UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

FOR THE QUARTERLY PERIOD ENDED ~~DECEMBER~~MARCH 31, ~~2011~~2012



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

Commission file number: 000-~~28793~~53519

~~TELIPHONE~~GMS CAPITAL CORP.

(Exact name of Registrant as specified in its charter)

Nevada		30-0651002
(State or jurisdiction of Incorporation or organization)		(IRS Employer ID Number)

Florida

~~424 St-François-Xavier Street, Montreal, Quebec, Canada H2Y 2S9~~7372

26-1094541

(State or jurisdiction of

(Primary Std.

(IRS Employer ID #)

Incorporation or

Industrial Classification

Organization)

Code #)

3055 L’Assomption Blvd., Montreal, Quebec H1N 2H1 Canada

(Address of principal executive offices) (Zip Code)

~~Registrant’s~~5925 ~~telephone~~Monkland ~~number~~Ave, ~~including~~suite ~~area~~202, ~~code:~~Montreal, ~~514-313-6000~~Quebec H4A 1G7 Canada

(Former address of principal executive offices) (Zip Code)

514-254-9473

Registrant’s telephone number, including area code

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value per share

(Title of Class)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. xYes oNo

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 ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated file, 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 ~~o Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company x~~

Accelerated filer

Non-accelerated filer

Smaller reporting company

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). oYes xNo

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date. As of ~~February~~ 20May 21, 2012, there were 615,~~360~~365,~~745~~400 shares of the issuer's $.001 par value common stock issued and outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements.	1
Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations	30
Item 4.	Control and Procedures	42
PART II – OTHER INFORMATION		42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults its Upon Senior Securities	43
Item 4.	(Removed and Reserved)	43
Item 5.	Other Information	43
Item 6.	Exhibits	43
Signatures		44

TELIPHONE CORP.
BALANCE SHEET
DECEMBER 31, 2011 (UNAUDITED) AND SEPTEMBER 30, 2011
ASSETS
	US $
	DECEMBER 31,		SEPTEMBER 30,
	2011		2011
	(UNAUDITED)
Current Assets:
Cash and cash equivalents	$34,716		$37,481
Accounts receivable, net	184,820		140,149
Inventory	12,849		18,690
Prepaid expenses and other current assets	67,125		47,065
Total Current Assets	299,510		243,385
Fixed assets, net of depreciation	3,752,194		1,240,513
Customer lists, net	1,812,226		1,389,416
Goodwill	2,585,040		585,040
TOTAL ASSETS	$8,448,970		$3,458,354
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
Deferred revenue	$876	$776
Current portion of related party convertible debentures	58,998	57,240
Current portion of non related party loans	164,419	137,500
Current portion of related party loans	93,244	266,856
Current portion of obligations under capital lease	20,451	24,418
Liability for stock to be issued	469,868	469,868
Accounts payable and accrued expenses	581,578	380,545
Total Current Liabilities	1,389,434	1,337,203
Long Term Liabilities:
Obligations under capital lease, net of current portion	1,399	3,686
Non related party loans, net of current portion	114,967	119,881
Related party loans, net of current portion	70,828	70,828
TOTAL LIABILITIES	1,576,628	1,531,598
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 Par Value; 125,000,000 shares authorized
and 61,360,745 and 41,360,745 shares issued and outstanding, respectively	61,360	41,360
Additional paid-in capital	7,105,882	2,125,882
Accumulated deficit	(313,355)	(224,852)
Accumulated other comprehensive income (loss)	18,455	(15,634)
Total Stockholders' Equity (Deficit)	6,872,342	1,926,756
Total Stockholders' Equity (Deficit)	6,872,342	1,926,756
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$8,448,970	$3,458,354

TELIPHONE CORP. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)
	US$
	THREE MONTHS ENDED
	DECEMBER 31,
	2011	2010
OPERATING REVENUES
Revenues	$1,225,176	$-
COST OF REVENUES
Inventory, beginning of period	18,690	-
Purchases and cost of VoIP services	791,114	-
Inventory, end of period	(12,849)	-
Total Cost of Revenues	796,955	-
GROSS PROFIT	428,221	-
OPERATING EXPENSES
Wages, professional and consulting fees	233,693	16,141
Other generals and administrative expenses	79,940	-
Depreciation and amortization	199,207	-
Total Operating Expenses	512,840	16,141
NET INCOME (LOSS) BEFORE OTHER
INCOME (EXPENSE)	(84,619)	16,141
OTHER INCOME (EXPENSE)
Interest expense	(3,884)	(3,902)
Total Other Income (Expense)	(3,884)	(3,902)
NET INCOME (LOSS) BEFORE NONCONTROLLING INTEREST AND PROVISION FOR INCOME TAXES	(88,503)	(20,043)
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES	(88,503)	(20,043)
Net income (loss) from continuing operations	(88,503)	(20,043)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$(88,503)	$(20,043)
Gain (loss) from continuing operations	(88,503)	(20,043)
DISCONTINUED OPERATIONS
Gain from discontinued operations	-	3,364
NET GAIN (LOSS) FROM DISCONTINUED OPERATIONS	-	3,364
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$(88,503)	$(16,679)
NET INCOME (LOSS) PER BASIC DILUTED SHARES
From continuing operations	$(0.00)	$(0.00)
From discontinued operations	-	0.00
	$(0.00)	$(0.00)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING	41,578,137	37,556,657
COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$(88,503)	$(16,679)
Other comprehensive income (loss)
Currency translation adjustments	34,089	(15,256)
Comprehensive income (loss)	$(54,414)	$(31,935)

TELIPHONE CORP.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)
	US$
	THREE MONTHS ENDED
	DECEMBER 31,
	2011	2010
CASH FLOWS FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS
Net income (loss)	$(88,503)	$(20,043)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation	199,207	-
Changes in assets and liabilities
(Increase) decrease in accounts receivable	(44,435)	-
(Increase) decrease in inventory	5,841	-
(Increase) decrease in prepaid expenses and other current assets	(20,060)	-
Increase (decrease) in deferred revenues	100	-
Increase in accounts payable and
and accrued expenses	201,033	24,853
Total adjustments	341,450	24,853
Net cash provided by (used in) operating activities	252,947	4,810
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of capital assets	(129,454)	-
Net cash (used in) investing activities	(129,454)	-
CASH FLOWS FROM FINANCING ACTIVITES
Payments under capital lease	(6,254)	-
Proceeds from debenture payable		2,017
Proceeds from loans payable - non-related parties, net of repayments	22,005	-
Proceeds from loan payable - related parties, net or repayments	(173,612)	(6,827)
Net cash provided by (used in) financing activities	(157,861)	(4,810)
DISCONTINUED OPERATION
Operating activities	-	350,762
Investing activities	-	(371,744)
Financing activities	-	21,443
Net cash flows provided by discontinued operations	-	461
Effect of foreign currencies	31,603	(461)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS	(2,765)	-
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD	37,481	-
CASH AND CASH EQUIVALENTS - END OF PERIOD	$34,716	$-
CASH PAID DURING THE PERIOD FOR:
Interest expense	3,884	$11,498
SUPPLEMENTAL NONCASH INFORMATION:
Common stock issued for acquisition of NYTEX	$5,000,000
Equipment purchased under capital lease		18,833

Table of Contents

~~The accompanying notes are an integral part of the financial statements~~Page

3PART I – FINANCIAL INFORMATION

~~TELIPHONE~~Item ~~CORP~~1.

~~FINANCIAL~~Financial ~~STATEMENTS~~Statements:

~~FOR~~Balance ~~THE~~Sheet ~~THREE~~as ~~MONTHS~~of ~~ENDED~~March ~~DECEMBER~~ 31, ~~2011~~2012 ~~AND 2010~~ (~~UNAUDITED~~unaudited) and December 31, 2011

NOTE 1-

ORGANIZATION AND BASIS OF PRESENTATION

The unaudited financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company’s annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the September 30, 2011 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

These unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.

Teliphone Corp. (the “Company”, formerly “OSK Capital II Corp” until it changed its name on August 21, 2006) was incorporated in the State of Nevada on March 2, 1999 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination with a domestic or foreign private business. Effective April 28, 2005, the Company achieved its objectives with the reverse merger and reorganization with Teliphone Inc., a Canadian company.

Teliphone, Inc. was founded by its original parent company, United American Corporation, a publicly traded Florida Corporation, in order to develop a Voice-over-Internet-Protocol (VoIP) network which enables users to connect an electronic device to their internet connection at the home or office which permits them to make telephone calls to any destination phone number anywhere in the world. VoIP is currently growing in scale significantly in North America. This innovative new approach to telecommunications has the benefit of drastically reducing the cost of making these calls as the distances are covered over the Internet instead of over dedicated lines such as traditional telephony.

Prior to its acquisition by the Company, Teliphone Inc. had grown primarily in the Province of Quebec, Canada through the sale of its product offering in retail stores and over the internet. In addition to the retail services provided, Teliphone Inc. also sold to wholesalers who re-billed these services to their customers and provided the necessary support to their customers directly.

~~TELIPHONE~~Statement ~~CORP.~~of Operations and Comprehensive Income (Loss) for the Three Months

FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)

NOTE 1-

ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

Teliphone Inc. provided its telecommunications services provided over its own network, and also re-sells traditional telecommunications services provided over the network of Major Telecommunications Providers across Canada through a direct sales channel.

On April 1, 2011, the Company consolidated its operations into that of the parent company. On May 31, 2011, the Company sold its entire ownership holdings in its subsidiary, Teliphone Inc. and continued operating the same business as before the disposition.

The Company acquired the New York Telecom Exchange Inc. (NYTEX), a telecommunications commodity exchange on December 31, 2011 for 20,000,000 common shares at a value of $0.25 per share. Management believes that the acquisition will allow it to provide a fully-integrated series of options which can now include wholesale traffic. While NYTEX has been in operation since January 2009, expansion of NYTEX will require the Company to seek additional financing externally or through supplier agreements.

NYTEX is a telecommunications commodity exchange established in October 2008 and officially launched in June 2009. It focuses on facilitating the exchange of international call termination. International call termination occurs when a caller initiates a call in one country and it terminates in another. NYTEX provides services much like other commodity exchanges whereby it provides a platform for buyers and sellers to come together to purchase and sell international termination. Unlike traditional telecommunications exchanges where buyers and sellers are matched one to one on a circuit to circuit, in the NYTEX concept sellers sell their termination into a market and buyer buy from that market. NYTEX also offers a one to one trading facility for clients who request it. NYTEX manages all aspects of the transactions including technical clearing, financial clearing and quality control of the termination bought and sold on the exchange. NYTEX developed all technical and conceptual aspects in house which includes a unique anti-False Answer Supervision (FAS) system which reduces the number of false calls by up to 90%. NYTEX has technical data centers in Montreal, London and Brussels which manage all calls.

Going Concern

As shown in the accompanying financial statements, the Company has a working capital deficit of ($1,089,924) as of December 31, 2011, and has an accumulated deficit of ($313,355) through December 31, 2011. The Company has and continues to streamline their business, and has expanded their services throughout Canada generating positive gross margins. While the Company shows a negative net income for the quarter, much of this is due to a significant increase in depreciation due to investment in equipment and an increase in consulting fees for platform upgrades as well as product development and implementation of its IPTV service. The Company is in the process of migrating all its voice/data purchases to a new supplier and as a result will reduce its operating costs even further. While the Company has demonstrated over the last two quarters that it is now operationally profitable, after producing operating losses in each of its fiscal years since inception in 1999 (except 2009, the lack of cash and operating history continues to raise substantial doubt about the Company’s ability to continue as a going concern.

The Company is working on reducing its working capital deficiency and once they issue shares that have been approved for issuance totaling $469,868 will reduce this deficiency by approximately 44%. The Company’s former subsidiary, Teliphone Inc. had accumulated trade payables greater than their trade receivables up to May 2011. The Company had consolidated their operations such that the Company and not its subsidiary, Teliphone Inc. is now operating the business as of April 1, 2011. On May 9, 2011, Teliphone Inc. filed for creditor protection under provisions of the Canadian Bankruptcy and Insolvency Act. On May 31, 2011, the Company sold its entire holdings of Teliphone Inc. and as such no longer has responsibility for this trade deficit.

~~TELIPHONE~~Ended ~~CORP.~~March 31, 2012 and 2011 (unaudited)

~~FINANCIAL~~Statement ~~STATEMENTS~~of Cash Flows for the Three Months Ended March 31, 2012 and 2011

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)

NOTE 1-

ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

There is still no guarantee that the Company will be able to raise additional capital or generate the increase in revenues to sustain its operations.

Going Concern (Continued)

Management believes that the Company’s capital requirements will depend on many factors. These factors include the increase in sales through existing channels as well as its ability to continue to expand its distribution points and leveraging its technology into the commercial small business segments. The Company’s strategic relationships with telecommunications interconnection companies, internet service providers and retail sales outlets has permitted the Company to achieve consistent monthly growth in acquisition of new customers.

The Company’s ability to continue as a going concern for a reasonable period is dependent upon management’s ability to raise additional interim capital. There can be no assurance that management will be able to raise sufficient capital, under terms satisfactory to the Company, if at all.

The financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.

Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards.

All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Positions or Emerging Issue Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”).

The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

~~TELIPHONE CORP.~~(unaudited)

Notes to Financial Statements (unaudited)

Item 2.

Management Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults upon Senior Securities

Item 4.

Submission of Matters to a Vote of Security Holders

Item 5.

Other Information

Item 6.

Exhibits

Signatures


GMS CAPITAL CORP.
BALANCE SHEETS
MARCH 31, 2012 (UNAUDITED) AND DECEMBER 31,2011

ASSETS
	(IN US$)
	March 31,	December 31,
	2012	2011
	(unaudited)
Current Assets:
Cash and cash equivalents	$1,449	$611
Accounts receivable, net	1,635	6,388

Total Current Assets	3,084	6,999


TOTAL ASSETS	$3,084	$6,999

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES
Current Liabilities:
Advances	$5,387	$75,922
Secured Note Payable	105,000	-
Line of credit	-	11,241
Due to related companies	75,909	17,460
Accounts payable and accrued expenses	15	4,000

Total Current Liabilities	186,311	108,623

Total Liabilities	186,311	108,623

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 Par Value; 100,000,000 shares authorized
and 5,365,400 shares issued and outstanding, respectively	5,365	5,365
Additional paid-in capital	509,805	509,805
Accumulated deficit	(675,735)	(592,089)
Accumulated other comprehensive income (loss)	(22,663)	(24,706)

Total Stockholders' Equity (Deficit)	(183,228)	(101,625)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$3,084	$6,999


GMS CAPITAL CORP.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
	IN US$
	2012	2011
OPERATING REVENUES
Sales	$2,997	$10,539

COST OF SALES
Purchases	3,310	-
Total Cost of Sales	3,310	-

GROSS PROFIT (LOSS)	(313)	10,539

OPERATING EXPENSES
Selling, general and administrative	83,334	33,287
Depreciation	-	110
Total Operating Expenses	83,334	33,397

LOSS BEFORE OTHER INCOME (EXPENSE)	(83,646)	(22,858)

OTHER INCOME (EXPENSE)
Interest expense	-	(118)
Total Other Income (Expense)	-	(118)

NET LOSS BEFORE PROVISION
FOR INCOME TAXES	(83,646)	(22,976)
Provision for Income Taxes	-	-

NET LOSS APPLICABLE
TO COMMON SHARES	$(83,646)	$(22,976)

NET LOSS PER BASIC AND DILUTED SHARES
BASIC AND DILUTED	$(0.02)	$(0.00)

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC AND DILUTED	5,365,400	5,365,400

COMPREHENSIVE INCOME (LOSS)
Net loss	$(83,646)	$(22,976)
Other comprehensive income (loss)
Currency translation adjustments	2,043	(2,020)
Comprehensive income (loss)	$(84,600)	$(24,996)


GMS CAPITAL CORP.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

	IN US$
	2012	2011

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$(83,646)	$(22,976)

Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation	-	110

Changes in assets and liabilities
Decrease in accounts receivable	8,958	1,512
Increase (decrease) in accounts payable and
and accrued expenses	(3,272)	6,581
Total adjustments	5,686	8,203

Net cash (used in) operating activities	(77,960)	(14,773)

CASH FLOWS FROM FINANCING ACTIVITES
Proceeds from line of credit, net of repayments	472	6,292
Increase (decrease) in due to/from related parties	78,906	(2,058)
Proceeds from officers, net of repayments	(693)	7,414

Net cash provided by financing activities	78,685	11,648

Effect of foreign currency	113	(488)

NET (DECREASE) IN CASH AND CASH EQUIVALENTS	838	(3,613)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	611	4,086

CASH AND CASH EQUIVALENTS - END OF PERIOD	$1,449	$473

CASH PAID DURING THE PERIOD FOR:
Interest expense	$-	$118


SUPPLEMENTAL NONCASH INFORMATION:

Conversion of related party payables and officers payables to Secured Note Payable	$105,000	$-

GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 21- ORGANIZATION AND BASIS OF PRESENTATION

~~SUMMARY~~The OFunaudited ~~SIGNIFICANT~~financial ~~ACCOUNTING~~statements ~~POLICIES~~included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company’s annual statements and notes.

~~Principles~~Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of ~~Consolidation~~America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the December 31, 2011 10-K and audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

~~The~~These unaudited financial statements ~~include~~reflect ~~the~~all ~~accounts~~adjustments, ofincluding ~~the~~normal ~~Company~~recurring ~~and~~adjustments ~~its~~which, ~~majority owned subsidiary for 2010. All significant intercompany accounts and transactions have been eliminated~~ in ~~consolidation. All minority interests have been reflected herein. With~~ the ~~sale~~opinion of ~~Teliphone~~management, ~~Inc.~~are onnecessary ~~May~~to ~~31,~~present ~~2011,~~fairly the ~~Company~~operations ~~disposed of its only majority-owned subsidiary,~~ and ascash aflows ~~result,~~for ~~all~~the ~~noncontrolling~~periods ~~interests have been disposed of~~presented.

~~Use~~GMS Capital Corp. (the “Company” or “GMS”), a Florida Corporation, was founded on March 9, 2000. Originally our Company was doing business as Metratech Retail Systems Inc., a Canadian Corporation up until the reincorporation as GMS Capital Corp. in the State of ~~Estimates~~Florida on September 18, 2007. The purpose of our Company was to develop and market inventory management software for suppliers to major retailers to enable suppliers to forecast consumer demand for their products and to optimize their production and inventory accordingly. The Company's objective in the reincorporation in the state of Florida is to raise capital through the issuance of stock on the public markets in the US once achieving regulatory approval. Thus far, the Company has grown primarily in the Province of Quebec, Canada through the installation of its software via direct sales to customers.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to investment tax credits, bad debts, income taxes and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Cash

The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents.

Comprehensive Income

The Company adopted ASC 220-10, “Reporting Comprehensive Income,” (formerly SFAS No. 130). ASC 220-10 requires the reporting of comprehensive income in addition to net income from operations.

Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of information that historically has not been recognized in the calculation of net income.

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 21- ORGANIZATION AND BASIS OF PRESENTATION (CONT’D)

~~SUMMARY~~Recently, OFfollowing ~~SIGNIFICANT~~a ~~ACCOUNTING~~review ~~POLICIES~~of our software operations, we have decided to abandon our software business effective April 1, 2012 and to engage in the distribution, marketing and sale of cosmetics and cosmetics-related products primarily in Canada, France and the French Caribbean. To that effect, On March 16, 2012, our Company entered into and closed a License and Distribution Agreement (~~CONTINUED~~the “License Agreement”) with 8012415 Canada Inc. (“Canada”) pursuant to which Canada granted the Company an exclusive worldwide license to distribute, market and sell the Nacara brand cosmetic products (the “Products”), excluding the territories of Finland, Russia and Sweden, in exchange for a royalty of 5% of the gross revenues of the Products sold by our Company. The Products include a full line of cosmetic products aimed at women with darker complexions and is currently available in Canada at drugstores including Pharmacie Jean-Coutu and Shoppers Drug Mart and in France at retailers including Galeries Lafayette, Marionnaud, Nocibé and Beauty Success.

~~Inventory~~Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Positions or Emerging Issue Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

Inventory is valued at the lower of cost or market determined on a first-in-first-out basis. Inventory consisted only of finished goods.

Fair Value of Financial Instruments

The carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. For the notes payable, the carrying amount reported is based upon the incremental borrowing rates otherwise available to the Company for similar borrowings.

Currency Translation

For accounts in currencies other than the U.S. dollar, the Company translates income and expense amounts at average exchange rates for the month, translates assets and liabilities at year-end exchange rates and equity at historical rates. The Company’s functional currency is the Canadian dollar, while the Company reports its currency in the US dollar. The Company records these translation adjustments as accumulated other comprehensive income (loss). Gains and losses from foreign currency transactions are included in other income (expense) in the results of operations.

Revenue Recognition

Operating revenues for the Company are generated directly within the Company and not in its former subsidiary, Teliphone Inc. since the Company consolidated its operations and sold the inoperative Teliphone Inc. on May 31, 2011. Operating revenues consist of telecommunications services (voice, data and long distance), customer equipment (which enables the Company's telephony services), consulting services and shipping revenue. Generally revenue recognition is the same for Teliphone Corp. and NYTEX except where indicated below. The point in time at which revenue is recognized is determined in accordance with Revenue Recognition under ASC 605-50, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products) ("ASC 605-50"), and ASC 605-25, "Revenue Arrangements with Multiple Deliverables" (“ASC 605-25”). When the Company emerged from the development stage with the acquisition of Teliphone Inc. in 2005, they began to recognize revenue from their Telephony services when they are earned, specifically when all the following conditions are met:

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 21- ORGANIZATION AND BASIS OF PRESENTATION (CONT’D)

~~SUMMARY~~Going ~~OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)~~Concern

~~Revenue~~As ~~Recognition~~shown in the accompanying financial statements the Company has incurred a net loss of (~~continued~~$83,646) and ($22,976) for the three months ended March 31, 2012 and 2011 and has an accumulated deficit of ($675,735) as of March 31, 2012. The Company’s limited customer base exposes them to significant risk of future revenues. The Company had been searching for new distribution channels to sell their software and services to provide additional revenues to support their operations. The Company has elected to pursue opportunities in the international Cosmetics Industry and is in the process of discontinuing its software business. Regardless of this transition, there is no guarantee that the Company will be able to raise additional capital, under terms satisfactory to the Company, or generate the increase in revenues sought.

·Management believes that the Company’s capital requirements will depend on many factors. These factors include the increase in sales in its new line of Cosmetics products as well as the Company’s ability to continue to expand its distribution channels.

~~Services~~The ~~are~~financial ~~provided~~statements do not include any adjustments relating to the carrying amounts of recorded assets or ~~products~~the ~~are~~carrying ~~delivered~~amounts and classification of recorded liabilities that may be required should the Company be unable to ~~customers~~ continue as a going concern.

·NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~There~~Management ~~is clear evidence that an arrangement exists~~ Estimates

·Management makes assumptions and estimates to prepare financial statements in conformity with accounting principles generally accepted in the United States of America. Those assumptions and estimates directly affect the amounts reported and disclosures included in the consolidated financial statements. Actual results could differ from those assumptions and estimates. Significant estimates for which changes in the near term are considered reasonably possible and that may have a material impact on the financial statements are disclosed in these notes to the consolidated financial statements.

~~Amounts~~Foreign ~~are~~Currency ~~fixed or can be determined~~ Translation

·The Company’s functional currency is the Canadian dollar, while the Company reports its currency in the US dollar. The Company records these translation adjustments as accumulated other comprehensive income (loss). Gains and losses from foreign currency transactions are included in other income (expense) in the results of operations.

The Company’s ability to collect is reasonably assured.

In particular, the Company recognizes:

For Teliphone Corp:

Monthly fees for local, long distance and wireless voice services, as well as data services when we provide the services

“Services over the Company’s network” means that a significant portion of the voice or data passes over the Company’s own data network which it controls and

“Services resold from Major Provider’s networks” means that the Company re-sells the services purchased from a Major Provider to its customer, and hence does not control the voice or data flow (represents majority of the Company’s revenues)

Consulting fees which the Company earns when it sells hourly consulting services.

Consulting services are typically computer software development related, along with any administrative services that occur in the management of those resources (such as project management, accounting, administrative support, etc)

Other fees, such as network access fees, license fees, hosting fees, maintenance fees and standby fees, over the term of the contract

Subscriber revenues when customers receive the service

Revenues from the sale of equipment when the equipment is delivered and accepted by customers

For NYTEX:

Revenue from minutes sold on the exchange at the time of purchase which includes the price of the minutes and a per minute transaction fee which can vary from transaction to transaction.

Consulting fees which the Company earns when it sells hourly consulting services

Consulting services are typically for network operators which require advice on management of their international call termination

Revenues from the sale of equipment when the equipment is delivered and accepted by customers

Revenues exclude sales taxes and other taxes we collect from our customers.

Multiple-Element Arrangements

We enter into arrangements that may include the sale of a number of products and services, notably in sales of voice services over our own network. In all such cases, we separately account for each product or service according to the methods previously described when the following three conditions are met:

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

~~SUMMARY~~Cash OFand ~~SIGNIFICANT~~Cash ~~ACCOUNTING POLICIES (CONTINUED)~~Equivalents

~~Revenue~~All ~~Recognition~~highly ~~(continued)~~liquid investments purchased with a maturity of three months or less are considered to be cash equivalents.

·Short-Term Investments

From time to time, the Company may have short-term investments which may consist of certificates of deposit with maturities greater than three months. The ~~product~~Company ormonitors ~~service~~concentrations ~~has~~of ~~value~~credit torisk associated with financial institutions with which the Company conducts significant business. The Company believes our ~~customer~~credit onrisk ais ~~stand~~minimal, as the Company primarily conducts business with large, well-~~alone~~established ~~basis~~ financial institutions.

·Accounts Receivable

~~here~~Accounts isreceivable ~~objective~~represent payments due to the Company for previously recognized net sales, reduced by allowances for sales returns and ~~reliable~~doubtful ~~evidence~~accounts or balances which are estimated to be uncollectible. Accounts receivable balances are written-off against the allowance for doubtful accounts when they become uncollectible. Recoveries of accounts receivable previously recorded against the ~~fair~~allowance ~~value~~are recorded in the consolidated statement of ~~any~~income ~~undelivered~~when ~~product~~received. orWe ~~service~~ generally grant credit based upon our analysis of the customer’s financial position as well as previously established buying patterns.

·Inventories

IfInventories, ~~the~~including ~~sale~~promotional ~~includes~~merchandise, aonly ~~general~~include ~~right~~inventory ofconsidered ~~return~~saleable ~~relating~~or tousable ain ~~delivered~~future ~~product~~periods, orand ~~service,~~is stated at the ~~delivery~~lower of cost or ~~performance~~market, ofwith ~~any~~cost ~~undelivered~~being ~~product~~determined oron ~~service~~the isfirst-in, ~~probable~~first-out method. Cost components include raw materials, components, direct labor and ~~substantially~~overhead in(e.g., ~~our~~indirect ~~control~~labor, utilities, depreciation, purchasing, receiving, inspection and warehousing) as well as inbound freight. Promotional merchandise is charged to cost of sales at the time the merchandise is shipped to the Company’s customers.

If there is objective and reliable evidence of fair value for all products and services in a sale, the total price to the customer is allocated to each product and service based on its relative fair value. Otherwise, we first allocate a portion of the total price to any undelivered products and services based on their fair value and the remainder to the products and services that have been delivered.

If the conditions to account separately for each product or service are not met, we recognize revenue pro rata over the term of the customer agreement.

Resellers

We may enter into arrangements with resellers who provide services to our customers. When we act as the principal in these arrangements, we recognize revenue based on the amounts billed to our customers. Otherwise, we recognize as revenue the net amount that we retain.

Sales Returns

We accrue an estimated amount for sales returns, based on our past experience, when revenue is recognized.

Deferred Revenues

We record payments we receive in advance, including upfront non-refundable payments, as deferred revenues until we provide the service or deliver the product to customers. Deferred revenues also include amounts billed under multiple-element sales contracts where the conditions to account separately for each product or service sold have not been met.

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)~~Derivatives

~~Accounts~~All ~~Receivable~~derivative instruments are recorded as either assets or liabilities and measured at fair value. The Company uses derivative instruments to principally manage a variety of market risks. For derivatives designated as hedges of the exposure to changes in fair value of the recognized asset or liability or a firm commitment (referred to as fair value hedges), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to include in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For our cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in equity (as a component of accumulated other comprehensive income) and is subsequently reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings immediately. The Company also holds certain instruments for economic purposes that are not designated for hedge accounting treatment. For these derivative instruments, the changes in their fair value are recorded in earnings immediately.

~~The~~Goodwill ~~Company conducts business~~ and ~~extends~~Other ~~credit~~Long-Lived ~~based on an evaluation of the customers’ financial condition, generally without requiring collateral.~~ Assets

~~Exposure~~Goodwill ~~to losses on receivables~~ is ~~expected~~calculated toas ~~vary~~the byexcess ~~customer~~of ~~due to~~ the ~~financial~~cost ~~condition~~ of ~~each~~purchased ~~customer.~~businesses ~~The~~over ~~Company~~the ~~monitors~~fair ~~exposure~~value toof ~~credit~~their ~~losses~~underlying ~~and~~net ~~maintains~~assets. Other ~~allowances~~indefinite-lived ~~for~~intangible ~~anticipated~~assets ~~losses~~principally ~~considered~~consist ~~necessary~~of ~~under the circumstances~~trademarks. Goodwill ~~The~~and ~~Company~~other ~~has~~indefinite-lived anintangible ~~allowance~~assets ~~for~~are ~~doubtful~~not ~~accounts of $30,988 at December 31, 2011~~amortized.

~~Accounts~~The ~~receivable~~Company evaluates goodwill and indefinite-lived intangible assets for ~~Teliphone~~impairment ~~Corp.~~at ~~are~~least ~~generally~~annually ~~due~~during ~~within~~the 30fourth ~~days~~quarter, ~~and~~or ~~collateral~~more isfrequently ~~not~~when ~~required.~~events ~~Unbilled~~occur ~~accounts~~or ~~receivable~~circumstances ~~represents~~change, ~~amounts~~such ~~due~~as ~~from~~an ~~customers~~unexpected ~~for~~decline ~~which~~in ~~billing~~sales, ~~statements~~that ~~have~~would more likely than not ~~been~~(i) ~~generated~~reduce ~~and~~the ~~sent~~fair tovalue of the ~~customers.~~reporting ~~NYTEX~~unit ~~generally~~below ~~operates~~its onfair avalue 15or ~~net~~(ii) 15indicate ~~basis~~that the carrying value of an indefinite-lived intangible asset may not be recoverable. ~~Traffic~~Impairment ~~that~~of goodwill is ~~purchased~~evaluated ~~during~~using ~~the~~a two step process. The first 15step ~~days~~involves a comparison of the ~~month~~estimated isfair ~~due~~value onof the ~~last~~reporting ~~day~~unit ofto the ~~month~~carrying ~~and~~value ~~traffic~~of ~~purchased~~that ~~from~~unit. If the ~~16th~~carrying tovalue of the ~~end~~reporting ofunit exceeds the ~~month~~fair isvalue ~~due~~of on the ~~15th~~reporting ofunit, the ~~following~~second ~~month.~~step ~~NYTEX~~of ~~may~~the ~~require~~process ~~pre-payment~~involves ifcomparison ~~credit~~of ~~has~~the ~~not~~implied ~~been~~fair ~~established~~value orof ~~exceeds~~goodwill ~~established~~(based ~~credit~~on ~~limits.~~industry ~~NYTEX~~purchase ~~may~~and ~~negotiate~~sale ~~other~~transaction ~~terms~~data) with ~~clients~~its ascarrying ~~appropriate~~value. ~~and~~If ~~may~~the ~~require~~carrying ~~pre-payment~~value of ~~traffic~~the ifreporting nounit’s ~~credit~~goodwill ~~can~~exceeds bethe ~~established~~implied orfair ifvalue aof ~~client~~that ~~desires~~goodwill, toan ~~exceed~~impairment ~~its~~loss ~~established~~is ~~credit~~recognized ~~limit~~as an amount equal to the excess.

GMS CAPITAL CORP.

FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Goodwill and Other Long-Lived Assets (Cont’d)

Testing goodwill for impairment requires us to estimate the fair value of the reporting unit using significant estimates and assumptions. The assumptions the Company makes will impact the outcome and ultimate results of the testing. In making our assumptions and estimates, the Company uses industry accepted valuation models and set criteria that are reviewed and approved by management and, in certain instances, the Company engages third party valuation specialists to advise us.

For indefinite-lived intangible assets, the evaluation requires a comparison of the estimated fair value of the asset to the carrying value of the asset. To determine fair value of indefinite-lived intangible assets, the Company uses an income approach, including the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. The relief-from-royalty calculations require us to make a number of assumptions and estimates concerning future sales levels, market royalty rates, future tax rates and discount rates. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, impairment is recorded.

Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset, no impairment charge is recorded. If our projection of undiscounted future cash flows is less than the carrying value of the intangible asset, an impairment charge would be recorded to reduce the intangible asset to its fair value.

Concentration of Credit Risk

The Company is a worldwide marketer and distributor of fragrance and fragrance related products, and sells its products to department stores, specialty retailers, mass-market retailers, supermarkets and domestic and international wholesalers and distributors. The Company grants credit to all qualified customers and does not believe it is exposed significantly to any undue concentration of credit risk.

GMS CAPITAL CORP.

FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Revenue Recognition

Prior to March 31, 2012, the Company generated revenue from the following primary sources: (1) licensing software products; (2) providing customer technical support (referred to as maintenance); and (3) providing professional services, such as consulting and education. The Company began the process of abandoning its software business on April 1, 2012 and in turn began to sell specialty cosmetics products.

The Company sells its products to department stores, specialty retailers, mass-market retailers, supermarkets and domestic and international wholesalers and distributors. The Company recognizes revenues when merchandise is shipped and the risk of loss passes to the customer. Net sales are comprised of gross revenues less returns, trade discounts and allowances. The Company does not bill its customer’s freight and handling charges. All shipping and handling costs are included in selling, general and administrative expenses in the consolidated statements of operations.

Sales Returns

Generally, the Company does not permit customers to return their unsold products. The Company regularly reviews and revises, as deemed necessary, its estimate of reserves for future sales returns based primarily upon historic trends and relevant current data including information provided by retailers regarding their inventory levels. In addition, as necessary, specific accruals may be established for significant future known or anticipated events. The types of known or anticipated events that we have considered, and will continue to consider, include, but are not limited to, the financial condition of our customers, store closings by retailers, changes in the retail environment and our decision to continue to support new and existing products. The Company records estimated reserves for sales returns as a reduction of sales, cost of sales and accounts receivable. Returned products are recorded as inventories and are valued based upon estimated realizable value. The physical condition and marketability of returned products are the major factors we consider in estimating realizable value. Actual returns, as well as estimated realizable values of returned products, may differ significantly, either favorably or unfavorably, from our estimates, if factors such as economic conditions, inventory levels or competitive conditions differ from our expectations.

GMS CAPITAL CORP.

FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Advertising and Promotion

Advertising and promotional costs are expensed as incurred and recorded as a component of cost of goods sold (in the case of free goods given to customers) or selling, general and administrative expenses.

Package Development Costs

Package development costs associated with new products and redesigns of existing product packaging are expensed as incurred.

Operating Leases

The Company recognizes rent expense from operating lease with various step rent provisions, rent concessions and escalation clauses on a straight-line basis over the applicable lease term. The Company considers lease renewals in the useful life of its leasehold improvements when such renewals are reasonably assured. In the event the Company receives capital improvement funding from its landlord, these amounts are recorded as deferred liabilities and amortized over the remaining lease term as a reduction of rent expense.

License Agreements

The Company’s current License Agreement provides the Company with worldwide rights to market and sell cosmetics and cosmetics related products under the Nacara brand of cosmetic products, excluding the territories of Finland, Russia and Sweden, in exchange for a royalty of 5% of the gross revenues of the Products sold by our Company. The Company’s License Agreement has a term of five years and will automatically renew for an additional five years provided that our Company Product sales of at least US$6 million in the first year, US$15 million in the second year and US$25 million in the third year following the date of the License Agreement.

GMS CAPITAL CORP.

FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

License Agreements (Cont’d)

Such licenses and rights to market and sell cosmetics and cosmetics related products typically have an initial term of approximately 5 years to 15 years, and are potentially renewable subject to compliance with the license agreement provisions. The remaining terms, including the potential renewal periods, typically range from approximately 2 years to 15 years. Under each license, the Company is usually required to pay royalties in the range of 5% to 10% to the licensor, at least annually, based on net sales to third parties.

The Company’s licenses are entered into to create additional sales. In some cases, the Company may pay an entry fee to acquire, or enter into, a license where the licensor or another licensee was operating a pre-existing cosmetic business. In those cases, the entry fee is capitalized as an intangible asset and amortized over its useful life.

Certain license agreements may require minimum royalty payments, incremental royalties based on net sales levels and minimum spending on advertising and promotional activities. Royalty expenses are accrued in the period in which net sales are recognized while advertising and promotional expenses are accrued at the time these costs are incurred.

In addition, the Company may be exposed to certain concentration risks. Currently our sole license to market and sell cosmetics and cosmetics related products is licensed from a related party, 8012415 Canada Inc, a company controlled by Nacara Montreal Inc. which is itself controlled by Mrs. Caroline Coulombe, our principal officer. Mrs. Coulombe is also in control of 7776446 Canada Inc. doing business as Cosmera Inc., a Canadian corporation which on March 9, 2012 became the controlling shareholder of our Company with the purchase of an aggregate of 3,574,920 shares of our common stock representing approximately 66.63% of the Company’s issued and outstanding common stock.

Income Taxes

The Company accounts for income taxes utilizing the liability method of accounting. Under the liability method, deferred taxes are determined based on differences between financial statement and tax bases of assets and liabilities at enacted tax rates in effect in years in which differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.

1115

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Convertible Instruments

The Company reviews the terms of convertible debt and equity securities for indications requiring bifurcation, and separate accounting, for the embedded conversion feature. Generally, embedded conversion features where the ability to physical or net-share settle the conversion option is not within the control of the Company are bifurcated and accounted for as a derivative financial instrument. (See Derivative Financial Instruments below). Bifurcation of the embedded derivative instrument requires allocation of the proceeds first to the fair value of the embedded derivative instrument with the residual allocated to the debt instrument. The resulting discount to the face value of the debt instrument is amortized through periodic charges to interest expense using the Effective Interest Method.

Derivative Financial Instruments

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow or market risks. However, certain other financial instruments, such as warrants or options to acquire common stock and the embedded conversion features of debt and preferred instruments that are indexed to the Company’s common stock, are classified as liabilities when either (a) the holder possesses rights to net-cash settlement or (b) physical or net share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period.

Advertising Costs

The Company expenses the costs associated with advertising as incurred. Advertising expenses for the three months ended December 31, 2011 and 2010 are included in the statements of operations.

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets; automobiles – 3 years, computer equipment – 3 years, ~~and~~ furniture and fixtures – 5 years and leasehold improvements- 5 years.

When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized. Deduction is made for retirements resulting from renewals or betterments.

TELIPHONE CORP.

FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)

NOTE 2-

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Impairment of Long-Lived Assets

Long-lived assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. The Company does perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated fair value.

~~Earnings~~ (Loss) Per Share of Common Stock

Basic net ~~income~~ (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents were not included in the computation of diluted earnings per share when the Company reported a loss because to do so would be ~~antidilutive~~anti dilutive for periods presented.

GMS CAPITAL CORP.

FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

(Loss) Per Share of Common Stock (Cont’d)

The following is a reconciliation of the computation for basic and diluted EPS:

December 31,


	March 31, 2012	March 31, 2011

Net Income (Loss)	($83,646)	($22,976)

Weighted average common shares Outstanding (Basic)	5,365,400	5,365,400

Weighted average common stock Equivalents Stock Options	729,729

Warrants

Weighted average common shares Outstanding (Diluted)	6,095,129	5,365,400

~~December~~The Company issued 729,729 options to purchase stock during the period ended March 31, 2012. These options have not been vested and are tied to the purchase of 10,000,000 shares of common stock of 8012415 Canada Inc. by the Company. The option expires on March 16, 2017. If there were options or warrants outstanding they would not be included in the computation of diluted EPS because inclusion would have been anti dilutive.

~~2011~~17

~~2010~~GMS CAPITAL CORP.

Net income (loss)

$(88,503)

($16,679)

Weighted-average common stock

Outstanding (Basic)

41,578,137

37,556,657

Weighted-average common stock

Equivalents

Stock Options

Warrants

Weighted-average common stock

Outstanding (Diluted)

41,578,137

37,556,657

TELIPHONE CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings (Loss) Per Share of Common Stock (Continued)

The Company has not issued options or warrants to purchase stock in these periods. If there were options or warrants outstanding they would not be included in the computation of diluted EPS when the Company reported a loss because inclusion would have been antidilutive.

Stock-Based Compensation

In 2006, the Company adopted the provisions of ASC 718-10 “Share Based Payments” for its year ended ~~September~~December 3031, 2008. The adoption of this principle had no effect on the Company’s operations.

The Company has elected to use the modified–prospective approach method. Under that transition method, the calculated expense in 2006 is equivalent to compensation expense for all awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair values. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination ~~behaviour~~behavior as well as trends of actual option forfeitures when estimating the forfeiture rate.

The Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The fair value of the option issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital.

Segment Information

The Company follows the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. Up to December 31 2011 had not segregated the business despite the Company incurring sales of hardware components for the VoIP service as well as the service itself. The Company treated these items as one component.

~~With the acquisition of NYTEX, beginning January 1, 2012, the Company will segregate the business between the activities of Teliphone and NYTEX.~~18

14GMS CAPITAL CORP.

TELIPHONE CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Customer Lists

The Company in March 2011 acquired customer lists in a transaction with a company. The customer lists will be amortized over a period of five years commencing April 1, 2011. The customer lists will be amortized utilizing the straight-line method.

In December 2011 the Company acquired customer lists in a transaction with a company. The customer lists will be amortized over a period of five years commencing January 1, 2012. The customer lists will be amortized utilizing the straight-line method.

Uncertainty in Income Taxes

The Company follows ASC 740-10, “Accounting for Uncertainty in Income Taxes” (“ASC 740-10”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. Management has adopted ASC 740-10 for 2009, and they evaluate their tax positions on an annual basis, and has determined that as of December 31, 2011, no additional accrual for income taxes other than the federal and state provisions and related interest and estimated penalty accruals is not considered necessary.

Noncontrolling Interests

In accordance with ASC 810-10-45, Noncontrolling Interests in Consolidated Financial Statements, the Company classifies controlling interests as a component of equity within the balance sheets. The Company has retroactively applied the provisions in ASC 810-10-45 to the financial information for the three months ended December 31, 2010. The Company disposed of their only non-wholly owned subsidiary on May 31, 2011.

Discontinued Operations

The Company has accounted for the sale of its entire holdings in its subsidiary Teliphone Inc in accordance with ASC 360-10-45, Property, Plant, and Equipment – Overall – Glossary-Component of an Entity, (formerly FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets). (See NOTE 13 – DISCONTINUED OPERATIONS). In the prior year financial statement comparatives, the Company has reflected the prior year presentation to reflect elements of the disposed subsidiary as discontinued operations. This reclassification had no effect on earnings per share of the prior period as is for presentation purposes only.

Recent Accounting Pronouncements

In May 2011, FASB issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. FASB ASU 2011-04 amends and clarifies the measurement and disclosure requirements of FASB ASC 820 resulting in common requirements for measuring fair value and for disclosing information about fair value measurements, clarification of how to apply existing fair value measurement and disclosure requirements, and changes to certain principles and requirements for measuring fair value and disclosing information about fair value measurements. The new requirements are effective for fiscal years beginning after December 15, 2011. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.

In June 2011, FASB issued ASU No. 2011-05, Presentation of Comprehensive Income, which amends the disclosure and presentation requirements of Comprehensive Income. Specifically, FASB ASU No. 2011-05 requires that all nonowner changes in stockholders’ equity be presented either in 1) a single continuous statement of comprehensive income or 2) two separate but consecutive statements, in which the first statement presents total net income and its components, and the second statement presents total other comprehensive income and its components. These new presentation requirements, as currently set forth, are effective for the Company beginning October 1, 2012, with early adoption permitted. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.

statement presents total net income and its components, and the second statement presents total other comprehensive income and its components. These new presentation requirements, as currently set forth, are effective for the Company beginning October 1, 2012, with early adoption permitted. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.

In September 2011, FASB issued ASU 2011-08, Testing Goodwill for Impairment, which amended goodwill impairment guidance to provide an option for entities to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. After assessing the totality of events and circumstances, if an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, performance of the two-step impairment test is no longer required. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. Adoption of this guidance is not expected to have any impact on the Company’s results of operations, cash flows or financial position.

There were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

NOTE 3-

FIXED ASSETS

Fixed assets as of December 31, 2011 (unaudited) and September 30, 2011 were as follows:

	Estimated Useful	(unaudited)
	Life (Years)	December 31,	September 30,
		2011	2011
Furniture and fixtures	5	$689	$689
Trading platform	5	2,300,000	-
Computer equipment	3	1,691,661	1,357,963
		3,992,350	1,358,652
Less: accumulated depreciation		240,156	118,139
Fixed assets, net		$3,752,194	$1,240,513

There was $122,017 and $0 charged to operations for depreciation expense for continuing operations for the three months ended December 31, 2011 and 2010, respectively.

NOTE 4-

CUSTOMER LISTS

Customer lists as of December 31, 2011 (unaudited) and September 30, 2011 were as follows:

	Estimated Useful	(unaudited)
	Lives (Years)	December 31,	September 30,
		2011	2011
Customer lists	5	$ 2,043,796	$ 1,543,796
		2,043,796	1,543,796
Less: accumulated amortization		231,568	154,380
Customer lists, net		$1,812,226	$1,389,416

There was $77,190 and $0 charged to operations for depreciation expense for continuing operations for the three months ended December 31, 2011 and 2010, respectively.

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 52- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

~~RELATED~~Recent ~~PARTY~~Accounting ~~LOANS~~Pronouncements (Cont’d)

~~Long~~There ~~Term~~were ~~Related~~other ~~Party~~updates ~~Debt~~recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

OnNOTE ~~April 1, 2011, the Company assumed debt of a shareholder previously held within its former majority~~3-~~owned~~ ~~subsidiary,~~FIXED Teliphone Inc. of $70,828. The loan matures on December 31, 2013 with interest only payable monthly at an annual rate of 12%. The Company reserves the right to pay the principal in its entirety at any time without penalty. The total amount is outstanding as of December 31, 2011.ASSETS

~~Current~~Fixed ~~Related~~assets ~~Party~~as ~~Debt~~of March 31, 2012 and December 31, 2011 were as follows:

The Company received a total of $74,709 collectively from a Director of the Company and a Company owned and controlled by the same Director through December 31, 2011. The advances are considered short term in nature, accrue interest at 12% per annum, and are due on demand. As of December 31, 2011, the Company has accrued $18,535 in interest on these advances.


	Estimated Useful Lives (Years)	March 31, 2012	December 31, 2011

Computer equipment	3	$ 1,318	1,318
Office equipment	5	1,422	1,422
Leasehold improvements	5	13,994	13,994
	TOTAL:	16,734	16,734

Less: accum depreciation		16,734	16,734
Property and equipment, net		$0	$0

NOTE 64- OPERATING LINE OF CREDIT

~~CONVERTIBLE~~Prior ~~DEBENTURES~~to March 9, 2012, The Company had established an operating line of credit of CDN$15,000 with a bank through a credit card, with the full outstanding amount guaranteed by a Director. On March 9, 2012, the outstanding balance of $11,780 was converted as part of a secured loan by the former shareholders of the Company. See NOTE – 5 RELATED PARTY LOAN CONVERSION.

OnThe ~~February 6, 2009, the~~ Company ~~entered~~does ~~into~~not ahave ~~12% Convertible Debenture (the “A Debenture”) with~~ an ~~individual.~~operating ~~The~~line ~~A Debenture had a maturity date~~ of ~~February~~credit 6,as ~~2010, and incurred interest at a rate~~ of ~~12%~~March ~~per annum. On February 6~~31, ~~2010, the A Debenture was renewed for an additional 12 months at 12% to mature on February 6,~~ 2012.

The A Debenture can either be paid to the holders on February 6, 2012 or converted at the holders’ option any time up to maturity at a conversion price equal to eighty percent (80%) of the average closing price of the common stock as listed on a Principal Market for the five (5) trading days immediately preceding the conversion date. If the common stock is not traded on a Principal Market, the conversion price shall mean the closing bid price as furnished by the National Association of Securities Dealers, Inc.

On February 17, 2009, the Company entered into a 12% Convertible Debenture (the “B Debenture”) with an individual. The B Debenture had a maturity date of February 17, 2010, and incurred interest at a rate of 12% per annum. On February 17, 2010, the B Debenture was renewed for an additional 12 months at 12% to mature on February 17, 2012.

The B Debenture can either be paid to the holders on February 17, 2012 or converted at the holders’ option any time up to maturity at a conversion price equal to eighty percent (80%) of the average closing price of the common stock as listed on a Principal Market for the five (5) trading days immediately preceding the conversion date. If the common stock is not traded on a Principal Market, the conversion price shall mean the closing bid price as furnished by the National Association of Securities Dealers, Inc.

The total amount of the A and B Debentures was $58,998.

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 65- RELATED PARTY LOAN CONVERSION

~~CONVERTIBLE~~Prior ~~DEBENTURES~~to March 9, 2012, the Company had entered into related party loan agreements with an officer and various shareholders of the Company. On March 9, 2012, the $105,000 outstanding (~~CONTINUED~~collectively the Operating line of Credit (see NOTE 4) and the related party loans from the Officer and Shareholders) were converted into a secure, non-interest bearing Promissory Note of equivalent value, payable on July 1, 2012. The loan amount is backed by a General Security Agreement which provides for a general, first ranked lien on all of the assets of the Company.

~~The~~NOTE ~~convertible debentures met the definition of hybrid instruments, as defined in ASC 815~~6-~~10,~~ ~~Accounting~~STOCKHOLDERS’ ~~for~~EQUITY ~~Derivative Instruments and Hedging Activities~~ (~~ASC 815-10~~DEFICIT). The hybrid instruments are comprised of a i) a debt instrument, as the host contract and ii) an option to convert the debentures into common stock of the Company, as an embedded derivative. The embedded derivative derives its value based on the underlying fair value of the Company’s common stock. The Embedded Derivative is not clearly and closely related to the underlying host debt instrument since the economic characteristics and risk associated with this derivative are based on the common stock fair value.

~~The~~Common ~~embedded derivative did not qualify as a fair value or cash flow hedge under ASC 815-10.~~ Stock

~~NOTE~~As 7-of March 31, 2012 and December 31, 2011, the Company had 5,365,400 shares of common stock issued and outstanding respectively.

~~COMMITMENTS~~The /Company ~~LITIGATION~~has not issued any shares for the three months ended March 31, 2012.

~~The~~On ~~Company~~March ~~assumed~~16, 2012, as part of the ~~lease~~License ~~from~~Agreement ~~its~~to ~~former~~obtain ~~subsidiary~~the ~~Teliphone~~exclusive worldwide rights to distribute, market and sell cosmetic products under the Nacara brand, excluding the territories of Finland, Russia and Sweden, we granted to Nacara Montreal Inc., ~~for~~a ~~its~~Canadian ~~Toronto,~~corporation ~~Canada~~controlled ~~offices~~Mrs Caroline Coulombe, ~~which~~our isprincipal ~~set~~officer, an option to ~~expire~~purchase 729,729 shares of the Company’s common stock. The option expires on ~~August~~March 3116, ~~2014~~2017 and can only be exercised by Nacara Montreal Inc if the Company exercises its own option to purchase from Nacara Montreal Inc. 10,000,000 shares of Class D common stock of 8012415 Canada Inc. The option granted to Nacara Montreal Inc to purchase 729,729 shares of the Company's common stock has not yet been. The option granted to Nacara Montreal Inc to purchase 729,729 shares of the ~~following~~Company's ~~commitments~~common ~~remaining~~stock onwill ~~this~~become ~~lease:~~vested only if and when the Company exercises its option to purchase from Nacara Montreal Inc. 10,000,000 shares of Class D common stock of 8012415 Canada Inc.

~~September~~On 30March 9, 2012:, 7776446 Canada Inc. doing business as Cosmera Inc., a Canadian corporation controlled by Mrs. Caroline Coulombe, our principal officer, purchased from Metratech Business Solutions Inc. and Marcel Côté an aggregate of 3,574,920 shares of common stock of the Company representing approximately 66.63% of the Company’s issued and outstanding common stock.

$37,831

2013: $51,960

2014: $43,300

The Company has a lease with a business center for its Montreal, Canada offices which is set to expire on November 30, 2013. The Company has the following commitments remaining on this lease:

September 30, 2012:

$68,239

2013: $13,980

The Company’ assumed the various capital lease agreements from its former subsidiary Teliphone Inc. for computer equipment with Dell Financial Services Canada Limited, both operating and capital leases. The Company’s operating leases expired during the year ended September 30, 2011. All new leases the Company has entered into have been capital leases, see Note 11.

In September 2011 the Company began negotiations with Dezmocom Inc. of Montreal to establish Teliphone Business Solutions Corp, a joint venture between the Company and Dezmocom dedicated to the marketing of the Company's products and services and establishment of new sales channels. Dezmocom had an established track record of developing and overseeing marketing channels such as resellers and agents as well as internal expertise in sales of products the same or similar to those of the Company. The Company has been working with Dezmocom on this project and has advanced Teliphone Business Solutions $19,764 which has been matched by Dezmocom. While no formal agreement has been executed, Teliphone Corp and Dezmocom would

share the profits from the joint venture equally. An agreement is expected to be executed in February 2012

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 76- STOCKHOLDERS’ EQUITY (DEFICIT) (CONT’D)

~~COMMITMENTS~~Common /Stock ~~LITIGATION~~ (~~CONTINUED~~Cont’d)

On ~~April~~March 2920, ~~2009~~2012, ~~9191-4200~~in ~~Quebec~~consideration ~~Inc.~~of ~~(“9191”)~~Nacara ~~entered~~Montreal ~~into~~Inc aand ~~purchase~~8012415 ~~agreement~~Canada ~~with~~Inc 3willingness ~~individuals~~to ~~residing~~enter ininto the ~~Province~~transactions ofabove ~~Ontario,~~and ~~Canada~~in ~~for~~order ~~all~~to ofprovide ~~the~~an ~~issued~~appropriate ~~and~~capital ~~outstanding~~structure ~~shares~~for ofthe ~~Orion~~Company, ~~Communications~~the ~~Inc.~~Company ~~(“Orion”). On~~entered ~~April~~into ~~30,~~a ~~2009,~~Stock ~~Orion,~~Cancellation ~~under~~Agreement ~~management~~with of7776446 ~~9191,~~Canada ~~had~~Inc. ~~executed~~doing abusiness ~~services~~as ~~agreement~~Cosmera ~~with~~Inc. ~~the~~pursuant ~~Company’s~~to ~~subsidiary,~~which ~~Teliphone~~Cosmera Inc. agreed to ~~provide~~proceed ~~telecommunications services~~ to the ~~customers~~cancellation of ~~Orion. On~~all ~~January~~of ~~18,~~the ~~2010,~~shares ~~9191~~it ~~filed~~owns ain ~~Statement~~the ofCompany ~~Claim~~within in30 ~~Superior~~days ~~Court~~after ofthe ~~Justice~~Company inobtains ~~the~~approval ~~Province~~by ofshareholders ~~Ontario,~~to ~~Canada~~change ~~for~~the ~~rescission~~name ~~due~~of the Company to ~~overpayment~~‘’Nacara World Corp.’’ and ~~damages~~the ~~totalling~~effectiveness ~~CDN$1,000,000~~of ~~claiming~~a ~~misrepresentation~~12 ofto ~~financial~~1 ~~statements~~forward ~~made~~split byof the ~~former~~Company’s ~~owners~~common stock.

OnAs ~~February~~of 18March 20, ~~2010~~2012, the ~~Former~~Company ~~owners~~had 5,365,400 shares of ~~Orion~~its ~~filed~~common ~~their~~stock ~~defense~~issued and ~~counterclaim~~outstanding. ~~against~~Upon ~~9191, naming~~ the ~~Company,~~effectiveness ~~its~~of ~~former~~the ~~subsidiary~~cancellation ~~Teliphone~~of ~~Inc.,~~an ~~George Metrakos~~3,574,920 ashares ~~former~~of ~~Director~~common stock of the Company ~~and~~representing approximately 66.63% of the Company’s ~~President~~issued and ~~CEO~~outstanding atcommon ~~the~~stock ~~time~~which are currently owned by 7776446 Canada Inc. doing business as Cosmera Inc, and ~~other~~the ~~individuals~~exercise asof ~~third~~the ~~party~~Option ~~claimants~~by ~~for~~the aCompany ~~total~~to acquire all Class D Shares of ~~CDN$4,000,000~~8012415 Canada Inc. ~~The~~ ~~Former~~to ~~Owners~~give Nacara Montreal Inc. 729,729 shares of ~~Orion~~the ~~claim~~common ~~that~~stock of the Company, ~~its~~the ~~former~~Company ~~subsidiary~~will have a total of 2,520,409 shares of common stock issued and ~~Director~~outstanding ~~are~~on ~~third~~a ~~party~~fully ~~claimants~~diluted ~~due~~basis. toUpon ~~its~~the ~~agreements~~effectiveness ~~with~~of ~~9191~~a 12 to ~~provide~~1 ~~services~~forward tosplit of our common stock, the ~~clients~~Company will have a total of ~~Orion~~30,244,908 shares of common stock issued and outstanding on a fully diluted basis.

The ~~Former~~Company ~~owners~~issued of250,000 ~~Orion~~shares ~~are~~of ~~also~~common ~~pursuing~~stock ~~the~~in ~~Company’s~~2010 ~~former subsidiary Teliphone Inc.~~ for ~~$150,000~~cash ~~for~~in the ~~early~~amount ~~termination~~ of ~~the employment agreement~~$48,630.

OnThe ~~March~~Company ~~10, 2010, Bank of Montreal (“BMO”), a Canadian financial institution and creditor of Orion~~ has ~~filed~~not aissued ~~claim~~any ~~against~~shares ~~the Company’s former subsidiary Teliphone Inc. requesting payment~~ of ~~Orion’s~~common ~~outstanding~~stock ~~debt of CDN$778,607. BMO stood as a secured creditor of Orion based on its issuance of a credit line to Orion~~ in ~~2007. BMO~~2009 ~~claimed~~or ~~that as a secured creditor holding a General Security Agreement, it had rights to the receivables of Orion and claims that these receivables are being collected by Teliphone Inc~~2008.

OnThe ~~March~~Company ~~30,~~issued ~~2011~~2,537,400 ~~the~~shares ~~Company~~of ~~acquired~~common ~~the~~stock ~~client lists from BMO and therefore resolved the disputes with BMO~~ for aservices ~~total~~during ~~settlement~~2007 ofvalued ~~$375,000 payable over 24 months as follows: $25,000 due~~ at ~~commencement and a further~~ $11253,~~458 per month, with a final payment of $75,000 on the 24th month (See Note 12 for further discussion)~~740.

~~Subsequently~~The onCompany ~~November~~issued 152, ~~2011~~578,000 ~~BMO~~shares ~~did~~of ~~not~~common ~~accept~~stock ~~the~~in ~~monthly~~2007 ~~payment~~as ~~claiming~~replacement ~~that~~shares ~~additional~~for ~~legal~~the ~~fees~~original ~~were~~shares ~~owed~~issued toin ~~BMO~~Metratech byRetail ~~Teliphone~~Systems, ~~and no payments have been made since that date~~Inc. These ~~fees~~shares were ~~not~~valued ~~listed~~at ~~in the original agreement and the Company and BMO remain in discussions to attempt to resolve BMO’s claim~~$212,800.

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 87- PROVISION FOR INCOME TAXES

~~STOCKHOLDERS~~Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s ~~EQUITY~~assets ~~(DEFICIT)~~and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

~~Common~~At ~~Stock~~March 31, 2012, deferred tax assets consist of the following:

AsAt ofMarch ~~December~~ 31, ~~2011~~2012, the Company ~~has~~had ~~125~~a net operating loss carryforward in the amount of $675,~~000~~735,~~000~~ ~~shares~~available to offset future taxable income through 2032. The Company established valuation allowances equal to the full amount of ~~common~~the ~~stock~~deferred ~~authorized~~tax ~~with~~assets adue ~~par~~to ~~value~~the uncertainty of ~~$.001.~~the utilization of the operating losses in future periods.

~~The~~A ~~Company~~reconciliation ~~has~~of ~~61,360,745~~the ~~shares~~Company’s ~~issued~~effective ~~and~~tax ~~outstanding~~rate as a percentage of ~~December~~income before taxes and federal statutory rate for the periods ended March 31, 2012 and 2011. is summarized as follows:

On September 30, 2004, the Company had 3,216,000 shares issued and outstanding. On April 28, 2005, the Company entered into a reverse merger upon the acquisition of Teliphone, Inc. and issued 27,010,000 shares of common stock to the shareholders of Teliphone, Inc. in exchange for all of the outstanding shares of stock of Teliphone, Inc. Thus the Company had 30,426,000 shares issued and outstanding.




	2012	2011
Federal statutory rate	(34.0)%	(34.0)%
State income taxes, net of federal benefits	3.3	3.3
Valuation allowance	30.7	30.7
	0%	0%

On August 31, 2005, the Company issued 663,520 shares of common stock in conversion of the Company’s convertible debentures in the amount of $331,760.

On August 22, 2006, the Company issued 1,699,323 shares of common stock to United American Corporation in conversion of related party debt in the amount of $421,080 (see Note 4). An additional 171 fractional shares were issued in December 2006.

On August 22, 2006, the Company issued 105,000 shares of common stock for consulting services. These services have been valued at $0.25 per share, the price at which the Company’s offering will be. The value of $26,250 was reflected in the consolidated statement of operation for the year ended September 30, 2006.

In December 2006, the Company issued 660,000 shares of common stock representing a value in the amount of $165,000, for consulting services that occurred during the year ended September 30, 2006. The Company recognized the expense in the year ended September 30, 2006 as the services were provided in this time frame. The Company used the $0.25 price for valuation purposes.

~~TELIPHONE~~GMS CAPITAL CORP.

FINANCIAL STATEMENTS

~~FOR~~MARCH ~~THE THREE MONTHS ENDED DECEMBER~~ 31, ~~2011~~2012 AND ~~2010~~2011 (UNAUDITED)

NOTE 8- FAIR VALUE MEASUREMENTS

~~STOCKHOLDERS~~The Company adopted certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s ~~EQUITY~~valuation ~~(DEFICIT)~~techniques ~~(CONTINUED)~~are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

~~Common~~Level ~~Stock~~1 ~~(Continued)~~inputs: Quoted prices for identical instruments in active markets.

~~The~~Level ~~Company~~2 ~~issued~~inputs: ~~3,812,633~~Quoted ~~shares~~prices offor ~~common~~similar ~~stock~~instruments ~~of the Company~~ in ~~February~~active ~~2009~~markets; asquoted ~~part~~prices offor ~~the~~identical ~~debt~~or ~~conversion~~similar ~~agreement~~instruments ~~with~~in ~~related~~markets ~~parties~~that onare ~~December~~not ~~31,~~active; ~~2008.~~and ~~The~~model-derived ~~Company~~valuations ~~also~~whose ~~issued~~inputs ~~10,000~~are ~~shares~~observable ofor ~~stock~~whose ~~for~~significant ~~services rendered at a~~ value ofdrivers ~~$.038~~are ~~per share ($380)~~observable.

~~The~~Level ~~Company~~3 ~~issued~~inputs: ~~180,000~~Instruments ~~shares~~with ofprimarily ~~common~~unobservable ~~stock~~value ~~to convert related party notes in the amount of $22,500 ($0~~drivers.~~125 per share) on March 31, 2010.~~

~~The~~NOTE ~~Company~~9- ~~issued~~CONCENTRATION ~~3,804,088~~OF ~~shares~~CREDIT ~~on May 4, 2011 for the acquisition of the rights to service the former clients of Orion Communications Inc. (“Orion”) after its dispute settlement with Orion’s secured creditors (see Note 10).~~RISK

~~The~~On ~~Company agreed to issue 489,871 shares on~~ March 31, ~~2010~~2012, ~~as part of an interest payment to shareholders in order to solidify personal guarantees in conjunction with an extension of~~ the Company’s ~~operating~~no ~~line~~longer ofhad ~~credit~~any ~~facility~~customer ~~with its Bank~~receivables. In ~~addition,~~For the ~~Company~~three ~~has~~months ~~agreed~~ended toMarch ~~issue 1~~31,~~800,000~~ ~~shares of stock for its acquisition of $450~~2011,~~000~~ ~~worth~~two ofand ~~equipment~~one ~~from~~customers ~~Orion~~represented ~~Communications,~~100% ~~Inc. on September 1, 2011. The 2,289,471 shares~~ of ~~stock~~the ~~has~~revenue ~~not~~for ~~been issued, however~~ the Company. ~~has~~Each ~~booked a liability for stock to be issued~~ of ~~$469,868~~these ascustomers ofwas ~~December~~considered ~~31,~~a ~~2011~~major customer.

~~The~~NOTE ~~Company~~10- ~~issued~~SUBSEQUENT 20,000,000 shares ($0.25 per share) on December 30, 2011 for the acquisition of the New York Telecom Exchange Inc. The value of $5,000,000 was allocated as follows: $2,300,000 for the trading platform, $200,000 for computer equipment, $500,000 for the customer lists, and the remaining balance of $2,000,000 allocated to goodwill.EVENT

~~NOTE~~Since 9-April 1, 2012, the Company began to realize revenues from the sales of cosmetics products to customers acquired from its License and Distribution Agreement with 8012415 Canada Inc. entered into on March 16, 2012. The Company is now restructuring its operations in order to transfer its resources from supporting the Software Business to that of the Cosmetics Business. On April 1, 2012, as part of this transition, the Company sold its contractual rights to supply Software and Services to its existing Software customers for a consideration of $5,246.

PROVISION FOR INCOME TAXES

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

At December 31, 2011 the Company had no deferred tax assets.

TELIPHONE CORP.

FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)

NOTE 9-

PROVISION FOR INCOME TAXES (CONTINUED)

At December 31, 2011, the Company had a net operating loss in the amount of amount of ($88,503), all of which occurring within the Province of Ontario, Canada, and hence no income tax is due.

A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the periods ended December, 2011 and 2010 is summarized as follows:

	2011	2010
Federal statutory rate	(34.0)%	(34.0)%
State income taxes, net of federal benefits	3.3	3.3
Valuation allowance	30.7	30.7
	0%	0%
	2011	2010
Canadian Federal statutory rate	3.5%	3.5%
Canadian Provincial income taxes, net of federal benefits	12.0	12.0
Valuation allowance	0.0	0.0
	15.5%	15.5%

NOTE 10-

SERVICING CONTRACT FOR THE CUSTOMERS OF ORION COMMUNICATIONS INC.

On May 7, 2009, the Company’s then subsidiary Teliphone Inc. entered into an assignment agreement with 9191-4200 Quebec Inc. (“9191”) in order to have the customer contracts of Orion Communications Inc., (“Orion”) an Ontario, Canada Company assigned to the Company for its management. No consideration was paid however the Company and 9191 had agreed to share 50% each of the gross benefits received from the customer base.

On February 23, 2010, the Company’s agreement of assignment with 9191 was cancelled due to a default of the assignor. As a result of the default, immediate payment for all amounts owed by 9191 was requested, however 9191 did not comply. The delivery of services to Orion clients was suspended, and the clients were permitted to request delivery of service directly from the Company. As a result of the cancellation of the contract, the Company took a write-down (fully impaired) of $337,275 previously listed as Goodwill.

TELIPHONE CORP.

FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)

NOTE 10-

SERVICING CONTRACT FOR THE CUSTOMERS OF ORION COMMUNICATIONS INC. (CONTINUED)

As a result of the lawsuits against the Company’s former subsidiary resulting from the transaction (See NOTE 7), on March 31, 2011, the Company

negotiated and entered into an Asset Purchase Agreement with Orion Communications, Inc. (“Orion”) and 9191-4200 Quebec, Inc. (“9191”) to acquire the customers from Orion valued at $1,479,265. As consideration for these customers, the Company issued 3,804,088 shares at a value of $0.25 per share for a total of $951,022, pay $375,000 to BMO in the form of a note payable (see Note 12) and utilize the $153,243 paid in advances from prior years.

NOTE 11-

OBLIGATIONS UNDER CAPITAL LEASE

On April 1, 2011, the Company assumed the capital leases of its former subsidiary Teliphone Inc. The Company leases some of its computer equipment pursuant to capital leases. At December 31, 2011, minimum future annual lease obligations are as follows:

Year Ending

December 31, 2012

$23,305

December 31, 2013

1,504

24,809

Less: Amounts representing interest

(2,959)

Total

21,850

Current portion

(20,451)

Long-term portion

$1,399

NOTE 12-

NOTE PAYABLE - BMO

On March 30, 2011, the Company entered into a non-interest bearing Note Payable to Bank of Montreal (“BMO”) for a total of $375,000 as part of its dispute resolution regarding the management of the clients of Orion Communications Inc. The Note calls for an initial payment of $25,000 followed by 24 equal payments due on the 15th of the month of $11,458, and a final payment of $75,000 due on April 15, 2013. The Company has classified the Note Payable on its balance sheet as at December 31, 2011 as $137,500 as a current liability and $114,967 as a long term liability. As of October 2011, the Company had met all of its payment obligations on this note payable. Subsequently on November 15, 2011, BMO did not accept the monthly payment claiming that additional legal fees were owed to BMO by Teliphone. These fees were not listed in the original agreement and the Company and BMO remain in discussions to attempt to resolve BMO’s claim (NOTE 7).

TELIPHONE CORP.

FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED DECEMBER 31, 2011 AND 2010 (UNAUDITED)

NOTE 13-

DISCONTINUED OPERATIONS

On April 1, 2011, the Company consolidated the operations of its subsidiary (operating within the jurisdictions of Quebec, Canada and Ontario, Canada) unto itself (operating in the jurisdiction of Nevada). As a result of the consolidation,

the following fixed assets (net of accumulated depreciation) were transferred from Teliphone Inc. to Teliphone Corp.:

Computer Equipment for IPTV:

$395,170

Computer Equipment for VoIP:

$132,431

Furniture and Office Equipment:

$660

Total:

$528,261

The only remaining fixed asset in Teliphone Inc. was:

Computer Equipment for Mobile VoIP:

$15,840

The Company also assigned all client and supplier contracts from Teliphone Inc. to Teliphone Corp and as such, continued to operate the same business.

On May 31, 2011, the Company sold its entire holdings consisting of 89.1% of the issued and outstanding Common Shares of its subsidiary Teliphone Inc. to YEURB INVESTMENTS COMPANY LIMITED, a Commonwealth of the Bahamas Corporation. The gains and losses from the disposition of certain income-producing assets and associated liabilities, operating results, and cash flows are reflected as discontinued operations in the financial statements for all periods presented. Although net earnings are not affected, the Company has reclassified results that were previously included in continuing operations as discontinued operations for qualifying dispositions.

As a result of this transaction, the Company’s financial statements have been prepared with the results of operations and cash flows of this disposed property shown as discontinued operations. All historical statements have been restated in accordance with GAAP.

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

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

~~This~~You ~~Quarterly~~should ~~Report~~read onthe ~~Form~~following ~~10-Q~~discussion of our financial condition and operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this quarterly report. This quarterly report contains forward-–looking statements ~~regarding~~within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements about our ~~business~~expectations, ~~financial~~beliefs, ~~condition~~intentions or strategies for the future, ~~results~~which ofwe ~~operations~~indicate ~~and~~by ~~prospects. Words~~words or phrases such as “~~expects~~anticipate,” “~~anticipates~~expect,” “~~intends~~intend,” “~~plans~~plan,” “~~believes~~will,” “~~seeks~~we believe,” “~~estimates~~our company believes,” “management believes” and similar ~~expressions~~language. orThe ~~variations~~forward–looking ofstatements ~~such~~are ~~words~~based on our current expectations and are ~~intended~~subject to ~~identify~~certain ~~forward-looking~~risks, ~~statements~~uncertainties and assumptions, ~~but~~including ~~are~~our ~~not~~ability ~~deemed~~to (1) obtain sufficient capital or a strategic business arrangement to ~~represent~~fund anour ~~all-inclusive~~expansion ~~means~~plans; (2) build the management and human resources infrastructure necessary to support the growth of ~~identifying~~our business; (3) competitive factors and developments beyond our control; and (4) those other risk factors, uncertainties and assumptions that are set forth in the discussion under the headings captioned “Business,” “Risk Factors,” and “Management’s Discussion and Analysis”. Our actual results may differ materially from results anticipated in these forward-–looking statements. We base the forward–looking statements on information currently available to us, and we assume no obligation to update or revise them, whether as ~~denoted~~a inresult ~~this~~of ~~Quarterly~~new ~~Report~~information, onfuture ~~Form~~events ~~10-Q~~or otherwise. ~~Additionally~~ In addition, ~~statements~~our ~~concerning~~historical financial performance is not necessarily indicative of the results that may be expected in the future ~~matters~~and ~~are~~we ~~forward-looking~~believe ~~statements~~that such comparisons cannot be relied upon as indicators of future performance.

~~Although~~The ~~forward-looking~~following ~~statements~~discussion inand ~~this~~analysis ~~Quarterly~~should ~~Report~~be onread ~~Form~~in ~~10-Q~~conjunction ~~reflect~~with ~~the good faith judgment of~~ our ~~management,~~consolidated ~~such~~financial statements ~~can only be based on facts~~ and ~~factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from~~ the ~~results~~related ~~and~~notes ~~outcomes~~thereto discussed in or anticipated by the forward-looking statements. We caution the reader that numerous important factors, including those factors discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, which are incorporated herein by reference, could affect our actual results and ~~could~~other ~~cause~~financial ~~our~~information ~~actual~~contained ~~results~~elsewhere ~~to differ materially from those expressed~~ in ~~any forward-looking statement made by, or on behalf of, the Company. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of~~ this ~~Quarterly Report on~~ Form 10-–Q. ~~We file reports with the Securities and~~

~~Exchange~~Item Commission (the “SEC” or “Commission”). You can read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1~~-800-SEC-0330~~. In addition, the SEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.Business

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report on Form 10-Q. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.Introduction

AsSubject ~~used~~to inshareholders ~~this~~approval, ~~Quarterly~~we ~~Report,~~intend to change the ~~terms~~name ~~“we~~of our Company to Nacara World Inc to better reflect our current business which consist in the distribution,” ~~“us~~marketing and sale of cosmetics and cosmetics-related products primarily in Canada,” “France and the French Caribbean. Following a review of our operations in the software business,” ~~and~~we ~~“Teliphone”~~have ~~mean~~decided ~~Teliphone~~to ~~Corp~~cease our software business effective April 1, 2012. Our Board of Directors and Majority Shareholders have approved an amendment to our ~~subsidiaries~~Articles ~~unless~~of ~~otherwise~~Incorporation ~~indicated~~to change our name from “GMS Capital Corp.” to “Nacara World Corp.”

~~GENERAL~~GMS ~~OVERVIEW~~Capital Corp. was incorporated in Canada on March 9, 2000 under the name "Metratech Retail Systems Inc." for the development and sales of specialized inventory management software. The Company re-incorporated itself in the State of Florida on

~~OVERVIEW~~25

WeSeptember ~~are~~18, a2007 ~~telecommunications~~and ~~company~~was ~~engaged~~subsequently renamed "GMS Capital Corp." in ~~the~~order ~~business~~to ofraise ~~providing~~capital ~~broadband~~on ~~telephone~~the ~~services~~US ~~utilizing~~public ~~our~~markets ~~innovative~~to ~~Voice~~realize ~~over~~its ~~Internet~~objectives ~~Protocol,~~of orinvesting ~~VoIP,~~in ~~technology~~its ~~platform~~development and marketing plans.

WeThe ~~were~~details ~~incorporated in the State~~ of ~~Nevada on March 2, 1999 under~~ the ~~name~~merger ~~"OSK~~and ~~Capital~~re-incorporation IIare ~~Corp." to serve~~ as afollows: ~~vehicle~~The ~~to effect a merger~~2, ~~exchange of capital stock~~578,000 ~~asset~~issued ~~acquisition~~and oroutstanding ~~other~~shares ~~business~~of ~~combination~~Metratech ~~with~~Retail aSystems ~~domestic or foreign private business~~Inc. ~~Effective~~were ~~April~~converted ~~28,~~to ~~2005~~2,578,000 weshares ~~achieved~~of ~~our~~GMS ~~objective~~Capital ~~with the reverse merger and reorganization with Teliphone Inc~~Corp., Each ashareholder ~~Canadian~~of ~~company.~~the OnCompany ~~August~~received ~~21,~~one ~~2006,~~share weof ~~changed~~GMS ~~our name from OSK~~ Capital II Corp. tofor ~~Teliphone~~every ~~Corp. As~~share ~~a result~~ of ~~the~~Metratech ~~merger~~Retail ~~and~~Systems ~~re-organization, Teliphone~~ Inc. The ~~became~~three ~~our~~directors ~~wholly~~of ~~owned~~Metratech ~~subsidiary~~Retail ~~and~~Systems ~~we became a majority owned subsidiary of Teliphone~~ Inc.'s, ~~parent~~George ~~company~~Metrakos, ~~United~~Marcel ~~American~~Côté ~~Corporation,~~and aSpiro ~~Florida~~Krallis ~~Corporation~~were ~~trading~~replaced by George Metrakos on the ~~OTC~~board ~~Bulletin~~of ~~Board~~directors ~~under~~of the ~~trading~~newly ~~symbol~~incorporated ~~UAMA~~company.

~~Effective~~On ~~August~~April 120, ~~2006~~2010, wethe ~~entered~~Company’s ~~into~~Initial aPublic ~~transaction~~Offering ~~with~~Prospectus ~~3901823~~was ~~Canada~~deemed ~~Inc.~~effective ~~("3901823")~~by ~~and~~the ~~issued~~Securities toand ~~3901823~~Exchange ~~shares of Teliphone Inc~~Commission. The ~~common~~Company ~~stock,~~successfully ~~which~~completed ~~was~~its ~~equal~~minimum tooffering aon ~~25%~~September ~~ownership interest~~17, in2010 ~~exchange~~with ~~for~~the ~~access~~issuance toof ~~3901823’s operating company Intelco Communications Inc. (“Intelco”) global distribution channels~~250,000 ~~cost~~shares ~~reduction through usage~~ of ~~Intelco’s~~common ~~network~~stock ~~and~~sold ~~data~~at ~~center, along with a credit facility of~~ $~~75,000~~0. ~~Subsequently~~20 onper ~~September~~share. ~~30,~~In ~~2008~~October, ~~Teliphone~~2010 ~~Inc.~~our ~~issued~~Company ~~additional~~began ~~stock~~the toprocess uswith ~~representing~~ the ~~conversion~~Financial ~~into~~Industry ~~equity~~Regulatory ofAuthority ~~cash~~(FINRA) ~~advances made between August 1, 2006~~ to ~~September~~have ~~30,~~its ~~2008. As~~common astock ~~result,~~traded weover-the-counter ~~increased~~on ~~own ownership interest in~~ the ~~outstanding~~OTCBB ~~capital stock of Teliphone Inc~~exchange. Our toCompany ~~87.1%~~was assuccessful ofand ~~September~~the ~~30,~~Company ~~2010. We~~now dotrades ~~not~~under ~~have~~the ~~any~~symbol ~~other subsidiary entities~~“GMCP”.

OnOur ~~February~~executive ~~15,~~offices ~~2008,~~are welocated ~~entered~~at ~~into~~3055 aL’Assomption ~~letter~~Blvd., ofMontreal, ~~intent~~Quebec, toCanada. ~~acquire~~Our ~~certain~~telephone ~~assets~~number ~~and~~in ~~liabilities~~Montreal ofis ~~the~~514-254-9473. ~~business~~We ~~operating~~maintain asour ~~"Dialek~~internet ~~Telecom"~~website ~~and~~at ~~complemented~~www.nacara.com ~~the~~You ~~offering~~can ofobtain ~~voice~~through ~~services over~~ our ~~own~~website, ~~network~~free ~~with the resale~~ of ~~voice~~charge, ~~and~~our ~~data~~annual ~~services~~reports ~~over~~on ~~the~~Form ~~networks~~10-K, ofquarterly ~~major~~reports ~~providers.~~on ~~The~~Form ~~Company entered into a definitive agreement with 9191~~10-~~4200 Quebec Inc.~~Q, ~~owners~~current ofreports ~~Dialek Telecom,~~ on ~~June~~Form 308-K, ~~2008~~ and ~~the~~amendments ~~transaction was deemed~~ to ~~have~~those anreports ~~effective~~filed ~~date~~or asfurnished ofpursuant ~~February~~to ~~15,~~Section ~~2008. As~~ 13(a) ~~result~~ of ~~this~~the ~~transaction,~~Securities weExchange ~~acquired~~Act anof ~~additional~~1934 ~~2,000~~as ~~customers~~soon ~~for~~as ~~telecommunications~~reasonably ~~services~~practicable inafter ~~Canada,~~we ~~along~~have ~~with~~electronically ~~other~~filed ~~assets~~them ~~valued~~with ator ~~CDN$86,000,~~furnished ~~liabilities~~them ~~valued at CDN$227,000 and access~~ to anthe ~~operating line of credit of CDN$150,000 at an annualized interest rate of 18%~~SEC.

InHistory ~~June 2008, we commenced trading~~ of ~~our~~Key ~~common stock on the OTC Bulletin Board and our common stock is currently quoted on the OTC pink sheets (OTCQB) electronic quotation system under the trading symbol TLPH.~~Agreements

30GMS Capital Corp., a Florida Corporation, was founded on March 9, 2000. Originally our Company was doing business as Metratech Retail Systems Inc., a Canadian Corporation up until the reincorporation as GMS Capital Corp. in the State of Florida on September 18, 2007. The purpose of our Company was to develop and market inventory management software for suppliers to major retailers to enable suppliers to forecast consumer demand for their products and to optimize their production and inventory accordingly.

~~On May 7~~Recently, ~~2009,~~following ~~we entered into~~ a ~~customer~~review ~~assignment agreement with the owners~~ of ~~Orion~~our ~~Communications~~software ~~Inc. (“Orion”). As a result of this transaction~~operations, we ~~acquired~~have andecided ~~additional~~to ~~580~~abandon ~~business~~our ~~customers~~software ~~for~~business ~~telecommunications~~effective ~~services~~April ~~in Canada~~1, ~~along~~2012 ~~with~~and ~~other~~to ~~assets~~engage ~~valued~~in atthe ~~CDN$376~~distribution,~~781~~ ~~and~~marketing ~~liabilities valued at CDN$418,762. We~~ and ~~the~~sale ~~owner~~ of ~~Orion,~~cosmetics ~~9191-4200~~and ~~Quebec Inc., agreed to a gross benefit sharing arrangement of 50%~~cosmetics-~~50%~~related ~~for~~products ~~any~~primarily ~~potential future benefits derived from the customer base. After a brief dispute with the secured creditors of Orion, on March 31, 2011, the Company acquired the client contracts~~ in ~~an acquisition valued at $1~~Canada,~~479,265. The~~ ~~Company~~France ~~paid~~and ~~$951,022 in common stock of~~ the ~~Company~~French ~~with the issuance of 3,804,088 shares (in May 2011) (valued at $0~~Caribbean.~~25 per share) and $528,243 in cash.~~

OnAs April 1, 2011, we consolidated our operations to include those of our majority-owned subsidiary Teliphone Inc. On May 31, 2011, we sold our entire holdings of our 87.1% ownership of Teliphone Inc. to YEURB INVESTMENTS COMPANY LIMITED, a ~~Commonwealth~~result of ~~the Bahamas Corporation. The impact on~~ our ~~balance~~decision ~~sheet due~~ to ~~the~~abandon ~~disposition of~~ our ~~subsidiary~~software ~~was as follows: We reduced our Assets by a total of $115~~operations,~~114,~~ ~~we reduced our Liabilities by $2,304,774 and we increased our Shareholder equity by $2,189,630. For~~ the ~~nine~~Company ~~months~~sold ~~ended~~its ~~June~~existing ~~30,~~customer ~~2011,~~contracts ~~the~~for ~~transaction had the following impact on our statement of operations: We reduced our Gross Profit by $524,369, and we reduced our Expenses including Operations, Interest and Amortization by~~ a total ofconsideration ~~$968,984. In total, the Company experienced a gain on disposal~~ of ~~its subsidiary of~~ $~~948~~5,~~266.~~246 ~~In total, the Company experienced a gain~~ on ~~disposition~~April ~~of $2~~1,~~462,895~~ 2012.

OnChanges ~~December~~in ~~31,~~Control 2011 we entered into an agreement with the New York Telecom Exchange Inc. (NYTEX) to purchase all the company's assets, liabilities, intellectual property, client list and operations for 20 million common shares of Teliphone Corp. at a value of $0.25 per share for a total transaction of $5,000,000. NYTEX is a telecommunications commodity exchange for the purchase and sale of international voice termination. NYTEX provides technical and financial clearing of transactions as well as value added services such as quality of service, anti-false answer supervision, market information and customer support. In 2011 NYTEX had transacted some 200 million minutes (100 million minutes bought and 100 million minutes sold) for a value of approximately $30 million ($15 million bought and $15 million sold).

~~Description of Business~~26

~~Principal~~On ~~products~~March or9, ~~services~~2012, Metratech Business Solutions Inc. and ~~their~~Marcel ~~markets~~Coté entered into and closed a Stock Purchase Agreement with 7776446 Canada Inc. doing business as Cosmera Inc., a Canadian corporation, pursuant to which the Cosmera Inc purchased an aggregate of 3,574,920 shares of common stock from the Metratech Business Solutions Inc. and Marcel Coté. The shares purchased by Cosmera Inc from Metratech Business Solutions Inc. and Marcel Coté represented approximately 66.63% of the Company’s issued and outstanding common stock. Since then, on March 13, 2012, Mr. George Metrakos resigned as our President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of the Registrant, effective March 26, 2012 and appointed Mrs Caroline Coulombe to serve as the Company’s President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and a director of the Company.

~~Teliphone~~License ~~Corp~~Agreement

WeOn ~~are~~March a16, ~~telecommunications~~2012, ~~company~~our ~~engaged~~Company inentered ~~the~~into ~~business~~and ofclosed ~~providing~~a ~~broadband~~License ~~telephone~~and ~~services~~Distribution ~~utilizing~~Agreement ~~our~~with ~~innovative~~8012415 ~~Voice~~Canada ~~over~~Inc. ~~Internet~~granting ~~Protocol,~~the ~~("VoIP")~~Company ~~technology~~an ~~platform. We~~exclusive ~~offer~~worldwide ~~feature-rich,~~license ~~low-cost communications services~~ to ~~our customers~~distribute, ~~thus~~market ~~providing~~and ~~them~~sell ~~what~~cosmetics weand ~~believe~~cosmetics isrelated anunder ~~experience~~the ~~similar~~Nacara tobrand, ~~traditional~~excluding ~~telephone~~the ~~services~~territories atof aFinland, ~~reduced~~Russia ~~cost.~~and ~~VoIP~~Sweden, ~~means~~in ~~that~~exchange ~~the~~for ~~technology~~a ~~used~~royalty toof ~~send~~5% ~~data~~of ~~over~~ the ~~Internet~~gross ~~(example,~~revenues anof ~~e-mail~~the orProducts ~~web~~sold ~~site~~by ~~page~~our ~~display) is used to transmit voice as well~~Company. The ~~technology~~Products isinclude ~~known~~a asfull ~~packet~~line ~~switching. Instead~~ of ~~establishing~~cosmetic aproducts ~~dedicated~~aimed ~~connection~~at ~~between~~women ~~two~~with ~~devices~~darker ~~(computers,~~complexions ~~telephones, etc.)~~ and ~~sending~~is ~~the~~currently ~~message~~available "in ~~one~~Canada ~~piece,"~~at ~~this~~drugstores ~~technology~~including ~~divides~~Pharmacie ~~the~~Jean-Coutu ~~message~~and ~~into~~Shoppers ~~smaller~~Drug ~~fragments,~~Mart ~~called~~and ~~'packets'.~~in ~~These~~France ~~packets~~at ~~are~~retailers ~~transmitted~~including ~~separately~~Galeries ~~over~~Lafayette, ~~the~~Marionnaud, ~~internet~~Nocibé and ~~when~~Beauty ~~they reach the final destination, they are reassembled into the original message~~Success.

WeThe ~~have~~License ~~invested~~Agreement inhas ~~the~~a ~~research~~term ~~and development~~ of ~~our~~five ~~VoIP~~years ~~telecommunications~~and ~~technology,~~will ~~which~~automatically ~~permits~~renew ~~the~~for ~~control,~~an ~~forwarding,~~additional ~~storing~~five ~~and~~years ~~billing~~provided ofthat ~~phone~~the ~~calls~~Registrant ~~made~~has orProduct ~~received~~sales ~~by our customers. Our technology consists~~ of ~~proprietary~~at ~~software~~least ~~programming~~US$6 ~~and~~million ~~specific~~in ~~hardware~~the ~~configurations;~~first ~~however~~year, weUS$15 ~~have~~million noin ~~specific legal entitlement that would prohibit a third party from utilizing~~ the ~~same~~second ~~base~~year ~~software languages~~ and ~~same~~US$25 ~~hardware~~million in ~~order~~the tothird ~~produce~~year ~~similar~~following ~~telephony~~the ~~service~~date ~~offerings~~of ~~adversely~~the ~~impacted~~License ~~our business~~Agreement.

~~Base~~Stock ~~software~~Purchase languages are the language building blocks used by programmers to translate the desired logic sequences into a message that the computer can understand and execute. An example of a logic sequence is “if the user dials “011” before the number, the software should then treat this as an international call and invoice the client accordingly”. The combination and use of these building blocks is known as "software code”, and hence this combination, created by our programmers, along with “off-the-shelf” computer and telecommunications hardware (i.e. equipment that is readily available by computer, networking and telecommunications companies) is collectively referred to as “our technology and trade secrets”.Agreement

~~Examples~~On ofMarch ~~“off-the-shelf”~~16, ~~hardware~~2012, ~~utilized~~our ~~include~~Company ~~the~~also ~~desktop~~entered ~~phones~~into and ~~handsets~~closed a Stock Purchase Agreement with Nacara Montreal Inc., ~~computer~~a ~~servers~~Canadian ~~used~~corporation, pursuant to ~~store~~which ~~such~~our ~~things~~Company aspurchased ~~account~~an ~~information~~aggregate ~~and~~of ~~voice~~100 ~~mail,~~shares of Class A common stock of 8012415 Canada Inc. from Nacara Montreal Inc in exchange for $100 and ~~telecommunications~~an ~~hardware~~Option ~~that~~to ~~permit~~purchase ~~the~~10,000,000 ~~routing~~shares of ~~telephone~~Class ~~voice~~D ~~calls~~common ~~between~~stock ~~various~~of ~~points~~8012415 ~~across~~Canada Inc. from Nacara Montreal Inc in exchange for the ~~internet~~issuance ~~and~~of 729,929 shares of the ~~world~~Company’s ~~Public~~common ~~Switched~~stock ~~Telephone~~upon ~~Network~~exercise ~~(PSTN),~~of the ~~global~~Option ~~wired~~by ~~and~~our ~~wireless~~Company. ~~connections~~The ~~between~~Option ~~every~~expires ~~land~~on March 16, 2017 and ~~mobile~~our ~~phone~~Company must exercise the Option by written notice to Nacara Montreal Inc. The shares of our common stock to be issued to Nacara Montreal Inc upon exercise of the Option are subject to a Lock-Up Agreement as described below.

~~We can provide no assurance that others will not gain access to our technology. In order to protect this proprietary technology, we enter into non~~Lock-~~disclosure~~Up and confidentiality agreements and understandings with our employees, consultants, re-sellers, distributors, wholesalers and technology partners. We can provide no assurance that our technology and trade secrets will not be stolen, challenged, invalidated or circumvented. If any of these were to occur, we would suffer from a decreased competitive advantage, resulting in lower profitability due to decreased sales.Agreement

31In connection with the Stock Purchase Agreement referred above, our Company entered into and closed a Lock-Up Agreement with the Nacara Montreal Inc, pursuant to which

~~We offer the following products and services to customers utilizing our VoIP technology platform:~~27

·Nacara ~~Residential~~Montreal ~~phone~~Inc ~~service.~~has ~~Customers~~agreed ~~purchase~~that athe ~~VoIP~~issuance ~~adaptor~~of ~~from~~the a729,729 ~~re-seller~~shares ~~and~~of ~~install~~our itcommon instock ~~their~~to ~~home~~be issued to Nacara Montreal Inc upon our Company exercising an option to purchase from Nacara Montreal Inc. ~~This~~10,000,000 ~~allows~~shares ~~all~~of Class D common stock of ~~their~~8012415 ~~traditional~~Canada ~~phones~~Inc. inwill ~~their~~be ~~home~~subject to ~~have~~lock ~~their~~up ~~inbound~~provisions and ~~outbound~~be ~~calls~~held ~~redirected~~in escrow and only remitted to Nacara Montreal Inc on occurrence of the following events: (i) 50% of the optioned shares of our ~~technology~~common ~~platform~~stock will be remitted to Nacara Montreal Inc following a period of three months when the average market price of our traded shares of the Company is at least $3.50 Asper share based on a ~~result~~12 to 1 forward split to be effectuated by the Company within ninety days of the closing of the Stock Purchase Agreement, subject to shareholder approval, (ii) 100% of the ~~residential~~optioned ~~customer~~shares ~~purchases~~of ~~their~~our ~~choice~~common stock will be remitted to Nacara Montreal Inc following a period of ~~unlimited~~three ~~local~~months orwhen ~~long~~the ~~distance~~average ~~calling~~market ~~services~~price of our traded shares is at least $5.00 upon giving effect to the Forward Split, ~~with~~(iii) ~~pay~~on termination of the Lock-~~per-minute~~Up ~~long~~Agreement, ~~distance~~100% ~~calling~~of ~~services~~the optioned shares to be remitted to Nacara Montreal Inc, or (iv) on the day the Company’s stock gets registered on NASDAQ or any major exchange, 100% of the optioned shares of our common stock will be remitted to Nacara Montreal Inc.

·Cancellation Business phone service. Customers purchase multiple VoIP adaptors from re-sellers and install them in their business. Similar to Residential phone service, customers purchase from us various local and long distance calling services.Agreement

~~For~~In ~~residential~~consideration for Nacara Montreal Inc and ~~business~~8012415 ~~phone~~Canada ~~services,~~Inc. ~~we,~~willingness ~~invoice~~to ~~and~~enter ~~collect~~into ~~funds~~the ~~directly~~transactions ~~from~~contemplated by the ~~end~~Stock Purchase Agreement, the Lock-~~user~~Up ~~customer~~Agreement and ~~pay~~the aLicense ~~commission~~Agreement and in order to ~~their~~provide ~~re-sellers~~an ~~and~~appropriate ~~distributors~~capital ~~upon~~structure ~~receipt~~for our Company after the effectiveness of the ~~funds.~~12 ~~The~~to ~~customer~~1 ~~can~~forward ~~also~~split ~~purchase~~of ~~the~~our ~~VoIP~~common ~~adaptors~~stock and ~~calling~~our ~~services~~name ~~directly~~change ~~via~~to Nacara World Corp we intend to proceed with., our ~~website www~~Company also entered into a Stock Cancellation Agreement with 7776446 Canada Inc.~~teliphone~~ doing business as Cosmera Inc.~~us for~~ USpursuant ~~customers~~to which Cosmera agreed to cancel all 3,574,920 shares of our common stock it currently owns within 30 days of the effectiveness of the forward split of our common stock and ~~www.teliphone.ca for~~ ~~Canadian~~our ~~customers~~name change to Nacara World Corp.

·Certain WeRelationships ~~also sell VoIP calling services to wholesalers who re-sell these services to their customers. In this case we provide the services to the end-user customers, but invoices~~ and ~~collects~~Related ~~funds from the wholesaler, who invoices their customers and provides technical support to their customers directly.~~Transactions

~~The~~Caroline ~~VoIP~~Coulombe, ~~adaptors~~our ~~are~~chief ~~manufactured~~executive byofficer, ~~Linksys-Cisco~~is the president, director and ~~purchased~~controlling byshareholder usof ~~directly~~7776446 ~~from~~Canada Inc. doing business as Cosmera Inc., which is the ~~manufacturer~~controlling shareholder of the Registrant, and ~~re-sold~~Ms. toCoulombe is also the ~~re-sellers~~president, director and ~~wholesalers~~a principal shareholder of Nacara Montreal Inc. Therefore, the transactions contemplated by the Stock Purchase Agreement, the Lock-Up Agreement and the License Agreement are related party transactions

~~teliPhone~~Security ~~Residential~~Ownership ~~IP-Television~~of ~~services~~Certain Beneficial Owners and Management and Related Stockholder Matters

WeThe ~~have~~following ~~recently~~table ~~introduced~~sets ~~IPTV~~forth ~~(Internet~~certain ~~Protocol~~information ~~Television)~~regarding ~~for~~the ~~our~~beneficial ~~residential~~ownership ~~clients.~~of ~~IPTV~~our iscommon astock ~~method~~as of ~~delivering~~March ~~television~~31, ~~movies~~2012, ~~and~~by ~~other~~each ~~streaming~~person ~~content~~or toentity aknown ~~television~~by ~~set~~us ~~via~~to be the ~~Internet.~~beneficial ~~The~~owner ~~service~~of ~~works~~more ~~much~~than ~~like~~5% ~~traditional~~of ~~cable in that~~ the ~~content~~outstanding isshares ~~streamed~~of tocommon astock, ~~decoder~~each ~~box~~of ~~via~~our ~~high~~directors ~~speed~~and ~~internet~~named ~~which~~executive isofficers, ~~then~~and ~~sent~~all ~~to the television via one~~ of ~~several~~our ~~wire~~directors ~~options. IPTV~~and isexecutive ~~sold~~officers as a ~~standalone~~ group.

service or part of a bundle of services. IPTV is currently unregulated by the Canadian Radio Television Commission (CRTC) the Federal regulatory body which overseas broadcasting in Canada. In November 2011 announced that it had no plans to regulate IPTV or other Internet streaming services but would monitor the industry on a regular basis.28

~~New~~Unless ~~York~~otherwise ~~Telecom~~indicated, ~~Exchange~~the ~~Inc~~persons named in the table have sole voting and sole investment power with respect to the shares set forth opposite the stockholder’s name, subject to community property laws, where applicable.

NYTEX is a telecommunications commodity exchange that focuses on facilitating the exchange of international call termination. International call termination occurs when a caller initiates a call in one country and it terminates in another. NYTEX provides services much like other commodity exchanges whereby it provides a platform for buyers and sellers to come together to purchase and sell international termination. Unlike traditional telecommunications exchanges where buyers and sellers are matched one to one on a circuit to circuit, in the NYTEX concept sellers sell their termination into a market and buyer buy from that market. NYTEX also offers a one to one trading facility for clients who request it. NYTEX manages all aspects of the transactions including technical clearing, financial clearing and quality control of the termination bought and sold on the exchange. NYTEX developed all technical and conceptual aspects in house. NYTEX has technical data centers in Montreal, London and Brussels which manage all calls. All calls utilize Voice over IP (VoIP) technology via the public Internet.


Title of Class	Name of Beneficial Owner	Amount and Nature Of Beneficial Owner	Percentage of Class (1)
Common Stock	Caroline Coulombe 3055 L’Assomption Blvd. Montreal, Quebec H1N 2H1 Canada	3,574,920 Shares(2) Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer and a director	66.63%
Common Stock	7776446 Canada Inc. doing business as Cosmera Inc. 5670 Sherbrooke Street East Montreal, Quebec H1N 1A1 Canada	3,574,920 Shares(2)	66.63%
Common Stock	All Executive Officers and Directors as a Group	3,574,920 Shares(2)	66.63%

NYTEX focuses on the trade and exchange of high value markets, typically with termination rates over $0.05 per minute. The majority of these markets are in countries with developing or emerging economies such as in Africa, Central and South America. NYTEX utilizes the services of authorized brokers who facilitate trading and help to develop its client base. Brokers are paid a proportion of the fees they generate or on a fixed salary basis.


(1)	Percentage of beneficial ownership of our common stock is based on 5,365,400 shares of common stock outstanding as of the date of the table.
(2)	Caroline Coulombe, our officer and director, has sole and dispositive power over the shares held by 7776446 Canada Inc. doing business as Cosmera Inc.
(3)	Resigned as a director effective as of the date that is ten days after the date on which we file with the SEC and mail to our shareholders our information statement in accordance with Rule 14f-1 of the Exchange Act (the “Information Statement Date”).

~~Distribution~~Beneficial ~~methods~~ownership is determined in accordance with the rules of the ~~products~~Securities and Exchange Commission and generally includes voting or ~~services~~investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees. Subject to community property laws, where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.

~~Teliphone~~Executive ~~Corp~~Officers and Directors.

~~Retail~~Our ~~Sales.~~directors and principal executive officers are as specified on the following table:

We distribute our products and services through our retail partners' stores. Our retail partners have existing public retail outlets where they typically sell telecommunications or computer related products and services such as other telecommunications services (cellular phones) or computer hardware and software.


Name	Age	Position
Caroline Coulombe	44	Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer and a director
George Metrakos	40	Director(1)

We(1) doResigned ~~not~~as ~~own~~a ordirector ~~rent~~effective ~~any~~as ~~retail~~of ~~space~~the ~~for~~Information ~~the~~Statement ~~purpose~~Date of ~~distribution~~March 26, ~~but instead rely on our re-seller partners to display and promote our products and services within their existing retail stores~~2012.

~~For~~The afollowing ~~retail~~is ~~sale~~a tobrief ~~occur,~~summary ~~our re-sellers purchase hardware from us and hold inventory~~ of ~~our hardware at their store. In some cases, we may sell~~ the ~~hardware~~background ~~to our re-sellers below cost in order to subsidize the customer's purchase~~ of the ~~hardware~~executive ~~from~~officer ~~the~~and ~~re-seller.~~director ~~Upon the sale~~ of ~~hardware to~~ the ~~customer, the retail partner activates the service on our website while in-store with the customer.~~Company:

~~Internet~~Caroline ~~Sales~~Coulombe, is the President, Chief Executive Officer Chief Financial Officer, Secretary, Treasurer and a Director of GMS Capital Corp. From March 2012 to August 2007, Mrs. Coulombe was founder and CEO of Nacara Montreal Inc. and from August 2007 to December 1999, Mrs. Coulombe was founder and CEO of Nacara Cosmetics Inc. Mrs. Coulombe has over 19 years in the cosmetics industry, having served in managerial and executive capacities for a number of cosmetics companies. Over the years, Mrs. Coulombe has concluded several partnerships with cosmetic companies including many of France's most prestigious companies such as Galeries Lafayette, Marionnaud, Nocibé, Beauty Success. Since 1995, Mrs. Coulombe has served as a Director of Caisse De Mercier Rosemont, a Montreal-based financial institution. From April 2006 to February 2007, Mrs. Coulombe was also a member of a working group on the participation of Black communities in Quebec established by the Minister of Immigration and Cultural Communities of the Quebec Government. Mrs. Coulombe has also been a founder and member of the Entrepreneurship Committee of the Young Chamber of Commerce of Montreal. Mrs. Coulombe has a diploma in business administration from l'Université du Québec à Montréal.

WeThe ~~distribute~~Company ~~our~~anticipates ~~products~~entering ~~through~~into an employment agreement with Mrs. Coulombe, the ~~sale~~terms of ~~hardware~~which onwill ~~our~~be ~~website~~disclosed when available, ~~www.teliphone.us.~~pursuant ~~The~~to ~~customer~~which ~~purchases~~Mrs. ~~the~~Coulombe ~~necessary~~is ~~hardware~~expected ~~from~~to ~~our~~receive ~~on-line~~a ~~catalogue.~~salary ~~Upon~~and/or ~~receipt~~stock ofbased ~~the~~compensation. ~~hardware~~Mrs. ~~from~~Coulombe ~~us,~~does ~~the~~not ~~customer~~currently ~~returns~~own toany ~~our~~shares ~~website~~of tothe ~~activate~~Company’s ~~their~~common ~~services~~stock.

32Family Relationships

~~Wholesale~~There ~~Sales~~are no family relationships among any of the officers and directors.

WeBoard distribute our products and services through wholesalers. A wholesaler is a business partner who purchases our products and services "unbranded" or on a private label basis and re-bills the services to their end-user customers. In the case of a sale to our wholesalers, we do not sell the hardware below cost.Committees

~~Direct~~Our ~~Sales~~Board of Directors has no committees. Because our Board of Directors will consist of only one member as of the Information Statement Date, we do not have a standing nominating, compensation or audit committee. Rather, our full Board of Directors performs the functions of these committees. Also, we do not have an audit committee financial expert on our board of directors as that term is defined by Item 407(d)(5) of Regulation S-K promulgated by the SEC. Caroline Coulombe, our current director, is also an executive officer of the Company and is therefore not independent.

We distribute our products and services directly to customers via our own sales force. We currently employ 2 people in this capacity, providing sales solutions directly to larger business clients throughout Canada.30

The agreements between our wholesalers and our customers are similar to those that we have with our retail customers. The wholesalers provide monthly calling services to their customers and invoice them on a monthly basis on their usage. Our form of general conditions for use of our telecommunications products and services is the agreement that we hold with our wholesalers. While product and professional liability cannot be entirely eliminated, the conditions set forth in terms and conditions of sale serve to forewarn wholesalers that should a stoppage of service occur, we cannot be held liable. Since we do not currently hold product and professional liability insurance coverage, this does not protect us from potential litigation.Summary

~~New~~The ~~York~~following ~~Telecom~~summary ~~Exchange~~is ~~(NYTEX)~~qualified in its entirety by and should be read together with the more detailed information and financial statements, including the related notes, contained or incorporated by reference in this report.

NYTEX does not have any direct sales channels. In order to obtain new clients it relies on trade show participation, management's contact base, brokers' contact base, publicity in trade magazines and other media and a very limited amount of advertising. General

~~Results~~As of ~~Operations~~April 1, 2012, we abandoned our software operations and we began distribute, market and sell cosmetics and cosmetics related products under the Nacara brand. ~~– Three~~We ~~Months~~intend ~~Ended~~to ~~December~~manage 31our business in four segments, ~~2011~~our ~~compared~~Canadian based operations, our European based operations, our United States based operations and Asian based operations. We plan to gradually deploy our operations globally. Currently, as result of the License Agreement we entered on March 16, 2012 with ~~Three~~8012415 ~~Months~~Canada ~~Ended~~Inc., ~~December~~our 31cosmetic products are primarily marketed and sold in Canada, ~~2010~~France and the French Caribbean.

~~Teliphone~~Our ~~generates~~License ~~revenues~~Agreement ~~from~~grants ~~the~~us ~~sale~~an ofexclusive, ~~telecommunications~~worldwide ~~services~~license to ~~our customers~~distribute, ~~along~~market ~~with~~and sell the ~~hardware~~Nacara ~~required~~brand ~~for~~cosmetic ~~our~~products, ~~customers~~excluding tothe ~~utilize~~territories ~~these services. Our cost~~ of ~~sales~~Finland, ~~includes~~Russia ~~all~~and ofSweden, ~~the~~in ~~necessary~~exchange ~~purchases~~for ~~required~~a ~~for~~royalty usof to5% ~~deliver~~of ~~these~~the ~~services.~~gross ~~This~~revenues ~~includes~~of the ~~use~~products ofsold ~~broadband~~by ~~internet~~us. ~~access~~We ~~required~~currently ~~for~~have ~~our~~a ~~servers~~distribution tonetwork beof inretail ~~communication~~outlets ~~with~~in ~~our~~Canada, ~~customers’~~France ~~VoIP~~and ~~devices~~the atFrench ~~the~~Caribbean. ~~customer’s~~In ~~location~~Canada, our ~~rental~~products ofcan ~~voice~~be ~~channels~~purchased ~~connected~~at todrugstores ~~the~~including ~~Public~~Pharmacie Jean-~~Switched-Telephone-Network;~~Coutu ~~that~~and isShoppers ~~the~~Drug ~~traditional~~Mart, ~~phone~~and ~~network~~in ~~which~~France, ~~currently~~at ~~links~~retailers ~~all~~such ~~phone numbers worldwide~~ as ~~well~~Galeries asLafayette, ~~the~~Marionnaud, ~~cost~~Nocibé toand ~~purchase~~Beauty ~~the telecommunications services from Major Carriers that we re-sell to our customers~~Success.

~~The New York Telecom Exchange generates revenues from buyers of international traffic termination cleared through its platform which includes transaction fees.~~ Our ~~cost~~business ofis ~~sales~~not ~~include~~capital ~~all~~intensive, ~~necessary~~and ~~purchases~~it ~~required~~is ~~for~~important us to ~~deliver~~note ~~this~~that ~~service.~~we ~~This~~do ~~includes~~not ~~the~~own ~~use~~any ofmanufacturing ~~broadband~~facilities. ~~internet~~We ~~access required to~~ receive ~~and~~finished ~~send~~products ~~call~~from ~~traffic,~~manufacturers ~~Voice~~to ~~over IP devices at~~ our ~~data~~distribution ~~centers~~center ~~required~~in toMontreal ~~receive~~ and ~~send~~we ~~traffic~~ship ~~and~~products ~~the~~to ~~cost~~our ~~of international call termination provided by sellers on the platform~~customers.

~~For~~As ~~the~~with ~~three~~any ~~month period ended December 31~~business, ~~2011,~~many weaspects ~~recorded sales~~ of ~~$1,225,176~~our asoperations ~~compared~~are tosubject ~~$1,039,858 for the same period in 2010 (prior~~ to ~~reclassification~~influences tooutside ~~discontinued~~our ~~operations)~~control. ~~All~~ ~~revenues~~We ~~for~~discuss ~~the Company~~ in ~~the~~greater ~~prior~~detail ~~period~~risk ~~were~~factors ~~generated~~relating byto our ~~majority-owned~~business ~~subsidiary~~in atItem 1A ~~the~~of ~~time,~~this ~~Teliphone~~Quarterly ~~Inc. We consolidated our operations into the parent company~~ on ~~April~~Form 1,10-Q ~~2011~~for ~~and sold~~ the ~~inoperative~~period ~~subsidiary~~ended onMarch ~~May~~ 31, ~~2011~~2012, and ~~hence~~the ~~prior~~reports ~~period sales were reported in~~ that ~~entity~~we ~~only. The~~file ~~revenues were derived entirely~~ from ~~the~~time ~~sale of telecommunications services~~ to ~~residential~~time ~~and~~with ~~business clients. There were no revenues from NYTEX as~~ the ~~acquisition~~Securities ~~became~~and ~~effective~~Exchange ~~only after the end of the first quarter~~Commission.

33Our Products

Our ~~cost~~Company ofoffer ~~sales~~a ~~was~~complete ~~$796,955~~range ~~for~~of ~~the~~derma-cosmetics ~~three~~and ~~month~~cosmetic ~~period~~related ~~ended~~products ~~December 31, 2011, as compared~~ to ~~$849,594~~care ~~in the prior year (prior to reclassification to discontinued operations). All purchases~~ for ~~the~~sensitive ~~Company~~darker ~~in the prior period were generated by our majority-owned subsidiary at the time, Teliphone Inc~~skin. We ~~consolidated~~Our ~~our~~products ~~operations~~are ~~into the parent company on April 1, 2011 and~~ sold under the ~~inoperative~~Nacara ~~subsidiary~~brand onname ~~May 31, 2011~~ and ~~hence prior period sales~~ are ~~being~~primarily ~~reported~~designed infor ~~that~~women ~~entity~~with ~~only. Our~~darker ~~cost of sales also includes our commissions paid to our re-sellers as we are distributing a portion of recurring revenues to the re-seller after the sale has been consummated~~complexions. Our ~~cost~~product ofline ~~sales also~~ includes ~~any~~lipsticks, ~~variable~~lip ~~costs~~gloss, ofcorrector ~~service~~sticks, ~~delivery~~pencils, ~~that~~cream wepowders, ~~may have~~foundations, ~~including~~correcting ~~our~~powders, ~~per-minute~~pressed ~~costs for terminating our customers’ calls on another carrier’s network. Gross margin for the period was $428~~powders,~~221,~~ ~~as compared to $292~~blushes,~~816~~ incustom ~~the~~correctors ~~prior~~and ~~year~~eye shadow.

Our products are based on formulations combining natural ingredients to soothe and soften skins. Our avant-garde makeup line is made to provide an instant sensation of well-being and amazing freshness for women of color. Our moisturizing creams are particularly recommended for sensitive skin prone to dryness. Our products are hypoallergenic, non-cosmedogenic, alcohol free and with no preservatives.

Our operating expenses were likewise affected by the consolidation of our operations and subsequent disposal of our subsidiary, Teliphone Inc. Employees were terminated in Teliphone Inc and re-hired in Teliphone Corp. so as to ensure continuity in the organization; likewise consultants were also terminated and then re-engaged within the new organization. As a result, the consolidation of our statements of operations for the period reflect the expenses actually incurred within the Company, and all expenses incurred during the current fiscal year that were incurred by our former subsidiary are included as reference figures. 31

Our ~~aggregate~~current ~~operating~~line ~~expenses~~of ~~for~~cosmetics ~~the~~is ~~three~~primarily ~~month~~made ~~period~~for ~~ended~~women ~~December~~of ~~31,~~color. ~~2011,~~Cosmetics ~~were~~for ~~$512,840~~women ~~compared~~of tocolor ~~$311,905~~must ~~for~~be ~~the~~different ~~prior~~than ~~year~~those ~~(prior~~offered to ~~reclassification to discontinued operations)~~Caucasians. ~~Other~~ ~~general and administrative expenses were $79~~Historically,~~940~~ ~~compared with $47,071 in~~ the ~~prior~~cosmetic ~~year. Professional~~industry ~~and~~has ~~consulting~~not ~~fees~~catered ~~were $233,693 during that period as opposed~~ to ~~$78,170 for~~ the ~~same~~needs ~~period~~of ~~last~~darker ~~year,~~skinned ~~the~~women ~~increase~~and ~~due~~it ~~primarily~~remains todifficult ~~consultants hired~~ to ~~upgrade~~find ~~the~~products ~~Teliphone~~that ~~platform~~offer ~~and~~an ~~further~~appropriate ~~develop~~range ~~the~~of ~~IPTV~~selection ~~systems. The Company increased its depreciation expenses from $22,708~~ for the ~~three~~darker ~~month~~shades ~~period~~of toskin ~~$199,207~~that asour ~~the~~ Company ~~commenced~~caters ~~its depreciation of its computer equipment acquired during the consolidation of April 1, 2011, has commenced~~ to ~~depreciate its acquired Orion Communications client lists effective April 1, 2011 and has commenced to depreciate equipment purchased during the period~~.

34Women of color bring a number of challenges for cosmetics companies, including:

As a result, we had net income of $(88,503) for the three month period ended December 31, 2011 as compared to a net income of $(16,679) (prior to reclassification to discontinued operations) for the same period in the prior year. The decrease in operating income is primarily due to an increase in depreciation due to equipment upgrading and purchase of professional services for product development. ·

~~Liquidity~~Dark ~~and~~skin ~~Capital~~is ~~Resources~~dryer than white skin – Most cosmetics are alcohol based which has for effect to dry up the skin by stripping the natural oils it produced. Cosmetics for darker skins must use some form of lotion cream to avoid dryness - most cosmetics currently available are not made for darker skin.

~~For the three month period ended December 31, 2011:~~·

OnDark ~~our~~skin ~~balance~~tends ~~sheet~~to asbe ofuneven ~~December~~and ~~31,~~has ~~2011,~~undertones ~~we had assets consisting~~ of ~~accounts~~browns, ~~receivable in the amount of $184~~oranges,~~820,~~ ~~inventory~~reds ofand ~~$12~~gold,~~849,~~ ~~prepaid~~and ~~expenses~~even ~~of $67~~purple,~~125~~ ~~and~~but ~~cash~~never ~~of $34~~pink,~~716.~~ Wewhich ~~also~~is ~~show~~the ~~fixed~~most ~~assets,~~common ~~net~~undertone of ~~depreciation~~white ~~of $3,752,194~~skin. We ~~likewise~~Makeup ~~show~~designed ~~Net~~for ~~Customer~~white ~~List~~women ~~asset~~is ~~value~~generally ofunflattering ~~$1,812,226~~when ~~representing~~applied ~~the~~to ~~acquisition~~darker ofshades; ~~the~~it ~~client~~tends ~~contracts~~to ~~from~~make ~~Orion~~darker-toned ~~Communications~~skin ~~Inc.~~look ~~and the~~ greyish.

New York Telecom Exchange Inc. and $2,585,040 representing the goodwill from our acquisition of the clients of Dialek Telecom in 2008, the client contracts of Orion in 2011 and the New York Telecom Exchange Inc. Our balance sheet reflects an accumulated deficit of $313,355 and total stockholder’s equity of $6,872,342.·

WeThe ~~had~~lips ~~net~~of ~~cash~~darker ~~provided~~skinned ofwomen ~~$252,947~~are ~~from~~not ~~operating~~necessarily ~~activities~~of ~~during~~the same shade, the ~~three~~lower ~~month~~lip ~~period~~being ~~ended~~often ~~December~~more ~~31,~~pink ~~2011.~~than ~~This~~the ~~change~~upper. ~~was~~Many ~~attributable~~black inwomen ~~large~~find ~~part~~it ~~due~~necessary to ~~the~~use ~~increase~~two inshades ~~accounts~~of ~~payable~~lipstick ofto ~~$201,033~~equalize their lip color.

WeNacara’s ~~used~~formulations ~~$129~~are based on beeswax,~~454~~ ofa ~~cash~~completely innon-greasy ~~investing~~and ~~activities~~optimal moisturizer for ~~the~~a ~~acquisition~~flawless ofcomplexion. ~~capital~~Our ~~assets~~cosmetics ~~for~~are ~~the~~easy ~~three~~to ~~month~~apply, ~~period~~offering ~~ended~~a ~~December~~healthy ~~31,~~long ~~2011,~~lasting asmatte-finish. ~~compared~~Our lipsticks are packed with intense pigments to ~~$371~~provide extremely long-lasting,~~744$~~ ~~use~~richest-ever ofcolors. Our ~~cash~~products inoffer ~~the~~excellent ~~prior~~texture ~~period~~quality ~~2010~~for dryer darker skins, all for an exceptional value at moderate price points.

~~For~~Our ~~the three month period ended December 31~~website, ~~2011,~~which weis ~~had~~located ~~net~~at ~~cash~~www.nacara.com ~~used~~provides ininformation ~~financing~~about ~~activities~~our ofproducts ~~$157,861~~as ~~due~~well inas ~~large~~locations ~~part~~where toour ~~the~~products ~~net~~are ~~repayment~~available offor ~~$173,612 in loans payable to related parties~~purchase.

InBusiness pursuing our business strategy, we will require additional cash for growing our operating and investing activities. We will continue to borrow money through our operating line of credit at our subsidiary’s bank when such cash for growth purposes is required. In order to increase this operating line, we rely on collateral guarantees from shareholders and related parties. We continue to search for ways to reduce costs and increase revenues of our VoIP and telecommunications resell services.Strategy

Focus on a multiethnic clientele. The market for cosmetics and personal beauty products is currently estimated at $170 billion worldwide. This is a market that has been growing at a rate of 4% to 6% per year since 1995, a rate faster than the general economy. Within this market, annual spending by Non-Whites on beauty products would account for about $35 billion worldwide and just over $11 billion in the U.S. alone. This market segment is however growing at a much faster rate (8%-10%) compared to what Caucasians are spending (2% - 5%) annually on beauty products. Nearly two-third of cosmetics and beauty products currently purchased by Non-Whites are products designed and made for White. Most likely, this is not because Non-Whites prefer to ‘’Buy White’’, it is a simple reflection of the relative unavailability of beauty products made for Non-White. Over the last decade, as new beauty products catering more specifically to Non-White were introduced, annual spending by Non-White on beauty products catering to White has decreased from nearly 75% to closer to 66%. For obvious reasons, given a choice, Non-White will prefer to purchase beauty products made for them.

We anticipate raising funds in order to increase our base of customers through the acquisition of telecommunications resellers. No financing agreements to date exist for the Company, but Management believes that growth the acquisition of clients will continue to support the growth of the Company in lieu of intense marketing expenditures. Likewise, we continues to pursue and carry out our business plan, which includes marketing programs aimed at the promotion of our services, hiring additional staff to distribute and find additional distribution channels, enhance the current services we are providing and maintain our compliance with Sarbanes - Oxley Section 404.32

~~Other~~The ~~than~~cosmetic ~~current~~market ~~requirements~~is ~~from~~expected ~~our~~to ~~suppliers~~be increasingly driven by the needs of women of color, a question of relative growth in population and disposable income. Non-Whites are the ~~maintenance~~fastest growing population; their disposable income are growing faster than Whites and, in the U.S., less than 35% of ~~our~~women ~~current~~of ~~level~~color are using makeup products, much lower than the U.S. national average which is closer to 50%. Still, it is in the U.S that women of ~~operating~~color ~~expenses~~are purchasing cosmetic products the most worldwide. Albeit slowly, wewith dothe ~~not~~disposable ~~have~~income ~~any~~of ~~commitments~~Non-Whites expected to increase faster than Whites worldwide as well as their population, spending on beauty products by Non-Whites should increase faster and, in particular, on products made for ~~capital~~and ~~expenditures~~sold orby ~~other~~multiethnic ~~known~~companies. With ora ~~reasonably~~line ~~likely~~of ~~cash~~cosmetics ~~requirements~~specifically designed for women of color, we believe our Company has a distinct competitive advantage.

Build specialty retail and online business. We believe the beauty industry has experienced significant growth in specialty retail and now increasingly, from online sales. We have ~~classified~~now an ~~additional~~agreement ~~$70~~in place to distribute,~~828~~ ofmarket and sell cosmetics and cosmetic related ~~party~~products ~~loans~~under the Nacara brand. We currently have agreements with specialty retailers, mass merchandisers and drugstores chains, including Pharmacie Jean-Coutu Pharmacie Jean-Coutu and Shoppers Drug Mart in Canada, and in France, at retailers such as aGaleries ~~long~~Lafayette, ~~term~~Marionnaud, ~~liability~~Nocibé ~~due~~and Beauty Success. Our intent is to ~~the~~continue ~~requirement~~to ofpursue ~~repayment~~innovative specialty retailers which offer a variety of ~~interest~~lifestyle ~~only~~to ~~over~~highly ~~the~~defined ~~next~~multiethnic 5customer ~~years~~niches. InWe ~~addition,~~also weintend ~~have~~to ~~current~~promote ~~obligations~~the online purchase of ~~$93,244~~our ~~which~~products ~~includes~~on ~~accrued~~an ~~interest~~as needed and when ordered basis to ~~related~~support ~~parties~~the distribution and selling of our products at physical point of sales on a commission sharing basis.

~~The~~In ~~accompanying~~addition, ~~financial~~we ~~statements~~intend ~~have~~to ~~been~~approach ~~prepared~~other ~~assuming~~manufacturers weof ~~will~~specialty ~~continue~~products asaiming a ~~going~~multiethnic ~~concern.~~clientele Weto ~~have~~determine ~~suffered~~if ~~recurring~~there ~~losses~~would ~~from~~be ~~operations~~an ~~from~~interest ~~our inception~~ in ~~2004~~establishing toa ~~our~~relationship ~~fiscal~~whereby ~~year~~we ~~ended~~would ~~September 30~~distribute, ~~2008. We~~market ~~had emerged from the recurring losses~~ and ~~posted~~sell atheir ~~net~~products ~~income~~under ~~for~~ the ~~year~~Nacara ~~ended September 30, 2009, however returned to a net loss position for the fiscal year ended September 30, 2010~~brand. ~~The~~ ~~disposition of our majority owned subsidiary Teliphone Inc. on May 31~~However, ~~2011~~we ~~permitted~~cannot usassure toyou ~~realize~~that awe ~~net~~will ~~income~~be ofable ~~$1,915,553 or $0.05 per share for the nine month period ending June 30, 2011, however this gain was made during an extraordinary event and is non-recurring. While the disposition permitted us~~ to ~~reduce~~enter ~~our~~into ~~working~~any ~~capital~~similar ~~deficiency~~future ~~from~~arrangements ~~($2,532,203)~~ on ~~March~~terms ~~31,~~favorable ~~2011~~ to ~~($656~~us,~~711)~~ onor ~~December,~~if ~~2011,~~ we ~~still~~do, ~~operate~~that ~~within~~any asuch ~~deficiency~~arrangements inwill ~~working~~be ~~capital and have yet to solidify an operating line of credit with our bank~~successful.

~~The~~Expand ~~financial~~existing ~~statements~~portfolio dointo ~~not~~new ~~include~~categories. ~~any~~We ~~adjustments~~intend ~~that~~to ~~might~~continue ~~result~~to ~~from~~broaden ~~the~~our ~~outcome~~product ofoffering ~~any~~beyond ~~uncertainty~~the ~~that~~cosmetic ~~may~~category ~~arise~~and ~~due~~offer toother ~~this~~cosmetic ~~working~~related ~~capital~~products ~~deficit.~~and Wepersonal ~~have~~care ~~been~~products ~~searching~~such ~~for~~as ~~new~~fragrance, ~~distribution~~hair ~~channels~~care toand ~~wholesale~~other ~~their~~fashion ~~services~~accessories tounder ~~provide~~the ~~additional~~Nacara ~~revenues to support their operations~~brand. ~~There~~ isWe nobelieve ~~guarantee~~such ~~that~~expanding weproduct ~~will~~offerings bewould ~~able~~meet tocustomer ~~raise~~needs ~~additional~~and ~~capital~~further orstrengthen ~~generate~~customer ~~the increase in revenues to sustain our~~ loyalty.

~~operations~~Build global distribution footprint. ~~Should~~Our ~~the~~business ~~financing~~is wea ~~require~~global tobusiness ~~sustain~~and ~~our~~we ~~working~~intend ~~capital~~to ~~needs~~continue beto ~~unavailable~~build orour ~~prohibitively~~global ~~expensive,~~distribution ~~the~~footprint. ~~consequences~~In ~~would~~order beto aadapt ~~material~~to ~~adverse~~changes ~~effect~~in onthe environment and our business, ~~operating~~our ~~results,~~intent ~~financial~~is ~~condition~~to ~~and~~establish ~~prospects. These~~operating ~~conditions~~joint ~~raise~~ventures ~~substantial~~or ~~doubt~~distribution ~~about~~subsidiaries ~~our~~in ~~ability~~major tomarkets, ~~continue~~including asthe aUnited ~~going~~States, ~~concern~~Europe and Asia for athe ~~reasonable~~distribution ~~period~~of cosmetics and cosmetic related products under the Nacara brand.

~~Off~~We ~~Balance~~might ~~Sheet~~enter ~~Arrangements~~into future joint ventures arrangements or acquire distribution companies within key markets to distribute our products. However, we cannot assure you that we will be able to enter into any future joint venture arrangements or acquire distribution

We do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effect on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.33

~~Going~~companies ~~Concern~~on terms favorable to us, or if we do, that any such transaction will be successful. We believe that in certain markets vertical integration of our distribution network is one of the keys to future growth of our company, and ownership of such distribution should enable us to better serve our customers’ needs in local markets and adapt more quickly as situations may determine.

Due to the lack of significant cash flow and the large working capital deficiency, these factors continue to raise substantial doubt about the Company’s ability to continue as a going concern. There can be no assurance that management will be able to raise sufficient capital, under terms satisfactory to us, if at all. Competition

~~Critical~~The ~~Accounting~~market ~~Policies~~for cosmetics and cosmetic related products is highly competitive and sensitive to changing preferences and demands. The Company competes primarily by:

~~Our~~• ~~significant~~Introducing ~~accounting~~quality ~~policies~~products ~~are~~with ~~summarized~~innovative inperformance ~~note~~features, 2shades, tofinishes ~~our~~and ~~financial~~packaging; ~~statements.~~• ~~While~~educating consumers about the ~~selection~~benefits of the Company’s products; • anticipating and ~~application~~responding ofto ~~any~~changing ~~accounting~~consumer ~~policy~~demands ~~may~~in ~~involve~~a ~~some~~timely ~~level~~manner, including the timing of ~~subjective~~new ~~judgments~~product introductions and ~~estimates~~line extensions; • offering attractively priced products, werelative ~~believe~~to the ~~following~~product ~~accounting~~benefits ~~policies~~provided; ~~are~~• maintaining favorable brand recognition; • generating competitive margins and inventory turns for the ~~most~~Company’s ~~critical~~retail tocustomers ~~our~~by ~~financial~~providing ~~statements~~relevant products and executing effective pricing, ~~potentially~~incentive ~~involve~~and ~~the~~promotion ~~most~~programs; ~~subjective~~• ~~judgments~~ensuring inproduct ~~their~~availability ~~selection~~through effective planning and ~~application~~replenishment collaboration with retailers; • providing strong and effective advertising, promotion, marketing and ~~are~~merchandising ~~the~~support; ~~most~~• ~~susceptible~~maintaining toan ~~uncertainties~~effective sales force; and ~~changing~~• ~~conditions:~~obtaining and retaining sufficient retail display space, optimal in-store positioning and effective presentation of the Company’s products at retail.

36An increase in or change in the current level of competition that the Company faces could have a material adverse effect on our business, financial condition and results of operations. In addition, the Company competes against a number of multi-national manufacturers, some of which are larger and have substantially greater resources than the Company, and which may therefore have the ability to spend more aggressively than the Company on advertising, promotions and marketing and have more flexibility than the Company to respond to changing business and economic conditions. In addition to products sold in the mass retail channel, the Company’s products also compete with similar products sold through other channels, including prestige and department stores, television shopping, door-to-door, specialty stores, the internet, perfumeries and other distribution outlets.

~~Use~~Additionally, the Company’s major retail customers periodically assess the allocation of ~~Estimates~~retail display space among competitors and in the course of doing so could elect to reduce the display space allocated to the Company’s products, if, for example, the Company’s marketing strategies for its new and/or existing products are less effective than planned, fail to effectively reach the targeted consumer base or engender the desired consumption; and/or the rate of purchases by the Company’s consumers are not as high as the Company

~~Cash~~anticipates. Any significant loss of display space could have an adverse effect on the Company’s business, financial condition and/or ~~Cash~~results ~~Equivalents~~of operations.

~~The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents.~~Inventory

~~Comprehensive~~We ~~Income~~purchase finished goods from our licensor and other component parts from suppliers based on internal estimates of anticipated need for finished goods. Our goal is to deliver product to customers within 72 hours of the receipt of their orders. Our business is not capital intensive, and it is important to note that we do not own manufacturing facilities.

~~The~~Product ~~Company adopted ASC 220-10, “Reporting Comprehensive Income,” (formerly SFAS No. 130). ASC 220-10 requires the reporting of comprehensive income in addition to net income from operations.~~Liability

~~Comprehensive~~We ~~income~~currently ishave anot ~~more~~any ~~inclusive~~coverage ~~financial~~for ~~reporting~~product ~~methodology~~liability. ~~that~~Our ~~includes~~intent ~~disclosure~~is to obtain product liability coverage in an amount of ~~information~~$5,000,000. Based upon industry standard and our experience, we believe that ~~historically~~such ~~has~~coverage ~~not~~will ~~been~~be ~~recognized~~adequate inand ~~the~~will ~~calculation~~cover substantially all of ~~net~~the ~~income~~exposure we may have with respect to our products.

~~Currency~~Government ~~Translation~~Regulation

~~For~~In ~~accounts~~the inUnited ~~currencies~~States, ~~other~~cosmetics ~~than~~and ~~the~~cosmetic ~~U.S.~~related ~~dollar,~~products are regulated under the ~~Company~~Federal ~~translates~~Food, ~~income~~Drug and ~~expense~~Cosmetics ~~amounts~~Act. atA ~~average~~cosmetic ~~exchange~~must ~~rates~~comply ~~for~~with the ~~year,~~labelling ~~translates~~requirements ~~assets~~of ~~and~~this ~~liabilities~~FDC atAct ~~year-end~~as ~~exchange~~well ~~rates~~as the Fair Packaging and ~~equity~~Labelling atAct ~~historical~~and ~~rates~~its regulations. ~~The~~Some ~~Company’s~~of ~~functional~~our ~~currency~~color iscosmetic ~~the~~products ~~Canadian~~may ~~dollar,~~contain ~~while~~menthol ~~the~~and ~~Company~~are ~~reports~~also ~~its~~classified ~~currency~~as ina ~~the~~“drug”. USUnder ~~dollar~~U.S. ~~The~~law, ~~Company~~a ~~records~~product ~~these~~may ~~translation~~be ~~adjustments~~classified as ~~accumulated~~both ~~other~~a ~~comprehensive~~cosmetic ~~income~~and ~~(loss)~~a drug. ~~Gains~~Additional ~~and~~regulatory ~~losses~~requirements ~~from~~for ~~foreign~~products ~~currency~~which ~~transactions~~ are ~~included~~“drugs” ininclude ~~other~~additional ~~income~~labelling ~~(expense)~~requirements, inregistration of the ~~results~~manufacturer and the semi-annual update of ~~operations~~a drug list.

37Our cosmetics that are sold in Europe are subject to certain regulatory requirements of the European Union. We do not expect to have any material difficulties in complying with such requirements.

~~Revenue Recognition~~Trademarks

~~Operating~~The ~~revenues~~market ~~consist~~for ofour ~~telecommunications~~products ~~services~~depends ~~(voice,~~to ~~data~~a significant extent upon the value associated with our trademarks and ~~long~~brand ~~distance),~~name. ~~customer~~We ~~equipment~~have ~~(which~~license ~~enables~~or ~~the~~other ~~Company's~~rights ~~telephony~~to ~~services)~~use, ~~consulting~~the ~~services~~material trademark and ~~shipping~~brand ~~revenue.~~name ~~The~~rights ~~point~~used in ~~time~~connection atwith ~~which~~the ~~revenue~~packaging, ismarketing ~~recognized~~and isdistribution ~~determined~~of inour ~~accordance~~products ~~with~~under ~~Revenue~~the ~~Recognition~~Nacara ~~under~~brand ~~ASC~~name ~~605-50,~~both ~~Accounting~~in ~~for~~the ~~Consideration~~United ~~Given~~States byand ain ~~Vendor~~other tocountries awhere ~~Customer~~such ~~(Including~~products aare ~~Reseller~~sold ofor ~~the~~intended ~~Vendor's~~to ~~Products)~~be ~~("ASC~~sold. ~~605-50")~~Therefore, trademark and ~~ASC~~brand ~~605-25,~~name ~~"Revenue~~protection ~~Arrangements~~is ~~with~~important ~~Multiple~~to ~~Deliverables"~~our ~~(“ASC 605-25”)~~business. ~~When~~Although most of the ~~Company~~brand ~~emerged~~names ~~from~~we ~~the~~license ~~development~~is ~~stage~~registered ~~with~~in the ~~acquisition~~United ofStates ~~Teliphone~~and ~~Inc.~~in certain foreign countries in ~~2005~~which we operate, ~~they~~we ~~began~~may tonot ~~recognize~~be ~~revenue~~successful ~~from~~in ~~their~~asserting ~~Telephony~~trademark ~~services~~or ~~when~~brand ~~they~~name ~~are~~protection. ~~earned~~In addition, ~~specifically~~the ~~when~~laws ~~all~~of certain foreign countries may not protect our intellectual property rights to the ~~following~~same ~~conditions~~extent ~~are~~as ~~met:~~the laws of the United States. The costs required to protect our trademarks and brand names may be substantial.

· Services are provided or products are delivered to customers · There is clear evidence that an arrangement exists · Amounts are fixed or can be determined · The Company’s ability to collect is reasonably assured.35

InProduct ~~particular, the Company recognizes:~~Development

~~Teliphone~~We are not currently conducting any product development activities. However, we anticipate the need to conduct product development activities in the near future.

· Monthly fees for local, long distance and wireless voice services, as well as data services when we provide the services o “Services over the Company’s network” means that a significant portion of the voice or data passes over the Company’s own data network which it controls and o “Services resold from Major Provider’s networks” means that the Company re-sells the services purchased from a Major Provider to its customer, and hence does not control the voice or data flow (represents majority of the Company’s revenues) · Consulting fees which the Company earns when it sells hourly consulting services.Employees

oAs ~~Consulting services are typically computer software development related, along with any administrative services that occur in the management~~ of ~~those~~March ~~resources (such as project management~~31, ~~accounting~~2012, ~~administrative~~we ~~support,~~have ~~etc)~~no ·employees ~~Other~~other ~~fees,~~than ~~such~~our ~~as network access fees~~officer, ~~license~~Caroline ~~fees,~~Coulombe. ~~hosting~~We ~~fees,~~are ~~maintenance~~not ~~fees~~a ~~and~~party ~~standby~~to ~~fees,~~any ~~over~~employment ~~the term of the contract · Subscriber revenues when customers receive the service · Revenues from the sale of equipment when the equipment is delivered and accepted by customers~~agreements.

~~Revenues exclude sales taxes and other taxes we collect from our customers.~~Facilities

~~Multiple-Element~~Our ~~Arrangements~~executive, administrative and operating offices are located at 3055 L’Assomption Blvd., Montreal, Quebec H1N 2H1 Canada.

WeCritical ~~enter~~Accounting ~~into~~Policies ~~arrangements that may include the sale of a number of products~~ and services, notably in sales of voice services over our own network. In all such cases, we separately account for each product or service according to the methods previously described when the following three conditions are met:Estimates

·Management's ~~The~~Discussion ~~product~~and orAnalysis ~~service~~of ~~has~~Financial ~~value~~Conditions toand ~~our~~Results ~~customer~~of onOperations aare ~~stand-alone~~based ~~basis~~upon ·our ~~There~~consolidated isfinancial ~~objective~~statements, ~~and~~which ~~reliable~~have ~~evidence~~been ofprepared ~~the~~in ~~fair~~accordance ~~value~~with ofaccounting ~~any~~principles ~~undelivered~~generally ~~product~~accepted orin ~~service~~the ·United IfStates. ~~the~~When ~~sale~~preparing ~~includes~~our afinancial ~~general~~statements, ~~right~~we ofmake ~~return~~estimates ~~relating~~and tojudgments athat ~~delivered~~affect ~~product~~the orreported ~~service,~~amounts ~~the~~on ~~delivery~~our orbalance ~~performance~~sheets ofand ~~any~~income ~~undelivered~~statements, ~~product~~and orour ~~service~~related isdisclosure ~~probable~~about contingent assets and ~~substantially~~liabilities. inWe ~~our~~continually ~~control.~~evaluate ·our Ifestimates, ~~there~~including isthose ~~objective~~related ~~and~~to ~~reliable~~revenue, ~~evidence~~allowance offor ~~fair~~doubtful ~~value~~accounts, reserves for ~~all~~income ~~products~~taxes, and ~~services~~litigation. inWe abase ~~sale,~~our ~~the~~estimates ~~total~~on ~~price~~historical toexperience ~~the~~and ~~customer~~on isvarious ~~allocated~~other toassumptions, ~~each~~which ~~product~~we ~~and~~believe ~~service~~to ~~based~~be onreasonable ~~its~~in ~~relative~~order ~~fair~~to ~~value.~~form ~~Otherwise,~~the webasis ~~first~~for ~~allocate~~making ajudgments ~~portion~~about of the ~~total~~carrying ~~price~~values toof ~~any~~assets ~~undelivered~~and ~~products~~liabilities ~~and~~that ~~services~~are ~~based~~not onreadily ~~their~~ascertained ~~fair~~from ~~value~~other ~~and~~sources. ~~the~~Actual ~~remainder~~results tomay ~~the~~deviate ~~products~~from ~~and~~these ~~services~~estimates ~~that~~if ~~have~~alternative ~~been~~assumptions ~~delivered~~or condition are used.

·Recent IfAccounting ~~the conditions to account separately for each product or service are not met, we recognize revenue pro rata over the term of the customer agreement.~~Pronouncements

38In May 2011, FASB issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. FASB ASU 2011-04 amends and clarifies the measurement and disclosure requirements of FASB ASC 820 resulting in common requirements for measuring fair value and for disclosing information about fair value measurements, clarification of how to apply existing fair value measurement and disclosure requirements, and changes to certain principles and requirements for measuring fair value and disclosing information about fair value measurements. The new requirements are effective for fiscal years beginning after December 15, 2011. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a material impact on the Company’s results of operations, cash flows or financial position.

~~New~~In ~~York~~June ~~Telecom~~2011, ~~Exchange~~FASB ~~Inc~~issued ~~(NYTEX)~~ASU No. 2011-05, Presentation of Comprehensive Income, which amends the disclosure and presentation requirements of Comprehensive Income.

·36

~~Revenue~~Specifically, ~~from~~FASB ~~minutes~~ASU ~~sold~~No. on2011-05 ~~the~~requires ~~exchange~~that atall ~~the~~nonowner ~~time~~changes in stockholders’ equity be presented either in 1) a single continuous statement of ~~purchase~~comprehensive income or 2) two separate but consecutive statements, in which ~~includes~~the first statement presents total net income and its components, and the ~~price~~second ofstatement presents total other comprehensive income and its components. These new presentation requirements, as currently set forth, are effective for the ~~minutes~~Company beginning October 1, 2012, with early adoption permitted. The Company plans to adopt this amended guidance on October 1, 2012 and at this time does not anticipate that it will have a ~~per~~material ~~minute~~impact ~~transaction~~on ~~fee~~the ~~which~~Company’s ~~can~~results ~~vary~~of ~~from~~operations, ~~transaction~~cash toflows ~~transaction~~or financial position.

·In September 2011, FASB issued ASU 2011-08, Testing Goodwill for Impairment, which amended goodwill impairment guidance to provide an option for entities to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. After assessing the totality of events and circumstances, if an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, performance of the two-step impairment test is no longer required. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. Adoption of this guidance is not expected to have any impact on the Company’s results of operations, cash flows or financial position.

~~Consulting~~There ~~fees~~were other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s ~~earns~~financial ~~when~~position, itresults ~~sells~~of ~~hourly~~operations ~~consulting~~or ~~services~~cash flows.

oFair Value Measurements

~~Consulting~~The ~~services~~Company ~~are~~adopted ~~typically~~certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for ~~network~~measuring ~~operators~~fair ~~which~~value ~~require~~under ~~advice~~generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on ~~management~~observable ofand ~~their~~unobservable ~~international~~inputs. ~~call~~Observable ~~termination~~inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

·Level 1 inputs: Quoted prices for identical instruments in active markets.

~~Revenues~~Level ~~from~~2 ~~the~~inputs: ~~sale~~Quoted ofprices ~~equipment~~for ~~when~~similar ~~the~~instruments ~~equipment~~in isactive ~~delivered~~markets; quoted prices for identical or similar instruments in markets that are not active; and ~~accepted~~model-derived byvaluations ~~customers~~whose inputs are observable or whose significant value drivers are observable.

~~Resellers~~Level 3 inputs: Instruments with primarily unobservable value drivers.

WeManagement may enter into arrangements with resellers who provide services to our customers. When we act as the principal in these arrangements, we recognize revenue based on the amounts billed to our customers. Otherwise, we recognize as revenue the net amount that we retain. Estimates

~~Sales Returns~~37

WeManagement ~~accrue~~makes anassumptions ~~estimated~~and ~~amount~~estimates to prepare financial statements in conformity with accounting principles generally accepted in the United States of America. Those assumptions and estimates directly affect the amounts reported and disclosures included in the consolidated financial statements. Actual results could differ from those assumptions and estimates. Significant estimates for ~~sales~~which ~~returns,~~changes ~~based~~in the near term are considered reasonably possible and that may have a material impact on ~~our~~the ~~past~~financial ~~experience,~~statements ~~when~~are ~~revenue~~disclosed isin ~~recognized~~these notes to the consolidated financial statements.

~~Deferred~~Foreign ~~Revenues~~Currency Translation

WeThe ~~record~~Company’s ~~payments~~functional wecurrency ~~receive~~is inthe ~~advance,~~Canadian ~~including upfront non-refundable payments~~dollar, aswhile ~~deferred~~the ~~revenues~~Company ~~until~~reports weits ~~provide~~currency in the ~~service~~US ordollar. ~~deliver~~The ~~the~~Company ~~product~~records tothese ~~customers.~~translation ~~Deferred~~adjustments ~~revenues~~as ~~also~~accumulated ~~include~~other ~~amounts~~comprehensive ~~billed~~income ~~under~~(loss). ~~multiple-element~~Gains ~~sales~~and ~~contracts~~losses ~~where~~from ~~the~~foreign ~~conditions~~currency totransactions ~~account~~are ~~separately~~included ~~for~~in ~~each~~other ~~product~~income or(expense) ~~service~~in ~~sold~~the ~~have~~results ~~not~~of ~~been met~~operations.

~~Accounts~~Cash ~~Receivable~~and Cash Equivalents

~~The~~All ~~Company~~highly ~~conducts~~liquid ~~business~~investments ~~and~~purchased ~~extends~~with ~~credit~~a ~~based~~maturity onof anthree ~~evaluation~~months ofor ~~the~~less ~~customers’~~are ~~financial~~considered ~~condition,~~to ~~generally~~be ~~without~~cash ~~requiring collateral~~equivalents.

~~Exposure~~Short-Term to losses on receivables is expected to vary by customer due to the financial condition of each customer. The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances.Investments

~~Accounts~~From ~~receivable~~time ~~are~~to ~~generally~~time, ~~due~~the ~~within~~Company 30has ~~days~~short-term ~~and~~investments ~~collateral~~which isconsist ~~not~~of ~~required~~certificates of deposit with maturities greater than three months. ~~Unbilled~~The ~~accounts~~Company ~~receivable~~monitors ~~represents~~concentrations ~~amounts~~of ~~due~~credit ~~from~~risk ~~customers~~associated ~~for~~with financial institutions with which ~~billing~~the ~~statements~~Company ~~have~~conducts ~~not~~significant ~~been~~business. ~~generated~~The ~~and~~Company ~~sent~~believes toour credit risk is minimal, as the ~~customers~~Company primarily conducts business with large, well-established financial institutions.

~~Income~~Accounts ~~Taxes~~Receivable

~~The~~Accounts receivable represent payments due to the Company ~~accounts~~for previously recognized net sales, reduced by allowances for ~~income~~sales ~~taxes~~returns ~~utilizing~~and ~~the~~doubtful ~~liability~~accounts ~~method~~or ofbalances ~~accounting. Under~~which ~~the~~are ~~liability~~estimated ~~method,~~to ~~deferred~~be ~~taxes~~uncollectible. Accounts receivable balances are ~~determined~~written-off ~~based~~against onthe ~~differences~~allowance ~~between~~for ~~financial~~doubtful ~~statement~~accounts ~~and~~when ~~tax~~they ~~bases~~become ofuncollectible. ~~assets~~Recoveries ~~and~~of ~~liabilities~~accounts atreceivable ~~enacted~~previously ~~tax~~recorded ~~rates~~against inthe ~~effect~~allowance inare ~~years~~recorded in ~~which~~the ~~differences~~consolidated ~~are~~statement ~~expected~~of toincome ~~reverse~~when received. ~~Valuation~~ ~~allowances~~We ~~are~~generally ~~established,~~grant ~~when~~credit ~~necessary,~~based toupon ~~reduce~~our ~~deferred~~analysis ~~tax~~of ~~assets~~the tocustomer’s ~~amounts~~financial ~~that~~position ~~are~~as ~~expected~~well toas bepreviously ~~realized~~established buying patterns.

39Inventories

~~Convertible~~Inventories, ~~Instruments~~including promotional merchandise, only include inventory considered saleable or usable in future periods, and is stated at the lower of cost or market, with cost being determined on the first-in, first-out method. Cost components include raw materials, components, direct labor and overhead (e.g., indirect labor, utilities, depreciation, purchasing, receiving, inspection and warehousing) as well as inbound freight. Promotional

~~Derivative~~merchandise ~~Financial~~is ~~Instruments~~charged to cost of sales at the time the merchandise is shipped to the Company’s customers.

~~Fixed~~All ~~Assets~~derivative instruments are recorded as either assets or liabilities and measured at fair value. The Company uses derivative instruments to principally manage a variety of market risks. For derivatives designated as hedges of the exposure to changes in fair value of the recognized asset or liability or a firm commitment (referred to as fair value hedges), the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. The effect of that accounting is to include in earnings the extent to which the hedge is not effective in achieving offsetting changes in fair value. For our cash flow hedges, the effective portion of the derivative’s gain or loss is initially reported in equity (as a component of accumulated other comprehensive income) and is subsequently reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. The ineffective portion of the gain or loss of a cash flow hedge is reported in earnings immediately. The Company also holds certain instruments for economic purposes that are not designated for hedge accounting treatment. For these derivative instruments, the changes in their fair value are recorded in earnings immediately.

~~Fixed~~Goodwill ~~assets~~and ~~are~~Other ~~stated at cost. Depreciation is computed using the straight~~Long-~~line~~Lived ~~method over the estimated useful lives of the assets; automobiles – 3 years, computer equipment – 3 years, and furniture and fixtures – 5 years.~~Assets

~~When~~Goodwill ~~assets~~is ~~are~~calculated ~~retired~~as orthe ~~otherwise~~excess ~~disposed~~ of, the ~~costs~~cost ~~and~~of ~~related~~purchased ~~accumulated~~businesses ~~depreciation~~over ~~are removed from~~ the ~~accounts,~~fair ~~and~~value ~~any~~of ~~resulting~~their ~~gain~~underlying ornet ~~loss~~assets. Other isindefinite-lived ~~recognized~~intangible inassets ~~income~~principally ~~for~~consist ~~the~~of ~~period~~trademarks. ~~The~~ Goodwill ~~cost of maintenance~~ and ~~repairs~~other isindefinite-lived ~~charged~~intangible toassets ~~income as incurred; significant renewals and betterments~~ are ~~capitalized. Deduction~~not ~~is made for retirements resulting from renewals or betterments~~amortized.

~~Impairment~~The Company evaluates goodwill and indefinite-lived intangible assets for impairment at least annually during the fourth quarter, or more frequently when events occur or circumstances change, such as an unexpected decline in sales, that would more likely than not (i) reduce the fair value of ~~Long~~the reporting unit below its fair value or (ii) indicate that the carrying value of an indefinite-~~Lived~~lived ~~Assets~~intangible asset may not be recoverable. Impairment of goodwill is evaluated using a two step process. The first step involves a comparison of the estimated fair value of the reporting unit to the carrying value of that unit. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, the second step of the process involves comparison of the implied fair value of goodwill (based on industry purchase and sale transaction data) with its carrying value. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized as an amount equal to the excess.

~~Long-lived~~Testing ~~assets,~~goodwill ~~primarily fixed assets, are reviewed~~ for impairment ~~whenever~~requires ~~events~~us orto ~~changes~~estimate ~~in circumstances indicate that~~ the ~~carrying~~fair ~~amount~~value of the ~~assets~~reporting ~~might~~unit ~~not~~using besignificant ~~recoverable.~~estimates ~~The~~and ~~Company does perform a periodic assessment of assets for impairment in the absence of such information or indicators~~assumptions. ~~Conditions~~The ~~that~~assumptions ~~would necessitate an impairment assessment include a significant decline in~~ the ~~observable~~Company ~~market~~makes ~~value~~will ofimpact ~~an asset, a significant change in~~ the ~~extent~~outcome orand ~~manner~~ultimate inresults ~~which~~of ~~an asset is used, or a significant adverse change that would indicate that~~ the ~~carrying amount of an asset or group of assets is not recoverable~~testing. ~~For~~In ~~long-lived~~making ~~assets~~our toassumptions ~~be held~~ and ~~used~~estimates, the Company ~~recognizes~~uses anindustry ~~impairment~~accepted ~~loss~~valuation ~~only~~models ifand ~~its~~set ~~carrying~~criteria ~~amount~~that isare ~~not~~reviewed ~~recoverable~~and ~~through~~approved ~~its~~by ~~undiscounted~~management ~~cash flows~~ and, ~~measures~~in ~~the~~certain ~~impairment~~instances, ~~loss based on~~ the ~~difference~~Company ~~between~~engages ~~the~~third ~~carrying~~party ~~amount~~valuation ~~and~~specialists ~~estimated~~to ~~fair~~advise ~~value~~us.

~~Earnings (Loss) Per Share of Common Stock~~39

~~Basic~~For ~~net~~indefinite-lived ~~income~~intangible ~~(loss)~~assets, ~~per~~the ~~common~~evaluation ~~share~~requires isa ~~computed~~comparison ~~using~~of the ~~weighted~~estimated ~~average~~fair ~~number~~value of ~~common~~the ~~shares~~asset ~~outstanding~~to the carrying value of the asset. ~~Diluted~~ ~~earnings~~To ~~per~~determine ~~share~~fair ~~(EPS)~~value ~~includes~~of ~~additional~~indefinite-lived ~~dilution~~intangible assets, the Company uses an income approach, including the relief-from-royalty ~~common~~method. ~~stock~~This ~~equivalents~~method assumes that, ~~such~~in aslieu ~~stock~~of ~~issuable~~ownership, ~~pursuant~~a third party would be willing to pay a royalty in order to obtain the ~~exercise~~rights ofto ~~stock~~use ~~options~~the ~~and~~comparable ~~warrants~~asset. ~~Common~~ ~~stock~~The ~~equivalents~~relief-from-royalty ~~were~~calculations ~~not~~require ~~included~~us into ~~the~~make ~~computation~~a number of ~~diluted~~assumptions ~~earnings~~and ~~per~~estimates ~~share~~concerning ~~when~~future sales levels, market royalty rates, future tax rates and discount rates. If the ~~Company~~carrying ~~reported~~value aof ~~loss~~an ~~because~~indefinite-lived tointangible doasset soexceeds ~~would~~its befair ~~antidilutive~~value, ~~for~~impairment ~~periods~~is ~~presented~~recorded.

40Intangible assets subject to amortization are evaluated for impairment testing whenever events or changes in circumstances indicate that the carrying amount of an amortizable intangible asset may not be recoverable. If impairment indicators exist for an amortizable intangible asset, the undiscounted future cash flows associated with the expected service potential of the asset are compared to the carrying value of the asset. If our projection of undiscounted future cash flows is in excess of the carrying value of the intangible asset, no impairment charge is recorded. If our projection of undiscounted future cash flows is less than the carrying value of the intangible asset, an impairment charge would be recorded to reduce the intangible asset to its fair value.

~~The~~Concentration ~~Company has not issued options or warrants to purchase stock in these periods. If there were options or warrants outstanding they would not be included in the computation~~ of ~~diluted~~Credit ~~EPS when the Company reported a loss because inclusion would have been antidilutive.~~Risk

~~Stock~~The Company is a worldwide marketer and distributor of fragrance and fragrance related products, and sells its products to department stores, specialty retailers, mass-~~Based~~market ~~Compensation~~retailers, supermarkets and domestic and international wholesalers and distributors. The Company grants credit to all qualified customers and does not believe it is exposed significantly to any undue concentration of credit risk.

~~In 2006, the Company adopted the provisions of ASC 718-10~~ ~~“Share~~Revenue ~~Based Payments” for its year ended December 31, 2008. The adoption of this principle had no effect on the Company’s operations.~~Recognition

The Company ~~has~~sells ~~elected~~its products to ~~use~~department ~~the~~stores, ~~modified–prospective~~specialty ~~approach~~retailers, ~~method.~~mass-market ~~Under that transition method~~retailers, ~~the~~supermarkets ~~calculated~~and ~~expense~~domestic inand ~~2006~~international iswholesalers ~~equivalent~~and todistributors. ~~compensation~~The ~~expense~~Company ~~for~~recognizes ~~all~~revenues ~~awards~~when ~~granted~~merchandise ~~prior~~is ~~to,~~shipped ~~but~~and ~~not~~the ~~yet~~risk ~~vested as~~ of ~~January~~loss 1,passes ~~2006,~~to ~~based on~~ the ~~grant-date fair values~~customer. ~~Stock-based~~Net ~~compensation~~sales ~~expense~~are ~~for~~comprised ~~all~~of ~~awards~~gross ~~granted~~revenues ~~after~~less ~~January 1~~returns, ~~2006~~trade isdiscounts ~~based~~and ~~on the grant-date fair values~~allowances. The Company ~~recognizes~~does ~~these~~not ~~compensation~~bill ~~costs,~~its ~~net~~customer’s offreight anand ~~estimated~~handling ~~forfeiture~~charges. ~~rate,~~All onshipping aand ~~pro~~handling ~~rata~~costs ~~basis~~are ~~over~~included ~~the~~in ~~requisite~~selling, ~~service~~general ~~period~~and ofadministrative ~~each~~expenses ~~vesting~~in ~~tranche~~the ofconsolidated ~~each~~statements ~~award. The Company considers voluntary termination behavior as well as trends~~ of ~~actual option forfeitures when estimating the forfeiture rate~~income.

~~The~~Sales ~~Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in~~ Returns

~~Conjunction~~Generally, ~~with~~the ~~Selling,~~Company ~~Goods~~does ornot ~~Services”. The~~permit ~~fair~~customers ~~value~~to ofreturn ~~the~~their ~~option~~unsold ~~issued~~products. isThe ~~used~~Company toregularly ~~measure~~reviews ~~the~~and ~~transaction~~revises, as ~~this~~deemed isnecessary, ~~more~~its ~~reliable~~estimate ~~than the fair value~~ of ~~the~~reserves ~~services~~for ~~received. The~~future ~~fair~~sales ~~value~~returns isbased ~~measured~~primarily atupon ~~the~~historic ~~value~~trends ofand ~~the~~relevant ~~Company’s~~current ~~common~~data ~~stock~~including oninformation ~~the~~provided ~~date that the commitment for performance~~ by ~~the~~retailers ~~counterparty~~regarding ~~has~~their ~~been~~inventory ~~reached or the counterparty’s performance is complete~~levels. ~~The~~In ~~fair~~addition, ~~value~~as ofnecessary, ~~the~~specific ~~equity~~accruals ~~instrument~~may isbe ~~charged~~established ~~directly~~for tosignificant ~~compensation~~future ~~expense~~known ~~and~~or ~~additional~~anticipated ~~paid-in capital~~events. The

~~Segment Information~~40

~~The~~types ~~Company~~of ~~follows~~known or anticipated events that we have considered, and will continue to consider, include, but are not limited to, the ~~provisions~~financial condition of ~~ASC~~our ~~280-10~~customers, ~~“Disclosures~~store ~~about~~closings ~~Segments~~by ofretailers, anchanges ~~Enterprise~~in the retail environment and ~~Related~~our ~~Information”.~~decision ~~This~~to ~~standard~~continue ~~requires~~to ~~that~~support ~~companies~~new ~~disclose~~and ~~operating~~existing ~~segments~~products. ~~based~~The onCompany ~~the~~records ~~manner~~estimated inreserves ~~which~~for ~~management~~sales ~~disaggregates~~returns ~~the~~as ~~Company~~a inreduction ~~making~~of ~~internal~~sales, ~~operating~~cost ~~decisions~~of sales and accounts receivable. UpReturned toproducts ~~December~~are 31recorded ~~2011~~as ~~had~~inventories ~~not~~and ~~segregated~~are ~~the~~valued ~~business~~based ~~despite~~upon ~~the~~estimated ~~Company~~realizable ~~incurring~~value. ~~sales~~The physical condition and marketability of ~~hardware~~returned ~~components~~products ~~for~~are the ~~VoIP~~major ~~service~~factors we consider in estimating realizable value. Actual returns, as well as ~~the~~estimated ~~service~~realizable ~~itself.~~values ~~The~~of ~~Company~~returned ~~treated~~products, ~~these~~may ~~items~~differ significantly, either favorably or unfavourably, from our estimates, if factors such as ~~one~~economic ~~component~~conditions, inventory levels or competitive conditions differ from our expectations.

~~With~~Advertising ~~the acquisition of NYTEX, beginning January 1, 2012, the Company will segregate the business between the activities of Teliphone~~ and ~~NYTEX.~~Promotion

~~Uncertainty~~Advertising and promotional costs are expensed as incurred and recorded as a component of cost of goods sold (in ~~Income~~the ~~Taxes~~case of free goods given to customers) or selling, general and administrative expenses.

~~The~~Package ~~Company~~Development follows ASC 740-10, “Accounting for Uncertainty in Income Taxes” (“ASC 740-10”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. ASC 740-10 is effective for fiscal years beginning after December 15, 2006. Management has adopted ASC 740-10 for 2009, and they evaluate their tax positions on an annual basis.Costs

~~Noncontrolling~~Package ~~Interests~~development costs associated with new products and redesigns of existing product packaging are expensed as incurred.

InOperating ~~accordance with ASC 810-10-45, Noncontrolling Interests in Consolidated Financial Statements, the Company classifies controlling interests as a component of equity within the balance sheets.~~ Leases

41The Company recognizes rent expense from operating lease with various step rent provisions, rent concessions and escalation clauses on a straight-line basis over the applicable lease term. The Company considers lease renewals in the useful life of its leasehold improvements when such renewals are reasonably assured. In the event the Company receives capital improvement funding from its landlord, these amounts are recorded as deferred liabilities and amortized over the remaining lease term as a reduction of rent expense.

License Agreement

Such licenses and rights to market and sell cosmetics and cosmetics related products typically have an initial term of approximately 5 years to 15 years, and are potentially

renewable subject to compliance with the license agreement provisions. The remaining terms, including the potential renewal periods, typically range from approximately 2 years to 15 years. Under each license, the Company is usually required to pay royalties in the range of 5% to 10% to the licensor, at least annually, based on net sales to third parties.

In addition, the Company may be exposed to certain concentration risk. Currently our sole license to market and sell cosmetics and cosmetics related products is licensed from related party, 8012415 Canada Inc, a company controlled by Nacara Montreal Inc which is itself controlled by Mrs. Caroline Coulombe, our principal officer. Mrs. Coulombe is also in control of 7776446 Canada Inc. doing business as Cosmera Inc., a Canadian corporation which on March 9, 2012 became the controlling shareholder of our Company with the purchase of an aggregate of 3,574,920 shares of our common stock representing approximately 66.63% of the Company’s issued and outstanding common stock.

Income Taxes

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets; automobiles – 3 years, computer equipment – 3 years, furniture and fixtures – 5 years and leasehold improvements- 5 years.

Impairment of Long-Lived Assets

(Loss) Per Share of Common Stock

Basic net (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents were not included in the computation of diluted earnings per share when the Company reported a loss because to do so would be anti dilutive for periods presented.

Stock-Based Compensation

In 2006, the Company adopted the provisions of ASC 718-10 “Share Based Payments” for its year ended December 31, 2008 and all subsequent years. The adoption of this principle had no effect on the Company’s operations.

The Company has elected to use the modified–prospective approach method. Under that transition method, the calculated expense in 2006 is equivalent to compensation expense for all awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair values. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual option forfeitures when estimating the forfeiture rate.

Segment Information

Results of Operations –Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

The Company recorded sales of $2,997 of which was entirely subscription revenue for the three month period ended March 31, 2012 as compared to $10,539 of of which $9,728 was professional services and $811 was maintenance revenues for the three month period ended March 31, 2011

The Company’s total Cost of Sales were $3,310 for the three month period ended March 31, 2012, compared to 0$ for the same period in 2011. The Company required the purchase of these professional services directly related to the license revenues deliverable for the period. For the period ended March 31, 2011, all revenues acquired were professional services with no costs associated against them.

The Company's total expenses before interest and income taxes were $83,334 for the three month period ended March 31, 2012 compared to $33,397 for the same period in 2011, primarily as a consequence of an increase in professional services required for the restructuring of the company through the change of control process for it to pursue its new opportunities in the Cosmetics industry. There was an increase in Selling, General and administrative expenses from $33,287 to $83,334 as the company increased its expenditures on legal and accounting professional. There was decrease in depreciation from $110 to $0 related to previous acquisitions of equipment and leasehold improvements that have been fully amortized as of December 31, 2011.

The Company had a net income (loss) of ($83,646) for the three month period ended March 31, 2012 compared to a net income (loss) of ($22,976) for the same period in 2011. The principal reasons for company’s net loss for the three month period ended March 31, 2012 as compared to the prior period is because the Company was unable to achieve the level of revenues required to sustain its operating costs, and is in process of restructuring.

Plan of Operations and Need for Additional Financing

The Company's plan of operations for most of 2012 is to build a retail distribution customer base for the supply of its newly acquired Cosmetics products, as it has abandoned its Software business as of March 31, 2012.

The Company successfully rendered its public offering of stock on Form S-1 on April 20, 2010 which permitted the Company to sell common stock at $0.20 per share for a total of $800,000 or 4,000,000 shares. On September 17, 2010, the Company successfully sold its

minimum offering of $250,000 shares for a total of $50,000 (CD$). The Company opted to close its offering after having completed the minimum offering so as to apply to the exchange regulators to have the common stock trade over the counter and to explore other avenues of raising capital and being supported by a trading stock. The company is still in the process of achieving this.

Liquidity and Capital Resources

For the period ended March 31, 2012:

On The Company's balance sheet as of March 31, 2012, the Company had assets consisting of cash in the amount of $1,449 and accounts receivable of $1,635. The Company has expended its cash in furtherance of its business plan, including primarily expenditure of funds to pay legal and accounting expenses, and to maintain service delivery to its customers. Consequently, the Company's balance sheet as of March 31, 2012 reflects an accumulated deficit of ($675,735) and a stockholders equity (deficit) of ($183,228).

The Company used $77,960 of cash in operating activities in 2012 compared to a use of $14,773 for the same period in 2011. This change was attributable in large part to an increase in net loss from operations.

The Company had net cash provided by financing activities of $78,685 in 2012 compared to being provided $11,648 during 2011. This change was primarily attributable to an increase of proceeds provided related parties of $78,906 as compared to a repayment of related party debt the prior period of $2,058.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required

ITEM 4. CONTROL AND PROCEDURES.

~~Conclusion~~Evaluation ~~Regarding the Effectiveness~~ of Disclosure Controls and Procedures

~~Under~~We ~~the~~maintain supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on this evaluation as of December 31, 2011, the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer concluded that ~~our~~are ~~disclosure~~designed ~~controls and procedures were not effective at a reasonable assurance level~~ to ensure that ~~the~~ information required to be disclosed in ~~reports~~our ~~filed or submitted under the Securities~~ Exchange Act ofreports ~~1934,~~is ~~including this Quarterly Report, were~~ recorded, processed, summarized and reported within the time periods specified in the ~~SEC~~Securities and Exchange Commission’s rules and forms, and ~~was~~that such information is accumulated and communicated to our management, including our ~~principal~~Chief ~~executive~~Executive ~~officer~~Officer and ~~principal~~Chief ~~financial~~Financial ~~officer~~Officer, as appropriate, to allow for timely decisions regarding required disclosure. ~~Our~~ ~~conclusion~~In isdesigning ~~based~~and ~~primarily~~evaluating onthe ~~our~~disclosure ~~inadvertent~~controls ~~failure~~and toprocedures, ~~file~~ management's ~~assessment~~recognizes ofthat ~~internal~~any controls ~~over~~and ~~financial~~procedures, ~~reporting~~no inmatter ~~connection~~how ~~with~~well ~~the~~designed ~~filing~~and ofoperated, ~~our~~can ~~Annual~~provide ~~Report~~only onreasonable ~~Form~~assurance ~~10-K~~of ~~for~~achieving the ~~period~~desired ~~ending~~control ~~September 30~~objectives, ~~2011,~~and ~~which~~management ~~failure~~is ~~stems,~~required weto ~~believe,~~apply ~~primarily~~its ~~from~~judgment ~~the~~in ~~fact~~evaluating ~~that~~the wecost-benefit ~~have~~relationship ~~limited~~of ~~personnel~~possible oncontrols ~~our accounting~~ and ~~financial staff~~procedures. We ~~are~~Our indisclosure ~~the~~controls ~~process~~and ofprocedures ~~considering~~were ~~changes~~designed into ~~our~~provide ~~disclosure~~reasonable ~~controls~~assurance ~~and~~that ~~procedures~~

~~in order to address the aforementioned failure to timely file the assessment, but have made no changes in our disclosure controls and procedures as of the date of this report.~~45

~~Changes~~the incontrols ~~Internal~~and ~~Controls~~procedures would meet their objectives. As required by SEC Rule 13a-15(b), our management carried out an evaluation, with the participation of our Chief Executive and Chief Financial Officers, 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.

~~There~~The ~~have~~Company’s ~~been~~management nocarried ~~changes~~out inan ~~our~~evaluation, ~~internal~~under the supervision and with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls ~~over~~and ~~financial~~procedures ~~reporting~~(as orsuch term is defined in ~~other~~Rules ~~factors~~13a-15(e) ~~that~~and ~~could~~15d-15(e) ~~materially~~under ~~affect~~the Securities Exchange Act of 1934, oras ~~are~~amended) ~~reasonably~~as ~~likely~~of the end of the period covered by this report, pursuant to ~~affect~~Exchange Act Rule 13a-15. Based upon that evaluation, ~~our~~the ~~internal~~Company’s Chief Executive Officer and the Company’s Chief Financial Officer concluded that the Company’s disclosure controls ~~over~~and ~~financial~~procedures ~~reporting~~were ~~during~~effective as of the ~~three~~end ~~months~~of ~~ended~~the ~~December~~period ~~31,~~covered ~~2011~~by this report.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

~~Former~~During ~~Owners~~the past five years, none of ~~Orion~~the ~~Communications~~following ~~Inc~~occurred with respect to a present or former director or executive officer of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the commodities futures trading commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

~~During~~We ~~the three~~are ~~months~~not ~~ended~~a ~~December~~party ~~31,~~to ~~2011,~~any ~~there~~pending ~~have~~material ~~been~~legal noproceedings ~~material~~and ~~developments~~are innot aware of any threatened or contemplated proceeding by any governmental authority against the ~~legal~~Company. ~~proceedings~~Notwithstanding, ~~discussed~~from intime ~~our~~to ~~annual~~time, ~~report~~the ~~filed~~Company onis ~~form~~subject ~~10-K~~to ~~for~~legal proceedings and claims in the ~~year~~ordinary ~~ended~~course ~~September~~of 30business, ~~2011~~including employment-related and trade related claims.

Bank of Montreal, related to Former Owners of Orion Communications Inc.

On March 30, 2011, BMO dropped its lawsuit against the Company’s subsidiary due to a negotiated settlement which permitted the transfer of full and unencumbered rights to the servicing contracts of the clients of Orion. As a result of the Company entered into a non-interest bearing Note Payable to BMO for a total of $375,000. The Note calls for an initial payment of $25,000 followed by 24 equal payments due on the 15th of the month of $11,458, and a final payment of $75,000 due on April 15, 2013. To date, the Company has met all of its payment obligations on this note payable.

ITEM 1A - RISK FACTORS

~~Not~~You ~~Applicable~~should carefully consider these risk factors before you decide to purchase or sell shares of our common stock. These factors could cause our future results to differ materially from those expressed or implied in forward-looking statements made by us. The

trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.

We have a relatively limited operating history. Such limited operating history makes it difficult for investors to evaluate our business and future operating results. An investor in our securities must consider the risks, uncertainties, and difficulties frequently encountered by companies in our industry. The risks and difficulties we face include challenges in accurate financial planning as a result of limited historical data and the uncertainties resulting from having had a relatively limited time period in which to implement and evaluate our business strategies as compared to older companies with longer operating histories.

We will need additional capital to implement our current business strategy, which may not be available to us.

In order to grow our business, we will need to raise capital. Obtaining financing will be subject to a number of factors, including market conditions, our operating performance and investor sentiment. These factors may make the timing, amount, terms and conditions of financing unattractive to us. We cannot assure you that we will be able to obtain any financing. If we are unable to obtain the financing needed to implement our business strategy, we may have to delay, modify or abandon some of our expansion plans. This could slow our growth, negatively affect our ability to compete in the marketplace and adversely affect our financial condition.

Raising additional capital will cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends.

We rely heavily on Caroline Coulombe, our current President and Chief Executive Officer. The loss of her services would have a material adverse effect upon the Company and its business and prospects.

Our success depends, to a significant extent, upon the continued services of Caroline Coulombe, who is the founder of Nacara and our current President and Chief Executive Officer. Mrs. Coulombe is not subject to any agreement that prevents her from soliciting our existing customers or disclosing information deemed confidential to us. If Mrs.

Coulombe resigns to join a competitor or form a competing company, the loss of such personnel, together with the loss of any customers or potential customers due to such executive’s departure, could materially and adversely affect our business and results of operations.

Developing and increasing awareness of our brand is crucial to increasing our customer base and our revenues.

We believe that increasing awareness of our brand will be critical to expanding our customer base and our revenues, especially as we expand our line of product offerings. If we fail to advertise and market our products effectively, we may not succeed in maintaining or increasing awareness of our brands and we may lose customers and our revenues will decline. The delivery of quality products to our customers is also of importance to maintaining and enhancing the reputation of our brand. If our customers do not perceive our products to be of high quality, demand for our products will decline, which could lead to a decline in revenues and an adverse effect on our financial condition.

We may be subject to product liability claims from our products, which could result in costly litigation and a material adverse effect on our business and results of operations.

The sale of our cosmetic products exposes us to the risk of damages from product liability or other consumer claims. Such claims may arise despite quality controls, proper testing and instruction for use of our products. We may still incur substantial costs related to a product liability claim, which could adversely affect our business and results of operations. At this time, our Company does not have coverage against product liability.

The costs to meet our reporting requirements as a public company subject to the Exchange Act of ’34 will be substantial and may result in us having insufficient funds to operate our business.

We will incur ongoing expenses associated with professional fees for accounting and legal expenses associated with being a public company. We estimate that these costs will range up to $100,000 per year for the next few years. Those fees will be higher if our business volume and activity increases. Those obligations will reduce and possibly eliminate our ability and resources to fund our operations and may prevent us from meeting our normal business obligations.

Our business could be adversely affected by a prolonged downturn or recession in the United States, Europe or other countries in which we conduct business.

A prolonged economic downturn or recession in the United States, Europe or any of the other countries in which we do significant business could materially and adversely affect our business, financial condition and results of operations. In particular, such a downturn or recession could adversely impact (i) the level of spending by our ultimate consumers, (ii) our ability to collect accounts receivable on a timely basis from certain customers,

(iii) our ability of certain suppliers to fill our orders for raw materials, packaging or co-packed finished goods on a timely basis, and (iv) the mix of our product sales.

Consumers may reduce discretionary purchases of our products as a result of a general economic downturn.

We believe that the high degree of global economic uncertainty could have a negative effect on consumer confidence, demand and spending. In addition, we believe that consumer spending on beauty products is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience sustained periods of declines in sales during periods of economic downturn as it may affect customers’ purchasing patterns. In addition, a general economic downturn may result in reduced traffic in our customers’ stores which may, in turn, result in reduced net sales to our customers. Any resulting material reduction in our sales could have a material adverse effect on our business, financial condition and operating results.

Uncertainties and continued deterioration in global credit markets, as evidenced by reductions in sovereign credit ratings in the United States and Europe, could negatively impact suppliers, customers and consumers, which could have an adverse impact on our business as a whole.

Uncertainties and continued deterioration in the global credit markets as evidenced by reductions in sovereign credit ratings in the United States and Europe, could negatively impact our suppliers, customers and consumers which, in turn, could have an adverse impact on our business. Uncertainties in global credit markets could make future financing difficult or more expensive. Such lack of credit or lack of credit on favorable terms could have a material adverse effect on our business, financial condition and operating results.

If our intangible assets, such as trademarks and goodwill, become impaired we may be required to record a significant non-cash charge to earnings which would negatively impact our results of operations.

Under United States generally accepted accounting principles, we review our intangible assets, including our license and goodwill, for impairment annually in the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate the carrying value of our intangible assets may not be fully recoverable. The carrying value of our intangible assets may not be recoverable due to factors such as reduced estimates of future cash flows, or slower growth rates in our industry. Estimates of future cash flows are based on a long-term financial outlook of our operations and the brand to which the intangible assets relate. However, actual performance in the near-term or long-term could be materially different from these forecasts, which could impact future estimates and the recorded value of the intangibles. Any significant impairment to our intangible assets would result in a significant charge to earnings in our financial statements during the period in which the impairment is determined to exist.

If we are unable to protect our intellectual property rights, specifically trademarks and brand names, our ability to compete could be negatively impacted.

The market for our products depends to a significant extent upon the value associated with the trademarks and brand name that we license, use or own. We have a license or other rights to use, the material trademark and brand name rights used in connection with the packaging, marketing and distribution of our products both in the United States and in other countries where such products may be sold. Therefore, trademark and brand name protection is important to our business. Although the brand name we license is registered in countries in which we operate, we may not be successful in asserting trademark or brand name protection. Further, the costs required to protect our trademarks and brand name may be substantial.

The success of our products is dependent on public taste.

Our revenues are substantially dependent on the success of our products, which depends upon, among other matters, pronounced and rapidly changing public tastes, factors which are difficult to predict and over which we have little, if any, control. In addition, we have to develop successful marketing, promotional and sales programs in order to sell our cosmetics and cosmetic related products. If we are not able to develop successful marketing, promotional and sales programs, then such failure will have a material adverse effect on our business, financial condition and operating results.

We are subject to extreme competition in the cosmetic industry.

The market for cosmetics and cosmetics related products is highly competitive and sensitive to changing market preferences and demands. Many of our competitors in this market are larger than we are and have greater financial resources than are available to us, potentially allowing them greater operational flexibility. The Company competes primarily by:


	•		Introducing quality products with innovative performance features, shades, finishes and packaging;
	•		educating consumers about the benefits of the Company’s products;
	•		anticipating and responding to changing consumer demands in a timely manner, including the timing of new product introductions and line extensions;
	•		offering attractively priced products, relative to the product benefits provided;
	•		maintaining favorable brand recognition;
	•		generating competitive margins and inventory turns for the Company’s retail customers by providing relevant products and executing effective pricing, incentive and promotion programs;
	•		ensuring product availability through effective planning and replenishment collaboration with retailers;
	•		providing strong and effective advertising, promotion, marketing and merchandising support;
	•		maintaining an effective sales force; and
	•		obtaining and retaining sufficient retail display space, optimal in-store positioning and effective presentation of the Company’s products at retail.

An increase in or change in the current level of competition that the Company faces could have a material adverse effect on our business, financial condition and results of operations. In addition, the Company competes against a number of multi-national manufacturers, some of which are larger and have substantially greater resources than the Company, and which may therefore have the ability to spend more aggressively than the Company on advertising, promotions and marketing and have more flexibility than the Company to respond to changing business and economic conditions. In addition to products sold in the mass retail channel, the Company’s products also compete with similar products sold through other channels, including prestige and department stores, television shopping, door-to-door, specialty stores, the internet, perfumeries and other distribution outlets.

Additionally, the Company’s major retail customers periodically assess the allocation of retail display space among competitors and in the course of doing so could elect to reduce the display space allocated to the Company’s products, if, for example, the Company’s marketing strategies for its new and/or existing products are less effective than planned, fail to effectively reach the targeted consumer base or engender the desired consumption; and/or the rate of purchases by the Company’s consumers are not as high as the Company anticipates. Any significant loss of display space could have an adverse effect on the Company’s business, financial condition and/or results of operations.

If we are unable to introduce new products or acquire or license additional brands, or obtain the required financing for these agreements and arrangements, then the growth of our business could be impaired.

Our future expansion through the introduction of new products or the acquisition of new product license or distribution arrangements, if any, will depend upon the capital resources and working capital available to us. Further, in view of the global banking crisis, we may be unable to obtain financing or credit that we may require for additional licenses, acquisitions or other transactions. We may be unsuccessful in identifying, negotiating, financing and consummating such acquisitions or arrangements on terms acceptable to us, or at all, which could hinder our ability to increase revenues and build our business.

We may engage in future acquisitions that we may not be able to successfully integrate or manage. These acquisitions may dilute our stockholders and cause us to incur debt and assume contingent liabilities.

We continuously review acquisition prospects that would complement our current product offerings, increase our size and geographic scope of operations or otherwise offer growth and operating efficiency opportunities. The financing, if available, for any of these acquisitions could significantly dilute our stockholders and/or result in an increase in our indebtedness. We may acquire or make investments in businesses or products in the future,

and such acquisitions may entail numerous integration risks and impose costs on us, including:


	·	difficulties in assimilating acquired operations or products, including the loss of key employees from acquired businesses;


	·	diversion of management’s attention from our core business;


	·	adverse effects on existing business relationships with suppliers and customers;


	·	risks of entering markets in which we have no or limited prior experience;


	·	dilutive issuances of equity securities;


	·	incurrence of substantial debt;


	·	assumption of contingent liabilities;


	·	incurrence of significant amortization expenses related to intangible assets and the potential impairment of acquired assets; and


	·	incurrence of significant immediate write-offs.

Our failure to successfully complete the integration of any acquired business could have a material adverse effect on our business, financial condition and operating results.

Our reliance on third party manufacturers could have a material adverse effect on us.

We rely on outside sources to manufacture our cosmetics and cosmetic related products. The failure of such third party manufacturers to deliver either components or finished goods on a timely basis could have a material adverse effect on our business. Although we believe there are alternate manufacturers available to supply our requirements, we cannot assure you that current or alternative sources will be able to supply all of our demands on a timely basis. We do not intend to develop our own manufacturing capacity. As these are third parties over whom we have little or no control, the failure of such third parties to provide components or finished goods on a timely basis could have a material adverse effect on our business, financial condition and operating results.

Our reliance on third party distributors could have a material adverse effect on us.

We will sell a substantial percentage of our cosmetics and cosmetic related products through independent distributors specializing in beauty products. We have little or no control over third party distributors and the failure of such third parties to provide services on a timely basis could have a material adverse effect on our business, financial condition and operating results. In addition, if we replace existing third party distributors with new third party distributors or with our own distribution arrangements, then transition issues could have a material adverse effect on our business, financial condition and operating results.

The loss of or disruption in our distribution facilities could have a material adverse effect on our business, financial condition and operating results.

We currently have one distribution facility in Montreal. The loss of the facility, as well as the inventory stored in that facility, would require us to find a replacement facility and assets. In addition, terrorist attacks, weather conditions, or natural disasters, could disrupt our distribution operations. If we cannot replace our distribution capacity and inventory in a timely, cost-efficient manner, it could have a material adverse effect on our business, financial condition and operating results.

Changes in laws, regulations and policies that affect our business could adversely affect our financial results.

Our business is subject to numerous laws, regulations and policies. Changes in the laws, regulations and policies, including the interpretation or enforcement thereof, that affect, or will affect, our business, including changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result could adversely affect our financial results.

Our success depends, in part, on the quality and safety of our products.

Our success depends, in part, on the quality and safety of our products. If our products are found to be defective or unsafe, or if they otherwise fail to meet our consumers’ standards, our relationships with customers or consumers could suffer, the appeal of our brand could be diminished, and we could lose sales and/or become subject to liability claims, any of which could result in a material adverse effect on our business, results of operations and financial condition.

The international character of our business renders us subject to fluctuation in foreign currency exchange rates and international trade tariffs, barriers and other restrictions.

The Company’s functional currency is the Canadian dollar, while the Company reports its currency in the U.S. dollar and transact in different currencies, mostly in euro. In an effort to reduce our exposure to foreign currency exchange fluctuations, we may engage in a controlled program of risk management that includes the use of derivative financial instruments. Despite such actions, fluctuations in foreign currency exchange rates for the U.S. dollar, particularly with respect to the euro, could have a material adverse effect on our operating results. Possible import, export, tariff and other trade barriers, which could be imposed by Canada, the United States, other countries or the European Union might also have a material adverse effect on our operating results.

Our business is subject to governmental regulation, which could impact our operations.

Cosmetics and cosmetic related products must comply with the labelling requirements of the Federal Food, Drug and Cosmetics Act as well as the Fair Packaging and Labelling Act and their regulations. Some of our color cosmetic products may also be classified as a

“drug”. Additional regulatory requirements for products which are “drugs” include additional labelling requirements, registration of the manufacturer and the semi-annual update of a drug list.

Some of cosmetics are also subject to the approval of the Bureau of Alcohol, Tobacco and Firearms as a result of the use of specially denatured alcohol. Thus far, our products have not experienced any difficulties in obtaining the required approvals.

Our cosmetics and cosmetic related products that are sold in Europe are subject to certain regulatory requirements of the European Union, but as of the date of this report, our products have not experienced any material difficulties in complying with such requirements.

However, we cannot assure you that, should we develop or market cosmetics and cosmetic related products with different ingredients, or should existing regulations or requirements be revised, we would not in the future experience difficulty in complying with such requirements, which could have a material adverse effect on our results of operations.

Our information systems and websites may be susceptible to outages and other risks.

We have information systems that support our business processes, including product development, marketing, sales, order processing, production, distribution, finance and intra-company communications. These systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, break-ins and similar events. Despite the implementation of network security measures, our systems may be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering. The occurrence of these or other events could disrupt or damage our information systems and adversely affect our business and results of operations.

The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our earnings or other financial performance.

Our business planning process is designed to maximize our long-term strength, growth and profitability, not to achieve an earnings target in any particular fiscal quarter. We believe that this longer-term focus is in the best interests of our Company and our stockholders. At the same time, however, we recognize that it may be helpful to provide investors with guidance as to our forecast of net sales and earnings per share. While we generally expect to provide guidance and updates to our guidance when we report our results each fiscal quarter, we assume no responsibility to update any of our forward-looking statements at such times or otherwise. In addition, the longer-term guidance we provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years. Such targets are more difficult to predict than our current quarter and fiscal year expectations.

In all of our public statements when we make, or update, a forward-looking statement about our sales and/or earnings expectations or expectations regarding other initiatives, we

accompany such statements directly, or by reference to a public document, with a list of factors that could cause our actual results to differ materially from those we expect. Such a list is included, among other places, in our earnings press release and in our periodic filings with the Securities and Exchange Commission (e.g., in our reports on Form 10-K and Form 10-Q). These and other factors may make it difficult for outside observers, such as research analysts, to predict what our earnings will be in any given fiscal quarter or year.

Outside analysts and investors have the right to make their own predictions of our financial results for any future period. Outside analysts, however, have access to no more material information about our results or plans than any other public investor, and we do not endorse their predictions as to our future performance. Nor do we assume any responsibility to correct the predictions of outside analysts or others when they differ from our own internal expectations. If and when we announce actual results that differ from those that outside analysts or others have been predicting, the market price of our securities could be affected. Investors who rely on the predictions of outside analysts or others when making investment decisions with respect to our securities do so at their own risk. We take no responsibility for any losses suffered as a result of such changes in the prices of our securities.

We may become subject to possible liability for improper comparative advertising or “Trade Dress”.

Brand name manufacturers and sellers of brand name products may make claims of improper comparative advertising or trade dress (packaging) with respect to the likelihood of confusion between some of our products and those of brand name manufacturers and sellers. They may seek damages for loss of business or injunctive relief to seek to have the use of the improper comparative advertising or trade dress halted. However, we believe that our displays and packaging constitute fair competitive advertising and are not likely to cause confusion between our products and others.

Market Risks Related to our Common Stock

Our stock price may be volatile, which may result in losses to our stockholders.

The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the Over-The-Counter Bulletin Board and OTCQB, where our shares of common stock are quoted, generally have been very volatile and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:


·	variations in our operating results;
·	changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
·	changes in operating and stock price performance of other companies in our industry;
·	additions or departures of key personnel; and
·	future sales of our common stock.

Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely.

Our common shares may be thinly-traded, and our stockholders may be unable to sell at or near ask prices or at all if they need to sell their shares to raise money or otherwise desire to liquidate such shares.

We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

The market for our common shares may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors.

First, as noted above, our common shares may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.

Secondly, an investment in us is a speculative or “risky” investment due to our lack of significant revenues or profits to date and uncertainty of future market acceptance for current and potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of

negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.

Investors should not look to dividends as a source of income.

In the interest of reinvesting initial profits back into our business, we do not intend to pay cash dividends in the foreseeable future. Consequently, any economic return will initially be derived, if at all, from appreciation in the fair market value of our stock, and not as a result of dividend payments.

Because we may be subject to the “penny stock” rules, the level of trading activity in our stock may be reduced, which may make it difficult for investors to sell their shares.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks, like shares of our common stock, generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.

We lack a public market for shares of our common stock, which may make it difficult for investors to sell their shares.

There is no public market for shares of our common stock. We cannot guaranty that an active public market will develop or be sustained. Therefore, investors may not be able to find purchasers for their shares of our common stock. Should there develop a significant market for our shares, the market price for those shares may be significantly affected by such factors as our financial results and introduction of new products and services. Factors such as announcements of new services by us or our competitors and quarter-to-quarter variations in our results of operations, as well as market conditions in our sector may have a significant impact on the market price of our shares. Further, the stock market has experienced extreme volatility that has particularly affected the market prices of stock of

many companies and that often has been unrelated or disproportionate to the operating performance of those companies.

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

None.

ITEM 3 - DEFAULTS UPON SENIOR ~~SECURITIES~~SECURITES

There have been no material defaults.

ITEM 4 - ~~(REMOVED~~SUBMISSION ~~AND~~OF ~~RESERVED)~~MATTERS TO A VOTE OF SECURITY HOLDERS

No matters have been submitted to a vote of security holders during the period covered by this report.

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 -– EXHIBITS

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

31.1

43Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2

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

32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbans-Oxley Act.

32.2

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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Montreal, Quebec, Canada.

Dated: ~~February~~ 20May 21, 2012

~~TELIPHONE~~GMS CAPITAL CORP. ~~/s/ Lawry Trevor-Deutsch Lawry Trevor-Deutsch Chief Executive Officer and President~~

~~TELIPHONE CORP.~~ /s/ ~~Lawry~~Caroline ~~Trevor-Deutsch Lawry Trevor-Deutsch Principal Financial Officer~~Coulombe

~~TELIPHONE~~Caroline ~~CORP. /s/ Lawry Trevor-Deutsch Lawry Trevor-Deutsch Principal Accounting Officer~~Coulombe

44Chief Executive Offier and President

GMS CAPITAL CORP.

/s/ Caroline Coulombe

Caroline Coulombe

Principal Financial and Accounting Officer

Filing Compare · Teliphone Corp