UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, DC. 20549

                                 FORM 10-KSB
 (Mark One)

 [X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                  For the fiscal year ended October 31, 2006

 [ ] TRANSITION 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 of        (I.R.S. Employer Identification No.)
 incorporation or organization)

           17383 SUNSET BOULEVARD, SUITE 350 LOS ANGELES, CA 90272
           -------------------------------------------------------
           (Address of principal executive offices)      (Zip Code)

                  Issuer's telephone number: (310) 566-1700

     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.
 Yes [X] No [ ]

 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). Yes [ ] No [X]

 The issuer's  revenues  for  the  fiscal year  ended  October 31, 2006  were
 $13,351,030.

 The aggregate market value of the voting and non-voting common stock held by
 non-affiliates of the registrant  as of January 18, 2007  was  approximately
 $1,413,718, based on  the average bid  and  ask price of a share  of  common
 stock as quoted on the OTC Bulletin Board of $0.07.

 As of January 18, 2007, there were 51,169,972 shares of registrant's common
 stock outstanding.

                  DOCUMENTS INCORPORATED BY REFERENCE: None

  Transitional Small Business Disclosure Format (Check One): Yes [ ]; No [X]

<PAGE>

                          FORWARD-LOOKING STATEMENTS

 This Annual Report on Form 10-KSB (this "Report") includes "forward-looking
 statements" within the meaning of Section 27A of the Securities Act of 1933,
 as amended (the "Securities Act"), and Section 21E of the Securities
 Exchange Act of 1934, as amended (the "Exchange Act"). 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," "will," "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, a Delaware corporation,
 and its subsidiaries. The Company was incorporated on July 10, 1986 under
 the Company Act of the Province of British 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 of Wyoming, and on
 November 30, 1994 our name was changed to "Canmax Inc." On February 1, 1999,
 we reincorporated under the laws of the State of Delaware under 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 out VoIP related services. In addition, we
 also believe that the name, which was the name of the company we acquired in
 October 2001, is a recognized brand name with members of the United States
 Military around the world, a significant source of retail revenue for the
 Company since the acquisition.

 Our principal executive offices are located at 17383 Sunset Boulevard, Suite
 350, Los Angeles, California 90272; our telephone number is (310) 566-1700;
 our website address is www.rapidlink.com; and our common stock currently
 trades on the OTC Bulletin Board under the symbol RPID.

 Business Strategy

 VoIP Niche Market Strategy

 Historically, Rapid Link has served as a facilities-based, communications
 company providing various forms of telephony services to wholesale and
 retail customers around the world. Rapid Link provides a multitude of
 international telecommunications services targeted to individual customers,
 as well as small and medium sized enterprises ("SMEs"). These services
 include the transmission of voice and data traffic over public and private
 networks. The Company also sells telecommunications services for both the
 foreign and domestic termination of international long distance traffic into
 the wholesale market.  The Company utilizes VoIP packetized voice technology
 (and other compression techniques) to improve both cost and efficiencies of
 telecommunication transmissions. To insure optimal quality and redundancy,
 the Company also utilizes the Public Switched Telecommunications Network, as
 well as the Internet, to transport communications services.

 The Company has now shifted its retail product focus to value-added VoIP
 communication services to customers, both domestically and internationally.
 Rapid Link focuses on key niche markets. These niche markets include
 specific ethnic demographics, targeted geographic locations both
 domestically and internationally, and the United States military. The
 Company's strategy includes plans to offer broadband access via its own
 facilities to insure reliable delivery of its VoIP services. Technology
 now allows for cost efficient and rapid build out of broadband facilities.
 Wi-MAX and other technologies can bring fast, reliable, high speed internet
 access to areas that have traditionally been unreachable or underserved.
 Through acquisitions and organic growth 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 still in question and
 Rapid Link believes the potential for unfair and or monopolistic behavior
 by incumbent providers, necessitates our strategy 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
 telephony services without the threat of compromised service quality.

 The Company offers PC-to-PC, PC-to-phone, and phone-to-phone calling using
 a mixture of software and/or hardware depending on the end-users' specific
 needs. Rapid Link offers VoIP service plans to conventional residential and
 business customers in addition to serving the military and other niches. The
 Company sells both flat-rate and cost-per-minute calling plans in order to
 directly address the customers' requirements.

 Development of VoIP Technology

 The growth of the Internet has accelerated the rapid merger of the worlds
 of voice-based and data-based communications. By first digitizing voice
 signals, then utilizing the same packetizing technology that makes the
 Internet possible, VoIP provides for a cost effective manner in which to
 perform the signal compression needed to maximize the return from the use of
 the public Internet. In this way, not only has efficiency of the dedicated
 circuits been improved, but use of the public Internet provides a much more
 cost effective means of transmission and rapid deployment compared to
 traditional private leased lines and circuits.

 During the latter part of fiscal 2004 we began offering value-added VoIP
 communications services to customers, both domestically and internationally.
 To date, our new VoIP product offerings have generated insignificant
 revenues. We strive to provide our customers with a reliable, scalable and
 affordable worldwide IP communication service with a quality focus. We focus
 our efforts on providing first class customer service, and hire employees
 with experience in developing and building technologically advanced IP
 enabled platforms and services. Our intention is to provide our customers
 with the best possible voice communication services, to both residential
 and business users, at affordable prices that allow them to communicate
 seamlessly and effortlessly to anywhere and from anywhere in the world.

 Niche Focus - U.S. Armed Forces

 We have established brand name recognition within the U.S. military market,
 offering affordable international calling to members of the U.S. military.
 The Company has served this niche market for several years. Historically, we
 focused on the soldier located in foreign markets. However, with our new,
 more cost effective VoIP service offerings, we are able to market to
 soldiers and their families both domestically and internationally. In
 addition, we have expanded our marketing efforts to include other niche
 markets such as ethnic demographics and rural area customers.

 Products and Services

 Rapid Link VoIP Services

 Rapid Link provides 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. We
 utilize an Internet Access Device ("IAD") (i.e. a desktop adapter or soft
 phone headset), to connect customers to our Rapid Link network software,
 which enables VoIP communications. Our desktop adapter allows for the
 connection of a standard telephone to the adapter, providing for familiar
 dialtone interface, while the soft phone headset plugs directly into the
 customer's computer. Our VoIP products use Session Initiation Protocol, or
 SIP, signaling, which empowers edge devices, such as multimedia terminal
 adapters, to establish and manage voice calls on all types of Internet
 systems.

 Our system provides an end user with a local phone number for inbound
 calling and comes with a full set of features and functionality, including
 call waiting, caller ID, three-way conference calling, and "follow me"
 features. Additional features include web-based tools allowing subscribers
 to manage their telephony features online, manage their accounts, and check
 their voice mail. We have designed our system to enable the termination of
 our customers' calls to the Public Switched Telephone Network, and to allow
 for direct connection directly over the Internet to other Rapid Link
 customers anywhere in the world. As part of the Rapid Link service, we
 currently resell IADs that we purchase from third parties. These IADs are
 configured prior to shipping to work with our VoIP software.

 We offer several VoIP rate plans to the business office, the business
 professional that may have a home office, the residential consumer and our
 niche markets. The residential plans offer customers a cheaper alternative
 to traditional local telephone service, as well as long distance and
 international calling. Our service plans are designed to provide our
 customers the lowest possible rates while maintaining the level of quality
 service they expect. Our customers are provided with the opportunity to
 access to a variety of services, including voice mail, caller ID, call
 waiting, 3-way calling, area code selection, and online account management
 and billing. While we are optimistic that our VoIP-based retail products
 will provide us with meaningful growth opportunities, we have yet to derive
 material revenues from any of these products.

 Our included voice mail service can also be used in a unique way that is
 very beneficial to our military customers stationed overseas. As a Rapid
 Link customer, received voice mails can be sent via email as a sound file
 attachment. This enables the overseas customer to hear their voice mail
 messages without having to have access to the telephone service. In many
 remote areas where military service personnel are stationed, email access is
 far more available than phone service. With Rapid Link, our customers need
 never be out of touch.

 Dial Thru and Re-origination Services

 We provide a variety of international "Dial Thru" and "Re-origination"
 services. The Dial Thru service allows customers the convenience of making
 local and/or international calls in the same manner as traditional long
 distance dialing. In those markets in which 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 switch in Los Angeles 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. Wherever possible, we route calls over
 our private network. By using VoIP to compress voice and data transmissions
 across the public Internet, we are able to offer these services at costs
 that are substantially less than traditional communications services. 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. Generally, the Dial Thru and
 Re-origination services are provided to customers that establish deposits
 or prepayments with us to be used for long-distance calling.

 International Wholesale Termination

 We offer international call completion on a wholesale basis to domestic
 and international telecommunications companies. This service enables our
 corporate customers to offer their own customers phone-to-phone global voice
 and fax services, and provides our customers with high quality and low cost
 long distance without having to deploy their own VoIP infrastructure. We can
 also provide additional termination opportunities to customers that have
 developed their own VoIP networks with nearly instant access to our
 termination points by connecting to these customers via the Internet.
 Therefore, we have the capability to offer our services to carriers
 connecting to our network through traditional dedicated switch to switch
 connections, and through the public Internet whereby our customers connect
 to our network using their own VoIP equipment.

 Global Roaming

 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 the U.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 to countries that are not aggressively marketed 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 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 to expand our market share in the telecommunications
 industry while taking advantage of several significant economies of scale,
 both in respect to direct cost reductions, as well as operational
 efficiencies. Even though our executive offices are in southern California,
 we have subsequently moved substantially all of our operational and
 administrative functions to the Telenational headquarters in Omaha,
 Nebraska.

 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 the United States and
 wholesale services to customers worldwide.

 Competition

 The telecommunications 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.
 Telecommunications 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 the long
 distance telecommunications industry, we compete with such dominant
 such as AT&T Corp. (T:NYSE), Sprint Nextel Corporation (S:NYSE) and Qwest
 Communications International (Q:NYSE), all of which are substantially larger
 than us and have the resources, history and customer bases to dominate
 virtually every segment of the telecommunications market.  As a service
 provider in the VoIP telecommunications industry, we compete with such
 dominant providers as Skype and Vonage (VG:NYSE), 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.

 A substantial majority of the telecommunications traffic around the world is
 carried by dominant carriers in each market. These carriers, such as British
 Telecom and Deutsche Telekom (DT:NYSE), have started to deploy packet-switch
 networks for voice and fax traffic. In addition, other industry leaders,
 such as AT&T, Sprint and Qwest Communications International, as well as
 large cable companies, have begun to offer Internet telephony services both
 in the United States and internationally. These and other competitors will
 be able to bundle services and products that are not offered by us, together
 with Internet telephony services, to gain a competitive advantage over us in
 the marketing and distribution of products and services

 We also compete with other smaller carriers including IDT Corp. (IDT:NYSE),
 deltathree.com, Primus Telecommunications Group, Inc. (PRTL:OTC-BB),
 Net2Phone Inc. and 8x8 Inc. Additionally, a number of non-traditional
 competitors have been attracted to the market, including internet-based
 service providers. 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 VoIP.

 The market for international voice and fax call completion services is also
 highly competitive. We compete both in the market for enhanced Internet
 communications services and 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.

 Future competition could come from a variety of enterprises both in the
 Internet and telecommunications industries. In addition, some Internet
 service providers have begun enhancing their real-time interactive
 communications and, although these companies have initially focused on
 instant messaging, we expect them to provide PC-to-phone services in the
 future.

 Wholesale Internet Telephone Service Providers

 During the past several years, a number of companies have introduced
 services that make Internet telephony or voice services over the Internet
 available to businesses and consumers. iBasis, Teleglobe International
 Holdings and the wholesale divisions of Net2Phone Inc. and deltathree.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 VoIP services or adapt their products to
 enable voice over the Internet services. Many of these companies have
 migrated into the Internet telephony market as direct competitors.

 Suppliers

 Our principal suppliers consist of domestic and international
 telecommunications carriers, and Internet Service Providers. Relationships
 currently exist with a number of reliable carriers. During the fiscal year
 ended October 31, 2006, one of the Company's suppliers accounted for
 approximately 26% 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.

 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 individuals and businesses 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, 2006 and 2005, $4.4 million or 33% and $3.4 million or 35% 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 VoIP products
 and services, targeting SMEs, members of the U.S. military, particularly
 those located in foreign markets where telecommunications deregulation has
 not taken place or is currently underway, residential customers in those
 same markets and to a lesser extent the United States, and VoIP wholesale
 customers located both domestically and internationally. We rely heavily on
 the use of commissioned agents to generate retail sales in foreign markets,
 as well as web portals, magazines and local military base events, and third
 party resellers. 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
 the United 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, 2006 we provided wholesale services
 to a customer who accounted for 12% of our revenues and to another customer
 who accounted for 10% of our revenues. During the fiscal year ended October
 31, 2005, we provided wholesale services to a customer who accounted for 13%
 of our revenues, and to another customer who accounted for 11% of revenues.
 We believe the loss of any individual customer would not materially impact
 our business. We generally do business with approximately 20 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 January 15, 2007, we have 30 full-time employees, seven of which
 perform administrative and financial functions, thirteen of which
 perform customer support duties, and ten of which have experience in
 telecommunications operations and/or sales. Twenty-one employees are located
 in Omaha, Nebraska, three employees are located in Los Angeles, California
 and the remaining six employees are located elsewhere. None of our employees
 are represented by a labor union, and we consider our employee relations to
 be good.

 Debt Restructurings

 On September 14, 2006, 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 due in November of 2006 payable to
 Global and GCA to be extended to November 1, 2007. In addition, any and all
 defaults incurred prior to September 14, 2006 have been cured or waived. It
 should be noted that Global and GCA have never deemed any of the notes to
 be in default. In addition, a conversion floor of $0.10 and a conversion
 ceiling of $0.25 were put into place for all convertible debentures
 outstanding with both Global and GCA.

 We are currently seeking a debt facility or equity financing that will allow
 us to either convert our outstanding debt obligations with GCA and Global
 into the new financing, and/or pay down a portion or all of the amounts now
 due. There can be no assurance that sufficient debt or equity financing will
 be available or available on terms acceptable to us.

 Also on September 14, 2006, the Company entered into an agreement with its
 Chief Executive Officer and significant shareholder, John Jenkins, amending
 the current note payable to add the outstanding interest due to the existing
 note, and extending the maturity date. The revised note is due February 28,
 2008.

 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 the United 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 us or the
 telecommunications industry at this time. Some of these future legislative,
 regulatory or judicial changes could have a material adverse impact on our
 business.

 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
 than interstate access 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.

 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 provide U.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
 one U.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 granting U.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.

 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, under U.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 the U.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 charges could also have a retroactive effect, which
 could materially adversely affect us. It is also possible that the FCC may
 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.

 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
 the U.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, 2006 and 2005, we recorded net losses
 from continuing operations of approximately $1.1 million and $2.5 million,
 respectively, on revenues from continuing operations of approximately $13.4
 million and $9.8 million, respectively. As a result of these losses and
 historical losses, we currently have a substantial working capital deficit.
 In addition, a significant amount of our trade accounts payable and accrued
 liabilities are past due. To be able to service our debt obligations over
 the course of the 2007 fiscal year, we must generate significant cash flow
 and obtain additional financing or extend the maturity date on current
 obligations. 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, it is likely that we will not be able to continue our
 operations.

 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, 2006, which states that "The Company has suffered
 recurring losses from continuing operations during each of the last two
 fiscal years. Additionally, at October 31, 2006, the Company's current
 liabilities (which includes significant amounts of past due payables)
 exceeded its current assets by $4.7 million and the Company had a
 shareholders' deficit totaling $2.6 million. These conditions raise
 substantial 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 VoIP portion of the telecommunications industry and the
 effectiveness of our business strategy. As of the date of this report, most
 of our revenues are not derived from VoIP communication services. Instead,
 we generated most of our revenues from wholesale and retail fixed-line
 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 you 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 additional financing.
 There is no assurance that adequate levels of additional financing will
 be available at all or on acceptable terms. If we are unable to obtain
 additional 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 you 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, virtually all 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.

 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
 telecommunication services 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 existing 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 Internet telephony 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 of John 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.

 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 VoIP network and the range of enhanced
 telecommunications 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.

                      Item 2.  Description of Property.

 We lease approximately 11,500 square feet in Omaha, Nebraska, located
 at 5408 N. 99th Street, and 3,200 square feet in Los Angeles, California
 located at 17383 Sunset Boulevard, Suite 350. Our operations and information
 systems are located in the Omaha facility, while our California office
 serves as our executive headquarters. We also have a small sales and
 administrative office in Johannesburg, 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:

 April 30, 2007    Los Angeles - Executive Headquarters
 June 30, 2011     Omaha - Operational and Administrative Headquarters
 March 31, 2007    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. The injunctive relief that Cygnus sought in this
 suit has been denied, but Cygnus continues to seek a license fee for the use
 of the technology. The Company believes that no license fee is required as
 the technology described in the patent is different from the technology used
 by the Company. In August 2002, Cygnus filed a motion for a preliminary
 injunction to prevent the Company from providing re-origination services.
 The Company filed a cross motion for summary judgment of non-infringement.
 Both motions were denied. On August 22, 2003, the Company re-filed the
 motion for summary judgment for non-infringement. In response to this
 filing, during August 2004, the court narrowly defined the issue to relate
 to a certain re-origination technology, which the Company believes it does
 not now, nor has it ever utilized to provide any of its telecommunications
 services. On August 17, 2005, the United States District Court for the
 Northern District of California issued a stay in the lawsuit for the purpose
 of reexamining the Cygnus patent. This stay is the result of a reexamination
 request received by the United States Patent and Trademark Office ("USPTO"),
 whereby the USPTO has issued a decision that the patents are invalid.
 Subsequently, we have filed a motion for Summary Judgment to relieve us of
 any liability and to have the case dismissed.  We are currently waiting for
 a ruling from the court, which we have yet to receive. The Company intends
 to continue defending this case vigorously, and though its ultimate legal
 and financial liability with respect to such legal proceeding is expected
 to be minimal, the potential loss or range of loss cannot currently be
 estimated with any certainty.

 State of Texas.  During fiscal 2004, the Company determined, based on final
 written communications with the State of Texas (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 of Texas filed a lawsuit
 in the 53rd Judicial District Court of Travis County, Austin, Texas against
 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 of Texas determined 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. These operations were classified as discontinued after the
 Company sold its retail automation software business in December 1998 and
 changed its business model.

 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. 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 of Texas is 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 in Dallas, 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 2006.

                                   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           Low
                                              ------        ------
 Fiscal Year Ended October 31, 2006
 ----------------------------------
      Fourth Quarter. . . . . . . . . . .     $ 0.14        $ 0.06
      Third Quarter . . . . . . . . . . .     $ 0.22        $ 0.09
      Second Quarter. . . . . . . . . . .     $ 0.40        $ 0.12
      First Quarter . . . . . . . . . . .     $ 0.19        $ 0.08

 Fiscal Year Ended October 31, 2005
 ----------------------------------
      Fourth Quarter. . . . . . . . . . .     $ 0.20        $ 0.11
      Third Quarter . . . . . . . . . . .     $ 0.51        $ 0.14
      Second Quarter. . . . . . . . . . .     $ 0.40        $ 0.18
      First Quarter . . . . . . . . . . .     $ 0.68        $ 0.10

 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 18, 2007, as reported on
 the OTC Bulletin Board, was $0.07.

 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 18, 2007.

 Recent Sales of Unregistered Securities

 None.

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

 This Annual Report on Form 10-KSB contains "forward-looking statements"
 within the meaning of Section 27A of the Securities Act of 1933 and Section
 21E of the Securities Exchange Act of 1934. 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, 2006 and 2005 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, communications company providing various forms of
 telephony services to wholesale and retail customers around the world.  We
 offer a multitude of international telecommunications 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 telecommunications 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 of retail telecommunications organizations, especially in the
 area of retail and wholesale VoIP.

 On May 5, 2006, we completed the acquisition of all of the issued and
 outstanding shares of capital stock of Telenational Communications, Inc.,
 who historically 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 allows us 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 the United States, and
 wholesale services to customers worldwide.

 The telecommunications 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 our VoIP business by 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 as the United States military.
 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 the United 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 that it believes
 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 are required to 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. To date, our new VoIP product offerings
 have generated insignificant revenues.

 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, that actually occurs.

 Carrier Disputes

 We review our vendor bills on a monthly basis and periodically dispute
 amounts invoiced by our carriers. We review our outstanding disputes on a
 quarterly basis as part of the overall review of our accrued carrier costs,
 and adjust our liability based on management's estimate of amounts owed.

 Recent Accounting Pronouncements

 In December 2004, the Financial Accounting Standards Board ("FASB") issued
 Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004),
 "Share-Based Payment" ("Statement 123R"), which revised SFAS No. 123 and
 supercedes APB Opinion No. 25. This revised accounting standard addresses
 the accounting for share-based payment transactions with employees and
 other third parties, eliminates the ability to account for share-based
 compensation transactions with employees using APB Opinion No. 25 and
 requires that the fair value of such share based payments be recognized in
 the consolidated statement of operations. The revised statement is effective
 as of the first interim or annual financial reporting period beginning after
 December 15, 2005. The Company adopted the statement as of November 1, 2006,
 applying the modified prospective method. The impact of adoption of SFAS No.
 123R cannot be predicted at this time because it will depend on levels of
 share-based payments granted in the future. However, had the Company adopted
 SFAS No. 123R in prior periods, the impact of that standard would have
 approximated the impact of SFAS No. 123 as described in the disclosure of
 pro forma net loss and net loss per share in the stock-based compensation
 policy note discussed previously.

 In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
 Hybrid Financial Instruments," an amendment of SFAS No. 133, "Accounting
 for Derivative Instruments and Hedging Activities," and SFAS No. 140,
 "Accounting for Transfers and Servicing of Financial Assets and
 Extinguishments of Liabilities." With respect to SFAS No. 133, SFAS No. 155
 simplifies accounting for certain hybrid financial instruments by permitting
 fair value remeasurement for any hybrid financial instrument that contains
 an embedded derivative that otherwise would require bifurcation and
 eliminates the interim guidance in Statement 133 Implementation Issue No.
 D1, "Application of Statement 133 to Beneficial Interests in Securitized
 Financial Assets," which provided that beneficial interests in securitized
 financial assets are not subject to the provision of SFAS No. 133. With
 respect to SFAS No. 140, SFAS No. 155 eliminates a restriction on the
 passive derivative instruments that a qualifying special-purpose entity may
 hold. SFAS No. 155 is effective for all financial instruments acquired or
 issued after the beginning of an entity's first fiscal year that begins
 after September 15, 2006. The Company does not expect adoption of SFAS No.
 155 to significantly affect our financial condition or results of
 operations.

 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. The accounting provisions of FIN 48 will be effective for us
 beginning November 1, 2007. The Company is in the process of determining
 the effect, if any, the adoption of FIN 48 will have on our financial
 statements.

 In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements."
 SFAS No. 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 affect
 our financial condition or results of operations.

<PAGE>
<TABLE>

 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       % Change       Year Ended
                                 October 31, 2006     2005 to    October 31, 2005
                                ------------------      2006    ------------------
                                              % of   Increase                 % of
                                   Amount     Rev.    (Decr.)     Amount      Rev.
                                -----------   ----    -------   -----------   ----
 <S>                            <C>           <C>      <C>      <C>           <C>
 Revenues                       $13,351,030   100%      36%     $ 9,827,049   100%

 Costs and expenses:
  Costs of revenues               9,644,235    72%      25%       7,713,349    78%
  Sales and marketing               856,037     6%     316%         205,973     2%
  General and administrative      3,596,171    27%      11%       3,227,609    33%
  Depreciation and amortization     747,562     6%      34%         557,131     6%
  Loss (gain) on disposal
    of property and equipment        56,771     -        *           (8,800)    -
  Net reductions of liabilities  (2,300,929)  (17%)    N/A                -     -
  Gain on legal settlement                -     -      N/A         (225,000)   (2%)
                                -----------   ----   ------     -----------   ----
    Total costs and expenses     12,599,847    94%      10%      11,470,262   117%
                                -----------   ----   ------     -----------   ----

 Operating income (loss)            751,183     6%       *       (1,643,213)  (17%)

 Other income (expense):
   Interest expense              (1,664,242)  (12%)    156%        (651,253)   (7%)
   Related party interest exp.     (216,233)   (2%)     (2%)       (219,362)   (2%)
   Foreign currency
     exchange gains                  18,134     -       73%          10,486     -
                                -----------   ----   ------     -----------   ----
     Total other income
       (expense)                 (1,862,341)  (14%)    117%        (860,129)   (9%)
                                -----------   ----   ------     -----------   ----

 Loss from continuing
   operations                    (1,111,158)   (8%)    (56%)     (2,503,342)  (26%)

 Loss from discontinued
   operations                             -      -     N/A          (62,000)    -
                                -----------   ----   ------     -----------   ----
 Net loss                       $(1,111,158)   (8%)    (57%)    $(2,565,342)  (26%)
                                ===========   ====   ======     ===========   ====

 Loss per share:
   Basic and diluted loss
   per share
     Continuing operations      $     (0.03)                    $     (0.11)
     Discontinued operations              -                               -
                                -----------                     -----------
                                $     (0.03)                    $     (0.11)
                                ===========                     ===========


 * Not computed as compares positive versus negative amounts.

</TABLE>

 Operating Revenues

 Our revenues increased from $9.8 million for fiscal 2005 to $13.4 million
 for fiscal 2006, a 36% increase, which is primarily attributable to the
 acquisition and inclusion of Telenational revenues since May 2006.

 Costs of Revenues

 Our costs of revenues as a percentage of revenues decreased from 78%
 for fiscal 2005 to 72% for fiscal 2006. This decrease as a percentage of
 revenues was primarily due to cost savings derived from the addition of
 alternative carrier sources brought to the Company through the Telenational
 acquisition. As a majority of our costs of revenues are 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 a small in-house sales and marketing
 organization.

 Our sales and marketing costs increased from 2% of revenues for fiscal
 2005 to 6% of revenues fiscal 2006. This increase is attributable to higher
 marketing costs and agent commissions attributed to Telenational during the
 current fiscal period. During fiscal 2006, 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

 Our general and administrative expenses decreased from 33% of revenues for
 fiscal 2005 to 27% for fiscal 2006. General and administrative expenses only
 increased $369,000, or 11% during fiscal 2006 as compared to fiscal 2005,
 even with the addition of personnel and other costs related to the
 Telenational acquisition, because (i) the Company was able to quickly
 eliminate duplicate costs between the combined entities, (ii) bad debt
 expenses decreased significantly, and (iii) expenses were incurred in fiscal
 2005 without corresponding amounts in fiscal 2006 related to warrants issued
 for services. 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, are no longer due and
 payable. Accordingly, this amount has been recorded as "Net reductions
 of liabilities" during fiscal 2006.

 Gain on Legal Settlement

 On July 20, 2004, we filed a suit against Q Comm International, Inc. ("Q
 Comm"), claiming damages resulting from the breach of a purchase agreement
 on the part of Q Comm relating to the sale of the Company's internally
 developed equipment for the prepaid telecommunications industry. During
 fiscal 2005, the Company entered into a Settlement and Release Agreement
 with Q Comm. The Agreement releases Q Comm from any and all claims in
 connection with the Company's lawsuit against Q Comm. In connection with the
 Settlement and Release Agreement, the Company agreed to a cash settlement of
 $225,000, which was received in fiscal 2005 and recorded this amount as a
 "Gain on legal settlement."

 Depreciation and Amortization

 Although a large portion of our assets still in use have become fully
 depreciated, depreciation and amortization costs increased (1) due to
 the assets acquired when we purchased Telenational in fiscal 2006 and (2)
 because we recorded $422,000 in amortization of customer lists during fiscal
 2006 with no corresponding expense during fiscal 2005. A majority of our
 depreciation and amortization expense relates to the equipment utilized in
 our VoIP network.

 Interest Expense

 The increase in interest expense for fiscal 2006 as compared to fiscal
 2005 primarily resulted from the extension of the maturity dates of our
 convertible debt instruments with our third party and related party lenders,
 debt issued in connection with the acquisition of Telenational, and
 additional borrowings during fiscal 2006. Interest expense includes
 amortization of deferred financing fees and debt discount on our debts to
 to third-party lenders and related parties. Interest expense for fiscal 2006
 and 2005 included interest expense of approximately $216,000 and $219,000,
 respectively, on our debt obligations to related parties.

 Income (loss) from discontinued operations

 Prior to fiscal 2005, we determined that we had a liability, incurred by
 a former operating subsidiary, to the State of Texas for sales taxes
 (including penalties and interest) totaling $1.1 million, which we accrued.
 In August 2005, the State of Texas filed a lawsuit in the 53rd Judicial
 District Court of Travis County, Austin, Texas against the Company. The
 lawsuit requests payment of approximately $1,162,000 including penalties and
 interest for state and local sales taxes. During fiscal 2005, we accrued an
 additional amount of $62,000. The State of Texas determined that we did not
 properly remit sales tax on certain transactions. Management believes that
 the amount due has been improperly assessed and will continue to pursue a
 lesser settlement amount, though we cannot assure you that this matter will
 be resolved in our favor.

 Liquidity and Sources of Capital

 To date we have been generally unable to achieve positive cash flow on a
 quarterly basis primarily due to the fact that our present lines of business
 do not generate a volume of business sufficient to cover our overhead costs.
 Our audit report includes an explanatory paragraph indicating substantial
 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, and the introduction of new 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 our VoIP and other lines of products and services.
 We anticipate a positive cash flow during the fiscal year ending October
 31, 2007. 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 us may have rights, preferences or privileges senior to our current
 common stockholders.

 At October 31, 2006, we had a cash and cash equivalents $30,000, a decrease
 in cash and cash equivalents of $142,000 from the balance at October 31,
 2005. We had working capital deficits at October 31, 2006 and 2005 of $4.7
 million and $6.6 million, respectively.

 Net cash used in operating activities was $1,035,000 and $310,000 during
 fiscal 2006 and 2005, respectively. 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. During fiscal 2005, net cash used in operating
 activities was primarily due to a net loss from continuing operations of
 $2,503,000; non-cash interest expense of $526,000; depreciation and
 amortization of $557,000; bad debt expense of $365,000; common stock and
 warrants issued for services of $206,000; net changes in operating assets
 and liabilities of $548,000; offset by gain on settlement of liabilities
 of $9,000.

 Net cash used in investing activities was $300,000 and $32,000 during fiscal
 2006 and 2005, respectively. Net cash used in investing activities during
 fiscal 2006 resulted from property and equipment purchases of $208,000 and
 payment of Telenational contingent purchase consideration of $250,000,
 offset by cash acquired in the Telenational acquisition of $158,000. Net
 cash used in investing activities during fiscal 2005 resulted from $27,000
 of property and equipment purchases, and $15,000 in Integrated acquisition
 costs, offset by $10,000 in proceeds from the sale of fixed assets.

 Net cash provided by financing activities was $1,193,000 during fiscal 2006
 compared to net cash used in financing activities of $72,000 during fiscal
 2005. 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 $300,000 from related parties, offset
 by debt and financing fee payments totaling $208,000. Net cash used in
 financing activities during fiscal 2005 resulted from payments on
 convertible debt.

 We have an accumulated deficit of approximately $50.0 million as of October
 31, 2006 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. As of October 31, 2006, in
 addition to our long-term debt obligations, we have approximately $717,000
 of convertible debentures (net of debt discount of $343,000) and notes
 payable to related parties of approximately $623,000 which will mature
 within the next year, as well as a significant amount of trade payables and
 accrued liabilities that are past due. Although we were current on our debt
 obligations at October 31, 2006, the Company has suspended its monthly
 principal and interest payments to Apex Acquisitions, Inc., a related
 party, since that date. In addition, the remaining contingent purchase
 consideration of $250,000 owed to Apex Acquisitions, Inc. was past due at
 October 31, 2006. We continue to explore external financing opportunities
 that will allow us to either convert our outstanding debt obligations into
 the new financing and/or pay down a portion or all of the amounts now due.
 Our management is committed to the success of our Company as is evidenced by
 the level of financing it has made available to our Company. However, if we
 are unable to obtain additional financing or extend the due date on current
 financing, our operations and financial condition in the short term may be
 materially affected, and we may not be able to remain in business. As a
 result of the aforementioned factors and related uncertainties, there is
 significant doubt about our Company's ability to continue as a going
 concern.

 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 2007.

 Debt Facilities and Equity Financing

<TABLE>
 The Company has various debt obligations as of October 31, 2006 and 2005,
 including amounts due to independent institutions and related parties.
 Descriptions of these debt obligations are included below. The following
 table summarizes outstanding debt as of October 31, 2006:

                              Information as of October 31, 2006
------------------------------------------------------------------------------------------
                                               Int.
  Brief Description of Debt       Balance      Rate     Due Date    Discount        Net
------------------------------------------------------------------------------------------
 <S>                            <C>            <C>      <C>        <C>         <C>
 Convertible notes, current
 --------------------------
      GC-Conote2                $     60,000     0%     3/30/2007  $   10,000  $    50,000
      Debentures                   1,000,000    10%      3/8/2007     333,333      666,667

 Related party notes, current
 ----------------------------
      Demand Note                    300,000     8%     on demand           -      300,000
      APEX Note 2                    322,633     8%     7/15/2007           -      322,633

 Convertible notes, long-term
 ----------------------------
      GCA-Debenture                  430,000     6%     11/1/2007           -      430,000
      GCA-Debenture                  552,457     6%     11/1/2007       4,247      548,210
      GC-Conote                    1,250,000   10.08%   2/28/2008     606,061      643,939

 Related party conv. notes, long-term
 ------------------------------------
      Notes (Executives)           1,905,078    10%     2/28/2008      44,120    1,860,958

 Related party note, long-term
 -----------------------------
      APEX Note 1                  1,000,000     8%     11/5/2007           -    1,000,000
</TABLE>

 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. The Company
 issued to the holder of the GCA-Debentures warrants to acquire an aggregate
 of 50,000 shares of common stock at an exercise price of $0.41 per share,
 which expire on January 28, 2007. In connection with an agreement to extend
 the maturity date of the GCA-Debenture, the Company issued to GCA warrants
 to purchase an additional 100,000 shares of common stock also at an exercise
 price of $0.21 per share, which expire on February 8, 2008.

 On June 1, 2005, the Company and GCA agreed to extend the maturity date of
 the two GCA-Debentures. The maturity dates were extended to November 26,
 2005. In connection with the extension, the Company issued GCA warrants to
 acquire 110,000 shares of common stock at an exercise price of $0.11 and
 300,000 warrants to acquire the Company's common stock at an exercise price
 of $0.38. These warrants expire in June 2010. The Company recorded $163,151
 as debt discount, representing the 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 extension period of the
 convertible debenture. In addition, the Company issued to GCA 140,000 shares
 of common stock valued at $0.45 per share, the Company's closing stock price
 on June 1, 2005, the date of issuance. In connection with the stock
 issuance, the Company recorded debt discount which is being amortized
 over the extension period of the convertible debenture.

 On September 14, 2006, the Company and GCA amended the GCA-Debentures to
 extend the maturity date of the GCA-Debentures 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. During fiscal 2006 and 2005, GCA converted GCA-Debenture
 debt and accrued interest of approximately $31,000 and $43,000,
 respectively, into approximately 407,000 and 352,000 shares, respectively,
 of common stock.

 GC-Note, GC-Conote and GC-Conote2

 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 29, 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
 discount debt 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 and 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.

 Debentures

 On March 8, 2006, the Company completed a private placement of two one-year
 10% convertible debentures ("Debentures"), for gross proceeds of $1,000,000
 maturing March 8, 2007. The Debentures are secured by assets of the Company
 not already secured by the GCA or Global notes. In connection with the
 Debentures, the Company agreed to issue the investors a total of 2,000,000
 immediately exercisable five-year warrants to purchase the Company's common
 stock at an exercise price of $0.14 for 1,000,000 warrants, and $0.25 for an
 additional 1,000,000 warrants. The Company paid $44,150 in financing fees
 in connection with the debentures which were recorded as a discount on the
 debentures. Additionally, in connection with these Debentures, the Company
 recorded debt discount of $955,850 related to the fair value of warrants
 issued and the related beneficial conversion feature that it is amortizing
 over the life of the Debentures. The fair value of the warrants 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 1.65; and an expected life of the warrants of three years.

 Related Party Notes

 The Company executed 10% convertible notes (the "Notes") with three
 executives (the "Executives") of the Company. Two of the Executives
 subsequently resigned from the Company and one remains on the Company's
 Board of Directors. The Note held by the director was paid in full during
 fiscal 2005. The Notes are secured, on a subordinated basis to the holders
 of the Debentures, by assets of the Company not already secured by the GCA
 or Global notes. Each Note is convertible into the Company's common stock at
 the option of the holder at any time. The Company 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 $0.78 per share, which expired on October 24,
 2006, warrants to acquire an additional 102,432 shares of common stock at
 an exercise price of $0.75, which expire on January 28, 2007, warrants to
 acquire an additional 300,000 shares of common stock at an exercise price
 of $0.75, which expire on July 8, 2007.

 On July 21, 2005, the Company and the Executives agreed to extend the
 maturity date of the Notes to February 29, 2008. In connection with the
 extension, the Company issued to the three executives warrants to acquire
 640,000 shares of common stock at an exercise price of $0.16. The warrants
 expire in July 2010. The Company recorded $88,238 as debt discount, the fair
 value of the warrants on July 21, 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 1.65; and an expected life of
 the warrants of three years. The debt discount is being amortized over the
 extension period of the Notes. During fiscal 2005, holders of the Notes
 elected to convert $467,500 of the Notes into 3,740,000 shares of common
 stock. The Company recorded debt discount amortization, which is recorded as
 related party interest expense, of $33,000 and interest expense of $100,000
 on these Notes during fiscal 2006.

 During fiscal 2006, the Company's Chief Executive Officer, John Jenkins,
 advanced funds to the Company in the aggregate amount of $550,000 which was
 repaid in full using proceeds from the Debentures financing. On September
 18, 2006, Mr. Jenkins advanced an additional $300,000 to the Company, which
 is classified as a current demand note (the "Demand Note"). On September 14,
 2006, Mr. Jenkins agreed to covert all unpaid interest on his Note in the
 amount of $901,688 to the principal balance of his Note under the same terms
 as the existing Note. The Company recorded interest expense during fiscal
 2006 of $25,000 on Mr. Jenkins' additional fiscal 2006 debt, which includes
 interest on the amount converted to principal and the Demand Note.

 On May 5, 2006 the Company acquired the stock of Telenational. As a
 component of the total purchase price, an 18-month note payable in the
 amount of $1,000,000 bearing 8% interest annually ("APEX Note 1") was
 issued to the seller of Telenational, Apex Acquisitions, Inc. ("APEX").
 The Company's Chief Financial Officer, Chris Canfield, is the majority
 shareholder of APEX. This Note is secured by 100% of the Telenational common
 stock. The Company recorded $40,000 in interest expense on APEX Note 1
 during fiscal 2006.

 On July 15, 2006, in conjunction with, but unrelated to the total purchase
 consideration paid for Telenational, the Company issued a note payable to
 APEX in the amount of $436,560 ("APEX Note 2"). This note bears interest
 at 8% annually. This Note is repayable in 12 equal monthly payments of
 principal and interest, until fully satisfied in July 2007. The Company
 recorded $18,000 in interest expense on APEX Note 2 during fiscal
 2006.Although the Company was current in its payments at October 31, 2006,
 the Company has suspended its monthly payments to APEX since that date.

 Contractual Obligations

 The Company leases office space under operating leases that run through Jun
 2011. In addition, we have numerous debt obligations outstanding.
 Contractual obligations as of October 31, 2006 are as follows:

                             Payments Due By Period

                          Less than                        More than
                           1 year     1-3 years  3-5 years  5 years     Total
                         ----------  ----------  ---------  -------  ----------
 Contractual Obligations:
  Debt Obligations       $1,683,000  $5,137,000  $       -  $     -  $6,820,000
  Operating leases          197,000     404,000     90,000        -     691,000
                          ---------   ---------  ---------  -------   ---------
 Total                   $1,880,000  $5,541,000  $  90,000  $     -  $7,511,000
                         ==========  ==========  =========  =======  ==========

                        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.

 As of the fiscal year ended October 31, 2006, 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, 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 the fourth quarter
 of fiscal 2006 that has materially affected, or is reasonably likely to
 materially affect, our internal control over financial reporting.

                         Item 8B.  Other Information.

 None.

                                   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 certain information regarding our executive
 officers and directors.

           Name             Age         Position with the Company
 -----------------------    ---    -----------------------------------
 John A. Jenkins             45    Chairman, Chief Executive Officer,
                                     Secretary and Director
 Christopher J. Canfield     46    President, Chief Financial Officer,
                                     Treasurer and Director
 Michael P. Prachar          37    Chief Operating Officer
 David R. Hess               45    Director
 Lawrence J. Vierra          61    Director
 Robert M. Fidler            68    Director

 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.

 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 the University of Las
 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.

 ROBERT M. FIDLER has served as one of our directors since November 1994.
 Mr. Fidler joined Atlantic Richfield Company (ARCO) in 1960, was a member of
 ARCO's executive management team from 1976 to 1994 and was ARCO's manager of
 New Marketing Programs from 1985 until his retirement in 1994. Mr. Fidler
 has both a bachelor's and master's degree.

 Meetings of the Board of Directors

 Our Board of Directors held four meetings during the fiscal year ended
 October 31, 2006. 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, Robert M.
 Fidler and Lawrence J. Vierra. 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, 2006.

 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, 2006, our executive officers, directors
 and all persons who own more than 10% of our common stock complied with all
 Section 16(a) requirements.

 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.

 The following table summarizes compensation we paid for services rendered to
 our Company during the fiscal years ended October 31, 2006, 2005 and 2004 to
 our chief executive officer, any executive officer with a total salary and
 bonus exceeding $100,000 during fiscal 2006, and all other executive
 officers as of October 31, 2006 (the "Named Executive Officers").

                                Annual Compensation       Long-Term Compensation
                          ------------------------------- ----------------------
        Name and                 Salary  Bonus All Other  Securities Underlying
   Principal Position     Year   ($)(1)   ($)  Comp. (2)       Options (#)
 -----------------------  ----  -------  ----- ---------  ----------------------
 John A. Jenkins          2006  150,000   -0-      -0-             -0-
 Chairman and Chief       2005  150,000   -0-      -0-             -0-
 Executive Officer        2004  150,000   -0-      -0-           100,000

 David R. Hess            2006  135,000   -0-    15,000            -0-
 President                2005   40,000   -0-    10,000            -0-

 Christopher J. Canfield  2006  150,000   -0-      -0-             -0-
 President and Chief
 Financial Officer

 Michael P. Prachar       2006  150,000   -0-      -0-             -0-
 Chief Operating Officer

 -----------------------
 (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.


 The following table sets forth information regarding stock option exercises
 by Named Executive Officers during fiscal 2006, along with option values as
 of October 31, 2006.

<TABLE>
                   Aggregated Option Exercises in Last Fiscal Year
                          and Fiscal Year-End Option Values
 ---------------------------------------------------------------------------------------------
                                                  Number of
                                            Securities Underlying      Value of Unexercised
                     Shares                  Unexercised Options       In-The-Money Options
                   Acquired on   Value      at Fiscal Year-End (#)   at Fiscal Year-End ($)(2)
                    Exercise    Realized  -------------------------  -------------------------
      Name             (#)       ($)(1)   Exercisable Unexercisable  Exercisable Unexercisable
 ----------------  -----------  --------  ----------- -------------  ----------- -------------
 <S>                   <C>        <C>       <C>            <C>          <C>           <C>
 John A. Jenkins.      -0-        -0-       100,000        -0-          -0-           -0-
 Christopher J.
  Canfield.......      -0-        -0-         -0-          -0-          -0-           -0-
 Michael P.
  Prachar........      -0-        -0-         -0-          -0-          -0-           -0-

 -----------------
 (1) Value realized is calculated based on the difference between the
 fair market value of the shares acquired and the exercise prices of the
 exercised options.

 (2) Dollar value of unexercised in-the-money options represents the
 positive spread between the exercise price of the option and the fair
 market value of the underlying shares based on the closing stock price
 of our common stock on October 31, 2006, which was $0.07 per share.
 In-the-money options include only those options where the fair market
 value of the stock is higher than the exercise price of the option on
 the date specified. The actual value, if any, an executive realizes on
 the exercise of options will depend on the fair market value of our
 common stock at the time of exercise.
</TABLE>

 Compensation of Directors

 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.

 Compensation Committee Interlocks and Insider Participation

 None of our executive officers or directors serves as members of the board
 of directors or compensation committee of any other entity, which has one or
 more executive officers serving as a member of our board of directors. The
 Compensation Committee is comprised of two non-employee directors, Robert M.
 Fidler and Lawrence J. Vierra.

          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, 2006 by (i) each
 stockholder known by us to beneficially own five percent or more of the
 Company's outstanding common stock, (ii) each of our current directors,
 (iii) each Named Executive Officer and (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 29,297,183 outstanding shares of the
 Company's common stock. 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 held by that
 person that will be exercisable within 60 days of December 31, 2006, are
 deemed to be outstanding. Such shares, however, are not deemed to be
 outstanding for the purpose of computing the ownership of any other person.

                                                Number of
 Beneficial Owner                                 Shares         Percent
 ------------------------------------           ----------       -------
 Apex Acquisitions, Inc. (1)                    19,175,000        37.47%
 P.O. Box 8658
 Breckenridge, CO  80424

 John A. Jenkins (2)                            41,390,499        50.75%
 David R. Hess (3)                               1,015,000         1.95%
 Lawrence J. Vierra (4)                          1,442,708         2.78%
 Robert M. Fidler (5)                               29,000            *
 Christopher J. Canfield (1)                             -            *
 Michael P. Prachar (1)                                  -            *
 All Executive Officers and Directors
   as a group (6 persons) (6)                   63,052,207        75.74%

 --------------
 * Reflects less than one percent.

 (1) Consists of shares issued by the Company to Apex Communications,
     Inc., which is 70% owned by Mr. Canfield and 30% owned by Mr. Prachar,
     for all shares of Telenational Communications, Inc. common stock.
 (2) Includes (i) 11,000,000 shares held directly, (ii) 100,000 shares of
     common stock which may be acquired through the exercise of options,
     (iii) 2,728,391 shares of common stock which may be acquired through the
     exercise of warrants, and (iv) 27,562,108 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, 2006 of $0.07); all of which are exercisable or convertible within
     60 days of December 31, 2006.
 (3) Includes (i) 15,000 shares of common stock, which may be acquired
     through the exercise of options and (ii) 1,000,000 shares of common
     stock which may be acquired through the exercise of warrants; all of
     which are exercisable within 60 days of December 31, 2006.
 (4) Includes (i) 795,000 shares held directly, (ii) 5,000 shares of
     common stock, which may be acquired through the exercise of options,
     (iii) 130,000 shares of common stock which may be acquired through the
     exercise of warrants and (iv) 512,708 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,
     2006 of $0.07); all of which are exercisable or convertible within 60
     days of December 31, 2006.
 (5) Includes (i) 4,000 shares held directly and (ii) 25,000 shares of
     common stock, which may be acquired through the exercise of options
     which are exercisable within 60 days of December 31, 2006.
 (6) Includes 19,175,000 shares of common stock owned by Apex
     Acquisitions, Inc., which is 100% owned by executive officers of the
     Company.

 Equity Compensation Plans

<TABLE>
 The following table sets forth, as of October 31, 2006, certain information
 related to the Company's compensation plans under which shares of our common
 stock are authorized for issuance.                                                               Number of Securities


                                                                 Remaining Available
                     Number of Securities                        For Future Issuance
                         to be Issued                               Under Equity
                         upon Exercise      Weighted-Average      Compensation Plans
                     Outstanding Options   Exercise Price of  (Excluding Securities)
                     Warrants and Rights  Outstanding Options,      Reflected in
    Plan Category         (column a)      Warrants and Rights      in column (a))
 ------------------- -------------------- -------------------- ---------------------
 <S>                     <C>                      <C>               <C>
 Equity compensation
 plans approved
 by securityholders      1,242,500 (1)            $0.12             2,757,500 (2)

 Equity compensation
 plans not approved
 by securityholders              -                 n/a                      -
                         ---------                -----             ---------
 Total                   1,242,500                $0.12             2,757,500
                         =========                =====             =========
 -------------------
   (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.
</TABLE>

 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.

 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. Subsequent to the
 adoption of the Incentive Plan, no further options will be granted under the
 Option Plan.

          Item 12.  Certain Relationships and Related Transactions,
                          and Director Independence.

 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.

 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 expire 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. The outstanding balance of these
 Notes, including the converted interest amount, was $1,905,078 at October
 31, 2006.

                             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 to Form 8-K dated January 30, 1998 (the "USC 8-K"), 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 to Form 8-K dated January
 15, 1998 (the "USC Rescission 8-K"), 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's Form 8-K dated December 7, 1998 and
 incorporated herein by reference)

 2.4 Asset Purchase Agreement dated November 2, 1999 among ARDIS Telecom &
 Technologies, Inc., Dial Thru International Corporation, a Delaware
 corporation, Dial Thru International Corporation, a California corporation,
 and John Jenkins (filed as Exhibit 2.1 to the Company's Current Report on
 Form 8-K dated November 2, 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's Form 8-K dated October
 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's
 Form 8-K dated October 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's
 Form 8-K dated October 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's
 Form 8-K dated December 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's
 Form 8-K dated December 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's Form 8-K dated October 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 (the "1999 Form 10-K") and incorporated herein by reference)

 3.2 Amended and Restated Bylaws of Dial Thru International Corporation
 (filed as Exhibit 3.2 to the 1999 Form 10-K and incorporated herein by
 reference)

 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's Form 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's Form 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's
 Form 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's Form 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's Form 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's Form 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's Form 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's Form 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's Form 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's Form 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's Form 8-K filed on September 23, 2003, and
 incorporated herein by reference)

 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's Form 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's Form 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's Form 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's Form 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's Form 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's Form
 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's Form 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's Form 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's Form 8-K filed on March 14, 2006, and incorporated herein by
 reference)

 4.26 Security Agreement dated March 8, 2006 between Rapid Link Incorporated
 and Charger Investments, LLC (filed as Exhibit 4.9 to the Company's Form 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 (the "Form S-3"),
 and incorporated herein by reference)

 10.2 Commercial Lease Agreement between Jackson--Shaw/Jetstar Drive Tri-star
 Limited Partnership and the Company (filed as Exhibit 10.20 to the Company's
 Annual Report on Form 10-K dated October 31, 1998, and incorporated herein
 by reference)

 10.3 Employment Agreement, dated November 2, 1999 between ARDIS Telecom &
 Technologies, Inc. and John Jenkins (filed as Exhibit 4.3 to the 2000 Form
 10-K and 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's Form 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's Form 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's Form 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's Form 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's Form 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's Form 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's Form 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's Form 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 of John Jenkins, dated September 14, 2006 (filed as
 Exhibit 10.1 to the Company's Form 8-K filed on June 7, 2005, and
 incorporated herein by reference)

 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's Form 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's Form 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's Form 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 Form 8-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's Form 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's Form 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's Form 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 the 2003 Form 10-K and 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

 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 $108,640 and $97,597 for
 fiscal 2006 and 2005, respectively.

 Audit-Related Fees

 The aggregate audit-related fees billed by KBA Group LLP for fiscal 2006
 were $41,045, which related 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. There were no audit-related
 fees billed by KBA Group LLP during fiscal 2005.

 Tax Fees

 The aggregate fees billed by KBA Group LLP for professional services
 rendered for tax compliance, tax advice and tax planning were $12,000 and
 $17,290 for fiscal 2006 and 2005, 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 2006 and
 2005.

                                  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. JENKINS
                                             ---------------------------
                                                   John A. Jenkins
                                                Chairman of the Board
                                             and Chief Executive Officer

     Date: January 29, 2007



 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,          January 29, 2007
 -----------------------      Chief Executive Officer,
 John A. Jenkins              Secretary and Director
                              (principal executive officer)

 /s/ CHRISTOPHER J. CANFIELD  President, Chief Financial      January 29, 2007
 ---------------------------  Officer, Treasurer and Director
 Christopher J. Canfield      (principal financial and
                              principal accounting officer)

 /s/ LAWRENCE J. VIERRA       Director                        January 29, 2007
 ---------------------------
 Lawrence J. Vierra


 /s/ ROBERT M. FIDLER         Director                        January 29, 2007
 ---------------------------
 Robert M. Fidler


 /s/ DAVID R. HESS            Director                        January 29, 2007
 ---------------------------
 David R. Hess

<PAGE>

                  RAPID LINK, INCORPORATED AND SUBSIDIARIES
                        INDEX TO FINANCIAL STATEMENTS


       Consolidated Financial Statements:                            Page

         Report of Independent Registered Public Accounting Firm      F-2

         Consolidated Balance Sheets at October 31, 2006 and 2005     F-3

         Consolidated Statements of Operations for the fiscal
         years ended October 31, 2006 and 2005                        F-4

         Consolidated Statement of Shareholders' Deficit for
         the fiscal years ended October 31, 2006 and 2005             F-5

         Consolidated Statements of Cash Flows for the fiscal
         years ended October 31, 2006 and 2005                        F-6

         Notes to Consolidated Financial Statements                   F-7

                                     F-1

<PAGE>

           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, 2006 and 2005, 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 audits 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 audit includes examining, on a test basis, evidence
 supporting the amounts and disclosures in the financial statements. An audit
 also includes 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, 2006 and 2005, 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, 2006, the Company's current
 liabilities (which includes significant amounts of past due payables)
 exceeded its current assets by $4.7 million and the Company has a
 shareholders' deficit totaling $2.6 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.


 /s/ KBA GROUP LLP
 Dallas, Texas
 January 29, 2007


                                     F-2

<PAGE>

                  RAPID LINK, INCORPORATED AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                                                              October 31,
                                                        -----------------------
                                                           2006         2005
                                                        ----------   ----------
                                                                     (restated)
                   ASSETS

 Current assets:
   Cash and cash equivalents                           $    30,136  $   172,164
   Trade accounts receivable, net of allowances
     of $99,666 and $427,099, respectively               1,400,568      564,039
   Prepaid expenses                                        204,335       35,140
   Other current assets                                     16,382      129,838
                                                        ----------   ----------
     Total current assets                                1,651,421      901,181
                                                        ----------   ----------

 Property and equipment, net                               379,027      353,726
 Customer lists, net                                     3,222,142      144,285
 Goodwill                                                2,868,461    1,796,917
 Other assets                                              121,286       74,758
                                                        ----------   ----------
     Total Assets                                      $ 8,242,337  $ 3,270,867
                                                        ==========   ==========

    LIABILITIES AND SHAREHOLDERS' DEFICIT

 Current liabilities:
   Bank overdrafts                                     $   101,097  $         -
   Trade accounts payable                                2,203,072    3,451,801
   Accrued interest (including $183,304 and
     $910,849, respectively, to related parties)           499,631    1,007,322
   Other accrued liabilities                               507,581      463,594
   Deferred revenue                                        183,510      401,640
   Deposits and other payables                              66,889      418,109
   Capital lease obligation                                      -      126,196
   Contingent purchase price consideration                 250,000            -
   Convertible notes, current portion, net of debt
     discount of $343,333 and $223,167, respectively       716,667      481,833
   Related party notes, current portion                    622,633            -
   Net current liabilities from discontinued operations  1,162,000    1,162,000
                                                        ----------   ----------
     Total current liabilities                           6,313,080    7,512,495
                                                        ----------   ----------
 Convertible notes, long-term, net of debt discount
   of $610,308 and $1,140,824, respectively              1,622,149      686,633
 Convertible notes payable to related parties,
   long-term, net of debt discount of $44,120
   and $77,208, respectively                             1,860,958      926,182
 Related party notes, long-term                          1,000,000            -
                                                        ----------   ----------
     Total liabilities                                  10,796,187    9,125,310
                                                        ----------   ----------
 Commitments and contingencies

 Shareholders' 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; 51,181,994 issued at October 31, 2006
     and 29,297,183 shares issued at October 31, 2005       51,182       29,298
   Additional paid-in capital                           47,248,729   42,858,862
   Accumulated deficit                                 (49,798,891) (48,687,733)
   Treasury stock, at cost; 12,022 shares at
     October 31, 2006 and 2005                             (54,870)     (54,870)
                                                        ----------   ----------
     Total shareholders' deficit                        (2,553,850)  (5,854,443)
                                                        ----------   ----------
     Total liabilities and shareholders' deficit       $ 8,242,337  $ 3,270,867
                                                        ==========   ==========

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

                                     F-3

<PAGE>

                 RAPID LINK, INCORPORATED AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS


                                                    Year Ended October 31,
                                                 ----------------------------
                                                     2006            2005
                                                 ------------    ------------
 Revenues                                       $  13,351,030   $   9,827,049

 Costs and expenses:
   Costs of revenues                                9,644,235       7,713,349
   Sales and marketing                                856,037         205,973
   General and administrative                       3,596,171       3,227,609
   Depreciation and amortization                      747,562         557,131
   Loss (gain) on disposal of property
     and equipment                                     56,771          (8,800)
   Net reductions of liabilities                   (2,300,929)              -
   Gain on legal settlement                                 -        (225,000)
                                                 ------------    ------------
     Total costs and expenses                      12,599,847      11,470,262
                                                 ------------    ------------

 Operating income (loss)                              751,183      (1,643,213)

 Other income (expense):
   Interest expense                                (1,664,242)       (651,253)
   Related party interest expense                    (216,233)       (219,362)
   Foreign currency exchange gains                     18,134          10,486
                                                 ------------    ------------
     Total other income (expense)                  (1,862,341)       (860,129)

                                                 ------------    ------------
 Loss from continuing operations                   (1,111,158)     (2,503,342)

 Loss from discountinued operations, net
   of income taxes of $0                                    -         (62,000)
                                                 ------------    ------------
 Net loss                                       $  (1,111,158)  $  (2,565,342)
                                                 ============    ============

 Loss per share information:
   Weighted average shares outstanding:
     Basic and diluted                             39,000,486      23,790,407
                                                 ============    ============
   Basic and diluted net loss per share
   information:
     Continuing operations                      $       (0.03)  $       (0.11)
     Discontinued operations                             0.00           (0.00)
                                                 ------------    ------------
                                                $       (0.03)  $       (0.11)
                                                 ============    ============

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

                                     F-4

<PAGE>
<TABLE>

                     RAPID LINK, INCORPORATED AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT


                                           Common      Common    Treasury     Additional       Accumulated
                                           Shares      Stock      Stock     Paid-in Capital      Deficit        Total
                                         ----------   --------   -------    ---------------   ------------    ----------
                                                                                                (restated)
 <S>                                    <C>          <C>        <C>           <C>            <C>             <C>
 Balance, October 31, 2004               23,034,151  $  23,034  $(54,870)     $40,055,719    $(46,122,391)   $(6,098,508)

 Issuance of common stock for
   convertible notes, including interest  1,008,032      1,009         -          116,698               -        117,707
 Issuance of common stock for
   convertible notes to related parties   3,740,000      3,740         -          463,760               -        467,500
 Beneficial conversion feature related
   to issuance of convertible debt                -          -         -        1,362,649               -      1,362,649
 Issuance of warrants in connection
   with amendments to convertible notes           -          -         -          363,648               -        363,648
 Issuance of warrants in connection with
   with amendments to convertible notes
   to related parties                             -          -         -           88,239               -         88,239
 Issuance of common stock in connection
   with amendments to notes payable         240,000        240         -           99,229               -         99,469
 Issuance of common stock for services      325,000        325         -           45,675               -         46,000
 Issuance of common stock for acquisition
   of customer base                         950,000        950         -          103,550               -        104,500
 Issuance of warrants for services                -          -         -          159,695               -        159,695

   Net loss                                       -          -         -                -      (2,565,342)    (2,565,342)
                                         -------------------------------------------------------------------------------
 Balance, October 31, 2005               29,297,183     29,298  $(54,870)     $42,858,862    $(48,687,733)   $(5,854,443)

 Issuance of common stock for
   convertible notes, including interest  2,709,811      2,709         -          193,442               -        196,151
 Beneficial conversion feature related
   to issuance of convertible debt                -          -         -          628,674               -        628,674
 Issuance of warrants in connection
   with issuance of convertible notes             -          -         -          327,176               -        327,176
 Issuance of common stock for acquisition
   of Telenational Communications, Inc.  19,175,000     19,175         -        3,240,575               -      3,259,750

   Net 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)
                                         ===============================================================================

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

                                     F-5
</TABLE>
<PAGE>

                   RAPID LINK, INCORPORATED AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                    Year Ended October 31,
                                                 ----------------------------
                                                     2006            2005
                                                 ------------    ------------
 Cash flows from operating activities of
 continuing operations:
   Net loss from continuing operations          $  (1,111,158)  $  (2,503,342)
   Adjustments to reconcile net loss from
   continuing operations to net cash
   provided by (used in) operating activities:
     Non-cash interest expense                      1,447,400         526,158
     Depreciation and amortization                    747,562         557,131
     Bad debt expense                                 136,391         365,289
     Warrants issued for services                           -         205,695
     Loss (gain) on disposal of property
       and equipment                                   56,771          (8,800)
     Gain on reduction/settlement of liabilities   (2,300,929)              -
     Changes (net of effect of acquisition)
     in operating assets and liabilities:
       Trade accounts receivable                      (39,042)        (88,201)
       Prepaid expenses and other current assets       11,198          32,990
       Other assets                                   (46,120)         (8,678)
       Trade accounts payable                        (269,074)        660,256
       Accrued liabilities                            444,134         (59,895)
       Deferred revenue                                18,870          21,196
       Deposits and other payables                   (131,326)        (10,000)
                                                 ------------    ------------
         Net cash used in operating activities
           of continuing operations                (1,035,323)       (310,201)
                                                 ------------    ------------
 Cash flows from investing activities
 of continuing operations:
   Purchases of property and equipment               (207,860)        (26,884)
   Proceeds from sale of property and equipment             -          10,000
   Acquisition costs                                        -         (15,000)
   Payment of contingent purchase consideration      (250,000)              -
   Cash acquired in acquisition                       158,135               -
                                                 ------------    ------------
         Net cash used in investing activities
           of continuing operations                  (299,725)        (31,884)
                                                 ------------    ------------
 Cash flows from financing activities
 of continuing operations:
   Bank overdrafts                                    101,097               -
   Proceeds from convertible debentures             1,000,000               -
   Payments on convertible debentures                (163,927)        (72,140)
   Payment of financing fees                          (44,150)              -
   Proceeds from related party notes and
     shareholder advances                             850,000               -
   Payment of shareholder advances                   (550,000)              -
                                                 ------------    ------------
         Net cash provided by (used in) financing
           activities of continuing operations      1,193,020         (72,140)
                                                 ------------    ------------
 Net (decrease) in cash and cash equivalents         (142,028)       (414,225)

 Cash and cash equivalents, beginning of period       172,164         586,389
                                                 ------------    ------------
 Cash and cash equivalents, end of period       $      30,136   $     172,164
                                                 ============    ============

 Supplemental disclosure of cash
 flow information:
   Interest paid                                $      15,000   $      79,803

 Supplemental schedule of non cash investing
 and financing activities
   Issuance of common stock for convertible
     notes and accrued interest                 $     196,151   $     117,707
   Issuance of common stock for convertible
     notes payable - related party                          -         467,500
   Fair value of common stock issued in
     connection with Telenational
     Communications acquisition                     3,259,750               -
   Note issued in connection with Telenational
     Communications acquisition                     1,000,000               -
   Contingent liability issued in connection
     with Telenational Communications
     acquisition                                      500,000               -
   Issuance of common stock for acquisition
     of customer base                                       -         104,500
   Accrued interest to related party converted
     to note payable to related party                 901,688               -
   Beneficial conversion feature of convertible
     debentures recorded as debt discount             628,674       1,362,649
   Fair value of warrants issued with debt            327,176               -
   Fair value of warrants issued in connection
     with amendments to debt agreements                     -         451,887
   Note payable exchanged for convertible debenture         -       1,250,000
   Convertible debenture issued for accrued interest        -         349,617
   Fair value of common stock issued in connection
     with amendments to note agreement                      -          99,469
   Convertible debenture issued for financing fees          -          50,383


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

                                     F-6
<PAGE>

                  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, a Delaware corporation, and its subsidiaries (collectively
 referred to as "Rapid Link" or the "Company"), has served as a facilities-
 based, communications company providing various forms of telephony services
 to wholesale and retail customers around the world. Rapid Link provides
 a multitude of international telecommunications services targeted to
 individual customers, as well as small and medium sized enterprises
 ("SMEs".) These services include the transmission of voice and data traffic
 over public and private networks. The Company also sells telecommunications
 services for both the foreign and domestic termination of international
 long distance traffic into the wholesale market. Rapid Link utilizes
 Voice over Internet Protocol ("VoIP") packetized voice technology (and
 other compression techniques) to improve both cost and efficiencies of
 telecommunication transmissions. Rapid Link utilizes the Public Switched
 Telecommunications Network as well as the Internet to transport the
 Company's communications services.

 The Company has recently shifted its retail product focus to value-added
 VoIP communication services to customers, both domestically and
 internationally. However, as of the date of this report, the majority of the
 Company's revenues have not been derived from VoIP communication services.
 Rapid Link focuses on the U.S. military and other key niche markets. The
 Company offers PC-to-PC, PC-to-phone, and phone-to-phone calling using a
 mixture of software and/or hardware depending on the end-users' specific
 needs. Rapid Link offers VoIP service plans to conventional residential and
 business customers in addition to serving the military and other niches. The
 Company's sells both flat-rate and cost-per-minute calling plans in order to
 directly address the customers' requirements. These plans include free
 features such as voice mail, call forwarding, three way calling and others.
 Rapid Link's VoIP Internet Access Devices ("IADs") for residential and
 business customers include single and multi-line adaptors. These adaptors
 enable customers to convert their traditional phone into a VoIP phone and
 access the Rapid Link network. Rapid Link also offers a headset that plugs
 directly into the customer's computer, eliminating the need for any
 additional hardware. All of these VoIP services connect through the
 Internet. The customer can then make and receive calls through their
 new or existing phone number using VoIP.

 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 $49.8 million as of October 31, 2006,
 as well as a working capital deficit of approximately $4.7 million. In
 addition, a significant amount of the Company's trade accounts payable and
 accrued liabilities are past due. 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, 2006, approximately 52% 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.

 As a result of the aforementioned factors and related uncertainties,
 there is substantial 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

 Restatements
 ------------

 Through communication with the Universal Service Administration Company
 ("USAC") and review of statements received during fiscal 2006, the Company
 determined that accrued USAC fees totaling $424,381 should have been
 reversed based on credits that were issued by USAC during periods prior to
 fiscal 2005.  Accordingly, the Company has reduced its estimated liability
 for USAC fees by $424,381 and restated the Balance Sheet at October 31, 2005
 to reflect the reduction of this liability and the related decrease in the
 accumulated deficit.

 Additionally, the Company has restated its consolidated financial statements
 as of and for the fiscal quarters ended January 31, 2006 and July 31, 2006
 to reflect in the proper quarterly period certain amounts that were recorded
 in the consolidated financial statements during the fourth quarter of fiscal
 2006. The restatements of these fiscal 2006 fourth quarter amounts to the
 first or third quarters of fiscal 2006 does not impact overall fiscal 2006
 operating results. (See Note 16 - Restated Quarterly Information for further
 details).

 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 in the Preparation of Consolidated Financial Statements
 ------------------------------------------------------------------------

 The preparation of consolidated financial statements in conformity with
 accounting principles generally accepted in the United States requires
 management to make estimates and assumptions that affect the reported
 amounts of assets and liabilities and disclosure of contingent assets and
 liabilities at the date of the 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
 -------------------------

 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
 --------

 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 follows SFAS No. 141,
 "Business Combinations" ("SFAS 141") and SFAS No. 142, "Goodwill and Other
 Intangible Assets" ("SFAS 142"). SFAS 141 requires that the purchase method
 of accounting be used for business combinations, and also specifies the
 criteria for the recognition of intangible assets separately from goodwill.
 Under SFAS 142, goodwill is no longer amortized but is subject to an
 impairment test at least annually or more frequently if impairment
 indicators arise.

 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.

 In accordance with SFAS 142, an annual impairment test of goodwill was
 performed by an independent valuation firm at each fiscal year-end. 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
 exceeds the carrying value of the Company's net assets and liabilities.
 Accordingly, the Company concluded that no impairment of goodwill existed.

 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 than 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.

 Debt Obligations
 ----------------

 When applicable, the Company calculates the beneficial 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 loss per 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, 2006 and 2005 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, 2006 and 2005.

 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 tax basis of 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.

 Stock-Based Compensation
 ------------------------

 The Company accounts for stock-based employee compensation arrangements in
 accordance with provisions of Accounting Principles Board ("APB") Opinion
 No. 25, "Accounting for Stock Issued to Employees," and complies with the
 disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
 Compensation," as amended by SFAS No. 148 "Accounting for Stock-Based
 Compensation - Transition and Disclosure." 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, no compensation cost has been recognized for its employee stock
 options in the financial statements during the years ended October 31, 2006
 and 2005 as the fair market value on the grant date approximates the
 exercise price. Had the Company determined compensation cost based on the
 fair value at the grant date for its stock options under SFAS No.123, as
 amended by SFAS No. 148, the Company's pro forma net loss from continuing
 operations for the years ended October 31, 2006 and 2005 would have been as
 follows:
                                                      2006           2005
                                                  -----------    -----------
 Net loss from continuing operations,
   as reported                                    $(1,111,158)   $(2,503,342)

 Add: stock-based employee compensation
   expense included in reported net loss
   from continuing operations                               -              -

 Deduct: stock-based employee compensation
   expense determined under the fair value
   method                                             (89,370)       (13,293)
                                                  -----------    -----------
 Pro forma net loss from continuing operations    $(1,200,528)   $(2,516,635)
                                                  ===========    ===========

 Net loss per share from continuing operations
   - basic and dilutive, as reported              $     (0.03)   $     (0.11)
                                                  ===========    ===========

 Net loss per share from continuing operations
   - basic and dilutive, pro forma                $     (0.03)   $     (0.11)
                                                  ===========    ===========

 For purposes of pro forma disclosures, the estimated fair value of the
 options is amortized to expense over the options' vesting periods. Because
 options vest over a period of several years and additional awards are
 generally made each year, the pro forma information presented above is not
 necessarily indicative of the effects on reported or pro forma net earnings
 or losses for future years.

 The fair value of options and warrants 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, with the
 following weighted-average assumptions:

                Year ended October 31, 2006
                ---------------------------
                  Risk-free interest rate              3.7%
                  Expected dividend yield                0%
                  Expected lives                      3 years
                  Expected volatility                  154%

 There were 2,317,500 options issued to employees during the year ended
 October 31, 2006. There were no options issued to employees during the year
 ended October 31, 2005.

 The Company accounts for equity instruments issued to non-employees in
 accordance with the provisions of SFAS No. 123 as amended by SFAS No. 148
 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.

 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 the United States are 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 the consolidated statements of operations.

 Recent Accounting Pronouncements
 --------------------------------

 In December 2004, the Financial Accounting Standards Board ("FASB") issued
 Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004),
 "Share-Based Payment" ("Statement 123R"), which revised SFAS No. 123 and
 supercedes APB Opinion No. 25. This revised accounting standard addresses
 the accounting for share-based payment transactions with employees and
 other third parties, eliminates the ability to account for share-based
 compensation transactions with employees using APB Opinion No. 25 and
 requires that the fair value of such share based payments be recognized in
 the consolidated statement of operations. The revised statement is effective
 as of the first interim or annual financial reporting period beginning after
 December 15, 2005. The Company adopted the statement as of November 1, 2006,
 applying the modified prospective method. The impact of adoption of SFAS No.
 123R cannot be predicted at this time because it will depend on levels of
 share-based payments granted in the future. However, had the Company adopted
 SFAS No. 123R in prior periods, the impact of that standard would have
 approximated the impact of SFAS No. 123 as described in the disclosure of
 pro forma net loss and net loss per share in the stock-based compensation
 policy note discussed previously.

 In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
 Hybrid Financial Instruments," an amendment of SFAS No. 133, "Accounting
 for Derivative Instruments and Hedging Activities," and SFAS No. 140,
 "Accounting for Transfers and Servicing of Financial Assets and
 Extinguishments of Liabilities." With respect to SFAS No. 133, SFAS No. 155
 simplifies accounting for certain hybrid financial instruments by permitting
 fair value remeasurement for any hybrid financial instrument that contains
 an embedded derivative that otherwise would require bifurcation and
 eliminates the interim guidance in Statement 133 Implementation Issue No.
 D1, "Application of Statement 133 to Beneficial Interests in Securitized
 Financial Assets," which provided that beneficial interests in securitized
 financial assets are not subject to the provision of SFAS No. 133. With
 respect to SFAS No. 140, SFAS No. 155 eliminates a restriction on the
 passive derivative instruments that a qualifying special-purpose entity may
 hold. SFAS No. 155 is effective for all financial instruments acquired or
 issued after the beginning of an entity's first fiscal year that begins
 after September 15, 2006. The Company does not expect adoption of SFAS No.
 155 to significantly affect our financial condition or results of
 operations.

 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. The accounting provisions of FIN 48 will be effective for us
 beginning November 1, 2007. The Company is in the process of determining
 the effect, if any, the adoption of FIN 48 will have on our financial
 statements.

 In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements."
 SFAS No. 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 affect
 our financial condition or results of operations.

 NOTE 3 - ACQUISITIONS

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

                Tangible assets acquired           $ 1,362,950
                Customer list                        3,500,000
                Goodwill                             1,071,544
                                                   -----------
                Total assets acquired                5,934,494
                Liabilities 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 acquired may not be amortized for federal
 income tax purposes.

 The following represents unaudited pro forma combined results of operations
 of the Company and Telenational as if the Telenational acquisition had
 occurred as November 1, 2004:

                                                    Year Ended October 31,
                                                  -------------------------
                                                      2006          2005
                                                  -----------   -----------
 Unaudited pro forma information:
   Revenues                                       $18,748,214   $20,539,023
   Net loss                                       $  (833,645)  $(3,100,838)
   Basic and diluted net loss per share           $     (0.02)  $     (0.07)
   Weighted average shares outstanding             49,586,137    42,965,407

 The pro forma information includes historical Telenational revenues and
 expenses after giving effect to certain adjustments, including amortization
 of the acquired customer list and interest expense on the promissory note.
 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.

 Integrated Telecommunications, Inc.

 On October 25, 2005, the Company entered into an Asset Purchase Agreement to
 acquire certain assets, including but not limited to the customer base and
 an item of equipment of Integrated Telecommunications, Inc. ("Integrated"),
 an international long distance carrier providing VoIP services to retail
 customers in the United States and wholesale services to customers
 worldwide. The closing date of the asset acquisition ("Closing Date") was
 October 31, 2005. The aggregate purchase price was $159,500, including
 950,000 of common stock, valued at $104,500, and an additional $55,000 in
 acquisition-related costs. The value of the common stock was determined
 based on the closing market price of the Company's common shares on October
 31, 2005. In accordance with SFAS 141, the Company has allocated the
 purchase price to the assets acquired based on their estimated fair values
 at the date of acquisition. The following table summarizes the estimated
 fair value of the assets acquired:

                Fixed assets                       $  15,215
                Customer base                        144,285
                                                   ---------
                Net assets acquired                $ 159,500
                                                   =========

 The customer base is being amortized over its estimated useful life of two
 years.

 NOTE 4 - PROPERTY AND EQUIPMENT

 Property and equipment consists of the following at October 31, 2006 and
 2005:

                                           2006          2005       Est. Life
                                        ----------    ----------    ---------
 Telephone switch equipment             $  625,151    $3,762,473     3-5 yrs.
 Computer software                       1,092,488     1,096,879     3-5 yrs.
 Computer equipment                        181,496       859,296     3-5 yrs.
 Furniture and fixtures                    154,561       232,917     5-7 yrs.
 Leasehold improvements                     53,941        58,379     5-7 yrs.
                                        ----------    ----------
                                         2,107,637     6,009,944
 Less: accumulated depreciation
   and amortization                     (1,728,610)   (5,656,218)
                                        ----------    ----------
   Property and equipment, net          $  379,027    $  353,726
                                        ==========    ==========

 Amortization of assets held under capital leases is included with
 depreciation expense. Property and equipment depreciation and amortization
 expense totaled $325,419 and $557,131 in fiscal 2006 and 2005, respectively.

 NOTE 5 - CUSTOMER LISTS

 Customer lists acquired from Telenational and Integrated, and corresponding
 accumulated amortization at October 31, 2006 and 2005 were as follows:

                                      2006          2005       Est. Life
                                   ----------    ----------    ---------
 Customer lists                    $3,644,285    $  144,285     2-5 yrs.
 Less: accumulated amortization    (  422,143)            -
                                   ----------    ----------
   Customer lists, net             $3,222,142    $  144,285
                                   ==========    ==========

 Amortization expense totaled $422,143 in fiscal 2006, with no amortization
 expense in fiscal 2005. Based on capitalized customer lists at October 31,
 2006, and assuming no impairment of these customer lists, estimated
 amortization expense amounts in future fiscal years are as follows:

        Year Ending October 31,
        -----------------------
            2007                         $  772,142
            2008                            700,000
            2009                            700,000
            2010                            700,000
            2011                            350,000
                                         ----------
              Total                      $3,222,142
                                         ==========

 NOTE 6 - CONVERTIBLE DEBENTURES AND NOTES PAYABLE, INCLUDING RELATED PARTY
 NOTES

<TABLE>
 The Company has various debt obligations as of October 31, 2006 and 2005,
 including amounts due to independent institutions and related parties.
 Descriptions of these debt obligations are included below. The following
 table summarizes outstanding debt as of October 31, 2006:

                              Information as of October 31, 2006
------------------------------------------------------------------------------------------
                                               Int.
  Brief Description of Debt       Balance      Rate     Due Date    Discount        Net
------------------------------------------------------------------------------------------
 <S>                            <C>            <C>      <C>        <C>         <C>
 Convertible notes, current
 --------------------------
      GC-Conote2                $     60,000     0%     3/30/2007  $   10,000  $    50,000
      Debentures                   1,000,000    10%      3/8/2007     333,333      666,667

 Related party notes, current
 ----------------------------
      Demand Note                    300,000     8%     on demand           -      300,000
      APEX Note 2                    322,633     8%     7/15/2007           -      322,633

 Convertible notes, long-term
 ----------------------------
      GCA-Debenture                  430,000     6%     11/1/2007           -      430,000
      GCA-Debenture                  552,457     6%     11/1/2007       4,247      548,210
      GC-Conote                    1,250,000   10.08%   2/28/2008     606,061      643,939

 Related party conv. notes, long-term
 ------------------------------------
      Notes (Executives)           1,905,078    10%     2/28/2008      44,120    1,860,958

 Related party note, long-term
 -----------------------------
      APEX Note 1                  1,000,000     8%     11/5/2007           -    1,000,000
</TABLE>

 Debt obligations as of October 31, 2006 are due as follows:

                              Within
                              1 year     1-2 years     Total
                            ----------  ----------  ----------
     Debt Obligations       $1,682,633  $5,137,535  $6,820,168

 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 corresponding
 equipment. The Company issued to the holder of the GCA-Debentures warrants
 to acquire an aggregate of 50,000 shares of common stock at an exercise
 price of $0.41 per share, which expire on January 28, 2007. In connection
 with an agreement to extend the maturity date of the GCA-Debenture, the
 Company issued to GCA warrants to purchase an additional 100,000 shares of
 common stock also at an exercise price of $0.21 per share, which expire on
 February 8, 2008.

 On June 1, 2005, the Company and GCA agreed to extend the maturity date of
 the two GCA-Debentures. The maturity dates were extended to November 26,
 2005. In connection with the extension, the Company issued GCA warrants to
 acquire 110,000 shares of common stock at an exercise price of $0.11 and
 300,000 warrants to acquire the Company's common stock at an exercise price
 of $0.38. These warrants expire in June 2010. The Company recorded $163,151
 as debt discount, representing the 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 extension period of the
 convertible debenture. In addition, the Company issued to GCA 140,000 shares
 of common stock valued at $0.45 per share, the Company's closing stock price
 on June 1, 2005, the date of issuance. In connection with the stock
 issuance, the Company recorded debt discount which is being amortized
 over the extension period of the convertible debenture.

 On September 14, 2006, the Company and GCA amended the GCA-Debentures to
 extend the maturity date of the GCA-Debentures 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. During fiscal 2006 and 2005, GCA converted GCA-Debenture
 debt and accrued interest of approximately $31,000 and $43,000,
 respectively, into approximately 407,000 and 352,000 shares, respectively,
 of common stock.

 GC-Note, GC-Conote and GC-Conote2

 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 29, 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 and 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.

 Debentures

 On March 8, 2006, the Company completed a private placement of two one-year
 10% convertible debentures ("Debentures"), for gross proceeds of $1,000,000
 maturing March 8, 2007. The Debentures are secured by assets of the Company
 not already secured by the GCA or Global notes. In connection with the
 Debentures, the Company agreed to issue the investors a total of 2,000,000
 immediately exercisable five-year warrants to purchase the Company's common
 stock at an exercise price of $0.14 for 1,000,000 warrants, and $0.25 for an
 additional 1,000,000 warrants. The Company paid $44,150 in financing fees in
 connection with the debentures which were recorded as a discount on the
 debentures. Additionally, in connection with these Debentures, the Company
 recorded debt discount of $955,850 related to the fair value of warrants
 issued and the related beneficial conversion feature that it is amortizing
 over the life of the Debentures. The fair value of the warrants 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 1.65; and an expected life of the warrants of three years.

 Related Party Notes

 The Company executed 10% convertible notes (the "Notes") with three
 executives (the "Executives") of the Company. Two of the Executives
 subsequently resigned from the Company and one remains on the Company's
 Board of Directors. The Note held by the director was paid in full during
 fiscal 2005. The Notes are secured, on a subordinated basis to the holders
 of the Debentures, by assets of the Company not already secured by the GCA
 or Global notes. Each Note is convertible into the Company's common stock at
 the option of the holder at any time. The Company 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 $0.78 per share, which expired on October 24,
 2006, warrants to acquire an additional 102,432 shares of common stock at an
 exercise price of $0.75, which expire on January 28, 2007, and warrants to
 acquire an additional 300,000 shares of common stock at an exercise price of
 $0.75, which expire on July 8, 2007.

 On July 21, 2005, the Company and the Executives agreed to extend the
 maturity date of the Notes to February 28, 2008. In connection with the
 extension, the Company issued to the three executives warrants to acquire
 640,000 shares of common stock at an exercise price of $0.16. The warrants
 expire in July 2010. The Company recorded $88,238 as debt discount, the fair
 value of the warrants on July 21, 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 1.65; and an expected life of
 the warrants of three years. The debt discount is being amortized over the
 extension period of the Notes. Debt discount amortization of $11,000 was
 recorded on the Notes in fiscal 2005. During fiscal 2005, holders of the
 Notes elected to convert $467,500 of the Notes into 3,740,000 shares of
 common stock. The Company recorded debt discount amortization, which is
 recorded as related party interest expense, of $33,000 and interest expense
 of $100,000 on these Notes during fiscal 2006.

 During fiscal 2006, the Company's Chief Executive Officer, John Jenkins,
 advanced funds to the Company in the aggregate amount of $550,000 which was
 repaid in full using proceeds from the Debentures financing. On September
 18, 2006, Mr. Jenkins advanced an additional $300,000 to the Company, which
 is classified as a current demand note (the "Demand Note"). On September 14,
 2006, Mr. Jenkins agreed to covert all unpaid interest on his Note in the
 amount of $901,688 to the principal balance of his Note under the same terms
 as the existing Note. The Company recorded interest expense during fiscal
 2006 of $25,000 on Mr. Jenkins' additional fiscal 2006 debt, which includes
 interest on the amount converted to principal and the Demand Note.

 On May 5, 2006 the Company acquired the stock of Telenational. As a
 component of the total purchase price, an 18-month note payable in the
 amount of $1,000,000 bearing 8% interest annually ("APEX Note 1") was
 issued to the seller, Apex Acquisitions, Inc. ("APEX"). The Company's Chief
 Financial Officer, Chris Canfield, is the majority shareholder of APEX. This
 Note is secured by 100% of the Telenational common stock. The Company
 recorded $40,000 in interest expense on APEX Note 1 during fiscal 2006.

 On July 15, 2006, in conjunction with, but unrelated to the total purchase
 consideration paid for Telenational, the Company issued a note payable to
 APEX in the amount of $436,560 ("APEX Note 2"). This note bears interest
 at 8% annually. This Note is repayable in 12 equal monthly payments of
 principal and interest, until fully satisfied in July 2007. The Company
 recorded interest expense of $18,000 on APEX Note 2 during fiscal 2006.
 Although the Company was current in its payments at October 31, 2006, the
 Company has suspended its monthly payments to APEX since that date.

 NOTE 7 - CAPITAL STOCK

 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 and 2005, GCA converted GCA-Debenture debt and accrued
 interest of approximately $31,000 and $43,000, respectively, into
 approximately 407,000 and 352,000 shares, respectively, of common stock.

 During fiscal 2006, Global converted GC-Conote2 debt of $165,000 into
 approximately 2,303,000 shares of common stock, and during fiscal 2005,
 converted GC-Conote debt of $75,000 into approximately 656,000 shares of
 common stock.

 During fiscal 2005, in connection with the extension of the maturity date of
 the GCA-Debenture, the Company issued GCA 100,000 shares of common stock.

 During fiscal 2005, in connection with the extension of the maturity date of
 the GCA-Note, the Company issued GCA 40,000 shares of common stock.

 During fiscal 2005, in connection with the extension of the maturity date of
 the GC-Note, the Company issued Global 100,000 shares of common stock.

 During fiscal 2005, the three holders of the Company's related party Notes
 converted $467,500 of debt into 3,740,000 shares of the Company's common
 stock.

 During fiscal 2005, the Company issued 200,000 shares of common stock for
 investor relations' services, which were recorded at the stock's fair market
 value at the date of issuance.

 During fiscal 2005, the Company issued 125,000 shares of common stock for
 legal services, which were recorded at the stock's fair market value at the
 date of issuance.

 During fiscal 2005, the Company issued 950,000 shares of common stock in
 connection with the purchase of certain assets, including but not limited to
 the customer base, certain specified contracts and an item of equipment, of
 Integrated Communications, Inc., valued at $104,500 at the date of issuance.

 The following table describes stock reserved for future issuances at October
 31, 2006:

                                            Number of
                                              Shares
                                            ----------
     Options                                 4,000,000
     Warrants                                6,877,433
     Convertible debt (1)                   62,008,477
                                            ----------
                                            72,885,910
                                            ==========

     (1) Assumes conversion on October 31, 2006 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 2006, the Company provided wholesale services to a customer
 who accounted for 12% of our revenues and another customer who accounted for
 10% of our 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. During fiscal 2005, the Company provided wholesale
 services to a customer who accounted for 13% of revenues and another
 customer who accounted for 11% of revenues. During the same period, one of
 the Company's suppliers accounted for approximately 20% of the Company's
 total costs of revenues and another supplier accounted for 11% of total
 costs of revenues. At October 31, 2005, one customer accounted for 35% 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:

                                  All other
                    South          foreign
                   Africa         revenues       Domestic          Total
                 ----------      ----------     -----------     -----------
 Fiscal 2006    $ 1,805,807     $ 2,552,222     $ 8,993,001     $13,351,030
 Fiscal 2005    $ 2,201,290     $ 1,215,614     $ 6,410,145     $ 9,827,049

 During fiscal 2006, 14% of the Company's revenue was generated from
 customers in South Africa. During fiscal 2005, 22% 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, 2006 and 2005.

 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 2006 and 2005 were $19,704
 and $11,245, respectively.

 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, are no longer due and
 payable. Accordingly, this amount has been recorded as "Net reductions of
 liabilities" during fiscal 2006. (See Note 16 - Restated Quarterly
 Information for further discussion).

 NOTE 11 - GAIN ON LEGAL SETTLEMENT

 On July 20, 2004, the Company filed a suit against Q Comm International,
 Inc. ("Q Comm") claiming damages resulting from the breach of a purchase
 agreement on the part of Q Comm relating to the sale of the Company's
 internally developed equipment for the prepaid telecommunications industry.
 Following execution of the agreement, the Company tendered certain
 proprietary software source code to Q Comm. However, Q Comm failed to pay
 the Company the initial amount due under the agreement and made copies of
 the source code without the Company's permission. During fiscal 2005, the
 Company entered into a Settlement and Release Agreement with Q Comm. The
 Agreement releases Q Comm from any and all claims in connection with the
 Company's lawsuit against Q Comm. In connection with the Settlement and
 Release Agreement, the Company agreed to a cash settlement of $225,000,
 which was received in fiscal 2005 and recorded this amount as a "Gain on
 legal settlement."

 NOTE 12 - DISCONTINUED OPERATIONS

 The Company has accrued $1,162,000 related to an assessment by the State of
 Texas for sales taxes (including penalties and interest). This amount is
 included in the October 31, 2006 and 2005 consolidated balance sheets as
 a liability from discontinued operations. (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

 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. Subsequent to the
 adoption of the Incentive Plan, no further options will be granted under the
 Option Plan.

 The Company's stock option activity for the two years ended October 31, 2006
 was as follows:

                                                                  Weighted
                                        Number       Option        Average
                                          of          Price       Exercise
                                        Shares      Per Share      Price
                                      ---------   ------------    --------
 Options outstanding at
   October 31, 2004                   1,674,000   $0.11 - 1.50      $0.35

 Options granted                              -              -          -
 Options exercised                            -              -          -
 Options cancelled                     (101,000)   0.12 - 0.70       0.22
                                      ---------
 Options outstanding at
   October 31, 2005                   1,573,000    0.11 - 1.50       0.36

 Options granted                      2,317,500    0.10 - 0.13       0.13
 Options exercised                            -              -          -
 Options cancelled                   (2,648,000)   0.11 - 1.50       0.27
                                      ---------
 Options outstanding at
   October 31, 2006                   1,242,500    0.10 - 0.14       0.12
                                      =========

 The weighted average grant date fair value of options granted during fiscal
 2006 was $0.09 per share. All options granted during fiscal 2006 were to
 employees. There were no options granted during fiscal 2005.

 The following table summarizes information about employee compensatory stock
 options outstanding at October 31, 2006:

                        Options Outstanding             Options Exercisable
                -----------------------------------   ----------------------
                               Weighted    Weighted                 Weighted
   Range of                     Average     Average                  Average
   Exercise         Number     Remaining   Exercise      Number     Exercise
    Prices       Outstanding      Life      Price     Exercisable    Price
 -------------   -----------   ---------   --------   -----------   --------
 $0.10 - $0.12      405,000       5.64       $0.11      105,000       $0.12
 $0.13 - $0.14      837,500       5.02        0.13      185,000        0.14
                  ---------                             -------
                  1,242,500       5.23       $0.12      290,000       $0.13
                  =========                             =======

 Warrants

 Warrant Issuances to Employees for Financing Transactions

 Employee warrant activity for the two years ended October 31, 2006 was as
 follows:

                                                                   Weighted
                                        Number       Warrant       Average
                                          of          Price        Exercise
                                        Shares      Per Share       Price
                                      ---------    -----------     --------
 Warrants outstanding at
   October 31, 2004                   2,648,391   $0.75 - 1.44     $   0.83

 Warrants granted                       640,000           0.16         0.16
 Warrants exercised                           -              -            -
 Warrants cancelled                    (300,000)          1.44         1.44
                                      ---------
 Warrants outstanding at
   October 31, 2005                   2,988,391   $0.16 - 1.44     $   0.62

 Warrants granted                     1,000,000           0.13         0.13
 Warrants exercised                           -              -            -
 Warrants cancelled                  (1,945,958)          0.78         0.78
                                      ---------
 Warrants outstanding at
   October 31, 2006                   2,042,433   $0.13 - 0.78     $   0.62
                                      =========

 Warrants issued to employees that were exercisable at October 31, 2006 and
 2005 totaled 2,042,433 and 2,988,391, respectively.

 Warrant Issuances to Non-Employees

 Non-employee warrant activity for the two years ended October 31, 2006 was
 as follows:

                                                                   Weighted
                                        Number       Warrant       Average
                                          of          Price        Exercise
                                        Shares      Per Share       Price
                                      ---------    -----------     --------
 Warrants outstanding at
   October 31, 2004                   1,437,500   $0.01 - 3.50     $   0.97

 Warrants granted                     2,035,000    0.11 - 0.78         0.55
 Warrants exercised                           -              -            -
 Warrants cancelled                    (212,500)          0.01         0.01
                                      ---------
 Warrants outstanding at
   October 31, 2005                   3,260,000   $0.11 - 3.50     $   0.77

 Warrants granted                     2,000,000    0.14 - 0.25         0.20
 Warrants exercised                           -              -            -
 Warrants cancelled                    (425,000)   0.89 - 3.50         2.73
                                      ---------
 Warrants outstanding at
   October 31, 2006                   4,835,000   $0.11 - 2.00     $   0.36
                                      =========

 The majority of the warrants issued to non-employees during fiscal 2006 and
 2005 were issued in connection with debt financing. In addition, the Company
 issued 1,000,000 warrants to a provider of legal and consulting services
 during fiscal 2005. Non-employee warrants that were exercisable at October
 31, 2006 and 2005 totaled 4,835,000 and 3,260,000, respectively.

 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, 2006 and 2005 are as follows:

                                                2006             2005
                                            -----------      -----------
    Deferred tax assets
      Net operating loss carryovers         $15,856,634      $15,769,757
      Accounts receivable                        20,286          145,214
      Advertising credits                       977,185          977,185
      Property and equipment                    194,903          227,065
      Warrants                                   54,296           54,296
      Accrued liabilities                        27,185           27,525
                                            -----------      -----------
        Total gross deferred tax assets      17,130,489       17,201,042

    Deferred tax liabilities
      Goodwill                                 (223,878)        (164,753)
                                            -----------      -----------
        Total gross deferred tax liabilities   (223,878)        (164,753)

    Net deferred tax assets                  16,906,611       17,036,289

    Valuation allowance                     (16,906,611)     (17,036,289)
                                            -----------      -----------
    Net deferred assets                     $         -      $         -
                                            ===========      ===========


                                                2006             2005
                                            -----------      -----------
    Income tax benefit at statutory rate    $  (377,794)     $  (872,216)
    Permanent differences                       495,457          180,396
    Change in valuation allowance              (129,677)         710,696
    Other                                        12,014          (18,876)
                                            -----------      -----------
                                            $         -      $         -
                                            ===========      ===========

 At October 31, 2006, the Company has U.S. net operating loss carryforwards
 for federal income tax purposes of approximately $46.6 million, which expire
 in 2007 through 2026. 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.

 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 Apex Communications, Inc., an entity owned by
 executive officers of the Company. Rent expense for operating leases was
 $343,000 and $249,000 during fiscal 2006 and 2005, respectively. Rent
 expense to APEX during fiscal 2006 totaled $45,000. There were no related
 party leases during fiscal 2005. The Company has no capital lease
 obligations as of October 31, 2006.

 Future minimum lease payments under noncancelable operating leases as of
 October 31, 2006 are as follows:

        Year Ending October 31,
        -----------------------
                  2007                          $ 196,940
                  2008                            134,860
                  2009                            134,860
                  2010                            134,860
                  2011                             89,907
                                                ---------
              Total minimum lease payments      $ 691,427
                                                =========
 Future minimum lease payments (included in the above table) relating to the
 APEX operating lease total $629,347.

 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. The injunctive relief that Cygnus sought in this
 suit has been denied, but Cygnus continues to seek a license fee for the use
 of the technology. The Company believes that no license fee is required as
 the technology described in the patent is different from the technology used
 by the Company. In August 2002, Cygnus filed a motion for a preliminary
 injunction to prevent the Company from providing re-origination services.
 The Company filed a cross motion for summary judgment of non-infringement.
 Both motions were denied. On August 22, 2003, the Company re-filed the
 motion for summary judgment for non-infringement. In response to this
 filing, during August 2004, the court narrowly defined the issue to relate
 to a certain re-origination technology, which the Company believes it does
 not now, nor has it ever utilized to provide any of its telecommunications
 services. On August 17, 2005, the United States District Court for the
 Northern District of California issued a stay in the lawsuit for the purpose
 of reexamining the Cygnus patent. This stay is the result of a reexamination
 request received by the United States Patent and Trademark Office ("USPTO"),
 whereby the USPTO has issued a decision that the patents are invalid.
 Subsequently, we have filed a motion for Summary Judgment to relieve us of
 any liability and to have the case dismissed.  We are currently waiting for
 a ruling from the court, which we have yet to receive. The Company intends
 to continue defending this case vigorously, and though its ultimate legal
 and financial liability with respect to such legal proceeding is expected
 to be minimal, the potential loss or range of loss cannot currently be
 estimated with any certainty.

 State of Texas.  During fiscal 2004, the Company determined, based on final
 written communications with the State of Texas (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 of Texas filed a lawsuit
 in the 53rd Judicial District Court of Travis County, Austin, Texas against
 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 of Texas determined 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. These operations were classified as discontinued after the
 Company sold its retail automation software business in December 1998 and
 changed its business model.

 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. 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 of Texas is 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 in Dallas, 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 - RESTATED QUARTERLY INFORMATION

 The Company has restated its consolidated financial statements as of and for
 the fiscal quarters ended January 31, 2006 and July 31, 2006, as shown in
 the table below, to properly reflect certain amounts that should have been
 recorded in those quarters of fiscal 2006. (See Note 10 - Net Reductions of
 Liabilities for further discussion).

                         Three Months Ended             Three Months Ended
                          January 31, 2006                 July 31, 2006
                    ----------------------------   ----------------------------
                    As Previously                  As Previously
                       Reported       Restated        Reported       Restated
                    -------------   ------------   -------------   ------------
 Net reductions
   of liabilities..  $         -    $  (809,781)    $  (308,879)   $(1,491,148)

 Total costs and
   expenses........  $ 2,432,133    $ 1,622,352     $ 4,784,659    $ 3,602,390

 Net income (loss).  $  (705,176)   $   104,605     $  (510,494)   $   671,775

 Basic and diluted
   earnings (loss)
   per share.......  $     (0.02)   $      0.00     $     (0.01)   $      0.01

 As a result of these restatements, when compared to amounts previously
 reported, current liabilities decreased by $810,000 as of January 31, 2006
 and by $1,992,000 as of July 31, 2006. The restatements of these fiscal 2006
 fourth quarter amounts to the first or third quarters of fiscal 2006 does
 not impact overall fiscal 2006 operating results.

<PAGE>
                                EXHIBIT INDEX

  NO.  DESCRIPTION OF EXHIBIT
 ----  ----------------------

 21.1  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)

 32.1  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)