shares at $.25 per
share and Mr. Smiley extended from July 25, 2004 to July 25, 2005 a $100,000
promissory note carrying 12% interest. In addition Mr. Smiley converted accrued
and unpaid interest on his various promissory notes of $ 9,975 through December
31, 2004 into 49,875 shares of common stock plus a 5 year warrant to purchase a
like amount of common stock at $.25 per share. Mr. Smiley's remaining $100,000
note is convertible into Common Stock of mPhase at the rate of $.25 cents per
share through July 25, 2009. Upon conversion, the note holder will be granted
warrants to purchase an equivalent amount of mPhase Common Stock at $.25 cents
per share for a period of five years from the date of conversion plus a 5 year
warrant for a like amount of shares at $.25 per share. Mr. Ronald A. Durando
converted $13,000 of accrued and unpaid interest on various demand notes issued
by the Company for loans by Mr. Durando during the six month period ended
December 31, 2004 into 65,000 shares of common stock plus a 5 year warrant to
purchase a like amount of shares at $.25 per share. In addition Mr. Durando
converted $13,954 of principal of a $75,000 promissory note into the exercise,
in full, of a warrant to purchase 1,395,400 shares of common stock at $.01
previously granted to Mr. Durando in exchange for cancellation of unpaid
compensation. Finally, Mr. Gustave Dotoli, Chief Operating Officer of the
Company converted $ 3,750 of accrued and unpaid interest on a $75,000 promissory
note into 375,000 shares of common stock at $.01 pursuant to a portion of a
warrant previously granted to Mr. Dotoli for unpaid compensation.
During fiscal year end June 30, 2006, Mr. Edward Suozzo, a consultant of the
Company, converted $50,000 of accounts payable owed by the Company into 331,864
shares of common stock plus a 5 year warrant to purchase 277,778 shares of
common stock at $.18 per share. During fiscal year end June 30, 2005, Mr. Suozzo
converted $20,000 of accounts payable owed by the Company into 100,000 shares of
common stock plus a 5 year warrant to purchase 100,000 shares of common stock at
$.25 per share.
During fiscal year end June 30, 2006, Microphase Corporation and Janifast Corp,
both related parties respectively converted $369,000 and $171,000 of accounts
payable owed by the Company into 2,050,000 and 950,000 shares of common stock
plus a 5 year warrant to purchase 2,050,000 and 950,000 shares of common stock
at $.18 per share.
During the three months ending September 30, 2004, a note payable in the amount
of $180,000 to Microphase Corporation, Such note was extended by Microphase from
July 25, 2004 and now matures on July 25, 2005. Additionally, a note payable to
Martin Smiley, CFO and General Counsel of mPhase, in the amount of $100,000 was
extended from July 25, 2004 to July 25, 2005. Both liabilities carry an interest
rate of 12% payable quarterly in arrears and were extended effective June 30,
2004. Each note is convertible into Common Stock of mPhase at the rate of $.25
cents per share plus a 5 year warrant for a like amount of common stock at $.25
per share through July 25, 2005 and a second 5 year warrant at $.50 per share
convertible into a like amount of shares.
48
On August 30, 2004, the Company paid $100,000 to Piper&Rudnick, LLP, its outside
counsel, in connection with the renegotiation of a Payment Agreement effective
June 30, 2004. Under the terms of the renegotiated Payment Agreement, the
Company agreed to payments of $25,000 each on December 1, 2004, March 1, 2005,
June 1, 2005 and September 1, 2005 and a payment of $50,000 on December 1, 2006
plus $25,000 payments on March 1, 2006, June 1, 2006, September 1, 2006 and a
final payment of $75,000 payment on December 1, 2007. In addition, Piper&Rudnick
LLP agreed to convert $150,000 of such payable into a 5 year cashless warrant to
purchase the Company's common stock at $.25 per share.
On August 30, 2004 the Company issued two demand promissory notes each in the
principal amount of $75,000 at 12% interest in consideration of loans of $75,000
to the Company from each of Mr. Dotoli, its COO and Mr. Smiley, its CFO and
General Counsel. In addition on September 30, 2004, the Company issued a demand
promissory note to Microphase Corporation, a related party, for a loan of
$175,000 to the Company with a 12% interest rate. Finally, the Company issued
demand promissory notes with an interest rate of 12% to Mr. Ronald Durando, CEO
of the Company for loans made to the Company dated August 30, 2004, as well as
demand promissory notes to Mr. Durando, its CEO, for loans to the Company of
$200,000 on August 30, 2004, $75,000 on September 28, 2004 and $175,000 on
September 30, 2004 respectively.
Necdet F. Ergul, Ronald A. Durando and Gustave T. Dotoli, our Chairman, Chief
Executive Officer and Chief Operating Officer, respectively, are executive
officers and shareholders of Microphase and Ronald Durando and Gustave T. Dotoli
are president and vice- president of PacketPort.com., respectively.
On November 26, 1999, Mr. Durando acquired, via a 100% ownership of PacketPort,
Inc., a controlling interest in Linkon Corporation, now known as PacketPort.com,
Inc. On November 26, 1999, PacketPort, Inc., a company owned 100% by Mr.
Durando, acquired controlling interest in Linkon Corp., which subsequently
changed its name to PacketPort.com, Inc. In connection with this transaction,
Mr. Durando transferred 350,000 shares of our common stock to PacketPort, Inc.
Transactions with Microphase Corporation
mPhase's President and Chairman of the Board of the Company are also employees
of Microphase. On May 1, 1997, the Company entered into an agreement with
Microphase, whereby it will use office space as well as the administrative
services of Microphase, including the use of accounting personnel. This
agreement for fiscal year 2006 required mPhase to pay Micophase $10,000 per
month. Microphase also charges fees for specific projects on a
project-by-project basis. During the year ended June 30, 2006 and for the period
of time from mPhase's inception (October 2, 1996) to June 30, 2006, $531,820 and
$8,670,776, respectively, have been charged to expense or inventory under these
Agreements and is included in operating expenses in the accompanying
consolidated statements of operations. Management believes that amounts charged
to the Company by Microphase are commensurate to amounts that would be incurred
if outside third parties were used.
The Company is obligated to pay a 3% royalty to Microphase on revenues from its
proprietary Traverser Digital Video and Data Delivery System and DSL component
products.
Transactions with Janifast
Janifast Ltd., a Hong Kong corporation manufacturer, which has produced
components for our prototype Traverser_ DVDDS product, and may produce such
components for us in the future. Necdet F. Ergul, Ronald A. Durando and Gustave
T. Dotoli are controlling shareholders of Janifast Ltd. with an aggregate
ownership interest of greater than 75% of Janifast Ltd. Mr. Durando is Chairman
of the Board of Directors and Mr. Ergul is a Director of Janifast.
Transactions with Other Related Parties
In March 2000, mPhase acquired a 50% interest in mPhaseTelevision.Net (formerly
Telco Television Network, Inc.), an incorporated joint venture. This percentage
was increased to approximately 57% in fiscal year 2001. Alpha Star
International, Inc currently owns the remaining joint venture interest.
Transactions with Strategic Vendors
Effective June 30, 2004, the Company was $473,787 in arrears with respect to a
Promissory Note issued to Piper Rudnick LLP plus other legal fees of
$118,773.36.  It should be noted that Piper & Rudnick received such Promissory
Note plus two warrants received in March of 2002 in exchange for cancellation of
certain payables. Such warrants have conversion rights into our common stock for
a total of 2,233,490 shares that have been registered under a recently effective
Form S-1 Registration Statement, and are cashless. On September 3, 2003, the
Company paid $10,000 in cash to Piper in exchange for reducing the total payable
to $550,000 plus the issuance of additional cashless warrant for $150,000 worth
of the Company's common stock valued at $.25 per share. The remaining $300,000
payable has the following future payment schedule
:
49
1. Payments of $25,000 each on December 1, 2004, March 1, 2005, June 1, 2005,
September 1, 2005, March 1, 2006, June 1, 2006 and September 1, 2006.
2. A payment of $50,000 on December 1, 2005
3. A payment of $75,000 due on December 1, 2006
Related Party Indemnification
On July 24, 2006, the Board of Directors of mPhase Technologies, Inc. with
Messrs. Durando and Dotoli abstaining voted 5-0 to approve the payment of up to
$225,000 of legal expenses incurred in the aggregate for Messrs. Durando and
Dotoli in connection with the Civil Law suit brought by the Securities and
Exchange Commission No. 19465 filed November 15, 2005 against Packetport.com et
al. which included Messrs Durando and Dotoli as officers of Packetport .com. The
Board based its approval upon (a) the denial of any wrong doing by Messrs.
Durando and Dotoli, (b) the key strategic role played by Messrs. Durando and
Dotoli as CEO and COO respectively of mPhase and (c) the current product
ingredient with the IPTV solution or voice over IP has part of the triple play
of services that are part of mPhase's TV+ solution. As of March 31,2007, the
Company has paid a total of $864,571 in legal fees , from inception in April of
2002 of  the Packetport litigation. For the period commencing April 1, 2007
through the date hereof the Company has incurred and additional $172,641 in
legal fees in connection with the Packetport litigation. The foregoing legal
fees were approved and ratified by the Board
of Directors by a 4-0 vote on May 14, 2007 with Messrs. Durando and Dotoli not
voting.
Effective June 30, 2001 the Company converted $2,420,039 of liabilities due to
directors and related parties into 4,840,077 shares of the Company's common
stock pursuant to debt conversion agreements. During the fiscal year ended June
30, 2002 certain strategic vendors and related parties converted approximately
$2.7 million of accounts payable and accrued expenses into 7,492,996 shares of
the Company's common stock and 5,953,490 warrants. During the twelve months
ending June 30, 2003, certain strategic vendors and related parties converted
approximately $1.9 million of accounts payable and accrued expenses into
5,923,333 shares of the Company's common stock and warrants to purchase
3,706,800 shares of common stock of mPhase.  Such vendors include Microphase
Corporation, Janifast, Ltd., and Strategic Vendors including Piper Rudnick LLP,
mPhase's outside counsel. Conversions with related parties only consisted of the
following during fiscal years ended June 30, 2004, June 30, 2005 and June 30,
2006 respectively and for the six month period ended March 31, 2007.
For the Nine
    Months
Ended March 31,
For the Years Ended June
    30,
(Unaudited)
Equity Conversions of
2004
2005
2006
2006
2007
Debt and Other
Financial Instruments
with Related Parties
Janifast
Number of shares
0
1,000,000
950,000
2,050,000
837,769
Number of warrants
0
1,000,000
950,000
2,050,000
0
Amount converted to equity
$0
$200,000
$171,000
$369,000
$108,000
Microphase
Corporation
Number of shares
0
1,250,000
2,050,000
950,000
0
Number of warrants
0
1,250,000
2,050,000
950,000
0
0Amount converted to equity
$0
$250,000
$369,000
$171,000
0
Officers
Number of shares
0
1,009,875
0
0
Number of warrants
0
1,009,875
0
0
Amount converted to equity
$0
$201,975
$0
0
Strategic Vendors
Number of shares
Number of warrants
1,100,467
0
331,864
0
4,786,293
Amount converted to equity
5,069,242
0
277,778
0
0
$1,963,202
$0
$50,000
$0
$801,294
Total Conversions
Number of shares
1,100,467
3,259,875
3,331,864
3,000,000
5,617,062
Number of warrants
5,069,242
3,259,875
3,277,778
3,000,000
0
Amount converted to equity
$1,963,202
$651,975
$590,000
$540,061
$909,194
50
SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of
shares of common stock by the selling stockholders as of the date of this
prospectus, and the number of shares of common stock covered by this prospectus.
Except as otherwise noted below, none of the selling stockholders has held any
position or office, or has had any other material relationship with us or any of
our affiliates within the past three years.
The number of shares of common stock that may be actually purchased by certain
selling stockholders under the warrants and the number of shares of common stock
that may be actually sold by each selling stockholder will be determined by such
selling stockholder. Because certain selling stockholder may purchase all, some
or none of the shares of common stock which can be purchased under the warrants
and each selling stockholder may sell all, some or none of the shares of common
stock which each holds, and because the offering contemplated by this prospectus
is not currently being underwritten, no estimate can be given as to the number
of shares of common stock that will be held by the selling stockholders upon
termination of the offering. The information set forth in the following table
regarding the beneficial ownership after resale of shares is based on the basis
that each selling stockholder will purchase the maximum number of shares of
common stock provided for by the warrants owned by the selling stockholder and
each selling stockholder will sell all of the shares of common stock owned by
that selling stockholder and covered by this prospectus.
Selling Shareholders List
Common
Total Beneficial
Names
Stock
Options
Warrants
Shares
Abikhzer, Chaim
280,000
280,000
Abikhzer, Elieyhau
93,333
93,333
Abikhzer, Moshe
466,667
466,667
Abikhzer, Naftoli
280,000
280,000
Abikhzer, Simon
300,000
300,000
Abraham Abikhzer Trust 2002
280,000
280,000
Abraham Zirsha Rausman Trust 2002
186,667
186,667
Ace Foundation
2,538,889
2,538,889
ADMK LLC
75,000
75,000
Alexander Hasenfeld, Inc.
333,653
333,653
Aspiotes, Nicholas & Aspiotes, Nancy
2,863,898
2,863,898
Ateres Mochoel Inc
121,871
121,871
Audiostocks, Inc
38,000
38,000
Barry Rausman Trust 2002
186,667
186,667
Baum, Mark L.
59,500
59,500
Beth Mayer Associates
3,350,000
100,000
3,450,000
Biderman, Abraham
1,835,898
1,087,500
35,000
2,958,398
Bolletteri, Angela
20,000
212,500
232,500
Br Charitable Trust
1,500,000
1,500,000
Calhoun, Wesley R. & Calhoun, Brenda
25,000
25,000
Camealjon Family LTD Partnership
-
70,000
70,000
Capasso, Stephen
-
142,500
142,500
Chabad, Colel
1,007,691
1,007,691
Chaim, Reb Ephraim & Miriam Rachel Klein
300,000
300,000
Chaim, Sholom & Babad, Sarah R.
-
100,000
100,000
Cheng, Tommy
1,600,000
1,281,250
2,881,250
51
Clemensen, Timothy
-
100,000
100,000
CMS Capital
2,500,001
2,500,001
Congregation Acheinu Bnei Yisroel
50,000
50,000
Congregation Irgun Shirurai Torah
884,615
410,000
1,294,615
Congregation of New Square
266,667
266,667
Congregation of Sharei Chaim
578,916
578,916
Congregation Usher Madanei
102,778
102,778
Cusick, Michael F.
350,000
350,000
Devlin, Michael
125,000
125,000
Donnelly, Harriet
59,375
59,375
Dotoli, Gustave
6,793,033
7,650,000
1,138,067
15,581,100
Double U Master Fund L.P.
16,946,154
16,946,154
Durando Investment LLC
420,000
420,000
Durando, Ronald
14,597,017
15,375,000
581,667
30,553,684
Ergul, Necdet
2,850,000
2,748,750
200,000
5,798,750
F&N Associates
660,803
660,803
Farber, David
2,327,444
2,327,444
Friedman, Steven
75,000
75,000
Gasparini, Peter
97,000
122,500
219,500
Gavrity, Camille
-
20,000
20,000
Gemilas Chesed Ach Tov
372,797
372,797
Gluck, David
12,000
12,000
Gluck, Leah
120,000
120,000
Goittesman, Bella
38,888
38,888
Goldenberg, Leon
250,000
250,000
Gronner, Sam
46,875
50,000
96,875
Guardino, Torry
-
77,500
77,500
Guerino, Anthony
-
787,500
35,000
822,500
Hannen, Charles
25,000
25,000
52
Hannen, Scott K. Dr. / Hannen, Aneesa
25,000
25,000
Hasenfeld Stein
150,000
150,000
Hasenfeld Stein, Inc. Pension Trust
1,533,669
1,533,669
Highgate Equities, LLC.
200,000
200,000
HSI Partnership
2,345,279
2,345,279
Hsu, Eddie
6,916,667
6,916,667
Iber International, Ltd.
4,937,632
4,937,632
Isaacs, Yisroel
300,000
300,000
Janifast Ltd.
8,227,778
1,950,000
10,177,778
Kahn, Paul
-
135,000
135,000
Kelly, Eugene L.
25,000
25,000
Kentucky National Insurance Company
533,928
533,928
Klein, Mervyn
175,000
200,000
933,334
1,308,334
Lalapet, Suren
-
50,000
50,000
Langa, Alex
-
200,000
200,000
LaSalle, Danielle
-
75,000
75,000
Lawrence, Victor
-
100,000
100,000
Lebed Biz, LLC
1,000,000
1,000,000
Lebed, Jonathan
400,000
175,000
575,000
Leibovich, Izzy
-
75,000
75,000
Leung, Luis
8,000
8,000
Leval Trading
1,270,745
1,270,745
Levin, Channa
50,000
50,000
Levitanski, Moshe
123,624
25,000
148,624
Levitanski, Rivkah
1,266,667
1,266,667
Liba Miriam Rausman Trust 2002
186,667
186,667
Lifshitz, David
25,000
25,000
Lifton, Victor
-
400,000
400,000
53
Magpie Telecom
2,441,176
2,441,176
Mark Value Partners LLC
400,000
400,000
Mary Park Properties
2,913,703
2,913,703
McCarthy, Timothy
1,688,056
1,688,056
Menboku
59,500
59,500
Merit Investments
41,667
41,667
Microphase Corporation
16,060,019
6,572,222
22,632,241
Mohs, Lawrence
1,365,000
400,000
1,765,000
Morgan, Philip
35,000
35,000
Mosdos Ohr Hatorah
100,000
100,000
Moshel, Avorhom
513,334
200,000
700,001
1,413,335
Naomi Rausman Trust 2002
186,667
186,667
New Square Trust 2002
933,333
933,333
Pensack, Harvey
166,667
166,667
Peterkin, Teresa L.
20,000
113,000
133,000
PJT Family Trust
30,000
30,000
Platinum Partners Value Arbitrage Fund
-
11,111,112
11,111,112
Raab, Samuel
115,000
115,000
Randazzo, John
-
47,500
47,500
Rappaport, Elliott
-
100,000
100,000
Rausman, Chaya Etta
15,000
15,000
Rausman, Herbert & Rausman, Rifka
746,667
746,667
Rausman, Shimon
166,667
166,667
Reickman, Rebecca
120,000
120,000
Rieder, Gary
455,556
455,556
Rieder, George
7,369,111
7,369,111
Rieder, Jeremy
120,000
120,000
Rieder, Leslie
500,000
500,000
Rieder, Mark
150,000
150,000
54
Rokowsky, Tyitzchok
100,000
100,000
Rosenberg, David
170,000
170,000
Rosenthal, Eliezer M.
1,897,186
1,897,186
Rosenthal, Judy
250,000
250,000
Rubinstein Investor Relations Inc
-
300,000
300,000
Rutgers Caualty Insurance Company
1,215,278
1,215,278
Rutgers Enhanced Insurance Company
148,808
148,808
Samuel, Connon
-
100,000
100,000
Santoriello, Anthony
1,050,000
1,050,000
Scari, Steven
1,106,500
1,106,500
Schuhalter, Coughlin & Suozzo, P.C.
75,000
345,000
420,000
Siciliano, Anthony
17,000
262,500
279,500
Silber, Brian
50,000
50,000
Silsby, Charles
-
275,000
275,000
Sima Rausman Trust 2002
186,667
186,667
Simon, Steve
125,000
1,750,000
1,875,000
Singaliese, Michael
-
252,500
252,500
Smiley, Martin
6,352,629
1,830,000
2,545,569
10,728,198
Spielman, Mark
-
162,500
162,500
Spitzer, Michael
50,000
50,000
Stefansky, Chaim
13,000
13,000
Stein, Nachum
2,676,756
2,676,756
Stein, Yakov
250,000
250,000
Sternfeld, Murray
603,973
603,973
Stockhamer, Lynn
-
50,000
50,000
Suozzo, Edward John
150,000
350,000
277,778
777,778
Swalm, William
-
100,000
100,000
Tatra Sheep Cheese Co Inc.
150,000
150,000
55
Thomas, Drew
-
87,500
87,500
Thompson, Phillip
125,000
2,050,000
2,175,000
Totten, Jackie
52,083
150,000
202,083
Trane Rausman Trust 2002
186,667
186,667
Traut, Fred
-
952,500
952,500
Trupia, Paul
200,000
125,000
325,000
Vac Sales USA, LLC
800,000
800,000
Velankani Telecommunications Inc
1,407,617
1,407,617
Waldhuber, Elena
31,250
162,500
193,750
Watkins, Patricia
-
100,000
100,000
Weinberger, George
17,238,753
17,238,753
Werdiger Family Foundation Inc.
3,470,833
3,470,833
Werdiger, Solomon
2,761,667
2,761,667
Wesco, Inc.
993,591
993,591
Whelan, Mary K.
125,000
1,500,000
1,625,000
Wolfson Equities
5,705,556
5,555,556
11,261,112
Wolfson, Aaron
-
375,000
375,000
Wolfson, Abraham
933,333
933,333
Wolmark, Rivka
120,888
120,888
Zahler, Wanna
120,000
120,000
Zeitman, Joshua
200,000
200,000
Zeldes, Shraga
100,000
100,000
Total
185,914,911
42,535,500
33,010,306
261,460,717
56
PLAN OF DISTRIBUTION
We are registering for resale by the selling stockholders and certain
transferees a total of shares of common stock, of which shares are issued and
outstanding and up to shares are issuable upon exercise of warrants. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of common stock, although we may receive up to approximately $57 million
upon  the exercise of all of the warrants and options by the selling
stockholders. We will bear all fees and expenses incident to our obligation to
register the shares of common stock. If the shares of common stock are sold
through broker-dealers or agents, the selling stockholder will be responsible
for any compensation to such broker-dealers or agents.
The selling stockholders may pledge or grant a security interest in some or all
of the shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to this
prospectus.
The selling stockholders also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling stockholders will sell their shares of common stock subject to the
following:
1.    all or a portion of the shares of common stock beneficially owned by the
selling stockholders or their respective pledgees, donees, transferees or
successors in interest, may be sold on the OTC Bulletin Board Market, any
national securities exchange or quotation service on which the shares of our
common stock may be listed or quoted at the time of sale, in the
over-the-counter market, in privately negotiated transactions, through the
writing of options, whether such options are listed on an options exchange or
otherwise, short sales or in a combination of such transactions;
2.     each sale may be made at market prices prevailing at the time of such
sale, at negotiated prices, at fixed prices, or at varying prices determined at
the time of sale;
3.     some or all of the shares of common stock may be sold through one or
more broker-dealers or agents and may involve crosses, block transactions, or
hedging transactions. The selling stockholders may enter into hedging
transactions with broker-dealers or agents, which may in turn engage in short
sales of the common stock in the course of hedging in positions they assume. The
selling stockholders may also sell shares of common stock short and deliver
shares of common stock to close out short positions, or loan or pledge shares of
common stock to broker-dealers or agent that in turn may sell such shares; and
4.     in connection with such sales through one or more broker-dealers or
agents, such broker-dealers or agents may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and may
receive commissions from the purchasers of the shares of common stock for whom
they act as broker-dealer or agent or to whom they sell as principal (which
discounts, concessions or commissions as to particular broker-dealers or agents
may be in excess of those customary in the types of transactions involved). Any
broker-dealer or agent participating in any such sale may be deemed to be an "underwriter" within the meaning of the Securities Act and will be required to
deliver a copy of this prospectus to any person who purchases any share of
common stock from or through such broker-dealer or agent. We have been advised
that, as of the date hereof, none of the selling stockholders have made any
arrangements with any broker-dealer or agent for the sale of their shares of
common stock.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be "underwriters".
In addition, any shares of common stock covered by this prospectus which qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this prospectus.
If required at the time a particular offering of the shares of common stock is
made, a prospectus supplement or, if appropriate, a post-effective amendment to
the shelf registration statement of which this prospectus is a part, will be
distributed which will set forth the aggregate amount of shares of common stock
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholder and any discounts,
commissions or concessions allowed or re-allowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with. There can
be no assurance that any selling stockholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
57
The selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Exchange Act and the rules and
regulations there under, including, without limitation, Regulation M of the
Exchange Act, which may limit the timing of purchases and sales of any of the
shares of common stock by the selling stockholders and any other participating
person. Regulation M may also restrict the ability of any person engaged in the
distribution of the shares of common stock to engage in market-making activities
with respect to the shares of common stock. All of the foregoing may affect the
marketability of the shares of common stock and the ability of any person or
entity to engage in market-making activities with respect to the shares of
common stock.
We will bear all expenses of the registration of the shares of common stock
including, without limitation, Securities and Exchange Commission filing fees
and expenses of compliance with state securities or "blue sky" laws. The selling
stockholders will pay all underwriting discounts and selling commissions and
expenses, brokerage fees and transfer taxes, as well as the fees and
disbursements of counsel to and experts for the selling stockholders, if any. We
will indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreement or the selling stockholders will be entitled to contribution. We will
be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act that may arise from any written information
furnished to us by the selling stockholders for use in this prospectus, in
accordance with the related registration rights agreement or will be entitled to
contribution. Once sold under this shelf registration statement, of which this
prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 900,000,000 shares of common stock,
$.01 par value as of June 28, 2006 the date of our most recent annual meeting.
As of July 9, 2007, approximately 391 million shares of our common stock are
issued and outstanding and held by approximately 17,000 stockholders of record.
Of the shares of our issued and outstanding common stock, 185,914,911 shares are
covered by this prospectus. In addition shares of our common stock authorized
but unissued as of the date of this prospectus will be issued on exercise of
warrants held by certain selling stockholders.
The following description of our capital stock is a summary of the material
terms of such stock. It does not purport to be complete and is subject in all
respects to the provisions of our Certificate of Incorporation and our Bylaws,
copies of which have been filed as exhibits to the registration statement of
which this prospectus is a part and to applicable New Jersey law.
Common Stock
Each holder of our common stock is entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Cumulative voting for
the election of Directors is not provided for in our Certificate of
Incorporation, which means that the holders of a majority of the shares of
common stock voted elects the Directors then standing for election. The holders
of outstanding shares of common stock are entitled to receive dividends out of
assets legally available for dividends, at such appropriate times and in such
amounts as our Board of Directors decides. The common stock is not entitled to
preemptive rights or other subscription rights and is not subject to conversion
or redemption. Upon liquidation, dissolution or winding up of our affairs, the
holders of common stock will be entitled to share ratably in all assets
remaining after the payment of liabilities. Shares of common stock shall be
transferred only on our books upon surrender to us or a duly appointed transfer
agent of the certificate or certificates properly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer.
Common Stock Warrants
This prospectus also covers shares of common stock purchasable pursuant to
newly issued warrants and options. The exercise price of these warrants and
options range from $.13 to $.25 and have an expiration term of 5 years.
Filling Vacancies on the Board
The Certificate of Incorporation provides that any vacancy on the Board that
results from an increase in the number of Directors during the interim between
annual meetings or special meetings of shareholders may be filled by the Board.
These provisions could temporarily prevent any shareholder from obtaining
majority representation on the Board by enlarging the Board and filling the new
directorships with its own nominees.
New Jersey Shareholders Protection Act
There are provisions of New Jersey law, and our Certificate of Incorporation
and Bylaws, that may have an anti-takeover effect. These provisions are designed
to protect shareholders against coercive, unfair or inadequate tender offers and
other abusive tactics and to encourage any person contemplating a business
combination with us to negotiate with our Board of Directors for the fair and
equitable treatment of all shareholders.
New Jersey has adopted a type of anti-takeover statute known as the New Jersey
Shareholders Protection Act. Subject to numerous qualifications and exceptions,
the statute prohibits an interested shareholder of a corporation from effecting
a business combination with the corporation for a period of five years unless
the corporation's board approved the combination prior to the shareholder
becoming an interested shareholder. In addition, but not in limitation of the
five-year restriction, if applicable, corporations covered by the New Jersey
statute may not engage at any time in a business combination with any interested
shareholder of that corporation unless the combination is approved by the board
prior to the interested shareholder's stock acquisition date, the combination
receives the approval of two-thirds of the voting stock of the corporation not
beneficially owned by the interested shareholder, or the combination meets
minimum financial terms specified by the statute. An "interested shareholder" is
defined to include any beneficial owner of 10% or more of the voting power of
the outstanding voting stock of the corporation and any affiliate or associate
of the corporation who within the prior five year period has at any time owned
10% or more of the voting power. The term "business combination" is defined
broadly to include, among other things: The merger or consolidation of the
corporation with the interested shareholder or any corporation that after the
merger or consolidation would be an affiliate or associate of the interested
shareholder, the sale, lease, exchange, mortgage, pledge, transfer or other
disposition to an interested shareholder or any affiliate or associate of the
interested shareholder of 10% or more of the corporation's assets, or the
issuance or transfer to an interested shareholder or any affiliate or associate
of the interested shareholder of 5% or more of the aggregate market value of the
stock of the corporation.
58
The effect of the statute is to protect non-tendering, post-acquisition minority
shareholders from mergers in which they will be "squeezed out" after the merger,
by prohibiting transactions in which an acquirer could favor itself at the
expense of minority shareholders. The New Jersey statute generally applies to
corporations that are organized under New Jersey law, have either their
principal executive offices or significant business operations located in New
Jersey, and have a class of stock registered or traded on a national securities
exchange or registered with the Securities and Exchange Commission pursuant to
Section 12(g) of the Securities Exchange Act of 1934.
LEGAL MATTERS
The validity of the common stock we are offering pursuant to this prospectus
will be passed upon by Martin S. Smiley General Counsel to the Company. Mr.
Smiley beneficially owns an aggregate of 10,728,198 shares of common stock of
the Company.
EXPERTS
The financial statements and schedules included in this prospectus and elsewhere
in the registration statement, to the extent and for the periods indicated in
their reports, have been audited or reviewed, as the case may be, by Rosenberg,
Rich ,Baker, Berman & Company and audited or reviewed, as the case may be, by
Arthur Andersen, LLP and Schuhalter, Coughlin & Suozzo, PC, independent public
accountants, and are included in reliance upon the authority of said firms as
experts in giving said reports. Prior to the date of this prospectus, Arthur
Andersen was indicted in connection with its rendering of services to another
company. Therefore, Arthur Andersen withdrew from practice before the SEC
effective prior to the date hereof and many of the accountants at Arthur
Andersen have left their current jobs or have been searching for a new place of
employment. Based on these factors, after reasonable efforts, including numerous
phone calls, we were unable to contact our former audit partner at Arthur
Andersen and therefore were unable to obtain Arthur Andersen's consent to the
inclusion of their report dated October 12, 2001. Accordingly, we have dispensed
with the requirement to file their consent in reliance upon Rule 437a of the
securities act. Because Arthur Andersen has not consented to the inclusion of
their report in this prospectus, you will not be able to recover against Arthur
Andersen under Section 11 of the securities act for any untrue statements of a
material fact contained in the financial statements audited by Arthur Andersen
or any omissions to state a material fact required to be stated therein. As of
March 31, 2006, Schuhalter, Coughlin & Suozzo, PC, owns approximately 829,098
shares of common stock directly and indirectly; options to purchase 875,000
shares of common stock and warrants to purchase 472,778 shares of common stock,
all of which are being registered pursuant to this prospectus. All of such
securities owned by Schuhalter, Coughlin & Suozzo, PC and Edward P. Suozzo,
individual and in trust for family members were issued to Schuhalter, Coughlin &
Suozzo, PC in consideration for non-audit consulting services and/or
satisfaction of payables related to non-audit consulting services and were
issued after Schuhalter, Coughlin & Suozzo, PC was no longer our independent
public accounting firm.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the information requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). In accordance with the Exchange Act, we
file reports, proxy statements and other information with the Securities and
Exchange Commission. Our reports, proxy statements and other information filed
with the SEC may be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. Copies of such material also may be obtained at prescribed rates from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549-1004. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. The SEC maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
59
You may request a copy of these filings, at no cost by writing or telephoning us
at the following address:
mPhase Technologies, Inc.
587 Connecticut Avenue
Norwalk, Connecticut 06854-0566
Attention: General Counsel
(203) 831-2242
You should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone else
to provide you with different information. The selling security holders will not
make an offer of the shares of our common stock in any state where the offer is
not permitted. You should not assume that the information in this prospectus or
any prospectus supplement is accurate as of any date other than the date on the
front of those documents.
60
mPHASE TECHNOLOGIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report
      of Rosenberg Rich Baker Berman & Company
F-1
Report
      of Arthur Andersen LLP
F-2
Report
      of Schuhalter, Coughlin & Suozzo, PC
F-3
Consolidated
      Balance Sheets as of June 30, 2005, June 30, 2006 and March 31, 2007
      (Unaudited)
F-4
Consolidated
      Statements of Operations for the years ended June 30, 2004, 2005, 2006 and
      for the  period from inception (October 2, 1996) through June 30,
      2005
F-5
Unaudited
      Consolidated Statements of Operations for the Six months ended March 31,
      2007 and for the period from inception (October 2, 1996) through March 31,
      2007
F-6
Consolidated
      Statements of Changes in Stockholders' Equity (Deficit) for the period
      from inception (October 2, 1996) to June 30, 1997 and for each of the nine
      years in the period ended June 30, 2006
F-7-12
Unaudited
      Consolidated Statement of Changes in Shareholders' (Deficit) for the Six
      months ended March 31, 2007
F-13
Consolidated
      Statements of Cash Flows for the years ended June 30, 2004 and 2005, 2006
      and for the period from inception (October 2, 1996) through June 30,
      2006
F-14
Unaudited
      Consolidated Statements of Cash Flows for the Three months ended March 31,
      2006 and 2006, and for the period from inception (October 2, 1996) through
      March 31, 2007
F-15
Notes
      to Consolidated Financial Statements
F-16
61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of mPhase Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of
mPhase Technologies, Inc. (a New Jersey corporation in the development stage)
and subsidiaries as of June 30, 2006 and June 30, 2005, and the related
consolidated statements of operations, changes in stockholders' equity
(deficit), cash flows and Schedule II (Valuation and Qualifying Accounts, Item
14B) for each of the three years in the period ended June 30, 2006 and for the
period from inception (October 2, 1996) to June 30, 2006. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of mPhase Technologies,
Inc. for the period from inception to June 30, 2001. Those statements were
audited by other auditors whose report has been furnished to us and our opinion,
insofar as it relates to amounts for the period from inception to June 30, 2001,
included in the cumulative totals, is based solely upon the report of the other
auditors.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material accounting misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other
auditors, the financial statements referred to above present fairly, in all
material respects, the financial position of mPhase Technologies, Inc. and
subsidiaries as of June 30, 2006 and 2005 and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2006 and for the period from inception to June 30, 2006, in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and is in a working capital deficit position that raises
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Rosenberg Rich Baker Berman & Company
Bridgewater, NJ
September
27, 2006
62
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To
the Board of Directors and Stockholders of mPhase Technologies, Inc.:
We
have audited the accompanying consolidated balance sheets of mPhase
Technologies, Inc. (a New Jersey corporation in the development stage) and
subsidiaries as of June 30, 2001 and 2000, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended June 30, 2001 and for the period
from inception (October 2, 1996) to June 30, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the financial statements of mPhase Technologies, Inc. for the period from
inception to June 30, 1998. Such amounts are included in the cumulative from
inception to June 30, 2001 totals of the statements of operations, changes in
stockholders' equity and cash flows and reflect total net loss of 6 percent of
the related cumulative totals. Those statements were audited by other auditors
whose report has been furnished to us and our opinion, insofar as it relates to
amounts for the period from inception to June 30, 1998, included in the
cumulative totals, is based solely upon the report of the other auditors.
We
conducted our audits in accordance with auditing standards generally accepted in
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
In
our opinion, based on our audits and the report of other auditors, the financial
statements referred to above present fairly, in all material respects, the
financial position of mPhase Technologies, Inc. and subsidiaries as of June 30,
2001 and 2000, and the results of their operations and their cash flows for each
of the three years in the period ended June 30, 2001 and for the period from
inception to June 30, 2001, in conformity with accounting principles generally
accepted in the United States.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has suffered recurring losses from operations
and is in a working capital deficit position that raises substantial doubt about
its ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Arthur
Andersen LLP
Stamford,
Connecticut
October
12, 2001
PURSUANT
TO SEC RELEASE NO. 33-8070 AND RULE 437A UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, mPHASE TECHNOLOGIES, INC. HAS NOT RECEIVED WRITTEN CONSENT AFTER
REASONABLE EFFORT TO USE THIS REPORT. THIS REPORT IS A COPY OF A PREVIOUSLY
ISSUED ARTHUR ANDERSEN LLP REPORT. THIS REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP. WITH RESPECT TO THIS INSTANT 10K/A, YOU WILL NOT BE ABLE TO
RECOVER AGAINST ARTHUR ANDERSEN LLP UNDER SECTION 11 OF THE SECURITIES ACT FOR
ANY UNTRUE STATEMENTS OF A MATERIAL FACT CONTAINED IN THE FINANCIAL STATEMENTS
AUDITED BY ARTHUR ANDERSEN LLP OR ANY OMISSIONS TO STATE A MATERIAL FACT
REQUIRED TO BE STATED THEREIN.
63
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To
the Board of Directors and Stockholders of mPhase Technologies, Inc.:
We
have audited the statements of operations, changes in stockholders's equity, and
cash flows for the period October 2, 1996 (date of inception) through June 30,
1998 of mPhase Technologies, Inc. (a development stage company). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.
We
conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In
our opinion, such financial statements present fairly, in all material respects,
the results of its operations and its cash flows for the period of October 2,
1996 (date of inception) through June 30, 1998 in conformity with generally
accepted accounting principles.
Schuhalter,
Coughlin & Suozzo, PC
Raritan,
New Jersey
January
28, 1999
64
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
JUNE 30,
JUNE 30,
March 31,
2005
2006
2007
ASSETS
(Unaudited)
Current
      Assets:
Cash
      and cash equivalents
$351,185
$1,359,925
$315,055
Accounts
      receivable, net of bad debt reserve of $0, $20,207 and $0 in 2005, 2006
      and March 31, 2007 respectively
533,841
106,237
2,770
Stock
      subscription receivable
460,000
Inventory,
      net of reserve of $205,642, $0 and $0 in 2005,  2006 and March 31,
      2007 respectively
490,142
161,270
476,534
Prepaid
      expenses and other current assets
25,622
66,777
494,430
Total
      current assets
1,860,790
1,694,209
1,288,789
Property
      and equipment, net
162,692
350,120
268,973
Patents
      and licenses, net
141,451
87,579
58,067
Other
      assets
67,250
50,000
50,000
Total
      assets
$2,232,183
$2,181,908
$1,665,829
LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)
Current
      Liabilities:
Accounts
      payable
$1,691,338
$1,638,322
$2,687,339
Accrued
      expense
431,765
557,342
535,920
Due
      to related party
721,569
274,271
776,397
Note
      payable, related party
277,000
161,000
Current
      portion of long term debt
413,537
318,058
101,640
Deferred
      revenue
37,933
Total
      current liabilities
$3,535,209
$2,787,993
$4,300,229
Other
      liabilities
214,709
Long-term
      debt, net of current portion
100,000
Total
      liabilities
$3,849,918
$2,787,993
$4,300,229
COMMITMENTS
      AND CONTINGENCIES (Note 11)
STOCKHOLDERS' (DEFICIT):
Common
      Stock, par value $.01 (900,000,000 shares authorized, 145,048,832,
      278,235,984 and 339,800,539 issued and outstanding in 2005, 2006 and March
      31, 2007 respectively. Note 8)
1,450,489
2,782,360
$3,398,005
Additional
      paid-in capital
123,949,156
148,079,585
156,495,997
Deficit
      accumulated during development stage
(127,009,407)
(151,460,057)
(162,520,429)
Less-treasury
      stock, 13,750 shares, at cost
(7,973)
(7,973)
(7,973)
Total
      stockholders' (deficit)
($1,617,735)
($606,085)
($2,634,400)
Total
      liabilities and stockholders' deficit
$2,232,183
$2,181,908
$1,665,829
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
65
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
From Inception
For the Years
(October 2, 1996)
Ended June 30,
to June 30,
2004
2005
2006
2006
TOTAL
      NET REVENUES
$4,641,346
$1,711,085
$975,482
$22,295,607
COSTS
      AND EXPENSES:
Cost
      of Sales (Including $3,647,599, $1,370,700 and $802,455 incurred with
      related parties in 2004, 2005, and 2006, respectively as discussed in Note
      9)
4,068,255
1,446,151
974,583
16,333,941
Research
      and development (including non-cash stock related charges of $72,000, $0,
      and $200,850 in 2004, 2005 and 2006 respectively, see also note Note 9
      Related Party Transactions)
4,069,721
5,127,438
8,034,964
51,579,202
General
      and Administrative (including non-cash stock related charges of
      $1,242,793, $2,948,083, $6,075,573 in years 2004, 2005 and
      2006 respectively, see notes 8 & 9 Stockholders Equity and
      Related Party Transactions)
4,177,961
6,579,761
11,121,235
96,756,092
Depreciation
      and Amortization
122,878
62,679
78,416
3,031,002
Total
      costs and expenses
12,438,815
13,216,029
20,209,198
167,700,237
Loss
      from operations
(7,797,469)
(11,504,944)
(19,233,716)
(145,404,630)
OTHER
      INCOME (EXPENSE):
Interest
      income (expense), net
(111,175)
(110,469)
(34,569)
(150,141)
Other
      Income (expense) including non cash reparation expense of  $5,530,504
      in 2006 (see Note 8 Stockholders Equity)
150,058
381,089
(5,182,365)
(5,905,286)
NET
      LOSS
$(7,758,586)
$ (11,234,324)
$ (24,450,650)
$ (151,460,057)
LOSS
      PER COMMON SHARE, basic and diluted
($.10)
($.10)
($.12)
WEIGHTED
      AVERAGE COMMON SHARES
OUTSTANDING,
      basic and diluted
77,677,120
108,657,578
199,610,372
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
66
mPHASE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
(Date of
Nine Months Ended
Inception) to
March 31,
March 31,
2006
2007
2007
REVENUES
$832,999
$135,743
$22,431,350
COSTS
      AND EXPENSES
Cost
      of Sales
729,475
88,207
16,422,148
Research
      and Development ( including non-cash stock related charges of $200,850, $0
      and $2,318,519, for 2006, 2007 and inception to date respectively)
6,120,253
4,964,404
56,543,605
General
      and Administrative (including non-cash stock related charges of,
      $4,510,350, $1,124,647 and $58,319,301 for 2006, 2007 and inception to
      date respectively)
8,002,079
5,012,073
101,768,166
Depreciation
      and Amortization
57,644
66,314
3,097,316
TOTAL
      COSTS AND EXPENSES
$14,909,451
$10,130,998
$177,831,235
LOSS
      FROM OPERATIONS
($14,076,452)
($9,995,255)
($155,399,885)
OTHER
      INCOME
Interest
      Income (Expense), net
(25,498)
(10,930)
(161,071)
Other
      Income (Expense) net
(4,902,302)
(1,054,187)
(6,959,473)
TOTAL
      OTHER INCOME (EXPENSE)
($4,927,800)
($1,065,117)
($7,120,544)
NET
      LOSS
($19,004,252)
($11,060,372)
($162,520,429)
LOSS
      PER COMMON SHARE, basic and diluted
($0.09)
($0.04)
WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING, basic and diluted
211,186,500
309,018,261
The
      accompanying notes are an integral part of these consolidated financial
      statements.
67
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS
IN THE PERIOD ENDED JUNE 30, 2006
Common Stock Shares
Par Value  0.01
Treasury Stock
Additional Paid-In Capital
Deferred Compensation
Accumulated Deficit
Total Stockholders Equity (Deficit)
BALANCE,
      OCTOBER 2, 1996
(date of inception).
1,140,427
$11,404
$459,753
($537,707)
($66,550)
Issuance
      of common stock of Tecma Laboratories, Inc., for 100% of the
    Company.
6,600,000
66,000
(537,157)
537,707
66,550
Issuance
      of common stock, in private placement, net of offering costs of
      $138,931
594,270
5,943
752,531
758,474
Net
      loss
(781,246)
(781,246)
BALANCE,
      JUNE 30, 1997
8,334,697
$83,347
$675,127
($781,246)
($22,772)
Issuance
      of common stock with warrants, in private placement, net of offering costs
      of $84,065
999,502
9,995
791,874
801,869
Issuance
      of common stock for services
300,000
3,000
147,000
150,000
Issuance
      of common stock in connection with investment in unconsolidated
      subsidiary
250,000
2,500
122,500
125,000
Repurchase
      of 13,750 shares of common stock
(7,973)
(7,973)
Issuance
      of common stock with warrants in private placement, net of offering costs
      of $121,138
1,095,512
10,955
659,191
670,146
Issuance
      of common stock for financing services
100,000
1,000
(1,000)
Issuance
      of common stock in consideration for 100% of the common stock of
      Microphase Telecommunications, Inc.
2,500,000
25,000
1,685,000
1,710,000
Net
      loss
(4,341,059)
(4,341,059)
BALANCE,
      JUNE 30, 1998
13,579,711
$135,797
($7,973)
$4,079,692
($5,122,305)
($914,789)
The
      accompanying notes are an integral part of these Consolidated Financial
      Statements.
68
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS
IN THE PERIOD ENDED JUNE 30, 2006
Common Stock Shares
Par Value  0.01
Treasury Stock
Additional Paid-In Capital
Deferred Compensation
Accumulated Deficit
Total Stockholders Equity (Deficit)
BALANCE,
      JUNE 30, 1998
13,579,711
$135,797
($7,973)
$4,079,692
($5,122,305)
($914,789)
Issuance
      of common stock with warrants in private placements, net of offering costs
      of $107,000
3,120,000
31,200
2,981,800
3,013,000
Issuance
      of common stock for services
1,599,332
15,993
8,744,873
8,760,866
Issuance
      of common stock with warrants in private placement, net of offering costs
      of $45,353
642,000
6,420
1,553,227
1,559,647
Issuance
      of common stock in private placement, net of offering costs of
    $679,311
4,426,698
44,267
10,343,167
10,387,434
Issuance
      of stock options for services
7,129,890
7,129,890
Issuance
      of warrants for services
16,302
16,302
Deferred
      employee stock option compensation
(140,000)
(140,000)
Net
      loss
(22,838,344)
(22,838,344)
BALANCE,
      JUNE 30, 1999
23,367,741
$233,677
($7,973)
$34,848,951
($140,000)
($27,960,649)
$6,974,006
Issuance
      of common stock and options in settlement
75,000
750
971,711
972,461
Issuance
      of common stock upon exercise of warrants and options
4,632,084
46,321
5,406,938
5,453,259
Issuance
      of common stock in private placement, net of cash offering costs of
      $200,000
1,000,000
10,000
3,790,000
3,800,000
Issuance
      of common stock in private placement, net of cash offering costs of
      $466,480
1,165,500
11,655
9,654,951
9,666,606
Issuance
      of common stock for services
1,164,215
11,642
8,612,265
8,623,907
Issuance
      of options for services
9,448,100
9,448,100
Deferred
      employee stock option compensation
1,637,375
(1,637,375)
-
Amortization
      of deferred employee stock option compensation
551,707
551,707
Net
      loss
(38,161,542)
(38,161,542)
BALANCE,
      JUNE 30, 2000
31,404,540
$314,045
($7,973)
$74,370,291
($1,225,668)
($66,122,191)
$7,328,504
The accompanying notes are an integral part of these Consolidated
      Financial Statements.
69
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS
IN THE PERIOD ENDED JUNE 30, 2006
Common Stock Shares
Par Value  0.01
Treasury Stock
Additional Paid-In Capital
Deferred Compensation
Accumulated Deficit
Total Stockholders Equity (Deficit)
BALANCE,
      JUNE 30, 2000
31,404,540
$ 314,045
($7,973)
$74,370,291
($1,225,668)
($66,122,191)
$7,328,504
Issuance
      of common stock upon exercise of options
320,000
3,200
-
324,300
-
-
327,500
Issuance
      of common stock with warrants in private placements, net of cash offering
      costs of $512,195
4,329,850
43,298
-
7,766,547
-
-
7,809,845
Issuance
      of common stock for services
450,000
4,500
-
1,003,125
-
-
1,007,625
Issuance
      of options and warrants for services
-
-
-
5,849,585
-
-
5,849,585
Deferred
      employee stock option compensation
-
-
-
607,885
(607,885)
-
-
Amortization
      of deferred employee stock option compensation
-
-
-
-
1,120,278
-
1,120,278
Issuance
      of common stock in settlement of debt to directors and related
    parties
4,840,077
48,402
-
2,371,637
-
-
2,420,039
Net
      Loss
-
-
-
-
-
(23,998,734)
(23,998,734)
BALANCE,
      JUNE 30, 2001
41,344,467
$ 413,445
($7,973)
$92,293,370
($713,275)
($90,120,925)
$1,864,642
Issuance
      of Common stock with warrants in private placement
6,980,643
69,807
-
1,903,943
-
1,973,750
Issuance
      of Common stock for services
2,976,068
29,760
-
1,169,241
-
-
1,199,001
Issuance
      of options and warrants for services
-
-
-
1,877,937
-
1,877,937
Cancellation
      of unearned options to former employees
-
-
-
(140,802)
140,802
-
-
Amortization
      of deferred employee stock option compensation
-
-
-
-
548,550
-
548,550
Issuance
      of common stock and warrants in settlement of debt to related parties and
      strategic vendors
7,492,996
74,930
-
2,663,728
-
-
2,738,658
Sale
      of Common stock to certain Officers and Directors in private
    placement
2,000,000
20,000
-
980,000
-
-
1,000,000
Issuance
      of Common stock upon exercise of options
13,334
133
-
204
-
-
337
Net
      Loss
-
-
-
-
-
(11,245,361)
(11,245,361)
Balance,
      June 30, 2002
60,807,508
$608,075
($7,973)
$100,747,621
($23,923)
$(101,366,286)
$ (42,486)
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
70
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS
IN THE PERIOD ENDED JUNE 30, 2006
Common Stock Shares
Par Value  0.01
Treasury Stock
Additional Paid-In Capital
Deferred Compensation
Accumulated Deficit
Total Stockholders Equity (Deficit)
Balance,
      June 30, 2002
60,807,508
$608,075
($7,973)
$100,747,621
($23,923)
$(101,366,286)
$ (42,486)
Issuance
      of Common stock with warrants in private placement, net of Cash offering
      costs of $124,687
4,296,680
42,967
1,125,014
1,167,981
Issuance
      of Common stock for services
426,000
4,260
107,985
112,245
Issuance
      of options and warrants for services
274,100
274,100
Amortization
      of deferred employee stock option compensations
23,923
23,923
Issuance
      of common stock and warrants in settlement of debt to related parties and
      strategic vendors
5,923,333
59,233
1,826,329
1,885,562
Net
      Loss
(6,650,211)
(6,650,211)
Balance,
      June 30, 2003
71,453,521
$714,535
($7,973)
$104,081,049
$0
$108,016,497
$ (3,228,886)
Issuance
      of common stock with warrants in private placement, net of cash offering
      costs of $313,200
15,177,973
151,779
4,322,934
4,474,713
Issuance
      of common stock for services
924,667
9,247
238,153
247,400
Issuance
      of options and warrants for services
1,067,393
1,067,393
Issuance
      of common stock pursuant to exercise of warrants
1,233,334
12,333
304,467
316,800
Issuance
      of common stock and warrants in settlement of debt to related parties and
      strategic vendors
110,467
1,105
1,962,099
1,963,204
Net
      Loss
(7,758,586)
(7,758,586)
Balance,
      June 30, 2004
88,899,962
$888,899
($7,973)
$111,976,095
$(115,775,083)
$ (2,917,962)
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
71
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (OCTOBER 2, 1996)
TO JUNE 30, 1997 AND FOR EACH OF THE NINE YEARS
IN THE PERIOD ENDED JUNE 30, 2006
Common Stock Shares
Par Value  0.01
Treasury Stock
Additional Paid-In Capital
Accumulated Deficit
Total Stockholders Equity (Deficit)
Balance,
      June 30, 2004
88,899,962
$888,999
($7,973)
$111,976,095
($115,775,083)
($2,917,962)
Issuance
      of Shares in Private Placement
39,853,661
398,535
6,888,553
7,287,088
Issuance
      of in connection with exercise of warrants
3,637,954
36,380
644,229
680,609
Conversion
      of Debt to Common stock and warrants
3,895,171
36,952
1,174,134
1,213,086
Options
      Awarded to Consultants
2,191,043
2,191,043
Options
      Awarded to Officers
625,290
625,290
Issuance
      of shares to Officers and consultants for services
1,151,000
11,510
322,500
334,010
Exercise
      of cashless warrants
4,949,684
49,499
(49,499)
Exercise
      of warrants by officers
1,770,400
17,704
17,704
Reparation
      of Private Placement Offering
891,000
8,910
176,811
185,721
Net
      Loss
(11,234,324)
(11,234,324)
Balance
      June 30, 2005
145,048,832
$1,450,489
$(7,973)
$123.949,156
$(127,009,407)
$(1,617,735)
Issuance
      of common stock pursuant to the exercise of warrants, net of cash expenses
      of $108,000
15,720,120
157,201
2,850,523
3,007,724
Issuance
      of common stock with warrants in private placements, net of cash expenses
      of $674,567
72,786,897
727,868
9,329,781
10,057,649
Issuance
      of common stock for services
11,500,000
115,000
2,324,000
2,439,000
Conversion
      of related party and strategic vendor debts to common stock and
      warrants
3,331,864
33,319
556,681
590,000
Stock
      options awarded to consultants, employees and officers
3,837,423
3,837,423
Issuance
      of additional shares and warrants to effect revised pricing on previous
      private offering charged to expense
29,848,271
298,483
5,232,021
5,530,504
Net
      loss
(24,450,650)
(24,450,650)
Balance,
      June 30, 2006
278,235,984
$2,782,360
($7,973)
$148,079,585
($151,460,057)
($606,085)
The
      accompanying notes are an integral part of these Consolidated Financial
      Statements.
72
mPHASE TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statement of Changes in
Shareholders' Deficit
(unaudited)
Shares
$.01 Stated Value
Treasury Stock
Additional Paid Capital
Accumulated Deficit
Total Shareholders (Deficit) Equity
Balance June 30, 2006
278,235,984
$2,782,360
($7,973)
$148,079,585
($151,460,057)
($606,085)
Issuance
      of common stock pursuant to the exercise of warrants
14,740,669
$147,406
$1,922,262
$2,069,668
Issuance
      of common stock with warrants in private placements, net of cash expenses
      of $414,783
28,376,022
$283,760
$3,441,958
$3,725,718
Issuance
      of common stock for services
1,822,983
$18,230
$321,158
$339,388
Conversion
      of vendor debt
5,617,062
$56,171
$853,123
$909,294
Issuance
      of additional shares and warrants to effect repricing
11,007,819
$110,078
$1,092,652
$1,202,730
Stock
      options awarded to employees and officers
$785,259
$785,259
Net
      Loss
($11,060,372)
($11,060,372)
Balance March 31, 2007
339,800,539
$3,398,005
($7,973)
$156,495,997
($162,520,429)
($2,634,400)
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
73
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30,
Inception (October 2, 1996) to June 30,
2004
2005
2006
2006
CASH
      FLOWS FROM OPERATING ACTIVITIES
:
Net
      loss
$(7,758,586)
$(11,234,324)
$(24,450,650)
$(151,460,057)
Adjustments
      to reconcile net loss to net
Cash
      used in operating activities:
Depreciation
      and amortization
730,099
280,590
$206,935
6,817,764
Book
      value of fixed assets disposed
74,272
Loss
      on unconsolidated subsidiary
1,466,467
Provision
      for doubtful accounts
32,124
Impairment
      of note receivable
232,750
Loss
      on securities
37,411
48,669
Gain
      on Extinguishments
(150,058)
(418,696)
(772,216)
Common
      stock, options and warrants for purchase of common stock granted
1,314,793
3,336,064
6,276,423
59,071,377
Reparation
      Cost
5,530,504
5,530,504
Changes
      in operating assets and liabilities:
Accounts
      receivable
223,035
(469,741)
887,604
321,639
Inventory
865,355
533,030
328,872
(165,831)
Prepaid
      expenses and other current assets
19,267
55,439
(41,155)
14,284
Other
      assets
(50,000)
17,250
(609,932)
Accounts
      payable
171,712
(85,579)
69,429
4,312,957
Accrued
      expenses
(32,702)
(111,589)
125,577
1,793,857
Deferred
      revenue
(214,180)
Due
      to related parties:
Receivable
      from Subsidiary
(150,000)
Microphase
83,762
257,348
(60,787)
2,576,272
Janifast
422,905
254,063
(485,556)
2,471,412
Officers
(90,583)
34,200
(23,400)
479,556
Lintel
477,000
Due
      to Others
(32,500)
179,472
Net
      cash used in operating activities
(4,227,501)
(7,795,964)
(11,618,954)
(67,257,660)
CASH
      FLOWS FROM INVESTING ACTIVITIES:
Investment
      in patents and licensing rights
(40,893)
(34,167)
(450,780)
Purchase
      of property and equipment
(104,001)
(121,476)
(340,493)
(3,103,075)
Net
      cash used in investing activities
(144,894)
(155,643)
(340,493)
(3,553,855)
CASH
      FLOWS FROM FINANCING ACTIVITIES:
Net
      proceeds from private placement of common stock and exercise of options
      and warrants
3,964,558
8,393,717
13,065,375
71,931,568
Repurchase
      of treasury stock at cost
(7,973)
Conversion
      of debt to equity
590,000
590,000
Advances
      from/repayment to Microphase
(180,000)
347,840
Proceeds
      from notes payable officers
300,000
535,000
965,000
Repayment
      of notes payable - officers
(650,000)
(314,709)
(994,709)
Repayment
      of notes payable
(18,978)
(65,970)
(372,479)
(660,286)
Net
      cash provided by financing activities
4,065,580
8,212,747
12,968,187
72,171,440
Net
      increase (decrease) in cash
(306,815)
261,140
1,008,740
1,359,925
CASH
      AND CASH EQUIVALENTS, beginning of period
396,860
90,145
351,185
CASH
      AND CASH EQUIVALENTS, end of period
$ 90,045
$ 351,185
$ 1,359,925
$ 1,359,925
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
74
mPHASE TECHNOLOGIES
(A Development Stage Company)
Consolidated Statements of Cash Flow
(Unaudited)
Nine Months Ended
(Date of Inception)
March 31,
To  March 31,
2006
2007
2007
Cash
      Flow From Operating Activities:
Net
      Loss
($19,004,252)
($11,060,372)
($162,520,429)
Adjustments
      to reconcile net loss to net cash used in operating activities:
Depreciation
      and amortization
140,862
165,028
6,982,792
(Gain)
      loss on debt extinguishments
(265,468)
-
(772,216)
Loss
      on unconsolidated subsidiary
-
-
1,466,467
Non-cash
      charges relating to issuance of common stock, common stock options and
      warrants
4,795,200
1,124,647
60,196,024
Reparations
      charges
5,167,740
1,202,730
6,733,235
Other
      non cash charges to income
17,250
-
387,815
Changes
      in assets and liabilities:
Accounts
      receivable
357,683
103,467
425,106
Inventories
37,047
(315,264)
(481,095)
Prepaid
      expenses and other current assets
(47,132)
(427,653)
(413,369)
Other
      non-current assets
-
-
(609,932)
Accounts
      payable
(914,257)
1,049,017
5,361,974
Conversion
      of Debt to equity
-
909,294
1,499,294
Accrued
      expenses
806,025
(21,422)
1,772,435
Due
      to/from related parties
-
-
-
Microphase
(150,034)
230,645
2,806,917
Janifast
(231,698)
10,752
2,482,164
Officers
(73,600)
260,729
740,285
Lintel
      and others
-
-
477,000
Deferred
      revenue
-
37,933
217,405
Receivables
      from Subsidiary
-
-
(150,000)
Net
      cash used in operating activities
($9,364,634)
($6,730,469)
($73,398,128)
Cash
      Flow from Investing Activities:
Payments
      related to patents and licensing rights
-
-
(450,780)
Purchase
      of fixed assets
(271,535)
(54,369)
(3,157,444)
Net
      Cash (used) in investing activities
($271,535)
($54,369)
($3,608,224)
Cash
      Flow from Financing Activities:
Proceeds
      from issuance of common stock and
exercises
      of options and warrants
$13,877,057
$5,795,386
$77,726,953
Payments
      of notes payable
(174,919)
(216,418)
(876,704)
Advances
      from Microphase
-
-
347,840
Proceeds
      from notes payable - officers
(97,000)
161,000
1,126,000
Repayments
      of notes payable - officers
-
-
(994,709)
Repurchase
      of treasury stock at cost
-
-
(7,973)
Net
      cash provided by financing activities
$13,605,138
$5,739,968
$77,321,407
Net
      increase (decrease) in cash
$3,968,969
($1,044,870)
$315,055
CASH
      AND CASH EQUIVALENTS, beginning  of period
$351,185
$1,359,925
CASH
      AND CASH EQUIVALENTS, end of  period
$4,320,154
$315,055
$315,055
The
accompanying notes are an integral part of these Consolidated Financial
Statements.
75
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
ORGANIZATION
AND NATURE OF BUSINESS
mPhase
Technologies, Inc. ("mPhase" or the "Company") was organized on October 2, 1996.
The primary business of mPhase is to design, develop, manufacture and market
high-bandwidth telecommunications products incorporating digital subscriber line
("DSL") technology. The present activities of the Company are focused on the
deployment of its TV+ System, which delivers MPEG2 digital television,
high-speed internet and voice over copper wire. Additionally, the Company sells
a line of DSL component products. In February of 2004, the Company entered the
field of Nanotechnology focused upon the development of batteries and power
cells with military applications as an additional product line.
On
February 17, 1997, mPhase acquired Tecma Laboratories, Inc., ("Tecma") in a
transaction accounted for as a reverse merger.
On
June 25, 1998, the Company acquired Microphase Telecommunications, Inc. ("MicroTel") a Delaware corporation, through the issuance of 2,500,000 shares of
its common stock in exchange for all the issued and outstanding shares of MicroTel (Note 4). The assets acquired in this acquisition were patents and
patent applications utilized in the Company's proprietary Traverser Digital
Video and Data Deliver System ("Traverser").
On
August 21, 1998, the Company incorporated a 100% wholly-owned subsidiary called
mPhaseTV.net, Inc., a Delaware corporation, to market interactive television and
e-commerce revenue opportunities. This subsidiary is dissolved.
On
March 2, 2000 the Company acquired a 50% interest in mPhaseTelevision.Net, Inc.,
an incorporated joint venture with AlphaStar International, Inc. (Note 8) for
$20,000. The Company acquired an additional interest in the joint venture of
6.5% in April of 2000 for $1.5 million. Based on its controlling interest in
mPhaseTelevision.Net, the operating results of mPhaseTelevision.Net are included
in the consolidated results of the Company since March 2, 2000.
The
Company is in the development stage and its present activities are focused on
the commercial deployment of its TV+ products for delivery of broadcast IPTV,
Broadband Watch loop diagnostic system and dsl component products which include
POTS splitters and a line of intelligent POTS splitter products and a new line
of power cell batteries being developed through the use of Nanotechnology. Since
mPhase is in the development stage, the accompanying consolidated financial
statements should not be regarded as typical for normal operating periods.
2.
LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT'S PLANS
Through
June 30, 2006, the Company had incurred development stage losses totaling
$151,460,057, and at June 30, 2006 had a stockholders' deficit of $606,085. At
June 30, 2006, the Company had $1,359,925 of cash and $106,237 of trade
receivables. Through March 31, 2007, the Company had incurred cumulative (a)
development stage losses totaling ($162,520,429), (b) a stockholders' equity
(deficit) of ($1,665,829), and (c) negative cash flow from operations equal to
($73,398,128).  At March 31, 2007, the Company had $315,055 of cash and
cash equivalents and $2,770 of trade receivables to fund short-term working
capital requirements.
The
Company's ability to continue as a going concern and its future success is
dependent upon its ability to raise capital in the near term to: (1) satisfy its
current obligations, (2) continue its research and development efforts, and (3)
the successful wide scale development, deployment and marketing of its
products.
The
Company believes that it will be able to complete the necessary steps in order
to meet its cash flow requirements throughout fiscal 2007 and continue its
development and commercialization efforts. In addition to the above financing
activities, the following business initiatives are also ongoing and are expected
to provide additional working capital to the Company.
The
Company is currently negotiating with several organizations for the commencement
of field trials that would lead to commercial sales of its broadcast television
platform products. The Company has had a downturn in sales of its POTS splitter
products for its fiscal year ended June 30, 2006 to $975,482, which included
sales to two customers of approximately $497,496 during such period.
Management
believes that actions presently being taken to complete the Company's
development stage through the commercial roll-out of its broadcast television
platforms will be successful. However, there can be no assurance that mPhase
will generate sufficient revenues to provide positive cash flows from operations
or that sufficient capital will be available, when required, to permit the
Company to realize its plans. The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
76
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
3.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of mPhase, its
wholly-owned and majority owned subsidiaries. Significant intercompany accounts
and transactions have been eliminated in consolidation.
USE
OF ESTIMATES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain
reclassifications have been made in the prior period consolidated financial
statements to conform to the current period presentation.
CASH
AND CASH EQUIVALENTS
mPhase
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.
STOCK
BASED COMPENSATION
SFAS
No. 123 (R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statements based on their
fair values.  The Company adopted the provisions of Statement No. 123(R) in
the current fiscal year.
PROPERTY
AND EQUIPMENT
Property
and equipment is recorded at cost. Depreciation is provided on the straight-line
method over the estimated useful lives of three to five years.
REVENUE
RECOGNITION
All
revenue included in the accompanying consolidated statements of operations for
all periods presented relates to sales of mPhase's POTS Splitter Shelves and DSL
component products.
As
required, mPhase has adopted the Securities and Exchange Commission ("SEC")
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," which provides guidelines on applying generally accepted accounting
principles to revenue recognition based on the interpretations and practices of
the SEC. The Company recognizes revenue for its POTS Splitter Shelf and other
DSL component products at the time of shipment, at which time, no other
significant obligations of the Company exist, other than normal warranty
support.
SHIPPING
AND HANDLING CHARGES
The
Company includes costs of shipping and handling billed to customers in revenue
and the related expense of shipping and handling costs is included in cost of
sales.
BUSINESS
CONCENTRATIONS AND CREDIT RISK
To
date the Company's products have been sold to a limited number of customers,
primarily in the telecommunications industry.
The
Company had revenue from two customers of 36% and 16% during the fiscal year
ended June 30, 2006. The Company had revenue from two customers of 35.1% and
28.9% during the fiscal year ended June 30, 2005.
Throughout
the year, cash may exceed FDIC insured limits. The Company maintains cash
balances at financial institutions.  The balances are insured by the
Federal Deposit Insurance Corporation up to $100,000.  Cash balances
exceeded FDIC insured limits at June 30, 2006 and June 30, 2005 and at times
throughout the year for the years then ended.
RESEARCH
AND DEVELOPMENT
Research
and Development cost are charged to operations when incurred. The amounts
charged to expense for the years ended 2004, 2005 and 2006, were $4,069,721,
$5,127,438 and $8,034,964 respectively.
77
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
3.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
(Continued)
ADVERTISING
COSTS
Advertising
costs are expensed as incurred.
PATENTS
AND LICENSES
Patents
and licenses are capitalized when mPhase determines there will be a future
benefit derived from such assets, and are stated at cost. Amortization is
computed using the straight-line method over the estimated useful life of the
asset, generally five years.
Amortization
expense was $86,395, $54,321, and $55,987 for the years ended June 30, 2004,
2005, and 2006, respectively.
The
impairment test for the Company's patents and license rights resulted in the
Company concluding that no impairment in addition to amortization previously
recorded was necessary during the year ended June 30, 2006.
INVENTORIES
The
Company uses the First In First Out method (FIFO) to account for inventory which
is carried at cost  Inventory consists mainly of the Company's POTS
Splitter Shelf, Filters, and Servers. Inventory is comprised of the following:
June 30
March 31
2005
2006
2007
Raw
      materials
$376,776
Work
      in Progress
$77,830
Finished
      goods
$241,178
$161,270
$476,534
Total
$695,784
$161,270
$476,534
Less:
      Reserve for obsolescence
$(205,642)
Net
      Inventory
$490,142
$161,270
$476,534
LONG-LIVED
ASSETS
In
August 2001, the FASB issued Statement No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," which became effective for the
Company July 1, 2002 for the fiscal years ended June 30, 2004, June
30, 2005 and June 30, 2006. The Company assesses long-term assets for impairment
under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. Under SFAS No. 144, the Company reviews long-term assets for
impairment whenever events or circumstances indicate that the carrying amount of
those assets may not be recoverable. The Company also assesses these assets for
impairment based on their estimated future cash flows.
INCOME
TAXES
The
Company accounts for income taxes using the liability method.  Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using tax rates and laws expected to be in effect when the differences
are expected to reverse.  Valuation allowances are provided against
deferred tax assets for which it has been determined the assets will not be
realized.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
carrying amounts reported in the consolidated balance sheets for mPhase's cash,
accounts receivable, accounts payable, and accrued expenses approximate their
fair values due to the short maturities of these financial instruments.
The
carrying amounts reported in the consolidated balance sheets for mPhase's notes
payable, long-term debt, amounts due to related parties approximate their fair
values and the amounts recorded as other liabilities and other liabilities -
related parties approximate their fair values based on current rates at which
the Company could borrow funds with similar maturities.
LOSS
PER COMMON SHARE, BASIC AND DILUTED
mPhase
accounts for net loss per common share in accordance with the provisions of SFAS
No. 128, "Earnings per Share" ("EPS"). SFAS No. 128 requires the disclosure of
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Common equivalent shares have been excluded from the computation of diluted EPS
since their effect is anti-dilutive.
78
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
3.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  -
(Continued)
WARRANTY
RESERVE
The
Company warrants that all equipment manufactured by it will be free from defects
in material and workmanship under normal use for a period of one year from the
date of shipment. Through June 30, 2006, substantially all sales by the Company
have been from component telephone equipment parts, primarily the Company's POTS
Splitter Shelves. The Company's actual experience for cost and expenses incurred
in connection with such warranties have been insignificant. Warranty expense for
the fiscal year ended June 30, 2006 was nominal. Reserve is considered efficient
to provide for future warranty costs on fiscal 2006 sales.  The Company's
aggregate accrued liability is $25,000 at this time.
RECENT
ACCOUNTING PRONOUNCEMENTS
FASB
153 - Exchange of Nonmonetary Assets
In
December 2004, the FASB issued FASB Statement No. 153.  This Statement
addresses the measurement of exchanges of nonmonetary assets.  The guidance
in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged.  The guidance in that Opinion, however,
included certain exceptions to that principle.  This Statement amends
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance.  A nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange.  This
Statement is effective for financial statements for fiscal years beginning after
June 15, 2005.  Earlier application is permitted for nonmonetary asset
exchanges incurred during fiscal years beginning after the date of this
Statement is issued.  Management believes this Statement will have no
impact on the financial statements of the Company once adopted.
FASB
123 (revised 2004) - Share-Based Payments
In December, 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123(R), "Share-Based Payment".  Among other things, SFAS No. 123 (R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statements based on their fair
values.  The Company adopted the provisions of Statement No. 123(R) in the
current fiscal year.
STATEMENT
OF CASH FLOW SUPPLEMENTAL INFORMATION
Cash
      Flow Schedule
2005
2006
2006
2007
Interest
      Paid
$48,090
$3,104
$25,498
$10,930
Taxes
      Paid
$550
$2,216
Non
      Cash Transactions from Financing and investing Activities
Conversion
      of accounts payable to equity
$590,000
$590,000
$909,294
Conversion
      of Accounts payable to Notes
$79,680
Reparation
      Cost
$5,530,504
$4,434,294
$1,202,730
Options
      Issued
$3,837,423
0
$785,259
Share
      based Compensation
$2,439,000
$1,351,125
$339,388
Work
      in process transferred to R&D
$214,800
Additions
      to Patents and Licenses
$38,750
79
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
4.
PROPERTY AND EQUIPMENT
Property
and equipment, at cost, consist of the following:
June 30
March 31
2005
2006
2007
Research
      Equipment
$2,426,605
$481,337
$461,567
Office
      and Marketing Equipment
514,895
73,255
$101,653
2,941,500
554,592
$563,220
Less-Accumulated
      Depreciation
(2,778,808)
204,472
$292,516
Property
      and Equipment net
$162,692
$350,120
$270,704
Depreciation
expense for the years ended June 30, 2004, 2005, and 2006 was $649,704, 227,269,
and $150,948 respectively, of which $613,221, $218,911 and $128,519
respectively, relates to research laboratory and testing equipment included in
research and development expense.
During
the Fiscal Year Ended June 30, 2006, the Company disposed of or otherwise
abandoned in excess of $3 million of fully depreciated property and research
equipment. Appropriate adjustments were made to the original cost and
accumulated depreciation of such assets.
5. ACCRUED EXPENSES
Accrued
expenses consist of the following:
June 30
June 30
March 31
2005
2006
2007
Lucent
      Projects (Note 11)
$100,000
Other
      General Expenses
$431,765
$457,342
$332,966
$431,765
$557,342
$332,966
6.
JOINT VENTURE
In
March 2000, mPhase acquired a 50% interest in mPhaseTelevision.Net (formerly
Telco Television Network, Inc.), an incorporated joint venture, for $20,000. The
agreement provided for the grant of warrants to the joint venture partner in
consideration of the execution of the Joint Venture Agreement, to purchase
200,000 shares of the Company's common stock for $4.00 per share (valued at
$2,633,400). This non-cash charge is included in general and administrative
expenses in the accompanying statement of operations for the year ended June 30,
2000. The fair value of the warrants granted to the joint venture partner as of
the date of grant was based on the Black-Scholes stock option pricing model,
using the following weighted average assumptions: annual expected rate of return
of 0%, annual volatility of 115%, risk free interest rate of 5.85% and an
expected option life of 3 years.
The
agreement stipulates for mPhase's joint venture partner, AlphaStar
International, Inc., ("Alphastar"), to provide mPhaseTelevision.Net right of
first transmission for its transmissions of MPEG-2 digital satellite television.
In addition, in March 2000, mPhase loaned the joint venture $1,000,000 at 8%
interest per annum. The loan is repayable to the Company from equity
 infusions to the subsidiary, no later than such time that
mPhaseTelevision.Net qualifies for a NASDAQ Small Cap Market Listing. During
April 2000, the Company acquired an additional 6.5% interest in
mPhaseTelevision.Net for $1,500,000.
As
of June 30, 2006 mPhase owns a 56.5% interest in mPhaseTelevision.net. The
Company terminated the lease of the earth station for business reasons, and
there was no material impact on mPhase Television.net's operating
activities.
80
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
7.
LONG TERM DEBT
Long-term
      debt is comprised of the following:
June 30,
June 30,
March 31,
2005
2006
2007
Settlement
      Agreements  Accounts payable originally expected to be converted to a
      $150,000 Note payable to GTRearing 7% in GTRC bearing 7%interest, amended
      in March 2004, and reduced to $100,000, to be amortized in equal Quarterly
      installments $ 16,667 plus interest at 7% through March 2005  (see
      also-Note 13-Commitments and Contingencies)
$50,000
$0
$0
Note
      payable to law firm bearing 8% interest, originally monthly installments
      of $5,000 per month commencing in June 2002 and continuing through
      December 1, 2003 with a final payment of principal plus accrued interest
      originally due at maturity on December 31, 2003, this note was in arrears
      as of June 30, 2004 and the company negotiated a new settlement
      arrangement as of August 31, 2004. Under such settlement agreement, which
      the Company made a $100,000 cash payment and gave a cashless warrant to
      purchase $150,000 worth of common stock valued at $.25 per share. In
      addition the Company agreed to pay $25,000 on each of December 1, 2004,
      March 1, 2005, June 1, 2005, September 1, 2005 and $50,000 shall be
      payable on December 1, 2005. Thereafter the Company is obligated to pay
      $25,000 on each of March 1, 2006, June 1, 2006, September 1, 2006 with a
      final payment of $75,000 on December 1, 2006.  (See also Note 8,
      Stockholders Equity)
$225,000
$125,000
$100,000
Note
      payable to vendor bearing 8% interest due in weekly payments of $5,000
      including accrued interest. These payments commenced in January 2002 and
      originally were scheduled to continue until June 2004.  This note is
      presently in arrears and is included in current portion of long term
      debt.
$198,057
$193,058
$0
Settlement
      payable, effective interest rate at 5% with vendor for 12 payments of
      $6,640 through March 31, 2006
$40,480
$0
$1,640
Total
$513,537
$318,058
$101,640
Less:
      Current portion
$413,537
$318,058
$101,640
Long-term
      Debt, non-current portion
$100,000
$0
$0
8.
STOCKHOLDERS' EQUITY
mPhase
initially authorized capital of 50,000,000 shares of common stock with no par
value. On February 23, 2000, the Board of Directors proposed and on May 22, 2000
the shareholders approved an increase in the authorized capital to 150,000,000
shares of common stock. On June 15, 2004, a Special Meeting of Shareholders of
the Company approved a proposal by the Company to amend the Company's
Certificate of Incorporation under New Jersey law to increase the authorized
shares of common stock from 150 million to 250 million shares and change the par
value of all shares of common stock from no par to $0.01 par stock. Effective,
June 30, 2005 and June 2006, the Company received authorization to increase the
number of authorized shares to 500 million and 900 million respectively.
During
the Fiscal Year Ending June 30, 2005 the following transactions impacted
stockholders equity.
In
July of 2004, the Company issued 622,000 shares of its common stock together
with a like amount of callable warrants at $.35 and $.50 respectively in a
private placement. In August and September of 2004, the Company issued 1,050,000
shares of its common stock together with a like amount of callable warrants at
$.25 and $.50 per share in private placements, which after cash outlays of
approximately $15,900, generated net proceeds of $247,500. The aggregate net
proceeds of such private placements of $402,100 were collected during the three
month period ended September 30, 2004. On December 7, 2004, the Company issued
an additional 891,000 shares to the investors in the foregoing private
placements due to a market value adjustment. These shares were valued at
$185,721 which is included in general and administrative expenses in the
accompanying statement of operations for the period ended December 31, 2004.
During
the three months ending December 31, 2004, the Company granted 134,500 shares of
its common stock to consultants for services performed valued at $26,900.
Additionally,
the Company issued 2,817,914 shares of its common stock pursuant to the exercise
of previously outstanding warrants, generating net proceeds intended to be used
for general corporate purpose of $563,590.
During
the quarter ended December 31 of 2004, the Company issued equity units
consisting of 10,717,700 shares of its common stock together with a like amount
of warrants, with an exercise price of $.25, in a private placement generating
net proceeds intended to be used for working capital and general corporate
purposes, of $2,116,600 of which $2,066,600 was collected through December 31,
2004 and $50,000 was collected in January of 2005. A consultant who assisted the
Company with this transaction also received 100,000 shares of the Company's
common stock.
Additionally,
a separate December 2004 private placement was closed out in January of 2005
with the placement of 3,600,000 equity units at $.20 per unit consisting of one
share of common stock plus 5 year warrants for a like amount of shares with a
strike price of $.25 per share generating net proceeds of $720,000 to the
Company. The December 31, 2004 and outstanding subscriptions receivable balance
of $ 50,000 was fully collected in January of 2005.
81
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
8.
STOCKHOLDERS' EQUITY - (Continued)
During
January 2005, Private Placement realized net proceeds of $357,250 upon issuance
of 1,793,750 shares of Common Stock at $.20
per share plus 5 year warrants to purchase 1,793,750 shares of Common Stock at
$.25 per share. A later Private Placement realized net proceeds of $1,351,000
upon issuance of 4,920,000 shares of Common Stock plus 5 year warrants to
purchase 4,920,000 shares of Common Stock at $.25 per share. A March Private
Placement resulted in the realization of net proceeds of $1,217,000 upon
issuance of 4,396,667 shares of Common Stock at $.30 per share plus 5 year
warrants to purchase 4,396,667 shares of Common Stock at $.30 per share.
In
January of 2005 there were stock option awards issued to two consultants for
services performed. The company granted 250,000 options to a consultant for
professional services, these options provide for the right of stock purchase at
an exercise price of $.25; these options have a five year life and expire in
January of 2010. A second award issued a like number of options to another
service provider under similar terms, except that the options associated with
this second award offer a call feature, available to the company, for redemption
of such options at a call price of $.45 at any time during their five year life.
In aggregate, 400,000 options were issued in connection with these awards and
will result in a charge to General and Administrative non-cash expense in the
amount of $ 133,990 in the third quarter of fiscal 2005. The valuation of this
charge was made on the basis of the fair market value of the Company's common
stock on the date of grant using the Black-Scholes option premium model.
In
February of 2005, GTARC tendered 5,069,242 of cashless warrants which they held
in connection with a previous debt settlement in exchange for 4,949,684 if the
company's shares of common stock, the balance of the 119,558 warrants were
effectively cancelled as a result of certain warrant exercise exchange
provisions adjusting the exchange rate based on specified stock pricing
experience as per the original debt settlement agreement.
On
February 17 of 2005, the Company granted 2,600,000 warrants and 400,000 options
to consultants for services performed valued at $ 1,328,600 and $ 204,400,
respectively. The warrants and options provide the right to purchase a share of
mPhase common stock at an exercise price $.45 and $.30 per share, respectively,
over their 5 year life expiring in February of 2010. These warrant and option
awards were valued on the basis of the fair market value of the Company's common
stock on the date of grant using the Black-Scholes option premium model and the
value of the award will be expensed to General and Administrative non-cash
expenses in the third quarter of fiscal 2005.
On
January 15, 2005, the company converted a $100, 000 convertible note payable to
Martin Smiley in exchange for 400,000 shares and a like number of warrants that
were price at $.25 per unit or $100,000 in aggregate.
Also
in January of 2005, Martin Smiley was awarded additional compensation of 425,000
shares of common stock. . This award will result in a charge to General and
Administrative non-cash expense in the amount of $ 131,750 in the third quarter
of fiscal 2005, representing an expense recognition consistent with the market
price of that stock of $.35 on the date of that award.
During
the nine months ending March 31, 2005, accounts payable in the amount of
$250,000 owed by mPhase to Microphase Corporation was cancelled in exchange for
the 1,250,000 shares of common stock and a 5 year warrant to purchase a like
amount of shares at $.25.In addition for such period, Janifast Ltd. cancelled
$200,000 of accounts payable owed by mPhase in exchange for 1,000,000 shares of
common stock and a 5 year warrant to purchase a like amount of shares at $.25
per share.
Mr.
Ronald A. Durando converted $13,000 of accrued and unpaid interest on various
demand notes issued by the Company for loans by Mr. Durando during the nine
month period ended March 31, 2005 into 65,000 shares of common stock plus a 5
year warrant to purchase a like amount of shares at $.25 per share. In addition
Mr. Durando converted $13,954 of principal of a $75,000 promissory note into the
exercise, in full, of a warrant to purchase 1,395,400 shares of common stock at
$.01 previously granted to Mr. Durando in exchange for cancellation of unpaid
compensation.
Mr.
Gustave Dotoli, Chief Operating Officer of the Company converted $ 3,750 of
accrued and unpaid interest on a $75,000 promissory note into 375,000 shares of
common stock at $.01 pursuant to a portion of a warrant previously granted to
Mr. Dotoli for unpaid compensation. A consultant of the Company converted
$20,000 of accounts payable owed by the Company to 100,000 shares of common
stock plus a 5 year warrant to purchase 100,000 shares of common stock at $.25
per share.
In
addition a demand note payable to Martin Smiley, CFO and General Counsel of
mPhase, in the amount of $75,000 was converted into 375,000 shares of common
stock plus a 5 year warrant to purchase a like amount of shares at $.25 per
share and Mr. Smiley extended from July 25, 2004 to July 25, 2005 a $100,000
promissory note carrying 12% interest. In addition Mr. Smiley converted accrued
and unpaid interest on his various promissory notes of $ 9,975 into 49,875
shares of common stock plus a 5 year warrant to purchase a like amount of common
stock at $.25 per share. Mr. Smiley's remaining $100,000 note is convertible
into Common Stock of mPhase at the rate of $.25 cents per share through July 25,
2009. Upon conversion, the note holder will be granted warrants to purchase an
equivalent amount of mPhase Common Stock at $.25 cents per share for a period of
five years from the date of conversion plus a 5 year warrant for a like amount
of shares at $.25 per share.
82
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
8.
STOCKHOLDERS' EQUITY - (Continued)
During
the Fiscal Year Ending June 30, 2006 and for the nine months ending March 31,
2007 the following transactions impacted stockholders equity.
Private
Placements:
During
the first fiscal quarter ended September 30, 2005, the Company issued 4,648,625
unregistered shares together with 5 year warrants to purchase 4,648,625 shares
at $.25 per share in a private placement pursuant to Rule 506 of Regulation D of
the Securities Act of 1933 generating $920,000 of gross proceeds. Also during
the quarter, the Company issued 9,877,000 shares of its common stock together
with 5 year warrants to purchase a like amount of shares at $.20 per share in
two private placement pursuant to Rule 506 of Regulation D of the Securities Act
of 1933 generating $2,167,400 of gross proceeds.
During the second fiscal quarter ended March 31, 2006 the Company
issued 1,702,900 shares together with of 5 year warrants to purchase 1,702,900
shares of the Company's common stock to accredited investors at $.20 per share
in a private placement generating pursuant to Rule 506 of Regulation D of the
Securities Act of 1933 generating $340,580 of gross proceeds Also during the
quarter, the Company issued 11,477,785 shares together with of 5 year warrants
to purchase 11,477,785 shares of the Company's common stock to accredited
investors at $.18 per share in a private placement pursuant to Rule 506 of
Regulation D of the Securities Act of 1933 generating $2,238,973 of gross
proceeds.
During the third fiscal quarter ended March 31, 2006, the Company
issued 29,861,772 shares together with of 5 year warrants to purchase 29,861,772
shares of the Company's common stock to accredited investors at $.18 per share
in a private placement generating pursuant to Rule 506 of Regulation D of the
Securities Act of 1933 generating $5,065,265 of gross proceeds.
In addition, the Company issues approximately 2,426,698 shares as
finders fees as part of the private placements during the year. (See also
comments regarding 12,792,117 shares explained under Reparations below)
During the quarter ended September 30, 2006, the Company issued
6,780,716 shares of its common stock together with 5,555,556 of  5 year
warrants to purchase one share each of the Company's common stock, with an
exercise price of $.18 per share in private placements generating net proceeds
of $1,104,000.
During the quarter ended December 31, 2006, the Company issued
6,622,223 shares of its common stock together with 5 year warrants to purchase
1,388,889 of   the Company's common stock, with an exercise price of
$.18 per share in private placements generating net proceeds of $833, 866.
Included in these amounts are finders fees paid in cash and 566,667 additional
shares of common stock.
During the quarter ended March 31, 2007, the Company issued
14,973,083 shares of its common stock. Private placements generating net
proceeds of $1,787,850; included in this amount is an estimate of finders fees
to be paid of $198,650.
Warrants
Exercised:
During
the first fiscal quarter ended September 30, 2005 the Company issued 225,000
shares of common stock pursuant to the exercise of warrants issued prior to the
3 month period generating net cash proceeds of $45,000.
During
the second fiscal quarter March 31, 2006, the Company issued 1,714,286 shares of
its common stock pursuant to the exercise of warrants, generating net proceeds
of $294,857.
During the third fiscal quarter ended March 31, 2006 , the Company
issued 12,530,834 shares of its common stock pursuant to the exercise of
warrants, generating net proceeds of $2,525,867.
The Company issued 1,250,000 shares of its common stock pursuant
to the exercise of warrants, generating net proceeds of $250,000 to the
Company.
During the quarter ended September 30, 2006, the Company issued
138,889 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $25,000 to the Company.
During the quarter ended December 31, 2006, the Company issued
12,101,780 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $1,669,668 to the Company. In addition, the Company
issued to certain investors new 5 year   warrants to purchase
11,111,112 of the Company's common stock, with exercise prices ranging from $.15
- $.18 per share.
During the quarter ended March 31, 2007, the Company issued
2,500,000 shares of its common stock pursuant to the exercise of warrants,
generating net proceeds of $375,000 to the Company.
83
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
8.
STOCKHOLDERS' EQUITY - (Continued)
Options
and Stock Based Compensation:
At various points during the fiscal year ended June 30, 2006, the
Company issued stock options to employees and officers for the right to purchase
23,595,000 shares. Pursuant to the adoption of FAS 123(R), the Company
recognized an expense in the amount of $3,837,423, all of which has been
included in general and administrative expense. The fair value of options
granted in 2006 were estimated as of the date of grant using the Black-Scholes
stock option pricing model, based on the following weighted average assumptions:
annual expected return of 0%, annual volatility of 108.5%, based on a risk-free
interest rate of 4.4% and expected option life of 3 years.
During the fiscal year the Company issued to key employees and
consultants common stock shares in the aggregate amount of 11,500,000 for
services rendered. The value of such shares was determined based on the fair
market value of the Company's stock on the date that such transaction was
authorized. Accordingly, the Company, recorded a charge to earnings in the
aggregate amount of $2,439,000
During the nine months ended March 31, 2007, the Company
authorized the issuance of 4,015,000 in options and warrants of 2,044,440 to
employees, officers, and consultants granting the right to purchase a like
amount of common shares. Pursuant to the adoption of FAS 123(R), the Company
recognized an expense in the amount of $785,259, all of which has been included
in general and administrative expense. The fair value of options granted was
estimated as of the date of grant using the Black-Scholes stock option pricing
model, based on the following weighted average assumptions: annual expected
return of 0%, annual volatility of approximately 80%, based on a risk-free
interest rate of 4.8% and expected option life of 5 years.
During the nine months ended March 31, 2007, the Board of
Directors authorized the issuance of 1,822,933 shares of common stock, with an
aggregate value of $339,388 as compensation to consultants and employees. The
stock value ranged in price from $.17 to $.20 per share, the fair value on the
date of the awards.
Debt
Conversions
During
the second fiscal quarter ended March 31, 2006 the Company converted $369,000
and $171,000 of liabilities due to Microphase Corporation, and Janifast Ltd into
2,050,000 shares and 950,000 shares of stock and warrants, respectively. In
addition the Company converted $50,000 of liabilities due to a strategic vendor
into 331,864 shares of stock plus warrants of 277,778. The value attributable to
the shares was based upon the market price of the Company's common stock on the
measurement date.
During the nine months ended March 31, 2007, the Company converted
accounts payable of $909,294 into 5,617,062 shares of common stock.
Reparations
At
various times during the second and third fiscal quarters of fiscal year end
June 30, 2006, the Company issued shares of its common stock together with a
like amount of warrants as reparation to affect revised pricing on previous
private offerings. This additional consideration was afforded to stockholders
who participated in the private placement of equity units and invested a minimum
of 30% of their original investment. Each unit consisted of one share of stock
and a warrant to purchase and equal amount of shares at $.18 per share. As
addition consideration, each investor received the amount of shares that were
required to bring the average cost of the total investment down to $.18 per
share (range of original investment $.25 - $.35). A total of 29,848,271 of such
shares were issued as reparation under such a program and the Company recorded a
charge to earnings (Other Expense ) in the amount of $5,530,504. In addition,
shares in the amount of 12,792,117 were issued and charged to "Additional Paid
In Capital" as an appropriate incentive for the additional cash investment.
Conversions, Settlements and Gain on Extinguishments
In addition, during the nine month period ended March 31, 2007,
the Company became obligated to issue 11,007,819 of its common stock as
reparation to affect revised pricing on previous private placements. This
additional consideration was afforded to past investors who agreed to make an
additional cash investment as part of a new private placement. The cost of such
consideration was estimated to be the fair value of such shares at the time of
the investment $1,202,730.
84
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
8.
STOCKHOLDERS' EQUITY - (Continued)
As
a result of the preceding, during the three years ended June 30, 2006,
extinguishments, cancellations and conversions of debt for issuance of the
Company's common stock to related parties is summarized in Note 11 and amounts
relating to strategic investors is summarized as follows:
For the Years Ended June 30,
Equity
      Conversions of Debt with Strategic Vendors
2004
2005
2006
Number
      of Shares
110,467
635,296
3,331,864
Number
      of Warrants
5,069,200
1,356,696
3,277,778
Amount
      Converted to Equity
$1,963,202
$426,894
$590,000
Gain
      on Extinguishments of Debt
$ 150,058
$418,696
$30,608
During
the year ended June 30, 2006, the Company recorded non-cash gain from
settlements of $369,675
The
Company has no commitments from affiliates or related parties to provide
additional financings. The Company has, from time to time, been able to obtain
financings from affiliates when conditions in the capital markets make third
party financing difficult to obtain or when external financing is available only
upon very unattractive terms to the Company, and when such capital has been
available from the affiliates. (See also-Note 9 Related Party Transactions)
STOCK
INCENTIVE PLANS
A
summary of the stock option activity for the years ended June 30, 2005, 2006
pursuant to the terms of both plans, which include incentive stock options and
non-qualified stock options, is set forth on the below:
NUMBER OF
WEIGHTED
OPTIONS
AVERAGE
EXERCISE PRICE
Outstanding
      at June 30, 2004
17,725,000
$.87
Granted
7,775,000
.35
Exercised
Canceled
      /Expired
1,240,167
(2.05)
Outstanding
      at June 30, 2005
24,259,833
.78
Granted
23,595,000
.19
Exercised
Canceled/Expired
4,381,833
.87
Outstanding
      at June 30, 2006
43,473,000
.26
Exercisable
      at June 30, 2006
43,473,000
$.26
The
fair value of options granted in fiscal year ended June 30, 2006 was estimated
as of the date of grant using the Black-Scholes stock option pricing model,
based on the following weighted average assumptions: annual expected return of
0%, annual volatility of, 145.3% in 2005, and 108.5% in 2006, a 4.4% a risk-free
interest rate and expected option life of 3 years.
The
per share weighted average fair value of stock options granted during 2004, 2005
and 2006 was $.35, $.35 and $.16 respectively. The per share weighted average
remaining life of the options outstanding at June 30, 2004, 2005, and 2006 is
2.88, 3.02 and 3.58 years, respectively.
During
fiscal 2006 the Company adopted the fair value recognition provisions of FASB
Statement No. 123,
Accounting for Stock-Based Compensation
, for
stock-based employee compensation, effective as of the beginning of the fiscal
year
Prior
to Fiscal year end 2006 mPhase has elected to continue to account for
stock-based compensation under APB Opinion No. 25, under which no compensation
expense has been recognized for stock options and certain compensating warrants
granted to employees at fair market value. Had compensation expense for stock
options granted under the Plan and certain warrants granted to employees in
2005, been determined based on fair value at the grant dates, mPhase's net loss
for, 2004 and 2005 would have been increased to the pro forma amounts shown
below.
85
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
8.
STOCKHOLDERS' EQUITY - (Continued)
Twelve months ended June 30,
2004
2005
Net
      loss, as reported
$(7,758,586)
$(11,234,324)
Add:
      Stock-based employee compensation expense net
72,000
131,750
included
      in report of net income, net of related tax effects
Deduct:
      Total stock-based employee compensation expense
(810,080)
(444,396)
determined
      under fair
value
      based method for all awards, net of related tax effects
Pro
      forma net loss
$(8,486,666)
$(11,546,970)
Loss
      per share:
Basic
      and diluted-as reported
$(.10)
$(.10)
Basic
      and diluted-pro forma
$(.11)
$(.11)
For
the year ended June 30, 2004 the Company recorded non-cash charges and deferred
compensation totaling $833,100 and $0 respectively, in connection with the grant
of options covering 4,370,000 shares of common stock to employees and
consultants and the Company recorded non-cash charges of $170,451 in connection
with the grant of 500,000 compensating warrants to employees and consultants for
services rendered or to be rendered. Such charges are the result of the
differences between the quoted market value of the Company's common stock on the
date of grant and the exercise price for option and warrants issued to employees
and Black-Scholes stock option pricing calculations for options and warrants
issued to consultants.
For
the year ended June 30, 2005, the Company recorded non-cash charges totaling
$2,816,333 in connection with the grant of 7,775,000 options to employees and
options to consultants for services rendered or to be rendered. For the year
ended June 30, 2006, the Company recorded non-cash charges totaling
$3,837,423 in connection with the grant of 23,595,000 options to employees
and consultants.  Such charges are the result of the differences between
the quoted market value of the Company's common stock on the date of grant and
the exercise price for option and warrants issued to employees and Black-Scholes
stock option pricing calculations for options and warrants issued to
consultants.
The
following summarizes information about stock options outstanding at June 30,
2006:
RANGE OF
NUMBER
WEIGHTED
WEIGHTED
NUMBER
WEIGHTED
EXERCISE
OUTSTANDING
AVERAGE
AVERAGE
EXERCISABLE
AVERAGE
PRICE
REMAINING
EXERCISE
EXERCISE
CONTRACTUAL
PRICE
PRICE
LIFE
$0 - $.50
43,473,000
43 months
$.26
43,473,000
$.26
WARRANTS
During
the nine months ended March 31, 2005, in connection with the private placements
discussed above the Company issued 27,200,117 of warrants to investors and
finders and when combined with warrants previously outstanding and exercised,
expired or canceled, during the period result in the Company now having
75,428,473 with a weighted average price of $.48.
During
May 2005 the Company adjusted the exercise price of $.45 per share of an
investor's 5 year warrant to purchase 714,296 shares of common stock. The
warrant was originally issued in January 2005, to $.225 in July of 2005. In July
of 2005 such investor exercised a portion of such warrant, as adjusted, to
purchase 200,000 shares of the Company's common stock generating $45,000 of net
proceeds to the Company.
On
July 20, 2005, at the Company's annual meeting of Shareholders, the
Shareholders' ratified an amendment to its Certificate of Incorporation to
increase the number of authorized shares of common stock from 250,000,000 to
500,000,000 shares.
During
June and July 2005 the Company completed a private placement of equity units
pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended.
Each unit consists of one share of the Company's common stock at $0.20 per share
plus a five (5) year warrant to purchase one share of the Company's common stock
at $.25 per share. Such placement generated an aggregate of $3,488,000 of
proceeds to the Company, to be used primarily to pay for research and
development expenses and for general corporate purposes. A total of 14,140,000
shares of the Company's common stock together with five (5) year warrants to
purchase 14,140,000shares of the Company's common stock at $.25 per share were
issued in such private placement. In connection with such private placement,
consultants and advisors received $253,500 of fees paid in cash and 476,500
shares of the Company's common stock and five (5) year warrants to purchase
476,500 shares of the Company's commons stock at $.25 per share.
86
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
8.
STOCKHOLDERS' EQUITY - (Continued)
During
the year ended June 30, 2005, the Company issued warrants to purchase 40,609,586
shares of common stock to investors and warrants to purchase 729,075 shares of
common stock to finders, consultants and investment banking firms. Of such
warrants, 39,124,586 shares of the Company's common stock may be purchased for 5
years at $.25 shares and may be purchased at $.35 and 1,485,003shares may be
purchased at $.50 in connection with private placements. Also, during the year
ended June 30, 2005, the Company granted 5 year warrants to purchase 2,600,000
shares to consultants for services performed with an exercise price of $.25 to
$.35 per share of common stock and warrants to purchase 4,616,571 shares to
creditors, including related parties (see Note 11), in connection with the
conversion of outstanding liabilities. Additionally, warrants cover 3,637,954 of
common stock were exercised during the fiscal year ended June 30, 2005,
generating net proceeds to the Company of $680,609. Also during the fiscal year
ended June 30, 2005 a cashless exercise of warrants previously issued resulted
in the issuance of 4,949,684 shares of the Company's common stock. Additionally,
during the fiscal year ended June 30, 2005, warrants covering 5,331,144 shares
were cancelled or expired.
As
of June 30, 2005, warrants covering 89,054,406 shares remain outstanding with a
weighted average exercise price of $.36.
During
The fiscal year ended June 30, 2006 the company issued 105,468,248 of warrants
at exercises prices ranging from $.17 to $.25.and 21,694,335 expired or were
cancelled. Such warrants were issued as part of investment units offerered in
private placements and as reparation to reduce the exercise price. Included in
this amount is 950,000 and 4,322,222 issued to Janifast and Microphase
respectively at $.18. In addition Mr. Smiley received 1,647,877 and 697,692
warrants to purchase common stock at $.21 and $.18 respectively.
During
the first fiscal quarter the Company issued 225,000 shares of common stock
pursuant to the exercise of warrants issued prior to the 3 month period
generating net cash proceeds of $45,000.
During
the second fiscal quarter, the Company issued 1,714,286 shares of its common
stock pursuant to the exercise of warrants, generating net proceeds of
$294,857.
During the third fiscal quarter, the Company issued 12,530,834
shares of its common stock pursuant to the exercise of warrants, generating net
proceeds of $2,525,867. The Company issued 1,250,000 shares of its common stock
pursuant to the exercise of warrants, generating net proceeds of $250,000 to the
Company.
As
of June 30, 2006, warrants covering 157,108,199 shares remain outstanding with a
weighted average exercise price of $.23.
9.
RELATED PARTY TRANSACTIONS
Mr.
Durando, the President and CEO of mPhase, and together with Mr. Ergul owns a
controlling interest and is a director of Janifast Limited. Mr. Durando and Mr.
Dotoli are officers of Microphase Corporation. Mr. Ergul, the chairman of the
board of mPhase, owns a controlling interest and is a director of Microphase
Corporation. mPhase, and Janifast.
Mr.
Abraham Biderman was employed until September 30, 2003 by our former
investment-banking firm Lipper & Company. During the fiscal year ended June
30 2006, Mr. Biderman's current firm Eagle Advisers, Inc. has acted as a finder
of money in connection with finder's fees of $782,567, as well as addition
administrative and occupancy charges of $75,000
During the six month period ended March 31, 2006, Mr. Durando, Mr.
Dotoli and Mr. Smiley made bridge loans to the Company in the aggregate amounts
of $50,000, $100,000 and $150,000. The loans due Mr. Dotoli and Mr. Smiley are
outstanding at March 31, 2006. All of the loans have since been repaid.
In
addition, at various points during the six months ended March 31, 2007, Messrs,
Durando, Dotoli and Smiley provided $490,000 in bridge loans to the Company
which was evidenced by individual promissory notes. During December 2006, Messrs
Durando and Dotoli agreed to convert their notes, in the amounts of $130,000 and
$200,000 respectively, to a deferred compensation arrangement, the repayment
terms of which have not been specified. Mr. Smiley has extended bridge loans to
the Company of $160,000, evidenced by promissory notes for $101,000 and a
$60,000 note with a 12% rate of interest. Both of the foregoing promissory notes
are payable on demand.
JANIFAST
During
the year ended June 30, 2000, mPhase advanced money to Janifast Limited, which
is owned by U.S. Janifast Holdings, Ltd, a related party of which three
directors of mPhase are significant shareholders, in connection with the
manufacturing of POTS Splitter shelves and DSL component products. As of June
30, 2000 the amount advanced to Janifast was approximately $1,106,000, which is
included in production advances-related parties on the accompanying balance
sheet. There were no such advances during the years ended June 30, 2002 and
2003. Pursuant to debt conversion agreements between the Company and Janifast,
for the year ended June 30, 2001 Janifast received 1,200,000 shares of mPhase
common stock canceling liabilities of $600,000, and for the year ended June 30,
2002 Janifast received 3,450,000 shares of mPhase common stock and 1,200,000
warrants to purchase mPhase common stock for the cancellation of $720,000 of
liabilities, as discussed in Note 10. During the year ended June 30, 2003
Janifast was issued 1,500,000 shares of mPhase common stock in connection with
the cancellation of $360,000 of outstanding liabilities of mPhase, the value of
which was based upon the price of the Company's common stock on the effective
date of settlement. No gain or loss was recognized in
87
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
9.
RELATED PARTY TRANSACTIONS – (Continued)
connection
with conversions by Janifast for fiscal 2003. During the years ended June 30,
2003, 2004 and 2005 and the period from inception (October 2, 1996) to June 30,
2005, there has been $174,959, $2,771,925, 1,536,494 and $15,001,105,
respectively, of invoices for products and services have been charged to
inventory or expense and is included in operating expenses in the accompanying
statements of operations. Effective December 30, 2004, Janifast Ltd. agreed to
convert $200,000 of accounts payable into common stock of the Company at $.20
per share plus a 5 year warrant for a like amount of shares at $.25 per share.
At June 30, 2005 the Company had $491,098 current accounts payable, which are
included in due to related parties and additionally, at June 30, 2005,
approximately $298,000 of undelivered purchase orders remain outstanding with
Janifast.
During the six months ended March 31, 2006 and 2006 and the period
from inception (October 2, 1996) to March 31, 2007, $544,449, $134,715 and
$16,031,811 respectively have been charged by Janifast to inventory or is
included in operating expenses in the accompanying statements of operations.
As a result of the foregoing transactions as of March 31, 2007,
the Company had $132,151 payable to Janifast, which is included in amounts due
to related parties in the accompanying balance sheet.
MICROPHASE
The
company leases office space from Microphase at both its Norwalk and Little Falls
location. Current rental expense is $5,000 and $13,800 per month at Norwalk and
Little Falls respectively. In addition, Microphase provides certain 
research and development services and shares administrative personnel from time
to time. (SEE RELATED CHARTS BELOW)
Year Ended June 30,
Charges
      and Expenses with Related Parties
2004
2005
2006
Charges
      incurred with Janifast Ltd. included in:
Cost
      of sales and ending inventory
$2,771,925
$1,536,494
895,991
Total
      Janifast
$2,771,925
1,536,494
895,991
Charges
      incurred with Microphase Corp included in:
Cost
      of sales and ending inventory
(Including
      Royalties)
$140,123
$94,740
32,014
Research
      and development
84,494
60,000
197,639
General
      and administrative
231,068
304,030
302,167
Total
      Microphase Corp.
$455,685
$458,770
531,820
Total
      Charges with Related Parties included in:
Cost
      of sales and ending inventory
$2,912,048
$1,631,234
928,005
Research
      and development
84,494
60,000
197,639
General
      and administrative
231,068
304,030
302,167
Total
      Charges with Related Parties
$3,227,610
$1,995,264
1,427,811
Included
      in Cost of Sales in the Consolidated Statements of Operations
(including
      changes in inventory)
Janifast
3,507,476
1,275,960
770,441
Microphase
      (including royalties)
140,123
94,740
32,014
Total
      Related Expense Included in Cost of Sales
3,647,599
1,370,700
802,455
Beginning July 1, 2006, billings for all administrative services
has been $5,000 per month. In addition, Microphase also charges fees for
specific projects on a project-by-project basis. During the six months ended
March 31, 2006 and 2006 and from inception (October 2, 1996) to March 31, 2007,
$90,000, $142,250 and $8,869,365 respectively, have been charged to expense. As
a result of the foregoing transactions as of March 31, 2007, the Company had a
$204,131 payable to Microphase.
On
August 30, 2004, the Company paid $100,000 in cash to Piper Rudnick LLP, outside
legal counsel in the Company as part of a renegotiated settlement agreement that
was originally effective as of March 31, 2002. The Company was in arrears with
respect to payments due under the original settlement agreement and as part of
the renegotiated agreement agreed to make the following payments:
88
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
9.
RELATED PARTY TRANSACTIONS – (Continued)
a.         
$25,000 on each of December 1, 2004, March 2005, June 1, 2005, September 1, 2005
and a $50,000 payment on December 1, 2005. Thereafter the Company is obligated
to pay $25,000 on each of March 1, 2006, June 1 2006, and September 1, 2006 with
a final payment of $75,000 of December 1, 2006.
b.        
The Company also delivered a 5 year cashless warrant to purchase $150,000 worth
of common stock at $.25 per share.
The
warrant was valued pursuant to EITF 96-18, the ascribed value of the warrant
minus the debt cancelled resulting loss of
      $40,500.
As of March 31, 2007, the Company has made each payment owed to
Piper Rudnick LLP, with the exception of the $25,000 payment due September 1,
2006 and the $75,000 payment due December 1, 2006.
As
of June 30, 2004, Mr. Smiley and Microphase each agreed to extend to July 25,
2005, the maturity on their 12% convertible promissory notes in the principal
amount of $100,000 and $180,000 respectively.
Additionally at June 30, 2004, Mr. Durando was owed $300,000 by
the Company as evidenced by a non-interest bearing promissory note that was
repaid in July 2004. As of June 30, 2004 a total of $55,000 in the aggregate was
due to Mr. Durando and Mr. Dotoli for unpaid compensation.
Mr.
Durando's June 30, 2004 note payable balance of $300,000 was repaid by the
Company during the nine month period ended March 31, 2005. During the first and
second quarters of fiscal year 2005, Mr. Durando made additional bridge loans to
the Company evidenced by various 12% demand notes in the aggregate of $525,000.
Mr. Durando was repaid a total of $450,000 of such loans in January of 2005. In
addition, Mr. Durando converted $13,954 of the principal amount of a $75,000
promissory note leaving unpaid principal of $61,046 outstanding. Mr. Durando
converted $13,000 of accrued and unpaid interest on various promissory notes of
the Company into 65,000 shares of common stock and a 5 year warrant to purchase
a like amount of common stock at $.25 per share.
During
the fiscal year ended June 30, 2005 Mr. Dotoli and Mr. Smiley, the COO, and CFO
and General Counsel of the Company respectively, each lent the Company $75,000.
Mr. Dotoli was repaid, the principal amount of such loan, in cash in January,
2005 and Mr. Smiley converted his $75,000 loan into 375,000 shares of common
stock of the Company plus a 5 year warrant to purchase a like amount of shares
at $.25 per share. In addition, Mr. Smiley converted $9,975 of accrued interest
into 49,875 shares of common stock plus a 5 year warrant to purchase a like
amount of shares at $.25 per share. Finally Mr. Smiley received 25,000
additional shares of common stock as a market adjustment to his equity
investment of $25,000 on August 30, 2004. Mr. Dotoli cancelled $3,750 of accrued
and unpaid interest from August 15, 2004 through January 15, 2004 into 375,000
shares of common stock pursuant to the terms of a portion of a warrant that was
exercised at $.01 per share previously given by the Company to Mr. Dotoli in
exchange for and cancellation of unpaid compensation. On January 15, 2004, Mr.
Smiley was awarded 425,000 shares of common stock as additional
compensation.
In
July of 2005, Mr. Smiley was repaid a loan of $35,000, without interest made to
the Company in June of 2005. In the three month period ended September 30, 2005,
Mr. Durando and Mr. Smiley lent the Company $50,000 and $100,000 respectively
which was repaid by the Company, without interest in October of 2005.
The
Following Summaries Compensation to Related Parties for the Fiscal Year Ended
June 30, 2006
Generally,
as summarized below, the Company has offered conversion of debts to related
parties on substantially the same terms as concurrent private placements
(typically in $.30 units, such units including both shares of common stock and
warrants to purchase a like amount of common stock) in addition to conversion of
debts pursuant to terms of concurrent private placements and financial
instruments which, pursuant to EITF 00-19 have been settled with the Company's
common stock as conditioned by benchmarks, generally coinciding with the
Company's negotiations to settle any and all obligations with Georgia Tech
Research and its affiliate (see also Note 11) as follows:
89
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
9.
RELATED PARTY TRANSACTIONS – (Continued)
The
following summarizes compensation to related parties for the fiscal year ended
June 30, 2006:
Durando
Dotoli
Ergul
Biderman
Smiley
Guerino
Janifast
Microphase
Total
Consulting/Salary
$643,600
$357,000
$39,000
$175,000
$1,214,600
Directors
      Stipend
$7,500
$7,500
$7,500
$22,500
Rent
$36,000
$204,444
$240,444
Cost
      of Sales/Royalty
$770,441
$32,014
$802,455
Loan
      Interest
$10,800
$10,800
R&D
$197,639
$197,639
SG&A
$86,923
$86,923
Estimated
      Value of Stock Issued
$1,260,000
$525,000
$210,000
$105,000
$331,213
$2,431,213
Estimated
      Value of Options Issued
$1,596,200
$836,400
$273,740
$85,890
$213,850
$56,990
$3,063,070
Reparations
      Shares
$834,633
$728,434
$1,563,067
Totals
$3,507,300
$1,725,900
$483,740
$265,890
$720,063
$64,490
$1,605,074
$1,260,254
$9,632,711
The
following summarizes compensation to related parties for the nine months ended
March 31, 2007:
Durando
Dotoli
Ergul
Biderman
Smiley
Guerino
Lawrence
Janifast
Microphase
TOTAL
Consulting
      / Salary
$295,200
$211,500
$150,000
$656,700
Directors
      Stipend
$7,500
$7,500
$3,750
$3,750
$3,750
$3,750
$3,750
$33,750
Rent
$45,000
$45,000
R&D
$165,035
$165,035
Finders
      Fees (including common shares)
$468,650
$468,650
Cost
      of Sales and SG&A
$134,715
$33,064
$167,779
Shares
      and Options
$196,000
$126,000
$63,000
$8,400
$56,000
$0
$0
$96,923
$0
$546,323
Totals
$498,700
$345,000
$66,750
$480,800
$209,750
$3,750
$3,750
$231,638
$243,099
$2,083,237
In addition to the above, the Company has paid a portion of the legal
expenses of its officers and directors named in the Civil case filed by the SEC
against Packetport.com, Inc. and others on November 15, 2005 (See page 41 "Legal
Proceedings"). Such expenses amounted to approximately $433,000 in the nine
months ended March 31,2007 and in the aggregate have totaled approximately
$1,037,000 since May of 2002. (See also "Subsequent Events" on P32 of the
prospectus).
90
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
9.
RELATED PARTY TRANSACTIONS -
(continued)
Equity
Conversions of Debt and Other Financial Instruments with Related Parties
June 30,
2004
2005
2006
Janifast:
Number
      of shares
0
1,000,000
950,000
Number
      of warrants
0
1,000,000
950,000
Amount
      converted to equity
$0
$200,000
$171,000
Microphase
      Corporation:
Number
      of shares
0
1,250,000
2,050,000
Number
      of warrants
0
1,250,000
2,050,000
Amount
      converted to equity
$0
$250,000
$369,000
Strategic
      Vendor Conversions:
Number
      of shares
1,100,467
0
331,864
Number
      of warrants
5,069,242
0
277,778
Amount
      converted to equity
$1,963,202
$0
$50,000
Officers
Number
      of shares
0
1,009,875
0
Number
      of warrants (A)
0
1,009,875
0
Amount
      converted to equity
$0
$201,975
$0
Total
      Related Party Conversions
Number
      of shares
1,100,467
3,259,875
3,331,864
Number
      of warrants
5,069,242
3,259,875
3,277,778
Amount
      converted to equity
$1,963,202
$651,975
$590,000
10.
INCOME TAXES
No
provision has been made for corporate income taxes due to cumulative losses
incurred. At June 30, 2006, mPhase has operating loss carryforwards of
approximately $89.3 million and $88.7 million to offset future federal and state
income taxes respectively, which expire at various times from 2016 through 2024.
Certain changes in stock ownership can result in a limitation in the amount of
net operating loss and tax credit carryovers that can be utilized each year.
At
June 30, 2006 the Company has net deferred income tax assets of approximately
$34.15 million comprised principally of the future tax benefit of net operating
loss carryforwards, which represents an increase of $6.9 million for the fiscal
year ended June 30, 2006. A full valuation reserve has been recorded against
such assets due to the uncertainty as to their future realizability.
11.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS
mPhase
has entered into various agreements with Georgia Tech Research ("GTRC") and its
affiliate, Georgia Tech Applied Research Corporation, ("GTARC"), pursuant to
which the Company receives technical assistance in developing the
commercialization of its Digital Video and Data Delivery System. The amount
incurred by the Company for GTRC technical assistance with respect to its
research and development activities during the years ended, 2004, 2005 and 2006
totaled  $0, $0 and $0 respectively, and $13,539,952 from the period from
inception through June 30, 2006.
If
and when sales commence utilizing its legacy DVDDS digital broadcast television
platform, mPhase will be obligated to pay to GTRC a royalty up to 5% of product
sales, as defined.
As
of June 30, 2006, mPhase is obligated to pay Lucent Technologies, Inc. $200,000
per month through and including the first of each month from July 1, 2005
through and including March 1, 2006 in connection with the development of its
Nanotechnology product line. Additionally, the Company engages Lucent on a
project-by-project basis for research and development of technical product
related enhancements for its TV+ product. The Company owed Lucent $613,600 in
accounts payable and accrued expenses through June 30, 2006. The amount incurred
by the Company with Lucent for assistance with respect to its research and
development activities during
the years ended 2004, 2005 and 2006 totaled $2,328,602, 3,424,800, and
$4,384,749 respectively, and $11,406,651 from the period from inception through
June 30, 2006.
91
mPHASE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(Unaudited for the Period Ended March 31, 2007)
11.
COMMITMENTS AND CONTINGENCIES -
(continued)
From
time to time, mPhase may be involved in various legal proceedings and other
matters arising in the normal course of business.  On November 15, 2005 a
civil enforcement action (c.v. action no. 3:05 cv1747) was filed in Federal
District Court in the State of Connecticut against Packetport.com, Inc. and
others including Messrs. Durando and Dotoli in their individual capacity for
alleged violations of the federal securities laws in connection with their
activities as Officer's and Director's of Packetport.com during the year
1999-2000.  A summary of the Complaint is contained in SEC Litigation
Release No. 19465 dated November 15, 2005.  The original complaint may be
accessed on the SEC web site under
http://www.sec.gov/litigation
.
 As noted in other public filings with the SEC, mPhase Technologies, Inc.
is not named as a party to the civil action.  Both Messrs. Durando and
Dotoli continue to deny any wrongdoing and will vigorously defend all
allegations in the complaint.
12.
SUBSEQUENT EVENTS
The
Company's current low levels of liquidity have required that payments of
accounts payable to vendors, including research partners, be extended beyond
terms.  The Company is actively engaged in negotiations with several
vendors to work out an equitable restructure of payment terms and/or conversion
of such debt into equity.
Subsequent to March 31, 2007, the Company has sustained operations primarily
through the issuance of common stock in Private Placement Agreements pursuant to
Regulation D of Rule 506 of the Securities Act of 1933, as amended with
Accredited Investors. Since March 31, 2007 the Company has raised approximately
$2.5 million under such agreements and issued in excess of 19.4 million shares
of its common stock. In addition, pursuant to the terms of these agreements, the
Company issued approximately 22.5 million shares to certain investors as
reparation shares so as to reduce investors past cost per share and encourage
additional investment. The proceeds of the Private Placement will be used for
research and Development payments to vender and working capital. On June 26,
2007 massers Dotoli and Durando provided temporary working capital in the amount
of $160,000 which was repaid on July 5, 2007.
The
Company also approved various incentive compensation arrangements with employees
and consultants involving the issuance of common stock and the granting of
options to purchase such stock. In total, 12,150,000 of common shares with an
estimated value of $1,822,000 and 2,600,000 options with an estimated value
$230,000 of were issued under such program. Included in this amount were grants
to the Messer's Durando, Dotoli and Smiley of 4,000,000, 3,000,000 and
1,750,000 of restricted shares of common shares respectively for which an
expense has been incurred of approximately $1,312,000. The exercise price of
options granted ranged from $.20 to $.25 cents per share.
In addition, the Company has incurred since March 31, 2007, and additional $172,541 in legal expenses in connection with the civil suit filed by the SEC on
November 15, 2005 against Packetport.com, Inc and others (See Page 41 "Legal
Proceedings").
On July 6, 2007, the Company announced that it had executed with
Double U Master Fund, L.P, a limited partnership organized under the laws of the
British Virgin Islands, a Private Equity Credit Agreement for an aggregate of up
to $6 million in financing through the sale, from time to time of the common
stock of mPhase at a 14% disc
ount to its market value (determined as a set forth
in the Private Equity Credit Agreement). The terms of the agreement provide that
mPhase will have the option to  "PUT" up to $300,000 of its common stock to the
Partnership per month upon the effectiveness of a Form S-1 Registration
Statement covering such shared of common stock to be filed by the company in the
near future. mPhase is not obligated to draw any minimum amount of money under
the Private Equity Credit Agreement.
92
Item
16. Exhibits and Financial Statements
Exhibit
Number
Description
2.1*
Exchange
      of Stock Agreement and Plan of Reorganization dated January 15,
  1997 (incorporated
      by reference to Exhibit 2(a) to our registration statement on
  Form 10SB-12G
      filed on October 16, 1998 (file no. 000-24969)).
2.2*
Exchange
      of Stock Agreement and Plan of Reorganization dated June 25,
1998 (incorporated
      by reference to Exhibit 2(b) to our registration statement on
  Form 10SB-12G
      filed on May 6, 1999 (file no. 000-24969)).
3.1*
Certificate
      of Incorporation of Tecma Laboratory, Inc. filed December 20,
  1979 (incorporated
      by reference to Exhibit 3(a) to our registration statement on
  Form 10SB-12G
      filed on October 16, 1998 (file no. 000-24969)).
3.2*
Certificate
      of Correction to Certificate of Incorporation of Tecma Laboratory,
    Inc. dated
      June 19, 1987 (incorporated by reference to Exhibit 3(b) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).
3.3*
Certificate
      of Amendment of Certificate of Incorporation of Tecma Laboratory,
    Inc. filed August 28, 1987 (incorporated by reference to Exhibit 3(c) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).
3.4*
Certificate
      of Amendment of Certificate of Incorporation of Tecma Laboratories,
      Inc. filed
      April 7, 1997 (incorporated by reference to Exhibit 3(d) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).
3.5*
Certificate
      of Amendment of Certificate of Incorporation of Lightpaths TP Technologies,
      Inc. filed June 2, 1997 (incorporated by reference to Exhibit 3(e)
    to our
      registration statement on Form 10SB-12G filed on October 16, 1998 (file
      no. 000-24969)).
3.6*
Certificate
      of Amendment of Certificate of Incorporation of mPhase
  Technologies, Inc.
      filed September 15, 2000 (incorporated by reference to Exhibit 3i to
      our quarterly
      report on Form 10Q filed on November 13, 2000 (file no.
  000-24969)).
3.7*
Bylaws
      of the Company (incorporated by reference to Exhibit 3(g) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).
4.1*
Form
      of Registration Rights Agreement, dated January 26, 2001, by and among
      the Company
      and the purchasers listed on Schedule A attached thereto (incorporated
      by reference
      to Exhibit 4.1 to our registration statement on Form S-1 filed on June
      18, 2001
      (file no. 33-63262)).
4.2*
Form
      of Registration Rights Agreement, dated February 9, 2001, by and among
      the Company
      and the purchasers listed on Schedule A attached thereto (incorporated
      by reference
      to Exhibit 4.2 to our registration statement on Form S-1 filed on June
      18, 2001
      (file no. 33-63262)).
4.3**
Form
      of Warrant.
4.4**
Warrant
      issued to Piper Rudnick LLP.
4.5**
Warrant
      issued to Piper Rudnick LLP.
4.6**
Form
      of Subscription Agreement, dated December 15, 2001.
4.7
Form
      of Agreement with Dutchess Equity Limited Partnership II, L.P. dated as of
      December 20, 2005, governing the terms of the Put Options.
93
5.1
Opinion
      of Martin S. Smiley, General Counsel to the Company.
10.1*
License
      Agreement, dated March 26, 1998, between the Company and Georgia
    Tech Research
      Corporation (incorporated by reference to Exhibit 10(e) to our
      registration statement
      on Form 10SB-12G filed on October 16, 1998 (file no.
000-24969)).
10.2*
First
      Amendment to the License Agreement, dated January 8, 2001, between
    the Company
      and Georgia Tech Research Corporation (incorporated by reference
  to Exhibit
      10.2 to our registration statement on Form S-1 filed on June 18, 2001
      (file no.
      33-63262)).
10.3*
Employment
      Agreement between Ronald A. Durando and the Company (incorporated
      by reference to Exhibit 10.8 to our registration statement on Form
    SB-2 filed
      on August 13, 1999 (file no. 333-85147)).
10.4*
Employment
      Agreement between Gustave T. Dotoli and the Company
(incorporated by
      reference to Exhibit 10.9 to our registration statement on Form SB-2 filed
      on August
      13, 1999 (file no. 333-85147)).
10.5*
Employment
      Agreement between Martin S. Smiley and the Company, dated as of August
      15, 2000 (incorporated by reference to Exhibit 10.5 to our
    registration statement
      on Form S-1 filed on June 18, 2001 (file no. 33-63262)).
10.6*
Employment
      Agreement between David C. Klimek and the Company, dated as of April
      1, 2001 (incorporated by reference to Exhibit 10.6 to our registration
      statement on
      Form S-1 filed on June 18, 2001 (file no. 33-63262)).
10.7*
Manufacturing
      Services Agreement, dated March 14, 2001, by and between the Company
      and Flextronics International USA, Inc (incorporated by reference
  to Exhibit
      10.7 to our registration statement on Form S-1 filed on June 18, 2001
      (file no.
      33-63262)).
10.8*
Supply
      Agreement by and between the Company and Hart Telephone Company,
    Inc., date
      of August 19, 1998 (incorporated by reference to Exhibit 10.8 to our
      registration statement
      on Form S-1 filed on June 18, 2001 (file no. 33-63262)).
10.9*
Facilities/Services
      Agreement between the Company and Microphase Corporation, dated
      as of July 1, 1998. (incorporated by reference to Exhibit 10.9 to
    our registration
      statement on Form S-1 filed on June 18, 2001 (file no.
  33-63262)).
10.10*
Company's
      2001 Stock Incentive (incorporated by reference to Exhibit C to
  our preliminary
      proxy statement on Form Pre 14A filed on March 21, 2001 (file
    no.000-30202)).
10.11*
License
      Agreement, dated July 31, 1996, by and between AT&T Paradyne Corporation
      and Microphase Corporation. (incorporated by reference to Exhibit
    10.11 to
      our registration statement on Form S-1 filed on June 18, 2001 (file no.
      33-63262)).
10.12(a)*
Assignment
      Agreement, dated February 17, 1997, by and between the Company
  and Microphase
      Corporation. (incorporated by reference to Exhibit 10.12 to our registration
      statement on Form S-1 filed on June 18, 2001 (file no. 33-
  63262)).
10.12(b)*
Distribution
      Agreement effective May 15, 2002 by and between Corning Cable System
      and the Company.
10.13*
Development
      Agreement between Lucent Technologies, Inc. and mPhase Technologies,
      Inc., effective as of December 1, 2002, relating to Video
  Services Switch
      and Statement of Work, dated December 9, 2002.***
10.14*
Purchase
      Order between the Company and Lucent Technologies, Inc., dated December
      15, 2002, for cost reduction of the mPhase Traverser INI set
  box.***
10.15*
Co-Branding
      Agreement, dated as of January 21, 2003, between the Company and Lucent
      Technologies, Inc.
94
10.16*
Systems
      Integrator Agreement, dated as of April 4, 2003, between the Company
      and Lucent
      Technologies, Inc.***
10.17*
Development
      Agreement between Lucent Technologies, Inc. and mPhase Technologies,
      Inc., relating to Broadcast Television Switch (BTS) effective as
  of September
      15, 2003.***
10.18*
Development
      Agreement effective February 3, 2004 between Lucent
Technologies, Inc.
      and mPhase Technologies, Inc. for development of micro fuel cell NanoTechnology.***
10.19***
Software
      License Agreement between Espial Group, Inc, a Canadian Corporation
    and mPhase
      Technologies entered into November 28, 2004
10.20***
Software
      Development Agreement between Magpie Telecom Insiders, Inc, and mPhase
      Technologies, dated September 2, 2004 and Work Order dated January
    3, 2005
10.21***
Development
      Agreement effective March 11, 2005 between Lucent Technologies
  Inc and
      mPhase Technologies relating to development of Magnetometers
10.22*
Amendment
      No. 2 to Development Agreement dated as of March 9, 2005 relating
  to Micro
      Power Source Cells between mPhase Technologies, Inc and Lucent Technologies
      Inc.
10.23***
Amendment
      No. 2 to Development Agreement between Lucent Technologies, Inc. and
      mPhase Technologies, Inc. dated as September 15, 2003
10.24***
Amendment
      No. 3 to Development Agreement between Lucent Technologies, Inc.
      and mPhase Technologies, Inc. dated as of September 15, 2003.
10.25***
Amendment
      No.4 to Development Agreement between Lucent Technologies, Inc.
      and mPhase Technologies, In. dated as of September 12, 2003.
10.26***
Annexure
      B Statement of Work dated August 22, 2005, to Development Agreement,
      dated September 1, 2004 between Magpie Insiders, Inc. and mPhase
      Technologies, Inc.
10.27***
Annexure
      C Statement of Work dated January 25, 2006 to Development Development
      Agreement dated September 1, 2004 between Magpie Insiders, Inc.
      and mPhase Technologies, Inc.
10.28***
3
rd
Amendment to Software License dated March 10, 2006 between Espial
    and mPhase
      Technologies, Inc.
10.29
Amendment
      to the November 23rd 2004 Mutual NDA dated November 10, 2006
10.30
Common
      Amendment to Statement of Work Velankani and mPhase Technologies, Inc dated
      November 14, 2006
10.31
Content
      License and Service Agreement between Accedo Broadband a Swedish Corp and
      mPhase Technologies, Inc dated December 15, 2006
10.32A
Agreement
      between Rubenstein Investor Relations, Inc and mPhase Technologies, Inc
      dated January 16, 2007
10.32B
Services Agreement
      between Rubenstein Associates, Inc and mPhase Technologies, Inc
      dated January 22, 2007
10.33
Memorandum
      of Understanding between Latens and mPhase Technologies, Inc dated January
      23, 2007
10.34
Amendment
      #4 between Lucent Technologies and mPhase Technologies, Inc dated February
      3, 2007
10.35
First
      Amendment to the Master Work Agreement between Velankani and mPhase
      Technologies, Inc dated February 6, 2007
10.36
Cooperative
      Research Agreement between Rutgers and mPhase Technologies, Inc dated
      February 5, 2007
10.37
Statement
      of Work Espial and mPhase Technologies, Inc dated February 22,
  2007
10.38
Payment
      Agreement between Espial and mPhase Technologies, Inc dated February 22,
      2007
10.39
Reseller Agreement
      between Steeleye Technologies and mPhase Technologies, Inc dated March 28,
      2007
10.40
Consulting
      Agreement between CT Nanobusiness Alliance and mPhase Technologies, Inc.
       dated May 10, 2007
10.41
Escrow Agreement
       between Wilson Sonsini Goodrich & Rosati and mPhase
      Technologies, Inc
      dated May 2007
10.42
Non-Exclusive
      Distribution Agreement between Netdialogue and mPhase Technologies, Inc.
      dated December 13, 2006
10.43
Cooperative
      Research and Development Agreement between US Army Picatinny and mPhase
      Technologies, Inc dated December 20, 2006
95
10.44
Amendment
      # 5 between Lucent Technologies Inc and mPhase Technologies, Inc
.
10.45
Private Equity Credit
      Agreement by and between mPhase Technologies, Inc. and Double U Master
      Fund LP. Dated as of June 27, 2007.
21*
List
      of Subsidiaries (incorporated by reference to Exhibit 21 to our
      registration statement
      on Form S-1 filed on June 18, 2001 (file no. 33-63262)).
23.1*
Consents
      of Schuhalter, Coughlin & Suozzo, LLC dated August 31, 1998
  and reference
      to Exhibit 23 to our registration statement on Form 10SB-12G filed
    on October
      16, 1998 (file no. 000-24969)).
23.2*
Consents
      of Schuhalter, Coughlin & Suozzo, LLC dated April 23, 1999
  and Mauriello,
      Franklin & LoBrace, P.C. dated April 23, 1999 (incorporated by
      reference to
      Exhibit 23 to our registration statement on Form 10SB-12G filed on May 6,
      1999 (file
      no. 000-24969)).
23.3*
Consent
      of Schuhalter, Coughlin & Suozzo, LLC dated August 13, 1999 (incorporated
      by reference to Exhibit 23.1 to our registration statement on Form
    SB-2 filed
      on August 13, 1999 (file no. 333-85147)).
23.4
Consent
      of Schuhalter, Coughlin & Suozzo, LLC.
23.5
Consent
      of Rosenberg Rich Baker Berman and Company.
24.1**
Power
      of Attorney (included as a part of the signature page of the initial
      filing of this
Registration
      Statement).
*
Incorporated by reference.
** Previously filed.
***
Portions of such documents have been omitted pursuant to Rule 406 of the
Securities Act of 1933, or Rule 24(b-2) of the Securities Exchange Act of 1934.
Omitted portions of documents have been separately filed with the Securities and
Exchange Commission.
96
Item
17. Undertakings.
1. The undersigned registrant hereby undertakes:
1.
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
2.
 To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
3.
To
reflect in the prospectus any facts or events arising after the effective date
of this registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) promulgated under the Securities Act of 1933
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the Calculation
of Registration Fee" table in this Registration Statement;
4.
To
include any material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material change to
such information in this Registration Statement.
Provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
1.
That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
2.
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
3.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of each issue.
97
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Norwalk, State of
Connecticut, on the 10th day of July 2007.
mPHASE
TECHNOLOGIES, INC.
/s/
Ronald A. Durando
By:
Ronald A. Durando
President
and Chief Executive Officer
98
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature
Title
Date
Necdet F. Ergul
Chairman of the Board of Directors
July 12, 2007
*
Ronald A. Durando
President, Chief Executive Officer
July 12, 2007
*
and Director (Principal Executive Officer)
/s/ Martin S. Smiley
Executive Vice President, Director
July 12, 2007
Chief Financial Officer, and General Counsel
(Principal Financial and Accounting
Officer)
Anthony H. Guerino
Director
July 12, 2007
*
Gustave T. Dotoli
Director and Chief Operating Officer
July 12, 2007
*
Victor Lawrence
Director
July 12, 2007
Abraham Biderman
Director
July 12, 2007
*
By:
/s/ Martin S. Smiley
Martin
S. Smiley
Attorney-in-fact
99