qumi_10q.htm

10-Q 1 qumi_10q.htm QUARTERLY REPORT qumi_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

Form 10-Q

_____________________

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

For the quarterly period ended: September 30, 2010

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

For the transition period from _______ to ________

QUAMTEL, INC.

(Exact name of small business issuer as specified in its charter)

Nevada		000-31757		98-0233452
(State of Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

14911 Quorum Drive, Suite 140, Dallas, Texas 75254

(Address of Principal Executive Office) (Zip Code)

(972) 361-1980

(Issuer’s telephone number, including area code)

Check whether the issuer (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 þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of each of the issuer's classes of common equity as of October 29, 2010 is 21,652,237.

QUAMTEL, INC.

Table of Contents

		Page

Part I – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL INFORMATION		3

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		15

ITEM 3.	QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK		21

ITEM 4T.	CONTROLS AND PROCEDURES		21

Part II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS		22

ITEM 1A	RISK FACTORS		22

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		22

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		22

ITEM 4.	(REMOVED AND RESERVED)		22

ITEM 5.	OTHER INFORMATION		22

ITEM 6.	EXHIBITS		23

SIGNATURES			24

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL INFORMATION

Quamtel, Inc.

Consolidated Balance Sheets

	September 30, 2010			December 31, 2009
ASSETS	(Unaudited)

Current assets:
Cash and cash equivalents	$	80,504		$	94,003
Accounts receivable, net		27,286			30,367
Income tax receivable		11,678			11,678
Inventory		21,870			61,750
Prepaid expenses and deposits		118,567			449,704
Total current assets		259,905			647,502

Restricted cash		150,000			-
Property and equipment, net		523,482			404,472
Intangible assets		4,291,290			2,653,109

TOTAL ASSETS	$	5,224,677		$	3,705,083


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	894,469		$	383,234
Accrued expenses		188,383			113,901
Unearned revenue		330,873			445,347
Advances from related party		708,242			758,781
Stock-based payable		310,000			26,000
Current portion of notes payable		663,834			250,336
Total current liabilities		3,095,801			1,977,599

Noncurrent portion of notes payable		1,058,040			14,496

TOTAL LIABILITIES		4,153,841			1,992,095

Shareholders' equity:
Common stock - $0.001 par value; 200,000,000 shares authorized;
21,577,237 and 18,662,175 shares issued and outstanding at
September 30, 2010 and December 31, 2009, respectively		21,577			18,662
Preferred stock - $0.001 par value; 50,000,000 shares authorized;
no shares issued and outstanding		-			-
Additional paid-in capital		8,299,158			3,624,338
Stock repurchase		(100,000	)		-
Accumulated deficit		(7,149,899	)		(1,930,012	)
Total shareholders' equity		1,070,836			1,712,988

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	5,224,677		$	3,705,083

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

Quamtel, Inc.

Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2010 and 2009

	Three Months						Nine Months
	2010			2009			2010			2009

Revenues	$	484,405		$	496,179		$	1,660,308		$	1,897,100

Cost of sales		419,096			416,086			1,355,694			1,206,289

Gross profit		65,309			80,093			304,614			690,811

Operating expenses:
Compensation, consulting and related expenses		2,427,897			956,386			3,827,279			1,432,192
General and administrative expenses		801,924			377,242			1,411,462			653,442
Depreciation and amortization		36,108			21,391			98,756			57,812
Total operating expenses		3,265,929			1,355,019			5,337,497			2,143,446

Loss from operations before income taxes		(3,200,620	)		(1,274,926	)		(5,032,883	)		(1,452,635	)

Other expense:
Loss on disposition of assets		1,137			-			73,761			-
Interest and financing expense		47,556			11,267			113,242			14,732
Total other expense		48,693			11,267			187,003			14,732

Loss before income taxes		(3,249,313	)		(1,286,193	)		(5,219,886	)		(1,467,367	)

Income tax expense (benefit)		-			-			-			(971	)

Net loss	$	(3,249,313	)	$	(1,286,193	)	$	(5,219,887	)	$	(1,466,396	)


Basic and diluted loss per share:

Loss from operations before income taxes	$	(0.17	)	$	(0.08	)	$	(0.27	)	$	(0.09	)
Income tax expense (benefit)		-			-			-			(0.00	)

Loss per share	$	(0.17	)	$	(0.08	)	$	(0.27	)	$	(0.09	)

Weighted average number of shares outstanding		19,446,625			16,546,275			19,093,158			16,497,090

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

Quamtel, Inc.

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

Nine Months Ended September 30, 2010

	Common Stock						Additional Paid-			Stock			Accumulated
	Shares			Amount			in Capital			Repurchase			Deficit			Total

Balances as of December 31, 2009		18,662,175		$	18,662		$	3,624,338		$	-		$	(1,930,012	)	$	1,712,988

Common stock issued for services		1,215,062			1,215			2,818,296			-			-			2,819,511
Common stock issued for cash		1,665,000			1,665			538,309			-			-			539,974
Common stock issued for domain name acquisition		25,000			25			62,225			-			-			62,250
Common stock issued for Syncpointe acquisition		1,000,000			1,000			2,479,000			-			-			2,480,000
Common stock to be repurchased		-			-			-			(100,000	)		-			(100,000	)
Conversion of stock-based payable to common stock		10,000			10			25,990			-			-			26,000
Partial rescission of common stock originally issued in 2009 for Data Jack acquisition		(1,000,000	)		(1,000	)		(1,249,000	)		-			-			(1,250,000	)
Net loss for the period					-			-			-			(5,219,887	)		(5,219,887	)

Balances as of September 30, 2010		21,577,237		$	21,577		$	8,299,158		$	(100,000	)	$	(7,149,899	)	$	1,070,836

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

Quamtel, Inc.

Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2010 and 2009

	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,219,887	)	$	(1,466,396	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		98,756			57,812
Loss on disposition of assets		73,761			-
Common stock issued for general and administrative expenses		465,000			-
Common stock issued for compensation and consulting expense		2,354,511			810,000
Noncash interest and financing expenses		-			10,500
Changes in operating assets and liabilities net of assets and liabilities acquired:
Accounts receivable		3,080			16,385
Inventory		39,880			-
Prepaid expenses and deposits		331,137			32,087
Income tax payable		-			(971	)
Accounts payable		65,733			104,597
Accrued expenses		74,483			142,804
Stock-based payable		310,000			-
Unearned revenue		(114,474	)		188,109
Net cash used in operating activities		(1,518,020	)		(105,073	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property & equipment		(165,380	)		(188,460	)
Acquisition of intangible assets		(26,577	)		(250,000	)
Increase in restricted cash		(150,000	)		-
Net cash used in investing activities		(341,957	)		(438,460	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from common stock issuances		539,975			80,000
Proceeds from issuance of notes payable		1,542,417			300,000
Advances from (repayments to) related party		(50,539	)		351,312
Cash paid to redeem common stock		(100,000	)		-
Repayment of notes payable		(85,375	)		(11,153	)
Net cash provided by financing activities		1,846,478			720,159

Net increase (decrease) in cash and cash equivalents		(13,499	)		176,626

Cash and cash equivalents at beginning of period		94,003			11,562
Cash and cash equivalents at end of period	$	80,504		$	188,188

Supplemental cash flow information:
Cash paid for taxes	$	-		$	-
Cash paid for interest	$	113,242		$	14,732

Noncash investing and financing activities:
Common stock issued for property and equipment	$	92,204		$	-
Common stock issued for intangible assets	$	1,645,548		$	67,500
Conversion of note or stock-based payable to common stock	$	26,000		$	310,500

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

QUAMTEL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 and 2009

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

Quamtel, Inc., formerly known as Atomic Guppy, Inc., XTX Energy, Inc. and Glen Manor Resources Inc., (the “Company”) was incorporated on November 16, 1999 under the laws of the State of Nevada. Prior to the closing of the share exchange agreement described below, the Company was a “shell” corporation as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act, as well as SEC Release Number 33-8407.

On January 13, 2009, the Company executed a Share Exchange Agreement (the “Share Exchange Agreement”), pursuant to which the shareholders of WQN, Inc. were entitled to receive a total of 15,000,000 post-split shares of the Company’s common stock. All conditions for closing were satisfied or waived, and the transaction closed on July 28, 2009. As a result of the Exchange, the shareholders of WQN, Inc. owned approximately 91% of the outstanding common stock of Quamtel. In conjunction with closing the Share Exchange Agreement, certain outstanding obligations of Quamtel including officers and director’s compensation, notes and amounts payable to officers and directors and third party loans outstanding, were exchanged for 1,275,000 post-split shares of Quamtel’s common stock.

As a result of the Share Exchange Agreement, WQN, Inc. became a wholly-owned subsidiary of Quamtel, through which its operations are now conducted. On September 8, 2009, Quamtel filed an amendment to its Articles of Incorporation concluding a one-for-ten reverse split of its common stock and increasing its authorized stock to 200,000,000 common shares and 50,000,000 preferred shares.

The Share Exchange Agreement has been accounted for as a reverse merger, and as such the historical financial statements of WQN, Inc. are being presented herein as those of the Company. Also, the capital structure of the Company for all periods presented herein is different from that appearing in the historical financial statements of the Company due to the recapitalization accounting.

On December 9, 2009, the Company acquired all of the outstanding membership interests of Mobile Internet Devices, LLC, a Florida limited liability company (“Mobile Devices”), for a combination of common stock, stock warrants, and a royalty based on future earnings and new subscribers of the acquired company. Mobile Devices was subsequently renamed and reorganized as Data Jack, Inc., a Texas corporation (“Data Jack”).

On August 21, 2010, the Company closed a Membership Interest Purchase Agreement entered into and effective August 18, 2010 to acquire all of the outstanding membership interests of Syncpointe, LLC, a Missouri limited liability company (“Syncpointe”). The Company acquired Syncpointe in exchange for 1,000,000 shares of its unregistered common stock with piggyback registration rights. The Sellers may receive earn-out payments equal to 12.5% of Syncpointe net income (as defined in the Membership Interest Purchase Agreement) as it operates as a division of the Registrant for 18 months.

The financial information presented herein should be read in conjunction with the financial statements of Quamtel for the year ended December 31, 2009, as presented in the Company’s Form 10-K filed on March 31, 2010. The accompanying financial statements for the three and nine months ended September 30, 2010 and 2009 are unaudited but, in the opinion of management, include all adjustments (which are normal and recurring in nature) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Interim results are not necessarily indicative of results for a full year. Therefore, the results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of operating results to be expected for the full year or future interim periods.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are detailed in Quamtel’s financial statements for the year ended December 31, 2009 as presented in the Company’s Form 10-K filed on March 31, 2010.

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred operating losses and negative cash flows from operations since the Share Exchange Agreement, has an accumulated deficit of $7,149,899 through September 30, 2010, and has been dependent on issuances of debt and equity instruments to fund its operations. The Company intends to increase its future profitability and seek new sources or methods of financing or revenue to pursue its business strategy. However, there can be no certainty that the Company will be successful in this strategy. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Accordingly, the Company's independent auditors added an explanatory paragraph to their opinion on the Company's consolidated financial statements for the year ended December 31, 2009, based on substantial doubt about the Company's ability to continue as a going concern.

NOTE C - ACQUISITIONS

On August 4, 2010, the Company and the original Data Jack sellers amended the Membership Purchase Agreement dated December 9, 2009, whereby the consideration was reduced from 1,500,000 to 500,000 shares of the Company’s restricted common stock, with the 1,000,000 reduced shares redeemed by the Company. Additionally, the Company will give the sellers 25,000 additional shares of restricted stock for every 5,000 new Data Jack customers that the Company acquires, subject to a maximum of 500,000 shares.

On August 21, 2010, the Company closed a Membership Interest Purchase Agreement entered into and effective August 18, 2010 to acquire all of the outstanding membership interests of Syncpointe, LLC, a Missouri limited liability company (“Syncpointe”). The Company acquired Syncpointe in exchange for 1,000,000 shares of the Company’s unregistered common stock with piggyback registration rights. The purchase price consisted of the following:

(1)	1,000,000 shares of the Company’s restricted common stock; and

(2)	The Company will pay the sellers 12.5% of the net income (as defined in the membership Interest Purchase Agreement) of Syncpointe as it operates as a subsidiary for a period of 18 months following the acquisition.
(3)	All notes payable by Syncpointe prior to its acquisition were relinquished by the former note holders in conjunction with the acquisition.

The condensed Syncpointe balance sheet, reflecting the net fair value amounts assigned to each major asset and liability, as of the date of its acquisition is as follows:

Computer equipment and software	$	92,204
Accounts payable		(445,501	)
Net identifiable assets acquired		(353,298	)

Intangible asset - goodwill		2,833,298

Net fair value of assets acquired	$	2,480,000

Syncpointe is a software developer focused on the development of mobile device management software. Syncpointe’s products are geared toward global enterprise, government, and consumer markets. Related patent rights were also acquired with the Syncpointe acquisition.

The Company is seeking to hire a third-party company to prepare a valuation to assist management of the Company in its allocation of the Syncpointe purchase price to specific intangible assets, primarily through the determination of the fair value and useful lives of the Syncpointe acquisition’s intangible assets. As of September 30, 2010 the Company recorded goodwill of $2,833,298, and upon the final results of the third-party valuation, management will adjust the allocation to the intangible assets.

NOTE D – RESTRICTED CASH

At September 30, 2010, restricted cash consisted of a $150,000 security deposit in the form of an irrevocable letter of credit (the “LOC”) held in escrow related to the Company’s performance under a service contract with one of its telecommunication service providers (the “Service Provider”). In accordance with the terms of the LOC, the Service Provider may draw on the LOC in the event of a payment default under the contract. The LOC’s initial term expires on April 14, 2013, and is renewable annually thereafter. Accordingly, the restricted cash balance of $150,000 as of September 30, 2010 is classified as noncurrent in the Company’s consolidated balance sheet.

NOTE E - PROPERTY AND EQUIPMENT, NET

At September 30, 2010 and December 31, 2009, respectively, property and equipment consisted of the following:

	September 30, 2010			December 31, 2009
	(Unaudited)

Computer equipment and software	$	624,113		$	519,144
Automobile		32,123			32,123
Furniture & Fixtures		12,274			12,274
Total		668,510			563,541
Less accumulated depreciation		(145,028	)		(159,069	)
Total	$	523,482		$	404,472

Depreciation expense for the nine months ended September 30, 2010 and 2009 amounted to $56,876 and $57,812, respectively.

NOTE F - INTANGIBLE ASSETS

At September 30, 2010 and December 31, 2009, respectively, intangible assets consisted of the following:

	September 30, 2010			December 31, 2009
	(Unaudited)

Goodwill associated with the acquisition of WQN, Inc.	$	367,589		$	367,589
Goodwill associated with the acquisition of Data Jack, Inc.		669,957			1,919,957
Goodwill associated with the acquisition of Syncpointe, LLC		2,833,298			-
Acquisition of 800.com domain name		317,500			317,500
Acquisition of DataJack.com domain name		56,000			56,000
Acquisition of other domain names		88,827			-
Total		4,333,171			2,661,046
Less accumulated amortization		(41,880	)		(7,938	)
Total	$	4,291,291		$	2,653,108

Amortization expense for the nine months ended September 30, 2010 and 2009 amounted to $41,880 and $0, respectively.

The goodwill amounts referenced above were recorded primarily in connection with the WQN, Inc. acquisition in June, 2007, the Data Jack acquisition in December, 2009, and the Syncpointe acquisition in August, 2010.

In August 2009, the Company issued 25,000 of its common shares, valued at $67,500, to Mr. Loren Stocker to acquire an option to purchase the URL 800.com (the “800 Domain Name”). Steven Ivester, an agent of iTella, Inc., (“Assignor”), subsequently acquired the 800 Domain Name in a Bankruptcy Court auction for the sum of $250,000. The acquisition was made for the benefit of the Company. Effective September 30, 2009, in return for the Company reimbursing to Assignor his $250,000 cost, Assignor assigned to the Company all right, title and interest in and to the 800 Domain Name. The total cost of the 800 Domain Name was $317,500 which is less than its estimated fair value, and is being amortized over a period of 10 years.

In December 2009, the Company purchased the URL DataJack.com (the "Data Jack Domain Name”) for a cash payment of $30,000, plus a commitment to issue 10,000 of the Company’s common shares, valued at $26,000, which were issued on May 4, 2010. The total cost of the Data Jack Domain Name was $56,000, which is less than its estimated fair value, and is being amortized over a period of 10 years.

In January 2010, the Company purchased the URL machine2machine.com and similarly-named domains (the "M2M Domain Names”) for a cash payment of $25,377, plus 25,000 of the Company’s common shares, which were valued at $62,250. The total cost of the M2M Domain Names plus other domain names purchased in 2010 was $88,827 which is less than their estimated fair value, and is being amortized over a period of 10 years.

NOTE G - RELATED PARTY TRANSACTIONS

From time to time, Steven Ivester, the Company’s former sole shareholder, who is currently the Assistant Secretary of and also a consultant to the Company through a Consulting Services Agreement with iTella, Inc., has made personal advances to the Company under an Unsecured Revolving Promissory Note (the "Unsecured Note"). The Unsecured Note has a maximum amount of $1,000,000, is repayable upon demand, is non-interest bearing and is unsecured. Advances under the Unsecured Note amounted to $708,242 and $758,781 at September 30, 2010 and December 31, 2009, respectively. See also Note F for the 800 Domain Name transaction involving Mr. Ivester.

Effective August 1, 2009 and subsequently amended, the Company executed a Restated Consulting Services Agreement with iTella, Inc., whereby iTella, Inc. provides, at the reasonable request of the Company’s management, advanced business strategy, financing, product development and marketing advice including but not limited to day to day operations. The initial term of this agreement is for five years and automatically renews for additional one year terms if approved by both parties. During this agreement’s term and at the Company’s expense, iTella, Inc. will be provided an office and administrative support in Weston, Florida. iTella, Inc.’s compensation consists of the following:

1.	Cash payments totaling $8,333 for the first two months, payable monthly;

2.	Cash payments totaling $66,667 for the next four months, payable monthly;

3.	Annual cash payments of $250,000 thereafter, payable monthly;

4.	Nine percent of the Company’s consolidated gross revenue, payable quarterly (except the first two months, in which the rate is one percent of gross revenues), subject to an annual calendar year cap of $800,000;

5.	Employees of Consultant may be eligible for grants of stock options pursuant to the Company’s Equity Incentive Plan, in such amounts as may from time to time be determined by the Company, at its sole discretion; and

6.	Reimbursement of reasonable, related business expenses.

Expenses under the Restated Consulting Services Agreement for the nine months ended September 30, 2010 and year ended December 31, 2009, respectively, were $332,761 and $109,761. Prior to closing the Restated Consulting Services Agreement, Quamtel did not have expertise in the management and financing of a public company, and required the services of iTella, Inc. as outlined in the Restated Consulting Services Agreement. The Restated Consulting Services Agreement is not cancellable by either party in advance of its contractual term, except under a defined change in control.

On August 20, 2009, the Company also executed a one-year consulting agreement with Mr. Warren Gilbert, who is the president of Gilder Funding Corp., a shareholder of the Company, whereby Mr. Gilbert will provide advice and counsel regarding the Company’s financial management and strategic opportunities. As compensation, Mr. Gilbert was issued 300,000 shares of the Company’s common stock, which were registered on a registration statement on Form S-8 on November 9, 2009.

See Note I for shares of the Company’s common stock issued to Robert Picow, a Director of the Company, and to Evan Picow as compensation for consultation services during the nine months ended September 30, 2010.

NOTE H - NOTES PAYABLE

At September 30, 2010 and December 31, 2009, notes payable consisted of the following:

	September 30, 2010			December 31, 2009
	(Unaudited)

Secured promissory note payable - shareholder and related party	$	1,203,815		$	-
Promissory note payable - shareholder		-			200,000
Notes payable - CIT Bank		38,937			35,899
Note payable - American Honda Finance Corporation		15,872			20,256
Note payable - Total Bank		11,250			8,677
Other notes and advances payable		452,000			-

Total notes payable		1,721,874			264,832

Less current portion		(663,834	)		(250,336	)

Noncurrent portion	$	1,058,040		$	14,496

On February 27, 2010, the Company executed a $1,000,000 Senior Secured Promissory Note payable to Gilder Funding Corp., a company controlled by Mr. Warren Gilbert (the “Secured Note”) for cash. The proceeds were used to repay the $200,000 note payable to Mr. Gilbert discussed in the following paragraph, plus accrued interest. On May 21, 2010 the Secured Note was increased by $250,000 reflecting additional cash proceeds. Interest on the Secured Note is payable monthly at 15% per annum beginning April 5, 2010, requiring monthly principal and interest payments of $27,000 beginning June 15, 2010. The Secured Note is secured by substantially all of the Company’s assets.

On December 15, 2009, the Company issued an unsecured $200,000 promissory note payable to Gilder Funding Corp. for cash. This note carried interest at 18% per year and was repaid in conjunction with the Secured Note discussed in the preceding paragraph.

The CIT bank notes are associated with computer purchases in 2007, are repayable in 36 equal monthly payments through September 2010, are unsecured, and bear interest at 24.49% per year. The Company is currently in arrears on payments.

The American Honda Finance Corporation note is related to an automobile purchase in 2008, is repayable in 60 equal monthly payments through June 2013, is secured by the automobile, and bears interest at 9.45% per year.

The Total Bank note is associated with an insurance policy, is repayable in equal monthly payments of $1,172 through July 2011, is unsecured, and bears interest at 10.34% per year.

The other notes and advances payable include an informal $30,000 advance from a person related to the Company’s President, which is non-interest bearing and is repayable on demand. The remaining $422,000 represents an informal advance paid by Mr. Warren Gilbert towards an anticipated future purchase of the Company’s common stock.

The noncurrent portion of notes payable at September 30, 2010 is payable in full by the end of 2015.

See Note G for a discussion of advances to the Company under an unsecured revolving promissory note from Steven Ivester, who is the Company’s former sole shareholder and currently is the Assistant Secretary of and also a consultant to the Company through a Consulting Services Agreement with iTella, Inc.

NOTE I – FINANCING AND OTHER TRANSACTIONS

During the first nine months of 2010, the Company issued 2,915,062 shares of common stock valued at $4,677,736, summarized as follows:

·	1,315,000 shares were issued and sold to six accredited investors for net proceeds of $464,975.

·	100,000 shares valued at $249,000 were issued to Stuart Ehrlich, the Company’s President and Chief Executive Officer, as partial compensation for his employment in 2010.

·	84,000 shares valued at $215,760 were issued to Robert Picow, a Director of the Company, as compensation for consultation services performed from time-to-time for the Company.

·	5,000 shares valued at $12,450 were issued to Marc Moore in exchange for consultation services.

·	40,000 shares values at $100,800 were issued to Evan Picow in exchange for consultation services.

·	35,000 shares valued at $88,250 were issued in connection with the Company’s acquisition of the various domain names.

·	25,000 shares valued at $36,250 were issued to Martin Lefrancois in exchange for consultation services.

·	15,000 shares valued at $37,500 were issued to Loren Stocker in exchange for consultation services.

·	500,000 shares valued at $1,147,000 were issued to Smart Future Ventures for advertising and consulting services.

·	125,000 shares valued at $310,000 were issued to Mirador Consulting, Inc. in exchange for consultation services.

·	201,062 shares valued at $402,751 were issued to non-officer employees as additional compensation.

·	20,000 shares valued at $48,000 were issued to a non-officer employee as additional compensation.

·	100,000 shares valued at $260,000 were issued to Mr. Windel Thelusma in exchange for consultation services.

·	350,000 shares were issued and sold to Robert Picow, a Director of the Company, for $75,000 cash.

·	1,000,000 shares valued at $1,250,000 were redeemed in conjunction with the Data Jack acquisition as discussed in Note C.

·	1,000,000 shares valued at $2,480,000 were issued in conjunction with the Syncpointe acquisition discussed in Note C.

On March 25, 2010, in order to settle certain disputes with a shareholder (the “Selling Shareholder”), the Company agreed to purchase and redeem 100,000 shares of its common stock owned by the Selling Shareholder for cash payments totaling $100,000. Of this amount, $85,100 was paid by September 30, 2010. The $14,900 balance is currently in arrears, and is included in accrued expenses on the Company’s consolidated balance sheet at September 30, 2010.

On June 7, 2010, the Company executed a one-year consulting agreement with Mr. Windel Thelusma, whereby Mr. Thelusma will provide advice and counsel regarding the Company’s financial management and strategic opportunities. As compensation, Mr. Thelusma was issued 100,000 shares of the Company’s common stock valued at $260,000 on July 9, 2010, which were registered on a registration statement on Form S-8 on November 9, 2009.

On August 23, 2010, the Company executed a six-month consulting agreement with Mirador Consulting, Inc. (“Mirador”), whereby Mirador will provide advice and counsel regarding the Company’s financial management and strategic opportunities. As compensation, Mirador was issued 125,000 shares of the Company’s common stock valued at $310,000 on August 23, 2010, and an additional 125,000 shares valued at $310,000 are to be issued by the end of the six-month term. The $310,000 is included in stock-based payable on the Company’s consolidated balance sheet at September 30, 2010.

The Company’s common shares issued as additional compensation and for consulting services have been valued at the shares’ exchange-quoted market prices at their respective dates of issuance or commitment.

NOTE J - INCOME TAXES

The components of the Company's income tax expense (benefit) are as follows:

	Nine Months Ended September 30,
	2010		2009

Current benefit	$	-	$	(971	)
Deferred benefit		-		-
Net income tax benefit	$	-	$	(971	)

The reconciliation of the income tax provision at the statutory rate to the reported income tax expense is as follows:

Computed at statutory rate	34.0	%	34.0	%
Stock-related compensation and consulting expenses	-15.3	%	0.0	%
Stock-related general and administrative expenses	-3.0	%	0.0	%
Valuation allowance	-15.6	%	-34.0	%
Total	0.0	%	0.0	%

At September 30, 2010, the Company's net deferred tax asset consisted of the following:

Net operating loss carryforward	$	1,197,573
Less valuation allowance		(1,197,573	)
Total	$	-

The Company's net operating loss carryforward for federal income tax purposes was approximately $3,523,245 as of September 30, 2010, expiring beginning in 2022. In accordance with Internal Revenue Code Section 382, the Company may be limited in its ability to recognize the benefit of future net operating loss carry-forwards. Consequently, the Company did not recognize a benefit from operating loss carry-forwards. The Company is only subject to federal income taxes.

NOTE K – COMMITMENTS AND CONTINGENCIES

Leases

The Company is obligated under a non-cancelable operating lease for its primary office facilities, which expires on February 28, 2015. The Company is also obligated under a non-cancelable operating lease for its Fort Lauderdale office facilities, which expires on February 28, 2013. Future minimum lease payments under these operating leases as of September 30, 2010 are as follows:

											2014 and
	Total		2010		2011		2012		2013		Thereafter

Dallas	$	273,162	$	15,462	$	61,848	$	61,848	$	61,848	$	72,156
Ft Lauderdale		80,838		5,775		29,589		36,090		9,384		-
	$	354,000	$	21,237	$	91,437	$	97,938	$	71,232	$	72,156

Rent expense for these operating leases (net of a month-to-month sublease for a small portion of the primary office premises in 2009) for the nine months ended September 30, 2010 and 2009 was $74,550 and $58,261, respectively.

Consulting Agreements

See Note G for a discussion of the Consulting Services Agreement with iTella, Inc. and the Consulting Agreement with Mr. Warren Gilbert.

See also Note I for a discussion of the consulting agreement with Mr. Windel Thelusma and Mirador.

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

Management’s Discussion and Analysis contains various “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-Q, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”, “expects”, “future” and similar statements or expressions, identify forward-looking statements. Any forward-looking statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which may be beyond the control of the Company. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth therein.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with the Company’s Financial Statements and Notes to Financial Statements included in its Annual Report on Form 10-K filed on March 31, 2010.

On January 13, 2009, Quamtel, Inc. (formerly Atomic Guppy, Inc.) (“Quamtel”) and WQN, Inc., a Texas corporation (“WQN”) (individually and collectively also referred to as the “Company”) executed a Share Exchange Agreement (the “Share Exchange Agreement”), pursuant to which the shareholders of WQN were entitled to receive a total of 15,000,000 post-split shares of common stock. All conditions for closing were satisfied or waived, and the transaction closed on July 28, 2009. As a result of the Exchange, the shareholders of WQN own approximately 91% of the outstanding common stock of Quamtel. In conjunction with closing the Share Exchange Agreement, certain outstanding obligations of Quamtel including officers and director’s compensation, notes and amounts payable to officers and directors and third party loans outstanding, were exchanged for 1,275,000 post-split shares of Quamtel’s common stock.

As a result of the Share Exchange Agreement, WQN became a wholly-owned subsidiary of Quamtel, through which its operations will be conducted. On September 8, 2009, Quamtel filed an amendment to its Articles of Incorporation concluding a one-for-ten reverse split of its common stock and increasing its authorized stock to 200,000,000 common shares and 50,000,000 preferred shares.

On August 4, 2010, the Company and the original Data Jack sellers amended the Membership Purchase Agreement dated December 9, 2009, whereby the consideration was reduced from 1,500,000 to 500,000 shares of the Company’s restricted common stock, with the 1,000,000 reduced shares redeemed by the Company. Additionally, the Company will give the sellers 25,000 additional shares of restricted stock for every 5,000 new DataJack customers that the Company acquires, subject to a maximum of 500,000 shares.

On August 21, 2010, the Company closed a Membership Interest Purchase Agreement entered into and effective August 18, 2010 to acquire all of the outstanding membership interests of Syncpointe, LLC, a Missouri limited liability company (“Syncpointe”), from Half A Minute, LLC; McPheeters Communication Group, LLC; and VKS, LLC (collectively, the “Sellers”). The Company acquired Syncpointe in exchange for 1,000,000 shares of its unregistered common stock with piggyback registration rights. The Sellers may receive earn-out payments equal to 12.5% of Syncpointe’s net income (as defined in the Membership Interest Purchase Agreement) for a period of 18 months as it operates as a division of the Company.

Overview

WQN was formed as a Texas corporation in June 2007, when it acquired an operating business that was originally founded in 1996. WQN provides prepaid and postpaid enhanced telecommunications services with an emphasis on transporting calls that originate from the United States and Canada and terminate to specific regions of the world. Customers utilize WQN’s Voice Over Internet Protocol (“VoIP”) network to place quality international calls at discounted rates. The voice quality of WQN’s VoIP calls is nearly the same as an international telephone call carried over a traditional telephone line. A substantial portion of WQN’s revenue is derived from the sale of prepaid service to customers calling from the United States to India. WQN’s products and services are provisioned and sold online via its websites.

Data Jack was formed in February 2009, and its revenues prior to the Company’s acquisition were $96,113. Data Jack specializes in delivering nationwide mobile 3G data coverage for a competitive fixed monthly price, through a proprietary USB device connected to any computer with a Windows or Mac operating system.

Syncpointe, LLC is a software developer focused on the development of mobile device management software. The Company’s products are geared toward global enterprise, government, and consumer markets.

Results of Operations for the Nine Months ended September 30, 2010 Compared to the Same Period in 2009

Revenues

Our revenues for the nine months ended September 30, 2010 and 2009 were $1,660,308 and $1,897,100, respectively. Revenues decreased primarily because the retail rates to India, one of the Company’s primary markets, have been rapidly declining due to increased competition. This trend is expected to continue, in turn putting further downward pressure on revenues and margins. Data Jack revenues were $301,238 for nine months ended September 30, 2010 (the Company recognized no revenue from Data Jack in the corresponding 2009 period, because Data Jack was acquired in December 2009), partially offsetting the India-based revenue decline. No Syncpointe revenues were recognized in the 2009 and 2008 periods, because the Company acquired Syncpointe on August 21, 2010.

Revenues are derived primarily from our prepaid international calling services and our consumer based internet telephony and wireless internet access services. Inflation has not had a material effect on net sales and revenues or on income from continuing operations during the past two fiscal years.

Cost of Sales and Gross Profit

Cost of sales was $1,355,694 and $1,206,289 for the nine months ended September 30, 2010 and 2009, respectively. This resulted in gross profit of $304,614 (18.3%) and $690,810 (36.4%) for the respective 2010 and 2009 periods. The decreased gross margin in 2010 was due to lowering our effective sales prices on our India traffic due to competitive market pressures, while our vendor cost reductions have not kept pace. Our aggregate gross profit decline during the nine months ended September 30, 2010 versus the corresponding 2009 period was otherwise due primarily to our decreased revenues during that period.

Operating Expenses

Operating expenses were $5,337,497and $2,143,446 for the nine months ended September 30, 2010 and 2009, respectively. Compensation and consulting expenses increased from $1,432,192 to $3,827,279 during these periods due primarily to the $1,854,511 increase in the value of common shares issued for compensation and consulting services as further described in Note I to the Company’s consolidated financial statements. General and administrative (“G&A”) expenses increased from $653,443 in the 2009 period to $1,411,462 in 2010, primarily due to $465,000 of common shares issued for advertising expenses as described in Note I to the Company’s consolidated financial statements, increased legal and audit fees associated with the Share Exchange Agreement and becoming a publicly reporting company, and generally increased advertising, rent and travel expenses.

Other Expenses

Interest and financing expenses increased from $14,732 to $113,242 for the nine months ended September 30, 2010 versus the corresponding 2009 period, due primarily to interest related to the secured and unsecured promissory notes payable discussed in Note H to the Company’s consolidated financial statements.

During the nine months ended September 30, 2010, we disposed of computer-related equipment with a net book value of $73,761 because the equipment needed replacement.

Net Income (Loss)

The revenue and gross margin decreases coupled with the operating and other expense increases noted above combined to result in a net loss of $5,219,887 and $ 1,466,396, in the 2010 and 2009 periods, respectively.

Results of Operations for the Three Months ended September 30, 2010 Compared to the Same Period in 2009

Revenues

Our revenues for the three months ended September 30, 2010 and 2009 were $484,405 and $496,179, respectively. Revenues have been decreasing primarily because the retail rates to India, one of the Company’s primary markets, have been rapidly declining due to increased competition. This trend is expected to continue, in turn putting further downward pressure on revenues and margins. Data Jack revenues were $100,725 for three months ended September 30, 2010 (the Company recognized no revenue from Data Jack in the corresponding 2009 period, because Data Jack was acquired in December 2009), partially offsetting the India-based revenue decline. No Syncpointe revenues were recognized in the 2009 and 2008 periods, because the Company acquired Syncpointed on August 21, 2010.

Cost of Sales and Gross Profit

Cost of sales was $419,096 and $416,086 for the three months ended September 30, 2010 and 2009, respectively. This resulted in gross profit of $65,309 (13.5%) and $80,093 (16.1%) for the respective 2010 and 2009 periods. The decreased gross margin in 2010 was due to lowering our effective sales prices on our India traffic due to competitive market pressures, while our vendor cost reductions have not kept pace. Our aggregate gross profit decline during the three months ended September 30, 2010 versus the corresponding 2009 period was otherwise due primarily to our decreased revenues during that period.

Operating Expenses

Operating expenses were $3,265,929 and $1,355,019 for the three months ended September 30, 2010 and 2009, respectively. Compensation and consulting expenses increased from $956,386 to $2,427,897 during these periods due primarily to the $1,199,551 increase in the value of common shares issued for compensation and consulting services as described in Note I to the Company’s consolidated financial statements, and to a lesser extent the iTella, Inc. consulting agreement entered into in 2009, as described in Note G to the Company’s consolidated financial statements. General and administrative (“G&A”) expenses increased from $377,242 in the 2009 period to $801,924 in 2010, primarily due to $465,000 of common shares issued for advertising expenses as further described in Note I to the Company’s consolidated financial statements.

Other Expenses

Interest, financing and other expenses increased from $11,267 to $47,556 for the three months ended September 30, 2010 versus the corresponding 2009 period, due primarily to the interest related to the secured and unsecured promissory notes payable discussed in Note H to the Company’s consolidated financial statements.

Net Income (Loss)

The revenue and gross margin decreases coupled with the operating and other expense increases noted above combined to result in a net loss of $3,249,313 and $1,286,193, in the 2010 and 2009 periods, respectively.

Liquidity and Capital Resources

Cash and cash equivalents were $80,504 at September 30, 2010. Our net cash used in operating activities for the nine months ended September 30, 2010 was $1,518,020, due primarily to our cash-based net loss during this period, partially offset by a decrease in our prepaid expenses and deposits, and other working capital changes. Our primary sources of funding have been through the proceeds of the $1,250,000 secured promissory note payable received in the first nine months of 2010 as discussed in Note H to the Company’s consolidated financial statements, from advances from a former shareholder under an unsecured, revolving, non-interest bearing promissory note payable with a maximum amount of $1,000,000 as described in Note G to the Company’s consolidated financial statements, an informal $422,000 advance from Mr. Warren Gilbert toward an anticipated future purchase of the company’s common stock, and sales of common stock and other notes payable for cash. Advances under the unsecured revolving promissory note totaled $708,242 at September 30, 2010.

At September 30, 2010, restricted cash consisted of a $150,000 security deposit in the form of an irrevocable letter of credit held in escrow related to the Company’s performance under a service contract with one of its telecommunication service providers, as discussed in Note D to the Company’s consolidated financial statements.

Our accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred operating losses and negative cash flows from operations since the Share Exchange Agreement, has incurred an accumulated deficit of $7,149,899 through September 30, 2010, and has been dependent on issuances of debt and equity instruments to fund its operations. The Company intends to increase its future profitability and seek new sources or methods of financing or revenue to pursue its business strategy. However, there can be no certainty that the Company will be successful in this strategy. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Accordingly, the Company's independent auditors added an explanatory paragraph to their opinion on the Company's consolidated financial statements for the year ended December 31, 2009, based on substantial doubt about the Company's ability to continue as a going concern.

These consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, the Company’s management is proposing to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.

On February 27, 2010, the Company executed a $1,000,000 Senior Secured Promissory Note payable to Gilder Funding Corp., a company controlled by Mr. Warren Gilbert (the “Secured Note”) for cash. The proceeds were used to repay the $200,000 note payable to Mr. Gilbert discussed in Note H to the Company’s consolidated financial statements, plus accrued interest. On May 21, 2010 the Secured Note was increased by $250,000 reflecting additional cash proceeds. Interest on the Secured Note is payable monthly at 15% per annum beginning April 5, 2010, requiring monthly principal and interest payments of $27,000 beginning June 15, 2010. The Secured Note is secured by substantially all of the Company’s assets.

Partial Rescission of Acquisition Agreement

As discussed in the Company’s Current Report on Form 8-K dated December 14, 2009, on December 9, 2009, we entered into and closed a Membership Interest Purchase Agreement (the “Agreement”) to acquire all of the outstanding membership interests of Mobile Internet Devices, LLC, which was subsequently renamed and reorganized as Data Jack, Inc., a Texas corporation (“Data Jack”). The sellers were DataJack, Inc., a Florida corporation owned by Keith R. Jones and Schooner Enterprises, Inc., a Nevada corporation owned by John W. Richardson.

Effective August 4, 2010, as discussed in the Company’s Current Report on Form 8-K dated August 13, 2010, the Company and the original Data Jack sellers amended the Agreement, whereby the consideration was reduced from 1,500,000 to 500,000 shares of the Company’s restricted common stock, with the 1,000,000 reduced shares redeemed by the Company and thereby reducing the amount of goodwill recognized in the transaction. Additionally, the Company will give the Data Jack sellers 25,000 additional shares of restricted stock for every 5,000 new Data Jack customers that the Company acquires, subject to a maximum of 500,000 shares.

Capital Expenditure Commitments

We did not have any substantial outstanding commitments to purchase capital equipment at September 30, 2010.

Plan of Operations

By adjusting our operations and development to the level of capitalization, we believe that we have sufficient capital resources to meet projected cash flow requirements. However, if during that period or thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition.

Our future cash requirements include those associated with maintaining our status as a reporting entity. We believe that on an annual basis those costs would not exceed an average of $25,000 per month.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief operating history and lack of substantial historical operating profits, our operations have not been a source of liquidity. We will need to obtain additional capital in order to fund our operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

Critical Accounting Policies

The application of our accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. These estimates bear the risk of change due to the inherent uncertainty attached to each estimate and are likely to differ to some extent from actual results. A description of our critical accounting policies follows:

In accordance with FASB ASC 350 (formerly Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets,") the Company tests its intangible asset (goodwill) for impairment at least annually by comparing the fair value of this asset to its carrying value. If in the future the carrying value of our goodwill exceeds its fair value, the Company will recognize an impairment charge in an amount equal to that excess. For purposes of these tests, the excess of the fair value of the Company over the amounts assigned to its identified assets and liabilities is the implied fair value of its goodwill.

Our revenues are primarily derived from fees charged to terminate voice services over the Company's network and from related monthly recurring charges. Variable revenue is earned based on the number of minutes during a call and is recognized upon completion of a call. Revenue from each customer is calculated from information received through the Company's network switches. The Company tracks the information received from the switch and analyzes the call detail records and applies the respective revenue rate for each call. Fixed revenue is earned from monthly recurring services provided to customers that are fixed and recurring in nature, and are connected for a specified period of time. Revenues are recognized as the services are provided and continue until the expiration of the contract or until cancellation of the service by the customer. Cash fees received prior to call completion are recorded on the Company’s balance sheet as unearned revenue.

Payments Due by Period

The following table illustrates our outstanding debt, purchase obligations, and related payment projections as of September 30, 2010:

			2010								2014 and
	Total		(Remainder)		2011		2012		2013		Thereafter

Advances from related party	$	708,242	$	708,242	$	-	$	-	$	-	$	-
Notes payable (principal)		1,721,874		555,279		163,561		189,854		220,374		592,805
Subtotals		2,430,116		1,263,521		163,561		189,854		220,374		592,805

Purchase obligations		-		-		-		-		-		-
Operating leases		354,000		21,237		91,437		97,938		71,232		72,156
Totals	$	2,784,116	$	1,284,758	$	254,998	$	287,792	$	291,606	$	664,961

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

As required by Rule 13a-15(b) under the Exchange Act as of September 30, 2010, our management conducted an evaluation with the participation of our President who also serves as our principal financial and accounting officer (the “Certifying Officer”) regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

Based on this evaluation and in accordance with the requirements of Auditing Standard No. 2 of the Public Company Accounting Oversight Board, our Certifying Officer concluded that our disclosure controls and procedures were ineffective as of September 30, 2010. Our President, who is our sole executive officer, is not a financial or accounting professional, and we do not have a chief financial officer or sufficient accounting staff. Until we are able to engage a qualified financial officer, and/or accounting staff, we may continue to experience material weaknesses in our disclosure controls that may adversely affect our ability to timely file our quarterly and annual reports.

Our management, including the Certifying Officer, does not expect that our disclosure controls and procedures will prevent all errors and all improper conduct. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, a design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct, if any, have been detected. These inherent limitations include the realities that judgments and decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more persons, or by management override of the control. Further, the design of any system of controls is also based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations and a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

The Company has an insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented or detected on a timely basis. We have not achieved the optimal level of segregation of duties relative to key financial reporting functions and we do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to have an audit committee or independent audit committee financial expert, it is management’s view that an audit committee, comprised of independent board members, and an independent financial expert is an important entity-level control over the Company's financial statements. We have not achieved an optimal segregation of duties for executive officers of the Company.

(b) Changes in Internal Control over Financial Reporting.

During the quarter ended September 30, 2010, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

See the risk factors set forth in our Annual Report on Form 10-K filed on March 31, 2010.

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

In the third quarter of 2010, the Company issued 2,546,062 shares of common stock valued at $4,029,551 as follows:

·	On July 1, 60,000 shares valued at $156,000 were issued to Robert Picow, a Director of the Company, as compensation for consultation services performed from time-to-time for the Company. (1)

·	On July 9, 100,000 shares valued at $260,000 were issued to Mr. Windel Thelusma in exchange for consultation services. (3)

·	On July 16, August 24, and September 10, a total of 500,000 shares valued at $1,147,000 were issued to Smart Future Ventures for advertising and consulting services. (2)

·	On August 4, 1,000,000 restricted shares valued at $1,250,000 were redeemed in conjunction with the Data Jack acquisition as discussed in Note C.

·	On August 9, 40,000 restricted shares values at $100,800 were issued to Evan Picow in exchange for consultation services.

·	On August 21, 1,000,000 restricted shares valued at $2,480,000 were issued in conjunction with the Syncpointe acquisition discussed in Note C.

·	On August 23, 125,000 restricted shares valued at $310,000 were issued to Mirador Consulting, Inc. in exchange for consultation services.

·	On September 1 and September 10, a total of 201,062 shares valued at $402,751 were issued to non-officer employees as additional compensation. (3)

·	On September 17, 2010, 20,000 restricted shares valued at $48,000 were issued to a non-officer employee as additional compensation.

·	On September 22, 1,150,000 restricted shares were issued and sold to two accredited investors for net proceeds of $300,000.

·	On September 24, 350,000 restricted shares were issued and sold to Robert Picow, a Director of the Company, for $75,000 cash.

(1)	10,000 of these shares were issued pursuant to the Company’s 2009 Equity Incentive Plan, registered in the Company’s Form S-8 filed on November 9, 2009 (File No. 333-162987). The balance of the shares issued was restricted.

(2)	300,000 of these shares were issued pursuant to the Company’s 2009 Equity Incentive Plan, registered in the Company’s Form S-8 filed on November 9, 2009 (File No. 333-162987). The balance of the shares issued was restricted.

(3)	All of these shares were issued pursuant to the Company’s 2009 Equity Incentive Plan, registered in the Company’s Form S-8 filed on November 9, 2009 (File No. 333-162987).

Except as noted above, all of these issuances were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 on the basis of the sophistication and small number of purchasers, and the restrictions placed on the certificates representing the shares and the representation received from the purchasers.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.		Description
2.1		Partial Rescission of Membership Interest Purchase Agreement. (Incorporated by reference to Form 8-K filed on August 13, 2010).

2.2		Membership Interest Purchase Agreement dated August 18, 2010 by and among the members of SYNCPOINTE, LLC, Half A Minute, L.L.C., McPheeters Communication Group, LLC, VKS, LLC, Quamtel, Inc., and SYNCPOINTE, LLC. (Incorporated by reference to Form 8-K filed on August 24, 2010).

4.1		Consulting Agreement with Mirador Consulting, Inc. dated August 23, 2010.

31.1		Certification of Principal Executive Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1		Certification of Principal Executive Officer and Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

99.1

Proforma unaudited condensed consolidated statements of operations for the nine months ended September 30, 2010 and 2009.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	QUAMTEL, INC.


Dated: November 15, 2010	By:	/s/ Stuart Ehrlich
		Stuart Ehrlich
		President and Chief Executive Officer