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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB/A

Amendment No. 2

(Amending Items 7, 8A and 13)



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(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, 2004.



| ̈ | 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



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i2 TELECOM INTERNATIONAL, INC.

(Name of Small Business Issuer in its Charter)



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



|                                           |  |           
|------------------------------------------ |  | ----------
|1200 Abernathy Rd., Suite 1800 Atlanta, GA |  | 30328     
|(Address of Principal Executive Offices)   |  | (Zip Code)



(770) 512-7174

(Issuers Telephone Number, Including Area Code)



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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)



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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. ̈



The issuers revenues for its most recent fiscal year were $547,656.



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 15, 2005 was approximately $24,066,020.



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 15, 2005, 34,381,172 shares
of the issuers common stock were outstanding.



DOCUMENTS INCORPORATED
BY REFERENCE: None.



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EXPLANATORY NOTE



This Amendment No. 2 to Form 10-KSB/A amends Items 7, 8A and 13 of the Annual Report on Form 10-KSB of i2 Telecom
International, Inc. (the Company) originally filed with the Securities and Exchange Commission (the SEC) on March 31, 2005 (the Initial Annual Report) and amended by Amendment No. 1 thereto filed on June 17, 2005
(Amendment No. 1).



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 8A. Controls and Procedures.



In the
Initial Annual Report, the Companys Chief Executive Officer and Chief Financial Officer evaluated the Companys controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(c) of the Exchange Act of 1934, as amended (the
Exchange Act)), as of the end of the period covered by the Initial Annual Report, as required by paragraph (b) of Rules 13a-15 or 15d-15 of the Exchange Act. Based on such evaluation, such officers initially concluded that, as of the end
of the period covered by the Initial Annual Report, the Companys controls and procedures were effective.



In connection with the restatement of the Companys Statements of Stockholders Equity as filed with Amendment No. 1 (the
Restatement), the Companys Chief Executive Officer and Chief Financial Officer reevaluated the effectiveness of the Companys controls and procedures as of December 31, 2004 pursuant to paragraph (b) of Rules 13a-15 or 15d-15
of the Exchange Act and, based on such reevaluation, such officers concluded that that the Companys controls and procedures were ineffective as of December 31, 2004 with respect to the Companys reporting in the Initial Annual Report in
the equity section of the Companys Statements of Stockholders Equity of the accounting recapitalization which resulted from the merger between a wholly-owned subsidiary of the Company and i2 Telecom International, Inc., a Delaware
corporation, in February 2004. The Companys Chief Executive Officer and Chief Financial Officer believe that such ineffective reporting has been addressed by filing the Restatement with the SEC.



Other than the internal control issue and the corresponding corrective action
discussed above, the Companys Chief Executive Officer and Chief Financial Officer have each confirmed that the Companys controls and procedures as of December 31, 2004 were otherwise effective and that there have been no changes in
internal controls over financial reporting that occurred that have materially affected, or are reasonably likely to affect materially, the Companys controls over financial reporting.



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Item 13. Exhibits, Lists and Reports on Form 8-K



(a) 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.



(b) During the
quarter ended December 31, 2004, the Company filed with the SEC:



| | (i) | on September 9, 2004, a Current Report on Form 8-K reporting under Item 5.02 thereof certain changes in management and under Item 7 thereof the related exhibits;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | on September 24, 2004, a Current Report on Form 8-K reporting under Item 5.02 thereof certain changes to the Board of Directors; and
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | on December 28, 2004, a Current Report on Form 8-K reporting under Item 5.02 thereof certain changes to the Board of Directors.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



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



I2 TELECOM INTERNATIONAL, INC.By:

/s/ David C. BurnsDavid C. BurnsChief Financial Officer (duly authorized signatory and Principal Financial and Accounting Officer)Date: July 12, 2005




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i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)



Index to Financial Statements



|                                                   |  |         
|-------------------------------------------------- |  | --------
|                                                   |  | Page    
|Report of Independent Registered Public Accountant |  | F-2     
|                                                   | 
|Consolidated Balance Sheets                        |  | F-3-F-4 
|                                                   | 
|Consolidated Statements of Operations              |  | F-5     
|                                                   | 
|Consolidated Statements of Stockholders Equity    |  | F-6     
|                                                   | 
|Consolidated Statements of Cash Flows              |  | F-8     
|                                                   | 
|Notes to Consolidated Financial Statements         |  | F-9-F-21



F-1



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|                                                                                                                   |  |                                                                                                                 |  | 
|------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------- |  | 
|                                                                                                                   |  | F
REEDMAN & GOLDBERGCERTIFIED PUBLIC ACCOUNTANTS  A PROFESSIONAL CORPORATION                                    |  | 
|ERIC W. FREEDMAN MICHAEL GOLDBERG DAVID C. GRIEP JULIE A. CHEEK WILLIAM A. MARSHALL AMY S. JACKNOW GLORIA K. MOORE |  | TRI-ATRIA32255 NORTHWESTERN HIGHWAY, SUITE 298FARMINGTON HILLS, MICHIGAN 48334(248) 626-2400FAX: (248) 626-4298 |  | 



Report of
Independent Registered Public Accountant



To the Board of Directors

i2 Telecom International, Inc. and Subsidiaries

1200
Abernathy Road, Suite 1800

Atlanta, GA 30328



We have audited the accompanying consolidated balance sheets of i2 Telecom International, Inc. and Subsidiaries (A Development Stage Enterprise) as of December 31, 2004
and 2003, 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 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, 2004 and 2003 and the results of its operations and its cash flows for the years then ended.



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 about 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.



As discussed
in Note 19 to the financial statements, the Company did a merger with Digital Data Networks (DDN) which is being accounted for as a recapitalization of the Company. As a result of the recapitalization, the financial statements for the periods ended
prior to the merger reflect a continuation of the Company and not of DDN. The consolidated statement of stockholders equity has been retroactively restated to reflect the equivalent number of shares received in the merger.



Respectfully,



|                                                                          
|--------------------------------------------------------------------------
|/s/ Freedman & Goldberg                                                   
|Freedman & Goldberg                                                       
|Certified Public Accountants                                              
|                                                                          
|Farmington Hills, MI                                                      
|February 28, 2005, except for notes 12 and 19 which are dated June 3, 2005



F-2



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i
2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

CONSOLIDATED BALANCE SHEETS



As of December 31, 2004 and 2003



ASSETS



|                                                                                              |  |      |           |                  |   |          
|--------------------------------------------------------------------------------------------- |  | ---- | --------- | ---------------- | - | ---------
|                                                                                              |  | 2004 |           | As Restated 2003
|Current Assets                                                                                |  |      |           |                  |   |          
|Cash                                                                                          |  | $    | 231,127   |                  | $ | 671,421  
|Accounts Receivable, Net of Allowance for Doubtful Accounts Of $75,000 and $-0-, respectively |  |      | 232,371   |                  |   | 146,738  
|Inventories                                                                                   |  |      | 961,056   |                  |   | 767,011  
|Prepaid Expenses and Other Current Assets                                                     |  |      | 231,966   |                  |   | 19,534   
|                                                                                              |  |      |           |                  |   |          
|Total Current Assets                                                                          |  |      | 1,656,520 |                  |   | 1,604,704
|                                                                                              |  |      |           |                  |   |          
|Property and Equipment, Net                                                                   |  |      | 1,267,763 |                  |   | 830,296  
|                                                                                              |  |     
|Other Assets                                                                                  |  |      |           |                  |   |          
|Intangible Assets, Net of Accumulated Amortization of $435,507 and $215, 660, respectively    |  |      | 2,880,579 |                  |   | 3,072,287
|Deposits                                                                                      |  |      | 78,164    |                  |   | 43,064   
|                                                                                              |  |      |           |                  |   |          
|Total Other Assets                                                                            |  |      | 2,958,743 |                  |   | 3,115,351
|                                                                                              |  |      |           |                  |   |          
|Total Assets                                                                                  |  | $    | 5,883,026 |                  | $ | 5,550,351
|                                                                                              |  |      |           |                  |   |          



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



F-3



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i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

CONSOLIDATED BALANCE SHEETS



As of December 31, 2004 and 2003



LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)



|                                                                                                                                                                                                     |  |      |             |   |                  |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                                                                     |  | 2004 |             |   | As Restated 2003 |  
|Current Liabilities                                                                                                                                                                                  |  |      |             |   |                  |   |            |  
|Accounts Payable and Accrued Expenses                                                                                                                                                                |  | $    | 1,303,656   |   |                  | $ | 756,490    |  
|Deferred Revenue                                                                                                                                                                                     |  |      | 99,901      |   |                  |   | 100,000    |  
|Notes Payable-Current                                                                                                                                                                                |  |      | 100,000     |   |                  |   | 350,000    |  
|Notes Payable-Related Parties                                                                                                                                                                        |  |      | -0-         |   |                  |   | 225,000    |  
|                                                                                                                                                                                                     |  |      |             |   |                  |   |            |  
|Total Current Liabilities                                                                                                                                                                            |  |      | 1,503,557   |   |                  |   | 1,431,490  |  
|                                                                                                                                                                                                     |  |      |             |   |                  |   |            |  
|Stockholders Equity (Deficit)                                                                                                                                                                       |  |      |             |   |                  |   |            |  
|Preferred Stock, No Par Value 7% Cumulative, 5,000,000 Shares Authorized, 4,175 Shares and 173,914 (Adjusted for reverse merger dated February
26, 2004) Shares Issued and Outstanding, respectively |  |      | 4,175,000   |   |                  |   | 8,606,555  |  
|Common Stock, No Par Value, 100,000,000 Shares Authorized, 34,491,402 Shares and 4,618,407 (Adjusted for reverse merger dated February 26,
2004) Shares Issued and Outstanding, respectively         |  |      | 13,035,158  |   |                  |   | 1,649,880  |  
|Restricted Stock                                                                                                                                                                                     |  |      |             |   |                  |   |            |  
|Common Stock (Related to No Par Value above), 991,858 and 542,315 (Adjusted for reverse merger dated February 26, 2004) Issued and
Outstanding, respectively                                         |  |      | 497,646     |   |                  |   | 272,096    |  
|Preferred Stock (Related to No Par Value above), -0- and 14,186 (Adjusted for reverse merger dated February 26, 2004) Issued And Outstanding,
respectively                                           |  |      | -0-         |   |                  |   | 446,347    |  
|Additional Paid-In Capital                                                                                                                                                                           |  |      | 404,100     |   |                  |   | 139,121    |  
|Accumulated Deficit During The Development Stage                                                                                                                                                     |  |      | (13,732,435 | ) |                  |   | (6,995,138 | )
|                                                                                                                                                                                                     |  |      |             |   |                  |   |            |  
|Total Stockholders Equity (Deficit)                                                                                                                                                                 |  |      | 4,379,469   |   |                  |   | 4,118,861  |  
|                                                                                                                                                                                                     |  |      |             |   |                  |   |            |  
|Total Liabilities and Stockholders Equity (Deficit)                                                                                                                                                 |  | $    | 5,883,026   |   |                  | $ | 5,550,351  |  
|                                                                                                                                                                                                     |  |      |             |   |                  |   |            |  



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



F-4



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i
2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF OPERATIONS



From the Date of Inception (February 28, 2002) through December 31,2004



|                                    |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|----------------------------------- |  | ---------------------------------------------------------------------------- | ----------- | - | ------------------------------------ | - | ---------- | ------------------------------------------------ |  | - | ---------- | -
|                                    |  | As Restated Cumulative From Inception February 28, 2002 to December 31, 2004 |             |   | For the Year Ended December 31, 2004 |   |            | As Restated For the Year Ended December 31, 2003 | 
|Revenue                             |  | $                                                                            | 694,321     |   |                                      | $ | 547,656    |                                                  |  | $ | 146,665    |  
|                                    |  |                                                                              |            
|Cost of Revenue                     |  |                                                                              | 977,438     |   |                                      |   | 565,225    |                                                  |  |   | 395,251    |  
|                                    |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Gross Profit (Loss)                 |  |                                                                              | (283,117    | ) |                                      |   | (17,569    | )                                                |  |   | (248,586   | )
|                                    |  |                                                                              |            
|General and Administrative Expenses |  |                                                                              | 13,068,880  |   |                                      |   | 6,675,769  |                                                  |  |   | 4,917,163  |  
|                                    |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Loss From Operations                |  |                                                                              | (13,351,997 | ) |                                      |   | (6,693,338 | )                                                |  |   | (5,165,749 | )
|                                    |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|                                    |  |                                                                              |            
|Other Income (Expense)              |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Interest Income                     |  |                                                                              | 13,237      |   |                                      |   | 3,044      |                                                  |  |   | 7,272      |  
|Interest Expense                    |  |                                                                              | (258,742    | ) |                                      |   | (30,070    | )                                                |  |   | (217,252   | )
|Gain on Forbearance of Debt         |  |                                                                              | 27,643      |   |                                      |   | 27,643     |                                                  |  |   | -0-        |  
|Loss on Disposal of Assets          |  |                                                                              | (593        | ) |                                      |   | (593       | )                                                |  |   | -0-        |  
|Loss on Subscription List           |  |                                                                              | (118,000    | ) |                                      |   | -0-        |                                                  |  |   | (118,000   | )
|                                    |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Total Other Income (Expense)        |  |                                                                              | (336,455    | ) |                                      |   | 24         |                                                  |  |   | (327,980   | )
|                                    |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Net Income (Loss)                   |  | $                                                                            | (13,688,452 | ) |                                      | $ | (6,693,314 | )                                                |  | $ | (5,493,729 | )
|                                    |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Weighted Average Common Shares:     |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Basic                               |  |                                                                              | 11,199,888  |   |                                      |   | 22,499,279 |                                                  |  |   | 4,365,130  |  
|Diluted                             |  |                                                                              | 28,117,717  |   |                                      |   | 39,703,035 |                                                  |  |   | 23,066,878 |  
|Earnings Per Common Share:          |  |                                                                              |             |   |                                      |   |            |                                                  |  |   |            |  
|Basic                               |  | $                                                                            | (1.22       | ) |                                      | $ | (.30       | )                                                |  | $ | (1.26      | )
|Diluted                             |  | $                                                                            | (.48        | ) |                                      | $ | (.17       | )                                                |  | $ | (.24       | )



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



F-5



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i
2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



From the Date of Inception (February 28, 2002) through December 31, 2004

(adjusted for reverse merger dated February 26, 2004)



|                                                                                                                |  |                                      |   |  |                                         |             |   |                                   |            |   |                                         |   |            |                                              |  |          |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | - |  | --------------------------------------- | ----------- | - | --------------------------------- | ---------- | - | --------------------------------------- | - | ---------- | -------------------------------------------- |  | -------- | -
|                                                                                                                |  | Preferred Stock Shares (As Restated) |   |  | Preferred Stock Par Value (As Restated) |             |   | Common Stock Shares (As Restated) |            |   | Common Stock No Par Value (As Restated) |   |            | Restricted Common Stock Shares (As Restated) | 
|Balance, February 28, 2002                                                                                      |  | -0-                                  |   |  | $                                       | -0-         |   |                                   | -0-        |   |                                         | $ | -0-        |                                              |  | -0-      |  
|Sale of common stock, at $.01/share                                                                             |  | 35,395                               |   |  |                                         | 3,712       |   |                                   | 1,353,063  |   |                                         |   | 2,263      |                                              |  | -0-      |  
|Sale of common stock, at $$2.00/share                                                                           |  | 49,464                               |   |  |                                         | 1,037,534   |   |                                   | 1,890,892  |   |                                         |   | 632,466    |                                              |  | -0-      |  
|Sale of common stock, at $5.00/share                                                                            |  | 11,255                               |   |  |                                         | 590,214     |   |                                   | 430,263    |   |                                         |   | 359,786    |                                              |  | -0-      |  
|Issuance of common stock, at $5.00/share, in Connection with Super-Caller acquisition                           |  | 19,155                               |   |  |                                         | 1,004,454   |   |                                   | 732,246    |   |                                         |   | 612,302    |                                              |  | -0-      |  
|Payments received on notes receivable                                                                           |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Net Loss for the period ended December 31, 2002                                                                 |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|                                                                                                                |  |                                      |   |  |                                         |             |   |                                   |            |   |                                         |   |            |                                              |  |          |  
|Balance, December 31, 2002                                                                                      |  | 115,269                              |   |  |                                         | 2,635,914   |   |                                   | 4,406,464  |   |                                         |   | 1,606,817  |                                              |  | -0-      |  
|Cancellation of notes Receivable                                                                                |  | (2,355                               | ) |  |                                         | (49,392     | ) |                                   | (90,016    | ) |                                         |   | (30,108    | )                                            |  | -0-      |  
|Sale of common stock, at $.01/share                                                                             |  | 3,555                                |   |  |                                         | 373         |   |                                   | 135,872    |   |                                         |   | 227        |                                              |  | -0-      |  
|Issuance of common stock, at $2.50 per share for payment of interest on convertible notes through July 1, 2003  |  | 1,496                                |   |  |                                         | 39,234      |   |                                   | 57,202     |   |                                         |   | 23,916     |                                              |  | -0-      |  
|Issuance of common stock, at $3.00/share for payment of interest on convertible notes through December 31, 2003 |  | 2,849                                |   |  |                                         | 80,426      |   |                                   | 108,885    |   |                                         |   | 49,028     |                                              |  | -0-      |  
|Conversion of convertible Notes                                                                                 |  | 53,100                               |   |  |                                         | 5,900,000   |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Payments received on notes receivable                                                                           |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Settlement of Stock Appreciation Rights                                                                         |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | 542,315  |  
|Warrants Issued For Services                                                                                    |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Net Loss for the year ended December 31, 2003                                                                   |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|                                                                                                                |  |                                      |   |  |                                         |             |   |                                   |            |   |                                         |   |            |                                              |  |          |  
|Balance, December 31, 2003                                                                                      |  | 173,914                              |   |  |                                         | 8,606,555   |   |                                   | 4,618,407  |   |                                         |   | 1,649,880  |                                              |  | 542,315  |  
|Issuance of Preferred Stock                                                                                     |  | 100,000                              |   |  |                                         | 2,000,000   |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Reverse merger with Digital Data Networks, Inc.                                                                 |  | -0-                                  |   |  |                                         | -0-         |   |                                   | 4,265,864  |   |                                         |   | -0-        |                                              |  | -0-      |  
|Conversion of Preferred Stock to Common                                                                         |  | (273,914                             | ) |  |                                         | (10,606,555 | ) |                                   | 23,654,322 |   |                                         |   | 10,606,555 |                                              |  | 889,613  |  
|Exercise of Options and Warrants                                                                                |  | -0-                                  |   |  |                                         | -0-         |   |                                   | 978,342    |   |                                         |   | 210,426    |                                              |  | -0-      |  
|Stock Dividend on Preferred Stock                                                                               |  | -0-                                  |   |  |                                         | -0-         |   |                                   | 98,147     |   |                                         |   | -0-        |                                              |  | -0-      |  
|Issuance of Preferred Stock                                                                                     |  | 4,500                                |   |  |                                         | 4,500,000   |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Conversion of Preferred to Common                                                                               |  | (325                                 | ) |  |                                         | (325,000    | ) |                                   | 406,250    |   |                                         |   | 325,000    |                                              |  | -0-      |  
|Warrants Issued For Services                                                                                    |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Stock Issued for Services                                                                                       |  | -0-                                  |   |  |                                         | -0-         |   |                                   | 30,000     |   |                                         |   | 22,500     |                                              |  | -0-      |  
|Transfer of Restricted Units                                                                                    |  | -0-                                  |   |  |                                         | -0-         |   |                                   | 440,070    |   |                                         |   | 220,797    |                                              |  | (440,070 | )
|Net Loss for the Year Ended December 31, 2004                                                                   |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|Dividends Paid on Preferred Stock                                                                               |  | -0-                                  |   |  |                                         | -0-         |   |                                   | -0-        |   |                                         |   | -0-        |                                              |  | -0-      |  
|                                                                                                                |  |                                      |   |  |                                         |             |   |                                   |            |   |                                         |   |            |                                              |  |          |  
|Balance, December 31, 2004                                                                                      |  | 4,175                                |   |  | $                                       | 4,175,000   |   |                                   | 34,491,402 |   |                                         | $ | 13,035,158 |                                              |  | 991,858  |  
|                                                                                                                |  |                                      |   |  |                                         |             |   |                                   |            |   |                                         |   |            |                                              |  |          |  



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





F-6



---

|                                                                                                                |  |                                                    |           |                                                 |         |   |                                                |   |          |                                          |  |   |                                   |   |  |                                              |             |   |                     |   |          |   |  |   |            |  
|--------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------- | --------- | ----------------------------------------------- | ------- | - | ---------------------------------------------- | - | -------- | ---------------------------------------- |  | - | --------------------------------- | - |  | -------------------------------------------- | ----------- | - | ------------------- | - | -------- | - |  | - | ---------- | -
|                                                                                                                |  | Restricted Common Stock No Par Value (As Restated) |           | Restricted Preferred Stock Shares (As Restated) |         |   | Restricted Preferred Stock Value (As Restated) |   |          | Additional Paid-In Capital (As Restated) |  |   | Accumulated Deficit (As Restated) |   |  | NotesReceivableFrom StockSales (As Restated) |             |   | Total (As Restated) |  
|Balance, February 28, 2002                                                                                      |  | $                                                  | -0-       |                                                 | -0-     |   |                                                | $ | -0-      |                                          |  | $ | -0-                               |   |  | $                                            | -0-         |   |                     | $ | -0-      |   |  | $ | -0-        |  
|Sale of common stock, at $.01/share                                                                             |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 5,975      |  
|Sale of common stock, at $$2.00/share                                                                           |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | (305,500 | ) |  |   | 1,364,500  |  
|Sale of common stock, at $5.00/share                                                                            |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 950,000    |  
|Issuance of common stock, at $5.00/share, in Connection with Super-Caller acquisition                           |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 1,616,756  |  
|Payments received on notes receivable                                                                           |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | 27,079   |   |  |   | 27,079     |  
|Net Loss for the period ended December 31, 2002                                                                 |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | (1,501,409  | ) |                     |   | -0-      |   |  |   | (1,501,409 | )
|                                                                                                                |  |                                                    |           |                                                 |         |   |                                                |   |          |                                          |  |   |                                   |   |  |                                              |             |   |                     |   |          |   |  |   |            |  
|Balance, December 31, 2002                                                                                      |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | (1,501,409  | ) |                     |   | (278,421 | ) |  |   | 2,462,901  |  
|Cancellation of notes Receivable                                                                                |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | 79,500   |   |  |   | -0-        |  
|Sale of common stock, at $.01/share                                                                             |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 600        |  
|Issuance of common stock, at $2.50 per share for payment of interest on convertible notes through July 1, 2003  |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 63,150     |  
|Issuance of common stock, at $3.00/share for payment of interest on convertible notes through December 31, 2003 |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 129,454    |  
|Conversion of convertible Notes                                                                                 |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 5,900,000  |  
|Payments received on notes receivable                                                                           |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | 19,412   |   |  |   | 19,412     |  
|Settlement of Stock Appreciation Rights                                                                         |  |                                                    | 272,096   |                                                 | 14,186  |   |                                                |   | 446,347  |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | 179,509  |   |  |   | 897,952    |  
|Warrants Issued For Services                                                                                    |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | 139,121                           |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 139,121    |  
|Net Loss for the year ended December 31, 2003                                                                   |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | (5,493,729  | ) |                     |   | -0-      |   |  |   | (5,493,729 | )
|                                                                                                                |  |                                                    |           |                                                 |         |   |                                                |   |          |                                          |  |   |                                   |   |  |                                              |             |   |                     |   |          |   |  |   |            |  
|Balance, December 31, 2003                                                                                      |  |                                                    | 272,096   |                                                 | 14,186  |   |                                                |   | 446,347  |                                          |  |   | 139,121                           |   |  |                                              | (6,995,138  | ) |                     |   | -0-      |   |  |   | 4,118,861  |  
|Issuance of Preferred Stock                                                                                     |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 2,000,000  |  
|Reverse merger with Digital Data Networks, Inc.                                                                 |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | (60,000                           | ) |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | (60,000    | )
|Conversion of Preferred Stock to Common                                                                         |  |                                                    | 446,347   |                                                 | (14,186 | ) |                                                |   | (446,347 | )                                        |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | -0-        |  
|Exercise of Options and Warrants                                                                                |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 210,426    |  
|Stock Dividend on Preferred Stock                                                                               |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | -0-        |  
|Issuance of Preferred Stock                                                                                     |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 4,500,000  |  
|Conversion of Preferred to Common                                                                               |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | -0-        |  
|Warrants Issued For Services                                                                                    |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | 324,979                           |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 324,979    |  
|Stock Issued for Services                                                                                       |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | 22,500     |  
|Transfer of Restricted Units                                                                                    |  |                                                    | (220,797) |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | -0-         |   |                     |   | -0-      |   |  |   | -0-        |  
|Net Loss for the Year Ended December 31, 2004                                                                   |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | (6,693,314  | ) |                     |   | -0-      |   |  |   | (6,693,314 | )
|Dividends Paid on Preferred Stock                                                                               |  |                                                    | -0-       |                                                 | -0-     |   |                                                |   | -0-      |                                          |  |   | -0-                               |   |  |                                              | (43,983     | ) |                     |   | -0-      |   |  |   | (43,983    | )
|                                                                                                                |  |                                                    |           |                                                 |         |   |                                                |   |          |                                          |  |   |                                   |   |  |                                              |             |   |                     |   |          |   |  |   |            |  
|Balance, December 31, 2004                                                                                      |  |                                                    | $497,646  |                                                 | -0-     |   |                                                | $ | -0-      |                                          |  | $ | 404,100                           |   |  | $                                            | (13,732,735 | ) |                     | $ | -0-      |   |  | $ | 4,379,469  |  
|                                                                                                                |  |                                                    |           |                                                 |         |   |                                                |   |          |                                          |  |   |                                   |   |  |                                              |             |   |                     |   |          |   |  |   |            |  



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



F-7



---

i
2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|------------------------------------------------ |  | -------------------------------------------------------------------------- | ----------- | - | ------------------------------------ | - | ---------- | ------------------------------------------------ |  | - | ---------- | -
|                                                 |  | As Restated Cumulative From Inception February 28,2002 to December 31,2004 |             |   | For the Year Ended December 31, 2004 |   |            | As Restated For the Year Ended December 31, 2003 | 
|Cash Flows From Operations                       |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Net Loss From Continuing Operations              |  | $                                                                          | (13,688,452 | ) |                                      | $ | (6,693,314 | )                                                |  | $ | (5,493,729 | )
|Adjustments to Reconcile Net Income to Net       |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Cash Provided By Operating Activities            |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Bad Debts                                        |  |                                                                            | 75,000      |   |                                      |   | 75,000     |                                                  |  |   | -0-        |  
|Depreciation and Amortization                    |  |                                                                            | 825,685     |   |                                      |   | 457,637    |                                                  |  |   | 364,188    |  
|Interest Paid Via Issuance of Stock              |  |                                                                            | 192,604     |   |                                      |   | -0-        |                                                  |  |   | 192,604    |  
|Gain on Forbearance of Debt                      |  |                                                                            | (27,643     | ) |                                      |   | (27,643    | )                                                |  |   | -0-        |  
|Loss on Disposal of Assets                       |  |                                                                            | 593         |   |                                      |   | 593        |                                                  |  |   | -0-        |  
|Stock Compensation                               |  |                                                                            | 1,384,552   |   |                                      |   | 347,479    |                                                  |  |   | 1,037,073  |  
|(Increase) Decrease In:                          |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Accounts Receivable                              |  |                                                                            | (307,371    | ) |                                      |   | (160,633   | )                                                |  |   | (146,738   | )
|Inventories                                      |  |                                                                            | (766,294    | ) |                                      |   | (194,045   | )                                                |  |   | (431,684   | )
|Prepaid Expenses                                 |  |                                                                            | (188,023    | ) |                                      |   | (171,489   | )                                                |  |   | 2,681      |  
|Other Assets                                     |  |                                                                            | (78,164     | ) |                                      |   | (35,100    | )                                                |  |   | (19,577    | )
|Increase (Decrease) In:                          |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Accounts Payable and Accrued Expenses            |  |                                                                            | 1,068,514   |   |                                      |   | 514,809    |                                                  |  |   | 3,457      |  
|Deferred Revenue                                 |  |                                                                            | 99,901      |   |                                      |   | (99        | )                                                |  |   | 100,000    |  
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Net Cash Used In Operating Activities            |  |                                                                            | (11,409,098 | ) |                                      |   | (5,886,805 | )                                                |  |   | (4,391,725 | )
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Cash Flows From Investing Activities             |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Proceeds from Disposal of Assets                 |  |                                                                            | 6,433       |   |                                      |   | 6,433      |                                                  |  |   | -0-        |  
|Equipment Purchases                              |  |                                                                            | (1,646,202  | ) |                                      |   | (682,283   | )                                                |  |   | (887,687   | )
|Payments for Patents and Trademarks              |  |                                                                            | (125,168    | ) |                                      |   | (28,139    | )                                                |  |   | (89,658    | )
|Investment in Subsidiary                         |  |                                                                            | (1,239,422  | ) |                                      |   | -0-        |                                                  |  |   | -0-        |  
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Net Cash Used In Investing Activities            |  |                                                                            | (3,004,359  | ) |                                      |   | (703,989   | )                                                |  |   | (977,345   | )
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Cash Flows From Financing Activities             |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Proceeds From Shareholder Loans                  |  |                                                                            | 231,000     |   |                                      |   | -0-        |                                                  |  |   | 225,000    |  
|Payments of Shareholder Loans                    |  |                                                                            | (231,000    | ) |                                      |   | (225,000   | )                                                |  |   | (6,000     | )
|Proceeds from Issuance of Convertible Notes      |  |                                                                            | 6,885,000   |   |                                      |   | 985,000    |                                                  |  |   | 5,900,000  |  
|Proceeds From Notes Payable                      |  |                                                                            | 100,000     |   |                                      |   | -0-        |                                                  |  |   | -0-        |  
|Payment of Notes Payable                         |  |                                                                            | (390,943    | ) |                                      |   | (290,943   | )                                                |  |   | (100.000   | )
|Issuance of Common Stock                         |  |                                                                            | 2,531,502   |   |                                      |   | 210,426    |                                                  |  |   | 600        |  
|Issuance of Preferred Stock                      |  |                                                                            | 5,515,000   |   |                                      |   | 5,515,000  |                                                  |  |   | -0-        |  
|Proceeds from Stock Notes Receivable             |  |                                                                            | 46,491      |   |                                      |   | -0-        |                                                  |  |   | 19,412     |  
|Dividends Paid                                   |  |                                                                            | (43,983     | ) |                                      |   | (43,983    | )                                                |  |   | -0-        |  
|Cash From Subsidiary Acquired Via Stock Exchange |  |                                                                            | 1,517       |   |                                      |   | -0-        |                                                  |  |   |            |  
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Net Cash Provided By Financing Activities        |  |                                                                            | 14,644,584  |   |                                      |   | 6,150,500  |                                                  |  |   | 6,039,012  |  
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Increase (Decrease) in Cash                      |  |                                                                            | 231,127     |   |                                      |   | (440,294   | )                                                |  |   | 669,942    |  
|Balance, Beginning of Period                     |  |                                                                            | -0-         |   |                                      |   | 671,421    |                                                  |  |   | 1,479      |  
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  
|Balance, End of Period                           |  | $                                                                          | 231,127     |   |                                      | $ | 231,127    |                                                  |  | $ | 671,421    |  
|                                                 |  |                                                                            |             |   |                                      |   |            |                                                  |  |   |            |  



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



F-8



---

i
2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



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 located in San Mateo, California.
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, 2004 and
2003 consisted of the following:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                |  |      |         |      |   |        
|--------------- |  | ---- | ------- | ---- | - | -------
|                |  | 2004 |         | 2003
|Raw Material    |  | $    | 110,259 |      | $ | 200,325
|Work in Process |  |      | 393,536 |      |   | 325,956
|Finished Goods  |  |      | 457,261 |      |   | 240,730
|                |  |      |         |      |   |        
|                |  | $    | 961,056 |      | $ | 767,011
|                |  |      |         |      |   |        



| | F. | 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.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-9



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



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



| | G. | Intangible Assets  The Company has capitalized certain costs related to registering a trademark and patent pending technology. These costs are being amortized on a
straight-line basis over its estimated lives of twenty years and fifteen years, respectively.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | H. | 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, 2004 and 2003.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | I. | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | J. | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | K. | 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.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | L. | New Accounting Pronouncements - In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities - an interpretation of ARB No. 51. This
interpretation addresses the consolidation of variable interest entities (VIEs) and its intent is to achieve greater consistency and comparability of reporting between business enterprises. It defines the characteristics of a business
enterprise that qualifies as a primary beneficiary of a variable interest entity. In December 2003, the FASB issued a modification to FIN 46, titled FIN 46R. FIN 46R delayed the effective date for certain entities and also provided technical
clarifications related to implementation issues. In summary, a primary beneficiary is a business enterprise that is subject to the majority of the risk of loss from the VIE, entitled to receive a majority of the VIEs residual returns, or both.
The Company adopted FIN No. 46 on January 1, 2004 and determined that it did not have an impact to its financial statements.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In May 2003, the FASB issued SFAS No. 150 Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.
This statement clarifies and defines how certain financial instruments that have both the characteristics of liabilities and equity be accounted for. Many of these instruments that were previously classified as equity will now be recorded as
liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and must be adopted for financial statements issued after June 15, 2003. As of December 31, 2004, the Company has not identified any
financial instruments that fall within the scope of SFAS No. 150, thus the adoption of SFAS No.1 50 does not have a material impact on the accompanying financial statements or results of operations.



F-10



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 1. Summary of Significant Accounting Policies  (Continued)



In April 2003, the FASB issued SFAS No. 149 Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies the accounting for and reporting of derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. SFAS
No. 149 is effective for contracts entered into after June 30, 2003. As of December 31, 2004, the Company has not identified any financial instruments that fall within the scope of SFAS No. 149, thus the adoption of SFAS No. 149 does not have a
material impact on the accompany consolidated financial statements or results of operations.



In December 2003, the Securities and Exchange Commission issued SAB No. 104 Revenue Recognition. This SAB revises or rescinds certain portions of interpretative guidance included in Topic 13 of the
codification of staff accounting bulletins. These changes make SAB 104 guidance consistent with current accounting regulations promulgated under U.S. generally accepted accounting principles. The adoption of SAB No. 104 did not have a material
impact on the accompanying financial statements or results of operations.



In September 2004, the FASB reached a final consensus on Emerging Issues Task Force (EITF) Issue No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings per Share that contingently
convertible debt instruments will be subject to the if-converted method under SFAS 128 Earnings Per Share, regardless of the contingent features included in the instrument. Under current practice, issuers of contingently convertible debt
instruments exclude potential common shares underlying contingently convertible debt instruments from the calculation of diluted earnings per share until the market price or other contingency is met. The effective for EITF Issue 04-8 is for
reporting periods ending after December 15, 2004 and requires the restatement of diluted earnings per share for all periods presented. The effect on this consensus did not have an impact on the accompany consolidated financial statements.



In November 2004, the FASB issued SFAS No. 151,
Inventory Costs, an amendment of ARB No. 43, Chapter 4. This statement amends the guidance in ARB No. 43 Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Paragraph 5 of ARB No. 43, Chapter 4, previously stated that  under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and handling costs may be so abnormal
to require treatment as current period charges This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of so abnormal. In addition, this statement
requires that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. The provision of this statement will be effective for inventory costs during the fiscal years beginning
after June 15, 2005. The Company does not believe that the adoption of this statement will have a material impact on its financial condition or results of operations.



On December 16, 2004, the FASB issued 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, and amends SFAS 95, Statement of Cash Flows. 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. Pro forma disclosure is no longer an alternative. SFAS123R must be adopted no later than July 1, 2005. Early adoption will be permitted in periods in which financial statement have not yet been issued. The Company expects to adopt SFAS 123R
on January 1, 2005.





F-11



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 2. Property and Equipment



The major components of property and equipment at December 31, 2004 and 2003
are as follows:



|                               |  |      |           |      |   |        
|------------------------------ |  | ---- | --------- | ---- | - | -------
|                               |  | 2004 |           | 2003
|Network Equipment              |  | $    | 707,625   |      | $ | 136,677
|Office Equipment               |  |      | 133,076   |      |   | 84,160 
|Software                       |  |      | 716,677   |      |   | 692,565
|Lab Equipment                  |  |      | 35,277    |      |   | 23,864 
|Furniture and Fixtures         |  |      | 66,194    |      |   | 50,109 
|                               |  |      |           |      |   |        
|                               |  |      | 1,658,849 |      |   | 987,375
|Less: Accumulated Depreciation |  |      | 391,086   |      |   | 157,079
|                               |  |      |           |      |   |        
|Net Property and Equipment     |  | $    | 1,267,763 |      | $ | 830,296
|                               |  |      |           |      |   |        



Depreciation charged
to operations was $237,790 and $148,528 for the years ended December 31, 2004 and 2003, respectively.



Note 3. Intangible Assets



Intangible assets at December 31, 2004 and 2003 consisted of the following:



|                          |  |                     |  |      |           |      |   |          
|------------------------- |  | ------------------- |  | ---- | --------- | ---- | - | ---------
|Amortized Intangibles     |  | Amortization Period |  | 2004 |           | 2003
|Patent Pending Technology |  | 15 Years            |  | $    | 3,266,915 |      | $ | 3,251,695
|Trademark                 |  | 20 Years            |  |      | 49,171    |      |   | 36,252   
|                          |  |                     |  |      |           |      |   |          
|                          |  |                     |  |      | 3,316,086 |      |   | 3,287,947
|Accumulated Amortization  |  |                     |  |      | 435,507   |      |   | 215,660  
|                          |  |                     |  |      |           |      |   |          
|Balance, net              |  |                     |  | $    | 2,880,579 |      | $ | 3,072,287
|                          |  |                     |  |      |           |      |   |          



Amortization charged
to continuing operations was $219,847 and $215,660 for the years ended December 31, 2004 and 2003, respectively.



Note 4. Notes Receivable From Stock Sales



Notes receivable from stockholders represent amounts owed to the Company by certain stockholders for the purchase of common stock of the Company. The
notes call for a 3% interest rate and aggregate monthly payments of $4,000 being made through payroll deduction, generally over a 26-month period. During the year ended December 31, 2003, the Company suspended monthly payments as part of a
compensation reduction plan. The common stock is being held as collateral for the notes. On December 31, 2003 all outstanding notes and accrued interest were cancelled as part of an agreement to cancel the Companys outstanding Stock
Appreciation Rights (See Note 12)





F-12



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 5. Notes Payable



Notes Payable as of December 31, 2004 and 2003 consisted of the following:



|                                                                                                                                                                                                                                                                                                                                                                                      |  |      |         |      |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                                                                                                                                                                                                                                                                                                                                      |  | 2004 |         | 2003
|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. These funding levels are expected to be met prior to December 31, 2005.                                                                                                       |  | $    | 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. These funding levels are expected to be met prior to December 31, 2005.                                                                                                       |  | $    | 50,000  |      | $ | 50,000 
|                                                                                                                                                                                                                                                                                                                                                                                      |  |     
|c. 6% note payable due to a corporation previously affiliated with SuperCaller. The principal and all accrued interest are due and payable upon the Company obtaining certain levels of equity
funding. On July 8, 2004, the Company signed a forbearance agreement to settle all outstanding interest and accrued interest for $235,000 which has been paid as of December 31, 2004. |  |      | -0-     |      |   | 250,000
|                                                                                                                                                                                                                                                                                                                                                                                      |  |      |         |      |   |        
|                                                                                                                                                                                                                                                                                                                                                                                      |  |     
|Total Long Term Debt                                                                                                                                                                                                                                                                                                                                                                  |  |      | 100,000 |      |   | 350,000
|Less: Current Portion                                                                                                                                                                                                                                                                                                                                                                 |  |      | 100,000 |      |   | 350,000
|                                                                                                                                                                                                                                                                                                                                                                                      |  |      |         |      |   |        
|Long-Term Portion                                                                                                                                                                                                                                                                                                                                                                     |  | $    | -0-     |      | $ | -0-    
|                                                                                                                                                                                                                                                                                                                                                                                      |  |      |         |      |   |        



Debt
maturities in the next five years are as follows:



|     |  |   |        
|---- |  | - | -------
|2005 |  | $ | 100,000
|2006 |  |   | -0-    
|2007 |  |   | -0-    
|2008 |  |   | -0-    
|2009 |  |   | -0-    
|     |  |   |        
|     |  | $ | 100,000
|     |  |   |        



On December 31, 2003,
with the consent of all note holders, the Company converted $5,900,000 of its convertible notes outstanding in exchange for 59,000 shares of its preferred stock, $1.00 par value, at a rate of 1 share of the Companys preferred stock for every
$100 of unpaid principal.



In addition, all accrued and unpaid
interest on the above mentioned notes was paid in shares of the Companys common stock, $.01 par value, with each such share valued at the conversion price associated with the note. Total interest paid and shares of common stock issued were
$192,604 and $73,342, respectively, for the year ended December 31, 2003.



In June 2004, the Company issued $985,000 of notes payable to two venture capital companies prior to the completion of a private placement offering (See Note 18). The notes required interest at 7% per annum to be paid
via issuance of common stock upon closing of the private placement offering. In August 2004, these notes were converted to convertible preferred stock. As of December 31, 2004 no common stock has been issued for the accrued interest related to these
notes. Interest accrued as of December 30, 2004 was $13,254.





F-13



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 6. Notes Payable  Related Parties



As of December 31, 2004 and 2003 the Company owed $-0- and $225,000,
respectively to certain shareholders for various advances made to the Company. The advances are unsecured and due on demand.



Note 7. Per Share Computation



Earnings per share have been calculated based on the weighted average number of shares outstanding.



Note 8. Income Taxes



The Company has incurred a net operating loss for federal income tax purposes of $6,712,060 and $4,668,223 in 2004 and 2003,
respectively, which it has elected to carry forward, therefore the Company has not recorded any current tax accrual. Additionally, from the SuperCaller Community, Inc. acquisition and the reverse merger with Digital Data Networks, Inc., the Company
has additional net operating loss carry forwards of $160,599 and $9,283,863, respectively. The Company has total net operating loss carry forwards of $21,580,686 which expire in various years ranging from 2006 to 2024



Deferred taxes are detailed as follows:



|                              |  |      |           |      |   |          
|----------------------------- |  | ---- | --------- | ---- | - | ---------
|                              |  | 2004 |           | 2003
|Deferred Income Tax Assets    |  |      |           |      |   |          
|Net Operating Loss Available  |  | $    | 7,337,433 |      | $ | 2,160,872
|Amortization of R&D Expenses  |  |      | 390,658   |      |   | 439,490  
|Accrued Expenses              |  |      | 385,149   |      |   | 244,271  
|                              |  |      |           |      |   |          
|                              |  |      | 8,113,240 |      |   | 2,844,633
|Valuation Allowance           |  |      | 8,113,240 |      |   | 2,844,633
|                              |  |      |           |      |   |          
|Net Deferred Income Tax Asset |  | $    | -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, 2004 and 2003.





F-14



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 9. Supplemental Cash Flow Disclosures



Interest received and paid, income taxes paid and non-cash transactions
incurred during the years ended December 31, 2004 and 2003 was as follows:



|                                          |  |      |         |      |   |          
|----------------------------------------- |  | ---- | ------- | ---- | - | ---------
|                                          |  | 2004 |         | 2003
|Interest Received                         |  | $    | 3,044   |      | $ | 7,237    
|                                          |  |      |         |      |   |          
|Interest Paid                             |  | $    | 6,065   |      | $ | 4,711    
|                                          |  |      |         |      |   |          
|Income Taxes                              |  | $    | -0-     |      | $ | -0-      
|                                          |  |      |         |      |   |          
|Non-Cash Transactions:                    |  |      |         |      |   |          
|Cancellation of Stock Notes               |  | $    | -0-     |      | $ | 79,500   
|Payment of Interest via Stock             |  |      | -0-     |      |   | 192,605  
|Conversion of Debt to Stock               |  |      | 985,000 |      |   | 5,900,000
|Cancellation of Stock Appreciation Rights |  |      | -0-     |      |   | 897,952  
|Debt Financed Insurance Premiums          |  |      | 40,943  |      |   | -0-      
|                                          |  |      |         |      |   |          



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, 2004 and 2003, the Companys uninsured cash balance totals $29,924 and $564,475, respectively.



Note 11. Stock Options and Warrants



During 2002, 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. The Company accounts for its stock option plan in accordance with the provisions of Account Principles Board (APB) Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations. As such, compensation expenses are 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 148,
Accounting for Stock-Based Compensation-Transition and Disclosure  an Amendment of FASB Statement No. 123, entities are permitted to recognize as expense, over the vesting period, the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS 148 also allows entities to continue to apply the provisions of APB Opinion 25 and provide pro forma net income (loss) disclosures for employee stock option grants as if the fair-value-based method defined in SFAS
148 had been applied. The Company has elected to continue to apply the provisions of APB Opinion 25 and provide the pro forma disclosures required by SFAS 148. All stock-based awards to non-employees are accounted for at their fair value in
accordance with SFAS 148 and related interpretations.



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.





F-15



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 11. Stock Options and Warrants (continued)



The following table summarizes relevant information as to reported results
under the Companys intrinsic value method of accounting for stock awards, with supplemental information as if the fair value recognition provisions of SFAS 148 had been applied for the year ended December 31, 2004 and 2003(adjusted for
conversion of shares due to merger).



|                                                                                                                              |  |                                      |            |   |                                      |   |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ---------- | - | ------------------------------------ | - | ---------- | -
|                                                                                                                              |  | For the Year Ended December 31, 2004 |            |   | For the Year Ended December 31, 2003 |  
|Net Loss, as reported                                                                                                         |  | $                                    | (6,693,314 | ) |                                      | $ | (5,493,729 | )
|Add: Stock-based employee compensation expense attributable to common stock options and warrants                              |  |                                      | 347,479    |   |                                      |   | 139,121    |  
|Less: Stock-based employee compensation expense attributable to common stock options determined under fair value based method |  |                                      | (511,692   | ) |                                      |   | (93,856    | )
|                                                                                                                              |  |                                      |            |   |                                      |   |            |  
|Net Loss, as Adjusted                                                                                                         |  | $                                    | (6,857,527 | ) |                                      | $ | (5,448,464 | )
|                                                                                                                              |  |                                      |            |   |                                      |   |            |  
|Loss Per Share-Basic, as Reported                                                                                             |  | $                                    | (.30       | ) |                                      | $ | (1.26      | )
|                                                                                                                              |  |                                      |            |   |                                      |   |            |  
|Loss Per Share-Diluted, as Reported                                                                                           |  | $                                    | (.17       | ) |                                      | $ | (.24       | )
|                                                                                                                              |  |                                      |            |   |                                      |   |            |  
|Loss Per Share-Basic, as Adjusted                                                                                             |  | $                                    | (.30       | ) |                                      | $ | (1.25      | )
|                                                                                                                              |  |                                      |            |   |                                      |   |            |  
|Loss Per Share-Diluted, as Adjusted                                                                                           |  | $                                    | (.17       | ) |                                      | $ | (.24       | )
|                                                                                                                              |  |                                      |            |   |                                      |   |            |  



The summary of the
status of the Companys stock option plan as of December 31, 2004 and 2003 and changes during the periods then ended is as follows (adjusted for conversion of shares due to merger):



|                                                                 |  |                             |   |      |                                 |     |                             |            |   |                                 |   |     |  
|---------------------------------------------------------------- |  | --------------------------- | - | ---- | ------------------------------- | --- | --------------------------- | ---------- | - | ------------------------------- | - | --- | -
|                                                                 |  | 2004                        |   | 2003 |                                
|                                                                 |  | Number of Options/ Warrants |   |      | Weighted Average Exercise Price |     | Number of Options/ Warrants |            |   | Weighted Average Exercise Price |  
|Outstanding at Beginning of Period                               |  | 16,178,349                  |   |      | $                               | .47 |                             | 10,527,826 |   |                                 |   | .48 |  
|Options Granted                                                  |  | 967,657                     |   |      | $                               | .83 |                             | 5,800,038  |   |                                 | $ | .48 |  
|Warrants Granted                                                 |  | 9,315,203                   |   |      | $                               | .89 |                             | 847,055    |   |                                 | $ | .36 |  
|Exercised                                                        |  | (978,340                    | ) |      | $                               | .25 |                             | -0-        |   |                                 |   | n/a |  
|Forfeited                                                        |  | (2,590,661                  | ) |      | $                               | .46 |                             | (996,570   | ) |                                 |   | (45 | )
|                                                                 |  |                             |   |      |                                 |     |                             |            |   |                                 |   |     |  
|Outstanding at End of Period                                     |  | 22,892,208                  |   |      | $                               | .67 |                             | 16,178,349 |   |                                 | $ | .47 |  
|                                                                 |  |                             |   |      |                                 |     |                             |            |   |                                 |   |     |  
|Options Exercisable at End of Period                             |  | 17,038,724                  |   |      | $                               | .45 |                             | 4,020,194  |   |                                 |   | .49 |  
|Weighted-average Fair Value of Options Granted During the Period |  |                             |   |      | $                               | .05 |                             |            |   |                                 | $ | .03 |  



As of December 31, 2004, the range of
option and warrant exercise prices for outstanding and exercisable options and warrants was $.01 to $1.80 with a weighted average remaining contractual life of 2.47 years.





F-16



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 12. Stock Appreciation Rights and Restricted Share Units



In October 2002, the Company reduced compensation 25% for all executives of
the Company. In November, the compensation of the Chief Executive Officer and President was further reduced to the minimum salary necessary to maintain group insurance coverage. To provide the Company executives the opportunity to restore this lost
compensation at a future date a Stock Appreciation Rights Plan (Plan) was established effective October 1, 2002. The Plan provides that at the time the Company changes ownership or becomes a publicly held company (per specific provisions in the
Plan), the Company executives receive in Company stock or cash the differential amount between the fair market value of the Company stock and the applicable initial value of their stock appreciation rights. For the period from October 1, 2002
through April 30, 2003, the conversion rate was $1.875 per each stock appreciation right for each $1.00 in reduced salary. Effective May 1, 2003, the conversion rate was amended to $3.00 per each stock appreciation right for each $1.00 in reduced
salary. As of December 31, 2004 and 2003, this was a total aggregate salary reduction amount of $-0- and $740,082, respectively.



On December 31, 2003, the Company terminated its Stock Appreciation Plan and cancelled all outstanding rights granted. As consideration for the
consideration of rights cancelled, each employee received restricted stock or cancellation their notes receivable (See Note 4) at rate of $3 per right. 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 units 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, $.01 par value on the date specified in the grant. As a result of the reverse merger with Digital Data Networks, Inc., each right to receive one share of common stock, $.01
par value was converted into a right to receive shares of common stock, no par value per share, and preferred stock series B, no par value per share as outlined in the merger agreement. On June 3, 2004, the right to receive preferred stock Series B,
no par value per share, was converted in a right to receive shares of common stock, no par value per share (See Note 19). The restricted share units granted under the plan vest evenly over three years, with immediate vesting upon termination.
Information with respect to restricted share units and stock appreciation rights as of December 31, 2004 and 2003 (Adjusted for Reverse Merger Dated February 26, 2004) is as follows:



|                                                        |  |      |  |          |  
|------------------------------------------------------- |  | ---- |  | -------- | -
|                                                        |  | 2004 |  | 2003     |  
|Stock Appreciation Rights Outstanding-Beginning of Year |  | -0-  |  | 54,522   |  
|Stock Appreciation Rights Granted                       |  | -0-  |  | 244,807  |  
|Rights Applied Towards Cancellation of Notes Receivable |  | -0-  |  | (59,848  | )
|Conversion to Restricted Units                          |  | -0-  |  | (239,481 | )
|                                                        |  |      |  |          |  
|Stock Appreciation Rights Outstanding-End of Year       |  | -0-  |  | -0-      |  
|                                                        |  |      |  |          |  

|                                                                       |  |          |   |  |           |         |   |        |         |           |   |        
|---------------------------------------------------------------------- |  | -------- | - |  | --------- | ------- | - | ------ | ------- | --------- | - | -------
|                                                                       |  | 2004     |   |  | 2003     
|                                                                       |  | Common   |   |  | Preferred |         |   | Common |         | Preferred
|Restricted Stock-Beginning of Year                                     |  | 542,315  |   |  |           | 14,196  |   |        | -0-     |           |   | -0-    
|Restricted Stock Granted                                               |  | -0-      |   |  |           | -0-     |   |        | 542,315 |           |   | 14,196 
|Conversion of Preferred to Common                                      |  | 889,613  |   |  |           | (14,196 | ) |        | -0-     |           |   | -0-    
|Transfer to Common Stock Due to Lapse of Restrictions                  |  | (440,070 | ) |  |           | -0-     |   |        | -0-     |           |   | -0-    
|                                                                       |  |          |   |  |           |         |   |        |         |           |   |        
|Restricted Stock-End of Year                                           |  | 991,858  |   |  |           | -0-     |   |        | 542,315 |           |   | 14,196 
|                                                                       |  |          |   |  |           |         |   |        |         |           |   |        
|Weighted Average Fair Value of Shares                                  |  |          |   |  | $         | .45     |   |        |         |           | $ | .45    
|Pre-Tax Compensation Expense Charged to Earnings, net of cancellations |  |          |   |  | $         | -0-     |   |        |         |           | $ | 727,606
|Cancellation of Notes Receivable                                       |  |          |   |  | $         | -0-     |   |        |         |           | $ | 179,544





F-17



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



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 20% of the
difference. The deferred amount is due at a time when the company becomes profitable. As of December 31, 2004 and 2003, the amount of deferred compensation accrued was $374,899 and $143,184, respectively.



Note 14. Employee Benefit Plans



Employees are paid through a professional employment organization (PEO). The
PEO is a co-employer with the Company. It carries and maintains the Companys employee benefit programs such as health insurance, dental, disability, life insurance and 401K plan. The Companys costs for these plans are imbedded in the fee
charged by the PEO for payroll costs.



Note 15. Lease Obligation



The Company leases office facilities in Atlanta, Georgia
and Boca Raton, Florida under operating leases expiring in January 2005. It also leases an engineering center in Redwood City, California under an operating lease expiring in February 2006.



During the years ended December 31, 2004 and 2003, the Company subleased the
Atlanta space to a third-party tenant while it was headquarter in Boca Raton. In December 2004, the Company relocated its headquarters back to Atlanta, Georgia.



Total rents paid during the years ended December 31, 2004 and 2003 were $306,671 and $215,789.



Total rents received from subleases during the years ended December 31, 2004
and 2003 were $93,948 and $42,625.



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



|                  |  |   |       
|----------------- |  | - | ------
|December 31, 2005 |  | $ | 92,396
|December 31, 2006 |  |   | 5,202 
|December 31, 2007 |  |   | -0-   
|December 31, 2008 |  |   | -0-   
|December 31, 2009 |  |   | -0-   
|                  |  |   |       
|                  |  | $ | 97,598
|                  |  |   |       





F-18



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 16. Development Stage Enterprises



The Company is a development stage enterprise in that planned principal
operations have not generated significant amounts of revenues since its inception. Development stage activities in which the Company has been actively engaged include building a management team, financial planning, raising capital, research and
development, establishing sources of supply, acquiring property and equipment and other operating assets, training personnel, developing markets, building a network operation center, and developing customer billing systems.



Because of the factors noted in the preceding paragraph, the Company
incurred a net loss of $6,693,314 and $5,354,608 during the years ended December 31, 2004 and 2003, respectively. These losses, as well as the uncertain conditions that the Company faces relative to its ongoing debt and equity fund-raising efforts,
create 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 areas of
business 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 has
also undertaken a study of potentially licensing its technology to other companies in order to both bring in a new revenue stream, but to also allow it to form new joint venture partners that will enable the Company to ultimately expand the market
for its products. Management believes that new products under development, the potential for newly identified foreign markets coupled with new capital form sophisticated institutional investors, should allow the Company to achieve its goal of
positive cash flow within the next twelve months.



Note 17. Contingencies



As of December 31, 2004, the Company was a defendent in a
lawsuit with former stockholders of its wholly-owned subsidiary, SuperCaller Community, Inc. (SC). The former stockholders have alleged the Company forced them to sell SC. Management believes the suit has no merit and plans to vigorously defend the
lawsuit. As of February 28, 2005 the outcome of the lawsuit is unknown. Therefore, no loss or liability has been recorded in the financial statements.



On June 30, 2003, the Company filed for arbitration against the former majority owner of SuperCaller Community, Inc. for liabilities exceeding the
$400,000 threshold on September 17, 2002 as provided for in the purchase agreement. The excess liabilities that the Company claims amounts to $452,250 and is represented by 540,857 shares of the Companys common stock that is being held in
escrow by the escrow agent.



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.



Note 18. Preferred Stock



On June 3, 2004, the shareholders of the Company approved
an amendment to the Companys Articles of Incorporation to increase the number of authorized shares of the Companys common stock, no par value per share, from 10,000,000 to 100,000,000 and to increase the number of authorized shares of
the Companys preferred stock, no par value per share, from 1,000,000 to 5,000,000. As a result of the increase in the number of authorized shares of the Companys common stock effected by such filing, all of the Companys outstanding
shares of preferred stock series A-1, preferred stock series A-2, preferred stock series B and preferred stock series C converted into shares of common stock in accordance with the applicable Statement of Rights of such preferred stock.
Consequently, as of June 3, 2004, the Company had outstanding 34,179,113 shares of common stock (including restricted shares), excluding shares of common stock payable as dividends with respect to, and upon conversion of, the preferred stock series
A-1 and preferred stock series A-2.





F-19



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 18. Preferred Stock (continued)



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 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 requires interest at a rate of 13% per annum from the payable date to date paid. During the year ended December 31, 2004, the Company paid $43,983. On January 3, 2005, the
company paid dividends of $75,906 related to its preferred stock. 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 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.



Note 19. Merger with Digital Data Networks, Inc.



On February 29, 2004, the Company merged with and into Digital Data Networks, Inc. (DDN), a Washington corporation. Pursuant to the plan of merger, the
Company and DDN Acquisition Corporation (a wholly-owned subsidiary of DDN) was merged with and into the Company with the Company to survive the Merger as a wholly-owned subsidiary of DDN. Subsequent to the merger Digital Data Networks, Inc. changed
its name to i2 Telecom International, Inc.



Under terms of the
agreement, at the effective time of the Merger, the issued and outstanding shares of:



| | 1. | The Companys common stock, $.01 par value per share, including restricted units, was converted into an aggregate of 5,160,722 shares of the DDNs common stock, no par
value per share and 135,000 shares of DDNs preferred stock series B, no par value per share.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | The Companys preferred stock series A-1, $1.00 par value per share was converted into the right to receive an aggregate of 22,500 shares of DDNs preferred stock Series
A-1, no par value per share.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | The Companys preferred stock series A-2, $1.00 par value per share was converted into the right to receive an aggregate of 30,600 shares of the DDNs preferred stock
series A-2, no par value per share.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | The Companys preferred stock series B, $1.00 par value per share was converted into the right to receive an aggregate of 100,000 shares of DDNs preferred stock series C,
no par value per share.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



DNN generates
advertising revenue in the out-of-home advertising industry through its Transit Network operation, which sells advertising on its digital information network. The Transit Networks digital information network is a network of computerized
electronic displays that delivers information, both text and graphics, to riders on-board public transit vehicles, utilizing an FM sub-carrier signal to transmit the data. The Transit Network currently operates its digital information network on the
Dallas Area Rapid Transit bus and rail system.



On February
27, 2004, in connection with the merger with the Company, DDN sold substantially all of its operating assets relating to its digital information network to a newly created entity owned by certain members of DDNs management team. Pursuant to
the agreement, the assets were exchanged for the new owners assuming certain liabilities and obligations relating to such assets.



The Merger and Asset Sale are being accounted for as a recapitalization of the Company and is merely a change in legal organization and not a change in
the entity. As a result of the recapitalization, the financial statements for the periods ended prior to the merger reflect a continuation of the Company and not of DDN. The consolidated statement of stockholders equity has been retroactively
restated to reflect the equivalent number of shares received in the merger.



F-20



---

i2 TELECOM INTERNATIONAL, INC. AND SUBSIDIARY

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



December 31, 2004 and 2003



Note 20. Restatement of Prior Financial Statements



The financial statements for the year ended December 31, 2003 have been
restated to reflect additional expense related to stock warrants issued during 2003 to various consultants for services performed. The effect of the restatement was to increase the net loss by $139,121, net of income taxes.



F-21



---

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                               
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Method of Filing                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|2.1         |  | Agreement and Plan of Merger dated as of January 30, 2004, among the Company, DDN Acquisition Corporation and i2 Telecom Communications, Inc. (The schedules to the Agreement and Plan of Merger
have been omitted from this Report pursuant to Item 601(b)(2) of Regulation S-B, and the Company agrees to furnish copies of such omitted schedules supplementally to the Securities and Exchange Commission upon request.) |  | Incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed on February 2, 2004.               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|2.2         |  | Asset Purchase Agreement dated as of January 30, 2004, between the Company and InTransit Media, Inc.                                                                                                                                                                                                                                                                                                                         |  | Incorporated by reference to Exhibit 2.2 to the Companys Current Report on Form 8-K filed on February 2, 2004.               
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|2.3         |  | First Amendment to Asset Purchase Agreement, dated February 26, 2004, between the Company and InTransit Media, Inc.                                                                                                                                                                                                                                                                                                          |  | Incorporated by reference to Exhibit 2.3 to the Companys Current Report on Form 8-K filed on March 12, 2004.                 
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|2.4         |  | 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.)                       |  | Incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed August 13, 2004.                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|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 of Preferred Stock Series D of i2 Telecom International, Inc.                                                                                                                                                                                                                                                                                                          |  | Incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed August 13, 2004.                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|3.4         |  | Amendment to the Companys Articles of Incorporation filed June 3, 2004.                                                                                                                                                                                                                                                                                                                                                     |  | Incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|3.5         |  | Amendment to the Companys Articles of Incorporation filed August 10, 2004.                                                                                                                                                                                                                                                                                                                                                  |  | Incorporated by reference to Exhibit 3.2 to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.1         |  | Form of Warrant issued by the Company to each buyer in connection with the 2004 Private Placement.                                                                                                                                                                                                                                                                                                                           |  | Incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed August 13, 2004.                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.2         |  | Form of Additional Investment Right issued by the Company to each buyer in connection with the 2004 Private Placement.                                                                                                                                                                                                                                                                                                       |  | Incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed August 13, 2004.                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.3         |  | Registration Rights Agreement among the Company and the buyers signatory thereto entered into in connection with the 2004 Private Placement.                                                                                                                                                                                                                                                                                 |  | Incorporated by reference to Exhibit 4.3 to the Companys Current Report on Form 8-K filed August 13, 2004.                   



---

|      |  |                                                                                                                                                                                                            |  |                                                                                                                                  
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                           
|4.4   |  | Form of Warrant issued by i2 Telecom International, Inc., a Delaware corporation, and converted in the Merger, exercisable until February 27, 2007, at an exercise price of $0.9031.                       |  | Incorporated by reference to Exhibit 4.4 to the Companys Registration Statement on Form SB-2 (No. 333-119254).                  
|      |  |                                                                                                                                                                                                           
|10.1  |  | Finders Fee Agreement dated January 30, 2004, between the Company and Howard Parker.                                                                                                                       |  | Incorporated by reference to Exhibit 10.1 to the Companys Annual Report on Form 10-KSB for the year ended December 31, 2003.    
|      |  |                                                                                                                                                                                                           
|10.2  |  | Employment Agreement between Paul R. Arena and i2 Telecom International, Inc., a Delaware corporation, dated June 1, 2002. Represents an executive compensation plan or arrangement.                       |  | Incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.3  |  | Amendment to Employment Agreement between Paul R. Arena and i2 Telecom International, Inc., a Delaware corporation, dated June 1, 2003. Represents an executive compensation plan or
arrangement.          |  | Incorporated by reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.4  |  | Amendment to Employment Agreement between Paul R. Arena and i2 Telecom International, Inc., a Delaware corporation, dated December 17, 2003. Represents an executive compensation plan or
arrangement.     |  | Incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.5  |  | Employment Agreement between Douglas F. Bender and i2 Telecom International, Inc., a Delaware corporation, dated November 12, 2002. Represents an executive compensation plan or
arrangement.              |  | Incorporated by reference to Exhibit 10.5 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.6  |  | Amendment to Employment Agreement between Douglas F. Bender and i2 Telecom International, Inc., a Delaware corporation, dated December 19, 2003. Represents an executive compensation plan or
arrangement. |  | Incorporated by reference to Exhibit 10.6 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.7  |  | Offer of Employment between Mark Bridges and i2 Telecom International, Inc., a Delaware corporation, dated December 26, 2002. Represents an executive compensation plan or
arrangement.                    |  | Incorporated by reference to Exhibit 10.7 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.8  |  | Amendment to Employment Agreement between Mark Bridges and i2 Telecom International, Inc., a Delaware corporation, dated December 17, 2003. Represents an executive compensation plan or
arrangement.      |  | Incorporated by reference to Exhibit 10.8 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.9  |  | Employment Agreement between Jerry Lumpkin and i2 Telecom International, Inc., a Delaware corporation, dated October 6, 2003. Represents an executive compensation plan or
arrangement.                    |  | Incorporated by reference to Exhibit 10.9 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.10 |  | Employment Agreement between Terry Palmeter and i2 Telecom International, Inc., a Delaware corporation, dated March 31, 2003. Represents an executive compensation plan or
arrangement.                    |  | Incorporated by reference to Exhibit 10.10to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004. 
|      |  |                                                                                                                                                                                                           
|10.11 |  | Amendment to Employment Agreement between Terry Palmeter and i2 Telecom International, Inc., a Delaware corporation, dated December 17, 2003. Represents an executive compensation plan or
arrangement.    |  | Incorporated by reference to Exhibit 10.11 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                           
|10.12 |  | Employment Agreement between Ron Roswell, Sr., and i2 Telecom International, Inc., a Delaware corporation, dated June 1, 2002. Represents an executive compensation plan or
arrangement.                   |  | Incorporated by reference to Exhibit 10.12 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                           
|10.13 |  | Amendment to Employment Agreement between Ron Roswell, Sr., and i2 Telecom International, Inc., a Delaware corporation, dated December 23, 2003. Represents an executive compensation plan or
arrangement. |  | Incorporated by reference to Exhibit 10.13 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.



---

|      |  |                                                                                                                                                                                                              |  |                                                                                                                                  
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                             
|10.14 |  | Employment Agreement between Ron Roswell, Jr., and i2 Telecom International, Inc., a Delaware corporation, dated June 1, 2002. Represents an executive compensation plan or
arrangement.                     |  | Incorporated by reference to Exhibit 10.14 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.15 |  | Amendment to Employment Agreement between Ron Roswell, Jr., and i2 Telecom International, Inc., a Delaware corporation, dated December 23, 2003. Represents an executive compensation plan or
arrangement.   |  | Incorporated by reference to Exhibit 10.15 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.16 |  | Employment Agreement between Rick Scherle and i2 Telecom International, Inc., a Delaware corporation, dated August 2, 2003. Represents an executive compensation plan or arrangement.                        |  | Incorporated by reference to Exhibit 10.16 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.17 |  | Employment Agreement between Anthony F. Zalenski and i2 Telecom International, Inc., a Delaware corporation, dated June 24, 2002. Represents an executive compensation plan or
arrangement.                  |  | Incorporated by reference to Exhibit 10.17 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.18 |  | Amendment to Employment Agreement between Anthony F. Zalenski and i2 Telecom International, Inc., a Delaware corporation, dated June 1, 2003. Represents an executive compensation plan or
arrangement.      |  | Incorporated by reference to Exhibit 10.18 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.19 |  | Amendment to Employment Agreement between Anthony F. Zalenski and i2 Telecom International, Inc., a Delaware corporation, dated December 17, 2003. Represents an executive compensation plan or
arrangement. |  | Incorporated by reference to Exhibit 10.19 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.20 |  | Offer of Employment from i2 Telecom International, Inc., a Delaware corporation, to Ming King dated March 15, 2004.                                                                                          |  | Incorporated by reference to Exhibit 10.20 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.21 |  | Offer of Employment from i2 Telecom International, Inc., a Delaware corporation, to Fenn King dated March 15, 2004.                                                                                          |  | Incorporated by reference to Exhibit 10.21 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.22 |  | Warrant Agreement dated March 11, 2003, granted to Robert F. Hussey to purchase 65,000 shares of the Companys common stock.                                                                                 |  | Incorporated by reference to Exhibit 10.22 to the Companys Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004.
|      |  |                                                                                                                                                                                                             
|10.23 |  | Form of Lock-up Agreement entered into in connection with the 2004 Private Placement.                                                                                                                        |  | Incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed August 13, 2004.                     
|      |  |                                                                                                                                                                                                             
|10.24 |  | Form of Conversion Agreement dated as of April 6, 2004 between the Company and each holder of the Companys Preferred Stock Series A-1.                                                                      |  | Incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.  
|      |  |                                                                                                                                                                                                             
|10.25 |  | Non-Negotiable Promissory Note dated May 14, 2004 made by the Company in favor of Vestal Venture Capital in principal amount of $500,000.00.                                                                 |  | Incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.  
|      |  |                                                                                                                                                                                                             
|10.26 |  | Non-Negotiable Promissory Note dated June 7, 2004 made by the Company in favor of Vestal Venture Capital in principal amount of $185,000.00.                                                                 |  | Incorporated by reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.  
|      |  |                                                                                                                                                                                                             
|10.27 |  | Non-Negotiable Promissory Note dated June 8, 2004 made by the Company in favor of Midsouth Investor Fund, LP in principal amount of $300,000.00.                                                             |  | Incorporated by reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.  



---

|      |  |                                                                                                                                                                                                   |  |                                                                                                                                
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|      |  |                                                                                                                                                                                                  
|10.28 |  | Form of Acknowledgement and Agreement dated July 6, 2004 between the Company and each former holder of the Companys Preferred Stock Series A-1 and Preferred Stock Series A-2.                   |  | Incorporated by reference to Exhibit 10.5 to the Companys Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004.
|      |  |                                                                                                                                                                                                  
|10.29 |  | Amendment to Employment Agreement between i2 Telecom International, Inc., a Delaware corporation, and Paul Arena dated August 24, 2004. Represents an executive compensation plan or
arrangement. |  | Incorporated by reference to Exhibit 99.2 to the Companys Current Report on Form 8-K filed September 9, 2004.                 
|      |  |                                                                                                                                                                                                  
|10.30 |  | Settlement Agreement dated February 24, 2005, between the Company and Anthony F. Zalenski.                                                                                                        |  | Incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed on March 2, 2005.                  
|      |  |                                                                                                                                                                                                  
|21.1  |  | Subsidiaries of the Company.                                                                                                                                                                      |  | Incorporated by reference to Exhibit 21.1 to the Companys Registration Statement on Form SB-2 (No. 333-119254).               
|      |  |                                                                                                                                                                                                  
|31.1  |  | Rule 13a-14(a)/15d-14(a) Certification of the Companys Chief Executive Officer.                                                                                                                  |  | Filed herewith.                                                                                                                
|      |  |                                                                                                                                                                                                  
|31.2  |  | Rule 13a-14(a)/15d-14(a) Certification of the Companys Chief Financial Officer.                                                                                                                  |  | Filed herewith.                                                                                                                
|      |  |                                                                                                                                                                                                  
|32.1  |  | Section 1350 Certification of the Companys Chief Executive Officer.                                                                                                                              |  | Filed herewith.                                                                                                                
|      |  |                                                                                                                                                                                                  
|32.2  |  | Section 1350 Certification of the Companys Chief Financial Officer.                                                                                                                              |  | Filed herewith.