eTEL10QSB

Item 1. Financial Statements

ETELCHARGE.COM, INC.
(A Development Stage Company)
BALANCE SHEETS
(unaudited)

		June 30,			December 31,
		2006			2005

ASSETS
Current assets:
Cash	$	2,030		$	13,671

Fixed assets, net of accumulated depreciation of $49,469 and $48,248		4,970			5,141
Deposits		1,980			1,980

Total assets	$	8,980		$	20,792

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Short term debt- related parties	$	6,117		$	6,117
Accrued expenses		111,140			56,284
Payroll tax obligation		154,437			143,970
Accounts payable		96,498			99,942
Note payable to shareholder		337,125			284,546
Short term debt		2,835			2,920
Pending stock subscriptions		-			5,213

Total current liabilities		708,152			598,992

Long term note payable		86,301			-

Total liabilities		794,453			598,992

Commitments		-			-

Stockholders' deficit:
Common stock, $.003 par value, 250,000,000 shares authorized,
129,738,746 and 128,921,706 shares issued and outstanding		389,216			386,765
Additional paid in capital		11,391,134			11,340,625
Deficit accumulated during the development stage		(12,565,823	)		(12,305,590	)
Total stockholders' deficit		(785,473	)		(578,200	)

Total liabilities and stockholders' deficit	$	8,980		$	20,792


ETELCHARGE.COM, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)

														June 7, 1999
	Six months ended						Three months ended							(Inception) to
	June 30,						June 30,							June 30,
		2006			2005			2006			2005			2006

Revenues	$	16,513		$	12,488		$	8,992		$	5,179		$	35,822

Operating expenses		261,428			1,943,273			138,828			30,881			12,592,449

Net loss from operations		(244,915	)		(1,930,785	)		(129,836	)		(25,702	)		(12,556,627	)

Other income		-			-			-			-			57,438

Interest expense		(15,318	)		(8,933	)		(8,771	)		(1,735	)		(66,634	)

Net loss	$	(260,233	)	$	(1,939,718	)	$	(138,607	)	$	(27,437	)	$	(12,565,823	)

Basic and diluted net loss per share	$	(0.00	)	$	(0.02	)	$	(0.00	)	$	(0.00	)

Weighted average shares outstanding		129,698,214			105,367,823			129,738,746			119,366,541

ETELCHARGE.COM, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
								June 7, 1999
	Six months ended							(Inception) to
	June 30,							June 30,
		2006			2005			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(260,233	)	$	(1,939,718	)	$	(12,565,823	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization and depreciation		1,221			1,756			112,469
Issuance of common stock for services		27,000			1,841,200			7,864,531
Imputed interest		11,747			6,380			23,761
Changes in:
Other assets		-			(100	)		(1,980	)
Accounts payable		(3,445	)		16,142			96,498
Accrued expenses		63,858			1,277			2,779,281
Payroll tax obligation		10,466			2,543			154,437
Net cash used in operating activities		(149,386	)		(70,520	)		(1,536,826	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(1,050	)		-			(49,639	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock		-			6,150			1,119,397
Net loan proceeds from shareholder		52,579			60,577			343,242
Proceeds from notes payable		86,301			-			89,221
Payments on note payable		(85	)		-			(85	)
Payment on payable to related party for asset purchase		-			-			(116,500	)
Cash received on pending stock subscriptions		-			2,005			153,220
Net cash provided by financing activities		138,795			68,732			1,588,495
NET CHANGE IN CASH AND CASH EQUIVALENTS		(11,641	)		(1,788	)		2,030
CASH AND CASH EQUIVALENTS, beginning of period		13,671			3,255			-
CASH AND CASH EQUIVALENTS, end of period	$	2,030		$	1,467		$	2,030

Supplemental schedule of non-cash financing activities:
Issuance of common stock in exchange for
receivable from shareholder	$	-		$	-		$	1,000
Issuance of payable to related party in exchange
for proprietary rights		-			-			116,500
Property and equipment acquired through
issuance of common stock		-			-			4,800
Issuance of common stock for accrued compensation		9,000			2,659,141			2,668,141
Issuance of common stock for pending stock
subscriptions		5,213			148,007			153,220
Supplemental cash flow disclosures:
Cash paid for income taxes		-			-			-
Cash paid for interest		2,225			127			7,950

ETELCHARGE.COM, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 1-BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of Etelcharge.com, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Etelcharge’s Annual Report filed with the SEC on Form 10-KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for 2005 as reported in the 10-KSB have been omitted.

NOTE 2 - ACCRUED COMPENSATION AND PENDING STOCK SUBSCRIPTIONS

During the quarter ended March 31, 2006, Etelcharge issued 417,040 shares of common stock valued at $5,213 to several investors under pending stock subscriptions. There are no stock subscriptions outstanding at June 30, 2006.

During the quarter ended March 31, 2006, Etelcharge issued 100,000 shares of common stock valued at $9,000 to an employee for accrued compensation. As of June 30, 2006, there were 753,126 shares of common stock valued at $72,682 accrued for compensation and $33,333 accrued for cash compensation.

NOTE 3 - NOTE PAYABLE

On March 31, 2006, Etelcharge signed a promissory note to American Home Market in the amount of $250,000. Of this amount, the lender advanced $86,301 during the quarter ended June 30, 2006. The note provides for an interest rate of 8% interest per annum, with interest only monthly payments commencing February 1, 2007. The entire principal is due in full on December 1, 2007. Interest of $1,375 was accrued as of June 30, 2006.

NOTE 4 - EQUITY

During the quarter ended March 31, 2006, Etelcharge issued 300,000 shares of common stock valued at $27,000 for services.

Item 2. Plan of Operation.

Plan of Operation contains various “ forward looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risk and uncertainties. Certain statements included in this Form 10-QSB, including, without limitation, statements related to anticipated cash flow sources and uses, and words included but not limited to “ anticipates”, “believes”, “plans”, “expects”, “continue”, “will”, and similar expressions are intended to identify forward- looking statements within the meaning of section 27A of the Securities Act of 1933 and Section 21E of the Securities act of 1934 regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operation results and financial position. We caution readers that a variety of factors could cause our actual results to differ materially from the anticipated results or other matters expressed in forward-looking statements.

The following information should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Form 10-QSB

We lost $260,233 during the six months ended June 30, 2006, a decrease of $1,679,485 compared to a net loss of $1,939,718 for the six months ended June 30, 2005. The decreased loss primarily resulted from fewer non-cash charges associated with the issuance of common stock for services in 2006 compared to 2005.

We lost $138,607 during the three months ended June 30, 2006, an increase of $111,170 compared to a net loss of $27,437 for the three months ended June 30, 2005. The increased loss primarily resulted from increased professional fees related to public company reporting, increased interest expense due to new borrowings and imputed interest due to shareholder, and the initial cost of a new billing and collection services agreement with AT&T.

Our ability to operate profitably depends on generating sales and achieving sufficient gross profit margins. We cannot assure you that we will achieve or maintain profitable operations in the future

PLAN OF OPERATION

We were organized in June 1999 and are in the development stage. Investors should note that our auditor's report for the year ended December 31, 2005, included a paragraph that expressed substantial doubt as to our ability to continue as a going concern. We expect that our revenue will be generated from both online and offline merchants and customers. We will maintain a billing fee of 3% to 4% of the purchase price of the goods or services charged, not including taxes, and an approximate new transaction fee of $.25 per transaction service charge. We plan to maintain a five percent 5% to ten percent 10% service charge to be added to total charges added to phone bills utilizing our telephone billing option, while limiting purchases to sixty dollars $60 per month. Our cost for phone billing are comprised of Billing Concepts 6% of billed revenue and Local Phone Company charges, which vary from $0.45 cents up to $1.65. Billing Concepts will earn this fee for providing the bills that the local telephone companies will include in their monthly billing statements to their customers. Additional revenue will be generated from our credit card merchant services. We plan to charge merchants a monthly fee ranging from $29 to $89 per month for leasing our credit card machines, a discount fee ranging from 1.69% to 3% for credit card processing, a transaction fee of twenty five cents $0.25, and a statement fee ranging from $10 to $15 per month.

In April 2006 we entered into a Billing and Collection Services agreement with AT&T and paid an initial set up fee for the AT&T Southwest region in the amount of $20,000. The final set up fee is an additional $20,000 with a forecasted implementation date of October 2006.

We intend to establish a reserve of 3% of fees due to us from merchants to cover defaults, refusals to pay, disputes and other charge backs due to customer nonpayment. This reserve is larger than that of our competitors, which averages approximately 2% of such fees according to these competitors. We have not made any independent assessment of the sufficiency of the reserve amount, because we have not yet generated on line billing transactions that create receivables due from merchants. Accordingly, although we believe our reserve will be adequate to cover defaults and other charge backs, we cannot give any such assurance. We intend to evaluate this reserve on an ongoing basis to reflect our experience.

We have tested our initial phone billing option with 19 Web merchants, all of which have been integrated into our billing system. Previously, it took a number of months to integrate our merchants, as they were required to write some of the computer code necessary to join our system. Recently, however, we began to provide the code ourselves which we believe will significantly shorten the time necessary for merchants to join our billing system. We expect, but cannot assure, that we will add new Web merchants in 2006, most of who will be signed up through the efforts of our resellers. We currently have three such resellers who are existing Web merchants, authorized agents and a shopping cart software company who are paid a commission of approximately 20% of the revenue generated from new Web merchants referred by them. Our resellers will take a three day training course from us, either online or at our corporate offices, before commencing to market any of our payment options including the new 1.1 and 2.0 versions of our payment options offered to merchants, 900 billing services to Web merchants, or our merchant service options for Visa, MasterCard or American Express. Our agreements with resellers provide 20% commission, a nominal residual fee so long as we retain Web merchants referred by the reseller and are cancelable by either party on 30 days notice to the other.

Commencing with the launch of the 1.1 and 2.0 version telephone billing option, and assuming financing is available, we intend to initiate an online advertising campaign, using mass e-mails to advise online users of our billing service. We also intend to commence at that time an effort to attract resellers through attendance at industry and trade shows and through advertising in trade journals. We are uncertain as to how many resellers we will be able to attract through these efforts.

We also seek to enter into agreements with other online entities, web sites and independent sales and marketing organizations to generate market awareness and usage of our eTelcharge.Com icon. We will also continue to promote our brand through the issuance of press releases to related trade publications, general interest media publications, print media and Internet media.

Over the next two years, we intend to make adjustments and improvements in our product software and marketing efforts. In order to identify the areas that need improvement, we anticipate meeting with online retailers who accepted our initial version and online shoppers to conduct online consumer interviews. In the near term, we will expand our efforts to reach online retailers, focusing upon the larger national retailers. Upon the launch of the 1.1and 2.0 version, assuming funds are available, we will also demonstrate our billing system at industry affiliated trade shows.

The initiation of our plan of operation is dependent upon our raising sufficient working capital to allow us to institute the plan. However, there can be no assurance that we will be successful in doing so. Due to our lack of capital and our need for working capital to continue our business plan, our auditors issued a going concern qualification as part of their audit opinion of our financial statements for the year ended December 31, 2005. We have generated $35,822 in revenue since our inception and since inception through the six months ended June 30, 2006 we incurred a cumulative net loss of $12,565,823 including a net loss of $260,233 for the six months ended June 30, 2006.

On March 31, 2006, Etelcharge executed a promissory note to American Home Market in the amount of $250,000. Of this amount, the lender advanced $86,301 during the quarter ended June 30, 2006. The note provides for an interest rate of 8% interest per annum, with interest only monthly payments commencing February 1, 2007. The entire principal is due in full on December 1, 2007. Interest of $1,375 was accrued as of June 30, 2006.

Prior to this borrowing our operations have been funded solely through the issuance of our common shares and advances from our CEO. Total cash proceeds for the issuance of common shares totaled $1,272,617 from inception through June 30, 2006. In order to institute our business plans we must continue to raise capital, as revenue from operations will be insufficient in the short run to meet our working capital needs. However, we cannot assure that any such capital will be available to us. Based upon our current cash resources, we cannot meet our cash requirements or institute our business plan for more than six months unless we raise additional funds from the sale of our securities, as we have done in the past, or unless our revenue grows significantly.

Item 3. Controls and Procedures

Etelcharge has adopted and implemented internal disclosure controls and procedures designed to provide reasonable assurance that all reportable information will be recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Under the supervision and with the participation of management, including our Chief Executive and Chief Financial Officer, Etelcharge has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of the end of the fiscal quarter covered by this report Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are not effective in timely alerting management to material information relating to us required to be included in our periodic SEC filings because we were unable to properly accrue unpaid compensation expenses. We are continuing our efforts to improve and strengthen our control processes and procedures to fully remedy these deficiencies. Our management and directors will continue to work with our auditors and other outside advisors to ensure that our controls and procedures are adequate and effective. There have been no changes in internal controls or in other factors during or since the end of the fiscal quarter covered by this report that have had a material effect or are reasonably likely to have a material effect on internal controls subsequent to the end of the fiscal quarter covered by this report.

Nevada	75-2847699
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization	Identification No.)

1636 N. Hampton, Suite 270, Desoto, Texas	75115
(Address of principal executive office)	(Zip Code)


	ETELCHARGE.COM, INC.

Date: November 3, 2006	By:	/s/ Carl O. Sherman
		Carl O. Sherman
		Chief Executive Officer


	ETELCHARGE.COM, INC.

Date: November 3, 2006	By:	/s/ Michelle R. Sherman

		Principal Financial Officer