10QSB

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

xQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2006

OR

oTransition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                          to                         

Commission file number - 0-2564

TELESOURCE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	59-3738614
(State or other jurisdiction of Incorporation or organization)	(IRS employer identification no.)
860 Parkview Boulevard, Lombard, Illinois	60148
(Address of principal executive offices)	(Zip code)
(630) 620-4787
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rules 12b-2 of the Act).
Yes o   No x

There were 93,438,140 shares of common stock, par value $0.01 per share, of Telesource International, Incorporated outstanding as of July 31, 2006.

Transitional Small Business Disclosure Format (check one):   Yes o   No x

TELESOURCE INTERNATIONAL, INC.

TABLE OF CONTENTS

		Page No.
PART I. Financial Information
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets - June 30, 2006 (unaudited) and December 31, 2005	3
	Condensed Consolidated Statements of Operations - six months ended June 30, 2006 and 2005 (unaudited)	4
	Condensed Consolidated Statements of Operations - three months ended June 30, 2006 and 2005 (unaudited)	5
	Condensed Consolidated Statements of Comprehensive Loss - for six and three months ended June 30, 2006 and 2005 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows - six months ended June 30, 2006 and 2005 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Controls and Procedures	20
PART II. Other Information
Item 1.	Legal Proceedings	20
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 5.	Other Information	21
Item 6.	Exhibits and reports on 8-K	21
	Signatures	21

2

Part I. Financial Information

Item 1. Financial Statements

TELESOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
as of June 30, 2006 and December 31, 2005

	June 30, 2006			December 31, 2005
	Unaudited
Assets
Current assets:
Cash and cash equivalents	$	1,296,401		477,944
Accounts receivable less allowance for doubful accounts of $38,457 and $26,177 at June 30, 2006 and December 31, 2005, respectively	1,266,591			2,021,136
Accounts receivable - related party	—			10,397
Current portion of net investment in sales-type lease	2,245,247			2,142,552
Prepaid expenses and other current assets	1,645,061			1,320,511
Total current assets	6,453,300			5,972,540
Net investment in sales-type lease — long term	4,242,435			5,391,333
Property, plant, and equipment, net	353,576			566,090
Other assets	37,358			42,358
Total assets	$	11,086,669		11,972,321
Liabilities and Stockholders’ Deficit
Current liabilities:
Notes payable - related party	$	2,730,000		—
Current portion of long-term debt	10,283,432			3,131,938
Accounts payable	632,489			1,051,622
Accounts payable — related party	215,949			133,289
Accrued expenses	1,346,614			1,674,919
Other current liabilities	82,860			22,739
Total current liabilities	15,291,344			6,014,507
Long-term debt	5,625,278			14,201,531
Total liabilities	20,916,622			20,216,038
Stockholders’ deficit:
Convertible Preferred Stock, $0.01 par value authorized 50,000,000 shares, none issued and outstanding at June 30, 2006 and December 31, 2005.
Common stock, $0.01 par value. Authorized 100,000,000 shares, 93,438,140 issued at June 30, 2006 and December 31, 2005.	934,381			934,381
Additional paid-in capital	50,352,180			50,352,181
Accumulated deficit	(60,995,847		)	(59,448,751	)
Accumulated comprehensive income (loss)	(120,667		)	(81,528	)
Total stockholders’ deficit	(9,829,953		)	(8,243,717	)
Total liabilities and stockholders’ deficit	$	11,086,669		11,972,321

See accompanying notes to condensed consolidated financial statements.

3

TELESOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)
Six months ended June 30, 2006 and 2005

	2006			2005
Revenues:
Service fees — power generation plant	$	2,051,652		1,843,244
Service Fees — related party	—			1,833
Rental income	956			—
Finance lease revenue	333,797			427,311
Construction revenues	—			1,114,573
Gross revenues	2,386,405			3,386,961
Costs and expenses:
Operation and maintenance costs - power generation plant	1,605,009			1,594,268
Costs of service	—			80,788
Provision for uncollectible accounts	12,280
Construction costs	—			1,033,889
Construction costs — related party	—			587
Cost of revenues	1,617,289			2,709,532
Gross profit	769,116			677,429
Operating expenses:
Salaries and employee benefits	448,112			903,162
Occupancy and equipment	104,681			158,639
General and administrative	1,069,405			1,694,160
Total operating expenses	1,622,198			2,755,961
Operating loss	(853,082		)	(2,078,532	)
Other income (expense):
Interest expense, net	(630,969		)	(631,745	)
Other income/(expense), net	118,661			93,600
Total other expense	(512,308		)	(538,145	)
Loss before income taxes	(1,365,390		)	(2,616,677	)
Income tax expense(benefit/	181,706			(13,104	)
Net loss	(1,547,096		)	(2,603,573	)
Net loss to common stockholders	$	(1,547,096	)	(2,603,573	)
Basic and diluted net loss per share	(0.02		)	(0.05	)
Weighted average shares outstanding	93,438,140			54,900,836

See accompanying notes to condensed consolidated financial statements.

4

TELESOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)
Three months ended June 30, 2006 and 2005

	2006			2005
Revenues:
Service fees — power generation plant	$	1,134,531		855,087
Service Fees — related party	—			2,368
Rental income	956			—
Finance lease revenue	160,776			208,081
Construction revenues	—			734,228
Gross revenues	1,296,263			1,799,764
Costs and expenses:
Operation and maintenance costs - power generation plant	667,706			804,056
Costs of service	—			35,981
Provision for uncollectible accounts	12,280			—
Construction costs	—			764,965
Construction costs — related party	—			(31,387	)
Cost of revenues	679,986			1,573,615
Gross profit	616,277			226,149
Operating expenses:
Salaries and employee benefits	270,532			472,549
Occupancy and equipment	49,174			79,180
General and administrative	356,670			832,941
Total operating expenses	676,376			1,384,670
Operating loss	(60,099		)	(1,158,521	)
Other income (expense):
Interest expense, net	(336,763		)	(309,899	)
Other income, net	49,116			67,085
Total other income/(expense)	(287,647		)	(242,814	)
Loss before income taxes	(347,746		)	(1,401,335	)
Income tax expense(benefit)	134,290			(13,104	)
Net loss	(482,036		)	(1,388,231	)
Net loss to common stockholders	$	(482,036	)	(1,388,231	)
Basic and diluted net loss per share	(0.01		)	(0.02	)
Weighted average shares outstanding	94,438,140			59,588,038

See accompanying notes to condensed consolidated financial statements.

5

TELESOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss (unaudited)
Six months ended June 30, 2006 and 2005

	Six Months
	Ended June 30,
	2006		2005
Net Loss	(1,547,096	)	(2,603,573	)
Other comphensive loss:
Foreign currency translation adjustment	(39,139	)	(31,655	)
Comprehensive loss	(1,586,235	)	(2,635,228	)

See accompanying notes to condensed consolidated financial statements.

TELESOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss (unaudited)
Three months ended June 30, 2006 and 2005

	Three Months
	Ended June 30,
	2006		2005
Net Loss	(482,036	)	(1,388,231	)
Other comphensive loss:
Foreign currency translation adjustment	20,344		(23,988	)
Comprehensive loss	(461,692	)	(1,412,219	)

See accompanying notes to condensed consolidated financial statements.

6

TELESOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 2006 and 2005

	2006			2005
Cash flows from operating activities:
Net loss	$	(1,547,096	)	(2,603,573	)
Adjustments to reconcile net loss to net cash used in operating activities cash used in operating activities:
Depreciation	115,363			188,626
(Gain)/Loss on sale or disposal of fixed assets	(58,795		)	5,056
Provision for uncollectible accounts	12,280			—
Changes in assets and liabilities:
Receivables	742,265			1,369,036
Receivables - related party	10,397			—
Prepaid expenses and other current assets	(324,550		)	64,872
Costs and estimated earnings in excess of billings	—			1,218,911
Net investment in sales-type lease	1,046,203			952,687
Other assets	5,000			(21,453	)
Accounts payable	(419,133		)	(1,844,361	)
Accounts payable - related party	82,660			521,318
Accrued expenses	(328,305		)	(773,754	)
Accrued loss on contracts in progress	—			(1,489,154	)
Billings in excess of cost and estimated earnings	—			(100,439	)
Other liabilities	60,124			—
Net cash used in operating activities	(603,587		)	(2,512,228	)
Cash flows from investing activities:
Proceeds from sale of equipment	225,295			—
Capital expenditures	(69,353		)	(43,577	)
Net cash provided by (used in) investing activities	155,942			(43,577	)
Cash flows from financing activities:
Proceeds from borrowings - related party	2,730,000			—
Principal payments on borrowings	(1,424,759		)	(4,084,871	)
Principal payments on borrowings - related party	—			(1,500,000	)
Proceeds from sale of common stock	—			7,093,274
Net cash provided by financing activities	1,305,241			1,508,403
Effect of exchange rate changes on cash	(39,139		)	(31,655	)
Net increase/(decrease) in cash and cash equivalents	818,457			(1,079,057	)
Cash and cash equivalents at beginning of period	477,944			1,972,729
Cash and cash equivalents at end of period	$	1,296,401		893,672
Supplemental disclosure:
Cash paid during the year for interest	$	566,705		485,755
Cash paid during the year for income taxes	28,026			—

See accompanying notes to condensed consolidated financial statements.

7

TELESOURCE INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Basis of Presentation

The interim condensed consolidated financial statements and notes thereto of Telesource International, Inc. and its subsidiaries (“Telesource” or the “Company”), have been prepared by management without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, the Company believes that the disclosures are adequate to make the information presented not misleading. The statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. All such adjustments are of a normal and recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s 2005 Annual Report on Form 10-KSB. The results of operations for the interim periods are not necessarily indicative of the results for any subsequent quarter or the entire fiscal year ending December 31, 2006.

Reclassifications

Certain prior period balances have been reclassified in the condensed consolidated financial statements to conform to current year presentation. These reclassifications had no effect on the reported net loss.

2.Description of Business

Telesource has three main operating segments: i) power generation, ii) construction of power plants and construction services and iii) brokerage of goods and services. The Company was incorporated in Delaware in 1994 and was formed to facilitate various intra-corporate activities and, until July 1999, was a wholly owned subsidiary of Sayed Hamid Behbehani & Sons Co. W.L.L. (“SHBC”), a Kuwait-based civil, electrical and mechanical construction company. Stockholders of SHBC currently control over 95.3% of the Company’s shares. Telesource common stock currently trades on the “pink sheets” under the ticker symbol “TSCI.”

The Company conducts its operations through the parent Company and two subsidiaries located in four geographic locations. Telesource International located in Lombard, Illinois U.S.A. is the Company’s headquarters where it also operates a small service for the procurement, export and shipping of U.S. fabricated products for use by the Company’s subsidiaries or for resale to customers outside of the mainland. The Company’s subsidiary, Telesource Fiji, Ltd., is located on the island of Fiji where it maintains and operates diesel fired electric power generation plants for the sale of electricity in the country. Additionally, the Company also is attempting to develop future construction and other energy related business activities in Fiji. The Company’s Mariana subsidiary, Telesource CNMI, Inc., is on the island of Tinian, an island in the Commonwealth of Mariana Islands (U.S. Territory), the Company operates a diesel fired electric power generation plant for the sale of electricity to the local power grid. In Saipan, the Company maintains offices for coordinating marketing and development activities in the region and is responsible for all operations including the development of future construction projects and energy conversion opportunities in the region.

The Company was previously engaged independently in the construction of airports, radio towers and single family homes. The Company’s new strategy, effective in 2006, will be to engage in construction activities in partnership with SHBC.

8

3.Liquidity and Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the fiscal years of 1998 through 2005, we experienced significant operating losses with corresponding reductions in working capital and net worth. Specifically, the Company incurred a net loss of approximately $1.5 million for the six months ended June 30, 2006 and losses of $5.4 million and $17.5 million for the years ended December 31, 2005 and 2004, respectively. As of June 30, 2006, the Company’s current liabilities exceeded its current assets by $8.8 million. The Company relies heavily on equity financing from SHBC, a related party, and bank loans to support its operations. The Company’s ability to refinance its existing bank debt is critical to provide funding to satisfy the Company’s obligations as they mature. As of June 30, 2006 the Company had total outstanding debt of $18.6 million of which $13.0 million is due in the next twelve months. As of June 30, 2006 the Company had an accumulated deficit of $61.0 million and total stockholders’ deficit of $9.8 million.

The Company’s net working capital deficiency, total debt, recurring losses and negative cash flows from operations raise substantial doubt and questions about the Company’s ability to continue as a going concern.

The Company has and expects to continue to seek support from its principal stockholder, SHBC, for its operations, for working capital needs, debt repayment, and business expansion as may be required. SHBC continues to provide funding for operations, including debt payments that are necessary through either stock purchases or direct loans. SHBC, through its related affiliates, has provided $2,730,000 in loans during the first half of 2006, and an additional $240,000 subsequent to the second quarter period end. It is the Company’s plan to convert these loans to equity upon authorization for issuance of additional shares. Furthermore, SHBC has agreed or has provided either a guarantee or letters of credit covering all of the company’s loans from non-related parties. The Company plans to raise an aggregate of approximately $4.4 million of funding from its principle shareholder, SHBC and its affiliates, in 2006. As of July 31, 2006 the Company has received $2.9 million of these anticipated funds through loans with SHBC related companies. In addition, management expects to have shareholders increase the authorized number of common stock shares at its 2006 annual general meeting. Upon obtaining the increase share authorization, management expects to convert the funds it received in 2006 from debt into equity.

To address the goingconcern issue, management has implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position Telesource for profitable operations by also increasing revenues. Management has received and plans to continue to obtain funds from SHBC through loans or the sales of the Company’s stock. Management improved its cash position during 2006 through additional debt financing. The Company is seeking new business opportunities and revenue growth in the construction industry with its partnership with SHBC. However, no assurance can be given that such increased revenues will be achieved. The condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the classifications of liabilities that might be necessary should we be unable to continue as a going concern.

While Telesource believes it has sufficient financing for its current working capital needs, there can be no assurance that Telesource’s present capital and financing will be sufficient to finance future operations. There can be no assurance that Telesource will be successful in its efforts raising capital in the future. If Telesource sells additional shares of common stock to raise funds, the terms and conditions of the issuances and any dilutive effect may have an adverse impact on the existing stockholders. If additional financing beyond current levels becomes necessary, there can be no assurance that the financing can be obtained on satisfactory terms, if at all. In this event, Telesource could be required to restrict or cease its operations.

9

4.Stock Options

In 2005, the Company accounted for its fixed plan stock options under the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. As such, compensation expense would be recorded on the date of grant and amortized over the period of service only if the current market value of the underlying stock exceeded the exercise price. No stock-based employee compensation cost is reflected in net losses, as each option granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

The Company adopted SFAS No. 123R, “Share-Based Payment,” as of January 1, 2006, using the modified prospective application. Under this method, all equity-based compensation awarded after the adoption date will be determined under the fair value provision of SFAS No. 123R. Additionally, for all equity-based compensation awarded prior to the adoption date, compensation for the portion of awards for which the requisite service is performed after the adoption date is recognized as service is rendered.

There was no stock based compensation granted in the six months ended June 30, 2006 and 2005.

5.Accounts Receivable

Accounts receivable were comprised of the following:

	June 30,		December 31,
	2006		2005
Service Fees - Power Production	$	1,262,921	$	741,354
Construction	3,670		1,279,782
	$	1,266,591	$	2,021,136

As of June 30, 2006 the accounts receivable balance from Commonwealth Utilities Corporation (CUC), the major power production customer of TCNMI, increased $360,990 or 78.4% to $821,605 from the December 31, 2005 balance of $460,615. This accounts receivable balance represents the total amount billed for fixed and variable service fees related to power production since October 2005. All of these amounts, net of a credit for maintenance supplies received and applied of $225,000, remain outstanding at June 30, 2006.

10

6.Long-term debt:

	June 30,	December 31,
	2006	2005
Ernil Continental SA (related party) with $440,000 due January 4, 2007,$346,500 due February 10, 2007, $121,000 due March 13, 2007, $192,500 due April 14, 2007, $71,500 due May 15, 2007 and $330,000 due June 12, 2007. These related party loans accrue interest at an annual rate of 6%. Interest is paid upon maturity.	1,501,500
Halbarad Group Ltd (related party) with $440,000 due January 4, 2007, $283,500 due February 10, 2007, $99,000 due March 13, 2007, $157,500 due April 14, 2007, $58,500 due May 15, 2007 and $270,000 due June 12, 2007. These related party loans accrue interest at an annual rate of 6%. Interest is paid upon maturity.	1,228,500
Bank of Hawaii loan, due in quarterly principal installments of $118,750 and interest payable monthly at prime with the loan maturing on June 3, 2007, secured by an irrevocable standby letter of credit for $625,000 issued by Bank of New York on behalf of SHBC.	473,467	710,967
Bank of Hawaii loan, due in quarterly principal installments of $37,491 and interest payable monthly at prime with the loan maturing on June 3, 2007, secured by an irrevocable standby letter of credit for $625,000 issued by Bank of New York on behalf of SHBC.	149,965	224,947
Commercial Bank of Kuwait loan, restructured during 2003, due in monthly installments of $180,000 plus interest, from February 4, 2004 through January 4, 2009, with a final payment of $2.2 million on February 4, 2009. The note bears interest at LIBOR plus 3%. The loan is guaranteed by SHBC and two shareholders of SHBC. In the event the Company defaults on one installment payment, the entire loan and accrued interest become due and payable.	7,780,000	8,860,000
Arab Banking Corporation Loan Facility with interest payments due in six month periods (September 30, 2006 and March 31, 2007), and principal balance due March 31, 2007. Interest is charged at 1.25% plus LIBOR. Guaranteed by Al Ahli Bank of Kuwait.	7,500,000	7,500,000

11

ANZ loan due on July 17, 2007 with monthly principal and interest payments of $2,000 collateralized by automobiles. Interest is charged at 8.0%. This was paid in full April 30, 2006.	0		28,227
VB Holdings Motor Vehicle due on September 24, 2006 with monthly principal and interest payments of $1,000. Interest is charged at 7.75%.	5,278		9,328
Total notes payable	18,638,710		17,333,469
Less current portion	13,013,432		3,131,938
Long-termportion	$	5,625,278	14,201,531

During October 2005, the Company entered into a credit facility agreement up to approximately FJD350,000 (approximately $196,000 USD at June 30, 2006) with Australia and New Zealand Banking Group Limited (“ANZBGL”). Interest will be charged at the rate of 7.75% per annum. This facility is revolving and is subject to annual review. Also, in addition to the revolving credit facility, the Company entered into an FJD $200,000 (approximately $112,000 USD at June 30, 2006) master lease agreement to purchase motor vehicles and a Visa Business Credit Card facility of FJD 20,000 (approximately $11,000 USD at June 30, 2006). As of June 30, 2006 the Company has not drawn upon the credit facility or the credit card facility. As noted above, the Company also has no balance outstanding at June 30, 2006 from the Master Lease Program.

7.Stockholders Equity

Preferred Stock

The Company has 50 million shares of Series A Cumulative Convertible Preferred Stock (The Preferred Shares) authorized. None of these Preferred Shares are issued nor outstanding as of June 30, 2006. Holders of the Preferred Shares are entitled to receive cumulative cash dividends at the annual rate of 6.5%. The Preferred Shares have no voting rights and rank senior as to dividends and upon liquidation to the common stock.

Common Stock

As of June 30, 2006 and December 31, 2005, 93,438,140 shares of the Company’s common stock were issued and outstanding. During the first half of 2006, no additional shares were issued.

8.Computation of Net Loss Per Share

Basic and diluted net loss per common share are presented in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share (“FAS 128”), for all periods presented. In accordance with FAS 128, basic and diluted net loss per common share has been computed using the weighted-average number of shares of common stock outstanding during the period. Shares associated with stock options, stock warrants, and convertible debt are not included because the inclusion would be anti-dilutive (i.e., reduce the net loss per share). The total numbers of such shares excluded from diluted net loss per common share were 3,224,999 at June 30, 2006 and 2005.

12

9.Commitments and Contingent Liabilities

On May 1, 2005, the Company entered into a sublease with Computhink, Inc., a related party, for a term of two years. The sublease requires a base rental amount of $5,332 per month which includes rent and reception services.

The Company is involved in various litigation proceedings arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

Telesource previously completed negotiations over the final billing for the West Tinian Airport Project (“WTA”). The Company had a continuing warranty obligation for three years from the date of final acceptance, which was December 3, 2003 and for which there were no material claims.

The Company, in 1999 was awarded a contract to build 45 housing units for the Northern Marina Housing Agency, a government unit. The houses were built and subsequently occupied. The Northern Marianas Housing Corporation has filed a lawsuit against Telesource and two other parties for $3.0 million in damages related to this project. These claims involve allegations of various construction defects. The Company estimates that, if the plaintiff is successful, the Company may have an estimated liability in the range of $300,000 to $650,000. The Company accrued a $300,000 estimated loss in 2004 which continues to be reflected under accrued expenses as of June 30, 2006 and December 31, 2005. Telesource has denied any liability and will aggressively defend itself to dismiss these claims.

Telesource’s power generation activities involve significant risks of environmental damage, equipment damage and failures, personal injury and fines and costs imposed by regulatory agencies. Though management believes its insurance programs are adequate, if a liability claim is made against it, or if there is an extended outage or equipment failure or damage at Telesource’s power plant for which it is inadequately insured or subject to a coverage exclusion, and Telesource is unable to defend against these claims successfully or obtain indemnification or warranty recoveries, Telesource may be required to pay substantial amounts, which could have a materially adverse effect on its financial condition. Although the equipment is covered under its insurance, the Company is liable for the deductible of 5,000,000 FJD (approximately $2,802,549 USD at June 30, 2006).

Telesource offers warranties on its construction services and power generating plants. Telesource does not maintain any material warranty reserves because these warranties are usually backed by warranties from its vendors. Should Telesource be required to cover the cost of repairs not covered by the warranties of Telesource’s vendors or should one of Telesource’s major vendors be unable to cover future warranty claims, Telesource could be required to outlay substantial funds, which could harm its financial condition.

The Company has an agreement with the Commonwealth of the Northern Mariana Islands to manage one of their power plants. In accordance with Change Order No. 3 of this agreement, the Company is required to upgrade the power distribution system in certain areas of the Tinian Island. The Company is responsible for the costs of the upgrade including labor and material. The Company estimates the cost of this upgrade to be approximately in the range of $800,000 to $1,300,000 and to be substantially completed in 2006.

The Company has commitments to provide services under its construction contracts, some of which cover a multi year period and the Company has commitments for the operation of power stations for up to another 18 years.

13

10.Related Party Transactions — Not described Elsewhere

Certain of the Company’s executive officers, directors, and major stockholders are also owners, officers, and/or directors of SHBC located in Kuwait. SHBC is a civil, electrical, and mechanical engineering firm and construction contractor with 750 employees and over 30 years of experience. SHBC and its affiliates were the sole stockholder of Telesource International prior to July 1999 and as of June 30, 2006 owned approximately 95.3% of the common stock outstanding. Additionally, SHBC and its majority stockholders, Fouad Behbehani and Nasrallah Behbehani, have signed as guarantors on Telesource CNMI’s promissory note with the Commercial Bank of Kuwait, New York Branch. SHBC and its majority stockholders have also signed as guarantors on a $625,000 letter of credit issued to the Bank of Hawaii to secure two installment loans. These credit facilities were used to finance the construction activities on the power plant, the West Tinian Airport expansion project, and to provide financing for other projects.

The Company has obtained loans from SHBC affiliated companies in the amount of $2,730,000 during the first half of 2006.

Additionally, from time to time the Company may hire, on a part time or temporary basis, individuals employed by SHBC to provide assistance to Telesource on certain projects in the Northern Mariana Islands.

The following table provides a summary of financial information related to all services provided by SHBC to the Company:

	Six Months Ended June 30, 2006		Six Months Ended June 30, 2005
Construction cost	$	—	$	587

The following table summarizes all balances related to transactions with SHBC as of June 30, 2006 and as of December 31, 2005:

	June 30, 2006		December 31, 2005
Accounts payable	$	195,344	$	126,497

Computhink, Inc. charged the Company $53,372 and $49,453 for the six months ended June 30, 2006 and 2005, respectively. The charges by Computhink, Inc. cover rent for office space occupied by the Company and for computer hardware and software provided by Computhink, Inc. The Company’s Chief Executive Officer, Nidal Zayed, serves on the Board of Directors for Computhink. The Company owed Computhink $20,605 as of June 30, 2006 and $6,791 at December 31, 2005.

11.Bank Deposits in Excess of FDIC

The Company maintains its cash accounts at numerous financial institutions. Certain of these financial institutions are located in foreign countries which do not have Federal Deposit Insurance Corporation, “FDIC” insurance. Those accounts covered by the FDIC are insured up to $100,000 per institution. As of June 30, 2006, the amount of bank deposits that exceeded or are not covered by the FDIC insurance was $1,365,736.

14

12.Business Segment Information

Telesource has three operating segments: power generation and construction of power plants, trading and construction services. The power generation and construction of power plants segment includes sales-type lease revenues recognized. There were no material amounts of transfers between segments. Any intersegment revenues have been eliminated. The following table sets forth certain segment information for the periods indicated:

	For the Six Months Ended June 30, 2006
	Power Generation and Construction of Power Plants			Trading	Construction	Total
Revenue	$	2,386,406		—	—	2,386,406
Interest expense	630,969			—	—	630,969
Depreciation and amortization	115,363			—	—	115,363
Net income/(loss) to common stockholders	(1,547,096		)	—	—	(1,547,096	)
Total capital expenditures	69,353			—	—	69,353
Total assets	11,072,584			—	14,085	11,086,669

	For the Six Months Ended June 30, 2005
	Power Generation and Construction of Power Plants			Trading		Construction		Total
Revenue	$	2,270,975		1,413		1,114,573		3,386,961
Interest income	—			—		6		6
Interest expense	58,749			—		573,002		631,751
Depreciation and amortization	51,113			—		137,513		188,626
Net income/(loss) to common stockholders	(1,065,278		)	(81,037	)	(1,457,258	)	(2,603,573	)
Total capital expenditures	43,577			—		—		43,577
Total assets	11,627,733			83		4,409,700		16,037,516

15

	For the Three Months Ended June 30, 2006
	Power Generation and Construction of Power Plants			Trading	Construction	Total
Revenue	$	1,296,263		—	—	1,296,263
Interest expense	336,763			—	—	336,763
Depreciation and amortization	33,024			—	—	33,024
Net income/(loss) to common stockholders	(482,036		)	—	—	(482,036	)
Total capital expenditures	54,727			—	—	54,727
Total assets	11,072,584			—	14,085	11,086,669

	For the Three Months Ended June 30, 2005
	Power Generation and Construction of Power Plants			Trading		Construction		Total
Revenue	$	1,063,167		2,368		734,229		1,799,764
Interest income	—			—		—		—
Interest expense	23,385			—		286,514		309,899
Depreciation and amortization	29,722			—		68,186		97,908
Net income/(loss) to common stockholders	(100,419		)	(80,082	)	(1,207,730	)	(1,388,231	)
Total capital expenditures	43,577			—		—		43,577
Total assets	11,627,733			83		4,409,700		16,037,516

The basis used to attribute revenues to individual countries is based upon where the services are provided. The power generation segment includes revenues from the Company’s power station in Fiji and the island of Tinian.

As noted earlier, existing construction projects have been completed and related revenues and costs have ceased.

16

13.Subsequent Events

The Company borrowed an additional $240,000 from SHBC affiliated companies subsequent to June 30, 2006.

14.Change in Accounting Estimate

The Company changed the estimated useful life that is the basis for calculating depreciation expense on certain of its assets. This change was required as a result of evaluating these assets and their estimated future benefit. The estimated life of these assets was previously 120 months or 10 years and these assets had been purchased between 1997 and 2003. As of January 1, 2006, the remaining useful life of these assets was determined to be one year.

The Company determined the net book value of these affected assets as of January 1, 2006 and will depreciate this balance over the next 12 months ending December 31, 2006. The effect of this change resulted in an increase in the operating loss from continuing operations in the amount of approximately $44,000 during the six month period ended June 30, 2006.

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

This Quarterly Report on Form 10-QSB, and in particular the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in Part I, contains forward-looking statements concerning future operations and performance of the Company. Forward-looking statements are subject to market, operating and economic risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from any future performance suggested herein. Factors that may cause such differences include, among others: increased competition, increased costs, changes in general market conditions, changes in the regulatory environment, changes in anticipated levels of government spending on infrastructure, and changes in loan relationships or sources of financing. Such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto included elsewhere herein and 2005 annual consolidated financial statements and notes thereto included in the Company’s Form 10-KSB Annual Report filed with the Securities and Exchange Commission.

Results of Operations for the six months ended June 30, 2006 compared to the six months ended June 30, 2005

Revenues

Service Fees — Power Generation Plant. Service fees — power generation plant increased 11.3% to $2,051,652 from $1,843,244 for the six months ended June 30, 2006 compared to the six months ended June 30, 2005. This increase is due to more energy demand in the Fiji plants. \

As noted in the footnote 5, at June 30, 2006 approximately $821,000 of fixed and variable Service Fees — Power Generation Plant billings to the CUC have been billed but not collected by the Company since October 2005. The CUC has been experiencing financial challenges caused by the increase in fuel prices and a rate structure that had not been sufficient to support the CUC operating costs. Consequently, the CUC implemented a significant rate hike during August of 2006. Management believes that as the CUC begins to collect from these higher rates, we will begin to receive payments on the outstanding balance. Furthermore, the CUC subsequently paid approximately $98,000 to the Company in August, 2006. Management believes that the Company will collect the entire outstanding receivable balance due from the CUC.

17

Finance Lease Revenues. Finance lease revenues decreased 21.9% to $333,797 from $427,311 for the six months ended June 30, 2006 compared to the six months ended June 30, 2005. The decrease is due to the declining balance of minimum lease payments which are amortized over the term of the Tinian power plant contract to yield a constant rate of return.

Construction Revenues. Construction revenues decreased to $0 from $1,114,573 for the six months ended June 30, 2006 compared to June 30, 2005. The decrease was due to the completion of all major construction projects in 2005. The Company did not enter into any new construction contracts during 2005 or the first half of 2006 and has altered its construction strategy to enter into only limited construction projects in partnership with its major investor, Sayed Hamid Behbehani & Sons Co. W.L.L. (‘SHBC”).

Expenses

Operations and Maintenance Costs — Power Generation Plant. Operations and maintenance costs — power generation plant increased 0.1% to $1,605,009 for the six months ended June 30, 2006 from $1,594,268 for the six months ended June 30, 2005 resulting primarily from an engine overhaul in the Fijian power plant.

Construction Costs. Total construction costs decreased to $0 from $1,034,476 for the six months ended June 30, 2006 compared to June 30, 2005. Construction costs include related party activity totaling $0 and $587 for the six months ended June 30, 2006 and 2005, respectively, which were paid to SHBC for goods and materials purchased on the prison project located in Saipan. Construction costs as a percentage of construction revenues were 0.0% and 92.8% for the six months ended June 30, 2006 and 2005, respectively.

Salaries and Employee Benefits. Salaries and employee benefits decreased 50.4% to $448,112 for the six months ended June 30, 2006 from $903,162 for the six months ended June 30, 2005. The decrease resulted from a significantly smaller labor force caused by the completion of all construction projects.

Occupancy and Equipment. Occupancy and equipment expenses decreased 34.0% to $104,681 from $158,639 for the six months ended June 30, 2006 as compared to June 30, 2005. The decrease in occupancy and equipment cost during the first six months of 2006 is attributed to the absence of construction activity and management’s corresponding intention to reduce occupancy and warehouse space

General and Administrative Expenses. General and administrative expenses decreased 36.9% to $1,069,405 for the six months ended June 30, 2006 from $1,694,160 for the six months ended June 30, 2005. The decrease is attributed to a reduction in infrastructure costs resulting from the completion of construction projects as well as cost cutting efforts being directed by management.

Other Expense, Net. Other expense decreased 4.8% to $512,308 for the six months ended June 30, 2006 from $538,145 for the six months ended June 30, 2005. The decrease is primarily attributed to an increase in other income.

Net Loss To common stockholders. Net losses to common stockholders were $1,547,096 for the six months ended June 30, 2006 and $2,603,573 for the six months ended June 30, 2005. The lower net loss during the first half of 2006 versus 2005 derived primarily from lower operating expenses.

Results of Operations for the three months ended June 30, 2006 compared to the three months ended June 30, 2005

Revenues

Service Fees — Power Generation Plant. Service fees — power generation plant increased 32.7% to $1,134,531 from $855,087 for the three months ended June 30, 2006 compared to the three months ended June 30, 2005. This increase is due to more energy demand in the Fiji plants.

Construction Revenues. Construction revenues decreased to $0 from $734,228 for the three months ended June 30, 2006 compared to June 30, 2005. The decrease was due to the completion of all major construction projects in 2005. The Company did not enter into any new construction contracts during 2005 or the first half of 2006 and has altered

18

its construction strategy to enter into only limited construction projects in partnership with its major investor, Sayed Hamid Behbehani & Sons Co. W.L.L. (‘SHBC”).

Finance Lease Revenues. Finance lease revenues decreased 22.7% to $160,776 from $208,081 for the three months ended June 30, 2006 compared to the three months ended June 30, 2005. The decrease is due to the declining balance of minimum lease payments which are amortized over the term of the Tinian power plant contract to yield a constant rate of return.

Expenses

Operations and Maintenance Costs — Power Generation Plant. Operations and maintenance costs — power generation plant decreased 17.0% to $667,706 for the three months ended June 30, 2006 from $804,056 for the three months ended June 30, 2005 resulting from operating efficiencies at both the Saipan and Fijian plants.

Construction Costs. Total construction costs decreased to $0 from $733,578 for the three months ended June 30, 2006 compared to June 30, 2005. Construction costs include related party activity totaling $0 and $(31,387) for the three months ended June 30, 2006 and 2005, respectively, which were paid to SHBC for goods and materials purchased on the prison project located in Saipan. Construction costs as a percentage of construction revenues were 0.0% and 99.9% for the three months ended June 30, 2006 and 2005, respectively.

Salaries and Employee Benefits. Salaries and employee benefits decreased 42.8% to $270,532 for the three months ended June 30, 2006 from $472,549 for the three months ended June 30, 2005. The decrease resulted from a significantly smaller labor force caused by the completion of all construction projects.

Occupancy and Equipment. Occupancy and equipment expenses decreased 37.9% to $49,174 from $79,180 for the three months ended June 30, 2006 as compared to June 30, 2005. The decrease in occupancy and equipment cost during the first three months of 2006 is related to the operation of the Saipan office.

General and Administrative Expenses. General and administrative expenses decreased 57.2% to $356,670 for the three months ended June 30, 2006 from $832,941 for the three months ended June 30, 2005. The decrease is attributed to a reduction in infrastructure costs resulting from the completion of construction projects as well as cost cutting efforts being directed by management.

Other Expense, Net. Other expense increased 18.5%to $287,647 for the three month period ended June 30, 2006 from $242,814 through the three month period ended June 30, 2005 due partially to interest expense.

Net Loss To common stockholders. Net losses to common stockholders were $482,034 for the three months ended June 30, 2006 and $1,388,231 for the three months ended June 30, 2005. The lower net loss during the first half of 2006 versus 2005 was driven by lower costs of revenues and operating expenses.

During the fiscal years of 1998 through 2005, we experienced significant operating losses with corresponding reductions in working capital and net worth. Specifically, the Company incurred a net loss of $1.5 million for the six months ended June 30, 2006 and losses of $5.4 million and $17.5 million for the years ended December 31, 2005 and 2004, respectively. As of June 30, 2006, the Company’s current liabilities exceeded its current assets by $8.8 million. The Company relies heavily on equity financing from SHBC, a related party, and bank loans to support its operations. The Company’s ability to refinance its existing bank debt is critical to provide funding to satisfy the Company’s obligations as they mature. As of June 30, 2006 the Company had total outstanding debt of $18.6 million of which $13.0 million is due in the next twelve months. As of June 30, 2006 the Company had an accumulated deficit of $61.0 million and total stockholders’ deficit of $9.8 million.

The Company has and expects to continue to seek support from its principal stockholder, SHBC, for its operations, for working capital needs, debt repayment, and business expansion as may be required. SHBC continues to provide funding for operations, including debt payments that are necessary through either stock purchases or direct loans. SHBC, through its related affiliates, has provided $2,730,000 in loans during the first half of 2006 and an additional $240,000 in loans subsequent to June 30, 2006. It is the Company’s plan to convert these loans to equity upon authorization for issuance of additional shares. Furthermore, SHBC has agreed or has provided either a guarantee or letters of credit covering all of the company’s loans from non-related parties.

19

To address the goingconcern issue, management has implemented financial and operational restructuring plans designed to improve operating efficiencies, reduce and eliminate cash losses and position Telesource for profitable operations by also increasing revenues. Management has received and plans to continue to obtain funds from SHBC through loans or the sales of the Company’s stock. Management improved its working capital during 2005 through additional debt and equity financing. The Company is seeking new business opportunities and revenue growth in the construction industry with its partnership with SHBC. However, no assurance can be given that such increased revenues will be achieved. The condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the classifications of liabilities that might be necessary should we be unable to continue as a going concern.

While Telesource believes it has sufficient financing for its current working capital needs, there can be no assurance that Telesource’s present capital and financing will be sufficient to finance future operations. There can be no assurance that Telesource will be successful in its efforts raising capital in the future. If Telesource sells additional shares of common stock to raise funds, the terms and conditions of the issuances and any dilutive effect may have an adverse impact on the existing stockholders. If additional financing beyond current levels becomes necessary, there can be no assurance that the financing can be obtained on satisfactory terms, if at all. In this event, Telesource could be required to restrict or cease its operations.

Item 3.Controls and Procedures

(a)Evaluation of disclosure controls and procedures.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-QSB, our Interim Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)Changes in internal controls.

There were no changes in our internal control in the second quarter.

Part II — Other Information

Item 1.Legal Proceedings

As noted in the 12-31-2004 10K, the Company, in 1999 was awarded a contract to build 45 housing units for the Northern Marinas Housing Agency, a government unit. The houses were built and subsequently occupied.

The Northern Marianas Housing Corporation has filed a lawsuit against Telesource and two other parties for $3.0 million in damages related to this project. The Company estimates that, if the plaintiff is successful, the Company may have an estimated liability in the range of $300,000 to $650,000. These claims involve

20

allegations of various construction defects. The Company recorded a $300,000 estimated loss during 2004 and continues to reflect this liability on its balance sheet. Telesource has denied any liability and will aggressively defend itself to dismiss these claims.

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

None

Item 3.Defaults Upon Senior Securities

None

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

None

Item 5.Other

None

Item 6.EXHIBITS AND REPORTS ON FORM 10QSB.

(a)Exhibits.

Exhibit 31.1	Certificate of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
Exhibit 31.2	Certificate of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
Exhibit 32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2004.
Exhibit 32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2004.

SIGNATURES

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

	Telesource International, Inc.
	(Registrant)
Date September 7, 2006	/s/ Nidal Zayed
	Nidal Zayed
	Acting President and Chief Executive Officer
	/s/ Greg Grosvenor
	Greg Grosvenor
	Chief Financial Officer

21

Index to Exhibits

Exhibits
31.1	Certificate of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
31.2	Certificate of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
32.1	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Executive Officer — Corporation
32.2	Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code — Chief Financial Officer — Corporation

22

EX-31.1

Exhibit 31.1

SIGNATURES

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Nidal Zayed, certify that:

1.I have reviewed this quarterly report on Form 10-QSB of Telesource International, Inc..;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: September 7, 2006	/s/ Nidal Zayed
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Greg Grosvenor, certify that:

1.I have reviewed this quarterly report on Form 10-QSB of Telesource International, Inc..;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: September 7, 2006	/s/ Greg Grosvenor
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2004

I, Nidal Zayed, President and Chief Executive Officer, in connection with the Report on 10-QSB of Telesource International, Inc. for the quarter ended June 30, 2006, (the “Report”) hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2004, that to my knowledge:

1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Telesource International, Inc.

/s/ Nidal Zayed

Nidal Zayed

President and Chief Executive Officer

Dated: September 7, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2004

I, Greg Grosvenor, Chief Financial Officer, in connection with the Report on 10-QSB of Telesource International, Inc. for the quarter ended June 30, 2006, (the “Report”) hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2004, that to my knowledge:

1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Telesource International, Inc.

/s/ Greg Grosvenor

Greg Grosvenor

Chief Financial Officer

Dated: September 7, 2006