United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31,~~June ~~2013~~30, 2014

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ________________

Commission File Number: 0-24857

Teleconnect Inc.

(Exact name of registrant issuer as specified in its charter)

Florida		90-0294361
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

Oude Vest 4

4811 HT Breda

The Netherlands

(Address of principal executive offices)

Registrant’s telephone number, including area code: 011-31- (0)6 30048023

N/A

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter 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 [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] 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 [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [x]

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

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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the last practicable date: ~~February~~Aug 14, ~~2013~~2014: 910,~~016~~525,~~183~~433 shares of common stock, $.001 par value.

~~TELECONNECT,~~Table ~~INC.~~of Contents 2

TELECONNECT INC.

INDEX

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of December 31, 2013 (unaudited) and September 30, 2013	3
	Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and September 30, 2013	3
	Condensed Consolidated Statements of Comprehensive Loss for the three ended December 31, 2013 and 2012 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended June 30, 2014 and 2013 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2013 and 2012 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2014 and 2013 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	67
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	910
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	1113
Item 4.	Controls and Procedures	1113
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	1214
Item 1A.	Risk Factors	1214
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1214
Item 3.	Defaults Upon Senior Securities	1214
Item 4.	Submission of Matters to a Vote of Security Holders	1214
Item 5.	Other Information	1214
Item 6.	Exhibits	1214
Signatures		1315

Table of Contents ~~-1-~~3

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Table of Contents ~~-2-~~4

TELECONNECT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			September 30,
	June 30,			September 30,
	2013			2013
	2014			2013
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3126,~~319~~160		$	83,886
Accounts receivable – trade		5719,~~092~~666			36,373
Other receivables – related parties		~~208~~233,~~334~~640			155,929
Inventory, work in process (net of reserve for slow moving inventory of $202,281 and $186,851 at December 31, 2013 and September 30, 2013, respectively)		55,374			65,460
Inventory, work in process (net of reserve for slow moving inventory of $222,897 and $186,851 at June 30, 2014 and September 30, 2013, respectively)		28,534			65,460
Prepaid taxes		2416,~~698~~453			25,528
Prepaid expenses		3444,~~700~~368			33,249
Total current assets		~~411~~368,~~517~~821			400,425
PROPERTY AND EQUIPMENT, NET		1980,~~410,128~~764			1,587,033
OTHER ASSETS:
Due from Giga Matrix Holding, B.V.		~~580~~569,~~791~~802			567,345
Investment in Giga Matrix Holdings, B.V.		—			—
Investment in Giga Matrix Holdings B.V.		—			—
Goodwill		~~428~~424,~~793~~657			419,900
Patents and tradenames, net		2,~~355~~132,~~346~~668			2,413,530
Long-term notes receivable (net of allowance for bad debts of $580,458 and $568,420 at December 31, 2013 and September 30, 2013, respectively)		—			—
Long-term notes receivable (net of allowance for bad debts of $574,860 and $568,420 at June 30, 2014 and September 30, 2013, respectively)		—			—
	$	54,~~186~~476,~~575~~712		$	5,388,233
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable – trade	$	~~327~~285,~~252~~353		$	239,644
Accounts payable – related parties		~~287~~245,~~523~~677			305,781
Accrued liabilities:
Related parties		~~566~~744,~~947~~463			474,819
Other		5094,~~333~~688			67,158
Deferred revenue		349,~~389~~557			4,401
Notes payable		~~558~~553,~~536~~149			546,953
Loans from related parties (net of loan discount of $202,165 and $168,685 at December 31, 2013 and September 30, 2013, respectively)		1,062,539			848,985
Loans from related parties (net of loan discount of $61,385 and $168,685 at June 30, 2014 and September 30, 2013, respectively)		1,279,899			848,985
Total current liabilities		23,~~887~~212,~~519~~786			2,487,741
STOCKHOLDERS' EQUITY:
STOCKHOLDERS' DEFICIT:
Preferred stock; par value of $0.001, 5,000,000 shares authorized, no shares outstanding		—			—
Common stock; par value of $0.001, 500,000,000 shares authorized, 8,390,849 and 8,148,631 shares outstanding at December 31, 2013 and September 30, 2013, respectively, 1,671,969 and 1,724,627 shares subscribed and unissued ($731,992) and ($746,695) at December 31, 2013 and September 30, 2013, respectively		10,063			9,873
Common stock; par value of $0.001, 500,000,000 shares authorized, 9,900,099 and 8,148,631 shares outstanding at June 30, 2014 and September 30, 2013, respectively, 1,649,675 ($710,483) and 1,724,627 ($746,695) shares subscribed and unissued at June 30, 2014 and September 30, 2013, respectively		11,550			9,873
Additional paid-in capital		4647,~~663~~273,~~014~~659			46,451,208
Accumulated deficit		(4143,~~512~~085,~~003~~580	)		(40,637,258	)
Accumulated other comprehensive loss		(2,~~862~~935,~~018~~703	)		(2,923,331	)
Total stockholders' equity		21,~~299~~263,~~056~~926			2,900,492
TOTAL LIABILITIES	$	54,~~186~~476,~~575~~712		$	5,388,233

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

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TELECONNECT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED JUNE ~~DECEMBER 31~~30, ~~2013 and~~2014 ~~2012~~AND 2013

	2013			2012
	For the three months ended						For the nine months ended
	(Unaudited)			(Unaudited)
	June 30,						June 30,
SALES	$	30,677		$	205,336
	2014			2013			2014			2013
COST OF SALES		56,401			163,024
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
GROSS (LOSS) INCOME		(25,724	)		42,312
SALES	$	9,674		$	30,670		$	140,262		$	315,177
OPERATING EXPENSES:
COST OF SALES		33,959			57,225			201,453			305,570
Selling, general and administrative expenses		462,878			715,385
GROSS (LOSS) INCOME		(24,285	)		(26,555	)		(61,191	)		9,607
Depreciation and amortization		314,729			313,652
OPERATING EXPENSES:
Total operating expenses		777,607			1,029,037
Selling, general and administrative expenses		348,825			457,266			1,203,771			1,683,011
LOSS FROM CONTINUING OPERATIONS		(803,331	)		(986,725	)
Depreciation and amortization		305,276			315,711			932,602			948,220
OTHER EXPENSES:
Total operating expenses		654,101			772,977			2,136,373			2,631,231
Loss on investment		(3,609	)		(10,096	)
LOSS FROM OPERATIONS		(678,386	)		(799,532	)		(2,197,564	)		(2,621,624	)
Other loss		(184	)		—
OTHER INCOME (EXPENSES):
Interest expense - related parties		(67,621	)		(93,748	)
Loss on investment		(2,947	)		(8,201	)		(10,194	)		(27,085	)
LOSS BEFORE INCOME TAXES		(874,745	)		(1,090,569	)
Other (expense) income		(580	)		—			(1,391	)		(178	)
(INCOME TAXES) BENEFIT FROM INCOME TAXES		—			—
Interest expense - related parties		(86,130	)		(98,746	)		(239,173	)		(287,772	)
NET LOSS	$	(874,745	)	$	(1,090,569	)
LOSS BEFORE INCOME TAXES		(768,043	)		(906,479	)		(2,448,322	)		(2,936,659	)
BASIC AND DILUTED LOSS PER SHARE:	$	(0.09	)	$	(0.12	)
(EXPENSE) BENEFIT FROM INCOME TAXES		—			—			—			—
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING		9,983,666			9,013,868
NET LOSS	$	(768,043	)	$	(906,479	)	$	(2,448,322	)	$	(2,936,659	)
THE COMPONENTS OF COMPREHENSIVE (LOSS) INCOME:
BASIC AND DILUTED LOSS PER SHARE:	$	(0.07	)	$	(0.10	)	$	(0.24	)	$	(0.32	)
Net Loss	$	(874,745	)	$	(1,090,569	)
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING		10,920,741			9,467,282			10,322,117			9,270,849
Foreign currency translation adjustment		92,898			(146,741	)
THE COMPONENTS OF COMPREHENSIVE LOSS:
Tax effect on currency translation		(31,585	)		49,892
Net loss	$	(768,043	)	$	(906,479	)	$	(2,448,322	)	$	(2,936,659	)
COMPREHENSIVE LOSS	$	(813,432	)	$	(1,187,418	)
Foreign currency translation adjustment		(36,760	)		(176,656	)		(18,745	)		(82,227	)
Tax effect on currency translation		12,498			60,063			6,373			27,957
COMPREHENSIVE LOSS	$	(792,305	)	$	(1,023,072	)	$	(2,460,694	)	$	(2,990,929	)

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

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TELECONNECT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~THREE~~NINE MONTHS ENDED ~~DECEMBER~~JUNE 3130, 2014 AND 2013

	2013			2012
	2014			2013
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(~~874~~2,~~745~~448,322	)	$	(12,~~090~~936,~~569~~659	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		~~314~~932,~~729~~602			~~313~~948,~~652~~220
Loan discount amortization		55191,~~293~~235			—3,702
Stock-based compensation		—			156,~~500~~038
Inventory allowance		833,~~319~~882			1032,~~884~~840
Loss on equity investments		3,609			10,096
Loss on sale and disposal of fixed assets		1,611			—
Change in operating assets and liabilities
Loss on equity investment		10,194			27,085
Accounts receivable - trade		(19,949	)		(6,173	)
Change in operating assets and liabilities:
Accounts receivable - other		(49,103	)		—
Accounts receivable - trade		17,119			15,366
Inventory		3,153			103,676
Accounts receivable - other		(75,944	)		—
Prepaid expenses		(747	)		27,984
Inventory		3,786			104,173
Prepaid taxes		1,371			(3,714	)
Prepaid expenses		(10,742	)		5,792
Accounts payable		57,799			(128,934	)
Prepaid taxes		9,364			1,182
Accrued liabilities and income taxes payable		63,825			201,745
Accounts payable		(20,574	)		(52,910	)
Deferred revenue		30,701			(46,230	)
Accrued liabilities and income taxes payable		297,023			532,871
Net cash used in operating activities		(405,745	)		(606,083	)
Deferred revenue		5,869			(34,763	)
Net cash used in operating activities		(1,052,897	)		(1,297,063	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to Giga Matrix		(56,~~040~~223	)		(6,~~007~~000	)
Purchase of patents		(~~302~~17,806	)		—(46,422	)
Purchase of property and equipment		—			(24,~~054~~644	)
Proceeds from disposal of equipment		314,~~647~~311			—
Net cash used in investing activities		(19,~~695~~718	)		(857,~~061~~066	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		~~349~~787,~~441~~123			~~623~~1,~~568~~312,602
Repurchase and cancellation of stock		(137,446	)		—
Proceeds from sale of notes payable		140,282			—
Loan proceeds		—			32,700
Net cash provided by financing activities		352,277			623,568
Loan proceeds from related parties		402,223			89,397
EFFECT OF EXCHANGE RATE		2,596			(1,183	)
Net cash provided by financing activities		1,051,900			1,434,681
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(52,567	)		8,241
EFFECT OF EXCHANGE RATE		(47,011	)		(3,135	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(57,726	)		77,417
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		83,886			38,067
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3126,~~319~~160		$	46115,~~308~~484

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

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TELECONNECT INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~December~~June 3130, ~~2013~~2014

1. BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

The accompanying unaudited ~~condensed~~ condensed consolidated financial statements of Teleconnect Inc. (the “Company”) have been prepared in accordance with ~~accounting~~ accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the ~~information~~ information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended ~~December~~June 3130, ~~2013~~2014 are not necessarily indicative of the results that may be expected for the full year.

The condensed consolidated financial statements include the accounts of Teleconnect Inc. and its subsidiaries PhotoWizz BV (“MediaWizz”), Wilroot B. V. (Wilroot) and Hollandsche Exploitatie Maatschappij (“HEM”). All significant inter-company balances and transactions have been eliminated.

The balance sheet at September 30, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended September 30, 2013.

Revenue Recognition -

The Company recognizes revenue from the sale of multimedia hardware components in the period in which title has passed and services have been rendered. The Company recognizes revenue from narrowcasting and age validation services when services have been rendered and realization is assured.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09: Revenue from Contracts with Customers. The standard outlines a five-step model for revenue recognition with the core principle being that a company should recognize revenue when it transfers control of goods or services to customers at an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. Companies can choose to apply the standard using either the full retrospective approach or a modified retrospective approach. Under the modified approach, financial statements will be prepared for the year of adoption using the new standard but prior periods presented will not be adjusted. Instead, companies will recognize a cumulative catch-up adjustment to the opening balance of retained earnings. For public entities this new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company has not yet made a determination been made as to the method of application (full retrospective or modified retrospective). It is too early to assess whether the impact of the adoption of this new guidance will have a material impact on the Company's results of operations, financial position or cash flows.

2. LOANS FROM RELATED PARTIES

During the ~~three~~nine months ended ~~December~~June 3130, 2014 ~~2013~~ the Company sold promissory notes with a face value of $262,081 (€191,500) and 814,894 shares of its common stock together as a package to qualified investors for $524,161 (€383,000). An outstanding loan €28,000 to related party was applied to the purchase of these stock and note packages. The purchase price was allocated to the notes and stock based on the relative fair value of each with $349,441 allocated to the shares and $174,721 allocated to the promissory notes, therefore a discount on the notes of $87,360 was ~~record~~recorded and is being amortized over 1 year.

Loan discount amortization of $5567,~~293~~788 and $191,235 is included in interest expense for the three and nine months ended ~~December~~June, 3130, ~~2013~~2014, respectively. The promissory notes bear 6% interest and are due when the Company has positive cash flow from operations.

~~The~~Table ~~weighted average interest rate~~ of ~~the~~Contents ~~loans from related parties for the three months ended December 31, 2013 was 4.46%.~~ 8

During the nine months ended June 30, 2014 the Company issued promissory notes of $227,502 which are due in one year and bear 8% interest. If the notes are not paid at the due date, the principal plus accrued interest will convert to shares of Company common stock at the rate of €0.30 ($0.41) per share. During the three months ended June 30, 2014 notes in the amount of $171,438 (€125,000) and accrued interest of $3,033 (€2,214) were converted into 424,045 shares of the Company’s common stock.

The weighted average interest rate of the loans from related parties for the nine months ended June 30, 2014 was 4.91%.

3. NOTE PAYABLE

As of ~~December~~June 3130, ~~2013~~ 2014 and September 30, 2013 the Company has three short-term bridge loans totaling $~~558~~553,~~536~~149 and $546,953, respectively, from potential investors. The notes bear interest between 0% and 8% per year and are due on demand.

4. LITIGATION AND CONTINGENT LIABILITIES

In the normal course of its operations, the Company may, from time to time, be named in legal actions seeking monetary damages. While the outcome of these matters cannot be estimated with certainty, management does not expect, based upon consultation with legal counsel, that they will have a material effect on the amounts recorded in the condensed consolidated financial statements.

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5. EQUITY TRANSACTIONS

During the ~~three~~nine months ended ~~December~~June 3130, ~~2013~~2014 the Company issued 814,894 shares of its common stock in relation to the sale of common stock and promissory note packages to qualified investors (See Note 2). The purchase price was allocated to the notes and stock based on the relative fair value of of each with $349,440 allocated to the shares and $174,721 allocated to the promissory notes.

During the nine months ended June 30, 2014 the company sold 1,062,911 shares of its common stock for $437,682.

During the nine months ended June 30, 2014 notes in the amount of $171,438 (€125,000) and accrued interest of $3,033 (€2,214) were converted into 424,045 shares of the Company’s common stock (See Note 2).

On July 31, 2013 the Company entered into an agreement with the Trustee of 2,293,067 shares, representing 24.14% of the Company’s issued and outstanding shares, in the name of Hombergh Holdings BV and Quick Holdings BV, such that these shares were to be repurchased by the Company for a total of €500,000 payable as described below.

In exchange, the Trustee agreed to irrevocably forgo his right to claim the return of €7,608,938 in loans made to the Company by Hombergh Holdings BV and Quick Holdings BV and the associated interest accrued up to the date of the agreement on receipt of a €200,000 installment which was paid with the signing of the agreement. The second installment of €200,000 was paid to the Trustee on September 30th, 2013 and the third installment of €100,000 was paid in December 2013. The trustee returned the last 625,334 share certificates to the Company in December 2013.

6. INCOME TAXES

The Company has not recorded any federal ~~income~~ income tax expense or benefit for the three and nine months ended ~~December~~June 3130, ~~2013~~2014 and ~~2012~~2013, mainly due to available net operating loss carryforwards. The Company has recorded an income tax valuation allowance equal to the benefit of any deferred tax asset because of the uncertain nature of realization.

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7. LOSS PER SHARE

Basic loss per share amounts are computed ~~based~~ based on the weighted average number of shares outstanding on that date during the applicable periods. There were no stock options ~~outstanding~~ outstanding as of ~~December~~June 3130, ~~2013~~2014 or ~~2012~~2013.

The following reconciles the components of of the earnings (loss) per share computation for the three months ended ~~December~~June 3130:

	2013			2012
	2014			2013
Basic and diluted loss per share computation
Numerator:
Net loss	$	(~~874~~768,~~745~~043	)	$	(1906,~~090,569~~479	)
Denominator:
Weighted average common shares outstanding		910,~~983~~920,~~666~~741			9,~~013~~467,~~868~~282
Basic and diluted loss per share:	$	(0.0907	)	$	(0.1210	)

The following reconciles the components of the earnings (loss) per share computation for the nine months ended June 30:

	2014			2013

Basic and diluted loss per share computation
Numerator:
Net loss	$	(2,448,322	)	$	(2,936,659	)

Denominator:
Weighted average common shares outstanding		10,322,117			9,270,849

Basic and diluted loss per share:	$	(0.24	)	$	(0.32	)

8. GIGA MATRIX HOLDING

Giga Matrix provides performance of market surveys and the broadcasting of in-store commercial messages using the age validation equipment between age checks. The Company accounts for its investment in Giga Matrix Holding, BV (“Giga”), including amounts due from Giga, under the equity method. Pursuant to accounting guidance the Company has combined its investment in Giga and amounts due from Giga for purposes of determining the amount of losses to be recognized under the equity method; accordingly, the Company ~~recognized~~ recognized $32,~~609~~947 and $108,~~096~~201 in losses on its equity investment during the three months ended ~~December~~June 3130, ~~2013~~2014 and ~~2012~~2013, respectively and $10,194 and $27,085 during the nine months ended June 30, 2014 and 2013, Respectively. As of ~~December~~June 3130, ~~2013~~2014, the Company’s maximum exposure to further losses is limited to the amount due from Giga of $~~580~~569,~~791~~802.

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The Company has analyzed its investment in Giga and determined that, while Giga is a variable interest entity the Company is not the primary beneficiary due to the fact that the Company has no further financial obligations to support Giga, and therefore it is not required to be consolidated.

Results of operations of Giga for the ~~three~~ nine months ended ~~December~~June 3130, ~~2013~~2014 and ~~2012~~2013 are as follows:

	2013			2012
	2014			2013
	(Unaudited)			(Unaudited)
Net loss	$	(720,~~364~~805	)	$	(2055,~~604~~277	)

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9. GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As shown in the accompanying ~~consolidated~~ consolidated financial statements, the Company incurred net losses of $~~874~~2,~~745~~448,322 for the ~~three~~nine months ended ~~December~~June 3130, ~~2013~~2014 and $12,~~090~~936,~~569~~659 for the ~~three~~nine months ended ~~December~~June 3130, ~~2012~~2013. In addition, the Company has incurred substantial losses since its inception.

As of ~~December~~June 3130, ~~2013~~2014, the Company had a working capital deficit of $2,~~476~~843,~~002~~ 965 as compared to its working capital deficit as of September 30, 2013 of $2,087,316. These factors raise substantial doubt about the Company's ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts ~~and~~ and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to attain a satisfactory ~~level~~ level of profitability and obtain suitable and adequate financing. Management anticipates that additional financing through long-term borrowing and equity placements will be necessary in the future. There can be no assurance that management's plan will be successful.

~~Table~~10. ofSUBSEQUENT ~~Contents -8-~~EVENTS

Subsequent to June 30, 2014 the Company received €227,170 ($310,269) for 824,406 shares of the Company’s common stock.

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

Caution Regarding Forward-Looking Statements

The following information may contain certain forward-looking statements that are not historical facts. These statements represent our expectations or beliefs, including but not limited to, statements concerning future acquisitions, future operating results, statements concerning industry performance, capital expenditures, financings, as well as assumptions related to the foregoing. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “shall,” “will,” “could,” “expect,” “estimate,” “anticipate,” “predict,” “should,” “continue” or similar terms, variations of those terms or the negative of those terms. Forward-looking statements are based on current expectations and involve various risks and uncertainties that could cause actual results and outcomes for future periods to differ materially from any forward-looking statement or view expressed herein. Our financial performance and the forward-looking statements contained in this report are further qualified by other risks including those set forth from time to time in documents filed by us with the SEC.

INTRODUCTION

The Company’s business model involves the age validation of consumers when purchasing age restricted products, such as alcohol or tobacco. This age validation business is at the core of the Company’s strategic direction. Our revenues are derived from the sales and leasing of age validation equipment, the performance of age validation as well as the sale and maintenance of vending solutions (through Mediawizz), and the broadcasting of in-store commercial messages using the age validation equipment between age checks (through HEM). Our revenues and operating results will depend in the future upon government laws and mandates, performance and pricing of our products/services, relationships with the public and other factors. The Company is not reliant on any one specific customer for revenues.

The amended Alcohol and Catering Act took effect in The Netherlands as of January 1, 2013. After this date, Dutch law enforcement authorities could temporarily close the alcohol section of supermarkets when they are repeatedly caught selling alcohol to minors. It iswas expected that the enforcement of this change ~~will~~would generate a significant demand for Ageviewers. Political resistance, however, has delayed the enforcement of the Act. With public awareness increasing, it is expected that the retail outlet demand for Ageviewers will commence shortly.

Today, our existing revenues may be impacted by other factors including the length of our sales cycle, the timing of sales orders, budget cycles of our customers, competition, the timing and introduction of new versions of our products, the loss of, or difficulties affecting, key personnel and distributors, changes in market dynamics or the timing of product development or market introductions. These factors have affected our historical results to a greater extent than has seasonality. Combinations of these factors have historically influenced our growth rate and profitability significantly in one period compared to another, and are expected to continue to influence future periods, which may compromise our ability to make accurate forecasts.

Cost of sales consists of customer support costs, training and professional services expenses, and parts for the terminals; which consist of small display screens, metallic housings, PC’s, switches, small cameras similar to webcams, electronic components, cables, power supplies and software licenses amongst other items.

Our gross profit will continue to be affected by a variety of factors, including: the resistance from retailers to migrate from existing inefficient on-site age verification procedures, possible new competitors entering the market, the mix and average selling prices of products, maintenance and services, new versions of products, the cost of equipment, component shortages, and the mix of distribution channels to which our products and services are sold. Our gross profit will be adversely affected if relevant laws and regulations are not readily adopted by the retail chains or are not enforced by local government.

Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, finance, accounting, legal and human resources personnel, professional fees and corporate expenses. We expect general and administrative expenses to increase ~~slightly~~ as the Company expands its points of sale in Europe as well as when it prepares itself to enter the U.S. market.

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~~Subsequent~~ BALANCE toSHEET ~~December~~COMPARISON ~~31,~~AT ~~2013~~JUNE 30, ~~directors~~2014 ofAND ~~the~~SEPTEMBER ~~Company have concluded that it is in the best interest of the Company to create an Advisory Board with senior industry members. At the next Board meeting of the Company~~30, ~~this proposal should be approved and the Advisory Board formally established. Members of the Advisory Board will be disclosed in an 8K filing.~~2013

~~BALANCE~~Assets: ~~SHEET~~Total ~~COMPARISON~~assets ATat ~~DECEMBER~~June 30, 312014 decreased $911,521 or 16.9% to $4,476,712 compared to $5,388,233 at September 30, 2013. This ~~AND~~decrease ~~SEPTEMBER~~is due primarily to the depreciation and amortization of fixed assets and intangible assets during the nine months ended June 30, ~~2013~~2014.

~~Assets~~Liabilities: Current ~~Total~~liabilities ~~assets~~ at ~~December~~June 3130, ~~2013~~ ~~decreased~~2014 increased $~~201~~725,~~658~~045 or 329.71% to $53,~~186~~212,~~575~~786 compared to $52,~~388~~487,~~233~~741 at September 30, 2013. This increase ~~decrease~~ is due primarily to an increase in accrued liabilities to related parties of $269,644 related to both the ~~depreciation~~accrued interest of related party notes and ~~amortization~~additional ofunpaid ~~fixed~~management ~~assets~~fees, and ~~intangible~~an ~~assets~~increase ~~during~~in ~~the~~loans ~~quarter~~from ~~ended~~related ~~December~~parties ~~31,~~of ~~2013~~$430,914.

~~Liabilities: Current~~OPERATIONS ~~liabilities~~COMPARISON atOF ~~December~~THE ~~31,~~THREE ~~2013~~MONTHS ~~increased~~ENDED ~~$399,778 or 16.1% to $2,887,519 compared to $2,487,741 at September~~ JUNE 30, ~~2013. This increase~~2014 isAND due primarily to an increase in loans from related parties of $213,554, as well as an increase in accounts payable trade of $87,608, an increase in accrued liabilities – related parties of $92,128 related to both the accrued interest of a related party note and additional unpaid management fees. The increase in accounts payable trade is a consequence of the decrease in working capital.2013

~~COMPARISON~~We OFhad ~~THE~~net ~~THREE~~loss ~~MONTHS~~of ~~ENDED~~$768,043 ~~DECEMBER~~for 31the three months ended June 30, 2014 as compared to a net loss of $906,479 during the comparable period in 2013, ~~AND~~a ~~2012~~decrease of 15.3% or $138,436. A comparison of revenues and expenses for the two periods is as follows:

We had net loss of $874,745 for the three months ended December 31, 2013 as compared to net loss of $1,090,569 during the comparable period in 2012, a decrease of 19.8% or $215,824. A comparison of revenues and expenses for the two periods is as follows:

REVENUES

Revenues for the three months ended June ~~December 31~~30, ~~2013~~2014 were $309,~~677~~ 674 as compared to revenues for the same period in ~~2012~~2013 of $~~205~~30,~~336~~670; a decrease of $~~174~~20,~~659~~996 or 8568.15%.

~~2012~~Current revenues were derived ~~primarily~~ from sales ~~$199,175~~ of ~~sales~~kiosk ofequipment. ~~a vending~~The ~~solution~~breakdown of revenues for ~~airports~~the ~~and~~three ~~railway~~months ~~stations.~~ended NoJune ~~such~~30, ~~sales~~2014 ~~occurred~~consists inof ~~the~~revenues ~~same~~of ~~period~~$9,186 from sale of ~~2013~~kiosk equipment, $326 from narrowcasting, and $162 from miscellaneous. ~~Revenues~~The breakdown of revenues for the three months ended ~~December~~June 3130, 2013 ~~consisted~~consists of ~~primarily~~revenues of ~~revenue~~$21,186 from ~~support~~sale of ~~installed~~vending ~~units~~machines, ~~and~~$3,349 ~~additional~~from ~~work~~Samsonite onsales, ~~existing~~$4,634 ~~kiosks~~from Clarity sales, and $1,501 from miscellaneous.

COST OF SALES

Cost of sales for the three month period ~~ended~~ ~~December~~ended 31June 30, ~~2013~~2014 ~~were~~was $5633,~~401~~959 as compared to $~~163~~57,~~024~~225 for the same period of ~~2012~~2013; a decrease of 6540.47% or $~~106~~23,~~623~~266. ~~The~~During ~~decrease~~the inthree ~~cost~~month period ended June 30, 2014, the breakdown of ~~sales~~costs ~~was~~of ~~primarly~~sales ~~due~~consists toof ~~the~~telecommunications ~~decrease~~costs inof $11,788, vending machine ~~solution~~costs ~~hardware~~of ~~sales~~$9,100, inkiosk support costs of $1,827 and inventory write-downs of $11,244. The breakdown of 2013 ascosts ~~compared~~consisted of totelecommunications ~~2012~~costs of $12,583, kiosk costs of $32,413, kiosk support costs of $449, inventory write-downs of $10,921 and other miscellaneous costs of $859.

~~The~~During three months ended June 30, 2014 and 2013, the cost of sales included costs derived from maintaining the contracts in relation to its age-validation business which provide the Company with the technical acceptance, market exposure and credibility required upon which to base the service offering. The allocation of such costs are in line with the Company’s strategic plan. These expenditures have been efficient in achieving the results to date in the area of technical adaptation to market requirements, market exposure and user acceptance. The Company expects its costs of sales to increase in line with the installations of Ageviewers in supermarkets under the new commercial conditions.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative ~~expenses~~ expenses have decreased by $~~252~~108,~~507~~441 or 3523.37% to $~~462~~348,~~878~~825 during the three months ended ~~December~~June 3130, ~~2013~~2014 as compared to $~~715~~457,~~385~~266 for ~~the~~ the comparable period in ~~2012~~2013. This decrease in selling, general and administrative expenses is primarily due to a ~~reduction~~ decrease in the cost of outside professional services and management fees.

~~Table~~OPERATIONS ofCOMPARISON ~~Contents~~OF ~~-10-~~THE NINE MONTHS ENDED JUNE 30, 2014 AND 2013

We had net loss of $2,448,322 for the nine months ended June 30, 2014 as compared to net loss of $2,936,659 during the comparable period in 2013, a decrease of 16.6% or $488,337. A comparison of revenues and expenses for the two periods is as follows:

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REVENUES

Revenues for the nine months ended June 30, 2014 were $140,262 as compared to revenues for the same period in 2013 of $315,177; a decrease of $174,915 or 55.5%.

Current revenues were derived from sales of kiosk equipment. The breakdown of revenues for the nine months ended June 30, 2014 consists of revenues of $136,597 from the sale of kiosk equipment, $655 from age verification, $1,309 from narrowcasting, and $1,701 from miscellaneous. The breakdown of revenues for the nine months ended June 30, 2013 consists of revenues of $296,625 from the sale of vending machines, $1,334 from age verification, $4,607 from narrowcasting, $638 from photoprint services and $11,973 from miscellaneous.

COST OF SALES

Cost of sales for the nine month period ended June 30, 2014 were $201,453 as compared to $305,570 for the same period of 2013; a decrease of 34.1% or $104,117. The breakdown of 2014 costs consisted of telecommunications costs of $36,354, kiosk costs of $112,867, kiosk support costs of $18,350 and inventory write-downs of $33,882. During nine month period ended June 30, 2013, the breakdown of costs of sales consists of telecommunications costs of $39,790, vending machine costs of $218,543, kiosk support costs of $7,159, inventory write-downs of $32,840, photoprint costs of $226 and other miscellaneous costs of $7,012.

During the nine month period ended June 30, 2014, the cost of sales also included costs derived from maintaining the contracts in relation to its age-validation business which provide the Company with the technical acceptance, market exposure and credibility required upon which to base the service offering. The allocation of such costs are in line with the Company’s strategic plan. These expenditures have been efficient in achieving the results to date in the area of technical adaptation to market requirements, market exposure and user acceptance. The Company expects its costs of sales to increase in line with the installations of Ageviewers in supermarkets under the new commercial conditions.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses have decreased by $479,240 or 28.5% to $1,203,771 during the nine months ended June 30, 2014 as compared to $1,683,011 for the comparable period in 2013. This difference is due to a decrease in the cost of professional services and management fees.

LIQUIDITY AND CAPITAL RESOURCES

AsAt ofJune ~~December 31~~30, 2014 and September 30, 2013, ~~the~~Teleconnect ~~Company~~Inc. had a working capital deficit of approximately $2,~~476~~843,~~002~~965 asand ~~compared to its working capital deficit as of September 30, 2013 of~~ $2,087,316, respectively. This decrease ~~increase~~of isworking ~~due~~capital, ~~primarily to an increase in accounts payable trade of~~ $87756,~~608~~649 ~~and~~or ~~an increase in accrued liabilities of $92~~36.2%,~~128~~ ~~associated~~is toprimarily ~~related~~a ~~parties~~result asof ~~well~~the ~~as an~~ increase in ~~loans~~total ~~from~~current ~~related~~liabilities ~~parties~~ of $~~213~~725,~~554 offset~~045 byas adetailed ~~decrease in accounts payable related parties~~previously.

The ability of the Company to satisfy its obligations and to continue as a going concern will depend on raising funds through the sale of additional shares of its common stock, increase borrowing, and upon its ability to reach a profitable level of operations. The Company’s financial statements do not reflect adjustments that might result from its inability to continue as a going concern and these adjustments could be material.

The Company’s capital resources have been provided primarily by capital contributions from stockholders, stockholders’ loans, the conversion of outstanding debt into common stock of the Company, and the sale of Common Stock.

The Company intends to look for additional equity funding to pay debts and for working capital. However, there is no assurance that such capital will be raised, and the Company may seek bank financing and other sources of financing to complete the payment of debt and for working capital.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the ~~three~~nine months ended ~~December~~June 3130, 2014 ~~2013~~ the Company ~~sold~~issued 814,894 shares of its common stock in relation to the sale of common stock and promissory note packages to qualified investors (See Note 2). The purchase price was allocated to the notes and stock based on the relative fair value of each with $349,440 allocated to the shares and $174,721 allocated to the promissory notes.

During the ~~three~~nine months ended ~~December~~June 3130, ~~2013,~~ ~~with a final payment of €100,000,~~ 2014 the ~~Company~~company ~~completed~~sold ~~the repurchase of a total of 2~~1,~~293~~062,~~067~~911 shares, ~~representing 24.14%~~ of ~~the~~its ~~Company’s~~common ~~issued~~stock ~~and outstanding shares, in the name of Hombergh Holdings BV and Quick Holdings BV, such that these shares were repurchased by the Company~~ for ~~a total of €500~~$437,~~000~~682. ~~The trustee has returned all share certificates to the Company and they are all to be retired.~~

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures and internal controls that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures and internal controls, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures and internal controls. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

As required by the Securities and Exchange Commission Rule 13a-15(e) and Rule 15d-15(e), we carried out an evaluation, under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls over Financial Reporting

There have not been any changes in our internal controls over financial reporting during the ~~fiscal~~nine ~~quarter~~months ended ~~December~~June 3130, ~~2013~~2014 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of its operations, ~~the~~ the Company, has been named in legal actions seeking monetary damages. During the ~~first~~nine ~~fiscal~~month ~~quarter~~period ofended June 30, 2014, the Company ~~continues~~ continued its legal actions in The Netherlands against parties which owe money to the Company. In one of these cases, relating to the Company’s past telecommunications business, a party filed during fiscal 2010, in defense, a counterclaim against the Company. There have been no new developments in this area. While the outcome of these matters cannot be estimated with certainty, management does not expect, based upon consultation with legal counsel, that they will have a material effect on the Company's business or financial condition or results of operations.

ITEM 1A. RISK FACTORS

None

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

During the ~~three~~nine months ended ~~December~~June 3130, 2014 ~~2013~~ the Company ~~sold~~issued 814,894 shares of its common stock ~~and~~in ~~promissory~~relation ~~note packages~~ to ~~qualified investors based on~~ the ~~relative~~sale ~~fair value~~ of ~~each~~common ~~with~~stock ~~$349,440 allocated to the shares~~ and ~~$174,721~~promissory ~~allocated~~note packages to ~~the~~qualified ~~promissory~~investors ~~notes~~(See Note 2).

~~All~~During ~~shares~~the ~~were~~nine ~~sold~~months toended ~~accredited~~June ~~investors~~30, ~~pursuant~~2014 ~~to Section 4(2) of~~ the ~~Securities~~company ~~Act~~sold ~~of 1933~~1,062,911 asshares ~~amended. There~~of ~~were~~its nocommon ~~underwriters~~stock ~~involved~~for ~~and no underwriting discounts or commissions were paid~~$437,682.

During the nine months ended June 30, 2014 notes in the amount of $171,438 (€125,000) and accrued interest of $3,033 (€2,214) were converted into 424,025 shares of the Company’s common stock (See Note 2).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

31.1		Certification of Dirk L. Benschop, Director, Chief Executive Officer, President, Treasurer
31.2		Certification of Leslie G. Pettitt, Director, Chief Financial Officer and principal accounting officer
32.1		Certification of Dirk L. Benschop and Leslie G. Pettitt

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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.

	TELECONNECT INC.
		Teleconnect Inc.
Date: February 14, 2014	By:	/s/ Dirk L. Benschop
Date: August 14, 2014	By:	/s/ Dirk L. Benschop
		Dirk L. Benschop
		Director, Chief Executive Officer, President and Treasurer

		Teleconnect Inc.
Date: February 14, 2014	By:	/s/ Leslie G. Pettitt
Date: August 14, 2014	By:	/s/ Leslie G. Pettitt
		Leslie G. Pettitt
		Director, Chief Financial Officer and principal accounting officer

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INDEX TO EXHIBITS

Exhibit No.		Description

31.1		Certification of Dirk L. Benschop, Director, Chief Executive Office, President, Treasurer
31.2		Certification of Leslie G. Pettitt, Director, Chief Financial Officer and principal accounting officer
32.1		Certification of Dirk L. Benschop and Leslie G. Pettitt

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Filing Compare · Teleconnect Inc.