UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549




FORM
10-Q/A




(Amendment
No. 1)




(Mark
One)




xQUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED March 31, 2009




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




Commission
File No. 0-27704




Geos
Communications, Inc.




(Exact
name of registrant as specified in it charter)




Washington
                      
                      91-1426372(State
      or other jurisdiction of incorporation or organization)
                      
                      (IRS
      Employer Identification
No.)





430 N
Carroll Ave


Suite
120


Southlake,
TX 76092


(Address
of principal executive offices)




(817)-240-0200




(Registrant’s
telephone number, including area code)




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




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      Accelerated Filer   ̈
              Non-Accelerated
      Filer   ̈Accelerated
      Filer   ̈
              Smaller
      Reporting Company x




The
registrant is a shell company (as defined by Rule 12b-2 of the Exchange
Act). Yes  ̈No x




APPLICABLE
ONLY TO CORPORATE ISSUERS:




The
registrant is a shell company (as defined by Rule 12b-2 of the Exchange
Act). Yes  ̈No x




Shares
outstanding of the issuer's common stock, as of May 13, 2009:  28,854,093
shares





GEOS
COMMUNICATIONS, INC.




TABLE OF
CONTENTS




TO
QUARTERLY REPORT ON FORM 10-Q/A




FOR
PERIOD ENDED March 31, 2009




PART
      I  FINANCIAL INFORMATION
                      1Item
      1.
                      FINANCIAL
      STATEMENTS
                      1Item
      2.
                      MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.
                      18Item
      3.
                      QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                      23Item
      4.
                      CONTROLS
      AND PROCEDURES.
                      23PART
      II OTHER INFORMATION
                      25Item
      1.
                      LEGAL
      PROCEEDINGS
                      25Item
      1A. RISK FACTORS
                      25Item
      2.
                      UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                      33Item
      3.
                      DEFAULTS
      UPON SENIOR SECURITIES
                      34Item
      4.
                      SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                      34Item
      5.
                      OTHER
      INFORMATION
                      35Item
      6.
                      EXHIBITS
                      36




This
Amendment No. 1 on Form 10-Q/A is being filed to amend our quarterly report on
Form 10-Q for the fiscal quarter ended March 31, 2009, as filed with the
Securities and Exchange Commission (the “Commission”) on May 15, 2009 to amend
our financial statements for the quarterly period ended March 31, 2009, and
amend Item 4, "Controls and Procedures." In connection with the Company’s audit
and year end accounting procedures, management and the Company’s Board of
Directors determined that there was an error in the calculation of the stock
option and warrant expenses for the three ended March 31, 2009. The Company
inadvertently did not record all the expenses related to the issuance of
warrants and stock options.




In
addition, we are filing updated certifications pursuant to the Sarbanes-Oxley
Act of 2002 as Exhibits 31.1 and 32.1.




On
September 8, 2009, the Company changed its name from i2 Telecom International,
Inc. to Geos Communications, Inc., and its wholly-owned subsidiary, i2 Telecom
International, Inc., a Delaware corporation, changed its name to Geos
Communications, Inc. We have not reflected these name changes in the body of
this Report.


i


PART
I  FINANCIAL INFORMATION




Item
1.  FINANCIAL STATEMENTS




i2
Telecom International, Inc.




CONDENSED  CONSOLIDATED
BALANCE SHEET


(Unaudited)


ASSETS


March 31, 2009
                                          
                                          
                                          December 31, 2008RestatedCurrent
      AssetsCash
      (Overdraft)
                                          
                                          $
                                          (31,054
                                          )
                                          
                                          $
                                          2,645Accounts
      Receivable
                                          
                                          
                                          2,350
                                          
                                          
                                          
                                          2,350Inventories
                                          
                                          
                                          188,343
                                          
                                          
                                          
                                          187,607Prepaid
      Expenses and Other Current Assets
                                          
                                          
                                          164,082
                                          
                                          
                                          
                                          210,709Total
      Current Assets
                                          
                                          
                                          323,721
                                          
                                          
                                          
                                          403,310Property
      and Equipment, Net
                                          
                                          
                                          1,158,111
                                          
                                          
                                          
                                          1,253,074Other
      AssetsIntangible
      Assets
                                          
                                          
                                          2,702,324
                                          
                                          
                                          
                                          2,788,947Deposits
                                          
                                          
                                          38,840
                                          
                                          
                                          
                                          38,840Total
      Other Assets
                                          
                                          
                                          2,741,164
                                          
                                          
                                          
                                          2,827,787Total
      Assets
                                          
                                          $
                                          4,222,996
                                          
                                          
                                          $
                                          4,484,172


1


i2
Telecom International, Inc.




CONDENSED
CONSOLIDATED BALANCE SHEET


(Unaudited)


LIABILITIES
AND SHAREHOLDERS’ EQUITY (DEFICIT)


March 31,
                                              2009
                                            
                                            
                                            December 31,
                                              2008Current
      LiabilitiesAccounts
      Payable and Accrued Expenses
                                            
                                            $
                                            2,624,812
                                            
                                            
                                            $
                                            2,399,660Deferred
      Revenue
                                            
                                            
                                            25,985
                                            
                                            
                                            
                                            25,985Convertible
      Bonds
                                            
                                            
                                            100,000
                                            
                                            
                                            
                                            100,000Notes
      Payable-Current
                                            
                                            
                                            4,190,262
                                            
                                            
                                            
                                            3,356,014Total
      Current Liabilities
                                            
                                            
                                            6,941,059
                                            
                                            
                                            
                                            5,881,659Shareholders’
      Equity (Deficit)Preferred
      Stock, No Par Value 7% Cumulative, 5,000,000 Shares Authorized, 0 and 0
      Shares Issued and Outstanding, respectively
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0Common
      Stock, No Par Value, 500,000,000 Shares Authorized, 2,750,489 Shares and
      2,727,856 Shares Issued and Outstanding, respectively
                                            
                                            
                                            35,905,738
                                            
                                            
                                            
                                            35,756,541Additional
      Paid-In Capital
                                            
                                            
                                            3,998,503
                                            
                                            
                                            
                                            3,100,500Accumulated
      Deficit
                                            
                                            
                                            (42,622,304
                                            )
                                            
                                            
                                            (40,254,528
                                            )Total
      Shareholders’ Equity (Deficit)
                                            
                                            
                                            (2,718,063
                                            )
                                            
                                            
                                            (1,397,487
                                            )Total
      Liabilities and Shareholders’ Equity (Deficit)
                                            
                                            $
                                            4,222,996
                                            
                                            
                                            $
                                            4,484,172


2





CONSOLIDATED
STATEMENT OF OPERATIONS


(Unaudited)





For the Three
                        Months Ended
                        March 31, 2009
                      
                      
                      For the Three
                        Months Ended
                        March 31, 2008RestatedRevenue
                      
                      $
                      132,142
                      
                      
                      $
                      157,456Cost
      of Revenue
                      
                      
                      126,051
                      
                      
                      
                      182,237Gross
      Profit (Loss)
                      
                      
                      6,091
                      
                      
                      
                      (24,781
                      )General
      and Administrative Expenses
                      
                      
                      2,261,454
                      
                      
                      
                      1,051,960Loss
      From Operations
                      
                      
                      (2,255,363
                      )
                      
                      
                      (1,076,741
                      )Other
      Income (Expense)Interest
      Expense
                      
                      
                      (114,294
                      )
                      
                      
                      (120,653
                      )Total
      Other Income (Expense)
                      
                      
                      (114,294
                      )
                      
                      
                      (120,653
                      )Net
      Income (Loss)
                      
                      $
                      (2,369,657
                      )
                      
                      $
                      (1,197,394
                      )Dividends
      on Preferred Stock
                      
                      
                      0
                      
                      
                      
                      6,000Net
      Loss Available to Common Shareholders
                      
                      $
                      (2,369,657
                      )
                      
                      $
                      (1,203,394
                      )Weighted
      Average Common Shares:Basic
                      
                      
                      27,357,354
                      
                      
                      
                      18,463,384Basic
      Earnings Per Common Share:Loss
      Before Cumulative Effect ofAccounting
      Change
                      
                      $
                      (.09
                      )
                      
                      $
                      (.07
                      )Cumulative
      Effect of Accounting Change
                      
                      
                      (.00
                      )
                      
                      
                      (.00
                      )Net
      Loss
                      
                      $
                      (.09
                      )
                      
                      $
                      (.07
                      )


3


i2
Telecom International, Inc.




CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




For the Three
                            Months Ended
                            March 31, 2009
                          
                          
                          For the Three
                            Months Ended
                            March 31, 2008RestatedNet
      Loss From Operations
                          
                          $
                          (2,369,657
                          )
                          
                          $
                          (1,197,394
                          )Adjustments
      to Reconcile Net Income to cashDepreciation
      and amortization
                          
                          
                          188,208
                          
                          
                          
                          159,316Amortization
      of Loan Fees
                          
                          
                          95,694
                          
                          
                          
                          104,385Gain
      on Forbearance of Debt
                          
                          
                          0
                          
                          
                          
                          0Warrants
      issued for services
                          
                          
                          726,553Stock
      compensation
                          
                          
                          74,720
                          
                          
                          
                          29,035Accounts
      receivable
                          
                          
                          0
                          
                          
                          
                          0Inventories
                          
                          
                          (736
                          )
                          
                          
                          (735
                          )Prepaid
      Expenses
                          
                          
                          (49,067
                          )
                          
                          
                          (44,909
                          )Other
      Assets
                          
                          
                          0
                          
                          
                          
                          0Increase
      (Decrease) In:Accounts
      Payable and Accrued Expenses
                          
                          
                          227,033
                          
                          
                          
                          344,157Deferred
      Revenue
                          
                          
                          0
                          
                          
                          
                          4,603Net
      Cash Used In Operating Activities
                          
                          
                          (1,107,252
                          )
                          
                          
                          (601,542
                          )Cash
      Flows From Investing ActivitiesEquipment
      Purchases
                          
                          
                          (6,622
                          )
                          
                          
                          (98,357
                          )Payments
      for Intangible Assets
                          
                          
                          0
                          
                          
                          
                          0Net
      Cash Used In Investing Activities
                          
                          
                          (6,622
                          )
                          
                          
                          (98,357
                          )Cash
      Flows From Financing ActivitiesPayment
      of Convertible Bonds
                          
                          
                          0
                          
                          
                          
                          0Proceeds
      From Notes Payable
                          
                          
                          835,000
                          
                          
                          
                          1,550,000Payment
      of Notes Payable
                          
                          
                          (752
                          )
                          
                          
                          (1,016,343
                          )Issuance
      of Common Stock
                          
                          
                          245,927
                          
                          
                          
                          0Issuance
      of Preferred Stock
                          
                          
                          0
                          
                          
                          
                          0Proceeds
      from redemption of options
                          
                          
                          0
                          
                          
                          
                          2,250Net
      Cash Provided By Financing Activities
                          
                          
                          1,080,175
                          
                          
                          
                          535,907Increase
      (Decrease) in Cash
                          
                          
                          (33,699
                          )
                          
                          
                          (163,992
                          )Balance,
      Beginning of Period
                          
                          
                          2,645
                          
                          
                          
                          194,279Balance,
      End of Period
                          
                          $
                          (31,054
                          )
                          
                          $
                          30,287


4


i2
Telecom International, Inc.




NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
1.            NATURE
OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES




Restatement




In
connection with the Company’s audit and year end accounting procedures,
management and the Company’s Board of Directors determined that there was an
error in the calculation of the stock option and warrant expenses of $663,898
for the three months ended March 31, 2009. The Company inadvertently did
not record all the expenses related to the issuance of warrants and stock
options. The statement of cash flows was also corrected for certain footing
errors. We effected a 1:10 reverse split of our Common Stock on May 14, 2009,
which has been retroactively reflected in this filing.




The
following table represents the amounts originally reported, and the restated
amounts as amended  and reported herein.




March 31, 2009
                    
                    
                    March 31, 2009(AS ORIGINALLY
                      FILED)
                    
                    
                    (AS AMENDED)Total
      Assets
                    
                    $
                    4,222,996
                    
                    
                    $
                    4,222,996Total
      Current Liabilities
                    
                    $
                    6,941,059
                    
                    
                    $
                    6,941,059Additional
      Paid In Capital
                    
                    $
                    3,334,605
                    
                    
                    $
                    3,998,503Accumulated
      Deficit
                    
                    $
                    (41,958,406
                    )
                    
                    $
                    (42,662,304
                    )Total
      Shareholders’ Equity (Deficit)
                    
                    $
                    (2,718,063
                    )
                    
                    $
                    (2,718,063
                    )Total
      Liabilities and Shareholders’ Equity (Deficit)
                    
                    $
                    4,222,996
                    
                    
                    $
                    4,222,996







AS ORIGINALLY FILED
                                      
                                      
                                      AS AMENDEDCONSOLIDATED STATEMENT OF OPERATIONS
                                        (Unaudited)
                                      
                                      For the Three Months
                                        Ended March 31, 2009
                                      
                                      
                                      For the Three
                                        Months Ended
                                        March 31, 2009Revenue
                                      
                                      $
                                      132,142
                                      
                                      
                                      $
                                      132,142Cost
      of Revenue
                                      
                                      
                                      126,051
                                      
                                      
                                      
                                      126,051Gross
      Profit (Loss)
                                      
                                      
                                      6,091
                                      
                                      
                                      
                                      6,091General
      and Administrative Expenses
                                      
                                      
                                      1,597,556
                                      
                                      
                                      
                                      2,261,454Loss
      From Operations
                                      
                                      
                                      (1,591,465
                                      )
                                      
                                      
                                      (2,255,363
                                      )Other
      Income (Expense)Interest
      Expense
                                      
                                      
                                      (114,294
                                      )
                                      
                                      
                                      (114,294
                                      )Total
      Other Income (Expense)
                                      
                                      
                                      (114,294
                                      )
                                      
                                      
                                      (114,294
                                      )Net
      Income (Loss)
                                      
                                      $
                                      (1,705,759
                                      )
                                      
                                      $
                                      (2,369,657
                                      )Dividends
      on Preferred Stock
                                      
                                      
                                      0
                                      
                                      
                                      
                                      0Net
      Loss Available to Common Shareholders
                                      
                                      $
                                      (1,705,759
                                      )
                                      
                                      $
                                      (2,369,657
                                      )Weighted
      Average Common Shares: Basic
                                      
                                      
                                      27,357,354
                                      
                                      
                                      
                                      27,357,354Basic
      Earnings Per Common Share:Loss
      Before Cumulative Effect of Accounting ChangeCumulative
      Effect of Accounting Change
                                      
                                      $
                                      (.06
                                      )
                                      
                                      $
                                      (.09
                                      )(.00
                                      )
                                      
                                      
                                      (.00
                                      )Net
      Loss
                                      
                                      $
                                      (.06
                                      )
                                      
                                      $
                                      (.09
                                      )


5





CONDENSED CONSOLIDATED STATEMENTS OF CASH
                                  FLOWS
                                  (Unaudited)
                                
                                For the Three
                                  Months Ended March31,
                                  2009
                                
                                
                                For theThree
                                  MonthsEnded
                                  March 31,2009AS ORIGINALLYFILED
                                
                                
                                ASAMENDEDNet
      Loss From Operations
                                
                                $
                                (1,705,759
                                )
                                
                                $
                                (2,369,657
                                )Adjustments
      to Reconcile Net Loss to cashDepreciation
      and amortization
                                
                                
                                188,208
                                
                                
                                
                                188,208Amortization
      of Loan Fees
                                
                                
                                95,694
                                
                                
                                
                                95,694Gain
      on Forbearance of Debt
                                
                                
                                0
                                
                                
                                
                                0Stock
      compensation
                                
                                
                                0
                                
                                
                                
                                74,720Warrants
      issued for services
                                
                                
                                0
                                
                                
                                
                                726,553Inventories
                                
                                
                                (736
                                )
                                
                                
                                (736
                                )Prepaid
      Expenses
                                
                                
                                (49,067
                                )
                                
                                
                                (49,067
                                )Increase
      (Decrease) In:Accounts
      Payable and Accrued Expenses
                                
                                
                                227,033
                                
                                
                                
                                227,033Deferred
      Revenue
                                
                                
                                0
                                
                                
                                
                                0Net
      Cash Used In Operating Activities
                                
                                
                                (1,244,627
                                )
                                
                                
                                (1,107,252
                                )Cash
      Flows From Investing ActivitiesEquipment
      Purchases
                                
                                
                                (6,622
                                )
                                
                                
                                (6,622
                                )Payments
      for Intangible Assets
                                
                                
                                0
                                
                                
                                
                                0Net
      Cash Used In Investing Activities
                                
                                
                                (6,622
                                )
                                
                                
                                (6,622
                                )Cash
      Flows From Financing ActivitiesProceeds
      From Notes Payable
                                
                                
                                835,000
                                
                                
                                
                                835,000Payment
      of Notes Payable
                                
                                
                                (752
                                )
                                
                                
                                (752
                                )Payment
      of Financing Cost with Warrants
                                
                                
                                96,729
                                
                                
                                
                                0Payment
      of Professional Fees with Warrants
                                
                                
                                137,376
                                
                                
                                
                                0Exercise
      of Common Stock Options
                                
                                
                                149,197
                                
                                
                                
                                245,927Net
      Cash Provided By Financing Activities
                                
                                
                                1,217,550
                                
                                
                                
                                1,080,175Increase
      (Decrease) in Cash
                                
                                
                                (33,699
                                )
                                
                                
                                (33,699
                                )Balance,
      Beginning of Period
                                
                                
                                2,645
                                
                                
                                
                                2,645Balance,
      End of Period
                                
                                $
                                (31,054
                                )
                                
                                $
                                (31,054
                                )




Nature
of Business




The
Company, through its subsidiary, i2Telecom International, Inc. (“i2Telecom
(DE)”), provides low-cost telecommunications services employing next-generation
VoIP technology. These operations are based in Roswell, Georgia. Through
i2Telecom (DE), the Company controls its own proprietary technology and
outsources the majority of its production and service functions with strategic
partners. The Company, through i2Telecom (DE), provides the VoiceStick®,
MyGlobalTalkTM, micro
gateway adapters, VoIP long distance and other enhanced communication services
to subscribers. The Company’s proprietary technology platform is built to the
Session Initiation Protocol (“SIP”) standard. The Company’s revenue model now
includes revenue from the sale of the VoiceStick®, MyGlobalTalkTM, and
other integrated access devices (“IADs”) along with recurring monthly
subscriptions and call minute termination. The Company believes its proprietary
technology provides meaningful advantages particularly in the areas of ease of
use, high quality service, and low cost and robust features.


6


The
Company, a Washington corporation was incorporated as “Transit Information
Systems, Inc.” under the laws of the State of Washington on October 17, 1988. In
March 2004, the Company changed its name to “i2 Telecom International, Inc. The
Company’s offices are currently located at 430 N Carroll Ave Sounthlake, TX
76092\, , and the Company’s telephone number at that address is (817) 240-0200.
The Company maintains websites at www.i2telecom.com,
www.voicestick.com
and www.myglobaltalk.com
..




The
Company’s proprietary technology platform is built to the SIP standard and
offers the end user the following primary benefits:




·
            near
      carrier grade quality of service


·
            low
      cost long distance calling
worldwide;


·
            broadband
      telephony access via your laptop with the Company’s VoiceStick®;


·
            broadband
      telephony technology;


·
            plug
      and play technology using traditional phones without professional
      installation;


·
            unlimited
      and “Pay as You” global calling among VoiceStick® and MyGlobalTalkTM
      users; and


·
            local
      and long distance calling via cellular phones utilizing Company’s
      proprietary technology.




The
Company’s management is focused solely upon VoIP as the Company’s primary line
of business. In addition, the Company’s management is constantly exploring
various strategic alternatives, including partnering with other
telecommunication companies, both foreign and domestic, and engaging in
acquisitions of strategic competitors and/or telecommunication service
providers. There can be no assurances that such efforts will be successful. The
Company may finance these new business opportunities through a combination of
equity and/or debt. If the Company determines to finance these opportunities by
issuing additional equity, then such equity may have rights and preferences
superior to the outstanding Common Stock, and the issuance of such equity will
dilute the ownership percentage of the Company’s existing shareholders. If the
Company determines to finance these opportunities by incurring debt, then such
debt may not be available to the Company on favorable terms, if at
all.




Critical
Accounting Policies




The
policies identified below are considered as critical to the Company’s business
operations and the understanding of the Company’s results of operations. The
impact of and any associated risks related to these policies on the Company’s
business operations is discussed throughout “Management’s Discussion and
Analysis or Plan of Operation.” For a detailed discussion on the application of
these and other accounting policies, see Note 1 in the Notes to the Company’s
consolidated financial statements for the year ended December 31, 2008, included
in the Annual Report. Preparation of this Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009 (this “Quarterly Report”) requires the Company to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities, and the reported
amounts of revenue and expenses. There can be no assurance that actual results
will not differ from those estimates.




Basis
of Consolidation




The
consolidated financial statements include the accounts of i2Telecom (DE) and
SuperCaller Community, Inc. (“SuperCaller”), both of which are, directly or
indirectly, wholly-owned subsidiaries of the Company. All significant
intercompany accounts and transactions have been eliminated in
consolidation.




Accounting
Estimates




The
preparation of 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 financial
statements and the reported amounts of revenue and expenses during the reporting
period. Estimates are used when accounting for allowances for doubtful accounts,
revenue reserves, inventory reserves, depreciation and amortization, taxes,
contingencies and impairment allowances. Such estimates are reviewed on an
on-going basis and actual results could differ from those
estimates.


7


Revenue
Recognition




The
Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
(“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”),
as amended by SAB No. 101A and SAB No. 101B. SAB No. 101 requires that four
basic criteria must be met before revenue can be recognized: (i) persuasive
evidence of an arrangement exists; (ii) delivery has occurred or services
rendered; (iii) the fee is fixed and determinable; and (iv) collectability is
reasonably assured. Determinations under criteria (iii) and (iv) are based on
management’s judgments regarding the fixed nature of the fee charged for
services rendered and products delivered and the collectability of those fees.
Should changes in conditions cause management to determine these criteria are
not met for certain future transactions, revenue recognized for any reporting
period could be adversely affected. The Company has concluded that its revenue
recognition policy is appropriate and in accordance with accounting principles
generally accepted in the United States of America and SAB No. 101.




Impairment
of Long-Lived Assets




The
Company evaluates its long-lived assets for financial impairment and continues
to evaluate them as events or changes in circumstances indicate that the
carrying value of such assets may not be fully recoverable. The carrying value
of long-lived assets is considered impaired when the anticipated undiscounted
cash flows from an asset is less than its carrying value. In that event, a loss
is recognized for the amount by which the carrying value exceeds the fair value
of the long-lived asset. The Company has not recognized any impairment
losses.




This
summary of significant accounting policies of i2 Telecom International, Inc. and
Subsidiary (the “Company”) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations of
the Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.




Stock
Compensation




The
Company measures all share-based payments, including grants of employee stock
options to employees and warrants to service providers, using a fair-value based
method in accordance with the ASC Topic No. 505 and Topic No. 718 (formerly SFAS
No. 123R) Share-Based
Payments. The cost of services received in exchange for awards of equity
instruments is recognized in the consolidated statement of operations based on
the grant date fair value of those awards amortized over the requisite service
period.




A.           Nature
of Operations – The parent Company was incorporated under the laws of the State
of Washington on October 17, 1988, and the operating subsidiary was incorporated
on February 28, 2002. The Company, headquartered in Roswell, Georgia is a
telecommunications service provider of Voice over Internet Protocol (“VoIP”)
technology. The Company has proprietary patent pending technology that allows
transmission of VoIP, connection to long distance public-switched telephone
network (“PSTN”), and other enhanced communications services through an Internet
Access Device (“IAD”).




The
Company has targeted specific markets that are connected to the Internet.
Customers are supplied an i2 Telecom “IAD” micro gateway which will enable them
to: 1) make at no cost other than the initial cost of micro gateway and the
subscription fee unlimited calls to other i2 Telecom subscribers – anywhere in
the world using the customer’s existing phone (no new or special IP phone
required); 2) make long distance calls to people who use a normal telephone line
using the i2 Telecom least cost routing network that provides competitive long
distance rates; and 3) use either a broadband (DSL Cable etc.) or dial up
service.


8




B.           Basis
of Consolidation – The consolidated financial statements include the accounts of
SuperCaller Community, Inc., a wholly owned subsidiary. All significant
inter-company accounts and transactions have been eliminated in
consolidation.




C.           Revenues
- The Company recognizes revenue from sale of its i2 Telecom “IAD” micro gateway
at time of shipment. Revenues from per-minute charges and user fees are
recognized as incurred by its customers.




D.           For
purposes of the statement of cash flows, the Company considers all short-term
securities purchased with a maturity of three months or less to be cash
equivalents.




E.           Inventories
- Inventories consisting of purchased components available for resale are stated
at lower of cost or market. Cost is determined on the first-in, first-out (FIFO)
basis.




F.           Costs
associated with obtaining loans have been capitalized and are being amortized on
a straight-line basis over the life of the loan.




G.           Property,
Equipment and Related Depreciation - Property and equipment are recorded at
cost. Depreciation is computed using the straight-line method for financial and
tax reporting purposes. Estimated lives range from five to ten years. When
properties are disposed of, the related costs and accumulated depreciation are
removed from the respective accounts and any gain or loss on disposition is
recognized at that time. Maintenance and repairs which do not improve or extend
the lives of assets are expensed as incurred.




H.           Intangible
Assets – The Company has capitalized certain costs related to registering
trademarks and patent pending technology. In accordance with SFAS No. 142,
intangible assets with an indefinite life are not amortized but are tested for
impairment at least annually or whenever changes circumstances indicate that the
carrying value may not be recoverable. The Company amortizes its intangible
assets with a finite life over 10 years on a straight-line basis.




I.           In
accordance with SFAS No. 144, the Company reviews its long-lived assets,
including property and equipment, goodwill and other identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. To determine
recoverability of its long-lived assets, the Company evaluates the probability
that future undiscounted net cash flows, without interest charges, will be less
than the carrying amount of the assets. Impairment is measured at fair value.
The Company had no impairment of assets during the first quarter or the three
months ended March 31, 2009 or the year ended December 31, 2008.




J.           Use
of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.




K.           Income
Taxes - The Company accounts for income taxes under the provisions of SFAS No.
109, “Accounting for Income Taxes,” which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the Company’s consolidated financial statements or tax
returns. Under this method, deferred tax assets and liabilities are determined
based on the differences between the financial accounting and tax basis of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.




L.           Research
and Development Expenses – The Company expenses research and development
expenses as incurred. Amounts payable to third parties under product development
agreements are recorded at the earlier of the milestone achievement, or when
payments become contractually due.


9


M.           Earnings
(loss) per share - Basic earnings (loss) per share represents income available
to common stockholders divided by the weighted average number of shares
outstanding during the period. Diluted earnings (loss) per share reflect
additional common shares that would have been outstanding if dilutive potential
common shares had been issued, as well as any adjustment to income that would
result from the assumed issuance. Options on shares of common stock and certain
bonds convertible into common shares were not included in the computing of
diluted earnings (loss) per share because their effects were
anti-dilutive.




N.           New
Accounting Pronouncements




In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statements of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities - Including an amendment
of FASB Statement No. 115”. SFAS No. 159 permits entities to choose to measure
eligible items at fair value at specified election dates and report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal
years beginning after November 15. 2007. Management is currently evaluating the
effect that adoption of this statement will have on the Company’s consolidated
financial position and results of operations.




On
January 1, 2007, we adopted FASB Interpretation No. 48 (“FIN
No. 48”), “Accounting for
Uncertainty in Income Taxes,” which prescribes a comprehensive model for
how a company should recognize, measure, present and disclose in its financial
statements uncertain income tax positions that the Company has taken or expects
to take on a tax return (including a decision whether to file or not to file a
return in a particular jurisdiction). The adoption of FIN No. 48 on
January 1, 2007 did not result in a cumulative-effect adjustment or have an
effect on our consolidated financial statements.




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS No. 157”). This Standard defines fair value, establishes 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 and interim periods within those years. Two FASB Staff Positions on SFAS
No. 157 were subsequently issued. On February 12, 2007, FSP
No. 157-2 delayed the effective date of SFAS No. 157 for non-financial
assets and non-financial liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis. This FSP is effective
for fiscal years beginning after November 15, 2008. On February 14,
2007, FSP No. 157-1 excluded FASB No. 13 Accounting for Leasesand
other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under FASB No. 13. However,
this scope exception does not apply to assets acquired and liabilities assumed
in a business combination that are required to be measured at fair value under
FASB Statement No. 141, Business Combinationsor FASB
No. 141R, Business
Combinations.This FSP is effective upon initial adoption of SFAS
No. 157. We are assessing the impact that SFAS No. 157 will have on
our consolidated financial statements.




In
September 2006, the FASB ratified the consensus on EITF Issue No. 06-3,
“How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the
Income Statement” (“EITF No. 06-3”). The scope of EITF No. 06-3
includes any tax assessed by a governmental authority that is directly imposed
on a revenue-producing transaction between a seller and a customer and may
include, but is not limited to, sales, use, value added, USF contributions and
excise taxes. The Task Force concluded that entities should present these taxes
in the income statement on either a gross or net basis, based on their
accounting policy, which should be disclosed pursuant to APB Opinion
No. 22, “Disclosure of Accounting Policies.” If such taxes are significant
and are presented on a gross basis, the amount of those taxes should be
disclosed. The consensus on EITF No. 06-3 was effective for interim and
annual reporting periods beginning after December 15, 2006. We currently
record sales, use and excise taxes on a net basis in our consolidated financial
statements whereas USF contributions are recorded on a gross basis in our
consolidated financial statements. The adoption of EITF No. 06-3 did not
have an effect on our consolidated results of operations.




Quantitative
and Qualitative Disclosure about Market Risk




The
Company believes that it does not have any material exposure to interest or
commodity risks. The Company does not own any derivative instruments and does
not engage in any hedging transactions.


10




Comprehensive
Income or Loss




The
Company has no components of other comprehensive income or loss, and
accordingly, net loss equals comprehensive loss for all periods
presented.




Earnings
per Share




For the
first quarter of 2009 and 2008, net income (loss) per share is based on the
weighted average number of shares of Common Stock outstanding. At March 31, 2009
and March 31, 2008, the Company had, on a weighted average, 27,37,354 shares and
18,433,84 shares of Common Stock outstanding, respectively.




At March
31, 2009, the Company had outstanding 27,504,888 shares of Common Stock and
options and warrants to purchase 18,618,916 shares of Common Stock.
Consequently, on an as-converted, fully-diluted basis, the Company would have
46,123,804 shares of Common Stock outstanding at March 31, 2009.




Stock
Compensation




During
2004, the Company’s shareholders approved a stock option plan for its officers,
directors and certain key employees. Generally, the options vest based on the
attainment of certain performance criteria set forth in the option agreements.
In addition, the Company has issued stock warrants to key employees,
consultants, and certain investors, with expiration dates of one to five years.
Effective January 1, 2005, the Company adopted early application of SFAS
No. 123R. SFAS No. 123R supersedes APB Opinion No. 25 which was previously
used by the Company. Generally, the approach in SFAS No. 123R is similar to the
approach described in SFAS No. 123. However, SFAS No. 123R requires all
share-based payments to employees, including grants of employee stock options,
to be recognized in the income statement based on their fair values. Under APB
Opinion No. 25, compensation expense was recorded on the date of grant only if
the current market price of the underlying stock exceeds the exercise price, the
intrinsic value method. Under SFAS No. 123R, the Company recognizes an expense
over the vesting period of the fair value of all stock-based awards on the date
of grant. Beginning January 1, 2005, all stock-based awards to
non-employees are accounted for at their fair value in accordance with SFAS No.
123R and related interpretations.




Additionally,
the Company adopted early application of SFAS No. 123R on January 1, 2005. The
cumulative effect of this change in accounting principle for periods prior to
2005 was $340,117, net of income tax and has been included on the statement of
operations for the three months ended March 31, 2005.




Stock
compensation expense is comprised of the amortization of deferred compensation
resulting from the grant of stock options to employees at exercise or sale
prices deemed to be less than fair value of the Common Stock at grant date, net
of forfeitures related to such employees who terminated service while possessing
unvested stock options, as these terminated employees have no further service
obligations.




Reclassifications




Certain
prior year amounts have been reclassified to conform to the current year
presentation.




Interim
Financial Data




In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements have been prepared by the Company pursuant to the rules and
regulations of the SEC. These financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These statements should be read in
conjunction with the Company’s audited consolidated financial statements for the
year ended December 31, 2008, set forth in the Annual Report. The interim
financial information included herein has not been audited. However, management
believes the accompanying unaudited interim financial statements contain all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the consolidated financial position of i2 Telecom International,
Inc. and Subsidiaries as of March 31, 2009 and March 31, 2008, and the results
of their operations and cash flows for the three months ended March 31, 2009 and
2008. The results of operations and cash flows for the period are not
necessarily indicative of the results of operations or cash flows that can be
expected for the year ending December 31, 2009.


11


NOTE
2.          NOTES
PAYABLE




Notes
Payable as of March 31, 2009 and December 31, 2008:




03/31/2009
                
                
                12/31/2008a.      10%
      note payable due to an individual shareholder of the company payable in
      monthly installments of $4,000, including interest, through July 27, 2009
      when all outstanding principal and interest is due. The note is unsecured
      and guaranteed by an officer of the Company
                
                
                145,262
                
                
                
                146,013b.      12%
      note payable. The principal and all accrued interest were due on December
      31, 2008. The note is unsecured and guaranteed by an officer of the
      Company. In March 2009, the maturity date was extended until June 30,
      2009.
                
                
                100,000
                
                
                
                100,000c.      8%
      note payable. The principal and all accrued interest were due on December
      31, 2008. The note is unsecured. In March 2009, the maturity date was
      extended until June 30, 2009
                
                
                25,000
                
                
                
                25,000d.      8%
      note payable. The principal and all accrued interest were due on December
      31, 2008. The note is unsecured. In March 2009, the maturity date was
      extended until June 30, 2009.
                
                
                25,000
                
                
                
                25,000e.      12%
      note payable to an institutional investor. The principal and all accrued
      interest were due on November 24, 2008. The note is secured. In April
      2009, the maturity date was extended until May 24, 2009
                
                
                150,000
                
                
                
                150,000f.      12%
      note payable to an institutional investor. The principal and all accrued
      interest were due on November 24, 2008. The note is secured. In April
      2009, the maturity date was extended until May 24, 2009
                
                
                162,500
                
                
                
                162,500g.      12%
      note payable to an institutional investor. The principal and all accrued
      interest were due on December 7, 2008. The note is secured. In April 2009
      the maturity date was extended until June 7, 2009.
                
                
                62,500
                
                
                
                62,500h.      12%
      note payable to an institutional investor. The principal and all accrued
      interest were due on November 22, 2008. The note is secured. In April
      2009, the maturity date was extended until May 24, 2009.
                
                
                25,000
                
                
                
                25,000i.      12%
      note payable to an institutional investor. The principal and all accrued
      interest were due on March 23, 2009. The note is secured. In March 2009,
      the maturity date was extended until June 23, 2009.
                
                
                135,000
                
                
                
                135,000j.      12%
      note payable to an institutional investor. The principal and all accrued
      interest were due on March 2, 2009. The note is secured. In March 2009,
      the maturity date was extended until June 23, 2009.
                
                
                225,000
                
                
                
                0k.      12%
      note payable. The principal and all accrued interest were due on November
      27, 2008. The note is secured. In April 2009, the maturity date was
      extended until May 27, 2009.
                
                
                50,000
                
                
                
                50,000l.      12%
      note payable. The principal and all accrued interest were due on December
      7, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 7, 2009.
                
                
                100,000
                
                
                
                100,000m.    12%
      note payable. The principal and all accrued interest were due on December
      14, 2008. The note is secured. In December 2008, the maturity date was
      extended until May 15, 2009.
                
                
                100,000
                
                
                
                100,000n.      12%
      note payable. The principal and all accrued interest were due on February
      10, 2009. The note is secured. In March 2009, the maturity date was
      extended until June 12, 2009.
                
                
                100,000
                
                
                
                100,000


12





03/31/2009
                
                
                12/31/2008o.      12%
      note payable. The principal and all accrued interest were due on November
      19, 2008. The note is secured. In November 2008, the maturity date was
      extended until May 20, 2009.
                
                
                100,000
                
                
                
                100,000p.      12%
      note payable. The principal and all accrued interest were due on November
      20, 2008. The note is secured. In November 2008, the maturity date was
      extended until June 1, 2009.
                
                
                200,000
                
                
                
                200,000q.      12%
      note payable. The principal and all accrued interest were due on November
      22, 2008. The note was unsecured. In April 2009, the maturity date was
      extended until May 27, 2009.
                
                
                50,000
                
                
                
                50,000r.      12%
      notes payable to a director and an individual. The principal and all
      accrued interest were due on January 25, 2009. The note is secured and
      half is guaranteed by an officer of the Company. In January 2009, the
      maturity date was extended until May 25, 2009.
                
                
                1,000,000
                
                
                
                1,000,000s.      12%
      notes payable to a director and an individual. The principal and all
      accrued interest were due on January 25, 2009. The note is secured. In
      January 2009, the maturity date was extended until May 25,
      2009.
                
                
                100,000
                
                
                
                100,000t.      12%
      notes payable to a director and an individual. The principal and all
      accrued interest were due on January 25, 2009. The note is unsecured. In
      January 2009, the maturity date was extended until May 25,
      2009.
                
                
                100,000
                
                
                
                100,000u.      12%
      note payable. The principal and all accrued interest were due on December
      1, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 1, 2009.
                
                
                25,000
                
                
                
                25,000v.      12%
      note payable. The principal and all accrued interest were due on August
      28, 2008. The note is secured. In April 2009, the maturity date was
      extended until May 28, 2009.
                
                
                50,000
                
                
                
                50,000w.      12%
      note payable. The principal and all accrued interest were due on December
      7, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 7, 2009.
                
                
                50,000
                
                
                
                50,000x.      12%
      note payable. The principal and all accrued interest were due on December
      1, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 1, 2009.
                
                
                50,000
                
                
                
                50,000y.      12%
      note payable. The principal and all accrued interest were due on December
      1, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 1, 2009.
                
                
                50,000
                
                
                
                50,000z.      12%
      note payable. The principal and all accrued interest were due on November
      20, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 20, 2009.
                
                
                25,000
                
                
                
                25,000aa.    12%
      note payable. The principal and all accrued interest were due on December
      15, 2008. The note is secured. In December 2008, the maturity date was
      extended until May 15, 2009.
                
                
                50,000
                
                
                
                50,000bb.   12%
      note payable. The principal and all accrued interest were due on December
      25, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 25, 2009.
                
                
                25,000
                
                
                
                25,000cc.    12%
      note payable. The principal and all accrued interest were due on December
      1, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 1, 2009.
                
                
                25,000
                
                
                
                25,000dd.   12%
      note payable. The principal and all accrued interest were due on November
      25, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 25, 2009.
                
                
                50,000
                
                
                
                50,000ee.    12%
      note payable. The principal and all accrued interest were due on December
      28, 2008. The note is secured. In January 2009, the maturity date was
      extended until June 28, 2009.
                
                
                50,000
                
                
                
                50,000


13





03/31/2009
                                                                            
                                                                            
                                                                            12/31/2008ff.      12%
      note payable. The principal and all accrued interest were due on December
      14, 2008. The note is secured. In May 2009, the maturity date was extended
      until June 15, 2009.
                                                                            
                                                                            
                                                                            50,000
                                                                            
                                                                            
                                                                            
                                                                            50,000gg.   12%
      note payable. The principal and all accrued interest were due on April 10,
      2009. The note is secured. In April 2009, the maturity date was extended
      until July 10, 2009.
                                                                            
                                                                            
                                                                            50,000
                                                                            
                                                                            
                                                                            
                                                                            0hh.   12%
      note payable. The principal and all accrued interest were due on December
      14, 2008. The note is secured. In April 2009, the maturity date was
      extended until June 15, 2009.
                                                                            
                                                                            
                                                                            25,000
                                                                            
                                                                            
                                                                            
                                                                            25,000ii.      12%
      note payable. The principal and all accrued interest were due on November
      18, 2008. The note is secured. In November 2009, the maturity date was
      extended until May 19, 2009.
                                                                            
                                                                            
                                                                            100,000
                                                                            
                                                                            
                                                                            
                                                                            100,000jj.      12%
      note payable. The principal and all accrued interest were due on March 17,
      2009. The note is secured. In March 2009, the maturity date was extended
      until June 17, 2009.
                                                                            
                                                                            
                                                                            50,000
                                                                            
                                                                            
                                                                            
                                                                            0kk.    12%
      note payable. The principal and all accrued interest were due on May 6,
      2009. The note is secured. In May 2009, the maturity date was extended
      until August 6, 2009.
                                                                            
                                                                            
                                                                            25,000
                                                                            
                                                                            
                                                                            
                                                                            0ll.      12%
      note payable. The principal and all accrued interest were due on May 7,
      2009. The note is secured. In May 2009, the maturity date was extended
      until August 7, 2009.
                                                                            
                                                                            
                                                                            25,000
                                                                            
                                                                            
                                                                            
                                                                            0mm.  12%
      note payable. The principal and all accrued interest were due on May 4,
      2009. The note is secured. In May 2009, the maturity date was extended
      until August 4, 2009.
                                                                            
                                                                            
                                                                            25,000
                                                                            
                                                                            
                                                                            
                                                                            0nn.   12%
      note payable. The principal and all accrued interest were due on May 6,
      2009. The note is secured. In May 2009, the maturity date was extended
      until August 6, 2009.
                                                                            
                                                                            
                                                                            25,000
                                                                            
                                                                            
                                                                            
                                                                            0oo.   12%
      note payable. The principal and all accrued interest were due on May 6,
      2009. The note is secured. In May 2009, the maturity date was extended
      until August 6, 2009.
                                                                            
                                                                            
                                                                            100,000
                                                                            
                                                                            
                                                                            
                                                                            0pp.   12%
      note payable. The principal and all accrued interest are due on May 19,
      2009. The note is secured
                                                                            
                                                                            
                                                                            40,000
                                                                            
                                                                            
                                                                            
                                                                            0qq.   12%
      note payable. The principal and all accrued interest are due on May 28,
      2009. The note is secured
                                                                            
                                                                            
                                                                            30,000
                                                                            
                                                                            
                                                                            
                                                                            0rr.     12%
      note payable. The principal and all accrued interest are due on May 24,
      2009. The note is secured
                                                                            
                                                                            
                                                                            110,000
                                                                            
                                                                            
                                                                            
                                                                            0ss.    12%
      note payable. The principal and all accrued interest are due on May 31,
      2009. The note is secured.
                                                                            
                                                                            
                                                                            50,000
                                                                            
                                                                            
                                                                            
                                                                            0tt.     12%
      note payable. The principal and all accrued interest are due on June 10,
      2009. The note is secured.
                                                                            
                                                                            
                                                                            50,000
                                                                            
                                                                            
                                                                            
                                                                            0uu.   12%
      note payable. The principal and all accrued interest are due on June 11,
      2009. The note is secured.
                                                                            
                                                                            
                                                                            25,000
                                                                            
                                                                            
                                                                            
                                                                            0vv.   12%
      note payable. The principal and all accrued interest are due on June 11,
      2009. The note is secured
                                                                            
                                                                            
                                                                            5,000
                                                                            
                                                                            
                                                                            
                                                                            0Total
      Notes Payable
                                                                            
                                                                            $
                                                                            4,190,262
                                                                            
                                                                            
                                                                            $
                                                                            3,356,014Due
      to Officers and Directors
                                                                            
                                                                            
                                                                            1,200,000
                                                                            
                                                                            
                                                                            
                                                                            1,200,000Due
      to Others
                                                                            
                                                                            $
                                                                            2,990,262
                                                                            
                                                                            
                                                                            $
                                                                            2,156,014




We have
been able to meet our operating requirements since January 1, 2009 by raising
approximately $1,000,000 of short term loans and approximately $500,000 of
equity related financing. We will need to receive additional capital to continue
our operations.




Financing
may not be available to us on commercially reasonable terms, if at all. There is
no assurance that we will be successful in raising additional capital or that
the proceeds of any future financings will be sufficient to meet our future
capital needs. It is not likely that we will be able to continue our business
without additional financing. Currently, we have no commitments for additional
financing.


14


NOTE
3.          CONVERTIBLE
BONDS




On
January 9, 2006, the Company sold $1,750,000 of 10% secured convertible
debentures pursuant to a Securities Purchase Agreement dated thereof. The
Company received $600,000 upon closing, $600,000 on April 6, 2006, and $550,000
May 10, 2006. The debentures were secured by all assets of the
Company.




During
the year ended December 31, 2006, the holders converted $425,000 of the
convertible bonds into 14,707,310 shares of common stock. In January 2007, the
Company paid off the remaining balance due.




On
December 9, 2006, the Company sold $2,000,000 of 6% secured convertible
debentures pursuant to a Securities Purchase Agreement dated thereof. The
Company received $1,625,000 in December 2006 and remaining $375,000 in January
2007. The Debentures matured on May 9, 2007. The Debentures were convertible
from time to time into 2,875,143 shares of common stock of the Company at the
price of $.70 per share and 2,857,143 warrants exercisable at the price of $.70
per share.




On
February 28, 2007, the Company sold $2,000,000 of 6% Senior Subordinated Secured
Convertible Notes convertible into 1,666,776 shares of the Company's common
stock priced at $120 each, and 833,333 Warrants, priced at $1.20 each. For every
two shares of common stock to be issued, the investor(s) received one warrant
which is exercisable into the Company's common stock at 100% of the Issue Price.
These warrants mature three years from issuance. The Notes will automatically
convert into the Company's common stock if any of the following events occur:
(i) the Shares become registered and freely trading, or (ii) the financial
closing by the Company of $10,000,000 or more. The Notes are secured by all
assets of the Company and its subsidiaries. All future debt securities issued by
the Company will be subordinate in right of payment to the Notes; provided,
however, that the Company may raise up to $1.0 million of senior indebtedness
that ranks pari passu with the Notes in the future.




During
the year ended December 31, 2007, the Company converted Convertible debt in the
amount of $3,392,274, net of bond discount of $557,419, in principal and accrued
interest, to common stock. Total shares issued in exchange for the debt were
4,085,152.




Due to
the late registration of shares received in conversion of the Convertible Debt
during 2007, penalty shares were awarded & issued to convertible note
holders. The total number of penalty shares issued was 632,048 .




Convertible
bonds remaining at March 31, 2009 and December 31, 2008 consisted of the
following:




March 31, 2009
                  
                  
                  Dec 31, 2008December
      2006 6% Convertible Bonds
                  
                  $
                  50,000
                  
                  
                  $
                  50,000February
      2007 6% Convertible Bonds
                  
                  
                  50,000
                  
                  
                  
                  50,000100,000
                  
                  
                  
                  100,000


15


NOTE
4.             STOCK
OPTIONS AND WARRANTS -Restated




March 31, 2009
                        
                        
                        December 31, 2008Number of
                          Options/
                          Warrants
                        
                        
                        Weighted
                          Average
                          Exercise
                          Price
                        
                        
                        Number of
                          Options/
                          Warrants
                        
                        
                        Weighted
                          Average
                          Exercise
                          PriceOutstanding
      at Beginning of Period
                        
                        
                        16,482,834
                        
                        
                        $
                        1.00
                        
                        
                        
                        12,244,823
                        
                        
                        $
                        2Options
      Granted
                        
                        
                        1,295,000
                        
                        
                        $
                        .80
                        
                        
                        
                        1,510,000
                        
                        
                        $
                        0.90Warrants
      Granted
                        
                        
                        4,832,218
                        
                        
                        $
                        .80
                        
                        
                        
                        20,446,350
                        
                        
                        $
                        1.00Exercised
                        
                        
                        (4,000,000
                        )
                        
                        $
                        1.20
                        
                        
                        
                        (1,215,483
                        )
                        
                        $
                        0.90Forfeited
                        
                        
                        (333,211
                        )
                        
                        $
                        .90
                        
                        
                        
                        (16,446,855
                        )
                        
                        $
                        3.30Outstanding
      at End of Period
                        
                        
                        18,276,751
                        
                        
                        $
                        .90
                        
                        
                        
                        16,502,834
                        
                        
                        $
                        1.30Options
      Exercisable at End of Period
                        
                        
                        16,676,07
                        
                        
                        $
                        1.30
                        
                        
                        
                        13,735,443
                        
                        
                        $
                        .90Weighted-average
      Fair Value of Options Granted During the Period
                        
                        
                        
                        
                        
                        $
                        .80
                        
                        
                        
                        
                        
                        
                        $
                        1.00




As of
March 31, 2009, the range of option and warrant exercise prices for outstanding
and exercisable options and warrants was $.01 to $1.00 with a weighted average
remaining contractual life of 2.31 years.




As of
March 31, 2009, $74,720 and $726,553 of stock options and warrants issued for
services, respectively were expensed and are included in General and
Administrative Expenses in the Consolidated Statement of
Operations.




NOTE
5.




None




NOTE
6.           SUBSEQUENT
EVENTS




In April
2009, we issued a total of 40,000 shares of Common Stock to an individual in
lieu of $30,000 of debt owed by us to the consultant for services performed for
us. The shares were issued without registration under the Securities Act in
reliance upon the exemptions from registration set forth in Section 4(2) and
Regulation D. We based such reliance upon factual representations by the
recipients of the shares to us regarding their investment interest and
sophistication, among other things.




Also in
April 2009, we issued a total of 104,000 shares of Common Stock to two
individuals in lieu of $62,500 of debt owed by us to these consultants for
services performed for us. The shares were issued without registration under the
Securities Act in reliance upon the exemptions from registration set forth in
Section 4(2) and Regulation D. We based such reliance upon factual
representations by the recipients of the shares to us regarding their investment
interest and sophistication, among other things.




Also in
April 2009, we issued a total of 125,000 shares of Common Stock to two
institutions in lieu of a $100,000 equity investment in the Company. The shares
were issued without registration under the Securities Act in reliance upon the
exemptions from registration set forth in Section 4(2) and Regulation D. We
based such reliance upon factual representations by the recipients of the shares
to us regarding their investment interest and sophistication, among other
things.




In May
2009, we have pending issuance a total of 94,359 shares of our Common Stock in
exchange for the exercise of 564,483 warrants to four individuals and one
institution. Of the total amount of shares issued, 88,196 shares of Common Stock
were issued in exchange for 533,622 cashless warrants from one individual who is
one of our directors and another individual who is an officer and director of
ours. These shares of our Common Stock shall be issued without registration
under the Securities Act in reliance upon the exemptions from registration set
forth in Section 4(2) and Regulation D. We based such reliance upon factual
representations by the recipients of the shares to us regarding their investment
interest and sophistication, among other things.




Also in
May 2009, we issued to one institution, warrants to purchase an aggregate of
111,250 shares of Common Stock at an exercise price of $01.00 per share, vested
immediately upon the date of grant with a five-year expiration period. The
warrants were issued in connection with the settlement of a debt owed by us to a
consultant for services performed for us. The warrants were issued without
registration under the Securities Act in reliance upon the exemptions from
registration set forth in Section 4(2) and Regulation D. We based such reliance
upon factual representations by the recipients of the warrants to us regarding
their investment interest and sophistication, among other
things.


16




Also in
May 2009, we have pending issuance a total of 40,000 shares of Common Stock to
four individuals in lieu of $24,000 of debt owed by us to these consultants for
services performed for us. The shares were issued without registration under the
Securities Act in reliance upon the exemptions from registration set forth in
Section 4(2) and Regulation D. We based such reliance upon factual
representations by the recipients of the shares to us regarding their investment
interest and sophistication, among other things.




Also in
May 2009, we issued to one individual, warrants to purchase an aggregate of
62,500 shares of Common Stock at an exercise price of $0.80  per
share, vested immediately upon the date of grant with a five-year expiration
period. The warrants were issued in connection with the execution of a
promissory note extension in the aggregate amount of $125,000 made to us. One of
our directors made the loan. The warrants were issued without registration under
the Securities Act in reliance upon the exemptions from registration set forth
in Section 4(2) and Regulation D. We based such reliance upon factual
representations by the recipients of the warrants to us regarding their
investment interest and sophistication, among other things. However, these
shares are entitled to “piggyback registration” rights upon filing by us of a
registration statement.


17


Item
2.          MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.




Forward
Looking Statements




Certain
statements in the Management’s Discussion and Analysis (“MD&A”), other than
purely historical information, including estimates, projections, statements
relating to our business plans, objectives and expected operating results, and
the assumptions upon which those statements are based, are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. These forward-looking statements generally
are identified by the words “believe,” “project,” “expect,” “anticipate,”
“estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. A detailed discussion of
risks and uncertainties that could cause actual results and events to differ
materially from such forward-looking statements is included in the section under
“Risk Factors”. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events, or otherwise.




As
used in this Form 10-Q, unless the context requires otherwise, “we” or “us” or
the “Company” or “i2” or “i2 Telecom” means i2 Telecom International, Inc. and
its subsidiaries.




Overview




The
Company, through its subsidiary, i2Telecom International, Inc., (“i2Telecom
(DE)”), provides low-cost telecommunications services employing next-generation
VoIP technology. These operations are based in Roswell, Georgia. Through
i2Telecom (DE), the Company controls its own proprietary technology and
outsources the majority of its production and service functions with strategic
partners. The Company, through i2Telecom (DE), provides the VoiceStick®,
MyGlobalTalkTM, micro
gateway adapters, VoIP long distance and other enhanced communication services
to subscribers. The Company’s proprietary technology platform is built to the
Session Initiation Protocol (“SIP”) standard. The Company’s revenue model now
includes revenue from the sale of the VoiceStick®, MyGlobalTalkTM, and
other integrated access devices (“IADs”) along with recurring monthly
subscriptions and call minute termination. The Company believes its proprietary
technology provides meaningful advantages particularly in the areas of ease of
use, high quality service, and low cost and robust features.




The
Company’s proprietary technology platform is built to the SIP standard and
offers the end user the following primary benefits:




·
            near
      carrier grade quality of service;


·
            low
      cost long distance calling
worldwide;


·
            broadband
      access via laptop with the Company’s
  VoiceStick®;


·
            broadband
      technology;


·
            plug
      and play technology using traditional phones (including cellular) without
      professional installation; and


·
            unlimited
      and “Pay as You” global calling among VoiceStick® and MyGlobalTalkTM
      users.




The
Company’s management intends to focus upon the monetization and royalty revenues
from our Intellectual property portfolio and related technology for mobile
communications applications as the Company’s primary lines of business. In
addition, the Company’s management is constantly exploring various strategic
alternatives, including partnering with other telecommunication companies, both
foreign and domestic, and engaging in acquisitions of strategic competitors
and/or telecommunication service providers. There can be no assurances that such
efforts will be successful. The Company may finance these new business
opportunities through a combination of equity and/or debt. If the Company
determines to finance these opportunities by issuing additional equity, then
such equity may have rights and preferences superior to the outstanding Common
Stock and Preferred Stock, and the issuance of such equity will dilute the
ownership percentage of the Company’s existing shareholders. If the Company
determines to finance these opportunities by incurring debt, then such debt may
not be available to the Company on favorable terms, if at all.


18


Critical
Accounting Policies and Estimates




Basis of Consolidation.The
consolidated financial statements include the accounts of i2Telecom (DE) and
SuperCaller Community, Inc. (“SuperCaller”), both of which are, directly or
indirectly, wholly-owned subsidiaries of the Company. All significant
intercompany accounts and transactions have been eliminated in
consolidation.




Accounting Estimates.The
preparation of 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 financial
statements and the reported amounts of revenue and expenses during the reporting
period. Estimates are used when accounting for allowances for doubtful accounts,
revenue reserves, inventory reserves, depreciation and amortization, taxes,
contingencies and impairment allowances. Such estimates are reviewed on an
on-going basis and actual results could differ from those
estimates.




Revenue Recognition.The
Company recognizes revenue in accordance with SEC Staff Accounting Bulletin
(“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”),
as amended by SAB No. 101A and SAB No. 101B. SAB No. 101 requires that four
basic criteria must be met before revenue can be recognized: (i) persuasive
evidence of an arrangement exists; (ii) delivery has occurred or services
rendered; (iii) the fee is fixed and determinable; and (iv) collectability is
reasonably assured. Determination of criteria (iii) and (iv) are based on
management’s judgments regarding the fixed nature of the fee charged for
services rendered and products delivered and the collectability of those fees.
Should changes in conditions cause management to determine these criteria are
not met for certain future transactions, revenue recognized for any reporting
period could be adversely affected. The Company has concluded that its revenue
recognition policy is appropriate and in accordance with accounting principles
generally accepted in the United States of America and SAB No. 101.




Impairment of Long-Lived Assets.The Company evaluates its long-lived assets for financial impairment and
continues to evaluate them as events or changes in circumstances indicate that
the carrying value of such assets may not be fully recoverable. The carrying
value of long-lived assets is considered impaired when the anticipated
undiscounted cash flows from an asset is less than its carrying value. In that
event, a loss is recognized for the amount by which the carrying value exceeds
the fair value of the long-lived asset. The Company has not recognized any
impairment losses.




Recent
Accounting Pronouncements




A.
            Nature
      of Operations – The parent Company was incorporated under the laws of the
      State of Washington on October 17, 1988, and the operating subsidiary was
      incorporated on February 28, 2002. The Company, headquartered in
      Southlake, TX , is a telecommunications service provider of Voice over
      Internet Protocol (“VoIP”) technology. The Company has proprietary patent
      pending technology that allows transmission of VoIP, connection to long
      distance public-switched telephone network (“PSTN”), and other enhanced
      communications services through an Internet Access Device
      (“IAD”).




The
Company has targeted specific markets that are connected to the Internet.
Customers are supplied an i2 Telecom “IAD” micro gateway, which will enable them
to: 1) make, at no cost other than the initial cost of micro gateway and the
subscription fee, unlimited calls to other i2 Telecom subscribers – anywhere in
the world using the customer’s existing phone (no new or special IP phone
required); 2) make long distance calls to people who use a normal telephone line
using the i2 Telecom least cost routing network that provides competitive long
distance rates; and 3) use either a broadband (DSL, Cable, etc.) or dial up
service.




B.
            Basis
      of Consolidation – The consolidated financial statements include the
      accounts of SuperCaller Community, Inc., a wholly owned subsidiary. All
      significant inter-company accounts and transactions have been eliminated
      in consolidation.


19


C.
            Revenues
      - The Company recognizes revenue from sale of its i2 Telecom “IAD” micro
      gateway at time of shipment. Revenues from per-minute charges and user
      fees are recognized as incurred by its customers. Revenues from the
      monetization or license fees generated by our Intellectual property are
      recognized upon completion of the earnings
  cycle..




D.
            For
      purposes of the statement of cash flows, the Company considers all
      short-term securities purchased with a maturity of three months or less to
      be cash equivalents.




E.
            Inventories
      - Inventories consisting of purchased components available for resale are
      stated at lower of cost or market. Cost is determined on the first-in,
      first-out (FIFO) basis.




F.
            Costs
      associated with obtaining loans have been capitalized and are being
      amortized on a straight-line basis over the life of the
    loan.




G.
            Property,
      Equipment and Related Depreciation - Property and equipment are recorded
      at cost. Depreciation is computed using the straight-line method for
      financial and tax reporting purposes. Estimated lives range from five to
      ten years. When properties are disposed of, the related costs and
      accumulated depreciation are removed from the respective accounts and any
      gain or loss on disposition is recognized at that time. Maintenance and
      repairs which do not improve or extend the lives of assets are expensed as
      incurred.




H.
            Intangible
      Assets – The Company has capitalized certain costs related to registering
      trademarks and patent pending technology. In accordance with SFAS No. 142,
      intangible assets with an indefinite life are not amortized but are tested
      for impairment at least annually or whenever changes circumstances
      indicate that the carrying value may not be recoverable. The Company
      amortizes its intangible assets with a finite life over 10 years on a
      straight-line basis.




I.
            In
      accordance with SFAS No. 144, the Company reviews its long-lived assets,
      including property and equipment, goodwill and other identifiable
      intangibles for impairment whenever events or changes in circumstances
      indicate that the carrying amount of the assets may not be fully
      recoverable. To determine recoverability of its long-lived assets, the
      Company evaluates the probability that future undiscounted net cash flows,
      without interest charges, will be less than the carrying amount of the
      assets. Impairment is measured at fair value. The Company had no
      impairment of assets during the years ended December 31, 2007 and
      2006.




J.
            Use
      of Estimates - The preparation of financial statements in conformity with
      generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from
      those estimates.




K.
            Income
      Taxes - The Company accounts for income taxes under the provisions of SFAS
      No. 109, “Accounting for Income Taxes,” which requires recognition of
      deferred tax assets and liabilities for the expected future tax
      consequences of events that have been included in the Company’s
      consolidated financial statements or tax returns. Under this method,
      deferred tax assets and liabilities are determined based on the
      differences between the financial accounting and tax basis of assets and
      liabilities using enacted tax rates in effect for the year in which the
      differences are expected to
reverse.




L.
            Research
      and Development Expenses – The Company expenses research and development
      expenses as incurred. Amounts payable to third parties under product
      development agreements are recorded at the earlier of the milestone
      achievement, or when payments become contractually
  due.




M.
            Earnings
      (loss) per share - Basic earnings (loss) per share represents income
      available to common stockholders divided by the weighted average number of
      shares outstanding during the period. Diluted earnings (loss) per share
      reflect additional common shares that would have been outstanding if
      dilutive potential common shares had been issued, as well as any
      adjustment to income that would result from the assumed issuance. Options
      on shares of common stock and certain bonds convertible into common shares
      were not included in the computing of diluted earnings per share because
      their effects were
anti-dilutive.


20


New
Accounting Pronouncements




In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statements of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities - Including an amendment
of FASB Statement No. 115”. SFAS No. 159 permits entities to choose to measure
eligible items at fair value at specified election dates and report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal
years beginning after November 15. 2007. Management is currently evaluating the
effect that adoption of this statement will have on the Company’s consolidated
financial position and results of operations.




On
January 1, 2007, we adopted FASB Interpretation No. 48 (“FIN
No. 48”), “Accounting for
Uncertainty in Income Taxes,” which prescribes a comprehensive model for
how a company should recognize, measure, present and disclose in its financial
statements uncertain income tax positions that the Company has taken or expects
to take on a tax return (including a decision whether to file or not to file a
return in a particular jurisdiction). The adoption of FIN No. 48 on
January 1, 2007 has not resulted in a cumulative-effect adjustment or have
an effect on our consolidated financial statements.




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS No. 157”). This Standard defines fair value, establishes 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 and interim periods within those years. Two FASB Staff Positions on SFAS
No. 157 were subsequently issued. On February 12, 2007, FSP
No. 157-2 delayed the effective date of SFAS No. 157 for non-financial
assets and non-financial liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis. This FSP is effective
for fiscal years beginning after November 15, 2008. On February 14,
2007, FSP No. 157-1 excluded FASB No. 13 Accounting for Leasesand
other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under FASB No. 13. However,
this scope exception does not apply to assets acquired and liabilities assumed
in a business combination that are required to be measured at fair value under
FASB Statement No. 141, Business Combinationsor FASB
No. 141R, Business
Combinations.This FSP is effective upon initial adoption of SFAS
No. 157. We are assessing the impact that SFAS No. 157 will have on
our consolidated financial statements.




In
September 2006, the FASB ratified the consensus on EITF Issue No. 06-3,
“How Taxes Collected from
Customers and Remitted to Governmental Authorities Should Be Presented in the
Income Statement” (“EITF No. 06-3”). The scope of EITF No. 06-3
includes any tax assessed by a governmental authority that is directly imposed
on a revenue-producing transaction between a seller and a customer and may
include, but is not limited to, sales, use, value added, USF contributions and
excise taxes. The Task Force concluded that entities should present these taxes
in the income statement on either a gross or net basis, based on their
accounting policy, which should be disclosed pursuant to APB Opinion
No. 22, “Disclosure of Accounting Policies.” If such taxes are significant
and are presented on a gross basis, the amount of those taxes should be
disclosed. The consensus on EITF No. 06-3 was effective for interim and
annual reporting periods beginning after December 15, 2006. We currently
record sales, use and excise taxes on a net basis in our consolidated financial
statements whereas USF contributions are recorded on a gross basis in our
consolidated financial statements. The adoption of EITF No. 06-3 did not
have an effect on our consolidated results of operations.


21


Results
of Operations-Restated




Comparison
of Three Months Ended March 31, 2009 and 2008




For the Three Months EndedMarch 31,2009
                
                
                2008
                
                
                Variance
                
                
                PercentageRevenue
                
                $
                132,142
                
                
                $
                157,456
                
                
                
                (25,314
                )
                
                
                -16.0
                %Cost
      of Revenue
                
                
                126,051
                
                
                
                182,237
                
                
                
                (56,186
                )
                
                
                30.8
                %Gross
      Profit (Loss)
                
                
                6,091
                
                
                
                (24,781
                )
                
                
                30,872
                
                
                
                124.6
                %Operating
      Expenses:General
      and Administrative Expenses
                
                
                2,261,454
                
                
                
                1,051,960
                
                
                
                1,209,494
                
                
                
                114.98
                %Other
      Income (Expense) Net
                
                
                (114,294
                )
                
                
                (120,653
                )
                
                
                6,359
                
                
                
                5.27
                %Net
      Profit (Loss)
                
                $
                (2,369,657
                )
                
                $
                (1,197,394
                )
                
                
                (1,172,263
                )
                
                
                97.90
                %




Revenues
decreased to $132,142 for the three months ended March 31, 2009 from $157,456
for the three months ended March 31, 2008. The decrease in revenues was due to
lower customer volume due to the focus of development toward a new product line
getting ready to launch. Additionally, we expanded fraud control procedures
and stricter customer acceptance methods.




Cost of
revenues decreased to $126,051 for the three months ended March 31, 2009 from
$182,237 for the three months ended March 31, 2008. The decrease in cost of
revenues was due to continuing efforts in negotiating lower carrier rates,
combined with lower sales volume.




Gross
loss decreased from a loss of $24,781 for the three months ended March 31, 2008
to a gain of $6,091 for the three months ended March 31, 2009.




Total
selling, general and administrative expenses for the three months ended March
31, 2009 was $2,261,454 compared to $1,051,960 for the three months ended March
31, 2008. The increase was due to higher stock options and warrants issued for
services, higher business development & marketing costs, combined with
higher salaries & accounting fees in connection with Sarbanes Oxley
compliance and Intellectual Property valuations during the first quarter of
2009.




Net loss
for the three months ended March 31, 2009 was $2,369,657 as compared to a net
loss of $1,197,394 for the three months ended March 31, 2008. The increase in
net loss is primarily a result of expanded business development and marketing
efforts.




Liquidity
and Capital Resources




On March
31, 2009, we had a working capital deficit of approximately $6,600,000 compared
to a working capital deficit of approximately $5,451,439 on March 31, 2008. The
decrease in working capital deficit was primarily due to increased cash
resources from the sale of intellectual property, which in turn served to payoff
current liabilities. Net cash used in operating activities was approximately
$1,107,000 for the three months ended March 31, 2009 as compared to net cash
used in operating activities of approximately $600,000 for the three months
ended March 31, 2008 . The increase in net cash used by operating activities
between these periods is attributable to expanded business development and
marketing efforts.




Net cash
used in investing activities was approximately $7,000 for the three months ended
March 31, 2009 as compared to net cash used in investing activities of $98,000
for the same period in 2008. The decrease in net cash used investing activities
is attributable to fewer purchases of network system equipment.


22


Net cash
provided by financing activities was approximately $1,080,000 for the three
months ended March 31, 2009 as compared to net cash provided of $536,000 for the
same period in 2008. The increase in net cash provided by financing activities
is attributable to fewer pay downs of promissory note debt, and the issuance of
common stock.




Off-Balance
Sheet Arrangements




We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholder’s equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.




Contractual
Obligations




We have
certain fixed contractual obligations and commitments that include future
estimated payments. Changes in our business needs, cancellation provisions,
changing interest rates, and other factors may result in actual payments
differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments.




We have
no current commitments or obligations for future capital expenditures. A summary
of our debt and lease obligations at March 31, 2009 are as follows:




Obligations payable inLess than 1 year
                  
                  
                  1-3 years
                  
                  
                  TotalDebt
                  
                  $
                  4,190,262
                  
                  
                  $
                  0
                  
                  
                  $
                  4,190,262Leases
                  
                  $
                  0
                  
                  
                  $
                  0
                  
                  
                  $
                  0




Item
3.          QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not
applicable.




Item
4.          CONTROLS AND
PROCEDURES.




Disclosure
Controls and Procedures




At the
end of the quarter covered by this report, an evaluation was carried out under
the supervision of and with the participation of the Company’s management,
including the Chief Executive Officer (“CEO”) and Chief Financial Officer
(“CFO”), of the effectiveness of the design and operations of the Company’s
disclosure controls and procedures (as defined in Rule 13a - 15(e) and Rule15d -
15(e) under the Exchange Act). Based on that evaluation the CEO and the CFO have
concluded that as of the end of the period covered by this report, the Company’s
disclosure controls and procedures were not adequately designed and were not
effective in ensuring that: (i) information required to be disclosed by the
Company in reports that it files or submits to the SEC under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in applicable rules and forms and (ii) material information required to be
disclosed in our reports filed under the Exchange Act is accumulated and
communicated to our management, including our CEO and CFO, as appropriate, to
allow for accurate and timely decisions regarding required
disclosure.




In
management’s review of financial information required to be reported in this
report on Form 10-Q/A, management determined that a material weakness existed in
the Company’s internal control over financial reporting, which resulted in
management determining that accounting errors were made in the Company’s
consolidated financial reports as filed with the SEC for prior reporting
periods. These accounting errors, which are more fully described in Note 1 to
the financial statements included in this report, include (i)) an error in
recording stock-based compensation, and (ii) an error
recording  warrants issued for services.


23


Changes
in Internal Control over Financial Reporting




There
were no other changes, other than those mentioned above in the Company’s
internal control over financial reporting that occurred during the Company’s
most recent quarter that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial
reporting.




As
described above under the heading “Disclosure Controls and Procedures”, the
Company’s management, has determined that accounting errors were made in
the Company’s financial reports as filed with the SEC for prior reporting
periods. These accounting errors, which are more fully described in Note 1 to
the financial statements included in this report, include (i) an error in
recording stock-based compensation, and (ii) an error recording amortization of
warrants.





Upon
review, the Company’s management has initially determined that the accounting
errors were derived from unintentional errors that went undetected by the
Company.





Management
has taken steps to address these issues by appointing a new Chief Financial
Officer, whom the Company’s management, board of directors, and audit committee
believe to possess the experience and knowledge required.


24




PART
II  OTHER INFORMATION




Item 1.
            LEGAL
      PROCEEDINGS




On
December 22, 2003, former stockholders of SuperCaller Community, Inc., a
Delaware corporation acquired by the Company in September 2002 (“SuperCaller”),
filed a lawsuit against the Company in the United States District Court for the
Northern District of California, San Francisco Division. The plaintiffs alleged
that i2Telecom (DE) and certain of its affiliates and representatives deceived
the plaintiffs into selling SuperCaller to the Company, among other things. On
March 27, 2006,  all federal claims against the Company and related parties
in the United States District Court in San Francisco were “dismissed with
prejudice” by Judge Vaughn Walker.  In addition, the court declined to
exercise supplemental jurisdiction over the remaining state law claims which
were all “dismissed” as well.  Therefore, no loss or liability has been
recorded in the Company’s financial statements. In March 2008, the federal
claims against the Company and related parties in the United States District
Appellate Court in San Francisco were “dismissed with prejudice”.




The
Company was named a defendant in a lawsuit regarding a disputed amount due for
patent preparation and filings by the same attorney representing the plaintiffs
in the above matter. In January 2008, the claims against the Company and related
parties in the United States District Appellate Court in San Francisco were
“dismissed with prejudice”. In April 2008, the same attorney representing the
plaintiffs in the above matter filed an action against the Company in the
Superior Court of California, County of Santa Clara (the Superior Court”). The
plaintiffs alleged that i2Telecom (DE) and certain of its affiliates and
representatives deceived the plaintiffs into selling SuperCaller to the Company,
among other things. A demurrer has been filed by the Company and sustained by
the Superior Court with leave to amend. The Company will continue to vigorously
defend these claims and believes this litigation to be unsubstantiated and
without merit.




On May
11, 2009, the Company commenced litigation against defendants MagicJack, LP; SJ
Labs, Inc.; YMAX Corporation, and Daniel Borislow, the (“Defendants”); In The
United States District Court Northern District of Ohio, amongst other claims,
for misappropriation and use of the Company’s intellectual property.  The
Company alleges that the Defendants: (i)  acquired the Company’s
intellectual property pursuant to contracts preserving its confidentiality;
(ii)  have improperly used the Company’s intellectual property in violation
of their contractual commitments, as well as statutory and common law; and 
(iii)  in combination with one another, agreed to conspire to use, convert,
or misappropriate the Company’s trade secrets for their own benefit.  As a
result, the Company alleges that the Defendants are jointly and severally liable
for actual, consequential, special, exemplary and
punitive damages.  The Company is also seeking a permanent injunction
to prevent Defendants from directly or indirectly using or misappropriating any
of the Company's trade secrets.




Item 1A.
RISK FACTORS




You
should carefully consider the risks described below together with all of the
other information included in this report before making an investment decision
with regard to our securities. The statements contained in or incorporated into
this offering that are not historic facts are forward-looking statements that
are subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements. If
any of the following risks actually occurs, our business, financial condition or
results of operations could be harmed. In that case, the trading price of our
common stock could decline, and you may lose all or part of your
investment.




Current
economic conditions may adversely affect our industry, business and results of
operations.




The
United States economy is currently undergoing a period of slowdown and very high
volatility and the future economic environment may continue to be less favorable
than that of recent years. A substantial portion of our revenues comes from
residential and small business customers whose spending patterns may be affected
by prevailing economic conditions. While we believe that the weakening economy
had a modest effect on our net subscriber additions during recent months, if
these economic conditions continue to deteriorate, the growth of our business
and results of operations may be affected. Reduced consumer spending may drive
us and our competitors to offer certain services at promotional prices, which
could have a negative impact on our operating results.


25




We
have a history of losses and negative cash flows from operations and we may not
be profitable in the future.




We had a
net loss of $2,369,657 for the three months ended March 31, 2009 and a net loss
of $1,197,384 for the three months ended March 31, 2008. We had a net loss for
the year ended December 31, 2008, and a net loss of $9,088,752 for the fiscal
year ended December 31, 2007, and a loss of $5,800,177 for the fiscal year ended
December 31, 2006. The improvement of the net loss between years ending 2008 and
2007 was largely attributable to a gain in the second quarter of 2008 in the
amount of $5,193,620 from the sale of technology. We had an accumulated deficit
at March 31, 2009 of $41,958,406. Our ability to generate positive cash flows
from operations and net income is dependent, among other things, on the
acceptance of our products in the marketplace, market conditions, cost control,
and our ability to raise capital on acceptable terms. The financial statements
included elsewhere in this prospectus do not include any adjustments that might
result from the outcome of these uncertainties. Furthermore, developing and
expanding our business will require significant additional capital and other
expenditures. Accordingly, if we are not able to increase our revenue, then we
may never achieve or sustain profitability. Recent economic events cast a doubt
of uncertainty as to the possible decline of consumer spending in the
future.




We have
been able to meet our operating requirements since January 1, 2009 by raising
approximately $1,000,000 of short term loans and approximately $500,000 of
equity related financing. We will need to receive additional capital to continue
our operations. The recent credit crisis may cause a prolonged strain on the
capital markets which would create even a greater difficulty in obtaining proper
financing into the Company.




Financing
may not be available to us on commercially reasonable terms, if at all. There is
no assurance that we will be successful in raising additional capital or that
the proceeds of any future financings will be sufficient to meet our future
capital needs. It is not likely that we will be able to continue our business
without additional financing. Currently, we have no commitments for additional
financing. The recent credit crisis may cause a prolonged strain on the capital
markets which would create even a greater difficulty in obtaining proper
financing into the Company.




The
price of our Common Stock has been volatile in the past and may continue to be
volatile.




The stock
market in general, and the market for technology companies in particular, has
been experiencing recent extreme volatility that has often been unrelated to the
operating performance of particular companies. From January 1, 2004 to March 31,
2009, the per share closing price of our Common Stock on the Over-the-Counter
Bulletin Board fluctuated from a high of $3.35 to a low of $.03. We believe that
the volatility of the price of our Common Stock does not solely relate to our
performance and is broadly consistent with volatility experienced in our
industry. Fluctuations may result from, among other reasons, responses to
operating results, announcements by competitors, regulatory changes, economic
changes, market valuation of technology firms and general market
conditions.




In
addition, in order to respond to competitive developments, we may from time to
time make pricing, service or marketing decisions that could harm our business.
Also, our Company’s operating results in one or more future quarters may fall
below the expectations of securities analysts and investors. In either case, the
trading price of our Common Stock would likely decline.




The
trading price of our Common Stock could continue to be subject to wide
fluctuations in response to these or other factors, many of which are beyond our
control. If the market price of our Common Stock decreases, then shareholders
may not be able to sell their shares of our Common Stock at a
profit.




Our
common shares are thinly traded, so you may be unable to sell at or near ask
prices or at all if you need to sell your shares to raise money or otherwise
desire to liquidate your shares.


26


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




The
market price for our common shares is particularly volatile given our status as
a relatively unknown company with a small and thinly-traded public float and
limited operating history. The price at which you purchase our common shares may
not be indicative of the price that will prevail in the trading market. You may
be unable to sell your common shares at or above your purchase price, which may
result in substantial losses to you.




The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or “risky” investment due to our
limited operating history, lack of profits to date, and lack of capital to
execute our business plan. As a consequence of this enhanced risk, more
risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer. The following factors may
add to the volatility in the price of our common shares: actual or anticipated
variations in our quarterly or annual operating results, government regulations,
announcements of significant acquisitions, strategic partnerships or joint
ventures, our capital commitments, and additions or departures of our key
personnel. Many of these factors are beyond our control and may decrease the
market price of our common shares, regardless of our operating performance. We
cannot make any predictions or projections as to what the prevailing market
price for our common shares will be at any time, including as to whether our
common shares will sustain their current market prices, or as to what effect, if
any, that the sale of shares or the availability of common shares for sale at
any time will have on the prevailing market price.




Volatility
in our common share price may subject us to securities litigation.




As
discussed in the preceding risk factor, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management's attention and resources. The
application of the “penny stock” rules could adversely affect the market price
of our common shares and increase your transaction costs to sell those
shares.




As long
as the trading price of our common shares is below $5 per share, the open-market
trading of our common shares will be subject to the “penny stock” rules. The
“penny stock” rules impose additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers
and accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their
spouse).


27


For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of securities and have received the
purchaser’s written consent to the transaction before the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
broker-dealer must deliver, before the transaction, a disclosure schedule
prescribed by the SEC relating to the penny stock market. The broker-dealer also
must disclose the commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information on the
limited market in penny stocks. These additional burdens imposed on
broker-dealers may restrict the ability or decrease the willingness of
broker-dealers to sell the common shares, and may result in decreased liquidity
for our common shares and increased transaction costs for sales and purchases of
our common shares as compared to other securities.




Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by
selling broker-dealers; and (5) the wholesale dumping of the same securities by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities.




The
Company may not be able to successfully manage its growth.




The
Company’s liability to manage its growth will require that the Company continue
to improve its operational, financial and management information systems, and to
motivate and effectively manage its employees. If the Company’s management is
unable to manage such growth effectively, then the quality of the Company’s
services, its ability to retain key personnel and its business, financial
condition and results of operations could be materially adversely
affected.




The
Company may be unable to fund future growth.




The
Company’s business strategy calls for the Company to grow and expand its
business both internally and otherwise. Significant funds will be required to
implement this strategy, funding for additional personnel, capital expenditures
and other expenses, as well as for working capital purposes. Financing may not
be available to the Company on favorable terms or at all. If adequate funds are
not available on acceptable terms, then the Company may not be able to meet its
business objectives for expansion. This, in turn, could harm the Company’s
business, results of operations and financial condition. In addition, if the
Company raises additional funds through the issuance of equity or convertible
debt securities, then the percentage ownership of the Company’s shareholders
will be reduced, and any new securities could have rights, preferences and
privileges senior to those of the Common Stock. Furthermore, if the Company
raises capital or acquires businesses by incurring indebtedness, then the
Company will become subject to the risks associated with indebtedness, including
interest rate fluctuations and any financial or other covenants that the
Company’s lender may require. Furthermore, the recent credit crisis may cause a
prolonged strain on the capital markets which would create even a greater
difficulty in obtaining proper financing into the Company.




Our
executive officers have been employed for a relatively short period of time, and
may not be able to implement our business strategy. The failure to effectively
implement our business strategy will have a material, adverse effect on our
business, financial condition and results of operations.




Our
management team consists of 3 executive officers who have been employed by us
for over three years. There can be no assurance that they will function
successfully as a management team to implement our business strategy. If they
are unable to do so, then our business, financial condition and results of
operations could be materially adversely affected.


28




Our
performance could be adversely affected if we are unable to attract and retain
qualified personnel in the fields of engineering, marketing and
finance.




Our
performance is dependent on the services of our management as well as on our
ability to recruit, retain and motivate other key employees in the fields of
engineering, marketing and finance. Competition for qualified personnel is
intense and there is a limited number of persons with knowledge of and
experience with VoIP. We cannot assure you that we will be able to attract and
retain key personnel, and the failure to do so could hinder our ability to
implement our business strategy and could cause harm to our
business.




The
general condition of the telecommunications market will affect our business.
Continued pricing declines may result in a decline in our operating
results.




We are
subject to market conditions in the telecommunications industry. Our operations
could be adversely affected if pricing continues to decline as it has in the
past few years. If pricing declines continue, then we may experience adverse
operating results.




The
VoIP telephony market is subject to rapid technological change. Newer technology
may render our technology obsolete which would have a material, adverse impact
on our business and results of operations.




VoIP
telephony is an emerging market that is characterized by rapid changes in
customer requirements, frequent introductions of new and enhanced products, and
continuing and rapid technological advancement. To compete successfully in this
emerging market, we must continue to design, develop, manufacture, and sell new
and enhanced VoIP telephony software products and services that provide
increasingly higher levels of performance and reliability at lower cost. Our
success in designing, developing, manufacturing, and selling such products and
services will depend on a variety of factors, including:




·
            the
      identification of market demand for new
  products;


·
            the
      scalability of our VoIP telephony software
  products;


·
            product
      and feature selection;


·
            timely
      implementation of product design and
  development;


·
            product
      performance;


·
            cost-effectiveness
      of current products and services and products under
      development;


·
            our
      ability to successfully implement service features mandated by federal and
      state law;


·
            effective
      manufacturing processes; and


·
            effectiveness
      of promotional efforts.




Additionally,
we may also be required to collaborate with third parties to develop our
products and may not be able to do so on a timely and cost-effective basis, if
at all. We have in the past experienced delays in the development of new
products and the enhancement of existing products, and such delays will likely
occur in the future. If we are unable, due to resource constraints or
technological or other reasons, to develop and introduce new or enhanced
products in a timely manner, if such new or enhanced products do not achieve
sufficient market acceptance, or if such new product introductions decrease
demand for existing products, our operating results would decline and our
business would not grow.




The
continued growth of the Internet as a medium for telephone services is
uncertain. If this growth does not continue, our business and financial
condition could be materially adversely affected.




The
continued market acceptance of the Internet as a medium for telephone services
is subject to a high level of uncertainty. Our future success will depend on our
ability to significantly increase revenues, which will require widespread
acceptance of the Internet as a medium for telephone communications. There can
be no assurance that the number of consumers using the Internet for telephone
communications will grow. If use of the Internet for telephone communications
does not continue to grow, our business and financial condition could be
materially adversely affected.


29




Our
business faces security risks. Our failure to adequately address these risks
could have an adverse effect on our business and reputation.




A party
who is able to circumvent our security measures could misappropriate proprietary
information or cause interruptions in our VoIP operations. We may be required to
expend significant capital and resources to protect against the threat of such
security breaches or to alleviate problems caused by such breaches. Consumer
concern over Internet security has been, and could continue to be, a barrier to
commercial activities requiring consumers to send their credit card information
over the Internet. Computer viruses, break-ins, or other security problems could
lead to misappropriation of proprietary information and interruptions, delays,
or cessation in service to our customers. Moreover, until more comprehensive
security technologies are developed, the security and privacy concerns of
existing and potential customers may inhibit the growth of the Internet as a
merchandising medium. Our failure to adequately address these risks could have
an adverse effect on our business and reputation.




The
Company’s ability to do business depends, in part, on the Company’s ability to
license certain technology from third parties.




The
Company relies on certain technology licensed from third parties, and there can
be no assurance that these third party technology licenses will be available to
the Company on acceptable commercial terms or at all. If the Company cannot
license the technology it needs on acceptable commercial terms, then its
business, financial condition and results of operations will be materially and
adversely affected.




Products
and services like the ones we offer change rapidly, therefore, we must
continually improve them. However, our need to invest in research and
development may prevent us from ever being profitable.




Products
and services like the ones we offer are continually upgraded in an effort to
make them work faster, be easier to us and provide more options. Our industry is
characterized by the need for continued investment in research and development.
If we fail to invest sufficiently in research and development, then our products
could become less attractive to potential customers, which could have a material
adverse effect on our results of operations and financial condition. However,
any investment in research and development and technological innovation will
cause our operating costs to increase. This could prevent us from ever achieving
profitability.




We
sell a service that allows our customers to make land-line or mobile telephone
calls over the Internet. Intellectual property infringement claims brought
against us, even without merit, could require us to enter into costly licenses
or deprive us of the technology we need.




The
service we sell allows our users to make land-line or mobile telephone calls
over the Internet. Third parties may claim that the technology we develop or
license infringes their proprietary rights. Any claims against us may affect our
business, results of operations and financial conditions. Any infringement
claims, even those without merit, could require that we pay damages or
settlement amounts or could require us to develop non-infringing technology or
enter into costly royalty or licensing agreements to avoid service
implementation delays. Any litigation or potential litigation could result in
product delays, increased costs or both. In addition, the cost of litigation and
the resulting distraction of our management resources could have a material
adverse effect on our results of operations and financial condition. If
successful, a claim of product infringement could completely deprive us of the
technology we need.




We
have developed our underlying software and we try to protect it from being used
by others in our industry. Failure to protect our intellectual property rights
could have a material adverse effect on our business.




We rely
on copyright, trade secret and patent laws to protect our content and
proprietary technologies and information, including the software that underlies
our products and services. Additionally, we have taken steps that we believe
will be adequate to establish, protect and enforce our intellectual property
rights. There can be no assurance that such laws and steps will provide
sufficient protection to our intellectual property. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain rights to use our products or technologies.


30




We have
pending several patent applications related to embedded software technology and
methods of use. There can be no assurance that these patents will be issued. On
February 28, 2008, the Company was awarded Patent #7,336,654 and on December 2,
2008 Patent #7,460,480 “Dynamically Adapting The Transmission Rate of Packets in
Real-Time VoIP Communications to the Available Bandwidth” from the United States
Patent Trademark Office. Even if the balance of patents pending are issued, the
limited legal protection afforded by patent, trademark, trade secret and
copyright laws may not be sufficient to protect our proprietary rights to the
intellectual property covered by these patents.




Furthermore,
the laws of many foreign countries in which we do business do not protect
intellectual property rights to the same extent or in the same manner as do the
laws of the United States. Although we have implemented and will continue to
implement protective measures in those countries, these efforts may also not be
successful. Additionally, even if our domestic and international efforts are
successful, our competitors may independently develop non-infringing
technologies that are substantially similar or superior to our
technologies.




If
our products contain defects, then our sales would be likely to suffer, and we
may even be exposed to legal claims.  Defects in our products could
have a material adverse impact on our business and operating
results.




Our
business strategy calls for the development of new products and product
enhancements which may from time to time contain defects or result in failures
that we did not detect or anticipate when introducing such products or
enhancements to the market. In addition, the markets in which our products are
used are characterized by a wide variety of standard and non-standard
configurations and by errors, failures and bugs in third-party platforms that
can impede proper operation of our products. Despite product testing, defects
may still be discovered in some new products or enhancements after the products
or enhancements are delivered to customers. The occurrence of these defects
could result in product returns, adverse publicity, loss of or delays in market
acceptance of our products, delays or cessation of service to our customers or
legal claims by customers against us. Any of these occurrences could have a
material adverse impact on our business and operating results.




Sales
to customers based outside the United States have recently accounted for a
significant portion of the Company’s operating revenues, which exposes the
Company to risks inherent in international operations.




One of
our goals is to increase our foreign sales in order to increase our revenues.
However, international sales are subject to a number of risks, including changes
in foreign government regulations, laws, and communications standards; export
license requirements; currency fluctuations, tariffs and taxes; other trade
barriers; difficulty in collecting accounts receivable; longer accounts
receivable collection cycles; difficulty in managing across disparate geographic
areas; difficulties associated with enforcing agreements and collecting
receivables through foreign legal systems; expenses associated with localizing
products for foreign markets; and political and economic instability, including
disruptions of cash flow and normal business operations that may result from
terrorist attacks or armed conflict.




If the
relative value of the U.S. dollar in comparison to the currency of our foreign
customers should increase, as it has in the last few months then the resulting
effective price increase of our products to these foreign customers could result
in decreased sales. In addition, to the extent that general economic downturns
impact our customers, the ability of these customers to purchase our products
could be adversely affected. Payment cycles for international customers are
typically longer than those for customers in the United States.




If we are
able to increase our foreign sales significantly, the occurrence of any of the
foregoing could have a material adverse impact on our results of
operations.




31




Doing
business over the Internet may become subject to governmental regulation. If
these regulations substantially increase the cost of doing business, they could
have a material adverse effect on our business, results of operations and
financial condition.


We are
not currently subject to direct federal, state, or local regulation, and laws or
regulations applicable to access to or commerce on the Internet, other than
regulations applicable to businesses generally. However, due to the increasing
popularity and use of the Internet and other VoIP services, it is possible that
a number of laws and regulations may be adopted with respect to the Internet or
other VoIP services covering issues such as user privacy, “indecent” materials,
freedom of expression, pricing content and quality of products and services,
taxation, advertising, intellectual property rights and information security.
The adoption of any such laws or regulations might also decrease the rate of
growth of Internet use, which in turn could decrease the demand for our products
and services or increase the cost of doing business or in some other manner have
a material adverse effect on our business, results of operations, and financial
condition. Although it is too early to gauge the impact of the most recent
election, the change in administration could ultimately impact existing laws and
regulations relating to our business sector.




The
Company may become subject to litigation.




The
Company may be subject to claims involving how the Company conducts its business
or the market for or issuance of the Common Stock or other securities. Any such
claims against the Company may affect its business, results of operations and
financial conditions. Such claims, including those without merit, could require
the Company to pay damages or settlement amounts and would require a substantial
amount of time and attention from the Company’s senior management as well as
considerable legal expenses. Although the Company does not anticipate that its
activities would warrant such claims, there can be no assurances that such
claims will not be made.




We
depend on third-party vendors for key Internet operations including broadband
connectivity, termination capability and different operating systems. The loss
of any of our vendors could have a material adverse effect on our business,
results of operations and financial condition.




We rely
on our relationships with third party vendors of Internet development tools and
technologies including providers of switches, network termination and
operational and billing specialized operations. There can be no assurance that
the necessary cooperation from third parties will be available on acceptable
commercial terms or at all. Although there are a number of providers of these
services, if we are unable to develop and maintain satisfactory relationships
with such third parties on acceptable commercial terms, or if our competitors
are better able to leverage such relationships, then our business, results of
operations and financial condition will be materially adversely
affected.




We
may not be able to successfully compete with current or future
competitors.




The
market for VoIP service providers and business solutions providers is highly
competitive, and rapidly changing. Since the Internet’s commercialization in the
early 1990’s, the number of websites on the Internet competing for the attention
and spending of consumers and businesses has proliferated. With no substantial
barriers to entry, we expect that competition will continue to intensify. In
addition to intense competition from VoIP services providers, we also face
competition from traditional telephone systems integrators and
providers.




Some of
our competitors, such as Vonage and Skype, have longer operating histories,
significantly greater financial, technical and marketing resources, greater name
recognition and larger existing customer bases than we have. These competitors
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements and to devote greater resources to the development,
promotion, and sale of their products or services than we can. There can be no
assurance that we will be able to compete successfully against current or future
competitors. If we cannot do so, then our business, financial condition and
results of operations will be materially and adversely affected.




32




We
may not be able to comply with the FCC’s requirements to provide 911 service to
our customers. Our inability to comply with these requirements could have an
adverse effect on our business and results of operations.


On June
3, 2005 the Federal Communications Commission (“FCC”) issued the VoIP 911 Order
adopting rules that require interconnected VoIP providers to provide their new
and existing subscribers with 911 service no later than November 28, 2005. On
November 5, 2005, the FCC issued a public notice stating that VoIP providers who
failed to comply with the VoIP 911 Order by November 28, 2005 would not be
required to discontinue the provision of interconnected VoIP service to any
existing customers, but would be required to discontinue marketing VoIP service
and accepting new customers for VoIP service in all areas where the providers
are not transmitting 911 calls to the appropriate PSAP (public safety answering
point) in full compliance with the FCC’s rules. Because we have not fully
complied with the VoIP 911 Order, we are subject to this restriction. We cannot
be certain that we will be able to fully comply with this VoIP 911 Order.
Because it would prevent us from marketing and accepting new customers in
certain areas, our inability to comply with the VoIP 911 Order may have an
adverse effect on our business and results of operations. Although it is too
early to gauge the impact of the most recent election, the change in
administration could ultimately impact existing FCC laws and regulations
relating to our business sector.




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




In
January 2009, we issued to an institution and an individual, warrants to
purchase an aggregate of  2,000,000 shares of Common Stock at an
exercise price of $0.80 per share, vested immediately upon the date of grant
with a five-year expiration period. The warrants were issued in connection with
the execution of a promissory note extension in the aggregate amount of
$1,000,000 made to us. One of our directors made the loan of which half was
guaranteed by an officer and director of ours. The warrants were issued without
registration under the Securities Act in reliance upon the exemptions from
registration set forth in Section 4(2) and Regulation D. We based such reliance
upon factual representations by the recipients of the warrants to us regarding
their investment interest and sophistication, among other things. However, these
shares are entitled to “piggyback registration” rights upon filing by us of a
registration statement.




Also in
January 2009, we issued to one institution and four individuals, warrants to
purchase an aggregate of 500,000 shares of Common Stock at an exercise price of
$0.80 per share, vested immediately upon the date of grant with a five-year
expiration period. The warrants were issued in connection with the execution of
extensions for promissory notes in the aggregate amount of $400,000 made to us.
The warrants were issued without registration under the Securities Act in
reliance upon the exemptions from registration set forth in Section 4(2) and
Regulation D. We based such reliance upon factual representations by the
recipients of the warrants to us regarding their investment interest and
sophistication, among other things. However, these shares are entitled to
“piggyback registration” rights upon filing by us of a registration
statement.




Also in
January 2009, we issued a total of 253,578  shares of Common Stock an
individual in lieu of $131,789 of debt owed by us to three consultants for
services perform for us. The shares were issued without registration under the
Securities Act in reliance upon the exemptions from registration set forth in
Section 4(2) and Regulation D. We based such reliance upon factual
representations by the recipients of the shares to us regarding their investment
interest and sophistication, among other things.




Also in
January 2009, we issued to three individuals, warrants to purchase an aggregate
of 202,127 shares of Common Stock at an exercise price of $0.50 per share,
vested immediately upon the date of grant with a five-year expiration period.
The warrants were issued in connection with the settlement of a debt owed by us
to three consultants for services performed for us. The warrants were issued
without registration under the Securities Act in reliance upon the exemptions
from registration set forth in Section 4(2) and Regulation D. We based such
reliance upon factual representations by the recipients of the warrants to us
regarding their investment interest and sophistication, among other
things.




In
February 2009, we issued to four individuals and an institution, warrants to
purchase an aggregate of 737,375 shares of Common Stock at an exercise price of
$0.80 per share, vested immediately upon the date of grant with a five-year
expiration period. The warrants were issued in connection with the execution of
promissory notes in the aggregate amount of $625,000 made to us. The warrants
were issued without registration under the Securities Act in reliance upon the
exemptions from registration set forth in Section 4(2) and Regulation D. We
based such reliance upon factual representations by the recipients of the
warrants to us regarding their investment interest and sophistication, among
other things. However, these shares are entitled to “piggyback registration”
rights upon filing by us of a registration statement.




Also in
February 2009, we issued to an institution, warrants to purchase an aggregate of
112500  shares of Common Stock at an exercise price of
$0.10  per share, vested immediately upon the date of grant with a
five-year expiration period. The warrants were issued in connection with the
settlement of a debt owed by us to a consultant for services performed for us.
The warrants were issued without registration under the Securities Act in
reliance upon the exemptions from registration set forth in Section 4(2) and
Regulation D. We based such reliance upon factual representations by the
recipients of the warrants to us regarding their investment interest and
sophistication, among other things.


33




Also in
February 2009, we issued a total of 30,000  shares of Common Stock to
two individuals in lieu of $24,000 of debt owed by us to these consultants for
services perform for us. The shares were issued without registration under the
Securities Act in reliance upon the exemptions from registration set forth in
Section 4(2) and Regulation D. We based such reliance upon factual
representations by the recipients of the shares to us regarding their investment
interest and sophistication, among other things.




In March
2009, we issued a total of 800,000  shares of our Common Stock in
exchange for the exercise of 40,000,000 warrants to one individual and one
institution. Of the total amount of shares issued, 800,000 shares of Common
Stock were issued in exchange for 4,000,000  cashless warrants from
one individual who is one of our directors and another individual who is an
officer and director of ours. These shares of our Common Stock shall be issued
without registration under the Securities Act in reliance upon the exemptions
from registration set forth in Section 4(2) and Regulation D. We based such
reliance upon factual representations by the recipients of the shares to us
regarding their investment interest and sophistication, among other
things.




Also in
March 2009, we issued to one institution and two individuals, warrants to
purchase an aggregate of 500,000 shares of Common Stock at an exercise price of
$0.80  per share, vested immediately upon the date of grant with a
five-year expiration period. The warrants were issued in connection with the
execution of extensions for promissory notes in the aggregate amount of $400,000
made to us. The warrants were issued without registration under the Securities
Act in reliance upon the exemptions from registration set forth in Section 4(2)
and Regulation D. We based such reliance upon factual representations by the
recipients of the warrants to us regarding their investment interest and
sophistication, among other things. However, these shares are entitled to
“piggyback registration” rights upon filing by us of a registration
statement.




Also in
March 2009, we issued to one institution, warrants to purchase an aggregate of
112,500 shares of Common Stock at an exercise price of $0.10 per share, vested
immediately upon the date of grant with a five-year expiration period. The
warrants were issued in connection with the settlement of a debt owed by us to a
consultant for services performed for us. The warrants were issued without
registration under the Securities Act in reliance upon the exemptions from
registration set forth in Section 4(2) and Regulation D. We based such reliance
upon factual representations by the recipients of the warrants to us regarding
their investment interest and sophistication, among other things.




Also in
March 2009, we issued to two institution, warrants to purchase an aggregate of
400,000 shares of Common Stock at an exercise price of $0.80 per share, and one
individual, warrants to purchase an aggregate of 20,000  shares of
Common Stock at an exercise price of $1.00  per share vested
immediately upon the date of grant with a three-year expiration period. The
warrants were issued in connection with the settlement of a debt owed by us to a
consultant for services performed for us. The warrants were issued without
registration under the Securities Act in reliance upon the exemptions from
registration set forth in Section 4(2) and Regulation D. We based such reliance
upon factual representations by the recipients of the warrants to us regarding
their investment interest and sophistication, among other things.




The
Company believes that the foregoing transactions with its officers and directors
were on terms no less favorable than could have been obtained from independent
third parties.




Item
      3.
            DEFAULTS
      UPON SENIOR SECURITIES




None.




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




None.


34







Item
      5.
            OTHER
      INFORMATION




(a)
            None.


(b)
            There
      were no changes to the procedures by which security holders may recommend
      nominees to our board of
directors.


35


Item 6.
            EXHIBITS




Exhibit No.
              
              Exhibit
              
              Method of Filing2.1
              
              Agreement
      and Plan of Merger dated as of January 30, 2004, among the Company, DDN
      Acquisition Corp. and i2 Telecom International, Inc. (The schedules to the
      Agreement and Plan of Merger have been omitted from this Report pursuant
      to Item 601(b)(2) of Regulation S-B, and the Company agrees to furnish
      copies of such omitted schedules supplementally to the Securities and
      Exchange Commission upon request.).
              
              Incorporated
      by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
      filed on February 2, 2004.2.2
              
              Asset
      Purchase Agreement dated as of January 30, 2004, between the Company and
      InTransit Media, Inc.
              
              Incorporated
      by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K
      filed on February 2, 2004.2.3
              
              First
      Amendment to Asset Purchase Agreement, dated February 26, 2004, between
      the Company and InTransit Media, Inc.
              
              Incorporated
      by reference to Exhibit 2.3 to the Schedule 13D filed by Paul R. Arena on
      March 8, 2004 with respect to ownership of the Company’s
      securities3.1
              
              Articles
      of Incorporation, as amended (including Certificates of Designations of
      Rights and Preferences of Series A-1, A-2, B and C Preferred
      Stock)
              
              Incorporated
      by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-KSB
      for the year ended December 31, 2003.3.2
              
              Bylaws,
      as amended.
              
              Incorporated
      by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-KSB
      for the year ended December 31, 2003.3.3
              
              Certificate
      of Designations of Rights and Preferences of Preferred Stock Series
      D
              
              Incorporated
      by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
      filed August 13, 2004.3.4
              
              Amendment
      to the Articles of Incorporation filed June 3, 2004.
              
              Incorporated
      by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended June 30, 2004.3.5
              
              Certificate
      of Designation of Rights and Preferences of Preferred Stock Series
      E
              
              Incorporated
      by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
      filed November 22, 2005.3.6
              
              Articles
      of Correction to the Articles of Incorporation filed April 17,
      2006.
              
              Incorporated
      by reference to Exhibit 3.1.8 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended March 31, 2006.4.01
              
              Form
      of Warrant issued by the Company to each buyer in connection with the 2004
      Private Placement.
              
              Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed August 13, 2004.4.02
              
              Form
      of Additional Investment Right issued by the Company to each buyer in
      connection with the 2004 Private Placement.
              
              Incorporated
      by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
      filed August 13, 2004.4.03
              
              Registration
      Rights Agreement among the Company and the buyers signatory thereto
      entered into in connection with the 2004 Private
Placement.
              
              Incorporated
      by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K
      filed August 13, 2004.





36





Exhibit No.
            
            Exhibit
            
            Method of Filing4.04
            
            Form
      of Warrant issued by i2 Telecom International, Inc., a Delaware
      corporation, and converted in the Merger, exercisable until February 27,
      2007, at an exercise price of $0.9031.
            
            Incorporated
      by reference to Exhibit 4.4 to the Company’s Registration Statement on
      Form SB-2 (No. 333-119254).4.05
            
            Warrant
      dated April 19, 2005 to purchase 52,083 shares of Common Stock granted to
      Midsouth Investor Fund, LP.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed April 25, 2005.4.06
            
            Registration
      Rights Agreement dated as of April 19, 2005 between the Company and
      Midsouth Investor Fund, LP.
            
            Incorporated
      by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
      filed April 25, 2005.4.07
            
            Warrant
      dated April 25, 2005 to purchase 156,249 shares of Common Stock granted to
      Vestal Venture Capital.
            
            Incorporated
      by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K
      filed April 25, 2005.4.08
            
            Registration
      Rights Agreement dated as of April 25, 2005 between the Company and Vestal
      Venture Capital.
            
            Incorporated
      by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K
      filed April 25, 2005.4.09
            
            Warrant
      dated June 28, 2005 to purchase 26,042 shares of the Company’s common
      stock granted to Hubert G. Phipps.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed July 5, 2005.4.10
            
            Registration
      Rights Agreement dated as of June 28, 2005 between the Company and Hubert
      G. Phipps.
            
            Incorporated
      by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
      filed July 5, 2005.4.11
            
            Warrant
      dated July 7, 2005 to purchase 39,062 shares of the Company’s common stock
      granted to Paul R. Arena.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed July 12, 2005.4.12
            
            Registration
      Rights Agreement dated as of July 7, 2005 between the Company and Paul R.
      Arena.
            
            Incorporated
      by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
      filed July 12, 2005.4.13
            
            Stock
      Option Agreement dated July 6, 2005 to purchase 85,714 shares of the
      Company’s common stock granted to James Rose.
            
            Incorporated
      by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K
      filed July 12, 2005.4.14
            
            Stock
      Option Agreement dated July 7, 2005 to purchase 168,000 shares of the
      Company’s common stock granted to James Rose.
            
            Incorporated
      by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K
      filed July 12, 2005.4.15
            
            Warrant
      dated August 30, 2005 to purchase 25,000 shares of the Company’s common
      stock granted to Aubrey L. Braswell.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed September 6, 2005.4.16
            
            Registration
      Rights Agreement dated September 7, 2005 among the Company, Troon &
      Co., Gregory P. McGraw and Jordan E. Glazov.
            
            Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      filed September 13, 2005.4.17
            
            Stock
      Option Agreement dated as of September 12, 2005 between the Company and
      Louis Libin.
            
            Incorporated
      by reference to Exhibit 99.7 to the Company’s Current Report on Form 8-K
      filed September 14, 2005.4.18
            
            Stock
      Option Agreement dated as of September 12, 2005 between the Company and
      Aubrey L. Braswell.
            
            Incorporated
      by reference to Exhibit 99.10 to the Company’s Current Report on Form 8-K
      filed September 14, 2005.4.19
            
            Form
      of Warrant dated July 12, 2005 by and amongst the Company and the
      purchasers of the Company’s Series E Preferred Stock.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed November 22, 2005.


37





Exhibit No.
            
            Exhibit
            
            Method of Filing4.20
            
            Warrant
      dated November 3, 2005 by and between the Company and Braswell
      Enterprises, LP.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.21
            
            Warrant
      dated November 18, 2005 by and between the Company and Mena
      Investment.
            
            Incorporated
      by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.22
            
            Warrant
      dated November 18, 2005 by and between the Company and Dr. Angela
      Ranzini.
            
            Incorporated
      by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.23
            
            Warrant
      dated November 23, 2005 by and between the Company and Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.24
            
            Registration
      Rights Agreement dated November 3, 2005 by and between the Company and
      Braswell Enterprises, LP.
            
            Incorporated
      by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.25
            
            Registration
      Rights Agreement dated November 18, 2005 by and between the Company and
      Dr. Angela Ranzini.
            
            Incorporated
      by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.26
            
            Registration
      Rights Agreement dated November 18, 2005 by and between the Company and
      Mena Investment.
            
            Incorporated
      by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.27
            
            Registration
      Rights Agreement dated November 23, 2005 by and between the Company and
      Vestal Venture Capital.
            
            Incorporated
      by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K
      filed December 07, 2005.4.28
            
            Warrant,
      dated as of January 9, 2006, between the Company and Cornell Capital
      Partners, LP.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed January 12, 2006.4.29
            
            Investor
      Registration Rights Agreement, dated as of January 9, 2006, between the
      Company and Cornell Capital Partners, LP.
            
            Incorporated
      by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
      filed January 12, 2006.4.30
            
            Warrant
      dated January 30, 2006 by and between the Company and Richardson &
      Patel, LLP.
            
            Incorporated
      by reference to Exhibit 4.35 to the Company’s Annual Report on Form 10-KSB
      filed April 4, 2006.4.31
            
            Warrant
      dated January 30, 2006 by and between the Company and Peter
      Hogan.
            
            Incorporated
      by reference to Exhibit 4.36 to the Company’s Annual Report on Form 10-KSB
      filed April 4, 2006.4.32
            
            Warrant
      Agreement dated March 11, 2003, granted to Robert F. Hussey to purchase
      65,000 shares of the Company’s common stock.
            
            Incorporated
      by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended March 31, 2004.4.33
            
            Warrant
      dated February 28, 2006 between the Company and Phillip Rapp,
      Jr.
            
            Incorporated
      by reference to Exhibit 4.38 to the Company’s Annual Report on Form 10-KSB
      filed April 4, 2006.4.34
            
            Warrant
      dated March 17, 2006 between the Company and Phillip Rapp,
    Jr.
            
            Incorporated
      by reference to Exhibit 21 to the Company’s Annual Report on Form 10-KSB
      filed April 4, 2006.4.35
            
            Form
      of Warrant.
            
            Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed January 5, 2007.4.36
            
            Form
      of Registration Rights Agreement.
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed January 5, 2007.


38





Exhibit No.
            
            Exhibit
            
            Method of Filing4.37
            
            Form
      of Registration Rights Agreement dated February 28, 2007 for $2 million
      financing
            
            Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed March 1, 2007.4.38
            
            Form
      of Warrant dated February 28, 2007 for $2 million
financing
            
            Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed March 1, 2007.4.39
            
            Registration
      Rights Agreement dated May 2007 by and between the Company and Vestal
      Venture Capital.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form
      10-QSB filed May 17, 2007.4.40
            
            Warrant
      dated May 2007 by and between the Company and Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form
      10-QSB filed May 17, 2007.4.41
            
            Warrant
      dated July 9, 2007 for the benefit of Vestal Venture Capital.
            
            Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed July 13, 2007.4.42
            
            Registration
      Rights Agreement dated July 9, 2007, by and between i2 Telecom
      International, Inc. and Vestal Venture Capital.
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed July 13, 2007.4.43
            
            Form
      of Warrant by and between the Company and Vestal Venture
      Capital
            
            Incorporated
      by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.4.44
            
            Form
      of Registration Rights Agreement by and between the Company and Vestal
      Venture Capital
            
            Incorporated
      by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.4.45
            
            Form
      of Warrant by and between the Company and Braswell Enterprises,
      LP
            
            Incorporated
      by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.4.46
            
            Form
      of Registration Rights Agreement by and between the Company and Braswell
      Enterprises, LP
            
            Incorporated
      by reference to Exhibit 4.8 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.4.47
            
            Form
      of Warrant by and between the Company and Paul Arena
            
            Incorporated
      by reference to Exhibit 4.11 to the Company’s Amendment to Current Report
      on Form 8-K/A filed October 5, 2007.4.48
            
            Form
      of Registration Rights Agreement by and between the Company and Paul
      Arena
            
            Incorporated
      by reference to Exhibit 4.12 to the Company’s Amendment to Current Report
      on Form 8-K/A filed October 5, 2007.4.49
            
            Warrant
      dated August 06, 2007 for the benefit of Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.4.50
            
            Registration
      Rights Agreement by and between the Company and Vestal Venture Capital
      dated September 28, 2007.
            
            Incorporated
      by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.


39





Exhibit No.
            
            Exhibit
            
            Method of Filing4.51
            
            Warrant
      dated August 31, 2007 for the benefit of Phipps.
            
            Incorporated
      by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.4.52
            
            Registration
      Rights Agreement by and between the Company and Phipps dated August 31,
      2007.
            
            Incorporated
      by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.4.53
            
            Warrant
      dated November 04, 2007 for the benefit of Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.4.54
            
            Warrant
      dated November 09, 2007 for the benefit of Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 10.30 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.4.55
            
            Form
      of Warrant.
            
            Incorporated
      by reference to Exhibit 10.33 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.4.56
            
            Form
      of Registration Rights Agreement.
            
            Incorporated
      by reference to Exhibit 10.34 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.4.57
            
            Form
      of Warrant.
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed January 7, 2008.4.58
            
            Form
      of Registration Rights Agreement.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed January 7, 2008.4.59
            
            Form
      of Warrant.
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed March 14, 2008.4.60
            
            Form
      of Registration Rights Agreement.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed March 14, 2008.4.61
            
            Form
      of Warrant.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed March 28, 2008.4.62
            
            Form
      of Warrant.
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed May 30, 2008.4.63
            
            Form
      of Registration Rights Agreement
              .
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed May 30, 2008.4.64
            
            Form
      of Warrant
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed October 3, 2008.4.65
            
            Form
      of Registration Rights Agreement
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed October 3, 2008.


40





Exhibit No.
            
            Exhibit
            
            Method of Filing4.66
            
            Form
      of Warrant
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed March 10, 2009.4.67
            
            Form
      of Registration Rights Agreement
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed March 10, 2009.4.68
            
            Certificate
      of Designations of Rights and Preferences of Series F Convertible
      Preferred Stock.
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K
      filed April 30, 2009.4.69
            
            Form
      of Warrant
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed May 4, 2009.4.70
            
            Form
      of Registration Rights Agreement.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed May 4, 2009.4.71
            
            Form
      of Warrant
            
            Incorporated
      by reference to Exhibit 4.60 to the Company’s Current Report on Form 8-K
      filed May 8, 2009.10.01
            
            Employment
      Agreement between Paul R. Arena and i2 Telecom International, Inc., a
      Delaware corporation, dated June 1, 2002. Represents an executive
      compensation plan or arrangement.
            
            Incorporated
      by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended March 31, 2004.10.02
            
            Amendment
      to Employment Agreement between i2 Telecom International, Inc., a Delaware
      corporation, and Paul Arena dated August 24, 2004. Represents an executive
      compensation plan or arrangement.
            
            Incorporated
      by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
      filed September 9, 2004.10.03
            
            I2
      Telecom International, Inc. 2004 Stock Incentive Plan.
            
            Incorporated
      by reference to Appendix C to the Company Schedule 14A Proxy Statement
      filed May 10, 2004.10.04
            
            Employment
      Agreement dated as of April 6, 2005, between the Company and James Rose.
      Represents an executive compensation plan or arrangement.
            
            Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      filed on April 11, 2005.10.05
            
            Form
      of Note Purchase.
            
            Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed January 5, 2007.10.06
            
            Term
      Loan Agreement between the Company and the Loan Guarantors dated January
      4, 2007.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed January 5, 2007.10.07
            
            Promissory
      Note Agreement between the Loan Guarantors and the Lender dated January 4,
      2007.
            
            Incorporated
      by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
      filed January 5, 2007.10.08
            
            Security
      Agreement between the Company and the Lender dated January 4,
      2007.
            
            Incorporated
      by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
      filed January 5, 2007.10.09
            
            Loan
      Repayment Agreement among the Company, the Lender and the Loan
      Guarantors.
            
            Incorporated
      by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K
      filed January 5, 2007.


41





Exhibit No.
            
            Exhibit
            
            Method of Filing10.10
            
            Form
      of Note Purchase Agreement dated February 28, 2007 for $2 million
      financing
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed March 1, 2007.10.11
            
            Promissory
      Note dated May 2007 by and between the Company and Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form
      10-QSB filed May 17, 2007.10.12
            
            Term
      Loan Agreement dated May 2007 by and between the Company and Vestal
      Venture Capital.
            
            Incorporated
      by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form
      10-QSB filed May 17, 2007.10.13
            
            Pledge
      Agreement dated May 2007 by and between the Company and Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form
      10-QSB filed May 17, 2007.10.14
            
            Loan
      Subordination Agreement dated May 2, 2007 by and between the Company and
      University Bank.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form
      10-QSB filed May 17, 2007.10.15
            
            Term
      Loan Agreement dated July 9, 2007, by and between i2 Telecom
      International, Inc. and Vestal Venture Capital.
            
            Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed July 13, 2007.10.16
            
            Loan
      Subordination Agreement dated July 9, 2007, by and between i2 Telecom
      International, Inc. and University Bank.
            
            Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed July 13, 2007.10.17
            
            Pledge
      Agreement dated July 9, 2007, by and between i2 Telecom International,
      Inc. and Vestal Venture Capital.
            
            Incorporated
      by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
      filed July 13, 2007.10.18
            
            Guaranty
      dated July 9, 2007, by and between Paul Arena and Vestal Venture
      Capital.
            
            Incorporated
      by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
      filed July 13, 2007.10.19
            
            Promissory
      Note dated July 9, 2007 by and between i2 Telecom International, Inc. and
      Vestal Venture Capital.
            
            Incorporated
      by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.10.20
            
            Form
      of Term Loan Agreement by and between the Company and Vestal Venture
      Capital
            
            Incorporated
      by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.10.21
            
            Form
      of Non-Negotiable Secured Promissory Note by and between the Company and
      Vestal Venture Capital
            
            Incorporated
      by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.10.22
            
            Form
      of Term Loan Agreement by and between the Company and Braswell
      Enterprises, LP
            
            Incorporated
      by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.10.23
            
            Form
      of Non-Negotiable Secured Promissory Note by and between the Company and
      Braswell Enterprises, LP
            
            Incorporated
      by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.10.24
            
            Form
      of Guaranty by and between the Company and Vestal Venture
      Capital
            
            Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.10.25
            
            Form
      of Pledge Agreement by and between the Company and Vestal Venture
      Capital
            
            Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A
      filed October 5, 2007.10.26
            
            Form
      of Term Loan Agreement by and between the Company and Paul
      Arena
            
            Incorporated
      by reference to Exhibit 4.9 to the Company’s Amendment to Current Report
      on Form 8-K/A filed October 5,
2007.


42





Exhibit No.
              
              Exhibit
              
              Method of Filing10.27
              
              Form
      of Non-Negotiable Secured Promissory Note by and between the Company and
      Paul Arena
              
              Incorporated
      by reference to Exhibit 4.10 to the Company’s Amendment to Current Report
      on Form 8-K/A filed October 5, 2007.10.28
              
              Employment
      Agreement dated October 11, 2007 by and between i2 Telecom International,
      Inc. and Mark Hewitt. Represents an executive compensation plan or
      arrangement.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed October 17, 2007.10.29
              
              Non-Negotiable
      Secured Promissory Note for the benefit of Vestal Venture Capital dated
      September 28, 2007.
              
              Incorporated
      by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.10.30
              
              Guaranty
      by and between Vestal Venture Capital and Paul Arena dated September 28,
      2007.
              
              Incorporated
      by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.10.31
              
              Term
      Loan Agreement by and between the Company and Vestal Venture Capital dated
      September 28, 2007.
              
              Incorporated
      by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.10.32
              
              Pledge
      Agreement by and between the Company and Vestal Venture Capital dated
      September 28, 2007.
              
              Incorporated
      by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.10.33
              
              Note
      Modification Agreement for the benefit of Phipps dated August 31,
      2007.
              
              Incorporated
      by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.10.34
              
              Form
      of Non-Negotiable Secured Promissory Note.
              
              Incorporated
      by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.10.35
              
              Form
      of Term Loan Agreement.
              
              Incorporated
      by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form
      10-QSB filed November 14, 2007.10.36
              
              Resignation
      Letter.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed November 15, 2007.10.37
              
              Form
      of Non-Negotiable Secured Promissory Note.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed January 7, 2008.10.38
              
              Form
      of Term Loan Agreement.
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed January 7, 2008.10.39
              
              Form
      of Non-Negotiable Secured Promissory Note.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed March 14, 2008.10.40
              
              Form
      of Term Loan Agreement.
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed March 14, 2008.





43





Exhibit No.
              
              Exhibit
              
              Method of Filing10.41
              
              Form
      of Non-Negotiable Secured Promissory Note
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed March 28, 2008.10.42
              
              Form
      of Term Loan Agreement
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed March 28, 2008.10.43
              
              Form
      of Guaranty
              
              Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed March 28, 2008.10.44
              
              Form
      of Non-Negotiable Secured Promissory Note.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed May 30, 2008.10.45
              
              Form
      of Term Loan Agreement.
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed May 30, 2008.10.46
              
              Employment
      Agreement, dated August 5, 2008 and effective August 18, 2008, by and
      between i2 Telecom International, Inc. and Christopher R. Miltenberger.
      Represents an executive compensation plan or arrangement.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed August 14, 2008.10.47
              
              Form
      of Non-Negotiable Secured Promissory Note
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed October 3, 2008.10.48
              
              Form
      of Term Loan Agreement
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed October 3, 2008.10.49
              
              Form
      of Non-Negotiable Secured Promissory Note.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed March 10, 2009.10.50
              
              Form
      of Term Loan Agreement
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed March 10, 2009.10.51
              
              12%
      Non-Negotiable Secured Promissory Note issued by the Registrant to Vestal
      Venture Capital, dated January 30, 2009.
              
              Incorporated
      by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
      filed March 10, 2009.10.52
              
              Term
      Loan Agreement between the Registrant and Vestal Venture Capital, dated
      January 30, 2009.
              
              Incorporated
      by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K
      filed March 10, 2009.10.53
              
              Pledge
      Agreement between the Registrant and Vestal Venture Capital, dated January
      30, 2009.
              
              Incorporated
      by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K
      filed March 10, 2009.10.54
              
              Employment
      Agreement, dated April 20, 2009, by and between the Company and Andrew L.
      Berman. Represents an executive compensation plan or
      arrangement.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed April 24, 2009.10.55
              
              Employment
      Agreement, dated April 20, 2009, by and between the Company and Paul R.
      Arena. Represents an executive compensation plan or
      arrangement.
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed April 24, 2009.


44





Exhibit No.
              
              Exhibit
              
              Method of Filing10.56
              
              Employment
      Agreement, dated April 20, 2009, by and between the Company and
      Christopher R. Miltenberger. Represents an executive compensation plan or
      arrangement.
              
              Incorporated
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed April 24, 2009.10.57
              
              Employment
      Agreement, dated April 20, 2009, by and between the Company and Douglas F.
      Bender. Represents an executive compensation plan or
      arrangement.
              
              Incorporated
      by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed April 24, 2009.10.58
              
              Form
      of Non-Negotiable Secured Promissory Note.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      filed May 4, 2009.10.59
              
              Form
      of Term Loan Agreement.
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed May 4, 2009.10.60
              
              Form
      of Subscription Agreement
              
              Incorporated
      by reference to Exhibit 10.66 to the Company’s Current Report on Form 8-K
      filed May 8, 2009.14.1
              
              Code
      of Ethics and Conduct.
              
              Incorporated
      by reference to Exhibit 14 to the Company’s Annual Report on Form 10-KSB
      filed April 4, 2006.21.1
              
              Subsidiaries
      of the Company.
              
              Incorporated
      by reference to Exhibit 21 to the Company’s Annual Report on Form 10-KSB
      filed April 4, 2006.31.1
              
              Rule
      13a-14(a)/15d-14(a) Certification of the Company’s Chief Executive
      Officer.
              
              Filed
      herewith.31.2
              
              Rule
      13a-14(a)/15d-14(a) Certification of the Company’s Chief Financial
      Officer.
              
              Filed
      herewith.32.1
              
              Section
      1350 Certification of the Company’s Chief Executive Officer and Principal
      Financial Officer.
              
              Filed
      herewith.32.2
              
              Section
      1350 Certification of the Company’s Principal Financial
      Officer.
              
              Filed
      herewith.


45


SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




GEOS COMMUNICATIONS, INC.(formerly known as i2 Telecom International, Inc.)Date: May 3, 2010
                By:
                /s/ Andrew L. BermanAndrew L. BermanChief Executive Officer
                  (Principal Executive Officer)





Date: May 3, 2010
                By:
                /s/ Richard RobersonRichard RobersonChief Financial Officer
                  (Principal Financial and Accounting Officer)


46