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 ~~June~~September 30, 2009

o 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 000-304799

eTELCHARGE.COM
(Exact name of registrant as specified in its charter)

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

124 Loftin Street, Suite 600 Cedar Hill, Texas		75104
(Address of principal executive offices)		(zip code)

972-298-3800
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o 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).

o 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

o (Do not check if a smaller reporting company)

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). o Yes x No

As of ~~August~~November 319, 2009 there were 320,737,978 outstanding shares.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

eTELCHARGE.COM (A Development Stage Company) BALANCE SHEETS
			June 30, 2009 (unaudited)		December 31, 2008 (audited)
			September 30, 2009 (unaudited)		December 31, 2008 (audited)
	ASSETS
Current assets:
	Cash	$	76,~~344~~257	$	-
	Prepaid expenses and other current assets		1,111		1,111
	Total current assets		87,~~455~~368		1,111
Fixed assets, net of accumulated depreciation of $0 and $12,078, respectively			-		21,434
Deferred financing costs			18,309		21,719
Deposits			1,980		1,980
Total assets		$	2827,~~744~~657	$	46,244
	LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
	Accrued expenses	$	~~304~~311,~~882~~946	$	295,063
	Payroll tax obligation		40,000		40,280
	Accounts payable		~~586~~585,~~465~~788		589,615
	Derivative liability		39,233		47,076
	Current portion of notes payable		2,414		5,151
	Cash received for stock purchased, but not yet issued		-		15,000
	7.75% Convertible debenture, net of $120,133 and $127,976 discount, respectively		219,867		212,024
	7.75% Convertible debenture, net of $103,012 and $127,976 discount, respectively		236,988		212,024
	Total current liabilities		1,~~192~~216,~~861~~369
Long-term liabilities:
	Notes payable		2,719		2,719
Total liabilities			1,~~195~~219,~~580~~088		1,206,928
Commitments and contingencies (Note 9)
Stockholders' deficit:
	Common stock, $0.003 par value, 400,000,000 shares authorized, 320,737,978 and issued and outstanding		962,213		962,213
	Common stock subscribed and paid but not yet issued		6065,000		-
	Additional paid-in capital		15,483,007		15,483,007
	Deficit accumulated during the development stage		(17,~~672~~701,~~056~~651)		(17,605,904)
	Total stockholders' deficit		(1,~~166~~191,~~836~~431)		(1,160,684)
Total liabilities and stockholders' deficit		$	2827,~~744~~657	$	46,244

See accompanying notes to the financial statements

eTELCHARGE.COM
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
		~~Three months ended~~	Three months ended				~~Six months ended~~	Nine months ended							~~June 7, 1999~~	June 7, 1999
		June 30,					June 30,								(Inception) to
			September 30,					September 30,								(Inception) to
															June 30,
																September 30,
		~~2009~~	2009		~~2008~~	2008	~~2009~~	2009			~~2008~~	2008			~~2009~~	2009
Revenues	$	~~15,748~~	17,512	$	~~9,164~~$	$9,997	~~33,315~~$	50,827	$	$	~~26,890~~	36,887	$	$	~~190,491~~	208,003
Operating expenses		~~18,946~~	23,851		~~582,684~~	762,953	~~68,453~~	93,764			~~1,051,922~~	1,814,875			~~17,549,078~~	17,572,930
Net loss from operations		~~(3,198)~~	(6,339)		~~(573,520)~~	(752,956)	~~(35,138)~~	(42937)			~~(1,025,032)~~	(1,777,988)			~~(17,358,587)~~	(17,364,927)
Other income		-	-		-	-	-	-			-	-			~~288,286~~	288,286
Loss on extinguishment of debt, net		-	-		-	-	~~(16,983)~~	(16,983)			-	-			~~(310,603)~~	(310,603)
Interest expense, net		~~(5,931)~~	(23,255)		~~(8,713)~~	(15,213)	~~(14,031)~~	(35,827)			~~(20,718)~~	(35,931)			~~(291,152)~~	(314,407)
Net loss	$	~~(9,129)~~	(29,594)	$	~~(582,233)~~$	$(768,169)	~~(66,152)~~$	(95,747)	$	$	~~(1,045,750)~~	(1,813,919)	$	$	~~(17,672,056)~~	(17,701,651)
Basic and diluted net loss per share	$	~~(0.00)~~	(0.00)	$	~~(0.00)~~$	$(0.00)	~~(0.00)~~$	(0.00)	$	$	~~(0.00)~~	(0.01)
Weighted average shares outstanding		~~320,737,978~~	320,737,978		~~320,737,978~~	304,561,443	~~320,737,978~~	320,737,978			~~289,441,951~~	295,600,790

eTELCHARGE.COM (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited)
eTELCHARGE.COM
					Six months ended June 30,				June 7, 1999 (Inception) to June 30,
(A Development Stage Company)
					2009		2008		2009
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
CASH FLOWS FROM OPERATING ACTIVITIES:
		Price per Share					Common Stock Subscribed			Amount		Number of Common Shares Issued		Amount		Additional Paid-in Capital		Accumulated Deficit		Total
	Net loss			$	(66,152)	$	(1,045,750)	$	(17,672,056)
Balances December 31, 2008 (audited)							3,000,000	$		15,000	$	320,737,978	$	962,213	$	15,483,007	$	(17,605,904)	$	(1,160,684)
	Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common stock for cash:		.003					-					-		-		-		-		-
		Amortization and depreciation			3,410		16,542		152,198
Issuance of common stock for services		.005					10,000,000			50,000		-		-		-		-		50,000
		Issuance of common stock for services			-		393,494		12,572,343
Conversion of Debenture into common stock		-					-			-		-		-		-		-		-
		Issuance of stock options for services			-		144,817		899,600
Amortization of Stock Options issued to officers for services Effect of derivatives		-					-			-		-		-		-		-		-
		Mark derivative instrument to market			-		830		(121,691)
Net loss							-			-		-		-		-		(95,747)		(95,747)
		Imputed interest			-		-		63,036
Balances, September 30, 2009 (unaudited)							13,000,000	$		65,000		320,737,978	$	962,213	$	15,483,007	$	(17,701,651)	$	(1,191,431)
		Loss on extinguishment of debt			16,983		-		310,603
		Changes in:
			Deferred acquisition fees		-		(230,000)
			Interest receivable		-		(2,872)		-
			Prepaid expenses and other current assets		-		16,897		3,090
			Accounts payable		(3,150)		359,708		586,465
			Accrued expenses		14,270		28,775		309,333
			Payroll tax obligation		(280)		(72,323)		40,000
		Net cash used in operating activities			(34,919)		(389,882)		(2,857,079)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital lease obligation				-		-		8,911
	Disposal of property and equipment				-		-		867
	Purchase of property and equipment				-		(2,991)		(79,873)
Net cash used in investing activities					-		(2,991)		(70,095)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from sales of common stock				-		171,499		2,126,286
	Proceeds from convertible note payable (net of offering costs)				-		-		757,810
	Proceeds from sales of common stock – not yet issued				45,000		-		60,000
	Net loan proceeds from shareholder				-		-		1,473
	Proceeds from note payable – other				-		-		153,233
	Payments on notes payable-other				(2,737)		(1,975)		(47,784)
	Payment on note payable to related party for asset purchase				-		-		(116,500)
Net cash provided by financing activities					42,263		169,524		2,934,518
NET CHANGE IN CASH					7,344		(223,349)		7,344
CASH, beginning of period					-		230,227		-
CASH, end of period				$	7,344	$	6,878	$	7,344

See accompanying notes to the financial statements

		Six months ended June 30,				June 7, 1999 (Inception) to June 30,
eTELCHARGE.COM (A Development Stage Company) STATEMENTS OF CASH FLOWS (Unaudited)
		2009		2008		2009
					Nine months ended September 30,				June 7, 1999 (Inception) to September 30,
Supplemental schedule of non-cash financing activities:
					2009		2008		2009
Issuance of common stock in exchange for receivable from shareholder	$	-	$	-	$	1,000
CASH FLOWS FROM OPERATING ACTIVITIES:
Issuance of common stock for retirement of debt		-		-		144,643
	Net loss			$	(95,747)	$	(1,813,919)	$	(17,701,651)
Increase (decrease) in derivative liability		(7,843)		830		(71,133)
	Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of payable to related party in exchange for proprietary rights		-		-		116,500
		Amortization and depreciation			28,374		19,660		177,162
Property and equipment acquired through issuance of common stock		-		-		21,595
		Issuance of common stock for services			-		395,777		12,572,343
Issuance of common stock for compensation		-		92,034		4,356,314
		Issuance of stock options for services			-		147,502		899,600
Issuance of common stock for pending stock subscriptions		-		-		153,220
		Mark derivative instrument to market			(7,843)		(81,173)		(129,534)
Stock issued for conversion of debenture		-		5,000		110,000
		Imputed interest			-		-		63,036
Fixed assets exchanged for extinguishment of debt		21,434		-		21,434
		Loss on extinguishment of debt			16,983		-		310,603
Note payable issued for purchase of insurance				26,000		26,000
		Changes in:
Supplemental cash flow disclosures:
			Interest receivable		-		(2,243)		-
Cash paid for interest	$	-	$	59,133	$	156,095
			Prepaid expenses and other current assets		-		16,199		3,090
			Accounts payable		(3,827)		546,163		585,788
			Accrued expenses		21,334		180,900		316,397
			Payroll tax obligation		(280)		(72,323)		40,000
		Net cash used in operating activities			(41,006)		(663,457)		(2,863,166)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital lease obligation				-		-		8,911
	Disposal of property and equipment				-		-		867
	Purchase of property and equipment				-		(2,991)		(79,873)
Net cash used in investing activities					-		(2,991)		(70,095)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from sales of common stock				-		205,100		2,126,286
	Proceeds from convertible note payable (net of offering costs)				-		-		757,810
	Proceeds from sales of common stock – not yet issued				50,000		-		65,000
	Net loan proceeds from shareholder				-		250,000		1,473
	Proceeds from note payable – other				-		-		153,233
	Payments on notes payable-other				(2,737)		(2,956)		(47,784)
	Payment on note payable to related party for asset purchase				-		-		(116,500)
Net cash provided by financing activities					47,263		452,144		2,939,518
NET CHANGE IN CASH					6,257		(214,304)		6,257
CASH, beginning of period					-		230,227		-
CASH, end of period				$	6,257	$	15,923	$	6,257

See accompanying notes to the financial statements


		Nine months ended September 30,				June 7, 1999 (Inception) to September 30,
		2009		2008		2009
Supplemental schedule of non-cash financing activities:
Issuance of common stock in exchange for receivable from shareholder	$	-	$	-	$	1,000
Issuance of common stock for compensation		-		93,435		4,356,314
Increase (decrease) in derivative liability		(7,843)		(81,173)		55,447
Issuance of payable to related party in exchange for proprietary rights		-		-		116,500
Property and equipment acquired through issuance of common stock		-		-		4,800
Issuance of common stock for pending stock subscriptions		-		-		153,220
Common stock issued for conversion of debenture		110,000		800,000		910,000
Fixed assets exchanged for extinguishment of debt		21,434		-		21,434
Note payable issued for purchase of insurance				15,633		-

Supplemental cash flow disclosures:
Cash paid for interest	$	-	$	92,248	$	156,095

See accompanying notes to the financial statements

eTELCHARGE.COM

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - HISTORY AND ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

eTelcharge.com (“eTelcharge” or the “Company”) was incorporated in Nevada on June 7, 1999. eTelcharge was formed for the purpose of providing an internet credit option for online shoppers to charge items sold over the Internet to their telephone bill. As of ~~June~~September 30, 2009, eTelcharge has not commenced significant operations. eTelcharge is in the process of raising financing to fund future operations and marketing of its product to target customers. As such, eTelcharge is considered to be in the development stage.

Basis of Presentation

The accompanying unaudited interim financial statements of eTelcharge have been prepared in accordance with accounting principles generally accepted (GAAP) in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in eTelcharge’s most recent Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosure contained in the audited financial statements for 2008 as reported in the 10-K have been omitted.

Subsequent Events

In preparing the consolidated financial statements, eTelcharge has reviewed, as determined necessary by the Company’s management, events that have occurred after ~~June~~September 30, 2009, up until the issuance of the financial statements, which occurred on ~~August~~November 319, 2009.

Fair Value of Financial Instruments

The Company adopted fair value accounting for certain financial assets and liabilities that have been evaluated at least annually. The standard defines fair value as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Management has determined that it will not, at this time, adopt fair value accounting for nonfinancial assets or liabilities currently recorded in the financial statements, which includes property and equipment, investments carried at cost, deposits and other assets. Impairment analyses will be made of all assets using fair value measurement.

Assets and liabilities measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by generally accepted accounting principles and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1 – Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2 – Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets in non-active markets;

Inputs other than quoted prices that are observable for the assets or liability; and

Inputs that are derived principally from or corroborated by other observable market data.

Level 3 – Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

Cash, accounts receivable and payable, amounts, accrued expenses and other current liabilities are carried at book value amounts which approximate fair value due to the short-term maturity of these instruments.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for a fair value on a recurring basis as of September 30, 2009, according to the valuation techniques the Company used to determine their fair values.

Assets:


		For Identical Assets		Observable Inputs		Unobservable Inputs		Total
		Level 1		Level 2		Level 3

Cash and cash equivalents	$	6,257	$	-	$	-	$	6,257
Derivative liability		-		39,233		-		39,233
Convertible debenture		-		-		236,988		236,988
	$	6,257	$	39,233	$	236,988	$	282,478

NOTE 2 - GOING CONCERN

As shown in the accompanying financial statements, eTelcharge incurred a net loss of $6695,~~152~~747 for the ~~six~~nine months ended ~~June~~September 30, 2009, has an accumulated deficit of $17,~~672~~701,~~056~~651 and a working capital deficit of approximately $1,~~184~~209,000. These conditions raise substantial doubt as to eTelcharge's ability to continue as a going concern. Management is trying to raise additional capital through financing and further development and marketing of its products and services in order to generate revenue. The financial statements do not include any adjustments that might be necessary if eTelcharge is unable to continue as a going concern.

NOTE 3 - PROPERTY AND EQUIPMENT

Prior to February, 2009, eTelcharge leased 3,000 square feet of office space on a three-year lease expiring January 31, 2010 at 1636 N. Hampton Road, Suite 270, DeSoto, Texas 75115. In February, 2009, the landlord confiscated the office furniture and all equipment of eTelcharge in exchange for past and future unpaid rent. The Company has recognized a $16,983 loss on extinguishment of debt in the accompanying financial statements as a result of this event.

NOTE 4 - ACCRUED COMPENSATION

As of ~~June~~September 30, 2009, the Company had accrued $232,813 payable in cash and $20,596 payable in 2,350,000 shares of common stock for compensation for services rendered to the Company.

NOTE 5 - PAYROLL TAX OBLIGATION

During 2007, the Company remitted previously unpaid Federal and State employer and employee payroll taxes for the years 2001 through mid-2007. In March 2008, the Company received an abatement of penalties on this obligation and, as a result, wrote-off accrued penalties of $68,026. The Company has recorded accrued interest from the date the taxes were due, through the date the taxes were paid. The total amount recorded for this obligation at ~~June~~September 30, 2009 and December 31, 2008 was $40,000 and $40,280, respectively. In November 2008, the IRS filed a lien on all property and rights to property belonging to eTelcharge.com for the amount of this interest.

NOTE 6 – STOCK OPTIONS

As of ~~June~~September 30, 2009, there were 20,010,000 options outstanding, all of which were vested. For the ~~six~~nine months ended ~~June~~September 30, 2009, no stock options were issued. There were no stock options exercised for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008. On July 24, 2008, 3,600,000 options were cancelled. On the same date, the Board of Directors approved issuing the same number of options, at the current stock price, under a new stock compensation plan, contingent upon approval of the plan by the company’s shareholders. The plan was not approved by the Company’s shareholders.

F5F7

the current stock price, under a new stock compensation plan, contingent upon approval of the plan by the Company’s shareholders. The plan was not approved by the Company’s shareholders.

Stock Option Activity

The following is a summary of all stock option transactions for the ~~six~~nine months ended ~~June~~September 30, 2009:

Outstanding at December 31, 2008	20,010,000
Granted at market price	-
Cancelled or expired	-
Exercised	-
Outstanding at June 30, 2009	20,010,000
Outstanding at September 30, 2009	20,010,000

At ~~June~~September 30, 2009, the Company had no stock options outstanding for which the exercise price was lower than the market value of the Company’s common stock. For additional or supplemental information regarding the Company’s stock options, see our Form 10-K for the fiscal year ended December 31, 2008.

NOTE 7 – DERIVATIVES

On December 28, 2007, eTelcharge entered into a securities purchase agreement with Golden Gate Investors (“GGI”). Under the purchase agreement, eTelcharge issued to GGI a debenture (the “Debenture”), convertible into eTelcharge’s common stock, in the amount of $1.5 million. GGI paid for the debenture by delivering a cash payment of $200,000 and a note for $1.3 million from GGI to eTelcharge. At any time, GGI may convert a portion of the Debenture equal to the amount of cash paid to eTelcharge on the initial issuance of the Debenture and pursuant to payments made under the note from GGI, into common stock at a conversion price equal to the lesser of $0.50 per share or 80% of the three lowest Volume Weighted Average Prices (“VWAP”) of eTelcharge’s common stock during the 20 trading days preceding the election to convert.

In July 2008, the Company borrowed another $250,000 under the Purchase Agreement. During the period of June 27, 2008 through August 15, 2008 GGI converted a total of $110,000 of principal, leaving a net principal balance of $340,000 as of ~~June~~September 30, 2009. At ~~June~~September 30, 2009, GGI has requested conversion of $10,000 (2,435,460 shares) which the Company has not granted.

The Debenture further provides for eTelcharge to have the right, but not the obligation, to choose to prepay any portion of the Debenture that the holder has elected to convert, for an amount equal to 120% of such amount, when the VWAP is below $0.05 per share. The Debenture also provides that the holder may not exercise the conversion privilege to the extent that it would acquire “beneficial ownership” of eTelcharge’s common stock of more than 4.99%, which may be increased to 9.99% on not less than 61 days prior notice, or such limitation may be removed entirely on 61 days prior notice by the holder.

Under the Purchase Agreement, GGI is required to purchase up to three additional debentures, each in the amount of $1.5 million, on terms analogous to the Debenture, upon satisfaction of the requirement that the Debenture, and each succeeding debenture which has been issued subsequent to the Debenture, has no more than $250,000 outstanding, i.e., the requirement arises when the prior debenture has been converted or otherwise redeemed so that no more than $250,000 is outstanding. GGI has the right to eliminate its obligations to purchase each of the three additional debentures by a payment of $100,000.

The promissory note delivered by GGI to pay for the Debenture requires GGI to pay $250,000 per month beginning July 15, 2008, and bears interest at the rate of 8% per annum and is payable at maturity, January 31, 2012, with interest payable to eTelcharge monthly. Interest on the Principal Amount of the Debenture is also payable monthly to GGI, at the rate of 7.75% per annum in cash, or at the option of the holder, in shares of eTelcharge’s common stock valued at the then applicable conversion price. The maturity date of the Debenture is December 26, 2011. GGI failed to make the required payments from August 15, 2008 through the current date. Additionally, GGI did not make the monthly interest payment due from October 1 through the current date.

The Debenture provides for various events of default, such as failure to pay principal or interest when due, if it is determined that any representations warranties or covenants made in the Purchase Agreement or other related documents were false or misleading, certain insolvency conditions, if eTelcharge’s common stock is no longer traded, if eTelcharge fails to file required reports under the securities laws, if eTelcharge defaults on any indebtedness exceeding $100,000, or if the VWAP of the common shares is $0.01 per share or less during the term of the Debenture. In such event, the Debenture holder would have the right to accelerate amounts due under the Debenture and require immediate redemption of the Principal Amount of the Debenture, at 120% of such amount, or 110% in the case of the default relating solely to the VWAP of the common shares being $0.01 or less.

share or less during the term of the Debenture. In such event, the Debenture holder would have the right to accelerate amounts due under the Debenture and require immediate redemption of the Principal Amount of the Debenture, at 120% of such amount, or 110% in the case of the default relating solely to the VWAP of the common shares being $0.01 or less.

The Debenture is secured by a pledge of 3,000,000 shares of common stock provided by a stockholder of eTelcharge. The promissory note issued by GGI is secured by all of the assets of GGI.

eTelcharge has identified that the Debenture contains more than one embedded derivative feature which SFAS 133 requires to be accounted for as derivatives. The derivative features that have been bundled together in the compound embedded derivative include: (1) the conversion feature of the debenture; (2) the put options to redeem the debenture after an event of default or failure to deliver stock; and (3) the call option to prepay the debenture subsequent to a conversion request when the VWAP is below $0.05. These embedded derivatives have been bifurcated from the host debt contract and accounted for as derivative liabilities in accordance with EITF 00-19. Since multiple derivatives exist within the Debenture, they have been bundled together as a single hybrid compound instrument in accordance with SFAS No. 133 Derivatives Implementation Group Implementation Issue No. B-15. The value of the compound embedded derivative liability was bifurcated from the debenture and recorded as a derivative liability, which results in a reduction of the initial carrying amount (as unamortized discount) of the related debenture at inception. F8

eTelcharge has identified that the Debenture contains more than one embedded derivative feature which GAAP requires to be accounted for as derivatives. The ~~impact~~derivative features that have been bundled together in the compound embedded derivative include: (1) the conversion feature of the ~~application~~debenture; (2) the put options to redeem the debenture after an event of ~~SFAS~~default ~~133~~or failure to deliver stock; and (3) the call option to prepay the debenture subsequent to a conversion request when the VWAP is below $0.05. These embedded derivatives have been bifurcated from the host debt contract and accounted for as derivative liabilities in accordance with EITF 00-19. Since onmultiple derivatives exist within the ~~balance~~Debenture, ~~sheet~~they have been bundled together as a single hybrid compound instrument in accordance with GAAP. The value of ~~June~~the ~~30,~~compound ~~2009,~~embedded ~~December~~derivative ~~31,~~liability ~~2008~~was bifurcated from the debenture and ~~December~~recorded ~~28,~~as ~~2007~~a derivative liability, ~~the~~which ~~date~~results in a reduction of the ~~agreement,~~initial ~~was~~carrying amount (as ~~follows:~~unamortized discount) of the related debenture at inception.

		June 30, 2009		December 31, 2008		December 28, 2007
Net balance	$	340,000	$	340,000	$	200,000
Less unamortized discount		120,133		127,976		144,845
Convertible debt	$	219,867	$	212,024	$	55,155

The impact of the application of GAAP and EITF 00-19 on the balance sheet as of September 30, 2009 and December 31, 2008 was as follows:


		September 30, 2009		December 31, 2008
Net balance	$	340,000	$	340,000
Less unamortized discount		103,012		127,976
Convertible debt	$	236,988	$	212,024

The unamortized discount is being amortized to interest expense using the effective interest method over the life of the debenture.

Lattice Valuation Model

eTelcharge valued the compound embedded derivative features in the 2007 Debenture using a Lattice Model. The lattice model values the compound embedded derivatives based on a probability weighted discounted cash flow model. This model is based on future projections of the five primary alternatives possible for settlement of the features included within the compound embedded derivative, including: (1) payments are made in cash, (2) payments are made in stock, (3) the holder exercises its right to convert the debenture, (4) eTelcharge exercises its right to convert the debenture and (5) eTelcharge defaults on the debenture. eTelcharge uses the model to analyze (a) the underlying economic factors that influence which of these events will occur, (b) when they are likely to occur, and (c) the common stock price and specific terms of the debenture such as interest rate and conversion price that will be in effect when they occur.

Based on the analysis of these factors, eTelcharge uses the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the debenture are determined based on management’s projections. These probabilities are used to create a cash flow projection over the term of the debenture and determine the probability that the projected cash flow would be achieved. A discounted weighted average cash flow for each scenario is then calculated and compared to the discounted cash flow of the debenture without the compound embedded derivative in order to determine a value for the compound embedded derivative.

The primary determinants of the economic value of a compound embedded derivative under the lattice model are (1) the price of eTelcharge's common stock, (2) the volatility of eTelcharge's common stock price, (3) the likelihood that eTelcharge will be required to pay registration delay expenses, (4) the likelihood that an event of default or a change in control will occur, (5) the likelihood that the conversion price will be adjusted, (6) the likelihood that eTelcharge's common stock will be listed on an exchange, (7) the likelihood that eTelcharge will be able to obtain alternative financing and (8) the likelihood that eTelcharge would be able to force conversion of the debenture.

F7The fair value of the compound derivative embedded in the Debenture as of September 30, 2009 and December 31, 2008 was determined using the lattice valuation model was based on the following management assumptions:

The fair value of the compound derivative embedded in the Debenture as of June 30, 2009, December 31, 2008 and December 28, 2007 determined using the lattice valuation model was based on the following management assumptions:


	September 30, 2009	December 31, 2008
Assumptions:
The price of the eTelcharge’s common stock would increase at a rate commensurate with the cost of equity, with a volatility of:	220%	220%
Percent likelihood that an event of default or a fundamental change would occur, increasing over time:	5%	5%
eTelcharge would redeem the Debenture if eTelcharge’s common stock price is below (starting at 0% increasing 2% per month to a maximum of 90%):	$0.15	$0.15

	June 30, 2009	December 31, 2008	December 28, 2007
Assumptions:
The price of the eTelcharge’s common stock would increase at a rate commensurate with the cost of equity, with a volatility of:	220%	220%	142%
Percent likelihood that an event of default or a fundamental change would occur, increasing over time:	5%	5%	5%
eTelcharge would redeem the Debenture if eTelcharge’s common stock price is below (starting at 0% increasing 2% per month to a maximum of 90%):	$0.15	$0.15	$0.05

Based on these management assumptions, the fair value of the embedded derivative as of ~~June~~September 30, 2009, and December 31, 2008 ~~and December 28, 2007~~ was calculated by management to be $~~120~~103,~~133,~~012 and $127,976 ~~and $144~~,~~845,~~ respectively.

All of the above assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuation.

Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (SFAS 157). SFAS 157 introduces a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. SFAS 157 for financial assets and liabilities is effective for fiscal years beginning after November 15, 2007, and the Company has adopted the standard for those assets and liabilities as of January 1, 2008 and the impact of adoption was not significant. At June 30, 2009 the Company’s derivative liability of $39,233 is carried at fair value measured on a recurring basis. The fair value is determined based on Level 2 inputs as defined in the valuation hierarchy of SFAS 157. Accordingly, the Company considers the financial assets and liabilities as reported in the Company’s financial statements to approximate their respective fair value.

In February 2008, the FASB decided that an entity need not apply this standard to nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis until the subsequent year. The Company continues to evaluate this standard with respect to its effect on nonfinancial assets and liabilities, but does not expect it to have a material impact on its results of operations or financial condition.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115.” The fair value option permits entities to choose to measure eligible financial instruments at fair value at specified election dates. The adoption of SFAS 159 in first quarter 2008 by the Company had no impact on the financial statements.

NOTE 8 - INCOME TAXES

eTelcharge uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. eTelcharge has incurred significant net losses in past years and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The difference between the statutory tax rate and the effective tax rate relates to the valuation allowance applied against the deferred tax assets generated from net operating losses. The cumulative net operating loss carry-forward at the effective Federal income rate of 34% is approximately $51,~~122~~767,000 and $51,~~100~~734,000 at ~~June~~September 30, 2009 and December 31, 2008, respectively, and will expire in the years 2020 through 2029.

At ~~June~~September 30, 2009 and December 31, 2008, deferred tax assets consisted of the following:

		June 30, 2009		December 31, 2008
		September 30, 2009		December 31, 2008
Net operating losses	$	51,~~122~~764,000	$	51,~~100~~734,000
Less: valuation allowance		(51,~~122~~764,000)		(51,~~100~~734,000)
Net deferred tax asset	$	-	$	-

NOTE 9 - COMMITMENTS AND CONTINGENCIES

On February 2, 2009, the Company was named a defendant in a suit brought by Golden State Equity Investors (formerly known as Golden Gate Investors, Inc.) in the Superior Court of the State of California, County of San Diego, COMPLAINT FOR BREACH OF CONTRACT concerning that certain Debenture, Securities Purchase Agreement and Promissory Note by and between Golden Gate Investors, Inc. and the Company dated December 27, 2007. The suit alleges the Company is in default of the agreement and seeks damages in the amount of $630,184.46, costs of suit incurred and attorneys' fees. There has been no action on the suit since it was filed. The Company intends to vigorously defend the suit and asserts that the secured promissory note receivable dated December 27, 2007 from Golden Gate Investors, Inc. to the Company is in default. It is the opinion of management this it is too early to make a determination of the outcome of the suit. Therefore, no additional liability has been recorded in accordance with ~~SFAS No~~GAAP. ~~5 “Accounting for Contingencies.”~~

The Department of the Treasury, Internal Revenue Service filed a Notice of Federal Tax Lien dated October 1, 2008 in the amount of $30,779.64~~. The~~ ~~Company reached a payout agreement with the IRS and is paying the IRS $1,500 per month to eliminate this liability.~~

On July 24, 2008, the Board of Directors approved a stock grant of 10,000,000 shares of the Company’s common stock to Robert Howe, CEO. Additionally the Board of Directors approved a twelve month consulting agreement for 19,500,000 shares. Both of these are contingent upon the shareholders approval of an increase in the authorized number of shares of the Company’s common stock to 3 billion shares.

eTelcharge has several agreements with employees and consultants that require eTelcharge to issue shares of common stock if the agreements are fulfilled by the employees and consultants. At ~~June~~September 30, 2009, eTelcharge will be required to issue up to approximately 4,300,000 shares of common stock over the next 63 months under existing agreements.

eTelcharge is obligated to issue 10,000 shares of common stock to each director each year for director services provided to eTelcharge. eTelcharge typically has four directors.

NOTE 10 - COMMON STOCK

Since inception and through ~~June~~September 30, 2009, the following share activity occurred:

	Shares		Amount
Shares for cash	90,415,257	$	2,151,286
Shares for services	159,553,914		12,572,343
Shares for items paid on the Company’s behalf	11,327,134		243,548
Settlement of debt	50,000,000		800,000
Conversion of debenture to common stock	9,548,873		110,000
Shares for assets	12,800		4,800
Amortization of stock options	-		899,599
Share cancellation	(120,000)		-
Imputed Interest	-		63,038
Totals	320,737,978	$	16,844,613

During the nine months ended September 30, 2009, the Company received $50,000 of the monies due from previously subscribed stock subscriptions. The Company did not issue any additional shares of common stock during the quarter ended September 30, 2009.

During the six months ended June 30, 2009, the Company received $45,000 of the monies due from previously subscribed stock subscriptions. The Company did not issue any additional shares of common stock during the quarter ended June 30, 2009.F10

The Company sold stock subscriptions during the year ended December 31, 2008, which if fully funded, would require the Company to issue common stock in excess of its currently authorized number of 400,000,000 shares. The Company plans to increase the number of authorized shares to 1 billion at its annual shareholders meeting to be held later in 2009.

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

Our financial statements and related notes, which are included in this filing, provide additional information relating to the following discussion of our financial condition, changes in financial condition and results of operations over the last two fiscal years.

Management’s discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Exchange Act, regarding future events or the future financial performance of eTelcharge that involve risk and uncertainties. Certain statements included in this Form 10-K, including, without limitation, statements related to anticipated cash flow sources and uses, and words such as “anticipates”, “believes”, “plans”, “expects”, “continue”, “will”, and similar expressions are intended to identify forward- looking statements regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operation results and financial position. We caution readers that a variety of factors could cause our actual results to differ materially from the anticipated results or other matters expressed in forward-looking statements.

Overview

eTelcharge was incorporated in Nevada in June 1999 to provide customers of online merchants the ability to charge their online purchases to their local telephone bill. In May of 2003, eTelcharge expanded its service by offering credit card processing for merchants and becoming a merchant service company. eTelcharge has worked closely with the changes in service offerings of the telco operators in the US throughout its history. As those offerings have changed, eTelcharge has sought to adapt its offerings to match the requirements of the telcos. eTelcharge has endeavored to operate by selling its services to consumers and merchants making a profit on the transaction processing fees generated at the point of sale. eTelcharge entered into an agreement with AT&T in February of 2006 for provision of billing and collection services which was amended in April 2006, and which allows it to process, subject to AT&T’s prior approval, non-credit card transactions for AT&T customers and have those transactions applied to their AT&T land-line telephone bills. Under the April 2006 amendment, eTelcharge and AT&T entered into a trial of billing information and entertainment type charges on the AT&T Telco End User monthly bill. eTelcharge launched its new Version 2.0 software and procedures to the public in September 2007, and it continues to refine and extend its services under that Version. In April of 2009 the ~~Company~~company received an executed copy of a new contract with AT&T under which AT&T issues bills to, and collects revenues from, its End-User customers (“End Users”) who subscribe to local exchange telecommunications services from the AT&T ILECs. The Services provided under this Agreement permit AT&T to issue bills to, and collect revenues from, End Users on behalf of eTelcharge. Services are limited to the billing and collection of those types of Customer/Client services and charges approved for billing.

eTelcharge will continue to promote consumer awareness of its brand and offers through the issuance of press releases to related trade publications, advertising in general interest media publications, print media and Internet media.

Results of Operations

Revenues

We are a development stage company and, as such, have generated nominal revenues. Revenues were $3350,~~315~~827 for the ~~six~~nine months ended ~~June~~September 30, 2009 as compared to $2636,~~890~~887 for the ~~six~~nine months ended ~~June~~September 30, 2008, a 2438% increase. This ~~decrease~~increase is due to ~~less~~more residual income caused by an ~~decrease~~increase in the transactions processed by our credit card merchants. We have generated $190,~~491~~436 in revenues since our inception.

Operating Expenses

Operating expenses for the ~~six~~nine months ended ~~June~~September 30, 2009 were $6893,~~453~~764 which is a decrease of $~~983~~1,~~469~~721,111 or 9395% as compared to $1,~~051~~814,~~922~~875 for the ~~six~~nine months ended ~~June~~September 30, 2008. The decrease primarily relates to a decrease in professional, consulting fees and 2008 expenses related to acquisitions and business development.

Net Loss

eTelcharge had a net loss of $6695,~~152~~747 for the ~~six~~nine months ended ~~June~~September 30, 2009, which is a decrease in the loss of $~~979~~1,~~598~~718,172 or 9495% as compared to a net loss of $1,~~045~~813,~~750~~919 for the ~~six~~nine months ended ~~June~~September 30, 2008. The decreased loss primarily resulted from a decrease in the operating expenses as discussed above. Since inception, we have incurred a cumulative net loss of $17,~~670~~701,~~351~~651. Our ability to operate profitably depends on generating sales and achieving sufficient gross profit margins. We cannot be certain that we will achieve or maintain profitable operations in the future.

~~F10~~F11

Financial Condition

The following table sets forth certain relevant measures of our liquidity and capital resources:

		Six months ended June 30, 2009
		Nine months ended September 30, 2009
Cash and cash equivalents	$	76,~~344~~257
Current Assets	$	87,~~455~~368
Current liabilities	$	1,~~192~~216,~~861~~369
Ratio of current assets to current liabilities		.0001
Stockholders’ deficit per common share	$	.0600

At ~~June~~September 30, 2009, we had $76,~~344~~257 in cash, an increase of $76,~~344~~257, as compared to $0 at December 31, 2008. This increase resulted from a decrease in cash used in operating activities ~~and an increase in cash provided by financing activities~~. Total cash provided by financing activities, net of offering costs, was $4247,263 for the ~~six~~nine months ended ~~June~~September 30, 2009, ana ~~increase~~decrease of $~~127~~404,~~261~~881 or ~~119~~90% as compared to cash ~~used~~provided in financing activities of $~~169~~452,~~524~~144 for the ~~six~~nine months ended ~~June~~September 30, 2008. The funds generated from financing activities during the ~~six~~nine months ended ~~June~~September 30, 2009 were used mainly to fund operating expenses. Total cash proceeds, net of offering costs, for financing activities is $2,~~934~~939,518 for the period from inception through ~~June~~September 30, 2009.

Our current liabilities ~~decreased~~increased from $1,204,209 at December 31, 2008, to $1,~~192~~216,~~861~~369 at ~~June~~September 30, 2009, a ~~decrease~~increase of 1%, primarily from aaccrued ~~non-cash extinguishment of debt~~expenses.

Historically, we have been dependent on financings to fund our development and working capital needs. We do not expect to generate significant revenues from customers in the immediate future. We believe our existing capital resources will not be sufficient to provide needed capital for three months. Accordingly, if we do not raise additional funds from other sources, we would have to continue to severely diminish our operations or halt them entirely. Additional financing may not be available to us on acceptable terms, or at all.

Due to our lack of capital and our need for working capital to continue our business plan, our independent registered public accountants issued a going concern qualification as part of their audit opinion of our financial statements for the year ended December 31, 2008.

OFF-BALANCE SHEET ARRANGEMENTS

None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

F11

Item 4T. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~June~~September 30, 2009. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer. Based on this evaluation of our disclosure controls and procedures and on the material weakness disclosed in our December 31, 2008 Form 10-K, we concluded that such disclosure controls and procedures were ineffective as of ~~June~~September 30, 2009 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting

During our most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting 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

The Department of the Treasury, Internal Revenue Service filed a Notice of Federal Tax Lien dated October 1, 2008 in the amount of $30,780.

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

During the ~~six~~nine months ended ~~June~~September 30, 2009, the Company did not issue any common stock.

During the ~~six~~nine months ended ~~June~~September 30, 2009, $4550,000 was received for the purchase of the Company’s common stock as part of various stock subscription agreements. None of the stock has been issued as of ~~August~~November 319, 2009.

Item 3. Defaults Upon Senior Securities

No senior securities exist.

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

None.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit No.

Date

Description

2.0

April 27, 2000

Articles of Incorporation and Bylaws

31.1

Rule 13a-14(a)/15d-14(a) Certification of Robert M. Howe III

32.1

Section 1350 Certification of Robert M. Howe III

F12

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.

eTELCHARGE.COM

(Registrant)

Date: ~~August~~November 319, 2009

/s/ Robert M. Howe III

By: Robert M. Howe III

Title: President and Chief Executive Officer

F13

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification

(Chief Executive Officer)

I, Robert M. Howe III, President and Chief Executive Officer of eTelcharge.com, certify that:

I have reviewed this quarterly report on Form 10-Q of eTelcharge.com;

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

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

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

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

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: ~~August~~November 319, 2009

/s/ Robert M. Howe III

Robert M. Howe III

President and Chief Executive Officer

F14

Exhibit 32.1

SECTION 1350 CERTIFICATION

(Chief Executive Officer)

I, Robert M. Howe III, President and Chief Executive Officer of eTelcharge.com (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

The Quarterly Report on Form 10-Q of the Company for the quarter ended September ~~June~~ 30, 2009 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.78m or 78o(d)); and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: ~~August~~November 319, 2009

/s/ Robert M. Howe III

Robert M. Howe III

President and Chief Executive Officer

This certification is being furnished to the SEC with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

F15

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