1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549





                                   FORM 10-KSB





(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

        For the fiscal year ended December 31, 2006.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

        For the transition period from              to
                                       -------------   -------------

                         Commission file number: 0-27704

[GRAPHIC OMITTED]
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                         i2 TELECOM INTERNATIONAL, INC.
                 (Name of Small Business Issuer in its Charter)

[GRAPHIC OMITTED]
1



     Washington                                                     91-1426372
    (State or Other Jurisdiction of                              (IRS Employer
     Incorporation or Organization)                         Identification No.)


         5070 Old Ellis Pointe Suite 110 Roswell, GA                  30076
           (Address of Principal Executive Offices)                 (Zip Code)

                                 (404) 567-4750
                (Issuer's Telephone Number, Including Area Code)





         Securities registered under Section 12(b) of the Exchange Act: None

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

                           Common Stock, no par value
                                (Title of class)




Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15 (d) of the  Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing  requirements  for the past 90 days. Yes |X| No |_| Check
if there is no  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|



<PAGE>
Indicate by check mark whether the registrant is a shell Company (as defined in
Rule 12b-2 of the exchange act). yes| |   no|X|

The  issuer's  revenues  for its most  recent  fiscal  year were  $754,939.

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold as March 30, 2007 was approximately $14,386,842.

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  As of March 30, 2007,  99,219,600
shares of the issuer's common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None.

<PAGE>


                                                     TABLE OF CONTENTS

PART I
    Item 1. Business
    Item 2. Properties
    Item 3. Legal Proceedings
    Item 4. Submission of Matters to a Vote of Security Holders

PART II
    Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
    Item 6. Management's Discussion and Analysis of Plan of Operation
    Item 7. Financial Statements
    Item 8. Changes in and Disagreements With Accountants on Accounting and
            Financial Disclosure
    Item 8A. Controls and Procedures
    Item 8B. Other Information

PART III
    Item 9. Directors and Executive officers of the Registrant; Compliance with
            Section 16(a) of the Exchange Act
    Item 10. Executive Compensation
    Item 11. Security Ownership of Certain Beneficial Owners and Management and
             Related Stockholder Matters
    Item 12. Certain Relationships and Related Transactions, and Director
             Independence
    Item 13. Exhibits
    Item 14. Principal Accountant Fees and Services

    SIGNATURES




<PAGE>

                                     PART I

Item 1. Description of the Business

Background of the Company

     i2 Telecom International,  Inc., a Washington corporation formerly known as
Digital Data  Networks,  Inc.  (the  "Company"),  was  incorporated  as "Transit
Information Systems,  Inc." under the laws of the State of Washington on October
17, 1988. In July 1995, the Company  changed its name to "Digital Data Networks,
Inc." In March 2004, the Company changed its name to "i2 Telecom  International,
Inc." The  Company's  offices are  currently  located at 5070 Old Ellis  Pointe,
Suite 110, Roswell, GA 30076, and the Company's telephone number at that address
is (404)  567-4750.  The Company  maintains  websites at  www.i2telecom.com  and
www.voicestick.com.

     From October 17, 1988, until February 27, 2004, the Company was a wireless,
passenger communication and advertising company,  principally engaged in selling
digital  advertising  space  through  the  operation  of a  digital  information
network,  utilizing  digital radio  transmission  technology to display  current
news,  information and  advertising to riders on-board public transit  vehicles.
From 1991 through  February  2004,  the Company  operated a digital  information
network in Dallas,  Texas under the assumed  name "The  Transit  Network" on the
Dallas Area Rapid Transit ("DART") bus and rail system.

     In February  1996,  the Company  completed  an initial  public  offering of
shares of its common  stock,  no par value per share (the "Common  Stock"),  and
raised net cash proceeds of approximately $5.8 million.

     On February  26,  2004,  a  newly-formed,  wholly-owned  subsidiary  of the
Company  merged  with  and  into i2  Telecom  International,  Inc.,  a  Delaware
corporation  ("i2  Delaware"),  with  i2  Delaware  surviving  the  merger  as a
wholly-owned subsidiary of the Company (the "Merger"),  pursuant to that certain
Agreement and Plan of Merger dated as of January 30, 2004, among the Company,  a
wholly-owned  subsidiary of the Company, i2 Delaware and certain stockholders of
the Company and i2 Delaware  signatory  thereto  (the  "Merger  Agreement").  In
connection with the Merger,  former  stockholders of i2 Delaware became entitled
to receive  shares of Common  Stock and shares of various  classes and series of
the  Company's  preferred  stock,  no par  value per  share  (collectively,  the
"Preferred  Stock"),  constituting up to 88.44% of the voting  securities of the
Company, assuming the issuance of all contingent consideration such stockholders
may  become  entitled  to receive  pursuant  to the  Merger  Agreement  upon the
resolution  of a certain  legal  proceeding  pending  against  i2  Delaware.  In
connection with the Merger, effective February 26, 2004, (i) the Company's Board
of Directors (the "Board of Directors") appointed Paul R. Arena, Chief Executive
Officer and Chairman of the Board of i2 Delaware,  to serve as a director of the
Company;  (ii) all  individuals  serving as officers of the Company  immediately
prior to the Merger  resigned their  positions  with the Company;  and (iii) the
officers of i2 Delaware were appointed as officers of the Company.

     On February 27, 2004, the Company sold  substantially  all of its operating
assets  relating to the  operations of The Transit  Network to Intransit  Media,
Inc.  ("InTransit  Media") in exchange  for  InTransit  Media  assuming  certain
obligations and liabilities relating to such assets (the "Asset Sale"), pursuant
to that  certain  Asset  Purchase  Agreement  dated as of January 30,  2004,  as
amended by the First  Amendment  thereto dated as of February 26, 2004,  between
the Company and InTransit Media (the "Asset Purchase Agreement").

     On March 5, 2004,  in  connection  with the Merger and the Asset Sale,  the
Company  changed  its name from  "Digital  Data  Networks,  Inc." to "i2 Telecom
International,  Inc." and  changed  its  ticker  symbol on the  over-the-counter
electronic bulletin board from "DIDA" to "ITUI".

     On December 8, 2004, the Company  relocated its corporate  headquarters  to
Georgia in order to be closer to more technology driven companies and to aide in
the Company's recruitment of technology workers.

     As a result of the Merger and the Asset Sale, the Company's  operations now
consist of the operations of i2 Delaware.  The Company's operations as currently
conducted are described below.

Business of the Company

     The  Company,  through  its  subsidiary,  i2  Delaware,  provides  low-cost
telecommunications   services  employing  next-generation  Voice  over  Internet
Protocol ("VoIP")  technology.  These operations are based in Roswell,  Georgia.
Through i2 Delaware,  the Company  controls its own  proprietary  technology and
outsources the majority of its  production and service  functions with strategic
partners. The Company,  through i2 Delaware,  provides the VoiceStick(R),  micro
gateway adapters,  VoIP long distance and other enhanced  communication services
to subscribers. The Company's proprietary technology platform is built to the

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<PAGE>



     Session Initiation  Protocol ("SIP") standard.  The Company's revenue model
now includes  revenue from the sale of the  VoiceStick(R)  and other  integrated
access  devices  ("IADs") along with recurring  monthly  subscriptions  and call
minute  termination.  The Company believes its proprietary  technology  provides
meaningful  advantages  as compared to the  technology  of other VoIP  providers
particularly in the areas of quality of service, cost and robust feature set.

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


          o near carrier grade quality of service

          o low cost long distance calling worldwide;

          o broadband telephony access via your laptop with the Company's
            VoiceStick.

          o broadband telephony technology in the Company's InternetTalker IAD.

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

          o unlimited global calling among VoiceStick(R) and micro gateway
            users with a minimal monthly subscription;

          o local and long distance calling via cellular phones utilizing
            Company's proprietary technology. and

     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.
Industry Overview

     The VoIP industry has grown  dramatically from the early days of calls made
through personal computers.  VoIP is an alternative  technology that can replace
services  provided  by  the  traditional   telephone  network.  VoIP  technology
translates voice into data packets, transmits the packets over data networks and
reconverts  them into voice at the  destination.  Unlike  traditional  telephone
networks, VoIP does not use dedicated circuits for each telephone call; instead,
the same VoIP network can be shared by multiple users for voice,  data and video
simultaneously.  This type of data  network is more  efficient  than a dedicated
circuit  network  because the data network is not  restricted  by the  one-call,
one-line limitation of a traditional telephone network. This improved efficiency
creates  cost savings that can be passed on to the consumer in the form of lower
rates or retained by the VoIP provider.

      The Company believes that the growth of VoIP has been and continues to be
      driven primarily by:

     o increasing user demands for lower cost phone service;

     o improved quality and reliability of VoIP calls fueled by technological
       advances, increased network development and greater bandwidth  capacity;

     o continuing domestic and international deregulation, opening new market
       opportunities for VoIP services;

     o new product innovations that allow VoIP providers to offer services
       not currently offered by traditional phone service companies; and


                                     2
<PAGE>



     o    growing demand for long distance communication services driven by the
          increased mobility of the global workforce.

     As  a   result   of  these   developments,   consumers,   enterprises   and
telecommunications  providers  are  continuing  to embrace  offerings  from VoIP
providers,  such as those  offered by the Company.  Consumers,  particularly  in
emerging markets,  are increasingly using VoIP-enabled  services,  calling cards
and Internet Protocol ("IP") telephones,  to realize significant cost savings on
long distance calls.  Enterprises are significantly  reducing telephony expenses
by using VoIP to link users  within  offices and around the world.  VoIP enables
telecommunications  providers to reduce their  network  costs and to deliver new
products and services that cannot be supported by traditional networks.

Competition

     Domestically,  the long  distance  market  in the  United  States is highly
competitive.  The Company faces  competition  from several much larger providers
and numerous  similar-sized and smaller providers.  This competition is based on
price and  service  offerings,  and the  Company  expects  to  continue  to face
competition based on price and service offerings from existing competitors.  The
principal competitive factors in the market include:  price, quality of service,
distribution,   customer   service,   reliability,   network  capacity  and  the
availability  of  enhanced  communications   services.  Some  of  the  Company's
competitors  include  AT&T,  Inc.,  Sprint,  Inc.  and Regional  Bell  Operating
Companies,  which offer services and products  competitive with the Company's on
the above factors,  including  offering their own pre-paid  calling cards.  Some
providers,  such as Vonage, Inc. and Net2Phone, Inc. offer VoIP services similar
to what is offered by the Company.

     Internationally,  the competitive marketplace varies from region to region.
In markets where the telecommunications  marketplace has been fully deregulated,
the competition  continues to increase.  Even a newly deregulated  market allows
new entrants to establish a foothold and offer competitive  services  relatively
easily. Internationally, the Company's competitors include both government-owned
and incumbent phone companies and emerging  competitive  carriers.  As consumers
and  telecommunications  providers have come to understand the benefits that may
be realized from transmitting  voice over the Internet,  a substantial number of
companies  have  emerged to provide VoIP  services.  The  principal  competitive
factors  in  the  international  market  include:  price,  quality  of  service,
distribution,  customer service, reliability, network capacity, the availability
of enhanced communications services and brand recognition.



Products and Services

     The  Company  is a low cost  long  distance  voice  service  provider  with
proprietary  products  such  as the  VoiceStick(R),  micro  gateways  and  other
non-proprietary  related devices. i2 Telecom(R) and VoiceStick(R) are registered
trademarks of the Company The Company uses highly  optimized  micro  controllers
and mixed  signal  integrated  circuits,  resulting  in a very  inexpensive  and
efficient  communications  platform  that is secure  and device  agnostic.  The
quality of service issues common to previous VoIP designs (dropped calls, delays
and  echoes)  have  been  greatly   reduced.   The  Company's   state-of-the-art
echo-canceling  technology  delivers sound quality  comparable to a conventional
phone call.

The VoiceStick(R) enables users to:
     o    make unlimited calls to other subscribers anywhere in the world using
          the customer's laptop and a broadband connection;

     o    make local and long distance calls to people who use a normal
          telephone line using the Company's least cost routing network that
          will provide competitive low cost long distance rates; and

     o    receive their own direct inward dial (DID) phone number.

     The VoiceStick(R) is a plug and play,  portable key chain-sized device that
inserts  directly  into the USB port of almost any desktop or notebook  computer
(including personal data assistants ("PDAs"). The VoiceStick(R) instantly allows
the  user to  make  domestic  and  international  long  distance  calls  via the
internet,  with the use of an included headphone and DID phone number.  Once the
VoiceStick(R)  is  installed  in the USB port or the  softphone  application  is
downloaded  from the Company's  website,  a dial pad display enables the user to
call  any  telephone  in the  world  directly  from  the  computer,  using  VoIP
technology, at a fraction of normal long-distance rates.

The micro gateway enables users to:

                                      3
<PAGE>


     make unlimited calls to other  subscribers  anywhere in the world using the
     customer's existing phone (no new or special IP phone required), at no cost
     other  than  the  initial  cost  of the  micro  gateways  and  the  monthly
     subscription fees;

     make local and long  distance  calls to people  who use a normal  telephone
     line using the i2 Delaware  least cost  routing  network  that will provide
     competitive low cost long distance rates;

receive their own direct inward dial (DID) phone number.

     A micro  gateway is the size of a PDA and enables the user to make  secure,
worldwide  phone calls over the Internet.  Broadband  users simply connect their
broadband Internet service to the micro gateway and plug in their regular phone.
The micro gateway combines  state-of-the-art  chipset design with patent pending
architecture  and proprietary  software to produce  performance  believed by the
Company to be competitive with other VoIP gateway  architectures.  Customers can
also  connect to the micro  gateway  through  their  personal  computer  ("PC").
Customers then activate their account by visiting the Company's  website and are
ready to make  calls.  The  subscriber  can make  unlimited  free calls to other
subscribers  located anywhere in the world for the cost of the micro gateway and
a nominal  monthly  subscription  fee. The  subscriber can also make domestic or
global long distance  calls to people who use a standard  telephone line through
the Company's  least cost routing  network at highly  competitive  long distance
rates.

     The Company plans to introduce other enhanced services and products through
its ongoing  investment in research and development.  The Company is integrating
IM chat,  video  and  Internet  television,  among  other  applications,  into a
communications  portal.  This would offer the user complete  mobility within the
home or office.  The  Company has  enhanced  cellular  connectivity  to the VoIP
network  through  modifications  to the  micro  gateway  and  its  VoiceStick(R)
service.

Business Strategy

     The Company's primary objective is to become a leading low cost provider of
domestic and international long distance  communications  services to enterprise
customers, small to middle market enterprises ("SMEs"), small office/home office
("SOHO") users and  individuals.  The following is a summary of the key elements
of the Company's business and growth strategy:


          Focus on markets where convenience and cost  are key concerns-

     o    The  Company's  VoceStick(R)  product  fills the void in the  market
          where  portability,  ease of use,  and true o  plug-n-play  is  almost
          non-existent. The VoiceStick(R) allows anyone with a laptop or desktop
          and  broadband  access to turn their  computer  into a soft phone with
          true   plug-n-play   capabilities.

          Utilize   multi-tiered   indirect distribution channels in
          international markets -

     o    The Company will employ various distribution  strategies in order to
          address  its  targeted  international  markets  in the most  efficient
          manner  possible.  Based upon the individual  characteristics  of each
          market,  the Company will leverage its  relationships  with enterprise
          customers,  telephone companies, major OEMs, cable companies, Internet
          Service Providers ("ISPs") and distributors.


          Seek OEM licensing opportunities -

     o    The  Company is seeking  additional  licensing  agreements  with large
          communications equipment suppliers that would o not only pay licensing
          fees, but would also market the use of the Company's  network services
          to its customer base.

          Control introduction of new products and services -

     o    The Company  believes  it will be able to provide  more  innovative
          products on an expedited basis because it either owns and controls its
          proprietary technology or has access to leading edge technologies.

          Outsource majority elements of production and service delivery -

     o    In order to reduce overhead and capital expenditure requirements, the
          Company will continue to rely largely upon outsourcing with best of
          breed strategic partners.


                                      4

<PAGE>


Sales and Marketing

     The  website   www.voicestick.com  is  the  cornerstone  for  domestic  and
international  information  retrieval,  the  service  plans  and call  rates for
specific countries as well as frequently asked questions. It also functions as a
full  e-commerce site through its ability to support  provisioning,  account set
up, the  addition of pre-paid  minutes to accounts,  account  status and account
inquiry.

     The Company has  implemented a variety of methods in order to drive traffic
to its  website.  Banner  advertisements  on key  portals,  websites  and search
engines are  expected to provide the Company  with a web  presence.  The Company
intends to develop partnerships with enterprise customers leveraging their brand
awareness and distribution into various sales channels and demographic segments.

     The primary  target  audience for the  VoiceStick(R)  are  individuals  and
employees   needing  a  second  line,  users  of  international   telephony  and
individuals  with  access to  broadband.  The  Company  is also  focused  on the
international  markets  with an  emphasis  on Asia  Pacific,  Central  and South
America as well as Europe.  Additionally,  the  Company  believes  that  foreign
markets have the highest cost of long  distance  service and thus provide one of
the best  opportunities for the Company to offer significant cost savings to end
users. To reach the end user segment, the Company will utilize an indirect sales
strategy that leverages strategic relationships with telephone companies,  major
OEMs, cable companies, ISPs and distributors.

     Since the United States is the most price competitive  market,  the Company
is  targeting  the U.S.  market  through  a  differentiated  approach  of retail
channels, agents and selected OEMs.

Customer Service

     The Company's customer support center is located in Roswell,  Georgia,  and
offers Tier 1 and Tier 2 support  with  established  escalation  procedures  and
associated response metrics.  Tier 3 support is provided by the Company's remote
engineering  staff. The Company continues to explore the feasibility of offering
24/7 customer support services to further refine quality of service. Pursuant to
its overall business strategy,  the Company may elect to outsource this function
in the future.


Intellectual Property

     The Company has patents  pending which include  technology  for a Telephony
Protocol  Engine,  ("TPE"),  which  includes,  but is not limited to  technology
involving  Audio  Compression  Enhancement,   ("ACE")  and  various  methods  of
originating  VoIP  communications.  Additionally,  there are 9 patents  pending,
including  over 80 claims,  and four  registered  trademarks  which the  Company
believes offer substantial  future value in the areas of cellular  bridging,  as
well as for the  "VoiceStick(R),  the first  portable VoIP phone.  It is further
believed that this IP offers additional  revenue potential through royalties and
licenses.


Government Regulation

     On  November  05,  2005,  the  Federal   Communications   Commission  (FCC)
(www.fcc.gov)  Enforcement  Bureau issued further  revisions to E.911 compliance
requirements for interconnected VoIP service providers.  VoIP providers won't be
forced to cut off  subscribers  who don't  receive E911 services by November 28,
2005.  However,  VoIP companies will be expected to stop marketing their service
and accepting  new  customers in service  areas that aren't  equipped to do E911
call routing,  even if subscribers would be able to get "basic" 911 service. The
FCC document states "Although we do not require providers that have not achieved
full 911  compliance  by November  28, 2005,  to  discontinue  the  provision of
interconnected  VoIP service to any existing  customers,  we do expect that such
providers will discontinue  marketing VoIP service,  and accepting new customers
for their service, in all areas where they are not transmitting 911 calls to the
appropriate PSAP in full compliance with the Commission's rules."

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<PAGE>


As of the date of this report, the Company has only partly met the
FCC's order for E.911 compliance.


Research and Development

     The Company  estimates that its employees have spent  approximately  10,000
hours in 2006 and  25,000  hours in 2005 in  efforts  related  to  research  and
development.  The Company  estimates  these  efforts  represented  approximately
twenty  percent of the total  overhead  expenses  incurred in each year,  as the
Company reduced its total overhead in 2006.

Environmental Regulations

     The Company does not have any environmental regulations to consider.

Manufacturing

     The Company procures the flash memory for the VoiceStick(R) from commercial
vendors and then  programs  the devices  with its  proprietary  and licensed 3rd
party software utilizing the Company's proprietary code. The units are assembled
and  programmed in the U.S. For the micro  gateway,  the Company  outsources the
manufacturing  through  third  parties  mostly  located  in China.  The  Company
believes  that  is has  negotiated  a very  favorable,  low  cost  manufacturing
contracts that leverages purchasing power and global scale. The Company has also
identified alternative sources of production.

Employees

     As of  March  30,  2007,  the  Company  had 10  full-time  employees  and 2
part-time employees.  The Company relies on a number of consultants and advisors
to assist it. All of such  employees  provide  services in  connection  with the
operations of the Company's subsidiary, i2 Delaware.

 Risk Factors

     The  Company  is  subject  to  various  risks  that may  material  harm its
business,  financial  condition and results of  operations.  An investor  should
carefully  consider the risks and  uncertainties  described  below and the other
information  in this filing  before  deciding to purchase the  Company's  common
stock. If any of these risks or  uncertainties  actually  occurs,  the Company's
business,  financial  condition or operating results could be materially harmed.
In that case, the trading price of the Company's  common stock could decline and
an investor could lose all or part of his or her investment.

 The Company has a history of losses and negative cash flows from operations
 and may not be profitable in the future.

     The Company has incurred  significant  net losses,  including net losses of
$5,800,177  for the year ended  December  31, 2006 and  $8,027,647  for the year
ended December 31, 2005. The Company has an accumulated deficit of approximately
$28  million at  December  31,  2006.  The  ability of the  Company to  generate
positive cash flows from  operations  and net income is  dependent,  among other
things,  on market  conditions,  the recovery of recorded assets,  cost control,
identifying and securing  additional revenue sources,  and the Company's ability
to raise capital under  acceptable  terms.  The  financial  statements  included
elsewhere in this report do not include any  adjustments  that might result from
the outcome of these  uncertainties.  Furthermore,  developing and expanding the
Company's  business  will  require  significant  additional  capital  and  other
expenditures.  Accordingly,  if the Company is not able to increase its revenue,
then  it  may  never  generate   sufficient   revenues  to  achieve  or  sustain
profitability.

The price of the Common Stock has been volatile.

     The stock  market in general,  and the market for  technology  companies in
particular,  has recently  experienced  extreme  volatility  that has often been
unrelated to the operating performance of particular companies.  From January 1,
2002 to December 31, 2006,  the per share  closing  price of the Common Stock on
the Over-the-Counter  Bulletin Board fluctuated from a high of $3.35 to a low of
$0.02. The Company believes that the volatility of the price of the Common Stock
does not solely relate to the Company's  performance  and is broadly  consistent
with volatility  experienced in the Company's 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,  the Company
may from time to time make pricing,  service or marketing  decisions  that could
harm its business. Also, the Company's operating results in one or more future

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<PAGE>


quarters may fall below the expectations of securities analysts and investors.
In either case, the trading price of the Common Stock would likely decline.

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

     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 which is relatively  unknown to stock  analysts,  stock brokers,
institutional  investors and others in the investment community that generate or
influence  sales  volume,  and  that  even if we came to the  attention  of such
persons,  they  tend to be  risk-averse  and  would be  reluctant  to  follow an
unproven  company  such as ours or purchase  or  recommend  the  purchase of our
shares until such time as we became more seasoned and viable.  As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or  non-existent,  as compared to a seasoned issuer which has a large
and steady volume of trading  activity that will  generally  support  continuous
sales without an adverse effect on share price. We cannot give 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 and lack of profits to date,  lack of capital to
execute our business plan, and  uncertainty of future market  acceptance for our
restaurant  concept.  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,  market  acceptance  of  our
restaurant  concept,   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.

                                      7
<PAGE>


     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).

     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.

The effectiveness of the Company's executive officers

     There can be no  assurance  that the  Company  can retain  their  executive
officers,  nor can there be  assurance  that the  current  management  team will
function successfully to implement the Company's strategy. If they are unable to
do  so,  then  the  Company's  business,  financial  condition  and  results  of
operations could be materially adversely affected.

The Company's performance could be affected if it is unable to attract and
retain qualified personnel.

     The Company's  performance  is  substantially  dependent on the services of
current  management as well as on the Company's  ability to recruit,  retain and
motivate  its other  officers  and key  employees.  The  Company's  success also
depends on its ability to attract  and retain  additional  qualified  employees.
Competition for qualified  personnel is intense and there is a limited number of
persons  with  knowledge  of and  experience  in the  Internet.  There can be no
assurance that the Company will be able to attract and retain key personnel, and
the  failure  to do so could  hinder the  Company's  ability  to  implement  its
business strategy and harm its business.

                                      8
<PAGE>


     The Company believes its future success will also depend in large part upon
its  ability  to attract  and retain  highly  skilled  management,  engineering,
consulting,  sales,  marketing  and  finance  personnel.  Competition  for  such
personnel  is intense and there can be no  assurance  that the  Company  will be
successful in attracting and retaining such personnel.

     The loss of the  services of any of the key  personnel,  the  inability  to
attract  or  retain  qualified  personnel  in the  future,  or  delays in hiring
required  personnel,  particularly  engineers,  consulting and sales  personnel,
could have a  material  adverse  effect on the  Company's  business,  results of
operations and financial condition.

The Company is exposed to the general condition of the telecommunications
market.

     The Company's  business is subject to global  economic  conditions,  and in
particular,  market conditions in the telecommunications industry. The Company's
operations  could be  adversely  affected if declines in capital  spending  from
telecommunications  service providers  continue.  If global economic  conditions
worsen,  or  if  the  prolonged  slowdown  in  the  telecommunications  industry
continues, then the Company may experience adverse operating results.

The Company must be able to adapt to rapidly changing technology.

     The Company's market is  characterized  by rapidly  changing  technologies,
frequent new product and service  introductions and evolving industry standards.
As a result of the complexities inherent in today's computing environments,  the
Company faces  significant  challenges in remaining  abreast of such changes and
product  introductions.  If the Company cannot keep pace with these changes,  it
will not be able to meet its clients'  increasingly  sophisticated needs and its
services will become less competitive.  The Company's future success will depend
on its  ability  to: keep pace with  continuing  changes in industry  standards,
information  technology,  and client  preferences;  respond effectively to these
changes; and develop new services or enhance its existing services.  The Company
may be unable to develop and introduce new services or  enhancements to existing
services in a timely  manner or in response to  changing  market  conditions  or
client requirements.

The Company's business depends upon the acceptance of the Internet as a medium
for commerce.

     Use of the Internet by consumers  for use in VoIP  communications  is at an
early stage of  development,  and market  acceptance of the Internet as a medium
for commerce is subject to a high level of  uncertainty.  The  Company's  future
success will depend on its ability to  significantly  increase  revenues,  which
will require the  development  and  widespread  acceptance  of the Internet as a
medium for  commerce.  There can be no  assurance  that the  Internet  will be a
successful  retailing  channel.  The  Internet  may  not  prove  to be a  viable
commercial  marketplace  because  of  inadequate  development  of the  necessary
infrastructure,  such as reliable network backbones,  or complementary services,
such as high-speed  modems and security  procedures for financial  transactions.
The  viability  of  the  Internet  may  prove  uncertain  due to  delays  in the
development  and adoption of new  standards  and  protocols to handle  increased
levels of Internet activity or due to increased government regulation. If use of
the  Internet  does  not  continue  to  grow,  or  if  the  necessary   Internet
infrastructure  or  complementary  services  are not  developed,  the  Company's
business,  results of operations,  and financial  condition  could be materially
adversely affected.

The Company faces security risks.

     A party who is able to circumvent  the Company's  security  measures  could
misappropriate  proprietary  information or cause interruptions in the Company's
VoIP operations.  The Company 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  the  Company's  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.

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.

The Company's need to invest in research and development could harm the
Company's operating results.

     The  Company's   industry  is  characterized  by  the  need  for  continued
investment  in  research  and  development.  If  the  Company  fails  to  invest
sufficiently  in research and  development,  then the Company's  products  could
become  less  attractive  to  potential  customers,  which could have a material
adverse effect on the Company's  results of operations and financial  condition.

                                      9

<PAGE>

As a result of the Company's need to maintain or increase its spending levels in
this area,  the Company's  operating  results could be materially  harmed if the
Company's  net sales fall below  expectations.  In addition,  as a result of the
need for research and development and  technological  innovation,  the Company's
operating costs may increase in the future.

Intellectual property infringement claims against the Company, even without
merit, could require the Company to enter into costly licenses or deprive the
Company of the technology it needs.

     The  Company's  industry  is  technology   intensive.   As  the  number  of
competitors in the Company's target markets  increases and the  functionality of
the products produced by such competitors  further  overlaps,  third parties may
claim that the  technology  the Company  develops or  licenses  infringes  their
proprietary rights.

     Any claims  against the Company or any of its  subsidiaries  may affect the
Company's  business,   results  of  operations  and  financial  conditions.  Any
infringement  claims, even those without merit, could require the Company to pay
damages  or  settlement   amounts  or  could  require  the  Company  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  the  Company's  management
resources  could  have a material  adverse  effect on the  Company's  results of
operations  and  financial  condition.   If  successful,   a  claim  of  product
infringement could deprive the Company of the technology it needs altogether.

Failure  to protect the Company's intellectual property rights could have a
material adverse effect on the Company's business.

     The Company  relies on  copyright,  trade secret and patent laws to protect
its content and proprietary  technologies  and  information.  Additionally,  the
Company has taken steps it believes will be adequate to  establish,  protect and
enforce its intellectual  property  rights.  There can be no assurance that such
laws and steps will provide  sufficient  protection to the Company.  Despite the
Company's  efforts to protect the  Company's  proprietary  rights,  unauthorized
parties  may attempt to copy or  otherwise  obtain  rights to use the  Company's
products or technologies.

     The Company has pending  several  patent  applications  related to embedded
software  technology.  There can be no  assurance  that  these  patents  will be
issued.  Even if these patents are issued, the limited legal protection afforded
by patent,  trademark,  trade secret and copyright laws may not be sufficient to
protect the Company's proprietary rights to the intellectual property covered by
these patents.

     Furthermore,  the laws of many foreign  countries in which the Company does
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  the Company has
implemented  and  will  continue  to  implement  protective  measures  in  those
countries, these efforts may also not be successful.  Additionally,  even if the
Company's  domestic and  international  efforts are  successful,  the  Company's
competitors  may  independently  develop  non-infringing  technologies  that are
substantially similar or superior to the Company's technologies.

If the Company's products contain defects, then the Company's sales are likely
to suffer, and the Company may be exposed to legal claims.

     The Company's  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 the Company did not detect or anticipate when  introducing such
products or  enhancements to the market.  In addition,  the markets in which the
Company's  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 the Company's  products.  Despite
product  testing by the  Company,  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 the  Company's
products,  delays or  cessation of service to the  Company's  customers or legal
claims by customers against the Company.

     To the extent that contractual provisions that limit the Company's exposure
to legal claims are unenforceable or such claims are not covered by insurance, a
successful  products liability claim could have a material adverse effect on the
Company's business, results of operations and financial condition.

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

     International  sales  represented  approximately  30  %  of  the  Company's
revenues for the year ended December 31, 2006. Furthermore,  the Company expects
sales to  international  markets to increase as a percentage  of revenues in the
future.  International sales are subject to a number of risks, including changes
in foreign government regulations,  laws, and communications  standards;  export

                                      10

<PAGE>

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 in hiring qualified local personnel; 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
the Company's  foreign customers should increase,  then the resulting  effective
price increase of the Company's products to these foreign customers could result
in decreased sales. In addition,  to the extent that general economic  downturns
impact the Company's  customers,  the ability of these customers to purchase the
Company's products could be adversely affected. Payment cycles for international
customers  are typically  longer than those for customers in the United  States.
The foreign  markets for the  Company's  products  may develop  more slowly than
currently anticipated.

The Company's business may become subject to governmental regulation.

     The Company is 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 the Company's products and services or increase the cost
of doing business or in some other manner have a material  adverse effect on the
Company's business, results of operations, and financial condition.

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.

The Company depends on third-party vendors for key Internet operations.

     The  Company  relies on its  relationships  with  third  party  vendors  of
Internet development tools and technologies.  There can be no assurance that the
necessary  cooperation  from  third  parties  will be  available  on  acceptable
commercial  terms or at all. If the  Company is unable to develop  and  maintain
satisfactory  relationships  with such third  parties on  acceptable  commercial
terms,  or if the  Company's  competitors  are  better  able  to  leverage  such
relationships,  then the Company's business, results of operations and financial
condition will be materially adversely affected.

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

     The market for VoIP services providers and business solutions  providers is
new,   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 businesses has proliferated. With no
substantial  barriers  to entry,  the  Company  expects  that  competition  will
continue to intensify.  With respect to competing for  business'  attention,  in
addition to intense competition from VoIP services  providers,  the Company also
faces competition from traditional telco systems consultants and providers. Many
of the  Company's  current  and  potential  competitors  have  longer  operating
histories,  significantly greater financial,  technical and marketing resources,
greater name  recognition and larger  existing  customer bases than the Company.
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 the  Company.  There can be no  assurance  that the Company will be able to
compete successfully  against current or future competitors.  If the Company can
not do so, then its business, financial condition and results of operations will
be materially and adversely affected.

The Company has a short operating history.

     The Company began providing low-cost  telecommunication  services employing
next-generation  VoIP  technology  when it acquired i2 Delaware in the Merger in
February 2004. i2 Telecom began its operations in January 2003.  Therefore,  the
Company has only a limited  operating  history upon which an  evaluation  of the
Company and its prospects can be based.  Consequently,  the Company's operations
are  subject  to all of  the  risks  inherent  in a  development-stage  business

                                      11

<PAGE>

enterprise,  and the Company's  prospects  must be evaluated  with a view to the
risks encountered by a company in an early stage of development, particularly in
light of the uncertainties relating to the new and evolving markets in which the
Company  operates and acceptance of the Company's  business model,  products and
services. The likelihood of the Company's success must be considered in light of
the  problems,  expenses,  difficulties,  complications  and  delays  frequently
encountered in connection with a new business and the competitive environment in
which we operate.

We may not be able to obtain additional financing.

     In order to develop  and  expand  the  Company's  operations  and  increase
revenues,  additional financing will be required, which additional financing may
not be available to the Company on  commercially  reasonable  terms,  if at all.
There is no assurance that the Company will be successful in raising  additional
capital or that the proceeds of any future financings will be sufficient to meet
the Company's  future capital needs.  We may need to seek  additional  financing
sooner than we anticipate as a result of any of the following factors:

    o        changes in operating plans;
    o        acceleration of the Company's business development plans;
    o        lower than anticipated sales;
    o        increased costs of business development;
    o        increased operating costs; or
    o        potential acquisitions.

We may not be able to comply with certain regulatory actions.

     On   November  7,  2005  the  Federal   Communications   Commission   (FCC)
(www.fcc.gov)  Enforcement  Bureau issued further  revisions to E911  compliance
requirements for interconnected VoIP service providers.  The FCC ruled that VoIP
providers  will not be forced to cut off  subscribers  who  don't  receive  E911
services by November 28, 2005. However,  VoIP companies will be expected to stop
marketing their service and accepting new customers in service areas that aren't
equipped  to do E911  call  routing,  even if  subscribers  would be able to get
"basic"  911  service.  The FCC  document  states  "Although  we do not  require
providers  that have not achieved  full 911  compliance by November 28, 2005, to
discontinue  the  provision  of  interconnected  VoIP  service  to any  existing
customers,  we do expect that such  providers  will  discontinue  marketing VoIP
service,  and accepting new customers for their service, in all areas where they
are not  transmitting  911 calls to the appropriate PSAP in full compliance with
the  Commission's  rules." The Company has been working to  implement  such E911
services and has various agreements in place to fulfill the requirements.

     The Company has available to all of its Residential and Mobile Professional
("VoiceStick(R)")  customers access to emergency  services with either VoIP E911
or 911 functionality.

     The VoIP E911  implementation  will deliver critical caller  information to
emergency  personnel and will insure that emergency  operators  receive the same
level of emergency  response  information  that  traditional  wireline  services
provide. E911 Mobility Service is an E911 solution for VoIP that supports mobile
and nomadic users, remote users, static users, and users with numbers foreign to
the local rate center.  With this  service,  VoIP 911 calls can be routed within
the  existing  911  network,   delivering   user-provided   registered  location
information and Automatic Number  Information  ("ANI") on dedicated 9-1-1 trunks
to the appropriate PSAP.

     Other  government  regulations  and taxes may be imposed  from time to time
which may  negatively  impact the  Company's  operations  and ability to perform
within certain guidelines. The Company intends to comply as necessary and within
its capabilities.


Item 2. Description of Property

     The Company  leases  approximately  3,500 feet in Roswell,  Georgia for its
corporate  operations,  and 100 square feet in downtown  Atlanta for its Network
Operation Center at a total monthly rent of $2,800 and $6,100, respectively. The
Company  is  obligated  under the lease in  Roswell,  Georgia  until  2008.  The
Company's lease for the Network  Operating Center is on a month-to-month  basis.
The addresses  for these  locations  are: 5070 Old Ellis Pointe Road,  Suite 110
Roswell 30076 and 56 Marietta Street, Atlanta, Georgia, 30303

                                      12

<PAGE>


      As of December 31, 2006, the Company's future minimum lease obligations
under the Company's operating leases are as follows:


                December 31, 2007      $     34,380

                December 31, 2008      $     26,361

                December 31, 2009      $       -0-

                December 31, 2010      $       -0-

                December 31, 2011      $       -0-
                                             -------
                Total                  $     60,741
                                             =======
     The Company  believes that its leased  facilities  are adequate to meet its
current  needs and that  additional  facilities  are available to the Company to
meet its expansion needs for the foreseeable future.


Item 3. Legal Proceedings

     From  time  to  time,  the  Company  may be  involved  in  litigation  with
customers, vendors, suppliers and others in the ordinary course of business, and
a number of claims may exist at any given time.  All such  existing  proceedings
are not expected to have a material  adverse impact on the Company's  results of
operations or financial condition.  In addition, the Company, or its subsidiary,
i2 Delaware, is a party to the proceedings discussed below.

     On June 30, 2003,  the Company filed a demand for  arbitration  against the
former  majority owner of SuperCaller  Community,  Inc., a Delaware  corporation
acquired by i2 Delaware in September 2002  ("SuperCaller"),  seeking  damages in
the amount of $452,250, which represents the amount of liabilities exceeding the
$400,000  threshold as of September 17, 2002 permitted by the purchase agreement
pursuant to which i2 Delaware acquired SuperCaller.

     On December 22, 2003, Darius Mostowfi, Teng Lew Lim, Fung Chee Lim and Teng
Howe  Lim,  former  stockholders  of  SuperCaller,  filed a lawsuit  against  i2
Delaware  in the United  States  District  Court for the  Northern  District  of
California,  San Francisco Division. The plaintiffs alleged that i2 Delaware and
certain of its  affiliates  and  representatives  deceived the  plaintiffs  into
selling SuperCaller to i2 Delaware, among other things.

     On March 27, 2006, all federal claims against i2Telecom and related parties
in the United  States  District  Court in San  Francisco  were  "dismissed  with
prejudice"  by Judge Vaughn  Walker.  The  claimants  had asserted that they had
ownership of certain core Intellectual Property of i2Telecom.  In addition,  the
court declined to exercise  supplemental  jurisdiction  over the remaining state
law claims that were all "dismissed" as well. The Plaintiff's  have appealed the
decision.  No loss or liability  has been  recorded in the  Company's  financial
statements.  In the event of a  favorable  decision by the  Appeals  Court,  the
Company will be entitled to recover 800,000 shares of the Company's common stock
held in escrow and will be required to issue  approximately  1,800,000 shares of
common stock to  shareholders of record on February 26, 2004,  which  represents
the date of the DDN merger. On that date, approximately 1,800,000 were held from
issuance pending the outcome of this litigation.

   The Company is subject to various legal  proceedings  and claims that arise
in the ordinary course of business.  The Company's management currently believes
that  resolution of such matters will not have a material  adverse impact on the
Company's financial position, results of operations or cash flows.

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

         There were no matters submitted during the fourth quarter of fiscal
         2006 to a vote of security holders.

                                      13
<PAGE>



                                     Part II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities

Market for Common Equity

Effective  March 5, 2004,  the Common Stock trading symbol was changed to "ITUI"
as a reflection of the Company's  name change.  Prior to the Merger and prior to
the name change that  occurred on March 5, 2004,  the Common  Stock traded under
the symbol "DIDA".  This had been the Company's  symbol since its initial public
offering  in May,  1998.  The Common  Stock is  reported  on the OTC  Electronic
Bulletin Board. The following table sets forth the range of reported closing bid
prices  of the  Company's  common  stock  during  the  periods  indicated.  Such
quotations  reflect prices between  dealers in securities and do not include any
retail  mark-up,  mark-down or  commission,  and may not  necessarily  represent
actual  transactions.  Trading in the Company's  common stock has generally been
limited and sporadic,  and should not be deemed to  constitute  an  "established
trading market".




                      High        Low
                     ------      -----
     2004
     ----
1st Quarter         $ 2.30    $    0.10
2nd Quarter           3.35         1.20
3rd Quarter           1.70         0.48
4th Quarter           0.90         0.54


     2005
     ----
1st Quarter         $ 1.04    $    0.67
2nd Quarter           0.61         0.29
3rd Quarter           0.44         0.29
4th Quarter           0.32         0.06


     2006
     ----
1st Quarter         $ 0.12    $    0.08
2nd Quarter           0.10         0.04
3rd Quarter           0.08         0.05
4th Quarter           0.12         0.03

     2007
     ----
1st Quarter         $ 0.28    $    0.11



     The above prices  represent  inter-dealer  prices,  without retail mark-up,
mark-down or commissions, and may not represent actual transactions.

     As of March 30, 2007, the Company had approximately  1,300  shareholders of
record.  The Company's  transfer agent is  Continental  Stock Transfer and Trust
Company located at 17 Battery Place, New York, New York, 10004, (212)509-4000.

                                      14

<PAGE>


     The  Company  has never  paid  cash  dividends  on its  Common  Stock,  and
currently  intends to retain  earnings,  if any, for use in the operation of its
business and  therefore  does not  anticipate  paying any cash  dividends on the
Common Stock in the foreseeable future.

Equity Compensation Plan Information

     The following table sets forth  information  regarding equity  compensation
plans under which the Common Stock is authorized for issuance as of December 31,
2006.


<TABLE>
<CAPTION>

                                                                                                         Number of
                                                                                                         Securities
                                                                                                          Remaining
                                                                                                        Available for
                                      Number of Securities to                 Weighted Average         Future Issuance
                                     be Issued Upon Exercise                 Exercise Price of          Under Equity
                                     of Outstanding Options,                Outstanding Options,        Compensation
Plan Category                         Warrants and Rights                   Warrants and Rights            Plans
-------------                        -----------------------               ---------------------     --------------------

<S>                                           <C>                             <C>                        <C>
Equity compensation plans
   approved by security
   holders: (1)                               7,764,409                       $       .19                2,025,682
Equity compensation plans not
   approved by security
   holders:                                   8,496,698(2)(3)                 $       .45(2)(3)                -0-
                                      -----------------------               ---------------------     --------------------
Total                                        16,261,107                       $       .47                2,025,682

</TABLE>


(1)  Represents options granted pursuant to the Company's 2004 Stock Incentive
     Plan.
(2)  Does not include (i) options and warrants to purchase 51,483,713 shares of
     Common Stock with a weighted average exercise price of $.083 per share,
     which were originally granted as options to purchase shares of i2
     Delaware's common stock pursuant to the i2 Delaware Stock Option Plan,
     which were assumed by the Company in connection with the Company's
     acquisition of i2 Delaware or issuances of options and warrants in
     connection with various financings. The Company has not made, and will not
     make, any further grants under the i2 Delaware Stock Option Plan.
(3)  Includes options and warrants to purchase Common Stock granted under plans
     not approved by the Company's shareholders. The material features of such
     plans are set forth below.

     From June 2002 to February 2004, the Company granted two current employees,
two current  directors and two former directors options to purchase an aggregate
of 4,351,689 shares of Common Stock at exercise prices having a weighted average
price of $0.4515  per share that have since all  vested.  These  options are all
considered non-qualified since the merger with Digital Date Networks on February
28, 2004.

     As part of a debt settlement from time to time the Company may negotiate to
pay its debt through a combination of stock options or shares of common stock.

Sales of Unregistered Securities

     In January 2006, five investors were issued 7,590,000 warrants  exercisable
at $0.07 to $0.10 each as part of loans made to the Company.  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. The
Company based such reliance upon factual  representations  by the  recipients of
the  warrants  to  the  Company   regarding   their   investment   interest  and
sophistication, among other things.

     In February 2006, the Company issued to a consultant three-year warrants to
purchase  aggregate of 200,000  shares of Common  Stock at an exercise  price of
$0.10 per share,  vested  immediately  upon the date of grant with a  three-year
expiration  period.  The  warrants  were issued in  connection  with  consulting
services  provided by them to the  Company.  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. The Company based such
reliance upon factual  representations  by the recipients of the warrants to the
Company  regarding their  investment  interest and  sophistication,  among other
things.

                                      15

<PAGE>


     Also in February 2006,  the Company issued to two  consultants an aggregate
of 6,000,000  shares of Common Stock in lieu of $480,000 in consulting  fees due
over a six month period,  The shares were issued in connection  with  consulting
services  provided  by them to 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. The Company based such
reliance upon factual  representations  by the recipients of the warrants to the
Company  regarding their  investment  interest and  sophistication,  among other
things.

     Also in February 2006,  the Company  issued to Troon and Mssrs.  McGraw and
Glazov three-year  warrants to purchase  aggregate of 1,200,000 shares of Common
Stock at an exercise price of $0.10 per share,  vested immediately upon the date
of grant with a three-year  expiration  period. The warrants were issued in lieu
of additional  consideration  for a loan extension to the Company.  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. The
Company based such reliance upon factual  representations  by the  recipients of
the  warrants  to  the  Company   regarding   their   investment   interest  and
sophistication, among other things.

     Also in February 2006,  the Company  issued to Mr. Phillip Rapp  three-year
warrants to purchase  aggregate of 200,000 shares of Common Stock at an exercise
price of $0.10  per  share,  vested  immediately  upon the date of grant  with a
three-year  expiration  period.  The warrants  were issued in lieu of additional
consideration  for a $200,000  loan to the  Company.  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. The Company based
such reliance upon factual  representations by the recipients of the warrants to
the Company regarding their investment interest and sophistication,  among other
things.

     In March 2006, the Company issued to three investors three-year warrants to
purchase  aggregate of 140,000  shares of Common  Stock at an exercise  price of
$0.10 per share,  vested  immediately  upon the date of grant with a  three-year
expiration period. The warrants were issued in lieu of additional  consideration
for loans to the Company.  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. The Company based such reliance upon factual
representations by the recipients of the warrants to the Company regarding their
investment interest and sophistication, among other things.

     Also in March  2006,  the Company  issued to Mr.  Phillip  Rapp  three-year
warrants to purchase  aggregate of 100,000 shares of Common Stock at an exercise
price of $0.10  per  share,  vested  immediately  upon the date of grant  with a
three-year  expiration  period.  The warrants  were issued in lieu of additional
consideration  for a $100,000  loan to the  Company.  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. The Company based
such reliance upon factual  representations by the recipients of the warrants to
the Company regarding their investment interest and sophistication,  among other
things.


     Also in March 2006,  the Company  issued to two  investors,  Mr. Arena,  an
officer  and  director of the Company  and Mr.  Purcell  three-year  warrants to
purchase  aggregate  of 40,000  shares of Common  Stock at an exercise  price of
$0.10 per share,  vested  immediately  upon the date of grant with a  three-year
expiration period. The warrants were issued in lieu of additional  consideration
for  loan   extensions  to  the  Company.   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. The Company based such
reliance upon factual  representations  by the recipients of the warrants to the
Company  regarding their  investment  interest and  sophistication,  among other
things.


     Also in March 2006,  the  Company  issued to  Richardson  & Patel and Peter
Hogan,  general counsel to the Company, an aggregate of 500,000 shares of Common
Stock in lieu of $63,000 in fees due over a four month period in connection with
services  provided by them to the Company.  The shares were issued in April 2006
without  registration  under the  Securities Act in reliance upon the exemptions
from  registration set forth in Section 4(2) and Regulation D. The Company based
such reliance upon factual  representations  by the  recipients of the shares to
the Company regarding their investment interest and sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon filing of the Company's next  registration  statement.  The Company filed a
registration  statement  which the  Securities  & Exchange  Commission  declared
effective on May 10, 2006.




      Also in April 2006, 1,663,609 shares of Common Stock were issued to 12
individuals and institutional investors of the Company's Series D and Series E
convertible preferred shares in lieu of $251,238 of preferred dividends for the
second , third and fourth quarters of 2005. 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. The Company based such
reliance upon factual representations by the recipients of the shares to the

                                      16
<PAGE>


Company regarding their investment interest and sophistication, among other
things. However, these shares are entitled to "piggyback registration" rights
upon filing of the Company's next registration statement. The Company filed a
registration statement which the Securities & Exchange Commission declared
effective on May 10, 2006.

     Also in April  2006,  the Company  issued to one  investor  Vestal  Venture
Capital and University Bank three-year warrants to purchase aggregate of 100,000
shares  of  Common  Stock  at an  exercise  price  of $0.10  per  share,  vested
immediately  upon the date of grant with a  three-year  expiration  period.  The
warrants were issued in lieu of additional  consideration for loan extensions to
the Company.  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. The Company based such reliance upon factual  representations
by the  recipients  of the warrants to the Company  regarding  their  investment
interest and sophistication, among other things.

     Also in April  2006,  the  Company  issued to Kenny  Securities,  financial
advisor to the Company,  an aggregate of 200,000  shares of Common Stock in lieu
of $25,000 in fees due.  The shares  were  issued in  connection  with  services
provided by them to 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. The Company  based such  reliance upon
factual representations by the recipients of the shares to the Company regarding
their investment interest and sophistication, among other things. However, these
shares are  entitled  to  "piggyback  registration"  rights  upon  filing of the
Company's  next  registration  statement.   The  Company  filed  a  registration
statement which the Securities & Exchange  Commission  declared effective on May
10, 2006.

     Also in April  2006,  the  Company  issued to Mr.  Phipps an  aggregate  of
350,000  shares  of  Common  Stock in lieu of a  $35,000  promissory  note  with
interest.  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. The Company based such  reliance upon factual  representations  by
the recipients of the shares to the Company regarding their investment  interest
and sophistication,  among other things.  However,  these shares are entitled to
"piggyback  registration"  rights upon filing of the Company's next registration
statement.  The Company filed a  registration  statement  which the Securities &
Exchange Commission declared effective on May 10, 2006.

     Also in April 2006,  the Company issued to CEOCast,  an investor  relations
advisory  firm  providing  services to the  Company,  an  aggregate of 1,000,000
shares  of Common  Stock in lieu of  $100,000  in fees due over the next  twelve
month  period.  The shares were issued in connection  with services  provided by
them to the Company.  The shares are to be issued without registration under the
Securities Act in reliance upon the exemptions  from  registration  set forth in
Section 4(2) and  Regulation  D. The Company  based such  reliance  upon factual
representations  by the recipients of the shares to the Company  regarding their
investment  interest and  sophistication,  among other  things.  However,  these
shares are  entitled  to  "piggyback  registration"  rights  upon  filing of the
Company's  next  registration  statement.   The  Company  filed  a  registration
statement which the Securities & Exchange  Commission  declared effective on May
10, 2006.

     Also in April  2006,  840,000  shares of Common  Stock were  issuable  upon
exercise of a warrant exercisable until April 11, 2011 to 5 individuals,  Mssrs.
Collins,  Dohrman,  Hamilton,  Klages and Olson and 1 Trust,  F/B/O,  Mr. & Mrs.
Swift, at an exercise price of $0.10 per share (subject to customary adjustments
in accordance with the terms  thereof).  The warrants are issued as compensation
for services rendered by the shareholders to the Company.  Brian Swift exercises
on behalf of the "Trust"  shareholder  voting and dispositive power with respect
to the  shares  of  Common  Stock  registered  hereby  for  the  account  of the
shareholders.  The shareholders are an affiliate of a registered  broker-dealer.
The shareholders  have certified to the Company that the  shareholders  received
the  securities  convertible  or  exercisable  into the  shares of Common  Stock
registered  hereby in the  ordinary  course of business  and at the time of such
receipt had no agreements or  understandings  with any person to distribute such
shares of Common Stock. The warrants were issued without  registration under the
Securities Act in reliance upon the exemption from registration set forth in
Section 4(2).


                                      17

<PAGE>


     Also in April  2006,  the  Company  had  issuable  to  Mssrs.  Lippert  and
Heilshorn,  consultants to the Company, an aggregate of 180,000 shares of Common
Stock in lieu of $18,000 in fees due. The shares were issued in connection  with
services  provided  by them to 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. The Company based such
reliance  upon factual  representations  by the  recipients of the shares to the
Company  regarding their  investment  interest and  sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon filing of the Company's next  registration  statement.  The Company filed a
registration  statement  which the  Securities  & Exchange  Commission  declared
effective on May 10, 2006.  Additionally,  the Company issued to Mssrs.  Lippert
and  Heilshorn  three-year  warrants to purchase  aggregate of 54,000  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 lieu of additional  consideration for a discount to the consulting  agreement
with the  Company.  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. The Company  based such  reliance  upon factual
representations by the recipients of the warrants to the Company regarding their
investment interest and sophistication, among other things.

     In May 2006,  the  Company  issued to Troon and  Mssrs.  McGraw  and Glazov
three-year warrants to purchase aggregate of 1,200,000 shares of Common Stock at
an exercise price of $0.15 per share,  vested immediately upon the date of grant
with a  three-year  expiration  period.  The  warrants  were  issued  in lieu of
additional  consideration for a loan extension to the Company. 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. The
Company based such reliance upon factual  representations  by the  recipients of
the  warrants  to  the  Company   regarding   their   investment   interest  and
sophistication, among other things.

     Also in May 2006,  1,225,000  shares  of  Common  Stock  were  issued  upon
exercise of a warrant  exercisable  until May 11, 2011 to 5 individuals,  Mssrs.
Collins,  Dohrman,  Hamilton,  Klages and Olson and 1 Trust,  F/B/O,  Mr. & Mrs.
Swift, at an exercise price of $0.10 per share (subject to customary adjustments
in accordance with the terms thereof).  The warrants were issued as compensation
for services rendered by the shareholders to the Company.  Brian Swift exercises
on behalf of the "Trust" voting and dispositive power with respect to the shares
of Common  Stock  registered  hereby  for the  account of the  shareholder.  The
shareholders  are an affiliate of a registered  broker-dealer.  The shareholders
have  certified to the Company  that the  shareholders  received the  securities
convertible or exercisable into the shares of Common Stock registered  hereby in
the  ordinary  course  of  business  and at the  time  of  such  receipt  had no
agreements or understandings with any person to distribute such shares of Common
Stock.The warrants were issued without  registration under the Securities Act in
reliance upon the exemption from registration set forth in Section 4(2).

     Also in May 2006, the Company issued to Mssrs.  Arena,  Braswell and Phipps
three-year  warrants to purchase  aggregate of 826,974 shares of Common Stock at
an exercise price of $0.10 per share,  vested immediately upon the date of grant
with a three-year  expiration  period. The warrants were issued in consideration
of  collateral  made  available  for benefit of the Company.  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. The
Company based such reliance upon factual  representations  by the  recipients of
the  warrants  to  the  Company   regarding   their   investment   interest  and
sophistication, among other things.

     Also in May 2006, the Company issued to one investor Vestal Venture Capital
and University Bank three-year  warrants to purchase aggregate of 200,000 shares
of Common Stock at an exercise price of $0.10 per share, vested immediately upon
the date of grant with a three-year  expiration period. The warrants were issued
in lieu of additional  consideration  for loan  extensions  to the Company.  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.  The  Company  based  such  reliance  upon  factual  representations  by  the
recipients of the warrants to the Company  regarding their  investment  interest
and sophistication, among other things.

     In July 2006, the Company issued to one investor Vestal Venture Capital and
University Bank three-year  warrants to purchase  aggregate of 200,000 shares of
Common Stock at an exercise price of $0.10 per share,  vested  immediately  upon
the date of grant with a three-year  expiration period. The warrants were issued
in lieu of additional  consideration  for loan  extensions  to the Company.  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.  The  Company  based  such  reliance  upon  factual  representations  by  the
recipients of the warrants to the Company  regarding their  investment  interest
and sophistication,  among other things. Also, in July 2006, 2,000,000 shares of
Common  Stock were issued to 1  corporation,  an  institutional  investor of the
Company's Series D convertible preferred shares which were converted. 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. The
Company based such reliance upon factual  representations  by the  recipients of

                                      18

<PAGE>

the  shares  to  the   Company   regarding   their   investment   interest   and
sophistication,  among other things. However, a portion of these shares are have
been registered with the Company's last registration statement now in effect.

     Also in July  2006,  the  Company  issued to one  investor  Vestal  Venture
Capital and University Bank three-year warrants to purchase aggregate of 300,000
shares  of  Common  Stock  at an  exercise  price  of $0.10  per  share,  vested
immediately  upon the date of grant with a  three-year  expiration  period.  The
warrants were issued in lieu of additional  consideration for loan extensions to
the Company.  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. The Company based such reliance upon factual  representations
by the  recipients  of the warrants to the Company  regarding  their  investment
interest and sophistication, among other things.

     In  August  2006,  75,000  shares  of  Common  Stock  were  issued  to  one
individual,  an investor of the Company's Series D convertible  preferred shares
which were  converted.  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. The Company  based such  reliance  upon factual
representations  by the recipients of the shares to the Company  regarding their
investment interest and sophistication,  among other things.  However, a portion
of  these  shares  have  been  registered  in the  Company's  last  registration
statement now in effect.

     Also in August 2006, the Company issued to a consultant three-year warrants
to purchase an  aggregate  of  1,000,000  shares of Common  Stock at an exercise
price of $0.07  per  share,  vested  immediately  upon the date of grant  with a
three-year  expiration  period.  The warrants  were issued in  consideration  of
consultancy  agreement  with the  Company.  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. The Company based such
reliance upon factual  representations  by the recipients of the warrants to the
Company  regarding their  investment  interest and  sophistication,  among other
things. In addition,  an aggregate of 500,000 shares of Common Stock are pending
issuance in lieu of $20,000 in fees due over a twelve month period in connection
with  services  provided  to the  Company.  The  shares  will be issued  without
registration  under the  Securities  Act in reliance  upon the  exemptions  from
registration  set forth in Section 4(2) and Regulation D. The Company based such
reliance  upon factual  representations  by the  recipients of the shares to the
Company  regarding their  investment  interest and  sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon filing of the Company's next registration statement.

     In September  2006,  the Company  issued to Mssrs.  Troon McGraw and Glazov
three-year warrants to purchase aggregate of 1,200,000 shares of Common Stock at
an exercise price of $0.07 per share,  vested immediately upon the date of grant
with a  three-year  expiration  period.  The  warrants  were  issued  in lieu of
additional  consideration for a loan extension to the Company. 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. The
Company based such reliance upon factual  representations  by the  recipients of
the  warrants  to  the  Company   regarding   their   investment   interest  and
sophistication, among other things.

     In October 2006,  2,100,000  shares of Common Stock in the  aggregate  were
issuable  upon  exercise  of  warrants  exercisable  until  October,  2009  to 6
individuals,  Mssrs. Arena (an officer and director of the Company), Braswell (a
director of the Company), Falkner, Purcell, Ranzini and Rapp and 2 Corporations,
Vestal  Ventures and Mena  Investments,  at an exercise price of $0.07 per share
(subject to customary  adjustments in accordance  with the terms  thereof).  The
warrants were issued in lieu of additional consideration for a loan extension to
the Company.  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. The Company based such reliance upon factual  representations
by the  recipients  of the warrants to the Company  regarding  their  investment
interest and sophistication, among other things.

     Also in October  2006,  the  Company  issued to one  consultant  three-year
warrants to purchase  aggregate of 225,000 shares of Common Stock at an exercise
price of $0.01  per  share,  vested  immediately  upon the date of grant  with a
three-year  expiration  period.  The  warrants  were issued in lieu of $9,000 in
consulting fees for services  rendered to the Company.  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. The Company based
such reliance upon factual  representations by the recipients of the warrants to
the Company regarding their investment interest and sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon filing of the Company's next registration statement.

     In November 2006, the Company issued to two consultants  five-year warrants
to purchase an  aggregate  of  1,500,000  shares of Common  Stock at an exercise
price of $0.07  per  share,  vested  immediately  upon the date of grant  with a
five-year  expiration period. The warrants were issued in lieu of a twelve-month
marketing and  consulting  agreement for services to be rendered to the Company.

                                      19
<PAGE>


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. The Company based such  reliance upon factual  representations  by
the  recipients  of the  warrants  to the  Company  regarding  their  investment
interest  and  sophistication,  among other  things.  However,  these shares are
entitled to "piggyback  registration"  rights upon filing of the Company's  next
registration statement.


     Between  August and December  2006,  a total of 7,428,571  shares of Common
Stock were  issued to 15  individual  investors  who  participated  in a private
placement in which the Company raised  $520,000.  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. The Company based such
reliance  upon factual  representations  by the  recipients of the shares to the
Company  regarding their  investment  interest and  sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon filing of the Company's next registration statement.


     In January  2007,  the Company  issued to James Rose and Doug Bender,  both
officers of the Company, 624,671 and 1,000,000 shares,  respectively,  of Common
Stock  in  lieu  of  compensation  in  the  amounts  of  $62,467  and  $100,000,
respectively.  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. The Company based such reliance upon factual  representations
by the  recipients  of the  shares to the  Company  regarding  their  investment
interest  and  sophistication,  among other  things.  However,  these shares are
entitled to "piggyback  registration" rights upon the filing by the Company of a
registration statement.

     Also in January 2007,  the Company  issued to five  individuals,  including
Audrey  Braswell,  a director,  and Paul  Arena,  an officer  and  director,  an
aggregate of 5,045,856 shares of Common Stock in lieu of outstanding  promissory
notes,  with  interest,  totaling  $504,587.  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. The Company based such
reliance  upon factual  representations  by the  recipients of the shares to the
Company  regarding their  investment  interest and  sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon the filing by the Company of a registration statement.


     In February 2007, the Company issued to Joel Katz an aggregate of 1,000,000
shares of Common  Stock in lieu of $100,000 in  consulting  fees due. The shares
were  issued in  connection  with  consulting  services  provided  by him to 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. The Company based such  reliance upon factual  representations  by
the  recipients  of the  warrants  to the  Company  regarding  their  investment
interest  and  sophistication,  among other  things.  However,  these shares are
entitled  to  "piggyback  registration"  rights  upon filing by the Company of a
registration statement


     Also in February 2007, the Company issued to five individuals, an aggregate
of 970,000  shares of Common  Stock in lieu of $112,150 in fees due.  The shares
were issued in  connection  with services  provided by them to 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.  The  Company  based  such  reliance  upon  factual  representations  by  the
recipients of the shares to the Company regarding their investment  interest and
sophistication,  among  other  things.  However,  these  shares are  entitled to
"piggyback  registration"  rights upon  filing by the Company of a  registration
statement.


     In March  2007,  the Company  issued to Audrey  Braswell,  a director,  and
Phillip  Rapp,  750,000 and 250,000  shares,  respectively,  of Common  Stock in
accordance  with the terms of  promissory  notes in the amounts of $750,000  and
$250,000,  respectively.  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. The Company  based such  reliance  upon factual
representations  by the recipients of the shares to the Company  regarding their
investment  interest and  sophistication,  among other  things.  However,  these
shares are  entitled  to  "piggyback  registration"  rights  upon  filing by the
Company of a registration statement.


     Also in March 2007, a total of 5,263,941 shares of Common Stock were issued
to 12  individuals  and  institutional  investors of the Company's  Series D and
Series E convertible preferred shares in lieu of $374,068 of preferred dividends
for the  first,  second , third and fourth  quarters  of 2006.  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. The
Company based such reliance upon factual  representations  by the  recipients of
the  shares  to  the   Company   regarding   their   investment   interest   and

                                      20

<PAGE>

sophistication,  among  other  things.  However,  these  shares are  entitled to
"piggyback registration" rights upon the filing of a registration statement.


     Also in March 2007, a total of 3,288,700 shares of Common Stock were issued
to 16 individuals and  institutional  investors who exercised  warrants received
upon the purchase of the Company's Series C convertible  preferred  shares.  The
Company  received  $394,644  from the warrant  exercise.  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. The Company based
such reliance upon factual  representations  by the  recipients of the shares to
the Company regarding their investment interest and sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon the filing of a registration statement

     Also in March 2007, the Company issued to Mssrs.  Troon,  McGraw and Glazov
an aggregate of 2,878,571  shares of Common Stock upon the exercise of warrants.
The warrants,  exercisable at an average exercise price of $.125 per share, were
issued in lieu of additional  consideration for a loan extension to the Company.
Mssrs.  Troon,  McGraw and Glazov  exercised  the  warrants  under the  cashless
exercise  provisions of their warrant agreement.  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. The Company based such
reliance upon factual  representations  by the recipients of the warrants to the
Company  regarding their  investment  interest and  sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon the filing of a registration statement.


     Also in March 2007,  the Company  issued to Phillip  Rapp an  aggregate  of
942,857  shares of Common  Stock upon the exercise of  warrants.  The  warrants,
exercisable at an average exercise price of $.077 per share, were issued in lieu
of  additional  consideration  for a loan  extension  to the  Company.  Mr. Rapp
exercised the warrants under a cashless exercise formula. 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. The Company based
such reliance upon factual  representations by the recipients of the warrants to
the Company regarding their investment interest and sophistication,  among other
things.  However,  these shares are entitled to "piggyback  registration" rights
upon the filing of a registration statement.


                                      21








<PAGE>



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

     The following  discussion and analysis  should be read in conjunction  with
the  Company's  Consolidated  Financial  Statements  included  elsewhere in this
Annual Report on Form 10-KSB (the "Annual Report").  This Annual Report contains
forward-looking  statements  that  involve  risks  and  uncertainties,  such  as
statements of the Company's  plans,  objectives,  expectations  and  intentions.
Forward-looking statements,  within the meaning of Section 21E of the Securities
and Exchange Act of 1934, as amended (the "Exchange  Act"),  are made throughout
this Management's  Discussion and Analysis of Financial Condition and Results of
Operations.  For this  purpose,  any  statements  contained  herein that are not
statements of historical  fact may be deemed to be  forward-looking  statements.
Without limiting the foregoing,  the words "believes",  "anticipates",  "plans",
"expects",   "estimates"  and  similar  expressions  are  intended  to  identify
forward-looking  statements.  There are a number of important factors that could
cause the  results of the  Company  to differ  materially  from those  indicated
herein.  The cautionary  statements made in this Annual Report should be read as
being applicable to all related forward-looking  statements wherever they appear
in this Annual Report.

Overview


      On February 26, 2004, a wholly-owned subsidiary of the Company merged with
and into i2 Delaware, whereby i2 Delaware became a wholly-owned subsidiary of
the Company. In connection with the Merger, the former stockholders of i2
Delaware became entitled to receive shares of the Company's Common Stock and
Preferred Stock constituting up to 88% of the Company's voting securities,
assuming the issuance of all contingent consideration which such stockholders
may become entitled to receive based upon the outcome of certain pending
litigation against i2 Delaware.

     On February 27,  2004,  the Company  consummated  the Asset Sale whereby it
sold  substantially all of its operating assets relating to the operation of the
InTransit  Network to InTransit  Media in exchange for InTransit  Media assuming
certain liabilities and obligations relating to such assets.

     On March 5, 2004, the Company changed its name from "Digital Data Networks,
Inc." to "i2 Telecom  International,  Inc." and changed its ticker symbol on the
over the counter bulletin board from "DIDA" to "ITUI".

     As a result of the Merger and the Asset Sale,  all of the operations of the
Company  now  consist  of the  operations  of its  wholly-owned  subsidiary,  i2
Delaware.  i2  Delaware  is  a  low-cost   telecommunications  service  provider
employing  next-generation  VoIP technology  with  operations  based in Atlanta,
Georgia i2 Delaware  controls its own proprietary  technology and outsources its
production and service functions with strategic partners.  i2 Delaware VoIP long
distance and other enhanced  communication  services  through the VoiceStick and
micro gateway  adapters to  subscribers.  i2 Delaware's  proprietary  technology
platform is built to the Session  Initiation  Protocol  standard.  i2 Delaware's
revenue model is multi-faceted and includes prepaid revenue from the sale of its
micro gateway integrated access device,  recurring monthly  subscriptions,  call
minute  terminations,  and original  VoiceStick(R)  and  equipment  manufacturer
royalties.

     The audited  financial  statements for i2 Delaware as of and for the period
ended December 31, 2006 are included elsewhere in this Annual Report.

Results of Operations

2006 Compared to 2005

     Revenues increased to $754,939 in 2006 from $485,485 in 2005,  attributable
to an increase in the number of subscribers to the Company's products.

     Cost of Goods Sold  decreased to $810,399 in 2006 from  $1,231,389 in 2005.
The decrease is attributable to a write down in inventory taken during 2005.

     Gross loss decreased to $56,060 in 2006,  compared to a loss of $745,904 in
2005. The improvement is applicable to efficiencies  implemented in our business
in 2006.  Furthermore,  our results in 2005 were negatively impacted s due to an
increase in G&A expense combined with the write off of obsolete inventory.

     General and  Administrative  Expenses  decreased to $5,306,407 in 2006 from
$7,216,844 in 2005. The decrease in general and administrative  expenses in 2006
was  primarily  attributable  to a reduction in the number of employees in sales
and marketing roles.

      Total Operating Loss from Continuing Operations decreased to $5,800,177 in
2006 from $8,027,647 in 2005. The decrease in operating loss was primarily
attributable to the reduction in operating expenses and SG&A expenses in 2006,
partially offset by the inventory write offs in 2005, all as described above.


                                      22
<PAGE>



      Changes in the Company's other expenses are as follows:

                                       For the year ended
                                          December 31,
                                       ------------------
                                                                Percenta1e
                                 2006            2005            Change
                            ------------        -----------     ---------------


Interest Income                    942             4,008          -76.50 %
Interest & Dividend (Expense) (466,346)          (79,750)       - 484.50%
Gain on Forbearance of Debt     33,675           350,960            N/A
Loss on Disposal of Assets     (5,981)             (0)              N/A
                            ------------       -----------     ---------------
Total other Income(Expenses) (437,710)           275,218           N/M
                            ------------       -----------     ---------------

Series D & E Preferred Stock
Dividends Accrued             (365,888)         (400,237)          N/M


Financial Condition, Liquidity and Capital Resources

     The Company's net cash used in operating activities for 2006 was $2,328,688
as compared to $4,282,626 used in operating activities during 2005. The decrease
in cash used in operating  activities  primarily resulted from an improvement in
operating  results  in 2006 as  compared  to 2005.  Net cash  used in  investing
activities in 2006 was $93,397 as compared to $331,924 in 2005.  The decrease in
net cash  used in  investing  activities  was due to a  reduction  of  equipment
purchases in 2006 as compared to 2005. Net cash provided by financing activities
was  $3,060,693 in 2006 as compared to $4,552,626 in 2005.  The decrease in cash
provided by financing  activities was due to a reduction in the amount  financed
in  shareholder  loans stock and notes payable of  approximately  $2,617,648,  a
decrease in sales of common and preferred  stock of  $1,401,000,  a reduction in
dividends paid of $148,999, all offset by an increase in proceeds of convertible
notes of $3,375,000.

     Proceeds  from  exercise of stock  options and  warrants  provided  cash of
$19,475 in 2006 as compared to $646,000 in 2005 which were exercised in exchange
for notes forgiven by the holders.


     The Company has no current  commitments or  obligations  for future capital
expenditures.  A summary of the Company's debt and lease obligations at December
31, 2006 are as follows:




                                Obligations payable in


             Less than 1 year         1 to 3 years                  Total
            ----------------     ------------------------   ------------------
Debt        $ 5,711,607               $  -0-                    $   5,711,607
Leases           34,380                26,361                          60,741
            ----------------     ------------------------   ------------------
            $ 5,745,987               $26,361                   $   5,772,348
            ================     =======================    ==================

Critical Accounting Policies

     The policies  identified below are considered as relatively critical to the
Company's business  operations and the understanding of the Company's results of
operations. The impact and any associated risks related to these policies on the
Company's business operations is discussed  throughout  Management's  Discussion
and  Analysis  of  Financial  Condition  and  Results of  Operations  where such
policies  affect  reported  and  expected  financial  results.  For  a  detailed

                                      23
<PAGE>



discussion on the application of these and other accounting policies, see Note 1
in the  Notes  to the  Financial  Statements  included  in this  Annual  Report.
Preparation  of this Annual  Report on Form 10-KSB  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.

Accounting for the Reverse Merger

     On  February  27,  2004,   subsequent  to  the  Merger,  the  Company  sold
substantially  all of its operating  assets relating to its digital  information
network to InTransit Media. Pursuant to the Asset Purchase Agreement, the assets
were exchanged for InTransit Media assuming certain  liabilities and obligations
relating thereto.

     The  Merger  and  Asset  Sale are being  accounted  for as a  transfer  and
exchange  and are  considered  merely a change in legal  organization  and not a
change in the entity.  Therefore,  all assets and liabilities are transferred at
historical cost and the gain on sale of assets is not included in the statements
of operations and cash flows for the year ending December 31, 2004.

     As of the  date  of the  Merger,  the  Company's  accumulated  deficit  was
$13,700,794.  In  accounting  for the  Merger,  the  accumulated  deficit of the
Company has been eliminated. The balance of accumulated deficit as of the end of
the period  represents the accumulated  deficit of i2 Delaware since  inception.
The  other  capital  accounts,  including  common  stock,  preferred  stock  and
additional   paid-in  capital  represent  the  stock  issued  by  the  surviving
corporation.  The write-off the Company's  accumulated deficit has been adjusted
by a reduction to the other capital  accounts  starting with additional  paid-in
capital,  then preferred stock, and the balance against common stock.  Since the
Company had no outstanding  preferred  stock prior to the Merger,  the preferred
stock of the Company has been reduced to zero.


Revenue Recognition

     The Company  recognizes  revenue in  accordance  with SEC Staff  Accounting
Bulletin ("SAB") No. 101,  "Revenue  Recognition in Financial  Statements" ("SAB
101"),  as  amended  by SAB 101A and 101B.  SAB 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)  collectibility  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  collectibility 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


     In December 2004, the Financial  Accounting Standards Board issued two FASB
Staff  Positions - FSP FAS 109-1  Application of FASB Statement 109  "Accounting
for  Income  Taxes" to the Tax  Deduction  on  Qualified  Production  Activities
provided by the American Jobs Creation Act of 2004, and FSB FAS 109-2 Accounting
and Disclosure Guidance for the Foreign Earnings  Repatriation  Provision within
the American Jobs Creation Act of 2004. Neither of these affected the Company as
it does not participate in the related activities.

     In March 2005, the SEC released Staff  Accounting  Bulletin No 107,  "Share
Based Payment" ("SAB 107"), which provides  interpretive guidance related to the
interaction  between SFAS 123(R) and certain SEC rules and regulations.  It also
provides  the SEC staff's  views  regarding  valuation  of  share-based  payment
regulations.  In April  2005,  the SEC  amended  the  compliance  dates for SFAS
123(R),  to allow  companies to implement  the standard at the  beginning of the
next fiscal year,  instead of the next reporting period beginning after June 15,
2005.  Management is currently evaluating the impact of SAB 107 will have on our
financial statements.

                                      24

<PAGE>


     In March 2005, the FASB issued FASB  Interpretation  No. 47, Accounting for
Conditional Asset Retirement  Obligations"  ("FIN 47"). FIN 47 provides guidance
relating to the identification of and financial  reporting for legal obligations
to perform an asset retirement activity. The Interpretation requires recognition
of a liability for the fair value of a conditional  asset retirement  obligation
when incurred if the liability's fair value can be reasonably estimated.  FIN 47
also defines  when an entity would have  sufficient  information  to  reasonably
estimate  the fair value of an asset  retirement  obligation.  The  provision is
effective no later than the end of fiscal years ending after  December 15, 2005.
The Company  will adopt FIN 47 beginning  the first  quarter of fiscal year 2006
and does not believe the adoption  will have a material  impact on its financial
position of results of operations or cash flows.

     In May 2005,  the FASB issued FASB Statement No. 154,  "Accounting  Changes
and  Error  Corrections."  This  new  standard  replaces  APB  Opinion  No.  20,
"Accounting  Changes,  and FASB Statement No. 3, Reporting Accounting Changes in
Interim Financial Statements," and represents another step in the FASB's goal to
converge  its  standards  with those  issued by the IASB.  Among other  changes,
Statement  154  requires  that a voluntary  change in  accounting  principle  be
applied  retrospectively with all prior period financial statements presented on
the new accounting principle, unless it is impracticable to do so. Statement 154
also  provides  that (1) a change in  method of  depreciating  or  amortizing  a
long-lived  non-financial  asset  be  accounted  for  as a  change  in  estimate
(prospectively) that was effected by a change in accounting  principle,  and (2)
correction of errors in previously issued financial  statements should be termed
a  "restatement".  The new  standard is  effective  for  accounting  changes and
correction  of errors made in fiscal years  beginning  after  December 15, 2005.
Early  adoption  of this  standard  is  permitted  for  accounting  changes  and
correction  of errors made in fiscal  years  beginning  after June 1, 2005.  The
Company has  evaluated  the impact of the adoption of Statement 154 and does not
believe the impact  will be  significant  to the  Company's  overall  results of
operation of financial position.

     In February of 2006, the FASB issued SFAS No. 155,  "Accounting for Certain
Hybrid Financial Instruments",  which is intended to simplify the accounting and
improve the financial reporting of certain hybrid financial instruments.  (i.e.,
derivatives embedded in other financial instruments).  The statement amends SFAS
No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities",  and
SFAS No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments  of  Liabilities - a replacement of FASB Statement No. 125. SFAS
No. 155 is effective for all financial  instruments issued or acquired after the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The Company is currently  evaluating the impact of SFAS No. 155 will have on its
financial statements, if any.

     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.

     In July 2006, the FASB issued FASB  Interpretation  No. 48,  Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a company's financial statements in accordance with SFAS 109. "Accounting For
Income  Taxes".  FIN 48  prescribes  a  recognition  threshold  and  measurement
attribute for the  financial  statement  recognition  and  measurement  of a tax
position  taken or expected to be taken in a tax  return.  FIN 48 also  provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition.

     In September 2006. the FASB issued SFAS No. 157, "Fair Value Measurements".
This statement  clarifies the definition of fair value,  establishes a framework
for  measuring   fair  value,   and  expands  the   disclosures  on  fair  value
measurements.  SFAS No.  157 is  effective  for  fiscal  years  beginning  after
November 15, 2007. We have not  determined  the effect,  if any, the adoption of
this statement will have on our results of operations or financial position.


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.

                                      25
<PAGE>



Item 7. Financial Statements

     The financial  statements  required to be filed with this Annual Report are
listed on the "Index to Financial Statements" on page F-1 hereof.

Item 8. Changes In and Disagreements with Accountants on Accounting and
        Financial Disclosure

         None.

Item 8A. Controls and Procedures

     Based on their most recent evaluation, which was completed as of the end of
the period  covered by this annual report on Form 10-KSB,  the  Company's  Chief
Executive  Officer,  who is also the Principal  Financial  Officer  believes the
Company's  disclosure  controls and procedures (as defined in Exchange Act rules
13a-15(e) and 15d-15(e) are effective to ensure that information  required to be
disclosed by the Company in this report is accumulated  and  communicated to the
Company's  management,  including its principal  executive officer and principal
financial officer, as appropriate,  to allow timely decisions regarding required
disclosure.

     During the last fiscal quarter to which this report relates,  there were no
changes  in  the  Company's  internal  controls  or  other  factors  that  could
significantly  affect these controls  subsequent to the date of their evaluation
and there were no corrective  actions with regard to  deficiencies  and material
weaknesses.


Item 8B. Other Information

     On March 29, 2006, the  shareholders of the Company approved by majority of
the voting  shares to increase the total number of shares which the  corporation
is  authorized to issue to  250,000,000  of common stock having no par value and
1,000,000 shares of preferred stock having no par value.

     On April 17, 2006, the Company issued  1,663,611  shares of common stock in
lieu of  $251,234  of  interest  owed in  respect of the  Company's  outstanding
Preferred Stock Series D and Preferred Stock Series E.

     As of  December  31,  2006,  the  Company  was in arrears in the payment of
dividends in the amount of $374,068 owed in respect of the Company's outstanding
Preferred  Stock  Series D and  Preferred  Stock  Series E. On March 27, 2007, a
total of  5,263,941  shares of Common  Stock were issued to 12  individuals  and
institutional  investors in full satisfaction of the above referenced dividends.
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.  The  Company  based  such  reliance  upon  factual  representations  by  the
recipients of the shares to the Company regarding their investment  interest and
sophistication,  among  other  things.  However,  these  shares are  entitled to
"piggyback registration" rights upon filing of a registration statement within 6
months.

The Certificate of Designations of Rights and Preferences of Preferred Stock
Series D was amended to include the following changes:

     (a) "Standard Conversion Price" means, with respect to the Preferred
         Shares, as of any Conversion Date or other date of determination,
         $0.20, subject to adjustment as provided herein.

     The previous Certificate of Designations was deleted in its entirety and
the following shall appear in its place:

     (b)  Holder's   Conversion   Right;   Mandatory   Redemption   or
          Conversion.  Subject to the provisions of Section 5 and Section 12, at
          any time or times  on or  after  the  Issuance  Date,  any  holder  of
          Preferred  Shares shall be entitled to convert any whole or fractional
          number of Preferred Shares into fully paid and nonassessable shares of
          Common Stock in accordance  with Section 2(d) at the  Conversion  Rate
          (as defined below).  If the Weighted Average Price of the Common Stock
          is equal to or exceeds $0.40  (subject to adjustment for stock splits,
          stock dividends, recapitalizations, combinations, reverse stock splits
          or other  similar  events) for any period of twenty  (20)  consecutive

                                      26
<PAGE>


          trading  days,  then  any  Preferred   Shares   outstanding  upon  the
          expiration   of  such  twenty  (20)   trading  day  period   shall  be
          automatically  converted into fully paid and  nonassessable  shares of
          Common Stock in accordance  with Section 2(d) at the Conversion  Rate.
          If any Preferred Shares remain outstanding on the Maturity Date, then,
          pursuant and subject to Section  2(d)(vii),  all such Preferred Shares
          shall  be  converted  at  the  Conversion  Rate  as of  such  date  in
          accordance  with  Section  2(d)(vii)  or  redeemed  by the  Company in
          accordance  with Section  2(d)(vii).  The Company  shall not issue any
          fraction of a share of Common Stock upon any conversion. All shares of
          Common Stock (including fractions thereof) issuable upon conversion of
          more than one Preferred  Share by a holder thereof shall be aggregated
          for purposes of determining whether the conversion would result in the
          issuance  of a  fraction  of a share of Common  Stock.  If,  after the
          aforementioned aggregation,  the issuance would result in the issuance
          of a fraction of a share of Common Stock, the Company shall round such
          fraction of a share of Common Stock up to the nearest whole share.

     (c)     Section 2(f) of the Certificate of Designations is hereby deleted
             in its entirety and the following shall appear in its place:

     (d)     [Intentionally omitted.]

     The  Amendment  was  adopted by the  Corporation's  Board of  Directors  on
December  9,  2005 and  approved  by its  stockholders  in  accordance  with the
provisions of RCW 23B.10.030 and 23B.10.040 on March 29, 2006.

The Certificate of Designations of Rights and Preferences of Preferred Stock
Series E was amended to include the following changes:

     (a) "Conversion Price" means, with respect to the Preferred Shares, as of
         any Conversion Date or other date of determination, $0.20, subject to
         adjustment as provided herein.

         Section 3(a) of the Certificate of Designations is hereby deleted in
         its entirety and the following shall appear in its place:

     (b) Holder's Conversion Right; Mandatory Redemption or Conversion. Subject
         to the provisions of Section 12, at any time or times on or after the
         Issuance Date, any holder of Preferred Shares shall be entitled to
         convert any whole or fractional number of Preferred Shares into fully
         paid and non-assessable shares of Common Stock in accordance with
         Section 3(c) at the Conversion Rate (as defined below). If the Weighted
         Average Price of the Common Stock is equal to or exceeds $0.40 (subject
         to adjustment for stock splits, stock dividends, recapitalizations,
         combinations, reverse stock splits or other similar events) for any
         period of twenty (20) consecutive trading days, then any Preferred
         Shares outstanding upon the expiration of such twenty (20) trading day
         period shall be automatically converted into fully paid and
         non-assessable shares of Common Stock in accordance with Section 3(c)
         at the Conversion Rate. The Company shall not issue any fraction of a
         share of Common Stock upon any conversion. All shares of Common Stock
         (including fractions thereof) issuable upon conversion of more than one
         Preferred Share by a holder thereof shall be aggregated for purposes of
         determining whether the conversion would result in the issuance of a
         fraction of a share of Common Stock. If, after the aforementioned
         aggregation, the issuance would result in the issuance of a fraction of
         a share of Common Stock, the Company shall round such fraction of a
         share of Common Stock up to the nearest whole share."

     (c) Section 3(e)(i) of the Certificate of Designations is hereby deleted in
         its entirety and the following shall appear in its place:

     (e)(i) [Intentionally omitted.]

     The  Amendment  was  adopted by the  Corporation's  Board of  Directors  on
December  9,  2005 and  approved  by its  stockholders  in  accordance  with the
provisions of RCW 23B.10.030 and 23B.10.040 on March 29, 2006.




                                    PART III

Item 9. Directors and Executive Officers of the Registrant

Directors and Executive Officers

                                      27

<PAGE>

     The  following  table  sets forth the names and ages of all  directors  and
executive  officers of the Company as of March 30, 2007.  The Board of Directors
is comprised of only one class.  All of the directors  will serve until the next
annual  meeting of  stockholders  and until  their  successors  are  elected and
qualified,  or until their earlier  death,  retirement,  resignation or removal.
There are no family  relationships among directors or executive officers.  There
are no arrangements or  understandings  between any two or more of the Company's
directors or executive officers. There is no arrangement or understanding any of
the Company's  directors or executive  officers and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement,  plan or understanding as to whether non-management
shareholders  will exercise their voting rights to continue to elect the current
board of directors. There are also no arrangements, agreements or understandings
between non-management  shareholders that may directly or indirectly participate
in or influence the management of the Company's affairs. Also provided herein is
a brief  description  of the business  experience of each director and executive
officer  during the past five years and an indication of  directorships  held by
each director in other companies subject to the reporting requirements under the
Federal securities laws.

     Set forth below is certain  information,  as of March 27, 2007,  concerning
each  of the  directors  and  executive  officers  of the  Company.  Each of the
individuals  listed as a director below shall serve as a director of the Company
until the  Company's  next  annual  meeting  of  shareholders  and  until  their
successors have been elected and qualified, or until their resignation, death or
removal.  Each of the individuals listed below as executive officers shall serve
in such offices until  removed by the Board of Directors,  subject to applicable
employment agreements.


Name                age   Position
-----              -----  ----------------------------------------------------
Paul R. Arena       48    Director, Chief Executive Officer, Chairman of the
                          Board and Secretary

James R. Rose       50    Director and Chief Technical Officer

Douglas F. Bender   57    GM, Senior Vice President Engineering

Audrey L. Braswell  77    Director

D.Christer Bylander 53    Director

     None of the Company's directors or executive officers, during the past five
years, (1) had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy  or within two years  prior to that  time;  (2) been  convicted  in a
criminal  proceeding  or  subject  to a pending  criminal  proceeding;  (3) been
subject to any order, judgment, or decree, not subsequently reversed,  suspended
or vacated, of any court of competent  jurisdiction,  permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities, futures, commodities or banking activities; or (4) been
found by a court of competent  jurisdiction (in a civil action),  the Securities
and Exchange  Commission or the Commodity  Futures Trading  Commission,  to have
violated a Federal or State  securities r commodities  law, and the judgment has
not been reversed, suspended or vacated.

     Certain  additional  biographical  information  concerning the  individuals
named above is set forth below.


Paul R. Arena, Chairman, Chief Executive Officer and Secretary

     Mr. Arena has served as a director,  Chief Executive  Officer,  Chairman of
the Board and  Secretary of the Company since  February 2004 and President  from
November  2005 to present.  Furthermore,  Mr.  Arena  served as President of the
Company  from  September  2004 to May  2005.  Mr.  Arena was the  founder  of i2
Delaware and has served as Chairman of the Board and Chief Executive  Officer of
i2 Delaware since i2 Delaware's  inception in February 2002.  From April 2000 to
the present,  Mr. Arena has been  Chairman  and Chief  Executive  Officer of AIM
Group, Inc., a holding company  specializing in materials for the wire and cable
industry.  In July 1994,  Mr. Arena founded  Cereus  Technology  Partners,  Inc.
("Cereus"),  a  publicly  traded  technology  company.  Mr.  Arena  served in an
executive capacity with Cereus and its predecessor companies, including Chairman
and Chief Executive Officer,  from May 1991 to April 2000. From June 1990 to May
1991,  Mr. Arena was a financial  business  consultant.  From  February  1988 to
January  1990,  he served as a Senior Vice  President  and partner of Gulfstream
Financial Associates, Inc., a subsidiary of the Kemper Group.
..


                                      28
<PAGE>


James R. Rose, Director and Chief Technology Officer

     Mr. Rose has served as a Director of the Company  since  November  2005 was
appointed  Chief  Technology  Officer in April 2005. He  previously  served as a
Managing  Director of the Company since September,  2004. From 2002 to 2004, Mr.
Rose  was  Partner/Consultant  for RKP  Steering  Group,  a  corporate  finance,
operation,  and strategic  planning  consulting firm focused  exclusively on the
telecommunications  industry.  From 2000 to 2002,  Mr. Rose served as  Executive
Vice President,  Chief Operating  Officer and Chief Technology  Officer - US and
Europe,   of  Rapid   Link   Communications,   a  provider   of   internet-based
communications  services.  From 1998 to 2000,  Mr. Rose served as Executive Vice
President  -  Operations  and  Engineering,   and  Chief  Operating  Officer  of
LDI/NETnet/Word  Access, a provider of  telecommunications  services in the U.S.
and  Europe.  In 1998,  Mr.  Rose  served as Vice  President  -  Operations  and
Engineering of TotalTel Communications,  Inc., a small to medium enterprise long
distance provider.  From 1994 to 1998, Mr. Rose served as Director of Operations
and Engineering of IXC Communications,  Inc., a long-distance telecommunications
company. Prior to his executive experience, Mr. Rose was part of engineering and
operations   teams  at   multiple   communications   companies   including   MCI
Telecommunications, Inc.

Douglas F.  Bender,  General  Manager  and Senior  Vice  President  of  Business
Development

     Mr.  Bender has served as General  Manager  and Senior  Vice  President  of
Business Development of the Company since February 2004. Furthermore, Mr. Bender
has served as General Manager and Senior Vice President of Business  Development
of i2 Delaware since November 2002., Mr. Bender  co-founded  RealVue  Simulation
Technologies,  a simulation  technology  company in the  business of  developing
complex equipment simulations for commercial and industrial  manufacturers,  and
from  October  1999 to  September  2002  served as Vice  President  of  Business
Development.  From  February  1999 to January  2000,  Mr.  Bender served as Vice
President of Engineering for Splash  Technologies,  a color solutions technology
company  supplying the commercial and OEM color print controller  markets.  From
October 1992 to January 1999, Mr. Bender served as Vice President of Engineering
and Operations for Western Development  Laboratories (later acquired by Lockheed
Martin), a communications  company focused in the hi-speed digital satellite and
medical  radiology  markets.  Mr. Bender started his career working for TRW as a
software  engineer,  progressing to project manager and subsequently to Business
Area Director.

Dr. Al Braswell, Director

     Dr.  Braswell has served as a director of the Company since June 2004 and a
director of i2 Delaware since February 2002. Since 1974, Dr. Braswell has served
as  President  and owner of Vista  Pacifica  Enterprises,  Inc.,  an operator of
several  health  care  facilities  in  California.  For the past 35  years,  Dr.
Braswell has been  engaged in various  levels of health,  education,  and social
assistance  activities.  Dr.  Braswell  is  also  a  real  estate  developer  of
residential,  commercial and industrial  properties.  Dr.  Braswell  previously
served on the board of directors of Cereus  Technology  Partners from March 1997
to October 1999. Dr. Braswell  obtained a Ph.D. from Oregon State  University in
1963,  received  an MS from  Oregon  State  University  in 1959,  an MA from Los
Angeles State College in 1954, and a BS from Bethany Nazarene College in 1949.

D. Chris Bylander, Director

     Mr.  Bylander began serving as a director of the Company in May, 2006. From
May 2004 to present,  Mr.  Bylander  has been the  founder,  Chairman and CEO of
Exxiss  Computer  Corporation,  CEO of  Notebook  Design  International,  LLC, a
computer  branding  company,  and a Director of IT vendor  NGendo  Systems,  LLC
operating under U.S. Government minority preferment.  In March, 2007 he became a
partner of IonIdea, Inc., an IT outsourcing/  offshoring company with production
facilities in the United  States,  India,  and Ukraine.  In October,  1995,  Mr.
Bylander founded  International  American Group (IAG),  specializing in business
development to the manufacturing and IT/ telecommunications industries. While at
IAG, he also served as U.S.  President and CEO of a European  telecommunications
company,  U.S.  President  and CEO of a  global  manufacturing  group,  Managing
Director of a software developer in the financial services industry,  and COO of
a top Gartner-rated  eBusiness  infrastructure  company. Mr. Bylander received a
bachelors  degree in  economics  from Uppsala  Cederblads  in Sweden in 1978 and
attended De La Salle in the  Philippines  and  Sigtunaskolan  in Sweden prior to
that. Between 1993 and 1996 he participated in the MBA program at Oxford Brookes
University (formerly Oxford Polytechnic) in Oxford, England.


Meetings and Committees of the Board of Directors

                                      29
<PAGE>


     During the year ended December 31, 2006, the Company had twelve  telephonic
meetings  of its Board of  Directors;  all of the board  actions  were  taken by
unanimous written consent.

     The Company does not have a nominating committee of the Board of Directors,
or any  committee  performing  similar  functions.  Nominees  for  election as a
director are selected by the Board of Directors.


     The compensation  committee of the Board of Directors consists of the three
directors  of the  Company,  two of  whom  are  employees  of the  Company.  The
compensation  committee reviews the performance of the executive officers of the
Company and reviews the  compensation  programs and agreements for key employees
including salary and bonus levels.

     Mr.  Braswell and Mr. Bylander are the Company's  independant  directors as
defined under Nasdaq Rule 4200(a)(14)

Audit commitee

     The audit  committee of the Board of  Directors  consists of Paul Arena and
James Rose,  who are  employees  of the  Company  and Dr. Al Braswell  who is an
independent  director of the Company.  The audit committee  reviews actions with
respect to various auditing and accounting  matters,  including the selection of
the company's  independent public  accountants,  the scope of the annual audits,
the nature of non-audit services,  the fees to be paid to the independent public
accountants,  and the accounting  practices of the Company. The Company does not
currently  have  an  audit  committee  financial  expert  serving  on its  audit
committee. The Company may in the future attempt to add a qualified board member
to serve as an audit committee  financial  expert in the future,  subject to its
ability to locate and compensate such a person.

Code of Ethics

     The Company has adopted a Code of Ethics and Conduct that applies to all of
the Company's employees, including the Company's Executive Officers. The Company
shall  provide  to any  person  without  charge,  upon  request,  a copy  of the
Company's  Code of Ethics and Conduct.  Such requests  should be directed to the
Secretary of i2 Telecom International,  Inc. at 5070 Old Ellis Pointe,Suite 110
Roswell, Georgia 30076.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the Exchange Act requires  the  Company's  directors  and
executive officers,  and all persons ("Reporting  Persons") who beneficially own
more than 10% of the  outstanding  shares of Common Stock,  to file with the SEC
initial  reports of ownership  and reports of changes in ownership of the Common
Stock and other equity  securities  of the Company.  Reporting  Persons are also
required  to furnish the  Company  with  copies of all Section  16(a) forms they
file.  To the Company's  knowledge,  based solely upon a review of the copies of
such forms  furnished to the Company for the year ended  December 31, 2005,  and
the information  provided to the Company by Reporting Persons of the Company, no
Reporting  Person  failed to file the forms  required  by  Section  16(a) of the
Exchange Act on a timely basis, except that (i) Mr. Arena did not report a total
of 30,000  warrants  received  in  connection  with a  certain  loan made to the
Company  on his Form 3  (originally  filed on June 7, 2004 and  amended  in June
2005) to accurately reflect his holdings of certain derivative  securities;  and
(ii) Dr. Braswell did not report an exercise of 332,190 stock options in August,
2005 along with  288,048warrants  received in connection with certain loans made
to the Company on his Form 3 (originally filed on June 7, 2004 and amended March
27, 2005) to accurately reflect his holdings of certain  derivative  securities;
and (iii) Mr. Phipps did not report his  170,000warrants  received in connection
with certain loans made to the Company on his Form 3  (originally  filed on June
7, 2004 and  amended  March 27,  2005) to  accurately  reflect  his  holdings of
certain derivative securities.

Item 10. Executive Compensation.

Director Compensation

     As  compensation  for board fees for  service to the  Company in 2006,  the
Board of Directors awarded  then-serving  director Audrey L. Braswell options to
purchase, 75,000 shares of common stock.

Executive Compensation

     The  following  table sets forth  certain  information  regarding  cash and
non-cash  compensation  paid by the Company  during each of the  Company's  last
three fiscal years to the Company's Chief  Executive  Officer and the other most
highly compensated  executive officers of the Company whose annual  compensation
exceeded  $100,000  during the fiscal year ended  December  31, 2006 (the "Named
Persons").


                                      30

<PAGE>

                                  Annual Compensation    Long-Term Compensation
                                 --------------------    ----------------------
                                                                    Awards
                                                                  Securities
                                    Year     Salary    Bonus  underlying Options
                                   ------   --------  ------- -----------------
Name and Principal Position

Paul R. Arena, Chairman &           2006    $111,550  $  -0-             -0-
Chief Executive Officer             2005     206,750     -0-             -0-
                                    2004     206,750     -0-             -0-

James R. Rose                       2006    $123,270  $  -0-             -0-
Chief Technology Officer & Director 2005     150,000     -0-             -0-
                                    2004       -0-       -0-             -0-

Douglas F. Bender, GM &             2006    $ 78,481  $  -0-             -0-
Sr.Vice President Engineering       2005     135,000     -0-             -0-
                                    2004     120,399     -0-             -0-

Jerome A. Lumpkin, Former Sr.
Vice President North American Sales 2006    $  -0-    $  -0-             -0-
                                    2005     180,000     -0-             -0-
                                    2004     107,632     -0-             -0-



(1) Mr. Fultz served as President and COO of the Company from May 1 until
October 31, 2005. (2) Mr. Lumpkin served as Vice President North American Sales
of the Company until June 17, 2005.

Option Grants in Last Fiscal Year

     During the year ended  December  31,  2006,  the  Company did not grant any
options to its Named Executive Officer.

Aggregated  Option  Exercises in the Last Fiscal Year and Fiscal Year-End Option
Values

     The following table sets forth information concerning the value at December
31,  2006,  of the  unexercised  options  held by each  of the  Named  Executive
Officers. The value of unexercised options reflects the increase in market value
of the Common Stock from the date of grant through December 31, 2006.

                     Number of Securities
                    Underlying Unexercised          Value of Unexercised
                           Options                   In-The-Money Options
                      at Fiscal Year-End            at Fiscal Year-End (1)
                    ------------------------------------------------------------
                   Exercisable   Unexercisable    Exercisable     Unexercisable
Name               -----------   -------------    -----------     -------------
Paul R. Arena       3,044,436                0   $         0    $           0
James R. Rose       1,175,000                0   $         0    $           0
Douglas Bender      1,088,042                0   $         0    $           0
Jerome Lumpkin        665,758                0   $         0    $           0



(1)  Value of the Company's unexercised, in-the-money options based on the
     average of the high and low price of a share of the Common Stock as of
     December 31, 2006, which was $0.

Employment Agreements

      The Company has entered into employment agreements with its key officers
as follows:

                                      31
<PAGE>

      On April 6, 2005, the Company entered into an employment agreement with
James R. Rose. Mr. Rose's position is Chief Technology Officer and the term of
his agreement is for two years and carries a base compensation of $150,000 per
year.

    Item 11. Security Ownership of Certain Beneficial Owners and Management and
             Related Stockholder Matters

Beneficial Ownership

     As used in this section,  the term  beneficial  ownership with respect to a
security is defined by Rule 13d-3 under the Securities  Exchange Act of 1934, as
amended,  as consisting of sole or shared voting power  (including  the power to
vote or direct the vote) and / or sole or shared investment power (including the
power to dispose  of or direct  the  disposition  of) with  respect of  security
through any contract, arrangement,  understanding, or relationship or otherwise,
subject to community property laws where applicable.

     As of March 30,  2007,  the  Company  had a total of  99,219,600  shares of
Common Stock issued and  outstanding,  which is the only issued and  outstanding
voting equity security of the Company.

     The following table sets forth, as of March 30, 2007; (a) the names of each
beneficial  owner of more than five percent (5%) of the  Company's  Common Stock
known to the Company, the number of shares of Common Stock beneficially owned by
each such person,  and the percent of the Company's  Common Stock so owned;  and
(b) the names of each  director and executive  officer,  the number of shares of
Common Stock beneficially owned and the percentage of the Company's Common Stock
so owned, by each such person,  and by all directors and executive officers as a
group.  Each person has sole  voting and  investment  power with  respect to the
shares of Common Stock, except as otherwise indicated.

                                                      Common Stock
                                                 Beneficially Owned (1)
                                             ---------------------------------
                                               Number of
                                               Shares of          Percentage of
Name of Beneficial Owner (2)                  Common Stock          Class (3)
---------------------------                   ------------        -------------
Paul R. Arena++ +                              8,047,553(4)            8.1%
Audrey L. Braswell+                            6,898,632(5)            7.0
James R. Rose++ +                              2,053,383(6)            2.1
Douglas Bender++                               2,405,082(7)            2.4
D. Christer Bylander++                         1,100,000(8)            1.1
Vestal Venture Capital                        45,070,907(9)           32.3
Renaissance Capital                           13,761,572(10)          12.5

All executive officers and directors as
a group (5 persons)                            20,464,650             13.6


+    Director of the Company
++    Officer of the Company

(1)  Unless otherwise noted, all of the shares shown are held by individuals or
     entities possessing sole voting and investment power with respect to such
     shares. Shares not outstanding but deemed beneficially owned by virtue of
     the right of a person or member of a group to acquire them within 60 days
     of March 30, 2007, are treated as outstanding only when determining the
     amount and percentage owned by such individual or group.
(2)  The address of each executive officer and director of the Company is 5070
     Old Ellis Pointe Road, Suite 110 Roswell, Georgia.
(3)  In accordance with regulations of the SEC, the percentage calculations are
     based on shares of Common Stock issued and outstanding as of March 30,
     2007, plus shares of Common Stock which may be acquired within 60 days of
     March 30, 2007, by each individual or group listed.
(4)  Includes (i) 60,890 shares of Common Stock held by Mr. Arena's wife, (ii)
     83,712 shares of Common Stock held in trust for the benefit of Mr. Arena's
     children, and (iii) 3,044,436 shares of Common Stock issuable upon exercise
     of certain options and warrants.
(5)  Represents (i) 2,540,760 shares of Common Stock owned by personally by Dr.
     Braswell and 2,290,767 shares of Common Stock owned by Braswell
     Enterprises, L.P., of which Dr. Braswell is a general partner, and (ii)
     2,067,105 shares of Common Stock issuable upon exercise of certain options
     and warrants.

                                      32
<PAGE>

(6)  Represents (i) 878,383 shares of Common Stock owned by Mr. Rose, and (ii)
     1,175,000 shares of Common Stock issuable upon exercise of certain options
     and warrants.
(7)  Represents (i) 1,317,040 shares of Common Stock owned by Mr.
     Bender, and (ii) 1,088,042 shares of Common Stock issuable upon exercise of
     certain options and warrants.
(8)  Represents 1,100,000 shares of Common Stock issuable to Mr. Bylander upon
     exercise of certain  options and  warrants.
(9)  Includes 40,082,588 shares of Common Stock issuable upon the exercise of
     certain convertible notes, convertible preferred shares and warrants.
     Includes 4,988,329 shares of Common Stock.  Mr. Allan Lyons, managing
     partner of 21st Century Strategic Investment Planning, LC is the General
     Partner on behalf of Vestal Venture Capital in voting these shares of
     Common Stock.
(10) Includes 10,640,625 shares of Common Stock issuable upon the exercise of
     certain convertible preferred shares and warrants.  Includes 3,120,947
     shares of Common Stock.  Mr. Russell Cleveland, President of Renaissance
     Capital is the Fund Manager on behalf of U.S Special Opportunities Trust
     PLC, Renaissance Capital Growth & Income Fund III and U.S. Growth
     Investment Trust, PLC which have equal positions in voting these shares of
     Common Stock.



Item  12.  Certain   Relationships   and  Related   Transactions   and  Director
Independence

     Described below are certain  transactions or series of transactions between
us and our executive officers, directors and the beneficial owners of 5% or more
of our common stock, on an as converted  basis,  and certain persons  affiliated
with or related to these persons, including family members, in which they had or
will have a direct or indirect  material  interest in an amount that exceeds the
lesser of $120,000 or 1% of the average of our total  assets as of year-end  for
the last three completed fiscal years, other than compensation arrangements that
are otherwise required to be described under "Executive Compensation".

     Mr.  Braswell and Mr. Bylander are the Company's  independant  directors as
defined under Nasdaq Rule 4200(a)(14)

     In February 2006, Al Braswell  provided a short term loan to the Company
in the amount of $25,000.  In connection  with such loan,  the Company issued to
Mr.  Braswell  warrants to purchase  10,000 shares of Common  Stock,  in lieu of
interest on such loans.  The warrants  have an exercise  price of $.20 per share
and are exercisable immediately for a three-year period.

     In May 2006,  the  Company  issued to Mssrs.  Arena,  Braswell  and  Phipps
three-year  warrants to purchase  aggregate of 826,974 shares of Common Stock at
an exercise price of $0.10 per share,  vested immediately upon the date of grant
with a three-year  expiration  period. The warrants were issued in consideration
of  collateral  made  available  for benefit of the Company.  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. The
Company based such reliance upon factual  representations  by the  recipients of
the  warrants  to  the  Company   regarding   their   investment   interest  and
sophistication, among other things.

      Also in May 2006, the Company issued to D. Christer Bylander, a director,
three -year stock options to purchase an aggregate of 1,000,000 shares of Common
Stock. The options have an exercise price of $.10 per option share.

     In August 2006, the Company issued to Al Braswell 332,190 shares of Common
Stock,  in settlement of principal and interest  related to a loan in the amount
of $150,000 provided to the Company in 2005.

     In December 2006, Mr. Arena and Mr. Braswell purchased 714,286 shares and
714,286  shares,  respectively,   of  Common  Stock  for  $50,000  and  $50,000,
respectively.

     In January 2007, the Company issued to Mr. Arena and Mr. Braswell,  908,212
shares and 544,970  shares,  respectively,  of Common Stock in  satisfaction  of
outstanding promissory notes, with interest, totaling $90,821.26 and $54,487.09,
respectively.  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. The Company based such reliance upon factual  representations
by the  recipients  of the  shares to the  Company  regarding  their  investment
interest  and  sophistication,  among other  things.  However,  these shares are
entitled to "piggyback  registration"  rights upon filing of the Company's  next
registration statement.

     Also in January  2007,  the Company  issued to James Rose and Doug  Bender,
both officers of the Company,  624,671 and 1,000,000  shares,  respectively,  of
Common  Stock in lieu of  compensation  in the amounts of $62,467 and  $100,000,
respectively.  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. The Company based such reliance upon factual  representations
by the  recipients  of the  shares to the  Company  regarding  their  investment
interest  and  sophistication,  among other  things.  However,  these shares are
entitled to "piggyback  registration"  rights upon filing of the Company's  next
registration statement.

     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 13. Exhibits

                                      33

<PAGE>


      A list of the exhibits required by Item 601 of Regulation S-B to be filed
as part of this Annual Report is shown on the "Exhibit Index" filed herewith.

Item 14. Principal Accountant Fees and Services

         Freedman & Goldberg, CPA's ("Freedman") billed $67,901 and $74,873 for
fiscal year 2006 and 2005, respectively.

Audit-Related Fees

      Freedman billed $63,689 for fiscal year 2006 and $69,075 for fiscal year
2005.

Tax Fees

Freedman billed $4,212 for fiscal year 2006 and $5,783 for fiscal year 2005 for
tax compliance, tax advice and tax planning. These services provided by Freedman
include the preparation of the Company's federal and state tax returns.


Policy  on Audit  Committee  Pre-Approval  of Audit  and  Permissible  Non-Audit
Services of Independent Auditors

     The  Company's  Audit  Committee is required to  pre-approve  all audit and
non-audit  services  performed  by  the  Company's  independent  auditors.   The
Company's Audit  Committee,  however,  has not adopted any general  pre-approval
policy  with  regard  to  specified  audit or  non-audit  services  which may be
provided by the  independent  auditors,  but requires that the  Company's  Audit
Committee grant specific  pre-approval of each audit or non-audit  service to be
provided by the independent auditor before the independent auditor is engaged to
render such service.


1





























                                       34
<PAGE>





                         i2 TELECOM INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                           DECEMBER 31, 2006 AND 2005


<PAGE>



                                  i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY
-------------------------------------------------------------------------------




                                TABLE OF CONTENTS
                                                                          Page
Report of Independent Registered Public Accountant............................1
Consolidated Balance Sheets.................................................2-3
Consolidated Statements of Operations.........................................4
Consolidated Statements of Stockholders' Equity.............................5-6
Consolidated Statements of Cash Flows.........................................7
Notes to Consolidated Financial Statements.................................8-22
-------------------------------------------------------------------------------

                                      35
<PAGE>







                               FREEDMAN & GOLDBERG

                          CERTIFIED PUBLIC ACCOUNTANTS

                           A PROFESSIONAL CORPORATION








                           31150 NORTHWESTERN HIGHWAY, SUITE 200

                                FARMINGTON HILLS, MICHIGAN 48334
ERIC W. FREEDMAN
MICHAEL GOLDBERG                     (248) 626-2400
DAVID C. GREIP
JULIE A. CHEEK                    FAX: (248) 626-4298
WILLIAM A. MARSHALL
AMY S. JACKNOW
GLORIA MOORE

               Report of Independent Registered Public Accountant

To the Board of Directors
i2 Telecom International, Inc. and Subsidiaries
5070 Old Ellis Pointe
Suite 110
Roswell, Georgia 30076

We have  audited  the  accompanying  consolidated  balance  sheets of i2 Telecom
International,  Inc. and  Subsidiaries as of December 31, 2006 and 2005, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audit in accordance  with the auditing  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial  statements.  An audit also includes  assessment of the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion

In our opinion the financial statements referred to above present fairly, in all
material respects, the financial position of i2 Telecom International,  Inc. and
Subsidiaries of December 31, 2006 and 2005 and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 16 to the
financial  statements,  the Company has suffered  ongoing losses from operations
since its inception.  These losses, as well as the uncertain conditions that the
Company  faces  relative to its ongoing  debt and equity  fund-raising  efforts,
raise  substantial  doubt  abut the  company's  ability to  continue  as a going
concern. The financial statements do not include any adjustments relating to the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classification  of liabilities  that might be necessary in the event the company
cannot continue in existence.


Respectfully,


/s/ Freedman & Goldberg
Freedman & Goldberg
Certified Public Accountants

Farmington Hills, MI
March 29, 2007
                                                                         Page 1

<PAGE>

<TABLE>
<CAPTION>


                      i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY
                                CONSOLIDATED BALANCE SHEETS

                                              As of December 31, 2006  and 2005



                                       ASSETS


                                                              2006                  2005
                                                     -------------------- ---------------------
Current Assets
<S>                                                     <C>                      <C>
 Cash                                                   $   807,811              $    238
 Restricted Cash                                              -0-                 168,965
 Accounts Receivable, Net of Allowance for Doubtful
 Accounts of $-0- and $235,000, respectively                 59,822                69,927
 Inventories                                                355,900               732,663
 Prepaid Expenses and Other Current Assets                   81,262                84,407
                                          .....................................................
   Total Current Assets                                   1,304,795             1,056,200
                                          .....................................................


Property and Equipment, Net                                 764,426             1,206,982


Other Assets
Intangible Assets                                         3,349,834             3,349,834
Deposits                                                     27,840                61,540
                                           ...................................................
 Total Other Assets                                       3,377,674             3,411,374
                                           ............................. .....................
    Total Assets                                        $ 5,446,895            $5,674,556
                                           ---------------------------------------------------
</TABLE>





The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page 2



<PAGE>



<TABLE>
<CAPTION>




                                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


                                                                  2006                   2005
                                                         ------------------- ----------------------
Current Liabilities
<S>                                                            <C>                    <C>
     Accounts Payable and Accrued Expenses                     $4,078,375             $3,797,814
     Deferred Revenue                                              56,000                    -0-
     Convertible Bonds                                          2,950,000                    -0-
     Notes Payable-Current                                      2,761,607              2,780,625
     Notes Payable-Related Parties                                    -0-                    -0-
                                                         ................... ......................
       Total Current Liabilities                                9,845,982              6,578,439
                                                         ................... ......................

Stockholders' Equity (Deficit)
     Preferred Stock, No Par Value 7% Cumulative,
        5,000,000  Shares Authorized, 4,495 and 4,910
        Shares Issued andOutstanding, respectively              4,470,000              4,885,000
     Common Stock, No Par Value, 250,000,000
        Shares Authorized, 77,183,480, and 37,460,159
        Shares Issued and Outstanding,  respectively           17,175,150             14,651,858
     Restricted Stock
        Common Stock (Related to No Par Value
         above), 1,003,784and 382,568 Shares Issued
        and Outstanding, respectively.                            143,473                191,946
     Additional Paid-In Capital                                 1,703,168              1,092,126
     Accumulated Deficit                                      (27,890,878)           (21,724,813)
                                                         .................... ......................
       Total Stockholders' Equity (Deficit)                    (4,399,087)             (903,883)
                                                         .................... ......................
      Total Liabilities and Stockholders'  Equity (Deficit)   $ 5,446,895            $ 5,674,556
                                                         -------------------- ----------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page 3
<PAGE>



                         i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY
                             CONSOLIDATED STATEMENTS OF OPERATIONS


                                 For the Years Ended December 31, 2006 and 2005

                                         For the                For the
                                       Year Ended             Year Ended
                                    December 31, 2006      December 31, 2005
                                ----------------------- ----------------------

Revenue                               $  754,939             $  485,485

Cost of Revenue                          810,999              1,231,389
                                ....................... ......................
Gross Profit (Loss)                      (56,060)              (745,904)

General and Administrative Expenses    5,306,407              7,216,844
                                ....................... ......................
Loss From Operations                  (5,362,467)            (7,962,748)
                                ....................... ......................

Other Income (Expense)
  Interest Income                            942                  4,008
  Interest Expense                      (466,346)               (79,750)
  Gain on Forbearance of Debt             33,675                350,960
  Loss on Disposal of Assets              (5,981)                    -0-
                                ....................... ......................
     Total Other Income (Expense)       (437,710)                 275,218
                                ....................... ......................
Loss Before Cumulative Effect of
   Accounting Change                  (5,800,177)            (7,687,530)
Cumulative Effect of Accouting Change
   On Years Prior to 2005, Net of Income
   Tax of $-0-                                 -0-             (340,117)
                                ....................... ......................
Net Loss                               (5,800,177)            (8,027,647)
Dividends on Preferred Stock             (365,888)              (400,237)
                                ..................... ......................
Net Loss Available to Common
Shareholders                         $ (6,166,065)          $ (8,427,884)
                                ----------------------- ----------------------
Weighted Average Common Shares:
  Basic                                54,637,647             36,779,820
                                 ....................... ......................
Basic Earnings Per Common Share:
   Loss Before Cumulative Effect of
       Accounting Change              $     (.11)            $     (.22)
  Cumulative Effect of Accounting Change    (.00)                  (.01)
                               ....................... ......................
Net Loss                              $     (.11)            $     (.23)
                               ----------------------- ----------------------



The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page 4
<PAGE>



                                  i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY
                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                For the Years Ended December 31, 2006 and 2005


<TABLE>
<CAPTION>

                                                                                                                  Restricted
                                                Preferred       Preferred           Common           Common           Common
                                                   Stock            Stock            Stock         Stock No            Stock
                                                  Shares        Par Value           Shares        Par Value           Shares
                                            ............... ................ ................ ................ ................
                                            ............... ................ ................ ................ ................

                                                                                                 $
<S>              <C>                               <C>        <C>               <C>              <C>                 <C>
Balance, January 1, 2005                           4,175      $ 4,175,000       34,491,402       13,035,158          991,858
   Issuance of Preferred Stock                     1,400        1,375,000              -0-              -0-              -0-
   Conversion of Preferred to Common                (665)        (665,000)         831,250          665,000              -0-
   Exercise of Options and Warrants                  -0-              -0-        1,528,217          646,000              -0-
   Transfer of Restricted Units                      -0-              -0-          609,290          305,700         (609,290)
   Stock Compensation                                -0-              -0-              -0-              -0-              -0-
   Cumulative Effect of Accounting Change            -0-              -0-              -0-              -0-              -0-
   Net Loss for the Year Ended
      December 31, 2005                              -0-              -0-              -0-              -0-              -0-
   Dividends Paid on Preferred Stock                 -0-              -0-              -0-              -0-              -0-
............................................ ............... ................ ................ ................ ................
Balance, December 31, 2005                         4,910       $4,885,000       37,460,159     $ 14,651,858          382,568
   Issuance of Common Stock                                                      7,428,573          276,494              -0-
   Conversion of Preferred to Common                (415)        (415,000)       2,075,000          415,000              -0-
      Conversion of Convertible Debt                 -0-              -0-       14,707,310          425,000              -0-
   Stock Dividend on Preferred Stock                 -0-              -0-        1,663,611          251,239              -0-
     Exercise of Options and Warrants                -0-              -0-        1,959,372           19,475              -0-
   Transfer of Restricted Units                      -0-              -0-        5,878,784          488,473       (5,878,784)
     Stock Compensation                              -0-              -0-              -0-              -0-              -0-
     Stock Issued for Services and Debt              -0-              -0-        6,010,671          647,611        6,500,000
     Net Loss for the Year Ended
      December 31, 2006                              -0-              -0-              -0-              -0-              -0-
     Dividends on Preferred Stock                    -0-              -0-              -0-              -0-              -0-
............................................ ............... ................ ................ ................ ................
Balance, December 31, 2006                          4495        4,470,000       77,183,480       17,175,150        1,003,784
------------------------------------------- --------------- ---------------- ---------------- ---------------- ----------------
</TABLE>


The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page5
<PAGE>



                                   2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY
                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                 For the Years Ended December 31, 2006 and 2005

<TABLE>
<CAPTION>



           Restricted        Restricted        Restricted
               Common         Preferred          Preferred       Additional
             Stock No             Stock              Stock           Paid-In        Accumulated
            Par Value            Shares              Value           Capital            Deficit        Total
      .................. ................. .................. ................. .................. .................

<S>         <C>                      <C>                <C>          <C>            <C>                 <C>
            $ 497,646               -0-                -0-           404,100        (13,296,929)        4,814,975
                  -0-               -0-                -0-               -0-                -0-         1,375,000
                  -0-               -0-                -0-               -0-                -0-                -0-
                  -0-               -0-                -0-               -0-                -0-           646,000
            (305,700)               -0-                -0-               -0-                -0-               -0-
                  -0-               -0-                -0-           347,909                -0-           347,909
                  -0-               -0-                -0-           340,117                -0-           340,117

                  -0-               -0-                -0-               -0-         (8,027,647)       (8,027,647)
                  -0-               -0-                -0-               -0-           (400,237)         (400,237)
      .................. ................. .................. ................. .................. .................
      .................. ................. .................. ................. .................. .................
           $  191,946               -0-                -0-        $1,092,126     $  (21,724,813)       $ (903,883)
                  -0-               -0-                -0-           243,506                -0-           520,000
                  -0-               -0-                -0-               -0-                -0-               -0-
                  -0-               -0-                -0-               -0-                -0-           425,000
                  -0-               -0-                -0-               -0-                -0-           251,239
                  -0-               -0-                -0-               -0-                -0-            19,475
             (488,473)              -0-                -0-               -0-                -0-               -0-
                  -0-               -0-                -0-           367,536                -0-           367,536
              440,000               -0-                -0-               -0-                -0-         1,087,611
                                    -0-                -0-               -0-                -0-               -0-
                  -0-               -0-                -0-               -0-         (5,800,177)       (5,800,177)
                  -0-               -0-                -0-               -0-           (365,888)         (365,888)
      .................. ................. .................. ................. .................. .................
           $  143,473               -0-                -0-        $1,703,168      $ (27,890,878)     $ (4,399,087)
      ------------------ ----------------- ------------------ ----------------- ------------------ -----------------
</TABLE>

the accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page6
<PAGE>

<TABLE>
<CAPTION>


                                                                i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY
                                                                     CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                              For the Years Ended December 31, 2006  and 2005



                                                                                            For the              For the
                                                                                         Year Ended           Year Ended
                                                                                  December 31, 2006    December 31, 2005
                                                                                 ..........................................
Cash Flows From Operations
<S>                                                                                    <C>                  <C>
    Net Loss From Continuing Operations                                                $ (5,800,177)        $ (8,027,647)
    Adjustments to Reconcile Net Income to Net
     Cash Provided By Operating Activities
              Bad Debts                                                                         -0-              167,857
              Depreciation and Amortization                                               1,177,751              497,343
              Loss on Disposal of Assets                                                      5,981                  -0-
              Gain on Forbearance of Debt                                                   (33,675)            (350,960)
              Stock Compensation                                                            608,706              311,629
         Cumulative Effect of Accounting Change                                                 -0-              340,117
              (Increase) Decrease In:
                  Accounts Receivable                                                        10,105               (5,413)
                  Inventories                                                               376,763              228,393
                  Prepaid Expenses                                                           25,445               29,575
                  Other Assets                                                               33,700               16,624
              Increase (Decrease) In:
                  Accounts Payable and Accrued Expenses                                   1,210,713            2,609,757
                  Deferred Revenue                                                            56,000             (99,901)
............................................................................................................................
         Net Cash Used In Operating Activities                                           (2,328,688)          (4,282,626)
............................................................................................................................
Cash Flows From Investing Activities
    Equipment Purchases                                                                     (93,397)            (298,175)
    Payments for Patents and Trademarks                                                          -0-             (33,749)
............................................................................................................................
     Net Cash Used In Investing  Activities                                                 (93,397)            (331,924)
............................................................................................................................
Cash Flows From Financing Activities
    Proceeds From Shareholder Loans                                                             -0-              649,500
    Payments of Shareholder Loans                                                               -0-              (74,500)
    Proceeds from Issuance of Convertible Notes                                           3,375,000                  -0-
    Proceeds From Notes Payable                                                             344,000            2,325,000
    Payment of Notes Payable                                                               (438,018)            (119,375)
    Issuance of Common Stock                                                                520,000              546,000
    Issuance of Preferred Stock                                                                 -0-            1,375,000
    Payment for Financing Cost                                                            (759,764)                  -0-
    Dividends Paid                                                                              -0-            (148,999)
       Exercise of Options                                                                   19,475                  -0-
............................................................................................................................
         Net Cash Provided By Financing Activities                                        3,060,693            4,552,626
............................................................................................................................

Increase (Decrease) in Cash                                                                 638,608              (61,924)
Balance, Beginning of Period                                                                169,203              231,127
............................................................................................................................
Balance, End of Period                                                                   $  807,811           $  169,203
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


the accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page7
<PAGE>



                    i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                 For the Years Ended December 31, 2006 and 2005


Note 1.  Summary of Significant Accounting Policies

          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.

      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 Atlanta,  Georgia, is a  telecommunications
          service  provider   employing  next  generation  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 will be 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 will provide
         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 intercompany 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 are stated at lower of cost or market. Cost
         is determined on the first-in, first-out (FIFO) basis. Inventory
         classifications as of December 31, 2006 and 2005 consisted of the
         following:

                                             2006                 2005
                                -------------------- --------------------
Raw Material                              $   -0-             $187,055
Work in Process                               -0-                  -0-
Finished Goods                            355,900              545,608
                                .................... ....................
                                         $355,900             $732,663
                                -------------------- --------------------

    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 by 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 currently.
         Maintenance and repairs which do not improve or extend the lives of
         assets are expensed as incurred.



the accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page8
<PAGE>



Note 1.  Summary of Significant Accounting Policies - (continued)

     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 intangible assets with a finite life
         over their respective useful lives 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, 2006 and 2005.

     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.       Advertising Costs - The Company expenses advertising costs as incurred.
         For the years ended December 31, 2006 and 2005, $159,321 and $513,078
         of advertising costs were expensed, respectively.

N.       Earnings(loss) per share - Basic earnings per share represents income
         available to common stockholders divided by the weighted average number
         of shares outstanding during the period. Diluted earnings 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.
         Potential common shares that may be issued by the Company relate to
         outstanding stock options, warrants and convertible debt. Earnings per
         common share have been computed based on the following:

                                       2006                 2005
                                -------------------- --------------------
Net Income (Loss)                  $ (5,800,177)        $ (8,027,647)
Less: Preferred Dividends              (365,858)            (400,237)
                                .................... ....................
                                   $ (6,166,065)        $ (8,427,884)
                                -------------------- --------------------
Weighted Average Shares Outstanding  54,637,647           36,779,820
Net Diluted Effect of Stock Options          -0-                  -0-
                                .................... ....................
Diluted Average Shares Outstanding   54,637,647           36,779,820
                                -------------------- --------------------

the accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page9
<PAGE>



Note 1.  Summary of Significant Accounting Policies - (continued)

         Options on 52,226,675 shares of common stock were not included in the
         computing of diluted earnings per share nor were bonds convertible into
         common shares because their effects were antidilutive.

         The following transactions occurred after December 31, 2006, which, had
         they taken place during the year ended December 31, 2006, would have
         changed the number of shares used in the computation of earnings per
         share: (1) 12,136,849 shares issued to pay off notes and trade payable;
         (2) 1,000,000 shares issued in part of a loan guaranty; (3) 5,263,941
         shares issued in lieu of payment of dividends; and (4) 5,888,290 shares
         issued with exercise of stock options.

    O.   New Accounting Pronouncements - In February of 2006, the FASB issued
         SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments",
         which is intended to simplify the accounting and improve the financial
         reporting of certain hybrid financial instruments. (i.e., derivatives
         embedded in other financial instruments). The statement amends SFAS No.
         133, "Accounting for Derivative Instruments and Hedging Activities",
         and SFAS No. 140, "Accounting for Transfers and Servicing of Financial
         Assets and Extinguishments of Liabilities - a replacement of FASB
         Statement No. 125. SFAS No. 155 is effective for all financial
         instruments issued or acquired after the beginning of an entity's first
         fiscal year that begins after September 15, 2006. The Company is
         currently evaluating the impact of SFAS No. 155 will have on its
         financial statements, if any.

         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.

         In July 2006, the FASB issued FASB Interpretation No. 48, Accounting
         for Uncertainty in Income Taxes - an Interpretation of FASB Statement
         No. 109" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in
         income taxes recognized in a company's financial statements in
         accordance with SFAS 109. "Accounting For Income Taxes". FIN 48
         prescribes a recognition threshold and measurement attribute for the
         financial statement recognition and measurement of a tax position taken
         or expected to be taken in a tax return. FIN 48 also provides guidance
         on derecognition, classification, interest and penalties, accounting in
         interim periods, disclosure and transition.

         In September 2006. the FASB issued SFAS No. 157, "Fair Value
         Measurements". This statement clarifies the definition of fair value,
         establishes a framework for measuring fair value, and expands the
         disclosures on fair value measurements. SFAS No. 157 is effective for
         fiscal years beginning after November 15, 2007. Management has
         determined the effect, if any, the adoption of this statement will have
         on our results of operations or financial position.


the accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page10
<PAGE>





Note 2.  Property and Equipment

     The major components of property and equipment at December 31, 2006 and
2005 are as follows:

                                             2006                    2005
                                 ---------------------- -----------------------
Network Equipment                       $ 797,438             $   775,571
Office Equipment                          212,086                 162,348
Software                                  733,177                 910,677
Lab Equipment                              40,277                  40,277
Furniture and Fixtures                     43,884                  68,151
                                 ...................... .......................
                                        1,826,862               1,957,024
Less:  Accumulated Depreciation         1,062,436                 750,042
                                 ...................... .......................
Net Property and Equipment             $  764,426             $ 1,206,982
                                 ---------------------- -----------------------

     Depreciation charged to operations was $356,272 and $358,956 for the years
ended December 31, 2006 and 2005, respectively.


Note 3. Intangible Assets

    Intangible assets at December 31, 2006 and 2005 consisted of the following:

                                               2006                   2005
                              -------------------------- ----------------------
Patent Pending Technology                 $ 3,190,917            $ 3,190,917
Trademark                                     158,917                158,917
                              .......................... ......................
                                            3,349,834              3,349,834
                              -------------------------- ----------------------

     The Company has filed for several patents that are pending. Therefore, the
     life is currently indeterminable and the cost of the patents are not
     amortizable. As of December 31, 2006, the Company has determined there in
     no impairment of the intangible assets.


Note 4.  Notes Payable
<TABLE>
<CAPTION>

    Notes Payable as of December 31, 2006 and 2005 consisted of the following:

<S>                                                                                        <C>             <C>
                                                                                           2006            2005
                                                                                  -------------- ---------------
     a. 8% note payable due to an individual previously affiliated with
     SuperCaller. The principal and all accrued interest are due and payable
     upon the Company obtaining certain levels of equity funding                    $  50,000       $  50,000

     b. 6% note payable due to an individual previously affiliated with
     SuperCaller. The principal and all accrued interest are due and payable
     upon the Company obtaining certain levels of equity funding.                      50,000          50,000

</TABLE>


The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page11
<PAGE>




Note 4.  Notes Payable (continued)


<TABLE>
<CAPTION>

<S>                                                                                        <C>             <C>
                                                                                           2006            2005
                                                                                  -------------- ---------------

     c. 8% note payable to a bank. The principal and all accrued interest were
     due on December 31, 2006. The note was paid off in full during 2006. The
     note was unsecured and guaranteed by an officer of the Company.                        -0-          80,625

     d. 10% note payable due to an individual shareholder of the company payable
     in monthly installments of $4,000, including interest, through August 31,
     2007 when all outstanding principal and interest is due. The note is
     unsecured and guaranteed by an officer of the Company.                             273,000         250,000

     e. 12% note payable due to a corporation. The principal and all accrued
     interest were due on September 30, 2005. The note is unsecured and
     guaranteed by an officer of the Company. In March 2007 the maturity date           100,000         100,000
     was extended to June 30, 2007.

     f. 12% note payable due to an corporation.  The principal and all accrued
     interest were due on March 15, 2007. In January 2007, the note and accrued
     interest was paid off via the issuance of common stock.                            300,000         300,000

     g.  12%  note  payable  to an  officer  &  director  of  the  Company.  The
     principal and accrued  interest were due on September 15, 2006. The note is
     unsecured.  In January 2007, the note and accrued interest was paid off via
     the issuance of common stock.                                                       75,000          75,000

     h. 12%  note  payable  due to an  individual.  The  principal  and  accrued
     interest were due on September 15, 2006. The note is unsecured.  In January
     2007,  the note and  accrued  interest  was  paid off via the  issuance  of
     common stock.                                                                       50,000          50,000

     i. 12%  note  payable  due to an  individual.  The  principal  and  accrued
     interest were due on September 15, 2006. The note is unsecured.  In January
     2007,  the note and  accrued  interest  was  paid off via the  issuance  of
     common stock.                                                                       50,000          50,000

     j. 12% note payable due to an  individual.  The  principal  and all accrued
     interest  were  due  on  August  15,  2006.  The  note  was  unsecured  and
     guaranteed  by an officer of the Company.  The note was paid in full during
     2006.                                                                                  -0-          50,000

     k.  10% note  payable  due to an  corporation.  The  note  requires  weekly
     payments of $3,000,  including  interest,  until paid in full.  In addition
     to  weekly  payments,  the note  requires  payments  of  $10,000  for every
     $100,000 of new capital raised. The note is unsecured.                             133,607         200,000

     l. 13% note payable due to a corporation. The principal and all accrued
     interest are due on March 15, 2007. The note is unsecured. The note was
     paid off in March 2007 (See Note 19)                                             1,000,000       1,000,000

     ml. 13% note payable due to a  corporation.  The  principal and all accrued
     interest are due on March 15,  2007.  The note is  unsecured.  The note was
     paid off in March 2007 (See Note 19)                                               100,000         100,000

     n. 13% note payable due to a  corporation.  The  principal  and all accrued
     interest are due on March 15,  2007.  The note is  unsecured.  The note was
     paid off in March 2007 (See Note 19)                                               100,000         100,000

     o. 12%  note  payable  due to an  individual.  The  principal  and  accrued
     interest were due on September 15, 2006. The note is unsecured.  In January
     2007,  the note and  accrued  interest  was  paid off via the  issuance  of
     common stock.                                                                       50,000          50,000
</TABLE>

The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page12
<PAGE>



Note 4.  Notes Payable (continued)

<TABLE>
<CAPTION>

<S>                                                                                        <C>             <C>
                                                                                           2006            2005
                                                                                  -------------- ---------------
     p. 12% note payable due to an individual. The principal and accrued
     interest were due on September 15, 2006. The note is unsecured. In January
     2007, the note and accrued interest was paid off via the issuance of
     common stock.                                                                       50,000          50,000

     q. 12% note payable due to a  corporation.  The  principal  and all accrued
     interest  were due on February 20,  2006.  The note was paid in full in May
     2006.  The note was unsecured.                                                         -0-         175,000

     r. 8%  note  payable  to an  individual.  The  principal  and  all  accrued
     interest were due on February 18, 2006.  The note is unsecured.  In March,
     2007 the maturity date was extended to June 30, 2007.                               25,000          25,000

     s. 8%  note  payable  to an  individual.  The  principal  and  all  accrued
     interest were due on February 18, 2006.  The note is unsecured.  In March,
     2007 the maturity date was extended to June 30, 2007.                               25,000          25,000

     t. 12% note  payable  to an  individual.  The  principal  and  all  accrued
     interest was due on March 15, 2007.  The note is unsecured. In March 2007,
     the maturity date was extended to June 30, 2007.                                   100,000             -0-

     u. 12% note  payable  to an  individual.  The  principal  and  all  accrued
     interest was due on March 15, 2007.  The note is unsecured. In March 2007,
     the maturity date was extended to June 30, 2007.                                    200,000             -0-

     v.  Non-interest  bearing note payable to a corporation  due on January 31,
     2007.  The note is unsecured.                                                       30,000             -0-
                                                                                  .............. ...............
     Total Long Term Debt                                                             2,761,607       2,780,625
     Less:  Current Portion                                                           2,761,607       2,780,625
                                                                                  .............. ...............
     Long-Term Portion                                                                 $    -0-        $    -0-
                                                                                  -------------- ---------------
</TABLE>

     During the year ended December 31, 2005, some of the shareholders loaned
     the Company $174,500. The loans were repaid prior to March 31, 2005,
     including reclassifying $100,000 to common stock as part of an exercise of
     stock options by one of the shareholders.


Note 5.  Convertible Bond

     On January 9, 2006, the Company closed a financing transaction in which it
     sold 10% secured convertible debentures (the "Debentures") to Cornell
     Capital Partners, LP ("Cornell") to raise $1,750,000 pursuant to a
     Securities Purchase Agreement dated thereof (the "Securities Purchase
     Agreement"). The Company received $600,000 upon closing. On April 6, 2006,
     the Company closed a financing transaction in which it sold 10% secured
     convertible debentures to Cornell. The Company received $600,000 upon
     closing. On May 10, 2006, the Company closed a financing transaction in
     which it sold 10% secured convertible debentures to Cornell. The Company
     received $550,000 upon closing.

The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page13
<PAGE>



Note 5.  Convertible Bond (continued)

     The Debentures mature on January 9, 2009, April 13, 2009 and May 10, 2009,
     respectively. The Debentures are convertible from time to time into the
     common stock of the Company by Cornell at the price per share equal to the
     lesser of (1) ninety percent (95%) of the lowest volume weighted average
     price of the Company's common stock, as quoted by Bloomberg, LP, for the
     thirty (30) trading days immediately preceding the conversion date or (2)
     $0.10. In the event that the volume weighted average price of the Company's
     common stock, as quoted by Bloomberg, LP, is below Four Cents ($0.04) for
     ten (10) consecutive Trading Days, Cornell shall not, unless waived by the
     Company, convert more than Two Hundred Thousand Dollars ($200,000) of
     principal and interest due and outstanding under the Debentures into shares
     of the Company's common stock in any thirty (30) calendar day period.
     Additionally, Cornell may not convert the Debentures or exercise the
     Warrant (as defined below) if such conversion or exercise would result in
     Cornell, together with any affiliate thereof, beneficially owning (as
     determined in accordance with Section 13(d) of the Securities Exchange Act
     of 1933 and the rules promulgated thereunder) in excess of 4.9% of the then
     issued and outstanding shares of the Company's common stock. The Company
     has an option to redeem a portion or all of the outstanding principle
     convertible Debentures, provided that the price of the Company's common
     stock is trading below the Fixed Conversion Price, with the redeem price of
     one hundred twenty percent (120%) of the amount redeemed plus accrued
     interest.


     The Company and its subsidiaries granted Cornell a security interest in
     certain of its assets pursuant to a Security Agreement dated January 9,
     2006 between the Company and Cornell and a Debenture dated January 9, 2006
     between i2 Telecom International Limited and Cornell (collectively, the
     "Security Agreements"). The Company entered into a Pledge and Escrow
     Agreement with Cornell, dated January 9, 2006 (the "Pledge Agreement")
     whereby the Company agreed to pledge 100,000,000 shares of its common stock
     until such time all obligations under the Debentures have been satisfied.
     In December 2005, pursuant to the Pledge Agreement, the Company delivered
     to the Escrow Agent stock certificates representing 26,886,667 shares of
     the Company's common stock with the remaining 73,113,333 shares of common
     stock delivered in 2007 when the authorized shares of the Company's common
     stock was increased to 250,000,000 shares. Additionally, certain of the
     Company's shareholders pledged and delivered to the Escrow Agent stock
     certificates representing a total of 8,269,751 shares of common stock (the
     "Stockholder Pledge Shares") pursuant to Pledge Agreements entered into by
     and among the shareholders, the Company and Cornell dated January 9, 2006
     (the "Shareholder Pledge Agreements"). The Stockholder Pledge Shares will
     be returned to the shareholders when the Company completes delivery of the
     Company Pledge Shares to the Escrow Agent. The Company paid Yorkville
     Advisors, LLC a structuring fee of $15,000 and paid a commitment fee equal
     to 10% of the total purchase price of the Debentures upon the funding of
     the Debentures. Cornell also received a three-year warrant to purchase
     7,150,000 shares of common stock at an exercise price of $0.07 per share
     (the "Warrant").


     During the year end December 31, 2006, Cornell 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 to Cornell
     on these bonds.

     On December 9, 2006, the Company closed a financing transaction in which it
     sold 6% secured convertible debentures (the "Debentures") to raise
     $2,000,000 pursuant to a Securities Purchase Agreement dated thereof (the
     "Securities Purchase Agreement"). The Company received $1,625,000 in
     December 2006 and remaining 375,000 in January 2007


The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page14
<PAGE>



Note 5.  Convertible Bond (continued)

     The Debentures  mature on May 9, 2007. The Debentures are convertible  from
     time to time into  28,571,429  shares of common stock of the Company at the
     price of $.07 per share and 28,571,429 warrants exercisable at the price of
     $.07 per share.  In  addition  The Notes will  automatically  convert  into
     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.

     Convertible bonds at December 31, 2006 and December 31, 2005 consisted of
the following:

                                    2006                     2005
                          -------------------------- ----------------------
10% Convertible Bonds           $ 1,325,000              $     -0--
12% Convertible Bonds             1,625,000                    -0-
                          .......................... ......................
                                $ 2,950,000              $     -0-
                          -------------------------- ----------------------

Note 6. Debt Maturities

    Debt maturities in the next five years are as follows:

              2007                                $5,711,607
              2008                                       -0-
              2009                                       -0-
              2010                                       -0-
              2011                                       -0-
                                               ................
                                                $ 5,711,607
                                               ----------------

Note 7.  Certain Related Party Transactions

     Interest expense on notes from related parties for the years ended December
31, 2006 and 2005 was $9,000 and $21,342 respectively.

Note 8.  Income Taxes

     The Company  has  incurred  net  operating  losses for  federal  income tax
     purposes of  $5,800,177  and  $8,230,701  for the years ended 2006 and 2005
     respectively,  which it has elected to carry forward, therefore the Company
     has not  recorded  any  current  tax  accrual.  The  Company  has total net
     operating loss carry forwards of $35,332,395  which expire in various years
     ranging from 2007 to 2026.



The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page15
<PAGE>



Note 8.  Income Taxes (continued)


     Deferred taxes are detailed as follows:

                                                2006                 2005
                                        ------------------ --------------------
Deferred Income Tax Liability
  Amortization of Patents and Trademarks     $ 297,844            $ 222,958
                                         ................. ....................
Deferred Income Tax Assets
  Net Operating Loss Available              12,013,014           10,135,872
  Amortization of R&D Expenses                 329,575              378,407
  Accrued Expenses                             735,024              682,375
                                         ................. ....................
                                            13,077,613           11,196,654
Valuation Allowance                         12,779,769           10,973,696
                                         ................. ....................
Net Deferred Income Tax Asset                  297,844              222,958
                                         ................. ....................
Net Deferred Income Taxes                   $    -0-             $    -0-
                                         ----------------- --------------------


     The valuation allowance is evaluated at the end of each year, considering
     positive and negative evidence about whether the asset will be realized. At
     that time the allowance will either be increased or reduced; reduction
     would result in the complete elimination of the allowance if positive
     evidence indicates that the value of the deferred tax assets is no longer
     required. Due to the above valuation allowance, the Company has not
     recorded any assets for deferred taxes as of December 31, 2006 and 2005.

Note 9. Supplemental Cash Flow Disclosures

     Interest received and paid, income taxes paid and non-cash transactions
     incurred during the years ended December 31, 2006 and 2005 was as follows:

                                                2006               2005
                                        -------------------- ------------------
 Interest Received                         $      942           $  4,008
                                        -------------------- ------------------
 Interest Paid                             $  206,079           $ 12,616
                                        -------------------- ------------------
 Income Taxes                              $    -0-             $  -0-
                                        -------------------- ------------------
 Non-Cash Transactions:
    Payment of Debt via Stock  Payment of  $ 1,087,611          $   -0-
 Dividends via stock                           251,238              -0-
          Conversion of Debt to Stock          460,000         100,000
                                        -------------------- ------------------

Note 10.  Significant Concentrations of Credit Risk

     The Company maintains cash balances at various financial institutions. The
     balances are insured by the Federal Deposit Insurance Corporation (FDIC) up
     to $100,000. At December 31, 2006 and 2005, the Company's uninsured cash
     balance totaled $695,817 and $68,965, respectively.


The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page16
<PAGE>




Note 11.  Stock Options and Warrants

     During 2004, the Company's board of directors  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 additions, 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.  123  (revised  2004),
     "Share-Based Payment", which is a revision of SFAS No. 123, "Accounting for
     Stock-Based Compensation" (SFAS 123R). SFAS 123R supersedes APB Opinion No.
     25,  "Accounting for Stock Issued to Employees,"  which was previously used
     by the  Company  (See Note 18).  Generally,  the  approach  in SFAS 123R is
     similar to the approach described in SFAS 123. However,  SFAS 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 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 123R,  "Accounting
     for Stock-Based Compensation",  the Company recognizes an expense, over the
     vesting  period,  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 123R and
     related interpretations.  The change to FSAS No. 123 has been accounted for
     as change in accounting  principle and the cumulative effect on prior years
     has been reflected on the consolidated statement of operations.

     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.

    The summary of the status of the Company's stock option plan as of December
    31, 2006 and 2005 and changes during the periods then ended is as follows:

<TABLE>
<CAPTION>

                                                    2006                            2005
                                        -------------------------------- -----------------------------
                                        --------------- ---------------- --------------- -------------
                                                          Weighted                        Weighted
                                         Number of         Average        Number of       Average
                                          Options/        Exercise         Options/       Exercise
                                          Warrants          Price          Warrants        Price
                                        --------------- ---------------- --------------- -------------

<S>                                       <C>                   <C>        <C>                <C>
     Outstanding at Beginning of
       Period                             27,784,602            $ .56      22,757,921         $ .67
     Options Granted                       7,546,940            $ .08       4,175,771         $ .53
     Warrants Granted                     25,243,315            $ .08       9,467,015         $ .34
     Exercised                            (5,518,731)           $ .24      (6,337,688)        $ .56
     Forfeited                            (1,959,372)           $ .01      (2,278,417)        $ .55
     .................................. ............... ................ ............... .............
     Outstanding at End of Period         53,096,754            $ .32      27,784,602         $ .57
     ---------------------------------- --------------- ---------------- --------------- -------------
     Options Exercisable at End of
      Period                              52,226,675            $ .16      16,918,676         $ .60
     Weighted-average Fair Value of
     Options Granted During
       the Period                                               $ .06                         $ .32
</TABLE>



     As of December 31, 2006, 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 1.84 years.

     During the years ended December 31, 2006 and 2005, total compensation costs
     recognized in income from stock-based compensation awards was $608,706 and
     $311,629 respectively

     .
The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page17
<PAGE>





Note 12.  Restricted Stock

     On December 31, 2003, the Company amended its 2002 Stock Option Plan to
     properly administer the granting of Restricted Stock. Under the amended
     plan, employees are granted restricted stock without cost to the employee.
     Each restricted share unit awarded to a participant represents an unfunded,
     unsecured right, which is nontransferable except in the event of death, of
     the employee to receive one share of common stock, no par value on the date
     specified in the grant. The restricted share stock granted under the plan
     vest evenly over three years, with immediate vesting upon termination.
     Information with respect to restricted share units as of December 31, 2006
     and 2005 is as follows:


<TABLE>
<CAPTION>

                                                                           2006                 2005
                                                                     -------------------- -------------------
                                                                                Common              Common
<S>                                                                            <C>                 <C>
Restricted Stock-Beginning of Year                                             382,568             991,858
Restricted Stock Granted                                                     6,500,000                 -0-
Transfer to Common Stock Due to Lapse of Restrictions                       (5,878,784)           (609,290)
                                                                     .................... ...................
Restricted Stock-End of Year                                                 1,003,784             382,568
                                                                     -------------------- -------------------
Weighted Average Fair Value of Shares                                           $  .14              $  .45
Pre-Tax Compensation Expense Charged to
  Earnings, net of cancellations                                              $392,500                 -0-
</TABLE>



Note 13.  Deferred Compensation Plan

      In September 2003, the Company instituted a second salary reduction plan
      whereas executives of the Company agreed to an additional decrease in
      salary. Under this plan, the Company will repay the difference between the
      wages paid immediately prior to the start of the plan and their reduced
      salary plus 25% of the difference. The deferred amount is due at a time
      when the company becomes profitable. As of December 31, 2006 and 2005 the
      amount of deferred compensation accrued was $382,067 and $303,692
      respectively.



Note 14.  Employee Benefit Plans

     During the year ended December 31, 2005, the Company discontinued using a
     professional employment organization (PEO) for its payroll and began doing
     payroll internally. As a result, benefits provided through the PEO such as
     dental, disability, life insurance and 401K plan were terminated. The
     Company does still provide health insurance benefits previously provided
     through the PEO.

The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page18
<PAGE>





Note 15.  Lease Obligations

     The Company leases its office facilities in Roswell, Georgia under an
operating lease expiring in September 2008.

     The Company also leases space for its network operations on a
month-to-month basis.

     The Company leased its former headquarters in Atlanta, Georgia under an
operating lease that expired in September 2006.

     During the year ended December 31, 2006, the Company terminated its lease
for its engineering center in Redwood City, California.

Total rents paid during the years ended December 31, 2006 and 2005 were $157,943
and $206,889 .

     Future minimum lease obligations under all operating leases are as follows:

December 31, 2007               $
December 31, 2008               34,380
December 31, 2009                           26,361
December 31, 2010                              -0-
December 31, 2011                              -0-
                                               -0-
                                .....................
                                           $60,741
                                ---------------------



Note 16.  Realization of Assets

    As shown in the accompanying financial statement, the Company incurred a net
    loss of $5,800,,177 and $8,027,647 during the years ended December 31, 2006
    and 2005, respectively, and as of December 31, 2006, the Company's current
    liabilities exceeded its current assets by $8,541,187 and its total
    liabilities exceeded its total assets by $4,399,087.

    The factors noted in the preceding paragraph, as well as the uncertain
    conditions that the Company faces relative to its ongoing debt and equity
    fund-raising efforts, creates a substantial doubt as to the Company's
    ability to continue as a going concern. The ability of the Company to
    continue as a going concern is dependent upon the Company's success in its
    ability to obtain needed financing and increase revenues.

    The Company has identified several new business strategies that should
    enable the Company to reach its profitability goals. First, the Company
    currently has a detailed plan under which it will bring in new capital for
    both its short term as well as its long term liquidity needs. The Company is
    in negotiations with several companies to enable the Company to ultimately
    expand the market and revenues for its products and services. Management
    believes that new products it has in development, the potential for newly
    identified business relationships coupled with new capital from
    sophisticated institutional investors, should allow the Company to achieve
    its goal of positive cash flow within the next twelve months.


The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page19
<PAGE>




Note 17.  Contingencies

     On June 30, 2003,  the Company filed a demand for  arbitration  against the
     former   majority  owner  of  SuperCaller   Community,   Inc.,  a  Delaware
     corporation  acquired by the  Company in  September  2002  ("SuperCaller"),
     seeking damages in the amount of $452,250,  which  represents the amount of
     liabilities  exceeding  the $400,000  threshold  as of  September  17, 2002
     permitted  by the purchase  agreement  pursuant to which  Company  acquired
     SuperCaller.

     On December 22, 2003, former  stockholders of 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
     i2 Delaware 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.  The  claimants  had
     asserted that they had ownership of certain core  Intellectual  Property of
     the  Company.  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. The claimants have filed for an appeal which is still
     pending.  In the event of a favorable  decision by the Appeals  Court,  the
     Company will be entitled to recover 800,000 shares of the Company's  common
     stock held in escrow and will be required to issue approximately  1,800,000
     shares of common  stock to  shareholders  of record on February  26,  2004,
     which  represents the date of the DDN merger.  On that date,  approximately
     1,800,000 were held from issuance pending the outcome of this litigation.

     The Company had been named a defendant in a lawsuit regarding a disputed
     amount due for patent preparation and filings. Based on the present status
     of these litigation matters, management believes this will not ultimately
     have a material effect on the results of operations, financial position, or
     cash flows of the Company.

     In January 2007, the Company guaranteed two loans totaling $1,000,000
     provided by a bank to two shareholders of the Company. The two shareholders
     then loaned the money to the Company.


Note 18.  Preferred Stock

     In August 2004, the Company the completed a private placement of 4,500
     shares of its preferred stock series D, warrants to purchase 2,812,500
     shares of its common stock, and 1,125 additional investment right
     units(AIRS) for an aggregate purchase price of $4.5 million. The preferred
     stock calls for quarterly dividends at 7% paid quarterly on a cumulative
     basis. Dividends not paid on the payable date require interest at a rate of
     13% per annum from the payable date to date paid. The shares of preferred
     stock series D are convertible into an aggregate of 5,625,000 shares of
     common stock with each share of preferred stock series D being convertible
     into 1,250 shares of common stock. Each additional investment right unit
     (AIR) is exercisable into one share of preferred stock series D and a
     warrant to purchase 625 shares of common stock at an exercise price of
     $1,000 per unit. The warrants issued in the private placement and issuable
     upon exercise of the additional investment right units are exercisable for
     a period of three years at a price of $.96 per share.

     During the year ended December 31, 2005, the Company received $575,000 from
     the exercise of 600 AIRS.

     During the year ended December 31, 2006 and 2005, 415 and 665 shares of the
     Company's preferred stock were converted into 2,075,000 and 831,250 shares
     of common stock, respectively.


The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page20
<PAGE>




Note 18.  Preferred Stock (continued)

     In July 2005, the Company completed a private placement of 800 shares of
     its preferred stock series E for $800,000. The preferred stock calls for
     quarterly dividends at 3% paid quarterly on a cumulative basis. The shares
     of preferred stock series D are convertible into 2,000,000 shares of common
     stock at $.40 each and warrants to purchase common stock at $.50 per share
     for a three year period.

     On September 12, 2005, the Company entered into an agreement for a
     $1,200,000 Secured Loan Facility with a trust and two individuals. The
     terms of the agreement called for a repayment of the loan on January 31,
     2006 with a 10% annual percentage rate of interest and the issuance of
     1,200,000 warrants exercisable at $.50 each for a period of three years.
     This effectively changed the conversion price of the Series E Convertible
     Preferred holders warrants of which there were 1,000,000 outstanding and
     exercisable at $.60 per share to $.50 per share. The warrants were issued
     without registration under the Securities Act in reliance upon the
     exemption set forth in Section 4(2).

     On December 9, 2005, the Company entered into an agreement with the holders
     of Series D and Series E Convertible Preferred Stock ("Series D" and
     "Series E") of the Company to modify the terms whereby;

     o   The exercise price will be fixed at $.20 per share into the common
         shares of the Company;
     o   There will be a mandatory conversion of the shares of Series D and
         Series E into common shares upon the Company's common shares
         trading at or above 200% of the exercise price for 20 consecutive
         trading days;
     o   The exercise  price of any of the Series D and Series E warrants will
         be fixed at $.20 per share into the common sharesof the Company;
     o   Any future anti-dilution full-ratchet provisions are eliminated.

     On March 29, 2006, the shareholders approved an amendment to the
     Certificate of Designations of Rights and Preferences of its Preferred
     Stock Series D and E in accordance with the above-mentioned agreement.

     Any outstanding dividends owed to the Series D and Series E holders will be
     converted to common stock at 90% of the average closing bid price of the
     Company's common stock for the 20 consecutive trading days immediately
     prior to the applicable dividend date for the dividend periods of the
     Company's second, third and fourth quarters.

     On March 26, 2007, the Company entered into an agreement with the holders
     of Series D and Series E Convertible Preferred Stock ("Series D" and
     "Series E") of the Company to modify the terms whereby the dividends due
     for year ended December 31, 2006 may be paid in shares of common stock and
     the amount of dividends due is based on a 9% annual percentage rate.

     Any outstanding dividends owed to the Series D and Series E holders will be
     converted to common stock at 90% of the average closing bid price of the
     Company's common stock for the 20 consecutive trading days immediately
     prior to the applicable dividend date for the dividend periods of the
     Company's first, second, third and fourth quarters

     On March 26, 2007, the shareholders approved the issuance of 5,263,941
     shares of common stock in satisfaction of dividends due on its Series D and
     E Convertible Preferred Stock in accordance with the above-mentioned
     agreement.

     During the years ended December 31, 2006 and 2005 the Company accrued
     dividends of $374,068 and $400,237. As of December 31, 2006, the company
     has unpaid dividends of $374,068.


The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page21
<PAGE>





Note 19.  Subsequent Events

     In January 4, 2007, the Company closed a financing transaction with one
     board member and an individual investor, (the "Loan Guarantors") whereby
     the Loan Guarantors advanced the Company $1,000,000 less transaction costs
     (the "Advance") pursuant to a $1,000,000 one-year term loan entered into by
     them with University Bank (the "Lender") at 8.25% interest (the "Loan"). In
     consideration for the Advance, the Company agreed to pay the Lender monthly
     interest and principal when due and pay the Loan Guarantors (i) 1,000,000
     shares of the Company's restricted common stock, as payment for the first
     three months of Loan exposure (the "Stock Consideration") and (ii) an
     additional 1,000,000 shares of the Company's restricted common stock as
     payment if the Loan exposure lasts past the three month as additional Stock
     Consideration. The Stock Consideration will have "Piggyback" Registration
     Rights which will require the Company to register the Stock Consideration
     shares in the Company's next registration statement. The Company agreed to
     issue an additional 3,000,000 shares of the Company's common stock to the
     Loan Guarantors if the Loan is not repaid or the Loan Guarantors are not
     relieved of the Loan liability within six months from the closing. The
     Company further agreed to secure the principal amount of $1,000,000 in
     favor of the Lender in a second secured position behind existing creditors
     who previously loaned the Company $1.2 million.

     On January 15, 2007, the Company issued 5,045,856 shares of its common
     stock lieu of principal and interest due on various loans totaling $504,576

     On March 5, 2007, the Company repaid in full loans totaling $1.2 million.
     The loans were originally issued with an aggregate total principal amount
     of $1,200,000. Pursuant to the agreement between the parties, the Company
     delivered a payment of approximately $1.289 million to the Lenders, which
     included a loan extension fee and all accrued interest and principal. The
     debt was not convertible into common stock, and the Lenders' 5.2 million
     warrants exercisable at an average of $0.125 each were exercised on a
     "cashless basis" into approximately 2.8 million shares of common stock of
     the Company as part of the debt retirement agreement.


     On February 28, 2007, the Company closed a financing transaction with 41
     accredited investors in which it sold $2,000,000 of 6% Senior Subordinated
     Secured Convertible Notes convertible into 16,666,666 shares of the
     Company's common stock priced at $.12 each, and 8,333,333 Warrants, priced
     at $.12 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 the Closing Date. 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 shall be secured by all assets of
     the Company and its subsidiaries, however, subordinate to a $1,200,000
     senior loan, $1,000,000 secure loan and pari-passu with $2,000,000 of
     convertible notes. 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.




The accompanying notes are an integral part of the financial statements.
-------------------------------------------------------------------------------
                                                                        Page 22
<PAGE>








                                   SIGNATURES

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


                                                I2 TELECOM INTERNATIONAL, INC.

                                                By: s/ Paul R. Arena
                                                    --------------------------
                                                    Paul R. Arena
                                                    Chairman of the Board and
                                                    Chief Executive Officer

                                                    Date: April 2, 2007

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






Name                                  Title                         Date
-----                                 -----                        -------
/s/ Paul R. Arena         Chairman of the Board and Chief       April 2, 2007
_________________         Executive Officer (Principal Executive
Paul R. Arena             Officer) and (Principal Financial Officer)

/s/ James R. Rose         Director and Chief Technical Officer  April 2, 2007
_________________
James R. Rose

/s/ Audrey L. Braswell    Director                               April 2, 2007
______________________
Audrey L. Braswell


/s/ D.Christer Bylander   Director                               April 2, 2007
______________________
D.Christer Bylander


<PAGE>



                                  EXHIBIT LIST

Securities Purchase Agreement dated as of August 11, 2004, among the Company and
each of the buyers signatory thereto.  (The schedules to the Securities Purchase
Agreement  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.)



<TABLE>
<CAPTION>





Exhibit
  No.                            Exhibit                                               Method of Filing
-------                          -------                                               ----------------
<S>                                                          <C>                                           <C>
  2.1       Agreement and Plan of Merger dated as of January 30,      Incorporated by reference to Exhibit 2.1 to the
            2004, among the Company, DDN Acquisition Corporation      Company's Current Report on Form 8-K filed on
            and i2 Telecom Communications, Inc. (The schedules to     February 2, 2004.
            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.).

  2.2       Asset Purchase Agreement dated as of January 30, 2004,   Incorporated by reference to Exhibit 2.2 to the
            between the Company and InTransit Media, Inc.            Company's Current Report on Form 8-K filed on
                                                                     February 2, 2004.

  2.3       First Amendment to Asset Purchase Agreement, dated       Incorporated by reference to Exhibit 2.3 to the
            February 26, 2004, between the Company and InTransit     Company's Current Report on Form 8-K filed on March
            Media, Inc.                                              12, 2004.

  2.4       Securities Purchase Agreement dated as of August 11,     Incorporated by reference to Exhibit 2.1 to the
            2004, among the Company and each of the buyers           Company's Current Report on Form 8-K filed
            signatory thereto. (The schedules to the Securities      August 13,2004.
            Purchase Agreement 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.).

  3.1       Articles of Incorporation, as amended.                    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 3.1 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     Incorporated by reference to Exhibit 3.1 to the
            of Preferred Stock Series D of i2 Telecom                 Company's Current Report on Form 8-K filed August 13,
            International, Inc.                                       2004.

  3.4       Amendment to the Company's Articles of Incorporation      Incorporated by reference to Exhibit 3.1 to the
            failed June 3, 2004.                                      Company's Quarterly Report on Form 10-QSB for the
                                                                      quarter ended June 30, 2004.

  3.5       Amendment to the Company's Articles of Incorporation      Incorporated by reference to Exhibit 3.2 to the
            filed August 10, 2004.                                    Company's Quarterly Report on Form 10-QSB for the
                                                                      quarter ended June 30, 2004.
  3.6       Certificate of Designations for Series E                  Incorporated by reference to Exhibit 3.1 to
            Preferred Stock.                                          the Company's Current Report on Form 8-K
                                                                      filed November 22, 2005.
  3.7       Amendment to the Company's Articles of Incorporation      Incorporated by reference to Exhibit 3.1.8 to the
            filed April 17, 2006.                                     Company's Quarterly Report on Form 10-QSB for the
                                                                      quarter ended March 31, 2007.
  4.1       Form of Warrant issued by the Company to each buyer in    Incorporated by reference to Exhibit 4.1 to the
            Connection with the 2004 Private Placement.               Company's Current Report on Form 8-K filed August 13,
                                                                      2004.

  4.2       Form of Additional Investment Right issued by the         Incorporated by reference to Exhibit 4.2 to the
            Company to each buyer in connection with the 2004         Company's Current Report on Form 8-K filed August 13,
            Private Placement.                                        2004.

  4.3       Registration Rights Agreement among the Company and       Incorporated by reference to Exhibit 4.3 to the
            the buyers signatory thereto entered into in              Company's Current Report on Form 8-K filed August 13,
            connection with the 2004 Private Placement.               2004.



  4.4       Form of Warrant issued by i2 Telecom International,       Incorporated by reference to Exhibit 4.4 to the
            Inc., a Delaware corporation, and converted in the        Company's Registration Statement on Form SB-2 (No.
            Merger, exercisable until February 27, 2007, at an        333-119254).
            exercise price of $0.9031.
  4.5       Warrant dated April 19, 2005 to purchase 52,083 shares    Incorporated by reference to Exhibit 4.1 to the
            of Common Stock granted to Midsouth Investor Fund, LP.    Company's Current Report on Form 8-K filed April 25,
                                                                      2005.
  4.6       Registration Rights Agreement dated as of April 19,       Incorporated by reference to Exhibit 4.2 to the
            2005 between the Company and Midsouth Investor Fund, LP.  Company's Current Report on Form 8-K filed April 25,
                                                                      2005.
  4.7       Warrant dated April 25, 2005 to purchase 156,249 shares   Incorporated by reference to Exhibit 4.3 to the
            of Common Stock granted to Vestal Venture Capital.        Company's Current Report on Form 8-K filed April 25,
                                                                      2005.
  4.8       Registration Rights Agreement dated as of April 25,       Incorporated by reference to Exhibit 4.4 to the
            2005 between the Company and Vestal Venture Capital.      Company's Current Report on Form 8-K filed April 25,
                                                                      2005.
  4.9       Warrant dated June 28, 2005 to purchase 26,042 shares     Incorporated by reference to Exhibit 4.1 to the
            of the Company's common stock granted to Hubert G.        Company's Current Report on Form 8-K filed July 5, 2005.
            Phipps.
 4.10       Registration Rights Agreement dated as of June 28, 2005   Incorporated by reference to Exhibit 4.2 to the
            between the Company and Hubert G. Phipps.                 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   Incorporated by reference to Exhibit 4.1 to the
            the Company's common stock granted to Paul R. Arena.      Company's Current Report on Form 8-K filed July 12,
                                                                      2005.
 4.12       Registration Rights Agreement dated as of July 7, 2005    Incorporated by reference to Exhibit 4.2 to the
            between the Company and Paul R. Arena.                    Company's Current Report on Form 8-K filed July 12,
                                                                      2005.
 4.13       Stock Option Agreement dated July 6, 2005 to purchase     Incorporated by reference to Exhibit 4.3 to the
            85,714 shares of the Company's common stock granted to    Company's Current Report on Form 8-K filed July 12,
            James Rose.                                               2005.
 4.14       Stock Option Agreement dated July 7, 2005 to purchase     Incorporated by reference to Exhibit 4.4 to the
            168,000 shares of the Company's common stock granted to   Company's Current Report on Form 8-K filed July 12,
            James Rose.                                               2005.
 4.15       Warrant dated August 30, 2005 to purchase 25,000 shares   Incorporated by reference to Exhibit 4.1 to the
            of the Company's common stock granted to Aubrey L.        Company's Current Report on Form 8-K filed September 6,
            Braswell.                                                 2005.
 4.16       Registration Rights Agreement dated September 7, 2005     Incorporated by reference to Exhibit 99.1 to the
            among the Company, Troon & Co., Gregory P. McGraw and     Company's Current Report on Form 8-K filed September
            Jordan E. Glazov.                                         13, 2005.
 4.17       Stock Option Agreement dated as of September 12, 2005     Incorporated by reference to Exhibit 99.7 to the
            between the Company and Louis Libin.                      Company's Current Report on Form 8-K filed September
                                                                      14, 2005.
 4.18       Stock Option Agreement dated as of September 12, 2005     Incorporated by reference to Exhibit 99.10 to the
            between the Company and Aubrey L. Braswell.               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    Incorporated by reference to Exhibit 4.1 to the
            Company and the purchasers of the Company's Series E      Company's Current Report on Form 8-K filed November 22,
            Preferred Stock.                                          2005.
 4.20       Warrant dated November 3, 2005 by and between the         Incorporated by reference to Exhibit 4.1 to the
            Company and Braswell Enterprises, LP.                     Company's Current Report on Form 8-K filed December 07,
                                                                      2005.
 4.21       Warrant dated November 18, 2005 by and between the        Incorporated by reference to Exhibit 4.2 to the
            Company and Mena Investment.                              Company's Current Report on Form 8-K filed December 07,
                                                                      2005.
 4.22       Warrant dated November 18, 2005 by and between the        Incorporated by reference to Exhibit 4.3 to the
            Company and Dr. Angela Ranzini.                           Company's Current Report on Form 8-K filed December 07,
                                                                      2005.
 4.23       Warrant dated November 23, 2005 by and between the        Incorporated by reference to Exhibit 4.4 to the
            Company and Vestal Venture Capital.                       Company's Current Report on Form 8-K filed December 07,
                                                                      2005.
 4.24       Registration Rights Agreement dated November 3, 2005 by   Incorporated by reference to Exhibit 10.5 to the
            and between the Company and Braswell Enterprises, LP.     Company's Current Report on Form 8-K filed December 07,
                                                                      2005.
 4.25       Registration Rights Agreement dated November 18, 2005     Incorporated by reference to Exhibit 10.6 to the
            by and between the Company and Dr. Angela Ranzini.        Company's Current Report on Form 8-K filed December 07,
            b                                                         2005.
 4.26       Registration Rights Agreement dated November 18, 2005     Incorporated by reference to Exhibit 10.7 to the
            by and between the Company and Mena Investment.           Company's Current Report on Form 8-K filed December 07,
                                                                      2005.
 4.27       Registration Rights Agreement dated November 23, 2005     Incorporated by reference to Exhibit 10.8 to the
            by and between the Company and Vestal Venture Capital.    Company's Current Report on Form 8-K filed December 07,
                                                                      2005.
 4.28       Warrant, dated as of January 9, 2006, between the         Incorporated by reference to Exhibit 10.4 to the
            Company and Cornell Capital Partners, LP.                 Company's Current Report on Form 8-K filed January 12,
                                                                      2006.
 4.29       Investor Registration Rights Agreement, dated as of       Incorporated by reference to Exhibit 10.5 to the
            January 9, 2006, between the Company and Cornell          Company's Current Report on Form 8-K filed January 12,
            Capital Partners, LP.                                     2006.
 4.30       Warrant dated January 30, 2006 by and between the         Incorporated by reference to Exhibit 4.35 to the
            Company and Richardson & Patel, LLP.                      Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 4.31       Warrant dated January 30, 2006 by and between the         Incorporated by reference to Exhibit 4.36 to the
            Company and Peter Hogan.                                  Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 4.32       Warrant Agreement dated March 11, 2003, granted to        Incorporated by reference to Exhibit 10.22 to the
            Robert F. Hussey to purchase 65,000 shares of the         Company's Quarterly Report on Form 10-QSB for the
            Company's common stock.                                   quarter ended March 31, 2004.
 4.33       Warrant dated February 28, 2006 between the Company and   Incorporated by reference to Exhibit 4.38 to the
            Phillip Rapp, Jr.                                         Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 4.34       Warrant dated March 17, 2006 between the Company and      Incorporated by reference to Exhibit 21 to the
            Phillip Rapp, Jr.                                         Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 4.35       Form of Warrant dated December 29, 2006 for $2 million    Incorporated by reference to Exhibit 10.1 to the
            financing                                                 Company's Current Report on Form 8-K filed January 5,
                                                                      2007.
 4.36       Form of Registration Rights Agreement dated December      Incorporated by reference to Exhibit 10.2 to the
            29, 2006 for $2 million financing                         Company's Current Report on Form 8-K filed January 5,
                                                                      2007.
 4.37       Form of Registration Rights Agreement dated February      Incorporated by reference to Exhibit 10.1 to the
            28, 2007 for $2 million financing                         Company's Current Report on Form 8-K filed March 1,
                                                                      2007.
 4.38       Form of Warrant dated February 28, 2007 for $2 million    Incorporated by reference to Exhibit 10.2 to the
            Financing                                                 Company's Current Report on Form 8-K filed March 1,
                                                                      2007.

 10.1       Employment Agreement between Paul R. Arena and i2         Incorporated by reference to Exhibit 10.2 to the
            Telecom International, Inc., a Delaware corporation,      Company's Quarterly Report on Form 10-QSB for the
            dated June 1, 2002. Represents an executive               Quarter ended March 31, 2004.
            compensation plan or arrangement.

 10.2      Form of Lock-up Agreement entered into in connection        Incorporated by reference to Exhibit 99.1 to the
           with the 2004 Private Placement.                            Company's Current Report on Form 8-K filed August 13,
                                                                       2004.

 10.3      Form of Conversion Agreement dated as of April 6, 2004      Incorporated by reference to Exhibit 10.1 to the
           between the Company and each holder of the Company's        Company's Quarterly Report on Form 10-QSB for the
           Preferred Stock Series A-1.                                 quarter ended June 30, 2004.

 10.4      Non-Negotiable Promissory Note dated May 14, 2004 made      Incorporated by reference to Exhibit 10.2 to the
           by the Company in favor of Vestal Venture Capital in        Company's Quarterly Report on Form 10-QSB for the
           principal amount of $500,000.00.                            quarter ended June 30, 2004.

 10.5      Non-Negotiable Promissory Note dated June 7, 2004 made      Incorporated by reference to Exhibit 10.3 to the
           by the Company in favor of Vestal Venture Capital in        Company's Quarterly Report on Form 10-QSB for the
           principal amount of $185,000.00.                            quarter ended June 30, 2004.

 10.6      Non-Negotiable Promissory Note dated June 8, 2004 made      Incorporated by reference to Exhibit 10.4 to the
           by the Company in favor of Midsouth Investor Fund, LP       Company's Quarterly Report on Form 10-QSB for the
           in principal amount of $300,000.00.                         quarter ended June 30, 2004.



 10.7       Form of Acknowledgement and Agreement dated July 6,       Incorporated by reference to Exhibit 10.5 to the
            2004 between the Company and each former holder of the    Company's Quarterly Report on Form 10-QSB for the
            Company's Preferred Stock Series A-1 and Preferred        Quarter ended June 30, 2004.
            Stock Series A-2.

 10.8       Amendment to Employment Agreement between i2 Telecom      Incorporated by reference to Exhibit 99.2 to the
            International, Inc., a Delaware corporation, and Paul     Company's Current Report on Form 8-K filed September 9,
            Arena dated August 24, 2004. Represents an executive      2004.
            compensation plan or arrangement.

 10.9       Settlement Agreement dated February 24, 2005, between     Incorporated by reference to Exhibit 99.1 to the
            the Company and Anthony F. Zalenski.                      Company's Current Report on Form 8-K filed on March 2,
                                                                      2005.
 10.10      I2 Telecom International, Inc. 2004 Stock Incentive       Incorporated by reference to Appendix C to the Company's
            Plan.                                                     Schedule 14A Proxy Statement filed May 10, 2004.
 10.11      Promissory Note dated April 7, 2005 issued by the         Incorporated by reference to Exhibit 99.1 to the
            Company in favor of Hubert G. Phipps in principal         Company's Current Report on Form 8-K filed on April 12,
            amount of $250,000.                                       2005.
 10.12      Employment Agreement dated as of April 6, 2005, between   Incorporated by reference to Exhibit 99.1 to the
            the Company and James Rose.                               Company's Current Report on Form 8-K filed on April 11,
                                                                      2005.
 10.13      Promissory Note dated April 19, 2005 issued by the        Incorporated by reference to Exhibit 99.1 to the
            Company in favor of Midsouth Investor Fund, LP in         Company's Current Report on Form 8-K filed April 25,
            principal amount of $100,000.                             2005.
 10.14      Form of Securities Purchase Agreement dated July 12,      Incorporated by reference to Exhibit 10.1 to the
            2005 by and amongst the Registrant and the purchasers     Company's Current Report on Form 8-K filed November 22,
            of the Registrant's Series E Preferred Stock.             2005.
 10.15      Form of Registration Rights Agreement dated July 12,      Incorporated by reference to Exhibit 10.2 to the
            2005 by and amongst the Registrant and the purchasers     Company's Current Report on Form 8-K filed November 22,
            of the Registrant's Series E Preferred Stock.             2005.
 10.16      Promissory Note dated November 18, 2005 by and between    Incorporated by reference to Exhibit 10.2 to the
            the Company and Dr. Angela Ranzini.                       Company's Current Report on Form 8-K filed December 7,
                                                                      2005.
 10.17      Promissory Note dated November 18, 2005 by and between    Incorporated by reference to Exhibit 10.3 to the
            the Company and Mena Investment.                          Company's Current Report on Form 8-K filed December 7,
                                                                      2005.
 10.18      Promissory Note dated November 23, 2005 by and between    Incorporated by reference to Exhibit 10.4 to the
            the Company and Vestal Venture Capital.                   Company's Current Report on Form 8-K filed December 7,
                                                                      2005.
 10.19      Guaranty dated November 23, 2005 by and between Paul      Incorporated by reference to Exhibit 10.9 to the
            Arena and Vestal Venture Capital.                         Company's Current Report on Form 8-K filed December 7,
                                                                      2005.
 10.20      Letter Agreement dated February 16, 2006.                 Incorporated by reference to Exhibit 10.51 to the
                                                                      Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 10.21      Promissory Note dated February 28, 2006 between the       Incorporated by reference to Exhibit 10.52 to the
            Company and Phillip Rapp, Jr.                             Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 10.22      Promissory Note dated March 17, 2006 between the          Incorporated by reference to Exhibit 10.53 to the
            Company and Phillip Rapp, Jr.                             Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 10.23      Form of Modification Agreement between the Company and    Incorporated by reference to Exhibit 49 to the
            the Series D Preferred Shareholders.                      Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 10.24      Form of Modification Agreement between the Company and    Incorporated by reference to Exhibit 50 to the
            the Series E Preferred Shareholders.                      Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.
 10.25      Form of Term Loan Agreement dated December 29, 2006 for   Incorporated by reference to Exhibit 10.3 to the
            $2 million financing                                      Company's Current Report on Form 8-K filed January 5,
                                                                      2007.
 10.26      Form of Note Purchase Agreement dated December 29, 2006   Incorporated by reference to Exhibit 10.4 to the
            For $2 million financing                                  Company's Current Report on Form 8-K filed January 5,
                                                                      2007.
 10.27      Form of Promissory Note Agreement dated December 29,      Incorporated by reference to Exhibit 10.5 to the
            2006 for $2 million financing                             Company's Current Report on Form 8-K filed January 5,
                                                                      2007.
 10.28      Form of Loan Repayment Agreement dated December 29,       Incorporated by reference to Exhibit 10.6 to the
            2006 for $2 million financing                             Company's Current Report on Form 8-K filed January 5,
                                                                      2007.
 10.29      Form of Loan Guaranty dated December 29, 2006 for $2      Incorporated by reference to Exhibit 10.7 to the
            Fillion financing                                         Company's Current Report on Form 8-K filed January 5,
                                                                      2007.
 10.30      Form of Note Purchase Agreement dated February 28, 2007   Incorporated by reference to Exhibit 10.3 to the
            For $2 million financing                                  Company's Current Report on Form 8-K filed March 1,
                                                                      2007.
  14        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        Subsidiaries of the Company.                              Incorporated by reference to Exhibit 21 to the
                                                                      Company's Annual Report on Form 10-KSB filed April 4,
                                                                      2006.


 23.1       Consent of Freedman & Goldberg, Certified Public          Filed herewith.
            Accountants.

 31.1       Rule 13a-14(a)/15d-14(a) Certification of the Company's   Filed herewith.
            Chief Executive Officer and Chief Financial Officer.

 32.1       Section 1350 Certification of the Company's Chief         Filed herewith.
            Executive Officer and Principal Financial Officer.
</TABLE>

<PAGE>




                               FREEDMAN & GOLDBERG

                          CERTIFIED PUBLIC ACCOUNTANTS

                           A PROFESSIONAL CORPORATION

]


                                                     TRI-ATRIA

                                       31150 NORTHWESTERN HIGHWAY, SUITE 200

ERIC W. FREEDMAN                          FARMINGTON HILLS, MICHIGAN 48334
MICHAEL GOLDBERG
DAVID C. GREIP                                     (248) 626-2400
JULIE A. CHEEK
WILLIAM A. MARSHALL                             FAX: (248) 626-4298
AMY S. JACKNOW
GLORIA MOORE

CONSENT OF INDEPENDENT AUDITORS

CONSENT OF INDEPENDENT AUDITORS

     We  consent  to the  use  in  this  Registration  Statement  of i2  Telecom
International,  Inc.  on Form 10K of our  report  dated  March  29,  2007 for i2
Telecom International, Inc for the years ended December 31, 2006 and 2005, which
is a part of this Registration Statement.


/s/ Freedman & Goldberg, CPAs, PC

Farmington Hills, MI
April 2, 2007



<PAGE>




                                                                  EXHIBIT 31.1

           Certification Required by Rule 13a-14(a) or Rule 15d-14(a)

I, Paul R. Arena, certify that:

     1.  I have reviewed this Annual Report on Form 10-KSB for the year ended
         December 31, 2005 of i2 Telecom International, Inc.,
         a Washington corporation;

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

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

     4.  The small business issuer's other certifying officer(s) and I are
         responsible for establishing 4 and maintaining disclosure controls and
         procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
         small business issuer and have:

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

          b.  Evaluated the effectiveness of the small business issuer's
              disclosure controls and procedures and presented in this report
              our conclusions about the effectiveness of the
              disclosure controls and procedures, as of the end of the period
              covered by this report based on such evaluation; and

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

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

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

          b.  Any fraud, whether or not material, that involves management or
              other employees who have a significant role in the small business
              issuer's internal control over financial reporting.


    /s/ Paul R. Arena
By: _________________
    Paul R. Arena
    Chief Executive Officer, Principal
    Financial Officer and
    Chairman of the Board
    April 2, 2007

<PAGE>





                                                                 EXHIBIT 32.1

                   Certification Pursuant to 18 U.S.C. Section
           As Adopted to Section 906 of the Sarbanes-Oxley Act of 2002

I, Paul R. Arena,  Chairman of the Board,  Chief Executive Officer and Principal
Financial Officer of i2 Telecom International,  Inc. (the "Company"),  do hereby
certify in accordance with 18 U.S.C. ss.1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

      . The Annual Report on Form 10-KSB of the Company for the year ended
     December 31, 2005 (the 1 "Periodic Report") fully complies with the
     requirements of section 13(a) or 15(d) of the
         Securities Exchange Act of 1934 (15 U.S.C. ss.ss.78m or 78o(d)); and

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

Dated: April 2, 2007


    /s/ Paul R. Arena
By: __________________
    Paul R. Arena
    Chief Executive Officer, Principal
    Financial Officer and
    Chairman of the Board