UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,DC.
      20549





FORM
      10-KSB


(Mark
      One)





xANNUAL
      REPORT UNDER SECTION 13 OR 15(d)
      OF THE SECURITIES EXCHANGE ACT OF 1934





For
      the fiscal year ended October 31,
      2007





oTRANSITION
      REPORT UNDER SECTION 13 OR
      15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For
      the transition period from _________
      to _________





COMMISSION
      FILE NUMBER
      0-22636


RAPID
      LINK, INCORPORATED


(Name
      of small business issuer in its
      charter)





DELAWARE
            75-2461665(State
                or other jurisdiction
                ofincorporation
                or
                organization)
            (I.R.S.
                Employer Identification
                No.)








5408
      N.
      99thStreet;Omaha,NE68134


(Address
      of principal executive offices)
      (Zip Code)





Issuer’s
      telephone number: (402)
      392-7561





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


Check
      whether the issuer (1) 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.  YesxNoo





Check
      if there is no disclosure of
      delinquent filers in response to Item 405 of Regulation S-B contained in this
      form, and no disclosure will be contained, to the best of registrant's
      knowledge, in definitive proxy or information statements incorporated by
      reference in Part III of this Form 10-KSB or any amendment to this Form
      10-KSB.x





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





The
      issuer’s revenues for the fiscal
      year ended October 31, 2007 were $17,326,035.





The
      aggregate market value of the voting
      and non-voting common stock held by non-affiliates of the registrant as ofJanuary 8, 2008was
      approximately$1,934,042,based
      on the average bid and ask price
      of a share of common stock as quoted on the OTC Bulletin Boardof
      $0.08.





As
      ofJanuary 8, 2008, there were
      65,149,522shares
      of registrant’s common stock
      outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE:
      None


Transitional
      Small Business Disclosure
      Format (Check One): Yeso; 
Nox





1





FORWARD-LOOKING
      STATEMENTS





This
      Annual Report on Form 10-KSB (this
      "Report") includes "forward-looking statements".  Forward-looking
      statements are statements other than historical information or statements of
      current condition.  Some forward-looking statements may be identified
      by the use of such terms as "expects,” "anticipates,” "estimates,” "believes,”
"plans" and words of similar meaning.  These forward-looking
      statements relate to business plans, programs, trends, results of future
      operations, satisfaction of future cash requirements, funding of future growth,
      acquisition plans, and other matters.  In light of the risks and
      uncertainties inherent in all such projected matters, the inclusion of
      forward-looking statements in this Form 10-KSB should not be regarded as a
      representation by us or any other person that our objectives or plans will
      be
      achieved or that our operating expectations will be
      realized.  Revenues and results of operations are difficult to
      forecast and could differ materially from those projected in forward-looking
      statements contained herein, including without limitation statements regarding
      our belief of the sufficiency of capital resources and our ability to compete
      in
      the telecommunications industry. Actual results could differ from those
      projected in any forward-looking statements for, among others, the following
      reasons: (a) increased competition from existing and new competitors using
      Voice
      over Internet Protocol ("VoIP") to provide telecommunications services over
      the
      Internet, (b) the relatively low barriers to entry for start-up companies using
      VoIP to provide telecommunications services over the Internet, (c) the
      price-sensitive nature of consumer demand, (d) the relative lack of customer
      loyalty to any particular provider of services over the Internet, (e) our
      dependence upon favorable pricing from our suppliers to compete in the
      telecommunications industry, (f) increased consolidation in the
      telecommunications industry, which may result in larger competitors being able
      to compete more effectively, (g) failure to attract or retain key employees,
      (h)
      continuing changes in governmental regulations affecting the telecommunications
      industry and the Internet and (i) changing consumer demand, technological
      developments and industry standards that characterize the industry. For a
      discussion of these factors and others, please see "Risk Factors" in Item 1
      of
      this Report.  Readers are cautioned not to place undue reliance on the
      forward-looking statements made in this Report or in any document or statement
      referring to this Report.  In addition, we are not obligated, and do
      not intend, to update any forward-looking statements at any time unless an
      update is required by applicable securities laws.





PART
      I





Item
      1.  Description of
      Business.





General





Throughout
      this Annual Report on Form
      10-KSB, the terms "we,"
      "Rapid Link," and the "Company" refer
      to Rapid Link, Incorporated, aDelawarecorporation,
      and its
      subsidiaries.  The Company was incorporated on July 10, 1986 under the
      Company Act of theProvinceofBritish
      Columbia,Canada.  On
      August 7, 1992, we
      renounced our original province of incorporation and elected to continue our
      domicile under the laws of the State ofWyoming,
      and on November 30, 1994, our name was
      changed to "Canmax Inc.”  On February 1, 1999, we reincorporated under
      the laws of the State ofDelawareunder
      the name "ARDIS Telecom &
Technologies, Inc.”  On November 2, 1999, we acquired substantially
      all of the business and assets of Dial Thru International Corporation, a
      California corporation (the "DTI Acquisition"), and, on January 19, 2000, we
      changed our name from ARDIS Telecom & Technologies, Inc. to Dial Thru
      International Corporation.  On November 1, 2005, we changed our name
      to "Rapid Link, Incorporated" as we believe this name will receive better market
      recognition and acceptance than its previous name, especially as the Company
      continues to roll outwireless broadband internet
      relatedservices.





Our
      principal executive offices are
      located at5408 N.
      99thStreet,Omaha,Nebraska,68134;
      our telephone number is (310)
      566-1700; our website address iswww.rapidlink.com;
      and our common stock currently trades
      on the OTC Bulletin Board under the symbolRPID.





2





Business
      Strategy





Communication
      Services





Rapid
      Link, Incorporated, aDelawarecorporation,
      and its subsidiaries
      (collectively referred to as “Rapid Link” or the “Company”), have served as
      facilities-based, communication companies providing various forms of voice
      and
      data services to customers around the world.  Rapid Link provides a
      multitude of communication services targeted to individual customers, as well
      as
      small and medium sized enterprises.  These services include the
      transmission of voice and data traffic over public and private
      networks.  The Company also sells foreign and domestic termination of
      voice traffic into the wholesale market.





The
      Company has shifted its retail
      product focus to wireless broadband niche marketsthatincludespecific
      ethnic demographics, targeted
      rural geographic locations, and others.  The Company’s strategy
      includes plans to offer broadband access via its own facilities to insure
      reliable delivery of its current and future services.  Technology now
      allows for swift and cost efficient deployment of broadband
      networks.  Wi-MAX and other technologies can bring fast, reliable,
      high-speed internet access to areas that have traditionally been inaccessible
      or
      underserved.  Through organic growth and acquisitions in targeted
      areas, the Company believes it will possess a strategic advantage over carriers
      that do not provide their own network access.The Companybelieves
      the potential for unfair and/or
      monopolistic behavior by incumbent providers, necessitatesourstrategy
      to “own” the customer by
      providing the service directly, rather than utilizing the networks of
      others.  This will allow the Company to provide its bundled products
      and communication services without the threat of compromised service
      quality.





Development
      of Wireless Broadband
      Internet





The
      tremendous growth of internet
      utilization worldwide has led to dramatic changes in how individuals and
      business consumers are able to access the internet.  Regional
      incumbents are generally offering broadband services over their legacy cable
      or
      telephone networks in most metropolitan areas of theUnited States.  Wireless
      internet service
      providers (“WISP’s”) are becoming much more prevalent, largely due to advances
      in technology and the demand for service in areas not adequately served by
      the
      incumbents.  During fiscal year 2007, we began offering wireless
      broadband internet services to customers located in the geographic area ofAmador County,California.





Recent
      advances in wireless Ethernet
      equipment now make it possible to build carrier-grade networks with
      significantly less capital investment than required in the past.  As
      recently as three years ago, a service which provided broadband speeds of
      100Mbps or more to an end-user, would have been prohibitively
      expensive.  Today, even faster speeds are available to business
      customers.  With the increased bandwidth now available to our
      customers, we are able to tailor our service offerings to suit the
      end-users’needs.  Synchronous
      connections (those with MATCHING upload and download speeds) are more important
      now than ever, and new wireless technologies make this
      possible.  Integrated voice services utilizing VoIP are a perfect
      example of the flexibility and performance synchronous connections
      allow.





3





Niche
      Focus- Broadband service in rural
      and underserved areas





The
      Company has recognized that many
      areas within theUnited
      Statesare lacking viable
      options for broadband internet access.  Generally, these are rural
      locations, which have not yet seen market penetration by regional telephony
      and
      cable incumbents.  With recent advances in wireless broadband
      technologies, we feel that we can offer a cost effective service, bringing
      high
      quality broadband internet to these underserved areas.





Niche
      Focus - Non-traditional broadband
      service offerings





The
      legacy services provided bytelecommunicationsincumbents have very
      specific limitations with regard to speeds, and are relatively
      expensive.Cableincumbents
      are generally not offering
      synchronous broadband speeds at all, thus limiting the scope of their products
      and services.  Wireless broadband technology enables the Company to
      provide services outside the limits of traditional telecommunications and cable
      based offerings.  Additionally, wireless broadband services can be
      easily and cost effectively upgraded to match the consumers changing
      needs.





Products
      and
      Services





Our
      goal is to provide the best possible
      communication experience to both residential and business users at affordable
      prices, allowing them to communicate seamlessly and effortlessly to and from
      anywhere in the world.





Rapid
      Link Wireless Broadband
      Service





Rapid
      Link provides Broadband Internet
      access via its wireless network equipment and service staff in ruralAmador County,California.  This
      service has been
      availablestartingOctober
      31, 2007, and is a
      servicethathas
      been marketed to consumers in the
      area for over 7 years by Communications Advantage, LLC, and Web-Breeze Networks,
      LLC.  Rapid Link acquired all the assets of Communications Advantage,
      LLC, and Web-Breeze Networks, LLC in October 2007.  The wireless
      broadband network covers over 350 square miles and serves more than 1400 users
      from 36 points of presence.  Other assets include web hosting, email,
      and national dial-up internet access.





We
      currently offer several internet
      access rate plans tailored to the needs of small business, home office and
      residential consumers.  Our service plans are designed to provide our
      customers the lowest possible rates while maintaining the service quality level
      they require.  Our broadband services feature synchronous internet
      access, which is critical to providing a satisfying internet experience when
      visiting newer “Web 2.0” sites.  Social networking experiences found
      with sites such as Myspace and Facebook benefit greatly from fast upload speeds,
      which are generally unavailable from the incumbent carriers.  In
      addition, we offer our customers a variety of additional services, including
      web
      hosting and email.  All of our broadband customers also receive a free
      dial-up account for use when away from home.





Rapid
      Link VoIP
      Services





Rapid
      Linkprovides an Internet-based
      communication
      service that works over virtually any high-speed Internet connection in the
      world.  Our service allows our customers to call to and/or from any
      phone in the world.  Rapid Link VoIP is a perfect complement to our
      broadband access service.  When used together, we are able to more
      closely control quality, by keeping calls on our own network as long as possible
      and avoiding the public internet as much as possible.





4





Wholesale
      Voice
      Termination





We
      offer call completion on a wholesale
      basis to domestic and international telecommunications
      companies.  This service enables our carrier customers to benefit from
      our VoIP and TDM voice network expertise without having to establish dozens
      of
      new relationships with smaller providers.  Our extensive experience
      and exiting relationships with voice service providers, allow us to offer
      reliable service to select destinations around the world at very competitive
      prices.





Legacy
      Products





These
      services, while still contributing
      a significant portion of our revenues, will continue to decrease as a percentage
      of our total revenues as we continue to develop and market new
      services.





International
      Re-origination
      Services





We
      provide a variety of international
      Re-origination services.  Our “Dial Thru” service allows customers the
      convenience of making local and/or international calls in the same manner as
      traditional long distance dialing.  In markets where we cannot
      currently provide Dial Thru service, we offer our Re-origination service, which
      allows a caller outside of the United States to place a long distance telephone
      call that appears to have originated from our US-based switch to the customer's
      location, and then connects the call through our network to anywhere in the
      world.  By completing the calls in this manner, we are able to provide
      very competitive rates to the customer.  Generally, the Dial Thru and
      Re-origination services are provided to customers that establish deposits or
      prepayments with us.





International
      Calling
      Cards





Our
“Global
      Roaming” service provides
      customers a single account number to initiate phone-to-phone calls from
      locations throughout the world using specific toll-free access
      numbers.  This service enables customers to receive the cost benefits
      associated with our telecommunications network throughout the
      world.





1+
      Long Distance





We
      also offer traditional 1+ long
      distance service to business and residential users throughout theU.S.We
      currently focus on SMEs
      through the agent channel, as well as our niche markets, which generally have
      a
      large amount of international calling.  By leveraging our
      long-standing international carrier relationships, we can provide low rates
      and
      excellent service when calling to countries that are not aggressively priced
      by
      the larger carriers.





Segment
      Information





Management
      regularly reviews one set of
      financial information and all of our products share similar economic
      characteristics.  Therefore, the Company has determined that it has
      one operating segment.





Recent
      Acquisitions





On
      October 31, 2007, the Company
      acquired 100% of the assets of Communications Advantage, LLC (“Communications
      Advantage”), and Web-Breeze Networks, LLC (“Web Breeze”).  The assets
      include a sizable wireless broadband network in a rural geographic area ofCaliforniathat
      fits into the Company’s niche
      market business model, a base of customers and revenues that are immediately
      accretive to our revenues and earnings, and a staff of tenured professionals
      with vast knowledge and experience in the wireless broadband
      sector.





On
      May 5, 2006, the Company acquired
      100% of the outstanding stock of Telenational Communications, Inc.
      (“Telenational”).Telenational historically
      serviced a
      sizable base of both retail and commercial customers which very closely mirror
      those customers Rapid Link has served.  This acquisition allows us toexpand our market share
      in
      the telecommunications industry whiletaking advantage of several
      significant
      economies of scale, both in respect to direct cost reductions, as well as
      operational efficiencies.We have subsequently
      moved
      substantially all of our operational and administrative functions to the
      Telenational headquarters inOmaha,Nebraska.





5





In
      October 2005, the Company completed
      the acquisition of the customer base of Integrated Telecommunications, Inc.,
      an
      international long distance carrier providing VoIP services to retail customers
      in theUnited Statesand
      wholesale services to
      customers worldwide.





Competition





The
      “Diversified Communication Services” industry is highly competitive, rapidly
      evolving, and subject to constant technological change.  Other
      providers currently offer one or more of each of the services offered by
      us.  Communications service companies compete for consumers based on
      price and quality, with the dominant providers conducting extensive advertising
      campaigns to capture market share.  As a service provider in Broadband
      Internet industry, we compete with dominant players such as Comcast Corp.
      (CMCSA), AT&T (T), all of which are substantially larger than us and have
      the resources, history and customer bases to dominate virtually every segment
      of
      the broadband internet market.  As a service provider in the VoIP
      telecommunications industry, we compete with such dominant providers as Skype
      and Vonage (VG), which are substantially larger than us and have greater
      resources, history and customer bases, and who may market services in areas
      and
      regions which may closely mirror ours.





We
      also
      compete with other smaller companies including Towerstream Corp. (TWER), and
      KeyOn Communications Holdings, Inc (KEYO).  We also believe that
      existing competitors are likely to continue to expand their service offerings
      to
      appeal to retailers and consumers especially in the area of wireless broadband
      internet service.





The
      market for international voice completion services is also highly
      competitive.  We compete both in the market for enhanced Internet
      communications services and in the market for carrier transmission
      services.  We believe that the primary competitive factors in the
      Internet and VoIP communications business are quality of service, price,
      convenience, and bandwidth.  We believe that the ability to offer
      enhanced service capabilities, including new services, will become an
      increasingly important competitive factor in the near future.





Wireless
      Broadband Internet Service
      Providers





During
      the past several years, a number
      of companies have introduced services that make Wireless Broadband Internet
      and
      Internet voice services available to businesses and
      consumers.  Towerstream Corporation and KeyOn Communications Holdings,
      Inc. offers wireless broadband internet and divisions of Net2Phone Inc. andDeltathree.com
      route traffic to
      destinations worldwide, and compete directly with us.  Other Internet
      telephony service providers focus on a retail customer base and may in the
      future compete with us.  These companies offer the kinds of voice
      services we are currently offering.  In addition, companies currently
      in related markets are providing wireless broadband internet and VoIP services,
      or adapt their products to enable voice over the Internet
      services.  Many of these companies have migrated into the wireless
      broadband and Internet telephony market as direct
      competitors.





Suppliers





Our
      principal suppliers consist of
      domestic and international telecommunications carriers,InternetServiceProviders,
      and Broadband suppliers.  Relationships currently
      exist with a number of reliable carriers.  During the fiscal year
      ended October 31, 2007, three of the Company's suppliers accounted for
      approximately 31%, 22%, and 12% of the Company's total costs of
      revenues.  Due to the highly competitive nature of the
      telecommunications business, we believe that the loss of any carrier would
      not
      have a long-term material impact on our business.





6





Sales
      and Marketing





We
      sell and market our services through
      vertical web portals, magazines, local military base events, and third-party
      resellers.  Our Company also receives a good deal of referrals from
      existing customers.  Our revenues are primarily derived from direct
      sales to business and residential accounts, sales through commissioned agents
      and wholesale sales to other telecommunications providers.  We plan to
      focus our sales efforts on expanding niche markets, as well as add products
      and
      services targeting residential customers in these niche
      areas.





We
      offer businessesandindividuals
      the opportunity to become
      resellers of our services through our affiliate and reseller
      programs.  Resellers are able to purchase bulk accounts and hardware
      at reseller specific pricing and they are then able to resell these accounts
      to
      private individuals under the Rapid Link brand.





We
      have substantial revenues in foreign
      markets.  For the fiscal years ended October 31, 2007 and 2006, $6.4
      million or 37% and $4.4 million or 33% of our total revenue from continuing
      operations for each year, respectively, originated from foreign
      markets.





Customers





We
      focus our current retail sales and
      marketing efforts on our Wireless Broadband Internet products and services,
      targeting residential customers and SMEs.  We rely heavily on the use
      of local advertising to generate retail sales in markets where we offer our
      Broadband service.  Additionally,we
      utilize agent sales channels to
      generate revenues.  By doing so, we believe that we establish a wide
      base of customers with little vulnerability based on lack of customer
      loyalty.  Our wholesale customers are primarily large
      telecommunications customers in theUnited States,
      and medium to large foreign Postal,
      Telephone and Telegraph companies, which are those entities responsible for
      providing telecommunications services in foreign markets and are usually
      government owned or controlled.





During
      the fiscal year ended October 31,
      2007, we did not provide wholesale services to any customer that accounted
      for
      more than 10% of our revenue.  During the fiscal year ended October
      31, 2006, we provided wholesale services to a customer who accounted for 12%
      of
      our revenues, and to another customer who accounted for 10% of
      revenues.  We believe the loss of any individual customer would not
      materially impact our business.  We generally do business with
      approximately 25 wholesale customers, any of which either collectively, or
      in
      most cases individually, could compensate for the loss of a major
      customer.  Typically, we have limited capacity, imposed by our
      suppliers, in which to transmit our telecommunications traffic.  We
      frequently offer this capacity to our larger customers, however it is possible
      to offer these opportunities to all or a few of our wholesale customers at
      any
      time, thus reducing our reliance on any one customer and providing a relatively
      quick transition between customers if we should lose a
      customer.





Employees





As
      of December 26, 2007, we have
      twenty-eightfull-time
      employees,nineof
      which perform administrative and
      financial functions,fourteenof
      which perform customer support
      duties, andthirteenof
      which have experience in
      telecommunications operations and/or sales.  Seventeen employees are
      located inOmaha,Nebraska,
      seven employees are located inCalifornia,
      and one employee is located inColorado.  None
      of our employees is
      represented by a labor union, and we consider our employee relations to be
      good.





7





Debt
      Restructurings





On
      October 31, 2007, the Company entered
      into a series of agreements, which modified its debt structure with Global
      Capital Funding Group Ltd. ("Global"), and with GCA Strategic Investment Fund
      Limited ("GCA").  The agreements call for two outstanding notes due in
      November of 2007 payable to Global and GCA to be extended toOctober 31,
      2009.  There were no other
      material changes to the terms of the existing notes.  The Company
      issued 50,000 warrant options to purchase common stock to Global and GCA in
      consideration for the extensions.





On
      October 31, 2007, the Company entered
      into an agreement, which modified its debt structure with Apex Acquisitions,
      Inc. ("Apex”).  The agreement calls for
      the outstanding note due in November of 2007 payable to Apex to be extended
      toNovember 1,
      2009.  The note was also
      modified to allow for the balance to be convertible to common stock at market
      pricing.  TheCompany
      President and Chief Financial
      Officer is the majority stockholder of Apex.





On
      October 31, 2007, the Company entered
      into an agreement, which modified its debt structure with the Company’s Chairman
      and Chief Executive Officer,John Jenkins.  The
      agreement calls for the
      outstanding note due in February of 2008 payable toJohn Jenkinsto
      be extended toNovember 1,
      2009.  There were no other
      material changestothe
      existing
      note.





Intellectual
      Property





We
      do not hold any patents or
      trademarks.  Our products and services are available to other
      telecommunications companies.





Government
      Regulation





Telecommunications
      services are subject
      to extensive government regulation at both the federal and state levels in
      theUnited States.  Any
      violations of these
      regulations may subject us to enforcement penalties.  The Federal
      Communications Commission ("FCC") has jurisdiction over all telecommunications
      common carriers to the extent they provide interstate or international
      communications services, including the use of local networks to originate or
      terminate such services. Each state regulatory commission has jurisdiction
      over
      the same carriers with respect to their provision of local and intrastate long
      distance communications services. Significant changes to the applicable laws
      or
      regulations imposed by any of these regulators could have a material adverse
      effect on our business, operating results and financial
      condition.





The
      following summary of regulatory
      developments and legislation is intended to describe what we believe to be
      the
      most important, currently effective and proposed international, federal, state,
      and local regulations and legislation that are likely to materially affect
      us.  Some of these and other existing federal and state regulations
      are the subject of judicial proceedings and legislative and administrative
      proposals that could change, in varying degrees, the manner in which this
      industry operates.  We cannot predict the outcome of any of these
      proceedings or their impact on the telecommunications industry or us at this
      time.  Some of these future legislative, regulatory, or judicial
      changes could have a material adverse impact on our
      business.





8





Regulation
      by the Federal Communications
      Commission-Universal
      Service
      Funds





In
      1997, the FCC issued an order,
      referred to as the Universal Service Order, to implement the provisions of
      the
      Telecommunications Act of 1996 relating to the preservation and advancement
      of
      universal telephone service. The Universal Service Order requires all
      telecommunications carriers providing interstate telecommunications services
      to
      periodically contribute to universal service support programs administered
      by
      the FCC (the "Universal Service Funds"). The periodic contribution requirements
      to the Universal Service Funds under the Universal Service Order are currently
      assessed based on a percentage of each contributor's interstate and
      international end user telecommunications revenues reported to the FCC, which
      we
      measure and report in accordance with the legislative rules adopted by the
      FCC.  The contribution rate factors are determined quarterly and
      carriers, including us, are billed for their contribution requirements each
      month based on projected interstate and international end-user
      telecommunications revenues, subject to periodic reconciliation.  We,
      and most of our competitors, pass through these Universal Service Fund
      contributions in the price of our services, either as a separate surcharge
      or as
      part of the base rate.  In addition to the FCC universal service
      support mechanisms, state regulatory agencies also operate parallel universal
      service support systems.  As a result, we are subject to state, as
      well as federal, universal service support contribution requirements, which
      vary
      from state to state.  As with any regulatory obligation, if a federal
      or state regulatory body determines that we have incorrectly calculated and/or
      remitted any universal service fund contribution, we could be subject to the
      assessment and collection of past due remittances as well as interest and
      penalties thereon.  Furthermore, if the FCC determines that we have
      incorrectly calculated and overstated a separately invoiced line item identified
      as a recovery of contributions to the Universal Service Funds we could be
      required to repay any such over-collection and be subject to
      penalty.





The
      FCC is currently considering several
      proposals that would fundamentally alter the basis upon which our Universal
      Service Fund contributions are determined and the means by which such
      contributions may be recovered from our customers, changing from a revenue
      percentage measurement to a connection (capacity), or telephone number (access)
      measurement.  Because we pass through these contributions to
      consumers, a change in the contribution methodology would not directly affect
      our net revenues; however, a change in how contributions are assessed might
      affect our customers differently than the customers of competing services,
      and
      therefore could either increase or decrease the attractiveness of our
      services.  The timing and effect of any FCC action on this proposal is
      not yet known.





Access
      Charges





As
      a long distance provider, we remit
      access fees directly to local exchange carriers or indirectly to our underlying
      long distance carriers for the origination and termination of our long distance
      telecommunications traffic.  Generally,intrastate
      access charges are higher thaninterstateaccess
      charges.  Therefore, to
      the degree access charges increase or a greater percentage of our long distance
      traffic is intrastate, our costs of providing long distance services will
      increase.





In
      April 2001, the FCC released a Notice
      of Proposed Rulemaking in which it proposed a "fundamental re-examination of
      all
      currently regulated forms of intercarrier compensation.”  Several
      different industry groups have submitted access charge reform proposals to
      the
      FCC.  The FCC has not yet acted on these proposals and it is not yet
      known when it will act.  Therefore, at this time we cannot predict the
      effect that the FCC's ultimate determinations regarding access charge reform
      may
      have upon our business.





9





Taxes
      and Regulatory
      Fees





We
      are subject to numerous local, state,
      and federal taxes and regulatory fees, including, but not limited to, the
      Federal excise tax, FCC universal service fund contributions and regulatory
      fees, and numerous public utility commission regulatory fees.  We have
      procedures in place to ensure that we properly collect taxes and fees from
      our
      customers and remit such taxes and fees to the appropriate entity pursuant
      to
      applicable law and/or regulation.  If our collection procedures prove
      to be insufficient or if a taxing or regulatory authority determines that our
      remittances were inadequate, we could be required to make additional payments,
      which could have a material adverse effect on our business.





International
      Telecommunications
      Services - Section 214.  In the United States, to the extent that we
      offer services as a carrier, we are required to obtain authority under Section
      214 of the Communications Act of 1934 to provide telecommunications service
      that
      originates within the United States and terminates outside the United
      States.  We have obtained the required Section 214 authorization from
      the FCC to provideU.S.international
      service.  As a condition to our Section 214 authorization, we are
      subject to various communications-oriented reporting and filing
      requirements.  Failure to comply with the FCC's rules could result in
      fines, penalties, forfeitures, or revocation of our FCC authorization, each
      of
      which could have a material adverse effect on our business, financial condition,
      and results of operation.





International
      Telecommunications
      Services - International Settlements





The
      FCC's International Settlements
      Policy ("Policy") restricts the terms on which U.S.-based carriers and certain
      of their foreign correspondents settle the cost of terminating each other's
      traffic over their respective networks.  Under the International
      Settlements Policy, absent approval from the FCC, international
      telecommunications service agreements with dominant foreign carriers must be
      non-discriminatory, provide for settlement rates usually equal to one-half
      of
      the accounting rate, and require proportionate share of return
      traffic.  This Policy, however, does not apply to arrangements with
      any non-dominant foreign carrier or, since March 30, 2005, with any dominant
      foreign carrier on routes where a demonstration has been made that at least
      oneU.S.carrier
      has a settlement arrangement
      with the dominant foreign carrier that is compliant with the FCC's applicable
      benchmark settlement rates. This action has greatly lessened the number of
      instances in which the Policy applies, effectively grantingU.S.and
      foreign carriers greater freedom to
      set rates and terms in their agreements.  As a result, 164 countries
      currently are exempt from the International Settlements Policy, representing
      over 90% of all U.S.-originated international
      traffic.  Notwithstanding the foregoing, the FCC could find that we do
      not meet certain International Settlements Policy requirements with respect
      to
      certain of our foreign carrier agreements.  Although the FCC generally
      has not issued penalties in this area, it has issued a Notice of Apparent
      Liability to a U.S. company for violations of the International Settlements
      Policy and it could, among other things, issue a cease and desist order, impose
      fines or allow the collection of damages if it finds that we are not in
      compliance with the International Settlements Policy.  Any of these
      events could have a material adverse effect on our business, financial
      condition, or results of operation.





State
      Regulations





Our
      intrastate long distance operations
      are subject to various state laws and regulations, including, in most
      jurisdictions, certification, and tariff filing requirements.  As a
      certificated carrier, consumers may file complaints against us at the public
      service commissions.  Certificates of authority can generally be
      conditioned, modified, canceled, terminated, or revoked by state regulatory
      authorities for failure to comply with state law and/or the rules, regulations
      and policies of the state regulatory authorities.  Fines and other
      penalties also may be imposed for such violations.  Public service
      commissions also regulate access charges and other pricing for
      telecommunications services within each state.  The Regional Bell
      Operating Companies and other local exchange carriers have been seeking
      reduction of state regulatory requirements, including greater pricing
      flexibility, which, if granted, could subject us to increased price
      competition.





10





Regulation
      of Internet Telephony and
      Other IP-Enabled Services





The
      use of the Internet to provide
      telephone service is a fairly recent market development.  At present,
      we are not aware of any domestic, and are aware of only a few foreign, laws
      or
      regulations that prohibit voice communications over the
      Internet.





United
      States





We
      believe that, underU.S.law,
      the Internet-related services that
      we provide constitute information services as opposed to regulated
      telecommunications services and, as such, are not currently actively regulated
      by the FCC or any state agencies charged with regulating telecommunications
      carriers.  We cannot provide assurances that our Internet-related
      services will not be actively regulated in the future.  Several
      efforts have been made in theU.S.to
      enact federal legislation that would
      either regulate or exempt from regulation services provided over the
      Internet.  Increased regulation of the Internet may slow its growth,
      particularly if other countries also impose regulations.  Such
      regulation may negatively impact the cost of doing business over the Internet
      and materially adversely affect our business, operating results, financial
      condition and future prospects.





The
      advent of VoIP services being
      provided by pure play VoIP providers, such as Vonage, cable television and
      other
      companies, and the increased number of traditional telephone companies entering
      the retail VoIP space has heightened the need for U.S. regulators to determine
      whether VoIP is subject to the same regulatory and financial constraints as
      wire
      line telephone service. On November 9, 2004, the FCC issued an order in response
      to a petition from Vonage declaring that Vonage-style VoIP services were exempt
      from state telecommunications regulations. The FCC order applies to all VoIP
      offerings provided over broadband services. However, this order did not clarify
      whether, or under what terms, VoIP traffic may be subject to intercarrier
      compensation requirements; whether VoIP was subject to state tax or commercial
      business regulations; or whether VoIP providers had to comply with obligations
      related to 911 emergency calls, and the Universal Service Fund ("USF") of the
      Communications Assistance for Law Enforcement Act ("CALEA").  The FCC
      is addressing many of these issues through its "IP-Enabled Services Proceeding,”
which opened in February 2004.





Due
      to perceived urgency, however, the
      FCC did take some specific actions outside of the broad IP-Enabled Services
      Proceeding to address emergency services and law enforcement
      issues.  On June 3, 2005, the FCC issued an order establishing rules
      requiring interconnected VoIP service providers to incorporate 911 emergency
      call capabilities for their customers as a standard feature of their services,
      rather than an optional enhancement.  And, on August 5, 2005, the FCC
      announced the extension of CALEA to certain types of VoIP
      providers.  Any additional regulation of IP-based services concerns us
      and we must therefore remain diligent with respect to evaluating the impact
      of
      FCC proposals and decisions.  However, based on the nature of the
      IP-enabled services we currently provide, we do not believe either FCC decision
      will materially adversely affect our business, operating results, financial
      condition, or future prospects.





The
      FCC has also considered whether to
      impose surcharges or other common carrier regulations upon certain providers
      of
      VoIP or Internet telephony.  While the FCC has presently refrained
      from such regulation, the regulatory classification of Internet telephony
      remains unresolved.  If the FCC were to determine that certain
      Internet-related services including Internet telephony services are subject
      to
      FCC regulations as telecommunications services, the FCC could subject providers
      of such services to traditional common carrier regulation, including
      requirements to make universal service contributions, and pay access charges
      to
      local telephone companies.  A decision to impose such chargescould also have a
      retroactive effect,which
      could materially adversely affect
      us.  It is also possible that the FCC will adopt a regulatory
      framework other than traditional common carrier regulation that would apply
      to
      Internet telephony providers.  Any such determinations could
      materially adversely affect our business, financial condition, operating results
      and future prospects to the extent that any such determinations negatively
      affect the cost of doing business over the Internet or otherwise slow the growth
      of the Internet.  Congressional dissatisfaction with FCC conclusions
      could result in requirements that the FCC impose greater or lesser regulation,
      which in turn could materially adversely affect our business, financial
      condition, operating results and future prospects.





11





States





State
      regulatory authorities may also
      retain jurisdiction to regulate certain aspects of the provision of intrastate
      Internet telephony services.  Several state regulatory authorities
      have initiated proceedings to examine the regulation of such
      services.  Others could initiate proceedings to do
      so.





International





The
      regulatory treatment of Internet
      telephony outside of theU.S.varies
      widely from country to
      country.  A number of countries that currently prohibit competition in
      the provision of voice telephony also prohibit Internet
      telephony.  Other countries permit but regulate Internet
      telephony.  Some countries will evaluate proposed Internet telephony
      service on a case-by-case basis and determine whether it should be regulated
      as
      a voice service or as another telecommunications service.  Finally, in
      many countries, Internet telephony has not yet been addressed by legislation
      or
      regulation.  Increased regulation of the Internet and/or Internet
      telephony providers or the prohibition of Internet telephony in one or more
      countries could materially adversely affect our business, financial condition,
      operating results and future prospects.





Other
      General
      Regulations





Although
      we do not know of any other
      specific new or proposed regulations that will affect our business directly,
      the
      regulatory scheme for competitive telecommunications market is still evolving,
      and there could be unanticipated changes in the competitive environment for
      communications in general.  For example, the FCC is currently
      considering rules that govern how Internet providers share telephone lines
      with
      local telephone companies and compensate local telephone
      companies.  These rules could affect the role that the Internet
      ultimately plays in the telecommunications market.





Risk
      Factors





Our
      cash flow may not be sufficient to
      satisfy our cost of operations.  If not, we must obtain equity or debt
      instruments.





For
      the fiscal years ended October 31,
      2007 and 2006, we recorded net losses from continuing operations of
      approximately $2 million and $1.1 million, respectively, on revenues from
      continuing operations of approximately $17.3 million and $13.4 million,
      respectively.For fiscal year 2007,
      our net loss from
      continuing operations included approximately $2 million in non-cash expenses,
      primarily depreciation expense and non-cash interest expense.  In
      addition, we generated approximately $659,000 of positive cash flow from
      operations during fiscal year 2007.  As a result of historical losses,
      we currently have a substantial working capital deficit.To
      be able to service our debt
      obligations over the course of the 2008 fiscal year, we must generate
      significant cash flowthroughadditional
      financing oran equity infusion.If
      we are unable to do so or are
      otherwise unable to obtain funds necessary to make required payments on our
      trade debt and other indebtedness,our ability to continue
      operations may
      be jeopardized.





12





Our
      independent auditors have included a
      going concern paragraph in their audit opinion on our consolidated financial
      statements for the fiscal year ended October 31, 2007, which states “The Company
      has suffered recurring losses from continuing operations during each of the
      last
      two fiscal years.  Additionally, at October 31, 2007, the Company's
      current liabilities exceeded its current assets by $5.4
      million and the Company had a
      shareholders' deficit totaling $2.8 million.Although our financial
      condition is
      improving, particularly from a cash flow perspective, these conditions raise
      doubt about the Company's ability to continue as a going
      concern.





Our
      operating history makes it difficult
      to accurately assess our general prospects in the broadband wireless internet
      sector of the Diversified Communications Service industry and the effectiveness
      of our business strategy.  As of the date of this report, most of our
      revenues are not derived from broadband internet services.  Instead,
      we generated most of our revenues from retail fixed-line and wholesale
      communication services.  In addition, we have limited meaningful
      historical financial data upon which to forecast our future sales and operating
      expenses.  Our future performance will also be subject to prevailing
      economic conditions and to financial, business and other
      factors.  Accordingly, we cannot assure that we will successfully
      implement our business strategy or that our actual future cash flows from
      operations will be sufficient to satisfy our debt obligations and working
      capital needs.





To
      implement our business strategy, we
      will need an additional equity infusion.  There is no assurance that
      adequate levels of additional equity or financing will be available at all
      or on
      acceptable terms.  If we are unable to obtain additional equity or
      financing on terms that are acceptable to us, we could be forced to dispose
      of
      assets to make up for any shortfall in the payments due on our debt under
      circumstances that might not be favorable to realizing the highest price for
      those assets.  A portion of our assets consist of intangible assets,
      the value of which will depend upon a variety of factors, including the success
      of our business. As a result, if we do need to sell any of our assets, we cannot
      assure that our assets could be sold quickly enough, or for amounts sufficient,
      to meet our obligations.





Potential
      for substantial dilution to
      our existing stockholders exists.





The
      issuance of shares of common stock
      upon conversion of secured convertible notes or upon exercise of outstanding
      warrants and/or stock options may cause immediate and substantial dilution
      to
      our existing stockholders.  In addition, any additional financing may
      result in significant dilution to our existing stockholders.





We
      face competition from numerous,
      mostly well-capitalized sources.





The
      market for our products and services
      is highly competitive.  We face competition from multiple sources,
      many of which have greater financial resources and a substantial presence in
      our
      markets and offer products or services similar to our
      services.  Therefore, we may not be able to successfully compete in
      our markets, which could result in a failure to implement our business strategy,
      adversely affecting our ability to attract and retain new
      customers.  In addition, competition within the industries in which we
      operate is characterized by, among other factors, price, and the ability to
      offer enhanced services.  Significant price competition would reduce
      the margins realized by us in our telecommunications operations.  Many
      of our competitors have greater financial resources to devote to research,
      development, and marketing, and may be able to respond more quickly to new
      or
      merging technologies and changes in customer requirements.





We
      have pledged our assets to existing
      creditors.





Our
      secured convertible notes are
      secured by a lien on substantially all of our assets.  A default by us
      under the secured convertible notes would enable the holders of the notes to
      take control of substantially all of our assets.  The holders of the
      secured convertible notes have no operating experience in our industry and
      if we
      were to default and the note holders were to take over control of our Company,
      they could force us to substantially curtail or cease our
      operations.  If this happens, you could lose your entire investment in
      our common stock.





13





In
      addition, the existence of our asset
      pledges to the holders of the secured convertible notes will make it more
      difficult for us to obtain additional financing required to repay monies
      borrowed by us, continue our business operations, and pursue our growth
      strategy.





The
      regulatory environment in our
      industry is very uncertain.





The
      legal
      and regulatory environment pertaining to the Internet and Diversified
      Communication Services industry is uncertain and changing rapidly as the use
      of
      the Internet increases.  For example, in the United States, the FCC
      had been considering whether to impose surcharges or additional regulations
      upon
      certain providers of Internet telephony, and indeed the FCC has confirmed that
      providers must begin charging Universal Service access charges of roughly
      6.5%.





In
      addition, the regulatory treatment of Internet telephony outside of the United
      States varies from country to country.  There can be no assurance that
      there will not be legally imposed interruptions in Internet telephony in these
      and other foreign countries.  Interruptions or restrictions on the
      provision of Internet telephony in foreign countries may adversely affect our
      ability to continue to offer services in those countries, resulting in a loss
      of
      customers and revenues.





New
      regulations could increase the cost
      of doing business over the Internet or restrict or prohibit the delivery of
      our
      products or services using the Internet. In addition to new regulations being
      adopted, existing laws may be applied to the Internet.  Newly enacted
      laws may cover issues that include sales and other taxes, access charges, user
      privacy, pricing controls, characteristics and quality of products and services,
      consumer protection, contributions to the Universal Service Fund, an
      FCC-administered fund for the support of local telephone service in rural and
      high-cost areas, cross-border commerce, copyright, trademark and patent
      infringement, and other claims based on the nature and content of Internet
      materials.





Changes
      in the technology relating to Broadband Wireless Internet could threaten our
      operations.





The
      industries in which we compete are
      characterized, in part, by rapid growth, evolving industry standards,
      significant technological changes, and frequent product
      enhancements.  These characteristics could render existing systems and
      strategies obsolete and require us to continue to develop and implement new
      products and services, anticipate changing consumer demands and respond to
      emerging industry standards and technological changes.  No assurance
      can be given that we will be able to keep pace with the rapidly changing
      consumer demands, technological trends, and evolving industry
      standards.





We
      need to develop and maintain
      strategic relationships around the world to be successful.





Our
      international business, in part, is
      dependent upon relationships with distributors, governments, or providers of
      telecommunications services in foreign markets.  The failure to
      develop or maintain these relationships could have an adverse impact on our
      business.





We
      rely on three key senior
      executives.





We
      rely heavily on our senior management
      team ofJohn
      Jenkins, Christopher
      Canfield and Michael Prachar, and our future success may depend, in large part,
      upon our ability to retain our senior executives.  In addition to the
      industry experience and technical expertise they provide to the Company, senior
      management has been the source of significant amounts of funding that have
      helped to allow us to meet our financial obligations.





14





Any
      natural disaster or other occurrence
      that renders our operations center inoperable could significantly hinder the
      delivery of our services to our customers because we lack an off-site back-up
      communications system.





Currently,
      our disaster recovery systems
      focus on internal redundancy and diverse routing within our operations
      center.  We currently do not have an off-site communications system
      that would enable us to continue to provide communications services to our
      customers in the event of a natural disaster, terrorist attack or other
      occurrence that rendered our operations center
      inoperable.  Accordingly, our business is subject to the risk that
      such a disaster or other occurrence could hinder or prevent us from providing
      services to some or all of our customers.  The delay in the delivery
      of our services could cause some of our customers to discontinue business with
      us, which could have a material adverse effect financial condition, and results
      of operations.





We
      may be unable to manage our
      growth.





We
      intend to expand our Wireless
      Broadband Internet network and the range of enhanced communication services
      that
      we provide.  Our expansion prospects must be considered in light of
      the risks, expenses and difficulties frequently encountered by companies in
      new
      and rapidly evolving markets.  Our revenues will suffer if we are
      unable to manage this expansion properly.





Our
      OTC Bulletin Board listing
      negatively affects the liquidity of our common stock as compared with other
      trading boards.





Our
      common stock currently trades on the
      OTC Bulletin Board.  Therefore, no assurances can be given that a
      liquid trading market will exist at the time any stockholder desires to dispose
      of any shares of our common stock.  In addition, our common stock is
      subject to the so-called "penny stock" rules that impose additional sales
      practice requirements on broker-dealers who sell such securities to persons
      other than established customers and accredited investors (generally defined
      as
      an investor with a net worth in excess of $1 million or annual income exceeding
      $200,000, or $300,000 together with a spouse).  For transactions
      covered by the penny stock rules, a broker-dealer must make a suitability
      determination for the purchaser and must have received the purchaser's written
      consent to the transaction prior to sale.  Consequently, both the
      ability of a broker-dealer to sell our common stock and the ability of holders
      of our common stock to sell their securities in the secondary market may be
      adversely affected.  The Securities and Exchange Commission (the
“SEC”) has adopted regulations that define a "penny stock" to be an equity
      security that has a market price of less than $5.00 per share, subject to
      certain exceptions.  For any transaction involving a penny stock,
      unless exempt, the rules require the delivery, prior to the transaction, of
      a
      disclosure schedule relating to the penny stock market.  The
      broker-dealer must disclose the commissions payable to both the broker-dealer
      and the registered representative, current quotations for the securities and,
      if
      the broker-dealer is to sell the securities as a market maker, the broker-dealer
      must disclose this fact and the broker-dealer's presumed control over the
      market.  Finally, monthly statements must be sent disclosing recent
      price information for the penny stock held in the account and information on
      the
      limited market in penny stocks.





Our
      executive officers, directors and major shareholders have significant
      shareholdings, which may lead to conflicts with other shareholders over
      corporate governance matters.





15





Our
      current directors, officers and more than 5% shareholders, as a group,
      beneficially own approximately 75% of our outstanding common
      stock.  Acting together, these shareholders would be able to
      significantly influence all matters that our shareholders vote upon, including
      the election of directors and mergers or other business
      combinations.  As a result, they have the ability to control our
      affairs and business, including the election of directors and subject to certain
      limitations, approval or preclusion of fundamental corporate
      transactions.  This concentration of ownership of our common stock may
      delay or prevent a change in the control, impede a merger, consolidation,
      takeover or other transaction involving us, or discourage a potential acquirer
      from making a tender offer or otherwise attempting to obtain control of our
      Company.





We
      will be subject to the requirements of section 404 of the Sarbanes-Oxley Act.
      If
      we are unable to timely comply with section 404 or if the costs related to
      compliance are significant, our profitability, stock price and results of
      operations and financial condition could be materially adversely
      affected.





We
      will
      be required to comply with the provisions of Section 404 of the Sarbanes-Oxley
      Act of 2002, which requires that we document and test our internal controls
      and
      certify that we are responsible for maintaining an adequate system of internal
      control procedures.  This section also requires that our independent
      registered public accounting firm opine on those internal controls and
      management’s assessment of those controls.  We are currently
      evaluating our existing controls against the standards adopted by the Committee
      of Sponsoring Organizations of the Treadway Commission.  During the
      course of our ongoing evaluation and integration of the internal controls of
      our
      business, we may identify areas requiring improvement, and we may have to design
      enhanced processes and controls to address issues identified through this
      review.





We
      intend to implement the requisite
      changes to become compliant with existing and new requirements that apply to
      our
      Company.





We
      believe that the out-of-pocket costs, the diversion of management’s attention
      from running the day-to-day operations and operational changes caused by the
      need to comply with the requirements of Section 404 of the Sarbanes-Oxley Act
      could be significant.  If the time and costs associated with such
      compliance exceed our current expectations, our results of operations could
      be
      adversely affected.  We cannot be certain at this time that we will be
      able to successfully complete the procedures, certification and attestation
      requirements of Section 404 or that our auditors will not have to report a
      material weakness in connection with the presentation of our financial
      statements.  If we fail to comply with the requirements of Section 404
      or if our auditors report such material weakness, the accuracy and timeliness
      of
      the filing of our annual report may be materially adversely affected and could
      cause investors to lose confidence in our reported financial information, which
      could have a negative effect on the trading price of our common
      stock.  In addition, a material weakness in the effectiveness of our
      internal controls over financial reporting could result in an increased chance
      of fraud and the loss of customers, reduce our ability to obtain financing
      and
      require additional expenditures to comply with these requirements, each of
      which
      could have a material adverse effect on our business, results of operations
      and
      financial condition.





Item
      2.  Description of
      Property.





We
      lease approximately 11,500 square
      feet inOmaha,Nebraska,
      located at5408 N. 99thStreet.  Our
      operations, information
      systems, and executive headquarters are located in theOmahafacility.  We
      also have a
      small sales and administrative office inJohannesburg,South
      Africa.  We believe that our
      facilities are sufficient for the operation of our business for the foreseeable
      future.  The expiration dates of the above-mentioned lease agreements
      are as follows:





16





June
                30,
                2011
            Omaha
–
Operational
                and
                Administrative HeadquartersMonth
                to
                month
            South
                Africa Sales and
                Administrative Office





Item
      3.  Legal
      Proceedings.





The
      Company, from time to time, may be
      subject to legal proceedings and claims in the ordinary course of business,
      including claims of alleged infringement of trademarks and other intellectual
      property of third parties by the Company.  Such claims, even if not
      meritorious, could result in the expenditure of significant financial and
      managerial resources.





Cygnus
      Telecommunications Technology, LLC.  On June 12, 2001, Cygnus
      Telecommunications Technology, LLC ("Cygnus"), filed a patent infringement
      suit
      (case no. 01-6052) in the United States District Court, Central District of
      California, with respect to the Company's "international re-origination"
      technology.  On March 29, 2007 the United States District Court in San
      Jose, California ruled that all Cygnus “international re-origination” patents
      are invalid, and dismissed all cases against Rapid Link (fka Dial Thru
      International Corporation) and related parties.  Cygnus is appealing to a
      higher court.





State
      ofTexas.  During
      fiscal 2004, the
      Company determined, based on final written communications with the State ofTexas(the
“State”),
      that it had a liability
      for sales taxes (including penalties and interest) totaling $1.1
      million.  The Company had previously accrued an estimated settlement
      amount of $350,000 during fiscal 2003.  During fiscal 2004, the
      Company accrued an additional $750,000.  On August 5, 2005, the State
      ofTexasfiled
      a lawsuit in the 53rdJudicialDistrictCourtofTravisCounty,Austin,Texasagainst
      the Company.  The
      lawsuit requests payment of approximately $1.162 million, including penalties
      and for state and local sales tax.  During fiscal 2005, the Company
      accrued an additional $62,000.  The sales tax amount due is
      attributable to audit findings of the State of Texas for the years 1995 to
      1999
      associated with Canmax Retail Systems, a current subsidiary of ours, and former
      operating subsidiary providing retail automation software and related services
      to the retail petroleum and convenience store industries.  The State
      ofTexasdetermined
      that Canmax Retail Systems
      did not properly remit sales tax on certain transactions.  Management
      believes that it will be able to negotiate a reduced settlement amount with
      the
      state, although there can be no assurance that the Company will be successful
      with respect to such negotiations.On
      January 8, 2008, the Attorney General
      of Texas offered to settle all sales tax claims against the Company for a sum
      total of $250,000, which must be paid by April 1, 2008 to relieve the Company
      from any and all sales tax liabilities including penalties and
      interest.The
      Company is currently considering whether to accept the
      offer.





The
      Company will continue to
      aggressively pursue the collection of unpaid sales taxes from former customers
      of Canmax Retail Systems, primarily Southland Corporation, now 7-Eleven
      Corporation ("7-Eleven"), as a majority of the amount owed to the State ofTexasis
      the result of uncollected taxes from
      the sale of software to 7-Eleven during the period under audit.However,
      there can be no assurance that
      the Company will be successful with respect to such
      collections.





On
      January 12, 2004, the Company filed a
      suit against 7-Eleven in the 162nd District Court inDallas,Texas.  The
      Company's suit claims a
      breach of contract on the part of 7-Eleven in failing to reimburse it for taxes
      paid to the State as well as related taxes for which the Company is currently
      being held responsible by the State.  The Company's suit seeks
      reimbursement for the taxes paid and a determination by the court that 7-Eleven
      is responsible for paying the remaining tax liability to the
      State.





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





No
      matters were submitted to a vote of
      security holders during the fourth quarter of fiscal 2007.





17





PART
      II





Item
      5.  Market for Common
      Equity and Related Stockholder Matters.





Market
      for the Company’s Common
      Stock





The
      Company’s common stock, $0.001 par
      value, is quoted on the OTC Bulletin Board under the trading symbol
“RPID”.  Each share ranks equally as to dividends, voting rights,
      participation in assets on winding-up and in all other respects.  No
      shares have been or will be issued subject to call or
      assessment.  There are no preemptive rights, provisions for redemption
      or for either cancellation or surrender, or provisions for sinking or purchase
      funds.





The
      following table sets forth, for the
      fiscal periods indicated, the high and low closing sales price per share of
      our
      common stock as reported on the OTC Bulletin Board:





High
            
            
            LowFiscal
                Year Ended October 31, 2007Fourth
                Quarter
            
            $
            0.11
            
            
            $
            0.04Third
            
            $
            0.08
            
            
            $
            0.03Second
                Quarter
            
            $
            0.09
            
            
            $
            0.06First
                Quarter
            
            $
            0.10
            
            
            $
            0.06Fiscal
                Year Ended October 31, 2006Fourth
                Quarter
            
            $
            0.14
            
            
            $
            0.06Third
                Quarter
            
            $
            0.22
            
            
            $
            0.09Second
                Quarter
            
            $
            0.40
            
            
            $
            0.12First
                Quarter
            
            $
            0.19
            
            
            $
            0.08





The
      market quotations presented reflect
      inter-dealer prices, without retail mark-up, mark-down or commissions and may
      not necessarily reflect actual transactions.





The
      closing price for our common stock on January 8, 2008, as reported on the OTC
      Bulletin Board, was $0.08.





Dividends





We
      have never declared or paid any cash
      dividends on our common stock and do not presently intend to pay cash dividends
      on our common stock in the foreseeable future.  We intend to retain
      future earnings for reinvestment in our business.





Holders
      of Record





There
      were 479 stockholders of record as of January 8, 2008.





Equity
      Compensation
      Plans





The
      following table sets forth, as of
      October 31, 2007, certain information related to the Company’s compensation
      plans under which shares of our common stock are authorized for
      issuance.





18


Plan
                Category
            
            Number
                ofSecurities
                to beIssued
                uponExercise
                ofOutstanding
                OptionsWarrants
                and Rightscolumn
                (a)
            
            
            Weighted-AverageExercise
                Price ofOutstandingOptions,Warrants
                and
                Rights
            
            
            Number
                ofSecuritiesRemaining
                AvailableFor
                Future IssuanceUnder
                EquityCompensationPlans
                (ExcludingSecuritiesReflected
                in columnin
                column
                (a))Equity
                compensationplans
                approvedby
                ecurity holders
            
            
            1,190,000
              (1)
            
            
            
            $
              0.10
            
            
            
            2,810,000
              (2)Equity
                compensationplans
                not approvedby
                security holders
            
            
            -
            
            
            
            n/a
            
            
            
            -Total
            
            
            1,190,000
            
            
            
            $
              0.10
            
            
            
            2,810,000





(1)
            Includes
                outstanding options
                granted pursuant to the Company’s 2002 Equity Incentive
                Plan.


(2)
            Includes
                shares remaining
                available for future issuance under the Company’s 2002 Equity Incentive
                Plan.





The
      Company’s 2002 Equity Incentive Plan
      (the "Equity Incentive Plan"), as amended, authorizes the Board of Directors
      to
      grant options to purchase up to 4,000,000 shares of the Company’s common
      stock.  On
      October 31, 2002 at our stockholder’s annual meeting, our stockholders approved
      the adoption of the Equity Incentive Plan.The
      maximum number of shares of common
      stock that may be issuable under the Equity Incentive Plan to any individual
      plan participant is 1,000,000 shares.  All options granted under the
      Equity Incentive Plan have vesting periods up to a maximum of five
      years.  The exercise price of an option granted under the Equity
      Incentive Plan shall not be less than 85% of the fair value of the common stock
      on the date such option is granted.





The
      Company’s 1990 Stock Option Plan
      (the "Option Plan"), as amended, authorized the Board of Directors to grant
      options to purchase up to 2,300,000 shares of the Company’s common
      stock.  No options were to be granted to any individual director or
      employee, which when exercised, would exceed 5% of the issued and outstanding
      shares of the Company.  The term of any option granted under the 1990
      Stock Option Plan was fixed by the Board of Directors at the time the options
      were granted, provided that the exercise period was not to be longer than 10
      years from the date of grant.  All options granted under the 1990
      Stock Option Plan have up to 10-year terms and have vesting periods that range
      from 0 to three years from the grant date.  The exercise price of any
      options granted under the 1990 Stock Option Plan is the fair market value at
      the
      date of grant.On October 31, 1990 at
      our stockholder’s
      annual meeting, our stockholders approved the adoption of the Option
      Plan.Subsequent
      to the adoption of the
      Incentive Plan, no further options will be granted under the Option
      Plan.





Recent
      Sales of Unregistered
      Securities





During
      the fiscal year ended October 31,
      2007, we did not issue any securities that were not registered under the
      Securities Act of 1933, as amended, except as disclosed in previous SEC
      filings.





19





Purchases
      of Equity Securities by the
      Issuer and Affiliated Purchasers





There
      were no repurchases of equity
      securities by the issuer or affiliated purchasers during the fiscal year ended
      October 31, 2007.





Item
      6.  Management’s
      Discussion and Analysis or Plan of Operation.





This
      Annual Report on Form 10-KSB
      contains "forward-looking statements".These
      statements relate to
      expectations concerning matters that are not historical facts.  Words
      such as "projects," "believes," "anticipates," "estimates," "plans," "expects,"
      "intends," and similar words and expressions are intended to identify
      forward-looking statements.  Although we believe that such
      forward-looking statements are reasonable, we cannot assure you that such
      expectations will prove to be correct.  Factors that could cause
      actual results to differ materially from such expectations are disclosed herein
      including, without limitation, in the section entitled "Risk Factors" in PART
      I,
      Item 1.  All forward-looking statements attributable to the Company
      are expressly qualified in their entirety by such language and we do not
      undertake any obligation to update any forward-looking
      statements.  You are also urged to carefully review and consider the
      various disclosures we have made which describe certain factors that affect
      our
      business throughout this Report.  The following discussion and
      analysis of financial condition and results of operations covers the years
      ended
      October 31, 2007 and 2006 and should be read in conjunction with our Financial
      Statements and the Notes thereto commencing at page F-1 included
      hereof.





Overview





We
      are a facilities-based,Diversified CommunicationsServicescompany
      providing various forms of
      telephonyand wireless
      broadband internetservices
      to wholesale and retail customers around the world.  We offer a
      multitude of international communications services targeted to individual
      customers, as well as small and medium sized enterprises.  These
      services include the transmission of voice and data traffic over public and
      private networks, and communications services for both the foreign and domestic
      termination of international long distance traffic into the wholesale
      market.  We have begun to utilize Voice over Internet Protocol
      (“VoIP”) packetized voice technology.





We
      continue to seek opportunities to
      grow our business through strategic acquisitions that will complement our retail
      strategy as well as adding key personnel that have demonstrated a proven track
      record in sales, marketing and operations ofwireless broadband internet
      and other
      diversified communication services.





On
      October 31, 2007, the Company
      acquired 100% of the assets of Communications Advantage, LLC (“Communications
      Advantage”), and Web-Breeze Networks, LLC (“Web Breeze”).  The assets
      include a sizable wireless broadband network in a rural geographic area ofCaliforniathat
      fits into the Company’s niche
      market business model, a base of customers and revenues that are immediately
      accretive to our revenues and earnings, and a staff of tenured professionals
      with vast knowledge and experience in the wireless broadband
      sector.





On
      May 5, 2006, we completed the
      acquisition of all of the issued and outstanding shares of capital stock ofTelenational
      Communications, Inc., whohistorically has serviced
      a sizable base
      of both retail and commercial customers, which very closely mirror those
      customers Rapid Link has served prior to the acquisition.  This
      acquisition allowedus
      to take advantage of
      several significant economies of scale, both in respect to direct cost
      reductions, as well as operational efficiencies.





On
      October 31, 2005, we completed the
      acquisition of the customer base of Integrated Telecommunications, Inc., an
      international long distance carrier providing VoIP services to retail customers
      in theUnited
      States, and wholesale
      services to customers worldwide.





20





TheDiversified
      Communication Services
      industry continues to
      evolve towards an increased emphasis on IP related products and
      services.  We have focused our business towards these types of
      products and services for the last couple of years.  Furthermore, we
      believe the use of the Internet to provide bundled IP related services to the
      end user customer, either as a stand alone solution or bundled with other IP
      products, will continue to impact the industry as large companies like Time
      Warner, Comcast and AT&T look to capitalize on their existing cable
      infrastructures, and smaller companies look to provide innovative solutions
      to
      attract commercial and residential users to their product
      offerings.





We
      are focused on the growth of ourwireless broadband internet
      and adding new products and
      services that can be offered to end user customers.  We are attempting
      to transition our current customers, and attract new customers through the
      sale
      of specialized VoIP Internet Access Devices, or IADs, that allow customers
      to
      connect their phones to their existing high-speed Internet
      connections.  These IADs allow the user to originate phone calls over
      the Internet, thereby bypassing the normal costs associated with originating
      phone calls over existing land lines.  By reducing these costs, we are
      able to offer lower priced services to these customers, which we believe will
      allow us to attract additional users.  We also believe there will be
      considerable demand for this type of product in certain foreign markets where
      end users pay a significant premium to their local phone companies to make
      long
      distance or international phone calls. We are targeting business and residential
      customers, as well as niche markets, such asrural or underserved
      areas withintheUnited
      States.  While we expect the growth
      in our customers and suppliers, and the introduction of innovative product
      offerings to retail users, specifically IADs, to have a positive impact on
      our
      revenues and earnings, we cannot predict our ability to significantly grow
      this
      line of business.  The revenue and costs associated with the IAD
      product offerings will depend on the number of customers and contracts we
      obtain.





Critical
      Accounting
      Policies





This
      disclosure is based upon the
      Company’s consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in theUnited States.  The
      preparation of these
      financial statements requires that we make estimates and assumptions that affect
      the reported amounts of assets, liabilities, revenues and expenses, and related
      disclosure of contingent assets and liabilities.  We base our
      estimates on historical experience and other assumptions thatwebelieve
      to be proper and reasonable
      under the circumstances. We continually evaluate the appropriateness of
      estimates and assumptions used in the preparation of its consolidated financial
      statements.  Actual results could differ from those
      estimates.  The following key accounting policies are impacted
      significantly by judgments, assumptions and estimates used in the preparation
      of
      the consolidated financial statements.





Revenue
      Recognition





For
      a majority of our products, our
      revenues are generated at the time a customer uses our network to initiate
      a
      phone call.  We sell our services to SMEs and end-users that utilize
      our network for international re-origination and dial thru services, and to
      other providers of long distance usage who utilize our network to deliver
      domestic and international termination of minutes to their own
      customers.  At times, we receive payment from our customers in advance
      of their usage, which we record as deferred revenue, recognizing revenue as
      calls are made.





For
      our newer VoIP product offerings,
      specifically our Rapid Link service, we recognize revenue in accordance with
      Emerging Issues Task Force ("EITF") consensus No. 00-21, "Accounting for Revenue
      Arrangements with Multiple Deliverables" which requires that revenue
      arrangements with multiple deliverables be divided into separate units of
      accounting if the deliverables in the arrangement meet specific
      criteria.  In addition, arrangement consideration must be allocated
      among the separate units of accounting based on their relative fair values,
      with
      certain limitations.  The provisioning of the Rapid Link service with
      the accompanying desktop terminal adapter or other customer premise equipment
      constitutes a revenue arrangement with multiple deliverables.  In
      accordance with the guidance of EITF No. 00-21, we allocate Rapid Link revenues,
      including activation fees, among the customer premise equipment and subscriber
      services. Revenues allocated to the customer premise equipment are recognized
      as
      product revenues at the end of 30 days after order placement, provided the
      customer does not cancel their Rapid Link service.  All other revenues
      are recognized as license and service revenues when the related services are
      provided.  We defer the cost of goods sold of products sold for which
      the end customer or distributor has a right of return.  The cost of
      the products sold is recognized, contemporaneously with the recognition of
      revenue, when the subscriber has accepted the service.





21





The
      Securities and Exchange Commission's
      Staff Accounting Bulletin No. 104, "Revenue Recognition,” provides guidance on
      the application of generally accepted accounting principles to selected revenue
      recognition issues.  We have concluded that our revenue recognition
      policy is appropriate and in accordance with generally accepted accounting
      principles and Staff Accounting Bulletin No. 104.





Allowance
      for Uncollectible Accounts
      Receivable





We
      regularly monitor credit risk
      exposures in our accounts receivable and maintain a general allowance for
      doubtful accounts based on historical experience.  Our receivables are
      due from commercial enterprises and residential users in both domestic and
      international markets.  In estimating the necessary level of our
      allowance for doubtful accounts, we consider the aging of our customers’
accounts receivable and our estimation of each customer’s willingness and
      ability to pay amounts due, among other factors.  Should any of these
      factors change, the estimates made by management would also change, which in
      turn would impact the level of the Company's future provision for doubtful
      accounts.  Specifically, if the financial condition of the Company's
      customers were to deteriorate, affecting their ability to make payments,
      additional customer-specific provisions for doubtful accounts may be
      required.  We review our credit policies on a regular basis and
      analyze the risk of each prospective customer individually in order to minimize
      our risk.





Purchase
      Price Allocations and
      Impairment Testing





We
      account for our acquisitions using
      the purchase method of accounting.  This method requires that the
      acquisition cost be allocated to the assets and liabilities we acquired based
      on
      their fair values.  We make estimates and judgments in determining the
      fair value of the acquired assets and liabilities.  We base our
      determination on independent appraisal reports as well as our internal judgments
      based on the existing facts and circumstances.We record goodwill when
      the
      consideration paid for an acquisition exceeds the fair value of net tangible
      and
      identifiable intangible assets acquired.If we were to use different
      judgments or
      assumptions, the amounts assigned to the individual assets or liabilities could
      be materially different.





Long-lived
      assets, including the
      Company’s customer lists, are reviewed for impairment whenever events or changes
      in circumstances indicate that the carrying amount of the assets might not
      be
      recoverable.  We assess our goodwill for impairment annually or more
      frequently if impairment indicators arise.  In order to properly
      complete these assessments, we rely on a number of factors, including operating
      results, business plans, and anticipated future cash flows.  Actual
      results that vary from these factors could have an impact on the amount of
      impairment, if any, which actually occurs.





Stock-Based
      Compensation





22





We
      have used stock grants and stock
      options to attract and retain directors and key executives and intend to use
      stock options in the future to attract, retain and reward employees for
      long-term service.





We
      account for these stock options under
      SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”).  In accordance
      with SFAS 123R, compensation cost is recognized for all share-based payments
      granted.  We have used the Black-Scholes valuation model to estimate
      fair value of our stock-based awards which requires various judgmental
      assumptions including estimating stock price volatility, forfeiture rates and
      expected life.  Our computation of expected volatility is based on a
      combination of historical and market-based implied volatility.  If any
      of the assumptions used in the Black-Scholes model change significantly,
      stock-based compensation expense may differ materially in the future from that
      recorded in the current period.





Recent
      Accounting
      Pronouncements





In
      July 2006, the FASB issued FASB
      Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,”
which prescribes a recognition threshold and measurement process for recording
      in the financial statements uncertain tax positions taken or expected to be
      taken in a tax return.  Additionally, FIN 48 provides guidance on
      derecognition, classification, accounting in interim periods and disclosure
      requirements for uncertain tax positions.We adopted FIN 48 on
      November 1, 2007
      and arein the process of
      determining the effect, if any,that it will have
      on ourconsolidatedfinancial
      statements.





In
      September 2006, the FASB issued SFAS
      No. 157, “Fair Value Measurements”(“SFAS 157”).  SFAS
      157 defines fair
      value, established a framework for measuring fair value in generally accepted
      accounting principles and expands disclosures about fair value
      measurements.  SFAS 157 is effective for financial statements issued
      for fiscal years beginning after November 15, 2007.  The Company does
      not expect the adoption of SFAS 157 to significantly affectourconsolidatedfinancial
      condition orconsolidatedresults
      of
      operations.





In
        February 2007, the FASB issued
        SFAS No. 159,“The
        Fair Value Option for Financial
        Assets and Financial Liabilities”,
        which allows companies the option to
        measure financial assets or liabilities at fair value and include unrealized
        gains and losses in net income rather than equity. This becomes available
        when
        the Company adopts SFAS 157, which will be fiscal year 2009.The
        Company is analyzing the expected
        impact from adopting this statement on its financial statements, but currently
        does not believe its adoption will have a significant impact on the financial
        position or results of operations of the Company.





In
      December 2007, the FASB issued
      SFAS No. 141(revised 2007), “Business Combinations”(“SFAS 141R”).SFAS 141R
      will significantly change
      the accounting for business combinations in a number of areas including the
      treatment of contingent consideration, contingencies, acquisition costs,
      IPR&D and restructuring costs.In
      addition, under SFAS 141R,
      changes in deferred tax asset valuation allowances and acquired income tax
      uncertainties in a business combination after the measurement period will impact
      income tax expense.SFAS 141R
      is effective for fiscal
      years beginning after December 15, 2008 and, as such, we will adopt this
      standard in fiscal 2010.We
      have not yet determined the impact,
      if any, of SFAS 141R on our consolidated financial
      statements.





23





Results
      of
      Operations





The
      following table set forth certain
      financial data and the percentage of total revenues of the Company for the
      periods indicated:





Year
                  Ended
                October31,
                  2007
              
              
              %
                  Change
                2006
                  to
              
              
              Year
                  Ended
                October31,
                  2006Amount
              
              
              %
                  of
                Rev.
              
              
              2007
                Increase
                (Decr.)
              
              
              Amount
              
              
              %
                  of
                Rev.Revenues
              
              $
              17,326,035
              
              
              
              100.0%
              
              
              
              30%
              
              
              $
              13,351,030
              
              
              
              100.0%Costs
                  and
                  expenses:Costs
                  of
                  revenues
              
              
              12,559,905
              
              
              
              72.5%
              
              
              
              30%
              
              
              
              9,644,235
              
              
              
              72.2%Sales
                  and
                  marketing
              
              
              1,212,355
              
              
              
              7.0%
              
              
              
              42%
              
              
              
              856,037
              
              
              
              6.4%General
                  and
                  administrative
              
              
              3,403,674
              
              
              
              19.6%
              
              
              
              (5%)
              
              
              
              3,596,171
              
              
              
              26.9%Depreciation
                  and
                  amortization
              
              
              928,427
              
              
              
              5.4%
              
              
              
              24%
              
              
              
              747,562
              
              
              
              5.6%Loss
                  on disposal of property and
                  equipment
              
              
              10,061
              
              
              
              .1%
              
              
              
              (82%)
              
              
              
              56,771
              
              
              
              .4%Net
                  reductions of
                  liabilities
              
              
              -
              
              
              
              -
              
              
              
              N/A
              
              
              
              (2,300,929
              )
              
              
              (17.2%
              )Gain
                  on legal
                  settlements
              
              
              (415,213
              )
              
              
              (2.4%
              )
              
              
              N/A
              
              
              
              -
              
              
              
              -Total
                  costs and
                  expenses
              
              
              17,699,209
              
              
              
              102.0%
              
              
              
              40%
              
              
              
              12,599,847
              
              
              
              94.4%Operating
                  income
                  (loss)
              
              
              (373,174
              )
              
              
              (2.2%
              )
              
              
              (150%)
              
              
              
              751,183
              
              
              
              5.6%Other
                  income
                  (expense):Noncash
                  interest
                  expense
              
              
              (1,043,261
              )
              
              
              (6.0%
              )
              
              
              (25%)
              
              
              
              (1,410,351
              )
              
              
              (10.6%
              )Related
                  party non-cash interest
                  expense
              
              
              (33,089
              )
              
              
              (.2%
              )
              
              
              
              
              
              
              (33,089
              )
              
              
              (.2%
              )Interest
                  expense
              
              
              (284,414
              )
              
              
              (1.6%
              )
              
              
              29%
              
              
              
              (220,802
              )
              
              
              (1.7%
              )Related
                  party interest
                  exp.
              
              
              (269,836
              )
              
              
              (1.6%
              )
              
              
              25%
              
              
              
              (216,233
              )
              
              
              (1.6%
              )Foreign
                  currencyexchange
                  gains
              
              
              4,389
              
              
              
              -
              
              
              
              (76%)
              
              
              
              18,134
              
              
              
              .1%Total
                  other income(expense)
              
              
              (1,626,211
              )
              
              
              (9.4%
              )
              
              
              13%
              
              
              
              (1,862,341
              )
              
              
              (13.9%
              )Net
                  loss
              
              
              (1,999,384
              )
              
              
              (11.5%
              )
              
              
              (80%)
              
              
              
              (1,111,158
              )
              
              
              (8.3%
              )Loss
                  per
                  share:Basic
                  and diluted loss per
                  share
              
              $
              (0.04
              )
              
              
              
              
              
              
              
              
              
              $
              (0.03
              )





24





Operating
      Revenues





Our
      revenues increased from $13.4
      million for fiscal 2006 to $17.3 million for fiscal 2007, a 30% increase, which
      is primarily attributable to the inclusion of Telenational revenues gained
      in
      the May 2006 acquisition of Telenational, which were included for only a portion
      of the comparable twelve-month period of fiscal year 2006.  In
      addition, revenues increased, in part, due to the expected variable nature
      of
      the wholesale revenue and billing component.





Costs
      of Revenues





Our
      costs of revenues increased $2.9
      million for fiscal year 2007 as compared to fiscal year 2006.  The
      increase in costs of revenues is primarily attributable to costs associated
      with
      the increase in sales revenue, and due to the inclusion of Telenational costs
      that were included for only a portion of the comparable twelve-month period
      of
      fiscal year 2006.





Costs
      of revenues as a percentage of
      revenues were72%
      for fiscal year 2007, and remained
      stable compared to fiscal year 2006, which was also72%.  As
      a majority of our costs
      of revenues is variable, based on per minute transportation costs, costs of
      revenues as a percentage of revenues will fluctuate, from year to year,
      depending on the traffic mix between our wholesale and retail products and
      total
      revenue for each year.





Sales
      and Marketing
      Expenses





A
      significant component of our revenue
      is generated by outside agents, a small in-house sales force, and marketing
      through web portals and magazine advertising, which is managed by anin-house
      sales and marketing
      organization.





Our
      sales and marketing costs increased
      from 6% of revenues for fiscal 2006 to7%
      of revenues fiscal
      2007.  This increase is attributable to higher marketing costs and
      agent commissions attributed to Telenational during the current fiscal
      period.  During fiscal 2007, we have focused our attention on
      increasing revenues through the efforts of our agents, and the marketing
      initiatives previously noted.  We will continue to focus our sales and
      marketing efforts on web portal and magazine advertising, the establishment
      of
      distribution networks to facilitate the introduction and growth of new products
      and services, and agent related expenses to generate additional
      revenues.





General
      and Administrative
      Expenses





Ourgeneral
      and administrative expenses
      decreased $192,000, or 5%, for fiscal year 2007 as compared to fiscal 2006,
      even
      with the addition of personnel and other costs related to the Telenational
      acquisition.  The decrease was due to eliminating duplicate costs
      between the combined entities, which included salaries, rent, telephone and
      utility cost reductions resulting from the closure of a couple of office
      locations.  In addition, the reduction ingeneral
      andadministrative
      expenses was achieved by
      improving our accounts receivable collection efforts resulting in a
      corresponding reduction in bad debt expense, and a decrease in expenses
      related to warrants issued forservices.





We
      review our general and administrative
      expenses regularly and continue to manage the costs accordingly to support
      our
      current and anticipated future business; however, it may be difficult to achieve
      significant reductions in future periods due to the relatively fixed nature
      of
      our general and administrative expenses.





Net
      Reductions of
      Liabilities





During
      fiscal 2006, the Company
      determined, based on a review of applicable statute of limitations regulations
      and/or current correspondence with vendors, that approximately $2,301,000 of
      liabilities, including $1,435,000 in carrier costs that were previously accrued,wereno
      longer due and
      payable.  Accordingly, this amountwasrecorded
      as “Net reductions of
      liabilities” during fiscal 2006.





25





Gain
      on Legal Settlements




During
      fiscal year 2007, the Company
      reached executed settlement agreements and recorded a “Gain on legal
      settlements”
of
      $415,000, net of attorney feestotaling
      $322,000.  On
      September 13, 2007, the Company executed a settlement agreement with Yahoo!
      settling a dispute over media credits purchased in a stock purchase agreement
      dated July 7, 2001.  Yahoo! paid the Company $475,000 in one lump sumcashpayment
      to settle all disputes and the
      Company agreed to dismiss its claims against Yahoo! in connection with such
      dispute.  This amount was received in fiscal 2007 and recorded as a
“Gain on legal settlements”.




OnSeptember
      3, 2007, the Company executed
      a settlement agreement with Affluent Media, et al settling a dispute over media
      credits purchased in a stock purchase agreement dated July 7,
      2001.  Affluent Media, et al paid the Company $35,000in cash and transferred300,000
      barter credits, recorded at a fair
      market value of
      $225,000,over the
      subsequent 3-month period to settle all disputes and the Company agreed to
      dismiss its claims against Affluent Media, et al in connection with such
      dispute.  These amountsreceivedwere
      recorded in fiscal 2007 asa“Gain
      on legal settlements”.




Noncash
      Interest Expense,Related Party Non-Cash
      Interest Expense,Interest Expense and
      Related Party InterestExpense





Noncash
      interest expense, related party non-cash
      interest
      expense, interest
      expense,and
      related party interest expense
      decreased $260,000, or 14% during fiscal 2007 as compared to fiscal
      2006.  The decrease was primarily attributable to certain debt
      discounts becoming fully amortized during fiscal 2007.  Noncash
      interest expense results from the amortization of deferred financing fees and
      debt discounts on our debts to third party lenders and related
      parties.  The decrease in noncash interest expense was partially
      offset by increased interest expense and related party interest
      expense.





Related
      party interest expense for
      fiscal 2007 increased $54,000, or 25%, as compared to fiscal 2006, and was
      primarily due to additional interest expense incurred in conjunction with the
      Telenational acquisition.





Liquidity
      and Sources of
      Capital





We
      generated approximately $659,000 of
      positive operating cash flow during fiscal 2007.  Prior to fiscal
      2007, we generally were unable to achieve positive cash flow on a quarterly
      basis primarily due to the fact that our previous lines of business did not
      generate a volume of business sufficient to cover our overhead
      costs.  Based on previous fiscal years, our current audit report
      includes an explanatory paragraph indicating doubt about our ability to continue
      as a going concern.





Our
      major growth areas are anticipated
      to include the establishment of additional wholesale points of termination
      to
      offer our existing wholesale and retail customers, the introduction ofwireless broadband internet
      services, as well asnew
      retail VoIP products, primarily our new Rapid Link products both domestically
      and internationally.  Our future operating success is dependent on our
      ability to generate positive cash flow from ourwireless broadband internet
      andVoIP lines of products
      and
      services.  We anticipate a positive cash flow during the fiscal year
      ending October 31, 2008.  We do not have any capital equipment
      commitments during the next twelve months.  We are actively pursuing
      debt or equity financing opportunities to continue our business.  Any
      failure of our business plan, including the risk and timing involved in rolling
      out retail products to end users, could result in a significant cash flow
      crisis, and could force us to seek alternative sources of financing as
      discussed, or to greatly reduce or discontinue operations.  Although
      various possibilities for obtaining financing or effecting a business
      combination have been discussed from time to time,there are no agreements
      with any party
      to raise money or for us to combine with another entity and we cannot assure
      you
      that we will be successful in our search for investors or lenders.  Any additional financing
      we
      may obtain may involve material and substantial dilution to existing
      stockholders.  In such event, the percentage ownership of our current
      stockholders will be materially reduced, and any new equity securities sold
      by
      usmay have rights,
      preferences, or privileges senior to our current common
      stockholders.





26





At
      October 31, 2007, we had a cash and cash equivalents $496,000, an increase
      in
      cash and cash equivalents of $466,000 from the balance at October 31,
      2006.  We had working capital deficits at October 31, 2007 and 2006 of
      $5.4 million and $4.7 million, respectively.





Net
      cash
      provided by (used in) operating activities was $659,000 and ($1,035,323) during
      fiscal 2007 and 2006, respectively.  Net cash provided by operating
      activities during fiscal 2007 was primarily due to a net loss from continuing
      operations of $1,999,000 adjusted for: non-cash interest expense of $1,076,000;
      depreciation and amortization of $928,000; bad debt expense of $88,000; loss
      on
      disposal of fixed assets of $10,000; net changes in operating assets and
      liabilities of $672,000; and share-based compensation expense of $18,000;
      partially offset by net reduction of liabilities of $135,000.  Net
      cash used in operating activities during fiscal 2006 was primarily due to a
      net
      loss from continuing operations of $1,111,000 adjusted for: non-cash interest
      expense of $1,447,000; depreciation and amortization of $748,000; bad debt
      expense of $136,000; loss on disposal of fixed assets of $57,000; offset by
      net
      reduction of liabilities of $2,301,000 and net changes in operating assets
      and
      liabilities of $11,000.





Net
      cash
      used in investing activities was $7,000 and $50,000 during fiscal 2007 and
      2006,
      respectively.  Net cash used in investing activities during fiscal
      2007 resulted from the purchase of property and equipment of
      $7,000.  Net cash used in investing activities during fiscal 2006
      resulted from property and equipment purchases of $208,000, offset by cash
      acquired in the Telenational acquisition of $158,000.





Net
      cash
      provided by (used in) financing activities was ($186,000) during fiscal 2007
      compared to $943,000 during fiscal 2006.  Net cash used in financing
      activities during fiscal 2007 resulted from reduction of bank overdrafts of
      $101,000 and payment on related party convertible notes and shareholder advances
      of $110,000; partially offset by the sale of common stock for
      $25,000.  Net cash provided by financing activities during fiscal 2006
      resulted from additional convertible debentures of $1,000,000, bank overdrafts
      of $101,000 and a net cash infusion of $50,000 from related parties, offset
      by
      debt and financing fee payments totaling $208,000.





We
      have
      an accumulated deficit of approximately $52.0 million as of October 31, 2007
      as
      well as a significant working capital deficit.  Funding of our working
      capital deficit, current and future operating losses, and expansion will require
      continuing capital investment, which may not be available to
      us.  Although to date we have been able to arrange the debt facilities
      and equity financing described below, there can be no assurance that sufficient
      debt or equity financing will continue to be available in the future or that
      it
      will be available on terms acceptable to us.Our
      current capital expenditure
      requirements are not significant, primarily due to the equipment acquired from
      Telenational and the subsequent consolidation of operating facilities into
      one
      operational facility.  We do not plan significant capital expenditures
      during fiscal 2008.





Debt
      Facilities and Equity
      Financing





27





The
      Company has various debt obligations
      as of October 31, 2007 and 2006, including amounts due to independent
      institutions and related parties.  Descriptions of these debt
      obligations are included below.  The following tablessummarizeoutstanding
      debt as of October 31, 2007and October 31,
      2006:





Information
                as of October 31,
                2007Brief
                Description of
                Debt
            
            Balance
            
            
            Int.
                Rate
            
            Due
                Date
            
            Discount
            
            
            NetConvertible
                notes, currentGC-Conote
            
            $
            1,200,000
            
            
            
            10.08
            %
            2/28/2008
            
            $
            151,515
            
            
            $
            1,048,485Debenture
            
            
            600,000
            
            
            
            10
            %
            3/8/2008
            
            
            -
            
            
            
            600,000Other
            
            
            42,500
            
            
            
            10
            %
            2/28/2008
            
            
            
            
            
            
            42,500Related
                party notes, current
            
            
            50,000
            
            
            
            10
            %
            4/30/2008
            
            
            -
            
            
            
            50,000Convertible
                notes payable to related parties, current
            
            
            1,000,000
            
            
            
            8
            %
            On
                Demand
            
            
            -
            
            
            
            1,000,000Convertible
                notes, long-termGCA-Debenture
            
            
            630,333
            
            
            
            6
            %
            10/31/2009
            
            
            -
            
            
            
            630,333GCA-Debenture
            
            
            570,944
            
            
            
            6
            %
            10/31/2009
            
            
            -
            
            
            
            570,944Convertiblenotespayable
                to related
                parties,
                long-term
            
            
            2,240,000
            
            
            
            8
            %
            11/01/2009
            
            
            -
            
            
            
            2,240,000





Debt
      obligations as of October 31, 2007
      are due as follows:





Within
                1
                year
            
            
            1-2
                years
            
            
            TotalDebt
                Obligations
            
            $
            2,892,500
            
            
            $
            3,441,277
            
            
            $
            6,333,777




Information
                  as of October 31,
                  2006Brief
                  Description of
                  Debt
              
              Balance
              
              
              Int.
                  Rate
              
              Due
                  Date
              
              Discount
              
              
              NetConvertible
                  notes, currentGC-Conote2
              
              $
              60,000
              
              
              
              0
              %
              3/31/2007
              
              $
              10,000
              
              
              $
              50,000Debentures
              
              
              1,000,000
              
              
              
              10
              %
              3/8/2007
              
              
              333,333
              
              
              
              666,667Related
                  party notes, currentDemand
                  Note
              
              
              300,000
              
              
              
              8
              %
              On
                  demand
              
              
              -
              
              
              
              300,000Apex
                  Note 2
              
              
              80,965
              
              
              
              8
              %
              7/15/2007
              
              
              -
              
              
              
              80,965Convertible
                  notes, long-termGCA-Debenture
              
              
              430,000
              
              
              
              6
              %
              11/1/2007
              
              
              -
              
              
              
              430,000GCA-Debenture1
              
              
              552,457
              
              
              
              6
              %
              11/1/2007
              
              
              4,247
              
              
              
              548,210GC-Conote
              
              
              1,250,000
              
              
              
              10.08
              %
              2/28/2008
              
              
              606,061
              
              
              
              643,939Convertible
                  notespayable
                  to related
                  parties,
                  long-term
              
              
              1,905,078
              
              
              
              10
              %
              2/28/2008
              
              
              44,120
              
              
              
              1,860,958Related
                  party note, long-term Apex
              
              
              1,000,000
              
              
              
              8
              %
              11/5/2007
              
              
              -
              
              
              
              1,000,000





GCA-Debentures





The
      Company has two 6% convertible debentures (the "GCA-Debentures") with GCA
      Strategic Investment Fund Limited ("GCA").  The GCA-Debentures are
      secured by the Company’s VoIP technology and certain equipment.  On
      October 31, 2007, the Company entered into a series of agreements, which
      materially modified its debt structure with Global Capital Funding Group Ltd.
      ("Global"), and with GCA Strategic Investment Fund Limited
      ("GCA").  The agreements call for two outstanding notes of $430,000
      and $552,457 due in November of 2007, including accrued interest of $140,994
      and
      $77,876, respectively, to be converted into two long-term convertible debentures
      of $570,944 and $630,333, respectively; both of which are due October 31,
      2009.  There were no other material changes to the terms of the
      existing notes.  In consideration of the extension, the Company issued
      50,000 warrant options to purchase common stock to Global and GCA in
      consideration for the extensions.  The fair value of the warrants was
      determined on the date of grant using the Black-Scholes pricing model with
      the
      following assumptions: applicable risk-free interest rate based on the current
      treasury-bill interest rate of 5.4%; volatility factor of the expected market
      price of the Company's common stock of 1.51; and an expected life of the
      warrants of five years.  The company recognized $8,281 of expense
      associated with these warrants in fiscal year 2007.





28





GC-Conote





In
      November 2002, the Company executed a 12% note payable secured by certain
      compression equipment (the "GC-Note") with Global Capital Funding Group, L.P.,
      ("Global") The Company issued to the holder of the GC-Note warrants to acquire
      an aggregate of 500,000 shares of common stock at an exercise price of $0.14
      per
      share, which expire on November 8, 2007.





On
      June
      1, 2005, the Company and Global agreed to extend the maturity date of the
      GC-Note to February 28, 2008.  In connection with the extension, the
      GC-Note was converted to a 10.08% Convertible Note ("GC-Conote").  The
      conversion price is equal to 80% of the average of the three lowest volume
      weighted average sales prices as reported by Bloomberg L.P. during the twenty
      Trading Days immediately preceding the related Notice of Conversion (the
      "Formula Conversion Price").  The Company calculated the beneficial
      conversion feature embedded in the GC-Conote in accordance with EITF 98-5 and
      EITF 00-27 and recorded $1,013,032 as debt discount.  This debt
      discount is being amortized over the life of the GC-Conote.  The
      Company also issued to the holder of the GC-Conote warrants to acquire an
      aggregate of 500,000 shares of common stock at an exercise price of $0.38,
      and
      125,000 warrants to purchase common stock at $0.11 per share, both warrants
      expiring in June 2010. The Company recorded $200,498 as debt discount, the
      relative fair value of the warrants on June 1, 2005.  This amount was
      calculated using the Black-Scholes pricing model with the following assumptions:
      applicable risk-free interest rate based on the current treasury-bill interest
      rate at the grant date of 4%; dividend yields of 0%; volatility factors of
      the
      expected market price of the Company's common stock of 1.64; and an expected
      life of the warrants of three years.  The debt discount is being
      amortized over the life of the GC-Conote.  In addition, the Company
      issued to Global 100,000 shares of common stock valued at $0.45 per share,
      the
      Company's closing stock price on June 1, 2005, the date of
      issuance.  The Company recorded $36,469 as debt discount, the relative
      fair value of the stock issued, which it is amortizing over the life of the
      GC-Conote.





On
      September 14, 2006, the Company and Global amended the GC-Conote to extend
      the
      maturity date of the GC-Conote to November 1, 2007, and stipulate that the
      conversion price of the Company’s common stock is not to be lower than $0.10 and
      not to exceed $0.25.  In connection with the amendment, the Company
      re-priced all warrants held by GCA to an exercise price of $0.05 and extended
      the maturity of the warrants to June 1, 2010.  Incremental debt
      discount amounts associated with the fiscal 2006 amendments were not
      material.





In
      connection with the extension of the maturity date of the GC-Note, the interest
      due on the GC-Note of approximately $350,000 as of May 31, 2005, was converted
      to a $400,000 non-interest bearing convertible note payable (the "GC-Conote2)
      to
      Global.  The GC-Conote2 requires quarterly payments of $50,000 on the
      last day of March, June, September, and December of each year until the March
      31, 2007 maturity date, commencing on June 30, 2005.  In addition, the
      GC-Conote2 provides for conversion based on a conversion price equal to 80%
      of
      the average of the three lowest volume weighted average sales prices as reported
      by Bloomberg L.P. during the twenty trading days immediately preceding the
      related Notice of Conversion (the "Formula Conversion Price").  The
      Company calculated the beneficial conversion feature embedded in the GC-Conote2
      in accordance with EITF 98-5 and EITF 00-27 and recorded approximately $350,000
      as debt discount.  This debt discount is being amortized over the life
      of the GC-Conote2.  The approximate $50,000 difference between the
      accrued interest at May 31, 2005 and the value of the GC-Conote2 represents
      a
      financing fee, was recorded as debt discount, and is being amortized over the
      life of the GC-Conote2.  During fiscal 2006 and 2005, GCA elected to
      convert $165,000 of the GC-Conote2 into approximately 2,303,000 shares of common
      stock and $75,000 of the GC-Conote into approximately 656,000 shares of common
      stock, respectively.  During fiscal 2007, the Company made a $30,000
      payment on the GC-Conote2, and GCA elected to convert $30,000 of the GC-Conote2
      into approximately 622,000 shares of common stock and $50,000 of the GC-Conote
      into 500,000 shares of common stock.





29





Debentures





Debentures
      totaling $1,000,000 with an original March 8, 2007 maturity date were extended
      during the second quarter of fiscal 2007 to March 8, 2008. The
      Debentures are secured by a first priority security interest in all of the
      assets of the Company other than those assets not already pledged to Global
      Capital as security. The term of the original 2,000,000 warrants
      issued related to these Debentures was extended by one year, which had an
      insignificant financial impact. In connection with the extension, however,
      2,000,000 additional warrants were issued, resulting in deferred financing
      fees
      of $139,000, of which $90,000 was expensed as noncash interest expense during
      fiscal 2007. The fair value of the warrants was determined on the date of grant
      using the Black-Scholes pricing model with the following assumptions: applicable
      risk-free interest rate based on the current treasury-bill interest rate of
      4.5%; volatility factor of the expected market price of the Company's common
      stock of 287%; and an expected life of the warrants of four years. Remaining
      deferred financing fees, classified as other current assets, will be amortized
      through March 8, 2008. In connection with these Debentures, the lenders are
      entitled to an additional 50,000 warrants monthly with exercise prices of $0.25
      and $0.10, respectively. These warrants vest and are exercisable each fiscal
      quarter until the Debentures are paid in full. The fair value of these
      additional warrants is calculated on the date earned using the Black-Scholes
      pricing model using applicable risk-free interest rates based on current
      treasury-bill interest rates; volatility factors of the expected market price
      of
      the Company's common stock over the expected term; and an expected life of
      the
      warrants of four years. Under the terms of this agreement, the Company has
      granted 400,000 warrants to the lenders as of October 31, 2007.





On
      October 31, 2007 debentures totaling $350,000 were converted into 2,500,000
      shares of common stock, reflecting a conversion price of $0.14 per
      share.  On October 31, 2007, $50,000 of debentures including $65,889
      of accrued interest was transferred by the debenture holders to John Jenkins,
      the Company’s Chairman and Chief Executive Officer.





Related
      Party Notes





On
      May 5,
      2006, the Company acquired 100% of the outstanding stock of Telenational
      Communications, Inc. (“Telenational”) for $4,809,750, including acquisition
      costs of $50,000.  The purchase consideration included a contingent
      cash payment in the amount of $500,000 and 19,175,000 shares of the Company’s
      common stock valued at $3,259,750.  On October 31, 2007, the
      contingent purchase price consideration was converted to a convertible demand
      note payable to Apex Acquisitions,
      Inc. ("Apex”)Apex in the amount of $500,000.  The Company President and
      Chief Financial
      Officer is the majority stockholder of Apex.





30





On
      October 31, 2007, the Company entered
      into an agreement, which modified its debt structure with Apex.  The
      agreement calls for the outstanding note due in November of 2007 payable to
      Apex
      to be extended to November 1, 2009.  The note was also modified to
      allow for the balance to be convertible to common stock at market
      pricing.The outstanding balance of the Apex Notes, including
      $120,000 of accrued interest that was rolled into the note, was $1,120,000
      at
      October 31, 2007.





On
      October 31, 2007, $50,000 of debentures including $65,889 of accrued interest
      was transferred by the debenture holders to John Jenkins, the Company’s Chairman
      and Chief Executive Officer.  These amounts, along with a $300,000
      related party demand note including accrued interest of $84,111, were rolled
      into a $500,000 convertible demand note payable to Mr. Jenkins.





On
      October 31, 2007, the Company entered
      into an agreement, which modified its debt structure with the Company’s Chairman
      and Chief Executive Officer, John Jenkins.  The agreement calls for
      the outstanding note due in February of 2008 payable to John Jenkins to be
      extended to November 1, 2009.The outstanding balance of these
      notes payable to Mr. Jenkins, including $241,000 of accrued interest that was
      rolled into the note, was $1,120,000 at October 31, 2007.





During
      fiscal 2007, the Company made payments totaling $80,965 on the Apex Note 2
      due
      July 15, 2007.





Contractual
      Obligations





The
      Company leases office space under
      operating leases that run through June 2011. In addition, we have numerous
      debt
      obligations outstanding. Contractual obligations as of October 31, 2007 are
      as
      follows:





Payments
                Due By
                PeriodLess
                than
              1
                year
            
            
            1-3
                years
            
            
            3-5
                years
            
            
            More
                than
              5
                years
            
            
            TotalContractual
                Obligations:Debt
                Obligations
            
            $
            1,892,500
            
            
            $
            4,441,277
            
            
            $
            -
            
            
            $
            -
            
            
            $
            6,333,777Operating
                leases
            
            
            134,860
            
            
            
            359,627
            
            
            
            -
            
            
            
            -
            
            
            
            494,487Total
            
            $
            2,027,360
            
            
            $
            4,800,904
            
            
            $
            -
            
            
            $
            -
            
            
            $
            6,828,264








Item
      7.  Financial
      Statements.





The
      information required by Item 7 of
      this Report is presented following Item 14, beginning on page
      F-1.





Item
      8.  Changes in and
      Disagreements with Accountants


on
      Accounting and Financial
      Disclosure.





None.





Item
      8A.  Controls and
      Procedures.





We
      carried out an evaluation, under the
      supervision and with the participation of our Chief Executive Officer and our
      Chief Financial Officer, of the effectiveness of the design and operation of
      our
      disclosure controls and procedures, as such term is defined under Rule 13a-15(e)
      promulgated under the Securities Exchange Act of 1934, as amended,“Exchange Act”as
      of the end of the period covered by
      this report.  Based on this evaluation, our Chief Executive Officer
      and our Chief Financial Officer concluded that our disclosure controls and
      procedures are effective to ensure that information we are required to disclose
      in reports that we file or submit under the Exchange Act is recorded, processed,
      summarized, and reported within the time periods specified in SEC rules and
      forms.





There
      have been no changes, significant
      or otherwise, in our internal controls over financial reporting, that occurred
      during fiscal 2007that
      has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.





Item
      8B.  Other
      Information.





None.





31





PART
      III





Item
      9.  Directors, Executive
      Officers, Promoters, Control Persons and Corporate


Governance;
      Compliance With Section
      16(a) of the Exchange Act.


The
      following table sets forth the names, ages, years elected and principal offices
      and positions of our current directors and executive officers as of January
      22,
      2008.





Name
            
            Age
            
            Position
                with the Company
            
            Year
                First
              Elected
                as
              Officer
                or
              DirectorJohn
                A. Jenkins
            
            46
            
            Chairman,
                Chief Executive Officer, Secretary and Director
            
            2001Christopher
                J. Canfield
            
            47
            
            President,
                Chief Financial Officer, Treasurer and Director
            
            2006Michael
                P. Prachar
            
            38
            
            Chief
                Operating Officer
            
            2006David
                R. Hess
            
            46
            
            Director
            
            2002Lawrence
                J. Vierra
            
            62
            
            Director
            
            2000





JOHN
      A.
      JENKINS has served as our Chairman of the Board and Chief Executive Officer
      since October 2001, served as our President from December 1999 until July 2005,
      and has served as a director since December 1999.  Mr. Jenkins has
      also served as the President of DTI Com, Inc., one of our subsidiaries, since
      November 1999.  In May 1997, Mr. Jenkins founded Dial Thru
      International Corporation (subsequently dissolved in November 2000), and served
      as its President and Chief Executive Officer until joining us in November
      1999.  Prior to 1997, Mr. Jenkins served as the President and Chief
      Financial Officer for Golden Line Technology, a French telecommunications
      company.  Prior to entering the telecommunications industry, Mr.
      Jenkins owned and operated several software, technology and real estate
      companies. Mr. Jenkins holds degrees in physics and business/economics from
      UCLA.





CHRISTOPHER
      J. CANFIELD was elected to our Board of Directors in May 2006, and has served
      as
      our Chief Financial Officer since May 2006 and President since November
      2006.  Mr. Canfield served as President and CEO of Telenational
      Communications, Inc. from April 1998 until its acquisition by Rapid Link in
      May
      2006.  Mr. Canfield has more than 15 years of experience working in
      the telecommunications marketplace, and co-founded Resource Communications,
      Inc.
      and Intercontinental Exchange, Inc. in 1995 and 1998 respectively, both of
      which
      were subsequently acquired by major telecommunications companies.  Mr.
      Canfield holds a BS degree in Business Administration and Marketing from
      California State University Hayward.





MICHAEL
      P. PRACHAR has served as Chief Operating Officer since May 2006.  Mr.
      Prachar served as Vice President and Chief Operating Officer of Telenational
      Communications, Inc. from April 1998 until its acquisition by Rapid Link in
      May
      2006.  Mr. Prachar has been involved in the telecommunications
      industry since 1992 and has practical experience in most related aspects,
      including equipment service, sales, marketing, management, and information
      technology.





DAVID
      R.
      HESS was elected to our Board of Directors in May 2002 and served as our
      President from July 2005 until October 2006.  Mr. Hess was
      instrumental in orchestrating the Integrated and Telenational
      acquisitions.  Prior to joining us, Mr. Hess was the Managing Partner
      of RKP Steering Group, a company he co-founded in August 2003.  From
      November 2001 until December 2002, Mr. Hess served as the Chief Executive
      Officer and President, North America of Telia International Carrier, Inc. Prior
      to joining Telia, Mr. Hess was part of a turnaround team hired by the board
      of
      directors of Rapid Link, Incorporated.  He served as the Chief
      Executive Officer and as a director of Rapid Link, Incorporated from August
      2000
      until September 2001. Mr. Hess received a BA in Communications with a Minor
      in
      Marketing from Bowling Green State University.





32





LAWRENCE
      J. VIERRA has served as one of
      our directors since January 2000, and from that time through October 2004,
      served as our Executive Vice President. Currently, Mr. Vierra is a professor
      at
      theUniversityofLas
      Vegas. From 1995 through 1999,
      Mr. Vierra
      served as the Executive Vice President of RSL Com USA, Inc., an international
      telecommunications company, where he was primarily responsible for international
      sales. Mr. Vierra has also served on the board of directors and executive
      committees of various telecommunications companies and he has extensive
      knowledge and experience in the international sales and marketing of
      telecommunications products and services. Mr. Vierra holds degrees in marketing
      and business administration.





Family
      Relationships





There
      are
      no family relationships among our directors or executive officers.





Involvement
      in Certain Legal Proceedings





None
      of
      our executive officers or directors has had any bankruptcy petition filed by
      or
      against any business of which such officer or director was a general partner
      or
      executive officer either at the time of the bankruptcy or within two years
      prior
      to that time.  None of our executive officers or directors have been
      convicted in a criminal proceeding or are subject to a pending criminal
      proceeding, excluding traffic violations or similar misdemeanors, nor have
      they
      been a party to any judicial or administrative proceeding during the past five
      years that resulted in a judgment, decree or final order prohibiting activities
      subject to federal or state securities laws, or a finding of any violation
      of
      federal or state securities laws.





Meetings
      of the Board of
      Directors





Our
      Board of Directors held four
      meetings during the fiscal year ended October 31, 2007.  The Board of
      Directors has two standing committees: an Audit Committee and a Compensation
      Committee.  There is no standing nominating committee.  Each
      of the directors attended the meeting of the Board of Directors and all meetings
      of any committee on which such director served.





Audit
      Committee Financial
      Expert





We
      currently do not have an audit
      committee financial expert as defined by Item 401(e) of Regulation S-B of the
      Exchange Act.  Our previous audit committee financial expert resigned
      from our board of directors in September 2004. As our current board of directors
      does not have anyone eligible to become our audit committee financial expert
      and
      be independent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of the
      above-mentioned act, our board of directors is currently conducting a search
      for
      a new audit committee financial expert.





Audit
      Committee





The
      Audit
      Committee is comprised of two non-employee directors, Lawrence J. Vierra and
      David Hess.The Audit
      Committee makes recommendations to our Board of Directors or management
      concerning the engagement of our independent public accountants and matters
      relating to our financial statements, our accounting principles and our system
      of internal accounting controls.  The Audit Committee also reports its
      recommendations to the Board of Directors as to approval of financial
      statements.  The Audit Committee held four meetings during the fiscal
      year ended October 31, 2007.





Compliance
      with Section 16(a) of the
      Securities Exchange Act of 1934





Section
      16(a) of the Exchange Act
      requires our directors, executive officers, and persons who own more than 10%
      of
      our common stock to file with the SEC initial reports of ownership and reports
      of changes in ownership of our common stock and other equity securities of
      our
      Company.  Officers, directors and greater than 10% stockholders are
      required by regulations promulgated by the SEC to furnish us with copies of
      all
      Section 16(a) reports they file.  Based solely on the review of such
      reports furnished to us and written representations that no other reports were
      required, we believe that during the fiscal year ended October 31, 2007, our
      executive officers, directors and all persons who own more than 10% of our
      common stock complied with all Section 16(a) requirements.





33





Code
      of Business Conduct and
      Ethics





We
      have adopted a code of business
      conduct and ethics for employees, executive officers and directors that is
      designed to ensure that all of our directors, executive officers and employees
      meet the highest standards of ethical conduct.  The code requires that
      our directors, executive officers, and employees avoid conflicts of interest,
      comply with all laws and other legal requirements, and conduct business in
      an
      honest and ethical manner and otherwise act with integrity and in our best
      interest.  Under the terms of the code, directors, executive officers,
      and employees are required to report any conduct that they believe in good
      faith
      to be an actual or apparent violation of the code.





As
      a mechanism to encourage compliance
      with the code, we have established procedures to receive, retain and treat
      complaints received regarding accounting, internal accounting controls or
      auditing matters.  These procedures ensure that individuals may submit
      concerns regarding questionable accounting or auditing matters in a confidential
      and anonymous manner.  The code also prohibits us from retaliating
      against any director, executive officer, or employee who reports actual or
      apparent violations of the code.





Item
      10.  Executive
      Compensation.


Summary
      Compensation





The
      following table summarizes
      compensation we paid for services rendered to our Company during the fiscal
      years ended October 31, 2007and2006
      to our chief executive officer, any
      executive officer with a total salary and bonus exceeding $100,000 during fiscal
      2007, and all other executive officers as of October 31, 2007 (the "Named
      Executive Officers").








Summary
                Compensation
                TableName
                and principal
                position
              (a)
            
            Year
              (b)
            
            
            Salary(1)
              ($)
              (c)
            
            
            Bonus
              ($)
              (d)
            
            
            Stock
                Awards
              ($)
              (e)
            
            
            Option
                Awards
              ($)
              (f)
            
            
            Non-Equity
                Incentive
                Plan
              ($)
              (g)
            
            
            Non-qualified
                Deferred
                Compen-sation Earnings
              ($)
              (h)
            
            
            All
                other
                compen-sation
              ($)
              (i)
            
            
            Total
              ($)
              (j)John
                A.
                Jenkins
              Chairman
                and Chief Executive
                Officer
            
            
            2007
              2006
            
            
            
            150,000
              150,000
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            150,000
              150,000David
                R. Hess
              President
            
            
            2007
              2006
            
            
            
            -0-
              135,000
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              15,000(2)
            
            
            
            -0-
              150,000Christopher
                J.
                Canfield
              President
                and Chief Executive
                Officer
            
            
            2007
              2006
            
            
            
            150,000
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            -0-
              -0-
            
            
            
            150,000
              -0-


(1)
      Messers. Canfield and Prachar earn an annual salary of $150,000, but did not
      receive this amount from Rapid Link during fiscal 2006, as they were executive
      officers of Telenational, which was acquired in May 2006.  No other
      person that served as an executive officer during fiscal 2006 earned a total
      salary and bonus exceeding $100,000 during fiscal 2006.


(2)
      This
      amount consists of an automobile allowance for Mr. Hess.





34





Outstanding
      Equity Awards at Fiscal Year End





The
      following table sets forth certain
      information regarding stock options at October 31, 2007 by the named executive
      officers.





OUTSTANDING
      EQUITY AWARDS TABLE(1)





Option
                AwardsEquity
                Incentive Plan
                Awards:Name
                and PrincipalPosition
            
            Number
                of SecuritiesUnderlying
                Unexercised
                Options
            
            
            Number
                of securities underlying
                unexercisedunearned
                options
            
            
            Exercise
              Price
            
            
            Expiration
              DateExercisable
            
            
            UnexercisableJohn
                A.
                Jenkins
              Chairman
                and Chief Executive
                Officer
            
            
            100,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Christopher
                J.
                Canfield
              President
                and Chief Executive
                Officer
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Michael
                Prachar
              Chief
                Operating
                Officer
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -





(1)No named executive has
      any
      stock awards outstanding at October 31, 2007.








Employment
      Agreements





The
      Company has not entered into any
      employment agreements or arrangements, whether written or oral, with any of
      its
      named executive officers.





Compensation
      of
      Directors





The
      members of our Board of Directors did not receive any type of compensation
      from
      us during the year ended December 31, 2007.  Directors are not compensated
      for
      attending Board and committee meetings, though our directors are allowed to
      participate in our Equity Incentive Plan for services rendered to the Company
      as
      a director.





35





Item
      11.  Security Ownership
      of Certain Beneficial Owners


and
      Management and Related Stockholder
      Matters.





The
      following table sets forth certain
      information regarding the beneficial ownership of our common stock as of
      December 31, 2007 by (i) each stockholder known by us to beneficially own five
      percent(5%)or
      more of the Company’s outstanding
      common stock, (ii) each of our current directors, (iii) eachof our officers and directorsand (iv) all of our
      executive officers and directors as a group.  Except as otherwise
      indicated below, each of the entities or persons named in the table has sole
      voting and investment power with respect to all shares of our common stock
      beneficially owned.The percentages in this
      table are based
      on 104,973,170 shares outstanding, assuming exercise and conversion of all
      options, warrants and other convertible securities beneficially owned by
      officers and directors as a group.Beneficial ownership
      is
      determined in accordance with the rules of the SEC and generally includes voting
      or investment power with respect to the securities.  In computing the
      number of shares beneficially owned by a person and the percentage ownership
      of
      that person, shares of our common stock underlying options or warrants or other
      convertible securities  held by that person that will be exercisable
      within 60 days of December 31, 2007, are deemed to be
      outstanding.  Such shares, however, are not deemed to be outstanding
      for the purpose of computing the percentage ownership of that person but are
      not
      treated as outstanding for the purpose of computing the percentage ownership
      of
      any other person.





Beneficial
                Owner
            
            Number
                of
              Shares
            
            
            PercentApex
                Acquisitions, Inc. (1)
              P.O.
                Box 8658
              Breckenridge,
                CO  80424
            
            
            38,233,824
            
            
            
            36.42
            %John
                A. Jenkins (2)
            
            
            39,038,824
            
            
            
            37.18
            %David
                R. Hess (3)
            
            
            1,000,000
            
            
            
            *Lawrence
                J. Vierra (4)
            
            
            825,000
            
            
            
            *All
                Executive Officers and Directors as a group (5 persons)
                (5)
            
            
            79,097,648
            
            
            
            75.35
            %





*
      Reflects less than one percent.





(1)
      Includes (i) 17,966,420 shares held directly, (ii) 19,058,824 shares of common
      stock which may be acquired through the conversion of convertible notes (shares
      from conversion calculated using the closing bid share price at December 31,
      2007 of $0.085), (iii) 1,208,580 shares held by dependent children; all of
      which
      are exercisable or convertible within 60 days of December 31,
      2007.  Apex is 70% owned by Mr. Canfield and 30% owned by Mr. Prachar,
      for all shares of common stock.


(2)
      Includes (i) 19,300,000 shares held directly, (ii) 100,000 shares of common
      stock which may be acquired through the exercise of options, (iii) 580,000
      shares of common stock which may be acquired through the exercise of warrants,
      and (iv) 19,058,824 shares of common stock which may be acquired through the
      conversion of a convertible note (shares from conversion calculated using the
      closing bid share price at December 31, 2007 of $0.085); all of which are
      exercisable or convertible within 60 days of December 31, 2007.


(3)
      Includes (i) 1,000,000 shares of common stock, which may be acquired through
      the
      exercise of warrants, which are exercisable within 60 days of December 31,
      2007.


(4)
      Includes (i) 795,000 shares held directly, (ii) 30,000 shares of common stock
      which may be acquired through the exercise of warrants, which are exercisable
      within 60 days of December 31, 2007.


(5)
      Calculations based on 104,973,170
      shares outstanding, assuming exercise and conversion of all options, warrants
      and other convertible securities beneficially owned by officers and directors
      as
      a group.





Changes
      in Control





There
      are no arrangements known to us
      which may result of a change in control of the Company.





Item
      12.  Certain
      Relationships and Related Transactions,


and
      DirectorIndependence.





In
      October 2001, we issued 10% convertible notes (the "Notes") to two of our
      executive officers and one director (the "Related Parties"), each of whom was
      also a director, who provided financing to our Company in the aggregate
      principal amount of $1,945,958.  The Notes were issued as follows: (i)
      a note in the principal amount of $1,745,958 to John Jenkins, our Chief
      Executive Officer; (ii) a note in the principal amount of $100,000 to our former
      Executive Vice President and Chief Financial Officer; and (iii) a note in the
      principal amount of $100,000 to Lawrence Vierra, a director.  With an
      original maturity date of October 24, 2003, these Notes were amended to mature
      on February 24, 2004.  Each Note was originally convertible at
      six-month intervals only, but was subsequently amended in November 2002 to
      provide for conversion into shares of our common stock at the option of the
      holder at any time.  The conversion price is equal to the closing bid
      price of our common stock on the last trading day immediately preceding the
      conversion.  We also issued to the holders of the Notes warrants to
      acquire an aggregate of 1,945,958 shares of common stock at an exercise price
      of
      $0.75 per share, which warrants expire on October 24, 2006.





36





In
      January and July 2002, the Notes issued to Mr. Jenkins were amended to include
      additional advances in the aggregate principal amount of $402,443.  We
      also issued to Mr. Jenkins two warrants to acquire an additional 102,443 and
      300,000 shares of common stock, respectively, at an exercise price of $0.75,
      which warrants expired on January 28, 2007 and July 8, 2007,
      respectively.





On
      July
      21, 2005, our Company and the Related Parties agreed to extend the maturity
      date
      of the Notes to February 29, 2008.  In connection with the extension,
      we issued to the Related Parties warrants to acquire 640,000 shares of common
      stock at an exercise price of $0.16.  The warrants expire in July
      2010.  In September 2005 and 2004, respectively, the holders of the
      Notes converted a total aggregate of $467,500 and $877,500, respectively, of
      the
      outstanding principal into an aggregate of 3,740,000 and 6,750,000,
      respectively, of shares of common stock.  On September 14, 2006, Mr.
      Jenkins agreed to convert all unpaid interest on his Note in the amount of
      $901,688 to the principal balance of his Note.





On
      May 5,
      2006, the Company acquired 100% of the outstanding stock of Telenational
      Communications, Inc. (“Telenational”) for $4,809,750, including acquisition
      costs of $50,000.  The purchase consideration included a contingent
      cash payment in the amount of $500,000 and 19,175,000 shares of the Company’s
      common stock valued at $3,259,750.  On October 31, 2007, the
      contingent purchase price consideration was converted to a convertible demand
      note payable to Apex Acquisitions,
      Inc. ("Apex”)Apex in the amount of $500,000.  The Company President and
      Chief Financial
      Officer is the majority stockholder of Apex.





On
      October 31, 2007, the Company entered
      into an agreement, which modified its debt structure with Apex.  The
      agreement calls for the outstanding note due in November of 2007 payable to
      Apex
      to be extended to November 1, 2009.  The note was also modified to
      allow for the balance to be convertible to common stock at market
      pricing.The outstanding balance of the Apex Notes, including
      $120,000 of accrued interest that was rolled into the note, was $1,120,000
      at
      October 31, 2007.





On
      October 31, 2007, $50,000 of debentures including $65,889 of accrued interest
      was transferred by the debenture holders to John Jenkins, the Company’s Chairman
      and Chief Executive Officer.  These amounts, along with a $300,000
      related party demand note including accrued interest of $84,111, were rolled
      into a $500,000 convertible demand note payable to Mr. Jenkins.





On
      October 31, 2007, the Company entered
      into an agreement, which materially modified its debt structure with the
      Company’s Chairman and Chief Executive Officer, John Jenkins.  The
      agreement calls for the outstanding note due in February of 2008 payable to
      John
      Jenkins to be extended to November 1, 2009.  The note was also
      modified to allow for the balance to be convertible to common stock at market
      pricing.The outstanding balance of these notes payable to Mr.
      Jenkins, including $241,000 of accrued interest that was rolled into the note,
      was $1,120,000 at October 31, 2007.





37





Item
      13.  Exhibits.





Exhibits





The
      following is a list of all exhibits
      filed with this Report, including those incorporated by
      reference.





2.1
      Agreement and Plan of Merger dated
      as of January 30, 1998, among Canmax Inc., CNMX MergerSub, Inc. and US
      Communications Services, Inc. (filed as Exhibit 2.1 tothe Company’s Current Report onForm
      8-KfiledFebruary
      9, 1998 , and incorporated
      herein by
      reference)





2.2
      Rescission Agreement dated June 15,
      1998 among Canmax Inc., USC and former principals of USC (filed as Exhibit
      10.1
      tothe Company’s Current
      Report onForm 8-K dated
      January30,
      1998, and incorporated herein by
      reference)





2.3
      Asset Purchase Agreement by and
      among Affiliated Computed Services, Inc., Canmax and Canmax Retail Systems,
      Inc.
      dated September 3, 1998 (filed as Exhibit 10.1 to the Company'sCurrent Report onForm
      8-KfiledDecember22,
      1998 and incorporated herein by
      reference)





2.4
      Asset Purchase Agreement dated
      November 2, 1999 among ARDIS Telecom & Technologies, Inc., Dial Thru
      International Corporation, aDelawarecorporation,
      Dial Thru International
      Corporation, aCaliforniacorporation,
      andJohn Jenkins(filed
      as Exhibit 2.1 to the Company's
      Current Report on Form 8-KfiledNovember17,
      1999 and incorporated herein by
      reference)





2.5
      Stock and Asset Purchase Agreement,
      dated as of September 18, 2001, by and among Rapid Link USA, Inc., Rapid Link
      Inc., and Dial Thru International Corporation (filed as Exhibit 2.1 to the
      Company'sCurrent Report onForm
      8-KfiledOctober
      29, 2001 and incorporated herein
      by reference)





2.6
      First Amendment to Stock and Asset
      Purchase Agreement, dated as of September 21, 2001, by and among Rapid Link
      USA,
      Inc., Rapid Link Inc., and Dial Thru International Corporation (filed as Exhibit
      2.2 to the Company'sCurrentForm
      8-KfiledOctober
      29, 2001 and incorporated herein
      by reference)





2.7
      Second Amendment to Stock and Asset
      Purchase Agreement, dated as of October 12, 2001, by and among Rapid Link USA,
      Inc., Rapid Link Inc., and Dial Thru International Corporation (filed as Exhibit
      2.3 to the Company'sCurrent Report onForm
      8-KfiledOctober
      29, 2001 and incorporated herein
      by reference)





2.8
      Third Amendment to Stock and Asset
      Purchase Agreement, dated as of October 30, 2001, by and among Rapid Link USA,
      Inc., Rapid Link Inc., and Dial Thru International Corporation (filed as Exhibit
      2.4 to the Company'sCurrent Report onForm
      8-KfiledDecember
      28, 2001 and incorporated
      herein by reference)





2.9
      Fourth Amendment to Stock and Asset
      Purchase Agreement, dated as of November 30, 2001, by and among Rapid Link
      USA,
      Inc., Rapid Link Inc., and Dial Thru International Corporation (filed as Exhibit
      2.5 to the Company'sCurrent Report onForm
      8-KfiledDecember
      28, 2001 and incorporated
      herein by reference)





2.10
      Asset Purchase Agreement, dated as
      of October 25, 2005, by and between Integrated Communications, Inc. and Dial
      Thru International Corporation (filed as Exhibit 2.5 to the Company'sCurrent Report onForm
      8-KfiledOctober
      31, 2005 and incorporated herein
      by reference)





3.1
      Certificate of Incorporation, as
      amended (filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for
      the fiscal year ended October 31, 1999  and incorporated herein by
      reference)





3.2
      Amended and Restated Bylaws of Dial
      Thru International Corporation (filed as Exhibit 3.2 tothe Company’sAnnual
      Report on Form 10-K for the
      fiscal year ended October 31, 1999 and incorporated herein by
      reference)





38





3.3
      Amendment to Certificate of
      Incorporation dated January 11, 2005 and filed with the State of Delaware on
      January 13, 2005 (filed as Exhibit 3.3 to the Company’s Annual Report on Form
      10-K for the fiscal year ended October 31, 2004 and incorporated herein by
      reference)





3.4
      Amendment to Certificate of
      Incorporation dated October 28, 2005 and filed with the State of Delaware on
      November 1, 2005 (filed as Exhibit 3.4 to the Company’s Annual Report on Form
      10-K for the fiscal year ended October 31, 2005 and incorporated herein by
      reference)





4.1
      Securities Purchase Agreement issued
      January 28, 2002 between Dial Thru International Corporation and GCA Strategic
      Investment Fund Limited (filed as Exhibit 4.1 to the Company'sRegistration Statement
      onForm S-3, File 333-82622,
      filed on
      February 12, 2002 and incorporated herein by reference)





4.2
      Registration Rights Agreement dated
      January 28, 2002 between Dial Thru International Corporation and GCA Strategic
      Investment Fund Limited (filed as Exhibit 4.2 to the Company'sRegistration Statement
      onForm S-3, File 333-82622,
      filed on
      February 12, 2002 and incorporated herein by reference)





4.3
      6% Convertible Debenture of Dial
      Thru International Corporation and GCA Strategic Investment Fund Limited (filed
      as Exhibit 4.3 to the Company'sRegistration Statement
      onForm S-3, File 333-82622,
      filed on
      February 12, 2002 and incorporated herein by reference)





4.4
      Common Stock Purchase Warrant dated
      January 28, 2002 between GCA Strategic Investment Fund Limited and Dial Thru
      International Corporation (filed as Exhibit 4.4 to the Company'sRegistration Statement
      onForm S-3, File 333-82622,
      filed on
      February 12, 2002 and incorporated herein by reference)





4.5
      Securities Purchase Agreement issued
      November 8, 2002 between Dial Thru International Corporation and Global Capital
      Funding Group, L.P. (filed as Exhibit 4.1 to the Company'sCurrent Report onForm
      8-K filed on September 23, 2003,
      and incorporated herein by reference)





4.6
      Secured Promissory Note issued
      November 8, 2002 between Dial Thru International Corporation and Global Capital
      Funding Group, L.P. (filed as Exhibit 4.2 to the Company'sCurrent Report onForm
      8-K filed on September 23, 2003,
      and incorporated herein by reference)





4.7
      Common Stock Purchase Warrant issued
      November 8, 2002 between Dial Thru International Corporation and Global Capital
      Funding Group, L.P. (filed as Exhibit 4.3 to the Company'sCurrent Report onForm
      8-K filed on September 23, 2003,
      and incorporated herein by reference)





4.8
      Registration Rights Agreement issued
      November 8, 2002 between Dial Thru International Corporation and Global Capital
      Funding Group, L.P. (filed as Exhibit 4.4 to the Company'sCurrent Report onForm
      8-K filed on September 23, 2003,
      and incorporated herein by reference)





4.9
      Securities Purchase Agreement issued
      July 24, 2003 between Dial Thru International Corporation and GCA Strategic
      Investment Fund Limited (filed as Exhibit 4.5 to the Company'sCurrent Report onForm
      8-K filed on September 23, 2003,
      and incorporated herein by reference)





4.10
      Promissory Note issued July 24,
      2003 between Dial Thru International Corporation and GCA Strategic Investment
      Fund Limited (filed as Exhibit 4.6 to the Company'sCurrent Report onForm
      8-K filed on September 23, 2003,
      and incorporated herein by reference)





4.11
      Common Stock Purchase Warrant
      issued July 24, 2003 between Dial Thru International Corporation and GCA
      Strategic Investment Fund Limited (filed as Exhibit 4.6 to the Company'sCurrent Report onForm
      8-K filed on September
      23, 2003, and incorporated herein by reference)





39





4.12
      Secured Promissory Note dated June
      1, 2005 between Global Capital Funding Group, L.P. and Dial Thru International
      Corporation (filed as Exhibit 4.1 to the Company'sCurrent Report onForm
      8-K filed on June 7, 2005, and
      incorporated herein by reference)





4.13
      Common Stock Purchase Warrant dated
      June 1, 2005 between Global Capital Funding Group, L.P. and Dial Thru
      International Corporation (filed as Exhibit 4.2 to the Company'sCurrent Report onForm
      8-K filed on June 7, 2005, and
      incorporated herein by reference)





4.14
      Common Stock Purchase Warrant dated
      June 1, 2005 between Global Capital Funding Group, L.P. and Dial Thru
      International Corporation (filed as Exhibit 4.3 to the Company's Form 8-K filed
      on June 7, 2005, and incorporated herein by reference)





4.15
      Common Stock Purchase Warrant dated
      June 1, 2005 between GCA Strategic Investment Fund Limited and Dial Thru
      International Corporation (filed as Exhibit 4.5 to the Company'sCurrent Report onForm
      8-K filed on June 7, 2005, and
      incorporated herein by reference)





4.16
      Common Stock Purchase Warrant dated
      June 1, 2005 between GCA Strategic Investment Fund Limited and Dial Thru
      International Corporation (filed as Exhibit 4.6 to the Company's Form 8-K filed
      on June 7, 2005, and incorporated herein by reference)





4.17
      Common Stock Purchase Warrant dated
      June 1, 2005 between GCA Strategic Investment Fund Limited and Dial Thru
      International Corporation (filed as Exhibit 4.7 to the Company's Form 8-K filed
      on June 7, 2005, and incorporated herein by reference)





4.18
      Securities Purchase Agreement dated
      March 8, 2006 between Rapid Link, Incorporated and Trident Growth Fund, L.P.
      (filed as Exhibit 4.1 to the Company'sCurrent Report onForm
      8-K filed on March 14, 2006, and
      incorporated herein by reference)





4.19
      10% Secured Convertible Debenture
      dated March 8, 2006 between Rapid Link, Incorporated and Trident Growth Fund,
      L.P. (filed as Exhibit 4.2 to the Company's Form 8-K filed on March 14, 2006,
      and incorporated herein by reference)





4.20
      Common Stock Purchase Warrant dated
      March 8, 2006 between Rapid Link, Incorporated and Trident Growth Fund, L.P.
      (filed as Exhibit 4.3 to the Company'sCurrent Report onForm
      8-K filed on March 14, 2006, and
      incorporated herein by reference)





4.21
      Security Agreement dated March 8,
      2006 between Rapid Link, Incorporated and Trident Growth Fund, L.P. (filed
      as
      Exhibit 4.4 to the Company'sCurrent Report onForm
      8-K filed on March 14, 2006, and
      incorporated herein by reference)





4.22
      Subordination Agreement dated March
      8, 2006 between Rapid Link, Incorporated Charger Investments, LLC and Trident
      Growth Fund, L.P. (filed as Exhibit 4.5 to the Company's Form 8-K filed on
      March
      14, 2006, and incorporated herein by reference)





4.23
      Securities Purchase Agreement dated
      March 8, 2006 between Rapid Link, Incorporated and Charger Investments, LLC
      (filed as Exhibit 4.6 to the Company'sCurrent Report onForm
      8-K filed on March 14, 2006, and
      incorporated herein by reference)





4.24
      10% Secured Convertible Debenture
      dated March 8, 2006 between Rapid Link, Incorporated and Charger Investments,
      LLC (filed as Exhibit 4.7 to the Company'sCurrent Report onForm
      8-K filed on March 14, 2006, and
      incorporated herein by reference)





4.25
      Common Stock Purchase Warrant dated
      March 8, 2006 between Rapid Link, Incorporated and Charger Investments, LLC
      (filed as Exhibit 4.8 to the Company'sCurrent Report onForm
      8-K filed on March 14, 2006, and
      incorporated herein by reference)





40





4.26
      Security Agreement dated March 8,
      2006 between Rapid Link Incorporated and Charger Investments, LLC (filed as
      Exhibit 4.9 to the Company'sCurrent Report onForm
      8-K filed on March 14, 2006, and
      incorporated herein by reference)





10.1
      Employment Agreement, dated June
      30, 1997 between Canmax Retail Systems, Inc. and Roger Bryant (filed as Exhibit
      10.3 to the Company's Registration Statement on Form S-3, File No. 333-33523,
      and incorporated herein by reference)





10.2
      Commercial Lease Agreement between
      Jackson--Shaw/JetstarDrive
      Tri-star Limited Partnership and
      the Company (filed as Exhibit 10.20 to the Company's Annual Report on Form
      10-Kfor the fiscal year endedOctober 31, 1998, and
      incorporated herein by reference)





10.3
      Employment Agreement, dated
      November 2, 1999 between ARDIS Telecom & Technologies, Inc. andJohn Jenkins(filed
      as Exhibit 4.3 to the Company's
      Annual Report on Form 10-Kfor the fiscal year endedOctober
      31,2000and
      incorporated herein by
      reference)





10.4
      Amendment Number 1 to Securities
      Purchase Agreement dated June 1, 2005 between Global Capital Funding Group,
      L.P.
      and Dial Thru International Corporation (filed as Exhibit 10.1 to the Company'sCurrent Report onForm
      8-K filed on June 7,
      2005, and incorporated herein by reference)





10.5
      Amendment Number 1 to Securities
      Purchase Agreement dated June 1, 2005 between GCA Strategic Investment Fund
      Limited and Dial Thru International Corporation (filed as Exhibit 10.2 to the
      Company'sCurrent Report onForm
      8-K filed on June 7,
      2005, and incorporated herein by reference)





10.6
      Amendment Number 1 to Securities
      Purchase Agreement dated June 1, 2005 between GCA Strategic Investment Fund
      Limited and Dial Thru International Corporation (filed as Exhibit 10.3 to the
      Company'sCurrent Report onForm
      8-K filed on June 7,
      2005, and incorporated herein by reference)





10.7
      Amendment Number 2 to Securities
      Purchase Agreement between Rapid Link, Incorporated and GCA Strategic Investment
      Fund Limited dated November 2, 2005 (filed as Exhibit 10.1 to the Company'sCurrent Report onForm
      8-K filed on March 14,
      2006, and incorporated herein by reference)





10.8
      Stock Purchase Agreement by and
      between Rapid Link, Incorporated and Apex Acquisitions, Inc. dated as of May
      3,
      2006 (filed as Exhibit 10.1 to the Company'sCurrent Report onForm
      8-K filed on May 9, 2006, and
      incorporated herein by reference)





10.9
      Amendment No. 1 to Stock Purchase
      Agreement by and between Rapid Link, Incorporated and Apex Acquisitions, Inc.
      dated as of May 5, 2006 (filed as Exhibit 10.2 to the Company'sCurrent Report onForm
      8-K filed on May 9, 2006, and
      incorporated herein by reference)





10.10
      Stock Pledge Agreement by and
      between Rapid Link, Incorporated and Apex Acquisitions, Inc. dated as of May
      5,
      2006 (filed as Exhibit 10.3 to the Company'sCurrent Report onForm
      8-K filed on May 9, 2006, and
      incorporated herein by reference)





10.11
      Secured Recourse Promissory Note
      dated as of May 5, 2006 made by Rapid Link, Incorporated in favor of Apex
      Acquisitions, Inc. (filed as Exhibit 10.4 to the Company'sCurrent Report onForm
      8-K filed on May 9, 2006, and
      incorporated herein by reference)





10.12
      Fifth Allonge to 10% Convertible
      Note of Dial Thru International Corporation in favor ofJohn Jenkins,
      dated September 14, 2006 (filed as
      Exhibit 10.1 to the Company'sCurrent Report onForm
      8-K filed on June 7, 2005, and
      incorporated herein by reference)





41





10.13
      Amendment Number 2 to Securities
      Purchase Agreement between Rapid Link, Inc., formerly known as Dial Thru
      International Corporation, and GCA Strategic Investment Fund Limited dated
      September 14, 2006 (filed as Exhibit 10.2 to the Company'sCurrent Report onForm
      8-K filed on September 20, 2006,
      and incorporated herein by reference)





10.14
      Amendment Number 2 to Securities
      Purchase Agreement between Rapid Link, Inc., formerly known as Dial Thru
      International Corporation, and Global Capital Funding Group, L.P. dated
      September 14, 2006 (filed as Exhibit 10.3 to the Company'sCurrent Report onForm
      8-K filed on September 20, 2006,
      and incorporated herein by reference)





10.15
      Amendment Number 2 to Securities
      Purchase Agreement between Rapid Link, Inc., formerly known as Dial Thru
      International Corporation, and GCA Strategic Investment Fund Limited dated
      August 15, 2006 (filed as Exhibit 10.4 to the Company'sCurrent Report onForm
      8-K filed on September 20, 2006,
      and incorporated herein by reference)





10.16
      Amendment Number 3 to 6%
      Convertible Debenture between GCA Strategic Investment Fund Limited and Rapid
      Link, Incorporated, formerly known as Dial Thru International Corporation dated
      September 14, 2006 (filed as Exhibit 10.5 to the Company's FormCurrent Report on8-K
      filed on September 20, 2006, and
      incorporated herein by reference)





10.17
      Amendment Number 4 to 6%
      Convertible Debenture between GCA Strategic Investment Fund Limited and Rapid
      Link, Incorporated, formerly known as Dial Thru International Corporation dated
      September 14, 2006 (filed as Exhibit 10.6 to the Company'sCurrent Report onForm
      8-K filed on September 20, 2006,
      and incorporated herein by reference)





10.18
      Amendment Number 1 to Secured
      Promissory Note due February 28, 2008 between Global Capital Funding Group,
      L.P.
      and Rapid Link, Inc., formerly known as Dial Thru International Corporation
      dated September 14, 2006 (filed as Exhibit 10.7 to the Company'sCurrent Report onForm
      8-K filed on September 20, 2006,
      and incorporated herein by reference)





10.19
      Amendment Number 1 to Secured
      Promissory Note due March 30, 2007 between Global Capital Funding Group, L.P.
      and Rapid Link, Inc., formerly known as Dial Thru International Corporation
      dated September 14, 2006 (filed as Exhibit 10.8 to the Company'sCurrent Report onForm
      8-K filed on September 20, 2006,
      and incorporated herein by reference)





14.1
      Code of Business Conduct and Ethics
      for Employees, Executive Officers and Directors (filed as Exhibit 14.1 to theCompany’s report on Form
      10-k for the fiscal year ended October 31, 2003and incorporated herein
      by
      reference)





21.1
      Subsidiaries of the Registrant
      (filed herewith)





23.1
      Consent of Independent Registered
      Public Accounting Firm (filed herewith)





31.1
      Certificate of Chief Executive
      Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
      Act of 1934 (filed herewith)





31.2
      Certificate of Chief Financial
      Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
      Act of 1934 (filed herewith)





32.1
      Certificate of Chief Executive
      Officer pursuant to 18 U.S.C. Section 1350 (furnished
      herewith)





32.2
      Certificate of Chief Financial
      Officer pursuant to 18 U.S.C. Section 1350 (furnished
      herewith)





Item
      14.  Principal Accountant
      Fees and Services.





Audit
      Fees





42





The
      aggregate fees billed by KBA Group
      LLP for professional services rendered for the audit of the Company's annual
      financial statements and review of the interim financial statements included
      in
      the Company's Forms 10-QSBs, including services related thereto, were$108,425and
      $108,640for
      fiscal 2007 and 2006,
      respectively.





Audit-Related
      Fees





The
      aggregate audit-related fees billed
      by KBA Group LLP for fiscal2007 and2006were$5,000
      and$41,045,respectively,whichfor
      fiscal year 2007 related to
      professional services rendered in connection with the review of a registration
      statement and for fiscal year 2006related to professional
      services
      rendered for the audit of Telenational Communications, Inc., reviews of interim
      financial statements and review of the Form 8-K and pro forma related to the
      Telenational Communications, Inc. acquisition.





Tax
      Fees





The
      aggregate fees billed byBenham, Ichen & Knox
      LLPfor professional
      services rendered for tax compliance, tax advice and tax planning were$12,000and
      $12,000 for fiscal 2007 and 2006,
      respectively.  The services comprising the fees reported as "Tax Fees"
      included tax return preparation and consultation regarding various tax
      issues.





All
      Other Fees





There
      were no other fees billed by KBA
      Group LLP during fiscal 2007 and 2006.





Policy
      Related to Board of Directors
      Pre-Approval of Audit and Permissible Non-Audit Services of Independent
      Registered Public Accounting Firm.





The
        Board of Directors will engage the
        Auditor for the audit of the Company’s consolidated financial statements, and
        other audit-related work as deemed necessary.  The Auditor may only be
        engaged for non-audit related work if those services enhance and support
        the
        attest function of the audit, or are an extension to the audit or audit related
        services.  Annually the Chief Financial Officer (“CFO”) will review
        with the Board of Directors the services the Auditor expects to provide in
        the
        coming year and the related fees.  The Auditor shall determine the
        scope of work necessary to render an opinion on the consolidated financial
        statements of the Company.  This determination should include the
        locations to visit, the scope of work to be performed at each location, and
        the
        timing of that work.  The scope of work will be presented to the Board
        of Directors for approval.





The
        Auditor shall be considered the
        preferred service provider of Audit Related Services if services are consistent
        with the attest role of the Auditor and either:





1.
              services
                  can only be provided by
                  the Auditor, or


2.
              services
                  are an extension of the
                  work performed as part of the Audit, or rely on work performed
                  as part of
                  the Audit such that the quality and timeliness of the services
                  can most
                  effectively be provided by the Auditor,
                  or


3.
              services
                  enhance the effectiveness
                  of the Auditor’s examination of the Company’s consolidated financial
                  statements.





The
        Board of Directors is responsible
        for approving all Audit, Audit Related, and Other Non-Audit
        Services.  Each year as part of the Annual Audit Plan, the CFO will
        provide the Board of Directors with a report of anticipated Audit, Audit
        Related, Other Non-Audit Services, together with an estimate of
        fees.  The size of the fee and the scope of these services will be
        carefully considered so as to avoid any real or perceived question as to
        the
        Auditor’s independence.





The
        Company shall not hire an audit
        engagement team member in a financial reporting oversight role where that
        person
        has prepared financial statements or exercised influence over the financial
        statements during the two year period prior to the date of
        employment.  The CFO is responsible for the implementation of this
        policy.





43





SIGNATURES





Pursuant
      to the requirements of Section
      13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.





RAPID
                LINK,
                INCORPORATED
              (Registrant)/s/
                John A.
                JenkinsJohn
                A.
                Jenkins
              Chief
                Executive Officer and
                Chairman of the BoardDate:
                January 22, 2008











Pursuant
      to the requirements of the
      Securities Exchange Act of 1934, this report has been signed by the following
      persons on behalf of the registrant and in the capacities and on the dates
      indicated.





NAME
              
              TITLE
              
              DATE/s/
                  JOHN A. JENKINS
              
              Chairman
                  of the Board,Chief
                  Executive Officer,Secretary
                  and Director(principal
                  executive officer)
              
              January
                  22, 2008John
                  A. Jenkins/s/
                  CHRISTOPHER J. CANFIELD
              
              President,
                Chief FinancialOfficer,
                Treasurer andDirector
                (principal financialand
                principal accountingofficer)
              
              January
                  22, 2008Christopher
                  J. Canfield/s/
                  LAWRENCE J. VIERRA
              
              Director
              
              January
                  22, 2008Lawrence
                  J. Vierra/s/
                  DAVID R. HESS
              
              Director
              
              January
                  22, 2008David
                  R. Hess





44





RAPID
      LINK, INCORPORATED AND
      SUBSIDIARIES


INDEX
      TO FINANCIAL
      STATEMENTS








Consolidated
                Financial Statements:
            PageReport
                of Independent Registered Public Accounting
                Firm
            F-2Consolidated
                Balance Sheets at
                October 31, 2007 and 2006
            F-3Consolidated
                Statements of
                Operations for the fiscal years ended October 31, 2007 and
                2006
            F-4Consolidated
                Statements of
                Shareholders' Deficit for the fiscal years ended October 31, 2007
                and
                2006
            F-5Consolidated
                Statements of Cash
                Flows for the fiscal years ended October 31, 2007 and
                2006
            F-6Notes
                to Consolidated Financial
                Statements
            F-7




F-1





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To
      the Board of Directors and
      Shareholders of


Rapid
      Link,
      Incorporated








We
      have audited the accompanying
      consolidated balance sheets of Rapid


Link,
      Incorporated and subsidiaries as
      of October 31, 2007 and 2006, and the related consolidated statements of
      operations, shareholders' deficit, and cash flows for the years then
      ended.  These consolidated financial statements are the responsibility
      of the Company's management.  Our responsibility is to express an
      opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance
      with the standards of the Public Company Accounting Oversight Board
      (United States).  Those
      standards require
      that we plan and perform the audit to obtain reasonable assurance about whether
      the financial statements are free of material misstatement.  The
      Company is not required to have, nor were we engaged to perform, an audit of
      its
      internal control over financial reporting.  Our audits included
      consideration of internal control over financial reporting as a basis for
      designing audit procedures that are appropriate in the circumstances, but not
      for the purpose of expressing an opinion on the effectiveness of the Company's
      internal control over financial reporting.  Accordingly, we express no
      such opinion.  An auditalsoincludes
      examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial
      statements,assessing
      the accounting principles used
      and significant estimates made by management, as well as evaluating the overall
      financial statement presentation.  We believe that our audits provide
      a reasonable basis for our opinion.





In
      our opinion, the consolidated
      financial statements referred to above present fairly, in all material respects,
      the financial position of Rapid Link, Incorporated and subsidiaries as of
      October 31, 2007 and 2006, and the results of their operations and their cash
      flows for the years then ended, in conformity with accounting principles
      generally accepted in the United States of America.





The
      accompanying consolidated financial
      statements have been prepared assuming that the Company will continue as a
      going
      concern.  As discussed in Note 1 to the consolidated financial
      statements, the Company has suffered recurring losses from continuing operations
      during each of the last two fiscal years.  Additionally, at October
      31, 2007, the Company's current liabilities exceeded its current assets by$5.4 millionand
      the Company has a shareholders'
      deficit totaling$2.8 million.These
      conditions raise substantial doubt
      about the Company's ability to continue as a going
      concern.  Management's plans as they relate to these issues are also
      explained in Note 1.  The consolidated financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.





As
      discussed in Note 2 to the
      consolidated financial statements, on November 1, 2006, the Company adopted
      Statement of Financial Accounting Standards No.123(R), “Share-Based
      Payment”.








/s/
      KBA GROUP LLP


Dallas,Texas


January
      22, 2008





F-2





RAPID
      LINK, INCORPORATED AND
      SUBSIDIARIES


CONSOLIDATED
      BALANCE
      SHEETS








October
                31,2007
            
            
            2006ASSETSCurrent
                assets:Cash
                and cash
                equivalents
            
            $
            496,306
            
            
            $
            30,136Accounts
                receivable, net of
                allowance of $53,584 and $99,666, respectively
            
            
            1,090,954
            
            
            
            1,400,568Prepaid
                expenses
            
            
            36,537
            
            
            
            204,335Other
                current
                assets
            
            
            200,809
            
            
            
            16,382Total
                current
                assets
            
            
            1,824,606
            
            
            
            1,651,421Property
                and equipment,
                net
            
            
            273,390
            
            
            
            379,027Customer
                lists,
                net
            
            
            2,536,400
            
            
            
            3,222,142Goodwill
            
            
            3,107,062
            
            
            
            2,688,461Other
                assets
            
            
            98,032
            
            
            
            121,286Totalassets
            
            $
            7,839,490
            
            
            $
            8,242,337LIABILITIES
                AND SHAREHOLDERS'
                DEFICITCurrent
                liabilities:Bank
                overdrafts
            
            $
            -
            
            
            $
            101,097Accounts
                payable
            
            
            2,319,099
            
            
            
            2,303,072Accrued
                interest (including $0 and
                $183,304, respectively, to related parties)
            
            
            227,037
            
            
            
            491,299Other
                accrued
                liabilities
            
            
            617,455
            
            
            
            507,581Deferred
                revenue
            
            
            66,113
            
            
            
            183,510Deposits
                and other
                payables
            
            
            77,106
            
            
            
            66,889Contingent
                purchase price
                consideration
            
            
            -
            
            
            
            500,000Convertible
                notes, current
                portion, net of debt discount of $151,515 and $343,333,
                respectively
            
            
            1,690,985
            
            
            
            716,667Convertible
                notes payable to
                related parties, current
            
            
            1,000,000
            
            
            
            -Related
                party notes,
                current
            
            
            50,000
            
            
            
            380,965Net
                current liabilities from
                discontinued operations
            
            
            1,162,000
            
            
            
            1,162,000Total
                current
                liabilities
            
            
            7,209,795
            
            
            
            6,313,080Convertible
                notes, long-term, net
                of debt discount of $0 and $610,308,
                respectively
            
            
            1,201,277
            
            
            
            1,622,149Convertible
                notes payable to
                related parties, long-term, net of debt discount of $0 and
                $44,120,
                respectively
            
            
            2,240,000
            
            
            
            1,860,958Related
                party notes,
                long-term
            
            
            -
            
            
            
            1,000,000Totalliabilities
            
            
            10,651,072
            
            
            
            10,796,187Commitments
                and
                contingenciesShareholders'
                deficit:Preferred
                stock, $.001 par value;
                10,000,000 shares authorized; none issued and
                outstanding
            
            
            -
            
            
            
            -Common
                stock, $.001 par value;
                175,000,000 shares authorized; 65,161,544 and 51,181,994sharesissued
                atOctober
                31, 2007 and October 31,
                2006, respectively
            
            
            65,162
            
            
            
            51,182Additional
                paid-in
                capital
            
            
            48,976,402
            
            
            
            47,248,729Accumulated
                deficit
            
            
            (51,798,275
            )
            
            
            (49,798,891
            )Treasury
                stock, at cost; 12,022
                shares
            
            
            (54,870
            )
            
            
            (54,870
            )Total
                shareholders'
                deficit
            
            
            (2,811,581
            )
            
            
            (2,553,850
            )Total
                liabilities and
                shareholders' deficit
            
            $
            7,839,490
            
            
            $
            8,242,337




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





F-3





RAPID
      LINK, INCORPORATED AND
      SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF
      OPERATIONS








Year
                Ended October
                31,2007
            
            
            2006Revenues
            
            $
            17,326,035
            
            
            $
            13,351,030Costs
                and
                expenses:Costs
                of
                revenues
            
            
            12,559,905
            
            
            
            9,644,235Sales
                and
                marketing
            
            
            1,212,355
            
            
            
            856,037General
                and
                administrative
            
            
            3,403,674
            
            
            
            3,596,171Depreciation
                and
                amortization
            
            
            928,427
            
            
            
            747,562Loss
                ondisposalof
                property and
                equipment
            
            
            10,061
            
            
            
            56,771Net
                reduction of
                liabilities
            
            
            -
            
            
            
            (2,300,929
            )Gain
                on legal
                settlements
            
            
            (415,213
            )
            
            
            -17,699,209
            
            
            
            12,599,847Operatingincome
                (loss)
            
            
            (373,174
            )
            
            
            751,183Other
                income
                (expense):Noncash
                interest
                expense
            
            
            (1,043,261
            )
            
            
            (1,410,351
            )Related
                party noncash interest
                expense
            
            
            (33,089
            )
            
            
            (33,089
            )Interest
                expense
            
            
            (284,414
            )
            
            
            (220,802
            )Related
                party interest
                expense
            
            
            (269,836
            )
            
            
            (216,233
            )Foreign
                currency exchange
                gain(loss)
            
            
            4,839
            
            
            
            (18,134
            )(1,626,211
            )
            
            
            (1,862,341
            )Net
                loss
            
            $
            (1,999,384
            )
            
            $
            (1,111,158
            )Loss
                per
                share:Basic
                and diluted weighted average
                shares outstanding
            
            
            53,618,865
            
            
            
            39,000,486Basic
                and diluted loss per
                share
            
            $
            (.04
            )
            
            $
            (.03
            )




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





F-4





RAPID
      LINK, INCORPORATED AND
      SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS’
DEFICIT





Common
                  Stock
              
              
              
              
              
              AdditionalShares
              
              
              Amount
              
              
              Treasury
                Stock
              
              
              Paid-in
                Capital
              
              
              AccumulatedDeficit
              
              
              TotalBalance,
                  October 31,
                  2005
              
              
              29,297,183
              
              
              $
              29,298
              
              
              $
              (54,870
              )
              
              $
              42,858,862
              
              
              $
              (48,687,733
              )
              
              $
              (5,854,443
              )Issuance
                  of common stockin connection
                  with
                  conversion ofconvertible
                  notesand accruedinterest
              
              
              2,709,811
              
              
              
              2,709
              
              
              
              -
              
              
              
              193,442
              
              
              
              -
              
              
              
              196,151Beneficial
                  conversion feature
                  related to issuance of convertible debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              628,674
              
              
              
              -
              
              
              
              628,674Issuance
                  of warrants in connection
                  with issuance of convertible debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              327,176
              
              
              
              -
              
              
              
              327,176Issuance
                  of common stock for
                  acquisition of Telenational Communications, Inc.
              
              
              19,175,000
              
              
              
              19,175
              
              
              
              -
              
              
              
              3,240,575
              
              
              
              -
              
              
              
              3,259,750Net
                  loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,111,158
              )
              
              
              (1,111,158
              )Balance,
                  October 31,
                  2006
              
              
              51,181,994
              
              
              
              51,182
              
              
              
              (54,870
              )
              
              
              47,248,729
              
              
              
              (49,798,891
              )
              
              
              (2,553,850
              )Issuance
                  of common stockin connection
                  with
                  conversion ofconvertiblenotes
                  and accrued
                  interest
              
              
              12,622,407
              
              
              
              12,622
              
              
              
              -
              
              
              
              1,317,378
              
              
              
              -
              
              
              
              1,330,000Issuance
                  of common stockfor
                  cash
              
              
              357,143
              
              
              
              358
              
              
              
              -
              
              
              
              24,642
              
              
              
              -
              
              
              
              25,000Issuance
                  of warrants in connection
                  with extension of convertible debt
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              278,950
              
              
              
              -
              
              
              
              278,950Share-basedcompensationexpense
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              17,703
              
              
              
              
              
              
              
              17,703Issuance
                  of common stock for
                  acquisition of Communications Advantageand Web
                  Breeze
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              -
              
              
              
              89,000
              
              
              
              -
              
              
              
              90,000Net
                  loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,999,384
              )
              
              
              (1,999,384
              )Balance,
                  October 31,
                  2007
              
              
              65,161,544
              
              
              $
              65,162
              
              
              $
              (54,870
              )
              
              $
              48,976,402
              
              
              $
              (51,798,275
              )
              
              $
              (2,811,581
              )




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





F-5





RAPID
      LINK, INCORPORATED AND
      SUBSIDIARIES


CONSOLIDATED
      STATEMENTS OF CASH
      FLOWS





Year
                Ended October
                31,2007
            
            
            2006Cash
                flows from operating
                activities:Net
                loss
            
            $
            (1,999,384
            )
            
            $
            (1,111,158
            )Adjustments
                to reconcile net loss
                to net cash provided by (used in) operating
                activities:Noncash
                interest
                expense
            
            
            1,076,350
            
            
            
            1,447,400Depreciation
                and
                amortization
            
            
            928,427
            
            
            
            747,562Bad
                debt
                expense
            
            
            88,812
            
            
            
            136,391Losson
                disposal of property and
                equipment
            
            
            10,061
            
            
            
            56,771Share-based
                compensation
                expense
            
            
            17,703
            
            
            
            -Non-cash
                gain onlegal
                settlementsandreduction
                of
                liabilities
            
            
            (135,000
            )
            
            
            (2,300,929
            )Changes
                in operating assets and
                liabilities(net of
                effect of acquisitions):Accounts
                receivable
            
            
            125,801
            
            
            
            (39,042
            )Prepaid
                expenses and other current
                assets
            
            
            167,209
            
            
            
            11,198Other
                assets
            
            
            19,925
            
            
            
            (46,120
            )Accounts
                payable
            
            
            116,027
            
            
            
            (269,074
            )Accrued
                liabilities
            
            
            351,018
            
            
            
            444,134Deferred
                revenue
            
            
            (117,397
            )
            
            
            18,870Deposits
                and other
                payables
            
            
            10,216
            
            
            
            (131,326
            )Net
                cash provided by (used in)
                operating activities
            
            
            659,136
            
            
            
            (1,035,323
            )Cash
                flows from investing
                activities:Purchases
                of property and
                equipment
            
            
            (7,048
            )
            
            
            (207,860
            )Proceeds
                from sale of property and
                equipment
            
            
            300
            
            
            
            -Cash
                acquired in Telenational
                acquisition
            
            
            -
            
            
            
            158,135Net
                cashused ininvesting
                activities
            
            
            (6,748
            )
            
            
            (49,725
            )Cash
                flows from financing
                activities:Increase
                (reduction)of
                bank
                overdrafts
            
            
            (101,097
            )
            
            
            101,097Proceeds
                from sale ofcommon
                stock
            
            
            25,000
            
            
            
            -Proceeds
                from convertible
                debentures
            
            
            -
            
            
            
            1,000,000Payment
                on convertible
                debentures
            
            
            -
            
            
            
            (163,927
            )Payment
                of financing
                fees
            
            
            -
            
            
            
            (44,150
            )Proceeds
                from related party notes
                and shareholder advances
            
            
            -
            
            
            
            850,000Payments
                on related party notes
                and shareholder advances
            
            
            (110,121
            )
            
            
            (800,000
            )Net
                cash provided by (used in)
                financing activities
            
            
            (186,218
            )
            
            
            943,020Net
                increase(decrease)in
                cash and cash
                equivalents
            
            
            466,170
            
            
            
            (142,028
            )Cash
                and cash equivalents,
                beginning ofyear
            
            
            30,136
            
            
            
            172,164Cash
                and cash equivalents, end ofyear
            
            $
            496,306
            
            
            $
            30,136Supplemental
                disclosure of cash
                flow information:Interest
                paid
            
            $
            165,500
            
            
            $
            15,000Supplemental
                schedule of non cash
                investing and financing activities:Issuance
                of common stockin connection
                with
                conversion ofconvertible
                notes and accrued
                interest
            
            $
            430,000
            
            
            $
            196,151Fair
                value of common stock issued
                in connection with Telenational Communications
                acquisition
            
            
            -
            
            
            
            3,259,750Note
                issued in connection with
                Telenational Communications acquisition
            
            
            -
            
            
            
            1,000,000Contingent
                liability issued in
                connection with Telenational Communications
                acquisition
            
            
            -
            
            
            
            500,000Accrued
                interest to related party
                converted to note payable to related party
            
            
            426,953
            
            
            
            901,688Accrued
                interest converted to note
                payable
            
            
            218,453
            
            
            
            -Fair
                value of common stock issued
                in connection with Communications Advantageand Web Breezeacquisition
            
            
            90,000
            
            
            
            -Beneficial
                conversion feature of
                convertible debentures recorded as debt discount
            
            
            -
            
            
            
            628,674Issuance
                of common stock to
                related partyin
                connection with conversion ofconvertible
                notesand accruedinterest
            
            
            900,000
            
            
            
            -Note
                issued in connection with
                Communications Advantageand Web Breezeacquisition
            
            
            50,000
            
            
            
            -Fair
                value of warrants issued with
                debt
            
            
            278,950
            
            
            
            327,176





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





F-6





RAPID
      LINK, INCORPORATED AND
      SUBSIDIARIES


NOTES
      TO CONSOLIDATED FINANCIAL
      STATEMENTS





NOTE
      1 - ORGANIZATION AND NATURE OF
      BUSINESS





Nature
      of Business





On
      November 1, 2005 the Company changed
      its name to “Rapid Link, Incorporated” from Dial Thru International
      Corporation.  Rapid Link, Incorporated, aDelawarecorporation,
      and its subsidiaries
      (collectively referred to as “Rapid Link” or the “Company”), have served as
      facilities-based, communication companies providing various forms of voice
      and
      data services to customers around the world.  Rapid Link provides a
      multitude of communication services targeted to individual customers, as well
      as
      small and medium sized enterprises.  These services include the
      transmission of voice and data traffic over public and private
      networks.  The Company also sells foreign and domestic termination of
      voice traffic into the wholesale market.  To insure optimal quality
      and redundancy, the Company utilizes the Public Switched Telecommunications
      Network, as well as the Internet, to transport communications
      services.





The
      Company has shifted its retail
      product focus to broadband wireless.  Broadband niche
      markets include specific ethnic
      demographics, targeted rural geographic locations, and others.  The
      Company’s strategy includes plans to offer broadband access via its own
      facilities to insure reliable delivery of its current and future
      services.  Technology now allows for swift and cost efficient
      deployment of broadband networks.  Wi-MAX and other technologies can
      bring fast, reliable, high-speed internet access to areas that have
      traditionally been inaccessible or underserved.  Through organic
      growth and acquisitions in targeted rural areas, the Company believes it will
      possess a strategic advantage over carriers that do not provide their own
      network access.  “Net Neutrality” is an issue, and Rapid Link believes
      the potential for unfair and/or monopolistic behavior by incumbent providers,
      necessitatestheirstrategy
      to “own” the
      customer by providing the service directly, rather than utilizing the networks
      of others.  This will allow the Company to provide its bundled
      products and communication services without the threat of compromised service
      quality.





Financial
      Condition





The
      Company is subject to various risks
      in connection with the operation of its business including, among other things,
      (i) changes in external competitive market factors, (ii) inability to satisfy
      anticipated working capital or other cash requirements, (iii) changes in the
      availability of transmission facilities, (iv) changes in the Company's business
      strategy or an inability to execute its strategy due to unanticipated changes
      in
      the market, (v) various competitive factors that may prevent the Company from
      competing successfully in the marketplace, and (vi) the Company's lack of
      liquidity and its ability to raise additional capital. The Company has an
      accumulated deficit of approximately $49 million as of October 31, 2007, as
      well
      as a working capital deficit of approximately $5.4million.  Funding
      of the
      Company's working capital deficit, its current and future anticipated operating
      losses, and expansion of the Company will require continuing capital
      investment.  Historically, some of the Company’s funding has been
      provided by a major shareholder.  The Company's strategy is to fund
      these cash requirements through debt facilities and additional equity
      financing.





Although
      the Company has been able to
      arrange debt facilities and equity financing to date, there can be no assurance
      that sufficient debt or equity financing will continue to be available in the
      future or that it will be available on terms acceptable to the
      Company.  Failure to obtain sufficient capital could materially affect
      the Company's operations in the short term and hinder expansion
      strategies.  The Company continues to explore external financing
      opportunities.  At October 31, 2007, approximately53%of
      the Company’s debt is due to the
      senior management and a Director of the Company, as well as an entity owned
      by
      senior management.





F-7





As
      a result of the aforementioned
      factors and related uncertainties, there is doubt about the Company's ability
      to
      continue as a going concern.  The consolidated financial statements do
      not include any adjustments to reflect the possible effects of recoverability
      and classification of assets or classification of liabilities, which may result
      from the inability of the Company to continue as a going
      concern.





NOTE
      2 - SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES





Principles
      of Consolidation





The
      accompanying consolidated financial
      statements include the accounts of the Company and its wholly owned
      subsidiaries.  All significant intercompany balances and transactions
      have been eliminated.  Certain amounts previously reported have been
      reclassified to conform to the current year presentation.





Use
      of
      Estimates





The
      preparation of consolidated
      financial statements in conformity with accounting principles generally accepted
      in theUnited Statesrequires
      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 consolidated financial statements and the reported amounts of revenues
      and
      expenses during the reporting period.  Actual results could differ
      from those estimates.





Revenue
      Recognition





Long
      distance
      revenue





Revenues
      generated by international
      re-origination, dial thru services and international wholesale termination,
      which are the primary source of the Company’s revenues, are based on minutes of
      customer usage.  The Company records payments received in advance as
      deferred revenue until such services are provided.





VoIP
      service revenue





The
      Company defers revenue recognition
      of new subscriber revenue from its service offerings until the acceptance period
      has expired.  New customers may terminate their service within thirty
      days of order placement and receive a full refund of fees previously
      paid.  The Company has been providing its VoIP services for a limited
      period of time, has an insignificant amount of revenue to date, and therefore,
      has not developed sufficient history to apply a cancellation rate to reserve
      against new order revenue.  Accordingly, the Company defers new
      subscriber revenue for thirty days to ensure that the thirty-day trial period
      has expired.





Emerging
      Issues Task Force Consensus No.
      00-21 ("EITF No. 00-21"), "Accounting for Revenue Arrangements with Multiple
      Deliverables" requires that revenue arrangements with multiple deliverables
      be
      divided into separate units of accounting if the deliverables in the arrangement
      meet specific criteria.  In addition, arrangement consideration must
      be allocated among the separate units of accounting based on their relative
      fair
      values, with certain limitations.  The VoIP service with the
      accompanying hardware that customers use to access the Internet constitutes
      a
      revenue arrangement with multiple deliverables.  In accordance with
      the guidance of EITF No. 00-21, the Company allocates VoIP revenues, including
      activation fees, among the hardware and subscriber services.  Revenues
      allocated to the hardware are recognized as product revenues at the end of
      thirty days after order placement, provided the customer does not cancel their
      service.  All other revenues are recognized as service revenues when
      the related services are provided.





Cash
      and
      Cash Equivalents





F-8





The
      Company considers all highly liquid
      investments purchased with an original maturity of three months or less to
      be
      cash equivalents.  Cash and cash equivalent are at risk to the extent
      that they exceed Federal Deposit Insurance Corporation insured
      amounts.  To minimize this risk, the Company places its cash and cash
      equivalents with high credit quality financial institutions.





Accounts
      Receivable





Trade
      accounts receivable are stated at
      the amount the Company expects to collect.  The Company maintains
      allowances for doubtful accounts for estimated losses resulting from the
      inability of its customers to make required payments.  Management
      considers the following factors when determining the collectibility of specific
      customer accounts: customer creditworthiness, past transaction history with
      the
      customer, current economic industry trends and changes in customer payment
      terms.  If the financial condition of the Company's customers were to
      deteriorate, adversely affecting their ability to make payments, additional
      allowances would be required.  Based on management's assessment, the
      Company provides for estimated uncollectible amounts through a charge to
      earnings and a credit to a valuation allowance.  Interest is typically
      not charged on overdue accounts receivable.  Balances that remain
      outstanding after the Company has used reasonable collection efforts are written
      off through a charge to the valuation allowance and a credit to accounts
      receivable.





Property
      and
      Equipment





Property
      and equipment are stated at
      cost.  Depreciation of property and equipment is calculated using the
      straight-line method over the estimated useful lives of the assets ranging
      from
      three to seven years.  Equipment held under capital leases and
      leasehold improvements are amortized on a straight-line basis over the shorter
      of the remaining lease term or the estimated useful life of the related asset
      ranging from five to seven years.  Expenditures for repairs and
      maintenance are charged to expense as incurred.  Major renewals and
      betterments are capitalized.





Goodwill





The
      Company accounts for goodwill in
      accordance with SFAS No.142, “Goodwill and Other Intangible Assets” (“SFAS
      142”).  In accordance with SFAS 142, goodwill is reviewed for
      impairment
      annually or more frequently if impairment indicators
      arise.  Impairment indicators include (i) a significant decrease in
      the market value of an asset, (ii) a significant change in the extent or manner
      in which an asset is used or a significant physical change in an asset, (iii)
      a
      significant adverse change in legal factors or in the business climate that
      could affect the value of an asset or an adverse action by a regulator, and
      (iv)
      a current period operating or cash flow loss combined with a history of
      operating or cash flow losses or a projection or forecast that demonstrates
      continuing losses associated with an asset used for the purpose of producing
      revenue.





The
      Company has one operating and
      reporting segment and one reporting unit.  For the purpose of
      identifying the reporting units, the Company followed the guidance in paragraph
      30 of SFAS 142, (i) an operating segment is a reporting unit if discrete
      financial information is available (ii) management regularly reviews individual
      operating results, and (iii) similar economic characteristics of components
      within an operating segment result in a single reporting unit.  The
      Company's management regularly reviews one set of financial information, and
      all
      of the Company's products share similar economic
      characteristics.  Therefore, the Company has determined that it has
      one single reporting unit.





The
      Company performs itsannual impairment test
      of goodwillin the fourth quarter
      of
      each year.The
      valuation process appraised the Company's enterprise value using a combination
      of market capitalization and multiples of earnings valuation
      techniques.  The valuation process indicated that the enterprise fair value
      exceededthe carrying value of
      the
      Company's net assets and liabilities.  Accordingly, the Company
      concluded that no impairment of goodwill existedat October 31, 2007 and
      2006.





F-9





Long-Lived
      Assets





Long-lived
      assets, including the
      Company’s customer lists, 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 not perform a periodic assessment of
      assets for impairment in the absence of such information or
      indicators.  Conditions that would necessitate an impairment 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 an impairment is
      indicated by its carrying value not being recoverable through undiscounted
      cash
      flows.  The impairment loss is the difference between the carrying
      amount and the fair value of the asset estimated using discounted cash
      flows.  Long-lived assets held for sale are reported at the lower of
      cost or fair value less costs to sell.





Fair
      Market
      Value of Financial Instruments





The
      carrying amount for current assets
      and liabilities, and long-term debt is not materially different from fair market
      value because of the short maturity of the instruments and/or their respective
      interest rate amounts and other terms have been negotiated
      recently.





ConvertibleDebt
      Obligations





When
      applicable, the Company calculates
      thevalue of thebeneficial
      conversion
      feature embedded in its debt borrowings in accordance with EITF 98-5,
      "Accounting for Convertible Securities with Beneficial Conversion Features
      or
      Contingently Adjustable Conversion Ratios," and EITF 00-27, "Application of
      Issue No. 98-5 to Certain Convertible Instruments," and records the calculated
      amount as debt discount.Debt
      discount is amortized over the term
      of the corresponding debt obligation.





Net
      Loss Per
      Share





Basic
      net lossper share is
      computed using the weighted average number of shares of common stock outstanding
      during the year.  Diluted net loss per share is computed using the
      weighted average number of shares of common stock outstanding during the year
      and common equivalent shares consisting of stock options, warrants, and
      convertible debentures (using the treasury stock method) to the extent they
      are
      dilutive.





Shares
      issuable upon the exercise of stock options, warrants, and convertible
      debentures are excluded from the calculation of net loss per share for the
      years
      ended October 31, 2007 and 2006, as their effect would be
      antidilutive.  Potentially issuable shares from outstanding stock
      options, warrants and convertible debentures amounted to 70,128,410 and
      54,388,861 shares, respectively, as of October 31, 2007 and 2006.





Income
      Taxes





The
      Company utilizes the asset and
      liability approach to financial accounting and reporting for income
      taxes.  Deferred income taxes and liabilities are computed for
      differences between the financial statement carrying amounts and taxbasesof
      assets and liabilities that will
      result in taxable or deductible amounts in the future based on enacted tax
      laws
      and rates applicable to the periods in which the differences are expected to
      affect taxable income.  Valuation allowances are recorded when
      necessary to reduce deferred tax assets to the amount expected to be
      realized.  Income tax expense or benefit is the tax payable or
      refundable for the period plus or minus the change during the period in deferred
      tax assets and liabilities.





F-10





Foreign
      Currency Translation and Foreign Currency Transactions





The
      Company's functional currency is the
      U.S. dollar.  The Company's foreign operations are subject to exchange
      rate fluctuations and foreign currency transaction costs.  Monetary
      assets and liabilities of subsidiaries domiciled outside theUnited Statesare
      translated at rates of exchange
      existing at the balance sheet date and non-monetary assets, liabilities and
      equity are translated at historical rates.  Revenues and expenses are
      translated at average rates of exchange prevailing during the
      period.  The resulting translation adjustments, and foreign currency
      transactions resulting in gains and losses, are recorded in theconsolidated statements
      of
      operations.





Stock-Based
      Compensation




The
      Company adopted SFAS No. 123R
“Share-Based Payment” ("SFAS 123R") as of November 1, 2006.  In
      March 2005, the SEC issued Staff Accounting Bulletin ("SAB") 107, "Share-Based
      Payment”, which does not modify any of SFAS 123R's conclusions or
      requirements, but rather includes recognition, measurement and disclosure
      guidance for companies as they implement SFAS 123R.






All
      of the Company's existing
      share-based compensation awards have been determined to be equity
      awards.  Under the modified prospective transition method, the Company
      is required to recognize noncash compensation costs for the portion of
      share-based awards that are outstanding as of November 1, 2006 for which the
      requisite service has not been rendered (i.e. nonvested awards) as the requisite
      service is rendered on or after that date.  The compensation cost is
      based on the grant date fair value of those awards, with grant date fair value
      currently being estimated using the Black-Scholes option-pricing model, a
      pricing model acceptable under SFAS 123R.  The Company is
      recognizing compensation cost relating to the nonvested portion of those awards
      in the consolidated financial statements beginning with the date on which
      SFAS 123R is adopted, through the end of the requisite service
      period.  SFAS 123R requires that forfeitures be estimated at the
      time of grant and revised, if necessary, in subsequent periods if actual
      forfeitures differ from those estimates.  Under the modified
      prospective transition method, the consolidated financial statements are
      unchanged for periods prior to adoption and the pro forma disclosure previously
      required for those prior periods will continue to be required to the extent
      those amounts differ from the amounts in the consolidated statement of
      operations.






Effective
      November 1, 2006, the Company
      accounts for equity instruments issued to non-employees in accordance with
      the
      provisions of SFAS 123R and Emerging Issues Task Force ("EITF") Issue No.
      96-18, "Accounting for Equity Instruments That Are Issued to Other Than
      Employees for Acquiring, or in Conjunction with Selling, Goods or
      Services.”  All transactions in which goods or services are the
      consideration received for the issuance of equity instruments are accounted
      for
      based on the fair value of the consideration received or the fair value of
      the
      equity instrument issued, whichever is more reliably measurable.  The
      measurement date of the fair value of the equity instrument issued is the
      earlier of the date on which the counterparty's performance is complete or
      the
      date on which it is probable that performance will occur.






F-11


The
        adoption of SFAS 123R had no
        effect on cash flows or basic and diluted loss per share.  No
        share-based compensation costs were capitalized during fiscal 2007. Noncash
        share-based compensation costs recorded in general and administrative expenses
        during fiscal year 2007 were approximately $18,000.


Prior
      to
      November 1, 2006, the Company accounted for its stock-based employee
      compensation arrangements under the intrinsic value method in accordance with
      APB Opinion No. 25 and followed the disclosure provisions of SFAS No. 123,
      "Accounting for Stock-Based Compensation," (SFAS 123) as amended by SFAS No.
      148
      "Accounting for Stock-Based Compensation - Transition and Disclosure” (SFAS
      148).  Under APB Opinion No. 25, compensation expense for employees is
      based on the excess, if any, on the date of grant, of fair value of the
      Company's stock over the exercise price.  Accordingly, compensation
      cost was not recognized related to stock options in the financial statements
      as
      the fair market value on the grant date approximated the exercise
      price.  Prior to the adoption of SFAS 123R, the Company
      calculated stock-based compensation pursuant to the disclosure provisions of
      SFAS 123 using the straight-line method over the vesting period of the
      option.  Had the Company determined compensation cost based on the
      fair value at the grant date for its stock options under SFAS 123, as amended
      by
      SFAS 148, the Company's pro forma net loss for fiscal 2006 would not have been
      materially different.  The fair value of options for shares of the
      Company's common stock issued to employees has been determined using the
      Black-Scholes option-pricing model, a pricing model acceptable under SFAS No.
      123.





Reclassifications





Certain
      prior period amounts have been
      reclassified to conform to current period presentation.





Recent
      Accounting Pronouncements





In
      July 2006, the FASB issued FASB
      Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,”
which prescribes a recognition threshold and measurement process for recording
      in the financial statements uncertain tax positions taken or expected to be
      taken in a tax return.  Additionally, FIN 48 provides guidance on
      derecognition, classification, accounting in interim periods and disclosure
      requirements for uncertain tax positions.  TheCompany adopted the provisions
      of FIN 48
      effective November 1, 2007.  The Company is in the process of
      determining the effect, if any, the adoption of FIN 48 will have on its
      consolidated financial statements.





In
      September 2006, the FASB issued SFAS
      No. 157, “Fair Value Measurements”(SFAS 157).  SFAS
      157 defines fair
      value, established a framework for measuring fair value in generally accepted
      accounting principles and expands disclosures about fair value
      measurements.  SFAS No. 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007.  The
      Company does not expect the adoption of SFAS No. 157 to significantly affectitsconsolidatedfinancial
      condition orconsolidatedresults
      of
      operations.





In
        February 2007, the FASB issued
        SFAS No. 159,“The
        Fair Value Option for Financial
        Assets and Financial Liabilities”,
        which allows companies the option to
        measure financial assets or liabilities at fair value and include unrealized
        gains and losses in net income rather than equity.This
        becomes available when the Company
        adopts SFAS 157, which will be fiscal year 2009.The
        Company is analyzing the expected
        impact from adopting this statement on its financial statements, but currently
        does not believe its adoption will have a significant impact on the financial
        position or results of operations of the Company.





In
      December 2007, the FASB issued
      SFAS No. 141(revised
      2007), “Business Combinations”(“SFAS 141R”).SFAS 141R
      will significantly change
      the accounting for business combinations in a number of areas including the
      treatment of contingent consideration, contingencies, acquisition costs,
      IPR&D and restructuring costs.In
      addition, under SFAS 141R,
      changes in deferred tax asset valuation allowances and acquired income tax
      uncertainties in a business combination after the measurement period will impact
      income tax expense.SFAS 141R
      is effective for fiscal
      years beginning after December 15, 2008 and, as such, we will adopt this
      standard in fiscal 2010.The Company has notyet
      determined the impact, if any, of
      SFAS 141R onourconsolidated
      financial
      statements.





F-12





NOTE
      3 - ACQUISITIONS





Communications
      Advantage, LLCand
      Web-Breeze Networks,
      LLC.





On
      October 31, 2007, the Company
      acquired 100% of the assets of Communications Advantage, LLC (“Communications
      Advantage”), and Web-Breeze Networks, LLC (“Web Breeze”)for $375,000.  The purchase
      consideration consisted of a cash payment of $75,000, a promissory note of
      $50,000, issuance of common stock valued at $90,000, forgiveness of amounts
      due
      totaling $95,000 and an additional $65,000 to be paid during fiscal year
      2008.The
      common stock issued was valued at
      $0.09 per share, which approximates the average trading value as quoted on
      the
      OTC Bulletin Board for the three days before and after the acquisition
      date.The assets
      include a sizable wireless broadband network in a rural geographic area ofCaliforniathat
      fits into the Company’s niche
      market business model, a base of customers and revenues that are immediately
      accretive to our revenues and earnings, and a staff of tenured professionals
      with vast knowledge and experience in the wireless broadband
      sector.





The
      following table summarizes the assets acquired as of the closing
      date:





Tangible
                assets acquired
            
            $
            50,000Customer
                list
            
            
            86,400Goodwill
            
            
            238,600Total
                assets acquired
            
            $
            375,000





The
      acquisition was accounted for using the purchase method of
      accounting.  The purchase price allocated to customer list was
      determined by management’s estimates of the value associated with each acquired
      customer.  The customer list is being amortized over its estimated
      useful life of two years.  Goodwill represents the excess of
      consideration given over the fair value of assets acquired.  The
      goodwill is expected to be deductible for federal income tax
      purposes.





Telenational
      Communications, Inc.





On
      May 5,
      2006, the Company acquired 100% of the outstanding stock of Telenational
      Communications, Inc. (“Telenational”) for $4,809,750, including acquisition
      costs of $50,000.  The purchase consideration consisted of a
      promissory note in the principal amount of $1,000,000, a contingent cash payment
      in the amount of $500,000 and 19,175,000 shares of the Company’s common stock
      valued at $3,259,750.  The stock was issued on May 5, 2006 and June 5,
      2006 (50% on each date) in conjunction with the acquisition.  Under
      the terms of the original purchase agreement, the second stock issuance was
      a
      contingent obligation.  This was subsequently amended, resulting in
      the June 5, 2006 stock issuance.  The value of the issued stock was
      determined by the average of $0.18 per share and $0.16 per share, which
      approximates the average trading value as quoted on the OTC Bulletin Board
      for
      the three days before and three days after May 5, 2006, and the stock price
      on
      June 5, 2006, respectively.  The contingent purchase price
      consideration, which was recorded on the date of acquisition, was based on
      the
      attainment of a predetermined level of short-term gross profit, which did
      occur.  The contingent purchase price consideration was subsequently
      converted to a related party convertible note payable to APEX in the amount
      of
      $500,000.  The primary purpose of the acquisition was to enable the
      Company to expand its market share in the telecommunications industry and
      eliminate certain costs by gaining operational efficiencies.





F-13





The
      following table summarizes the assets acquired and liabilities assumed as of
      the
      closing date:





Tangible
                assets acquired
            
            $
            1,362,950Customer
                list
            
            
            3,500,000Goodwill
            
            
            1,071,544Total
                assets acquired
            
            
            5,934,494Liabilities
                assumed
            
            
            (1,124,744
            )Net
                assets acquired
            
            $
            4,809,750





The
      acquisition was accounted for using the purchase method of
      accounting.  The purchase price allocated to customer list was
      determined by management’s estimates of the value associated with each acquired
      customer.  The customer list is being amortized over its estimated
      useful life of five years.  Goodwill represents the excess of
      consideration given over the fair value of assets acquired.  The
      goodwill is expected to be deductible for federal income tax
      purposes.





The
      following represents unaudited pro
      forma combined results of operations of the Company, Communications Advantage,
      Web-Breeze
      and Telenational as if the Communications Advantage, Web-Breeze and Telenational
      acquisitions had occurred as of November 1, 2005:




Year
                  Ended October
                  31,2007
              
              
              2006Unaudited
                  pro forma information:Revenues
              
              $
              17,748,309
              
              
              $
              19,170,488Net
                  loss
              
              $
              (1,854,770
              )
              
              $
              (689,031
              )Basic
                  and diluted net loss per
                  share
              
              $
              (0.03
              )
              
              $
              (0.01
              )Weighted
                  average shares
                  outstanding
              
              
              54,616,125
              
              
              
              50,586,137





The
      pro forma information includes
      historical Telenational,
      Communications Advantage and Web-Breezerevenues and expenses
      after giving
      effect to certain adjustments, including amortization of the acquired customer
      listsand
      interest expense on the promissory
      notes.  The
      pro forma financial
      information is shown for illustrative purposes and does not purport to be
      indicative of the Company's future results of operations or the Company's
      results of operations that would have actually occurred had the transaction
      been
      in effect for the periods presented.





NOTE4-
      PROPERTY AND
      EQUIPMENT





Property
      and equipment consists of the
      following at October 31, 2007 and 2006:





2007
            
            
            2006
            
            Est.
                LifeTelephone
                switch
                equipment
            
            $
            675,151
            
            
            $
            625,151
            
            3-5
                yrs.Computer
                software
            
            
            1,093,045
            
            
            
            1,092,488
            
            3-5
                yrs.Computer
                equipment
            
            
            186,706
            
            
            
            181,496
            
            3-5
                yrs.Furniture
                and
                fixtures
            
            
            154,561
            
            
            
            154,561
            
            5-7
                yrs.Leasehold
                improvements
            
            
            41,494
            
            
            
            53,941
            
            5-7
                yrs.2,150,957
            
            
            
            2,107,637Less:
                accumulated
                depreciationand
                amortization
            
            
            (1,877,567
            )
            
            
            (1,728,610
            )Property
                and equipment,
                net
            
            $
            273,390
            
            
            $
            379,027




Amortization
      of assets held under
      capital leases is included with depreciation expense. Property and equipment
      depreciation and amortization expense totaled$152,325and $325,419 in fiscal
      2007 and 2006,
      respectively.





F-14





NOTE5–
CUSTOMER
      LISTS





Customer
      lists acquired from
      Telenational, Integrated, and Communications Advantage, and corresponding
      accumulated amortization at October 31, 2007 and 2006 were as
      follows:





2007
            
            
            2006
            
            
            Est.LifeCustomer
                lists
            
            $
            3,730,685
            
            
            $
            3,644,285
            
            
            2-5
                yrs.Less:
                accumulated
                amortization
            
            
            (1,194,285
            )
            
            
            (422,143
            )
            
            -Customer
                lists,
                net
            
            $
            2,536,400
            
            
            $
            3,222,142





Amortization
      expense totaled $772,142 in
      fiscal 2007 and $422,143 in fiscal 2006.  Based on capitalized
      customer lists at October 31, 2007, and assuming no impairment of these customer
      lists, estimated amortization expense amounts in future fiscal years are as
      follows:





Year
                Ending
              October
                31,2008
            
            $
            743,2002009
            
            
            743,2002010
            
            
            700,0002011
            
            
            350,000Total
            
            $
            2,536,400





At
      October 31, 2007, the weighted
      average remaining life of the customer lists is 3.45 years.





F-15





NOTE6-
      CONVERTIBLE DEBENTURES AND NOTES
      PAYABLE, INCLUDING RELATED PARTY NOTES





The
      Company has various debt obligations
      as of October 31, 2007 including amounts due to independent institutions and
      related parties.  Descriptions of these debt obligations are included
      below.  The following tablessummarize
      outstanding debt as of October
      31, 2007and
      2006:





Information
                as of October 31,
                2007Brief
                Description of
                Debt
            
            Balance
            
            
            Int.
                Rate
            
            Due
                Date
            
            Discount
            
            
            NetConvertible
                notes, currentGC-Conote
            
            $
            1,200,000
            
            
            
            10.08
            %
            2/28/2008
            
            $
            151,515
            
            
            $
            1,048,485Debenture
            
            
            600,000
            
            
            
            10
            %
            3/8/2008
            
            
            -
            
            
            
            600,000Other
            
            
            42,500
            
            
            
            10
            %
            2/28/2008
            
            
            
            
            
            
            42,500Related
                party notes, current
            
            
            50,000
            
            
            
            10
            %
            4/30/2008
            
            
            -
            
            
            
            50,000Convertible
                notes payable to related parties, current
            
            
            1,000,000
            
            
            
            8
            %
            On
                Demand
            
            
            -
            
            
            
            1,000,000Convertible
                notes, long-termGCA-Debenture
            
            
            630,333
            
            
            
            6
            %
            10/31/2009
            
            
            -
            
            
            
            630,333GCA-Debenture
            
            
            570,944
            
            
            
            6
            %
            10/31/2009
            
            
            -
            
            
            
            570,944Convertiblenotespayable
                to related
                parties,
                long-term
            
            
            2,240,000
            
            
            
            8
            %
            11/01/2009
            
            
            -
            
            
            
            2,240,000





Debt
      obligations as of October 31, 2007
      are due as follows:





Within
                1
                year
            
            
            1-2
                years
            
            
            TotalDebt
                Obligations
            
            $
            2,892,500
            
            
            $
            3,441,277
            
            
            $
            6,333,777








Information
                as of October 31,
                2006Brief
                Description of
                Debt
            
            Balance
            
            
            Int.
                Rate
            
            Due
                Date
            
            Discount
            
            
            NetConvertible
                notes, currentGC-Conote2
            
            $
            60,000
            
            
            
            0
            %
            3/31/2007
            
            $
            10,000
            
            
            $
            50,000Debentures
            
            
            1,000,000
            
            
            
            10
            %
            3/8/2007
            
            
            333,333
            
            
            
            666,667Related
                party notes, currentDemand
                Note
            
            
            300,000
            
            
            
            8
            %
            On
                demand
            
            
            -
            
            
            
            300,000Apex
                Note 2
            
            
            80,965
            
            
            
            8
            %
            7/15/2007
            
            
            -
            
            
            
            80,965Convertible
                notes, long-termGCA-Debenture
            
            
            430,000
            
            
            
            6
            %
            11/1/2007
            
            
            -
            
            
            
            430,000GCA-Debenture
            
            
            552,457
            
            
            
            6
            %
            11/1/2007
            
            
            4,247
            
            
            
            548,210GC-Conote
            
            
            1,250,000
            
            
            
            10.08
            %
            2/28/2008
            
            
            606,061
            
            
            
            643,939Convertible
                notespayable
                to related
                parties,
                long-term
            
            
            1,905,078
            
            
            
            10
            %
            2/28/2008
            
            
            44,120
            
            
            
            1,860,958Related
                party note, long-termApex
            
            
            1,000,000
            
            
            
            8
            %
            11/5/2007
            
            
            -
            
            
            
            1,000,000




F-16





GCA-Debentures





The
      Company has two 6% convertible debentures (the "GCA-Debentures") with GCA
      Strategic Investment Fund Limited ("GCA").  The GCA-Debentures are
      secured by the Company’s VoIP technology and certain equipment.  On
      October 31, 2007, the Company entered into a series of agreements, which
      modified its debt structure with Global Capital Funding Group Ltd. ("Global"),
      and with GCA Strategic Investment Fund Limited ("GCA").  The
      agreements call for two outstanding notes of $430,000 and $552,457 due in
      November of 2007, including accrued interest of $140,994 and $77,876,
      respectively, to be converted into two long-term convertible debentures of
      $570,944 and $630,333, respectively; both of which are due October 31,
      2009.  There were no other material changes to the terms of the
      existing notes.  In consideration for the extensions, the Company
      issued 50,000 warrants each to Global and GCA to purchase common stock at $0.09
      per share to Global and GCA.  The fair value of the warrants was
      determined to be $8,281 on the date of grant using the Black-Scholes pricing
      model with the following assumptions: applicable risk-free interest rate based
      on the current treasury-bill interest rate of 5.4%; dividend yield of 0%;
      volatility factor of the expected market price of the Company's common stock
      of
      1.51; and an expected life of the warrants of five years.  The Company
      recognized $8,281 of expense associated with these warrants in fiscal year
      2007.





GC-Conote





In
      November 2002, the Company executed a 12% note payable secured by certain
      compression equipment (the "GC-Note") with Global Capital Funding Group, L.P.
      ("Global"). The Company issued to the holder of the GC-Note warrants to acquire
      an aggregate of 500,000 shares of common stock at an exercise price of $0.14
      per
      share, which expired on November 8, 2007.





On
      June
      1, 2005, the Company and Global agreed to extend the maturity date of the
      GC-Note to February 28, 2007.  In connection with the extension, the
      GC-Note was converted to a 10.08% Convertible Note ("GC-Conote").  The
      conversion price is equal to 80% of the average of the three lowest volume
      weighted average sales prices as reported by Bloomberg L.P. during the twenty
      Trading Days immediately preceding the related Notice of Conversion (the
      "Formula Conversion Price").  The Company calculated the beneficial
      conversion feature embedded in the GC-Conote in accordance with EITF 98-5 and
      EITF 00-27 and recorded $1,013,032 as debt discount.  This debt
      discount is being amortized over the life of the GC-Conote.  The
      Company also issued to the holder of the GC-Conote warrants to acquire an
      aggregate of 500,000 shares of common stock at an exercise price of $0.38 per
      share, and 125,000 warrants to purchase common stock at $0.11 per share, both
      warrants expiring in June 2010. The Company recorded $200,498 as debt discount,
      the relative fair value of the warrants on June 1, 2005.  This amount
      was calculated using the Black-Scholes pricing model with the following
      assumptions: applicable risk-free interest rate based on the current
      treasury-bill interest rate at the grant date of 4%; dividend yield of 0%;
      volatility factor of the expected market price of the Company's common stock
      of
      1.64; and an expected life of the warrants of three years.  The debt
      discount is being amortized over the life of the GC-Conote.  In
      addition, the Company issued to Global 100,000 shares of common stock valued
      at
      $0.45 per share, the Company's closing stock price on June 1, 2005, the date
      of
      issuance.  The Company recorded $36,469 as debt discount, the relative
      fair value of the stock issued, which it is amortizing over the life of the
      GC-Conote.  During fiscal year 2007 and 2006, the Company amortized
      $454,545 and $454,545 of GC-Conote debt discount, respectively.





On
      September 14, 2006, the Company and Global amended the GC-Conote to extend
      the
      maturity date of the GC-Conote to February 28, 2008, and stipulate that the
      conversion price of the GC-Conote is not to be lower than $0.10 per share and
      not to exceed $0.25 per share.  In connection with the amendment, the
      Company re-priced all warrants held by GCA to an exercise price of $0.05 and
      extended the expiration date of the warrants to June 1,
      2010.  Incremental debt discount amounts associated with the fiscal
      2006 amendments were not material.





F-17





In
      connection with the extension of the maturity date of the GC-Note, the interest
      due on the GC-Note of approximately $350,000 as of May 31, 2005, was converted
      to a $400,000 non-interest bearing convertible note payable (the "GC-Conote2)
      to
      Global.  The GC-Conote2 requires quarterly payments of $50,000 on the
      last day of March, June, September, and December of each year until the March
      31, 2007 maturity date, commencing on June 30, 2005.  In addition, the
      GC-Conote2 provides for conversion based on a conversion price equal to 80%
      of
      the average of the three lowest volume weighted average sales prices as reported
      by Bloomberg L.P. during the twenty trading days immediately preceding the
      related Notice of Conversion (the "Formula Conversion Price").  The
      Company calculated the beneficial conversion feature embedded in the GC-Conote2
      in accordance with EITF 98-5 and EITF 00-27 and recorded approximately $350,000
      as debt discount.  This debt discount is being amortized over the life
      of the GC-Conote2.  The approximate $50,000 difference between the
      accrued interest at May 31, 2005 and the value of the GC-Conote2 represents
      a
      financing fee, which was recorded as debt discount and is being amortized over
      the life of the GC-Conote2.  During fiscal 2006 and 2005, GCA elected
      to convert $165,000 of the GC-Conote2 into approximately 2,303,000 shares of
      common stock and $75,000 of the GC-Conote into approximately 656,000 shares
      of
      common stock, respectively.  During fiscal year 2007, the Company made
      a $30,000 payment on the GC-Conote2, and GCA elected to convert $30,000 of
      the
      GC-Conote2 into approximately 622,000 shares of common stock and $50,000 of
      the
      GC-Conote into 500,000 shares of common stock.





Debentures





Debentures
      totaling $1,000,000 with an original March 8, 2007 maturity date were extended
      during the second quarter of fiscal 2007 to March 8, 2008. The
      Debentures are secured by a first priority security interest in all of the
      assets of the Company other than those assets not already pledged to Global
      Capital as security.The term of the original 2,000,000 warrants issued
      related to these Debentures was extended by one year, which had an insignificant
      financial impact.  In connection with the extension, 2,000,000
      additional warrants were issued with an exercise price of $0.10 per share and
      a
      five year term, resulting in deferred financing fees of $139,000, of which
      $90,000 was expensed as noncash interest expense during fiscal
      2007.  The fair value of the warrants was determined on the date of
      grant using the Black-Scholes pricing model with the following assumptions:
      applicable risk-free interest rate based on the current treasury-bill interest
      rate of 4.5%; dividend yield of 0%; volatility factor of the expected market
      price of the Company's common stock of 287%; and an expected life of the
      warrants of four years.  Remaining deferred financing fees, classified
      as other current assets, will be amortized through March 8, 2008.  In
      connection with these Debentures, the two lenders are entitled to 30,000 and
      20,000 additional warrants, respectively, with an exercise price of
      $0.10.  These warrants vest and are exercisable each fiscal quarter
      until the Debentures are paid in full. The fair value of these additional
      warrants is calculated on the date granted using the Black-Scholes pricing
      model
      using applicable risk-free interest rates based on current treasury-bill
      interest rates; volatility factors of the expected market price of the Company's
      common stock over the expected term; and an expected life of the warrants of
      four years.  Under the terms of this agreement, the Company has
      granted 400,000 warrants valued at approximately $24,000 to the lenders as
      of
      October 31, 2007.





On
      October 31, 2007 debentures totaling $350,000 were converted into 2,500,000
      shares of common stock, reflecting a conversion price of $.14 per
      share.  On October 31, 2007, $50,000 of debentures including $65,889
      of accrued interest was transferred by the debenture holders to John Jenkins,
      the Company’s Chairman and Chief Executive Officer.





Related
      Party Notes





On
      May 5,
      2006, the Company acquired 100% of the outstanding stock of Telenational
      Communications, Inc. (“Telenational”) for $4,809,750, including acquisition
      costs of $50,000.  The purchase consideration included a contingent
      cash payment in the amount of $500,000 and 19,175,000 shares of the Company’s
      common stock valued at $3,259,750.  On October 31, 2007, the
      contingent purchase price consideration was converted to a convertible demand
      note payable to Apex Acquisitions,
      Inc. ("Apex”)Apex in the amount of $500,000.  The Company President and
      Chief Financial
      Officer is the majority stockholder of Apex.





F-18





On
      October 31, 2007, the Company entered
      into an agreement, which modified its debt structure with Apex.  The
      agreement calls for the outstanding note due in November of 2007 payable to
      Apex
      to be extended to November 1, 2009.  The note was also modified to
      allow for the balance to be convertible to common stock at market
      pricing.The outstanding balance of the Apex Notes, including
      $120,000 of accrued interest that was rolled into the note, was $1,120,000
      at
      October 31, 2007.





On
      October 31, 2007, $50,000 of debentures including $65,889 of accrued interest
      was transferred by the debenture holders to John Jenkins, the Company’s Chairman
      and Chief Executive Officer.  These amounts, along with a $300,000
      related party demand note including accrued interest of $84,111, were rolled
      into a $500,000 convertible demand note payable to Mr. Jenkins.





On
      October 31, 2007, the Company entered
      into an agreement, which modified its debt structure with the Company’s Chairman
      and Chief Executive Officer, John Jenkins.  The agreement calls for
      the outstanding note due in February of 2008 payable to John Jenkins to be
      extended to November 1, 2009.The outstanding balance of these
      notes payable to Mr. Jenkins, including $241,000 of accrued interest that was
      rolled into the note, was $1,120,000 at October 31, 2007.





During
      fiscal 2007, the Company’s Chief Executive Officer elected to convert $900,000
      of the 10% “related party convertible notes” due February 28, 2008 into
      9,000,000 shares of common stock, reflecting a conversion price of $0.10 per
      share.





During
      fiscal 2007, the Company made payments totaling $80,965 on the Apex Note 2
      due
      July 15, 2007.





NOTE
      7 - CAPITAL STOCK





During
      fiscal 2007, the Company issued 1,000,000 shares of its common stock in
      connection with the acquisition of Communications Advantage and Web-Breeze,
      valued at $90,000.





During
      fiscal 2007, the Company issued 2,500,000 shares of its common stock in
      connection with the conversion of $350,000 of convertible
      debentures.





During
      fiscal 2007, GCA converted GCA-Conote debt of $50,000 into 500,000 shares of
      common stock.





During
      fiscal 2007, the Company’s Chief Executive Officer elected to convert $900,000
      of the 10% “related party convertible notes” due February 28, 2008 into
      9,000,000 shares of common stock, reflecting a conversion price of $0.10 per
      share.





During
      fiscal 2007, GCA elected to convert $30,000 of convertible debt into
      approximately 622,000 shares of common stock.





During
      fiscal 2007, the Company sold 357,143 shares of its common stock for $25,000
      to
      Westside Capital.





During
      fiscal 2006, the Company issued 19,175,000 shares of its common stock in
      connection with the acquisition of 100% of the outstanding stock of Telenational
      Communications, Inc., valued at $3,259,750 at the date of issuance.





During
      fiscal 2006, GCA converted GCA-Debenture debt and accrued interest of
      approximately $31,000 into approximately 407,000 shares of common
      stock.





F-19





During
      fiscal 2006, Global converted GC-Conote2 debt of $165,000 into approximately
      2,303,000 shares of common stock.





The
      following table describes stock reserved for future issuances at October 31,
      2007:




Number
                of SharesOptions
            
            
            4,000,000Warrants
            
            
            11,835,000Convertible
                debt (1)
            
            
            62,412,77078,247,770





(1)
      Assumes conversion on October 31, 2007 under the terms of the related
      agreements.





NOTE
      8 - BUSINESS AND CREDIT CONCENTRATIONS





In
      the
      normal course of business, the Company extends unsecured credit to virtually
      all
      of its customers.  Management has provided an allowance for doubtful
      accounts, which reflects its estimate of amounts, which may become
      uncollectible.  In the event of complete non-performance by the
      Company's customers, the maximum exposure to the Company is the outstanding
      accounts receivable balance at the date of non-performance.





During
      fiscal 2007, the Company did not provide wholesale services to any single
      customer who accounted for more than 10% of revenues.During the same period,
      three of the Company's suppliers accounted for approximately 31%, 22%, and
      12%
      of the Company's total costs of revenues.At
      October
      31, 2007, one customer accounted for 10% of the Company's trade accounts
      receivable.During
      fiscal 2006, the Company provided
      wholesale services to a customer who accounted for 12% of revenues and another
      customer who accounted for 10% of revenues. During the same period, one of
      the
      Company's suppliers accounted for approximately 26% of the Company's total
      costs
      of revenues. At October 31, 2006, one customer accounted for 13% of the
      Company's trade accounts receivable.





Due
      to
      the highly competitive nature of the telecommunications business, the Company
      believes that the loss of any carrier would not have a long-term material impact
      on its business.





Information
      regarding the Company's domestic and foreign revenues is as
      follows:





South
                Africa
            
            
            All
                other
              foreign
              revenues
            
            
            Domestic
            
            
            TotalFiscal
                2007
            
            $
            1,334,620
            
            
            $
            5,028,530
            
            
            $
            10,962,885
            
            
            $
            17,326,035Fiscal
                2006
            
            $
            1,805,807
            
            
            $
            2,552,222
            
            
            $
            8,993,001
            
            
            $
            13,351,030





During
      fiscal 2007, 8% of the Company's revenue was generated from customers in South
      Africa.  During fiscal 2006, 14% of the Company's revenue was
      generated from customers in South Africa.  No individual foreign
      country held more than 10 percent of the Company’s long-lived assets as of
      October 31, 2007 and 2006.





NOTE
      9 – EMPLOYEE BENEFIT PLAN





The
      Company’s 401(k) Plan (the “Plan”) is a defined contribution plan covering all
      domestic employees of the Company.  The Plan provides for voluntary
      contributions by employees into the Plan subject to the limitations imposed
      by
      the Internal Revenue Code Section 401(k).  The Company matches
      participant contributions 50% on every dollar deferred to a maximum of 6% of
      compensation.  The Company's matching funds are subject to a six-year
      vesting schedule from the date of original employment.  Company
      contributions charged to expense during fiscal 2007 and 2006 were $17,703 and
      $19,704, respectively.





F-20





NOTE
      10-
      NET REDUCTIONS OF
      LIABILITIES





During
      fiscal 2006, the Company
      determined, based on a review of applicable statute of limitations regulations
      and/or current correspondence with vendors, that approximately $2,301,000 of
      liabilities, including $1,435,000 in carrier costs that were previously accrued,wereno
      longer due and
      payable.  Accordingly, this amountwasrecorded
      as “Net reductions of
      liabilities” during fiscal 2006.





NOTE
      11 - GAIN ON LEGAL SETTLEMENTS




During
      fiscal year 2007, the Company executed settlement agreements and recorded a
      “Gain on legal settlements” of $415,000, net of attorney fees totaling
      $322,000.  On September 13, 2007, the Company executed a settlement
      agreement with Yahoo! settling a dispute over media credits purchased in a
      stock
      purchase agreement dated July 7, 2001.  Yahoo! paid the Company
      $475,000 in one lump sum cash payment to settle all disputes and the Company
      agreed to dismiss its claims against Yahoo! in connection with such
      disputes.  This amount was received in fiscal 2007 and recorded as a
“Gain on legal settlements”.




On
      September 3, 2007, the Company executed a settlement agreement with Affluent
      Media, et al settling a dispute over media credits purchased in a stock purchase
      agreement dated July 7, 2001.  Affluent Media, et al paid the Company
      $35,000 in cash and transferred 300,000 barter credits, valued at $225,000
      over
      the subsequent 3-month period to settle all disputes and the Company agreed
      to
      dismiss its claims against Affluent Media, et al in connection with such
      disputes.  These cash and barter credits were received in fiscal 2007
      and recorded as “Gain on legal settlements”.  Fair market value of
      these barter credits was based on a detailed analysis of relative prices for
      general and operating goods and services used in the normal course of the
      Company’s operations.




NOTE
      12-
      DISCONTINUED
      OPERATIONS





The
      Company has accrued $1,162,000
      related to an assessment by the State ofTexasfor
      sales taxes (including penalties and
      interest).  This amount is included in the October 31, 2007 and 2006
      consolidated balance sheets as a liability from discontinued
      operations.On
      January 8, 2008, the Attorney General of Texas offered to settle all sales tax
      claims against the Company for a sum total of $250,000, which must be paid
      by
      April 1, 2008 to relieve the Company from any and all sales tax liabilities
      including penalties and interest.  The Company is currently
      considering
      whether to accept the offer (See Note 15 – Commitments and Contingencies
      for further discussion).





NOTE
      13-
      STOCK OPTIONS AND
      WARRANTS





Stock
      Options





2002
      Equity Incentive
      Plan





The
      Company’s 2002 Equity Incentive Plan
      (the "Equity Incentive Plan"), as amended, authorizes the Board of Directors
      to
      grant options to purchase up to 4,000,000 shares of the Company’s common
      stock.  The maximum number of shares of common stock that may be
      issuable under the Equity Incentive Plan to any individual plan participant
      is
      1,000,000 shares.  All options granted under the Equity Incentive Plan
      have vesting periods up to a maximum of five years.  The exercise
      price of an option granted under the Equity Incentive Plan shall not be less
      than 85% of the fair value of the common stock on the date such option is
      granted.





1990
      Stock Option
      Plan





F-21





The
      Company’s 1990 Stock Option Plan
      (the "Option Plan"), as amended, authorized the Board of Directors to grant
      options to purchase up to 2,300,000 shares of the Company’s common
      stock.  No options were to be granted to any individual director or
      employee, which when exercised, would exceed 5% of the issued and outstanding
      shares of the Company.  The Board of Directors fixed the term of any
      option granted under the 1990 Stock Option Plan at the time the options were
      granted, provided that the exercise period was not to be longer than 10 years
      from the date of grant.  All options granted under the 1990 Stock
      Option Plan have up to 10-year terms and have vesting periods that range from
      0
      to three years from the grant date.  The exercise price of any options
      granted under the 1990 Stock Option Plan is the fair market value at the date
      of
      grant.  Subsequent to the adoption of theEquityIncentive
      Plan, no further options will
      be granted under the Option Plan.





The
      Company's stock option activity for
      the two years ended October 31, 2007 was as follows:




Number
                of
              Shares
            
            
            Option
                Price
              Per
                Share
            
            
            Weighted
              Average
              Exercise
              PriceOptions
                outstanding at October 31,
                2005
            
            
            1,573,000
            
            
            $
            0.11 –
1.50
            
            
            $
            0.36Options
                granted
            
            
            2,317,500
            
            
            
            0.10 –  
              .13
            
            
            
            .13Options
                exercised
            
            
            -
            
            
            
            -
            
            
            
            -Options
                cancelled
            
            
            (2,648,000
            )
            
            
            0.11
–
1.50
            
            
            
            0.27Options
                outstanding at October 31,
                2006
            
            
            1,242,500
            
            
            
            0.10
–
0.14
            
            
            
            0.12Options
                granted
            
            
            400,000
            
            
            
            0.05
            
            
            
            0.05Options
                exercised
            
            
            -
            
            
            
            –
            
            
            
            -Options
                cancelled
            
            
            (452,500
            )
            
            
            0.10
–
0.13
            
            
            
            0.11Options
                outstanding at October 31,
                2007
            
            
            1,190,000
            
            
            
            0.05
–
0.14
            
            
            
            0.10





The
      weighted average grant date fair value of options granted during fiscal 2007
      was
      $0.06 per share.  All options granted during fiscal 2007 were to
      employees.  The aggregate intrinsic value of exercisable options
      outstanding at October 31, 2007 was $0 based on the closing price of the
      Company’s common stock of $.09 per share on October 31, 2007.  The
      weighted average remaining contractual term of exercisable options outstanding
      at October 31, 2007 was 5.4 years, and the weighted average remaining
      contractual term of exercisable and non-exercisable options outstanding at
      10/31/2007 was 4.5 years.  The total unrecognized cost related to
      non-vested options at 10/31/2007 was $56,598, and the weighted average over
      which it will be recognized is 4.2 years.





The
      following table summarizes information about employee compensatory stock options
      outstanding at October 31, 2007:





Options
                Outstanding
            
            
            Options
                ExercisableRange
                of
              Average
              Exercise
              Prices
            
            
            Number
              Outstanding
            
            
            Weighted
              Average
              Remaining
              Life
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Number
              Exercisable
            
            
            Weighted
              Average
              Exercise
              Price$0.05
            
            
            
            400,000
            
            
            
            4.92
            
            
            $
            0.05
            
            
            
            -
            
            
            
            -$0.12
                - $0.14
            
            
            
            790,000
            
            
            
            4.23
            
            
            
            0.13
            
            
            
            260,000
            
            
            
            0.131,190,000
            
            
            
            4.47
            
            
            $
            0.10
            
            
            
            260,000
            
            
            $
            0.13





Warrants





Warrant
      Issuances to
      Employees





F-22





Employee
      warrant activity for the two
      years ended October 31, 2007 was as follows:





Number
                of
              Shares
            
            
            Warrants
              Price
                Per
              Share
            
            
            Weighted
              Average
              Exercise
              PriceWarrantsoutstanding
                at October 31,
                2005
            
            
            2,988,391
            
            
            $
            .16
              - 1.44
            
            
            $
            .62Warrantsgranted
            
            
            1,000,000
            
            
            
            .13
            
            
            
            .13Warrantsexercised
            
            
            -
            
            
            
            -
            
            
            
            -Warrantscancelled
            
            
            (1,945,958
            )
            
            
            .78
            
            
            
            .78Warrantsoutstanding
                at October 31,
                2006
            
            
            2,042,433
            
            
            $
            .13
              -.78
            
            
            $
            .62Warrantsgranted
            
            
            -
            
            
            
            -
            
            
            
            -Warrantsexercised
            
            
            -
            
            
            
            -
            
            
            
            -Warrantscancelled
            
            
            (402,433
            )
            
            
            .75
            
            
            
            .75Warrantsoutstanding
                at October 31,
                2007
            
            
            1,640,000
            
            
            $
            .13
              -.16
            
            
            $
            .14





Warrants
      issued to employees that were
      exercisable at October 31, 2007 and 2006 totaled 1,640,000 and 2,042,433,
      respectively.The weighted average
      remaining contractual term of employee warrants outstanding at October 31,
      2007
      was 3.5 years.





Warrant
      Issuances to
      Non-Employees





Non-employee
      warrant activity for the
      two years ended October 31, 2007 was as follows:




Number
                of
              Shares
            
            
            Warrants
              Price
                Per
              Share
            
            
            Weighted
              Average
              Exercise
              PriceWarrants
                outstanding at October
                31, 2005
            
            
            3,260,000
            
            
            $
            0.11
              - 3.50
            
            
            $
            0.77Warrants
                granted
            
            
            2,000,000
            
            
            
            0.14
–
0.25
            
            
            
            0.20Warrants
                exercised
            
            
            -
            
            
            
            -
            
            
            
            -Warrants
                cancelled
            
            
            (425,000
            )
            
            
            0.89
              - 3.50
            
            
            
            2.73Warrants
                outstanding at October
                31, 2006
            
            
            4,835,000
            
            
            $
            0.11
              - 2.00
            
            
            $
            0.36Warrants
                granted
            
            
            7,100,000
            
            
            
            .09
              - .10
            
            
            
            0.10Warrants
                exercised
            
            
            -
            
            
            
            -
            
            
            
            -Warrants
                cancelled
            
            
            (100,000
            )
            
            
            0.40
–
2.00
            
            
            
            1.20Warrants
                outstanding at October
                31, 2007
            
            
            11,835,000
            
            
            $
            0.10
              - 0.78
            
            
            $
            0.20





The
      majority of the warrants issued to
      non-employees during fiscal 2007 and 2006 were issued in connection with debt
      financing.  Non-employee warrants that were exercisable at October 31,
      2007 and 2006 totaled 11,835,000 and 4,835,000,
      respectively.The weighted average remaining contractual term
      of non-employee warrants outstanding at October 31, 2007 was 2.2
      years.





On
      June 15, 2007, the Company entered
      into a series of agreements with Westside Capital, LLC whereby the Company
      sold
      357,143 shares of the Company's common stock to Westside Capital for a purchase
      price of $25,000 and issued to Westside Capital Common Stock Purchase Warrants
      (the "Warrants") to purchase up to an additional 50,000,000 shares of the
      Registrant's common stock ("Warrant Shares") at exercise prices as follows:
      20,000,000 Warrant Shares exercisable at $0.10 per share (Warrant "A");
      15,000,000 Warrant Shares exercisable at $0.20 per share (Warrant "B"); and
      15,000,000 Warrant Shares exercisable at $0.30 per share (Warrant "C"). The
      Warrants vest in 4,000,000 share increments at such time as the previous
      increment has been fully exercised.  Should the Company not receive
      cumulative gross proceeds of at least three million dollars ($3,000,000) in
      the
      form of equity, debt, any other injection of capital into the Company, or any
      combination thereof from Westside Capital or from sources introduced by Westside
      Capital by February 24, 2008, then all outstanding Warrants shall
      expire.  On June 15, 2007, 4,000,000 warrants vested resulting in the
      recognition of approximately $71,000 of expense included in "other" on the
      accompanying statement of operations for fiscal year 2007.  The fair
      value of the warrants was determined on the date of grant using the
      Black-Scholes pricing model with the following assumptions: applicable risk-free
      interest rate based on the current treasury-bill interest rate of 5.38%;
      volatility factor of the expected market price of the Company's common stock
      of
      1.38; and an expected life of the warrants of eight months.





F-23





NOTE
      14-
      INCOME TAXES





Deferred
      income taxes reflect the net
      tax effects of temporary differences between the carrying amounts of assets
      and
      liabilities for financial reporting purposes and the amounts reported for income
      tax purposes. Significant components of the Company's deferred tax assets and
      liabilities at October 31, 2007 and 2006 are as follows:




2007
            
            
            2006Deferred
                tax assetsNet
                operating loss carryovers
            
            $
            16,292,411
            
            
            $
            15,856,634Accounts
                receivable
            
            
            18,219
            
            
            
            20,286Advertising
                credits
            
            
            -
            
            
            
            977,185Property
                and equipment
            
            
            30,586
            
            
            
            194,903Warrants
            
            
            54,296
            
            
            
            54,296Accrued
                liabilities
            
            
            25,552
            
            
            
            28,185Total
                gross deferred tax assets
            
            
            16,421,064
            
            
            
            17,130,489Deferred
                tax liabilitiesGoodwill
            
            
            (14,632
            )
            
            
            (223,878
            )Total
                gross deferred tax liabilities
            
            
            (14,632
            )
            
            
            (223,878
            )Net
                deferred tax assets
            
            
            16,406,432
            
            
            
            16,906,611Valuation
                allowance
            
            
            (16,406,432
            )
            
            
            (16,906,611
            )Net
                deferred assets
            
            $
            -
            
            
            $
            -





The
      following is a reconciliation of the Company’s income tax expense (benefit) at
      the statutory rate to the income tax expense (benefit) at the effective tax
      rate:





2007
            
            
            2006Income
                tax benefit at statutory rate
            
            $
            (679,791
            )
            
            $
            (377,794
            )Permanent
                differences
            
            
            370,891
            
            
            
            495,457Net
                operating loss expiration
            
            
            751,994
            
            
            
            10,038Change
                in valuation allowance
            
            
            (500,179
            )
            
            
            (129,677
            )Other
            
            
            57,085
            
            
            
            1,976$
            -
            
            
            $
            -





At
      October 31, 2007, the Company has U.S. net operating loss carryforwards for
      federal income tax purposes of approximately $45 million, which expire in 2008
      through 2027.  Utilization of U.S. net operating losses is subject to
      annual limitations provided for by the Internal Revenue Code. The annual
      limitation may also result in the expiration of net operating losses before
      utilization.





Realization
      of tax benefits depends on having sufficient taxable income within the carryback
      and carryforward periods. The Company continually reviews the adequacy of the
      valuation allowance and recognizes these benefits as reassessment indicates
      that
      it is more likely than not that the benefits will be realized. Based on pretax
      losses incurred in prior years, management has established a valuation allowance
      against the entire net deferred asset balance.





F-24





NOTE
      15-
      COMMITMENTS AND
      CONTINGENCIES





Operating
      Leases, including Related
      Party Lease





The
      Company leases its corporate office
      and branch office facilities under various noncancelable operating leases with
      terms expiring at various dates through 2011.  The operational and
      administrative headquarters facility is leased through June 2011 from
      ApexCommunications,
      Inc., an entity owned by
      executive officers of the Company.Rent
      expense for operating leases was$196,940 and $343,000 during fiscal 2007 and 2006, respectively. Rent
      expense to Apex was $134,860 and $45,000 duringfiscal 2007and
      2006, respectively.The Company has no capital
      lease obligations as of October 31, 2007.





Future
      minimum lease payments under noncancelable operating leases as of October 31,
      2007 are as follows:





Year
                Ending October 31,2008
            
            $
            134,8602009
            
            
            134,8602010
            
            
            134,8602011
            
            
            89,907Total
                minimum lease payments
            
            $
            494,487





Future
      minimum lease paymentsrelateto
      the Apexoperating
      lease.





Legal
      Proceedings





The
      Company, from time to time, may be
      subject to legal proceedings and claims in the ordinary course of business,
      including claims of alleged infringement of trademarks and other intellectual
      property of third parties by the Company.  Such claims, even if not
      meritorious, could result in the expenditure of significant financial and
      managerial resources.





Cygnus
      Telecommunications Technology, LLC.  On June 12, 2001, Cygnus
      Telecommunications Technology, LLC ("Cygnus"), filed a patent infringement
      suit
      (case no. 01-6052) in the United States District Court, Central District of
      California, with respect to the Company's "international re-origination"
      technology. On March 29, 2007 the United States District Court in San Jose,
      California ruled that all Cygnus “international re-origination” patents are
      invalid, and dismissed all cases against Rapid Link (fka Dial Thru International
      Corporation) and related parties. Cygnus is appealing to a higher
      court.





State
      ofTexas.  During
      fiscal 2004, the
      Company determined, based on final written communications with the State ofTexas(the
“State”),
      that it had a liability
      for sales taxes (including penalties and interest) totaling $1.1
      million.  The Company had previously accrued an estimated settlement
      amount of $350,000 during fiscal 2003.  During fiscal 2004, the
      Company accrued an additional $750,000.  On August 5, 2005, the State
      ofTexasfiled
      a lawsuit in the 53rdJudicialDistrictCourtofTravisCounty,Austin,Texasagainst
      the Company.  The
      lawsuit requests payment of approximately $1.162 million, including penalties
      and for state and local sales tax.  During fiscal 2005, the Company
      accrued an additional $62,000.  The sales tax amount due is
      attributable to audit findings of the State of Texas for the years 1995 to
      1999
      associated with Canmax Retail Systems, a current subsidiary of ours, and former
      operating subsidiary providing retail automation software and related services
      to the retail petroleum and convenience store industries.  The State
      ofTexasdetermined
      that Canmax Retail Systems
      did not properly remit sales tax on certain transactions.  Management
      believes that it will be able to negotiate a reduced settlement amount with
      the
      state, although there can be no assurance that the Company will be successful
      with respect to such negotiations.On
      January 8, 2008, the Attorney General
      of Texas offered to settle all sales tax claims against the Company for a sum
      total of $250,000, which must be paid by April 1, 2008 to relieve the Company
      from any and all sales tax liabilities including penalties and
      interest.The
      Company is currently considering whether to accept the
      offer.





F-25





The
      Company will continue to
      aggressively pursue the collection of unpaid sales taxes from former customers
      of Canmax Retail Systems, primarily Southland Corporation, now 7-Eleven
      Corporation ("7-Eleven"), as a majority of the amount owed to the State ofTexasis
      the result of uncollected taxes from
      the sale of software to 7-Eleven during the period under
      audit.  However, there can be no assurance that the Company will be
      successful with respect to such collections.





On
      January 12, 2004, the Company filed a
      suit against 7-Eleven in the 162nd District Court inDallas,Texas.  The
      Company's suit claims a
      breach of contract on the part of 7-Eleven in failing to reimburse it for taxes
      paid to the State as well as related taxes for which the Company is currently
      being held responsible by the State.  The Company's suit seeks
      reimbursement for the taxes paid and a determination by the court that 7-Eleven
      is responsible for paying the remaining tax liability to the
      State.





NOTE
      16 – SUBSEQUENT
      EVENTS





On
      January 8, 2008, the Attorney General
      of Texas offered to settle all sales tax claims, as discussed in NOTE 15,
      against the Company for a sum total of $250,000, which must be paid by April
      1,
      2008 to relieve the Company from any and all sales tax liabilities including
      penalties and interest.




F-26


EXHIBIT
      INDEX





NO.
            
            DESCRIPTION
                OF EXHIBIT21.1
            
            Subsidiaries
                of the Registrant
                (filed herewith)23.1
            
            Consent
                of Independent Registered
                Public Accounting Firm (filed herewith)31.1
            
            Certification
                of Chief Executive
                Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
                Exchange Act of 1934 (filed herewith)31.2
            
            Certification
                of Chief Financial
                Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities
                Exchange Act of 1934 (filed herewith)32.1
            
            Certification
                of Chief Executive
                Officer pursuant to 18 U.S.C. Section 1350 (furnished
                herewith)32.2
            
            Certification
                of Chief Financial
                Officer pursuant to 18 U.S.C. Section 1350 (furnished
                herewith)





45