SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 10-KSB

(Mark One)
x	Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2007
	or
o	Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to _________

000-27277

(Commission File No.)

VOCALSCAPE NETWORKS, INC.

(Name of Small Business Issuer in Its Charter)

NEVADA

(State or other jurisdiction of incorporation or organization

98-0207554

(I.R.S. Employer

Identification No.)

170 E. Post Road, Suite 206

White Plains, New York

(Address of principal executive offices)

10601

(Zip Code)

Issuer’s Telephone Number, including area code: (914) 448-7600

Securities registered under Section 12(b)

of the Securities Exchange Act of 1934: NONE

Securities registered under Section 12(g)

of the Securities Exchange Act of 1934:

COMMON STOCK, $.001 PAR VALUE

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 o No x

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not 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. o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes o No x

Issuer’s revenues for its most recent fiscal year were: $70,322.

As of May 14, 2008, the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was recently sold was: $1,586,478.

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act: Yes o No x

As of May 14, 2008, there were 383,783,937 shares of the issuer’s common stock outstanding, 45,000 shares of Series A Convertible Preferred Stock outstanding, and 100,000,000 shares of Class A Common Stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes o No x

Table of Contents

		Page

PART I		3
ITEM 1.	DESCRIPTION OF BUSINESS	3
ITEM 2.	PROPERTY	9
ITEM 3.	LEGAL PROCEEDINGS	9
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS	9

PART II		10
ITEM 5.	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, COMPANY PURCHASES OF EQUITY AND SECURITIES	10
	Recent Sales of Unregistered Securities	10
ITEM 6.	MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	10
ITEM 7.	FINANCIAL STATEMENTS	14
ITEM 8A.	CONTROLS AND PROCEDURES	15
ITEM 8B.	OTHER INFORMATION	15

PART III		15
ITEM 9.	DIRECTORS AND EXECUTIVE OFFICERS	15
ITEM 10.	EXECUTIVE COMPENSATION	17
	Executive Compensation	17
	Employment Agreements	19
ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	21
ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	22
ITEM 13.	EXHIBITS	22
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	22

Description

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB contains “forward-looking statements.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements include, among other things, the company’s ability to (i) adapt to rules and regulations that may be promulgated that affect how Vocalscape must conduct its Voice-over-Internet Protocol business and operations; (ii) market and distribute its Voice-over-Internet Protocol services; (iii) secure capital to continue operations; (iv) achieve and manage growth; and (v) develop or acquire new technology to effectively provide new and/or better services. Additional factors that will impact the company’s success include the company’s ability to attract and retain qualified personnel; the voting decisions of Robert Koch, who controls approximately 76% of the voting power of all security holders of the Vocalscape; and other factors discussed in Vocalscape’s filings with the Securities and Exchange Commission.

Our management has included projections and estimates in this Form 10-KSB, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the Securities and Exchange Commission or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Background

Prior to its merger, effective October 4, 2005, with Dtomi, Inc., a Nevada corporation (“Dtomi”), the assets of Vocalscape were operated in a Delaware corporation named “Vocalscape, Inc.”, and the shares of common stock of Vocalscape, Inc. were quoted on the Pink Sheets in 2004 and part of 2005 (while it operated what is now the current business of Vocalscape). Prior to the merger with Dtomi on October 4, 2005, Vocalscape, Inc. sold and assigned substantially all of its assets to a wholly-owned subsidiary named “Vocalscape Networks, Inc.”, which merged with a wholly-owned subsidiary of Dtomi, named “Dtomi Acquisition Corp.”, which was a Nevada corporation. Vocalscape Networks, Inc. was the surviving corporation in the merger with Dtomi Acquisition Corp, and changed its name to “Vocalscape Operating Subsidiary, Inc.” Shortly thereafter, “Dtomi, Inc. changed its name to “Vocalscape Networks, Inc.”, and Vocalscape Operating Subsidiary, Inc. is a wholly owned subsidiary of Vocalscape Networks, Inc.

Summary of Business

Vocalscape is a next generation communications provider that provides Voice over Internet Protocol (“VoIP”) solutions. What used to be housed in multiple refrigerator sized boxes costing over $1,000,000 (with additional funds needed for telephony features) is now available on a group of five computers not much larger than a standard desktop PC’s available from Dell. It is a ‘paradigm shift.’ We provide the end-to-end solution comprised of hardware and software that allow companies to offer residential telephony services without the need for investments totaling millions of dollars. The experience is the same - you just pick up the phone and make a call - long distance or local.

Vocalscape Milestones

Prior to its merger with Dtomi, Inc., the business of Vocalscape had been operated for approximately two years. With limited funding, it has been able to deliver to the market a very strong group of solutions. These encompass Residential VoIP systems (prepaid / subscription), Calling Card Solutions, Multiple versions of our Eyefon Softphone and an impressive list of features within the systems. These features consist of Standard Voicemail, Voicemail to E-mail, Web Voicemail, Online Payment, Fax to E-mail, Call forwarding, Virtual Numbers, Caller ID and 3 way calling.

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

As a result of these developments, consumers, enterprises, ISPs, ITSPs and telecommunications companies are continuing to embrace offerings from VoIP providers. Consumers, particularly in emerging markets, are increasingly using VoIP-enabled services, to overcome regulatory and incumbent-imposed constraints to reduce their telephony costs. Enterprises are significantly dropping their telephony expenses by using VoIP to link users within offices and around the world. VoIP enables telecommunications providers to reduce their network costs and to deliver new products and services that cannot be supported by traditional telephone networks.

Target Markets/Solutions

Vocalscape delivers a grouping of technology and solutions that provide reliable VoIP solutions and products to service providers, new entrants and existing VoIP providers. These solutions and hardware are built to work with dial-up, high-speed and wireless networks using both private networks and public internet connections.

Target Market	Solution/Product

ISPs/ITSPs (medium size)	Residential VoIP Telephony Solution Resellers of DigitalEphone Solution
Alternative Operators	Residential VoIP Telephony Solution Calling Card Solution
Cable Operators with VoIP systems	VoIP Telephony Adapters
Independent Local Exchange Carriers (ILEC) Local Exchange Carriers (LEC) Competitive Local Exchange Carriers (CLEC) With VoIP Services/IP PBX Services	VoIP Telephony Adapters IP Telephones Eyefon Softphone
Enterprises	IP Telephones Eyefon Softphone
Residential/SOHO Telephony Users	DigitalEphone Solution

Market Opportunity

Vocalscape is focused on supplying residential VoIP Solutions, products and services to the ISP, ITSP, Alternative Operators and existing ILECS, LECS and Enterprises.

Arthur D. Little expects that VoIP will be one of the most widely used application on the Internet by 2010, with over 70% of households with broadband subscribing to the service.

One of the market leaders within the VoIP market for residential subscribers is Vonage. They are spending hundreds of millions of dollars educating the market on broadband VoIP phone services and have revolutionized the fixed line business with unlimited calling plans at very low rates. This has a “halo” effect and is driving entrepreneurs, ISP’s, Cable operators to rapidly search for their own VoIP telephony solutions.

Vocalscape has the following approach to the VoIP market Opportunity:

Sell to the Service provider marketplace

The ISP’s, and Cable Operators already have a customer base with broadband services with a relatively stagnant revenue base - they are looking for additional revenues from their current customers along with expansion outside of their current geographical boundaries.

Alternative Operators are very much looking for the same Residential telephony systems and also represent a significant segment of potential customers.

Provide our own residential services to the market using what we have learned by working with our clients through our own branded solution - tentatively called DigitalEphone

This direct to consumer model will allow Vocalscape to directly target consumers that would like an alternative VoIP telephony service. This approach also allows Vocalscape to also target companies that would potentially like to resell our services under the DigitalEphone brand.

Vocalscape is positioned uniquely to capture a share of the VoIP service provider and hardware marketplace. The solutions developed by Vocalscape are critical for the new entrant VoIP provider. The hardware products and softphone can target the existing VoIP businesses. Vocalscape’s solutions set will be one of the first to completely install every aspect of the VoIP business for entrepreneurs and also include the option to choose parts of the product platform. The modular system and robust set of technology and hardware can be easily integrated into the telephony network. Vocalscape delivers the capabilities providers require to create a business and, in doing so, creates the opportunity for Vocalscape to service its ongoing support, enhancement, network monitoring and support needs.

Vocalscape Solution

Vocalscape delivers residential/soho telephony solutions to our clients. In order to do so, we have partnered, purchased or developed the products and services necessary to create the total solution. The products are a combination of both software and hardware.

Software: Turnkey VoIP solutions

Residential System

Vocalscape has designed and developed a residential telephony system that is a total solution. It encompasses the complete lifecycle of the customer from Initial signup online, assignment of phone numbers and features (voicemail, call forwarding, caller id etc.), My Account functionality for the customer (Call Details, Payment/Billing), Warehousing and Account administration features (customer views, rates administration, account payment, reporting etc) as part of the Customer service and System Administration features. It is an end to end solution.

The residential system is available as either a Prepaid or a Subscriber solution.

The prepaid solution allows customer to purchase a device from a retail store/online and then activate it online to receive a phone number, calling features and a set amount of airtime. The airtime decrements as calls are made. This can then be recharged online through a credit card or banking transaction.

The Subscriber solution allows a customer to purchase a device from a retail store or online that is activated on the system when the customer has registered. The customer is billed monthly for the service which can either be based on minutes usage or unlimited calling within a region. Calling outside of the region will incur long distance charges

Calling Card System

Vocalscape’s VoIP Calling Card solution allows businesses to run a calling card business. Customers can purchase either one time calling cards from retail locations or virtual calling cards online. One time cards contain a fixed value and are not refillable. The virtual calling card can be refilled online using a credit card to pay. The system allows resellers to generate cards, manage user accounts, offer multiple packages and generate reports. The solution also enables a business to set up a variety of rules regarding service fees.

Services

DigitalEphone Retail System

As an additional revenue stream to the overall residential/soho model, Vocalscape is becoming a Residential service provider with the DigitalEphone system running on the Vocalscape Residential Solution. . The service has been set-up to offer broadband and dial-up accessible VoIP phone service to compete with Vonage, Packet 8 and other major providers. DigitalEphone will compete in this market through reseller partnerships with ISPs, web site communities and entrepreneurs.

Production Support and Monitoring

Vocalscape provides to its customer ongoing production support and monitoring services. These services are comprised of second tier technical support and 7x24 system monitoring through our state of the art SNMP monitoring system which pages and e-mails our support staff if any system deficiencies are noted.

System Enhancements

From time to time our customer require modifications to the systems that they have purchased - Vocalscape provides these services to them on either a contract or time and materials basis.

Consulting

Business Consulting - Vocalscape brings extensive industry knowledge to assist customers in developing a long-range VoIP strategy and how to develop and implement models that will result in a successful business

Telephony Engineering - Our engineers are experts in both the network and telephony domains. We can solve problems and implement system that traverse both the IP and Telephony networks.

Custom Termination Solutions for large customers - Vocalscape has partnered with various service providers to enable our customers the best connections to destinations throughout the world

Future Product Offerings

Seamless 911 Dashboard and Emergency Services

Vocalscape is attempting to integrate 911 and emergency services modules into their current system. This produces a base code module for integrating multiple 911 providers and enabling a seamless 911 dashboard for VoIP providers to meet the emergency services requirements of their respective countries. The expert telephone engineers on Vocalscape’s staff and development team have built a reliable, redundant and efficient solution within the Vocalscape system that is being matured into a module for resale. This addition will enable existing networks to meet the 911 requirements that were imposed by the Federal Communications Commission on May 19, 2005. These regulations require Internet telephone companies to provide emergency 911 services to all their customers. Globally, these services are being mandated and a large market for the service and dashboard software is expected.

IP PBX Subscriber System

The IP phone system market (“PBX”) is one of the fastest growing markets benefiting telephone services to businesses. The hosted platform Vocalscape is developing will enable resellers to service businesses online. It will feature a self-managed phone system. The billing and logistical requirements have been done within the Vocalscape subscriber platform. Further development is being completed to simplify the self-management functions of the automated attendant, the management of multiple phone numbers and extensions and the administrative control of individual user accounts. With the completion of the hosted business IP PBX solution, Vocalscape will be one of the only solutions providers within the market to complete an IP PBX system featuring its own manufactured handsets and devices. Until recently, the only market providers with this breadth of product and software solutions were CISCO and Lucent. Hosted VoIP enables enterprises to capitalize on the cost advantages of converging voice and data networks without the large capital investment in equipment. Hosted VoIP is expected to grow from $233 million in revenues in 2005 to $1.2 billion by 2010, for a compound annual growth rate of almost 40%.

Call Centers, Logistics and Field Services

Vocalscape is developing an intricate network of support providers and partners to maintain their products and client networks. The call centers and support networks will be an additional service to clients who do not have the infrastructure to handle the necessary support. Through this network, Vocalscape can provide a client located anywhere in the world with a custom support solution that covers the full range of modern support services from call centers to parts replenishment systems and direct field support.

Technology and Product Development

Vocalscape has a team of highly skilled and experienced engineers with significant software and systems industry experience. These senior engineers and management have significant experience in telecommunications, communication and control systems development. Vocalscape will be able to bring to market its products in a timely fashion while retaining the IP, and producing a superior product with high reliability and quality. Our core team overseeing the development and design has expertise in systems engineering and application level software.

Sales and Marketing

Vocalscape’s growth is based on:

1. A proven and growing market

2. Direct and Indirect sales team.

3. A world-class technical team.

4. Customer focused operations and execution.

5. Global presence via the web, resellers and existing clients.

Vocalscape will build an integrated sales team consisting of both direct and indirect resources. Direct resources will target the ISP’s, ITSP’s and Alternative Providers with the residential VoIP solution. Indirect channels will include VARs that supply the growing VoIP provider market with hardware endpoint devices.

The sales force will also utilize web based leads (generated by search engine, blog, publication and email marketing) and outbound telemarketing to go directly after the solution sales clients.

A select number of tradeshows will be attended to build the Vocalscape brand and the awareness of the solutions and product offerings from the company.

At this time, Vocalscape has targeted its initial marketing efforts to alternative providers, ISPs and ITSPs within North America.

Competitive Advantages

Vocalscape has many competitive advantages, including:

Proven in-house expertise in VoIP networks

Established in global markets.

Strategic approach to growth that leverages well established clients and business networks.

Solutions that save time, money and resources.

Outsourced manufacturing

Existing, well-established relationships with ISPs and telephony providers.

A clearly articulated and fully framed technology development strategy.

A balance between world-class technologists and experienced business leaders.

An intellectual property protection plan.

10.

In-house experts that have built a strong following of online readers of articles and publications on VoIP start-up opportunities and who have created an expert name for Vocalscape Networks online.

11.

Legislation and regulations are adapted within the VoIP system to meet market needs, making all Vocalscape solutions one-stop leading edge technology.

Vocalscape has a significant amount of trade secrets and proprietary technology within their overall portfolio of applications and hardware devices that span over two years of development .

Our belief is that VoIP is no different than traditional high-cost telephone service . W hen a client picks up the phone , they want it to work exactly like the traditional phone. Our extensive knowledge and systems enable us to provide this experience.

Competition

The market for VoIP telephony software and services is relatively new and is quickly evolving and subject to rapid technological change. The VoIP telephony market has also seen significant consolidation and this trend is projected to continue. The companies presented below are not meant to be an exhaustive list of competitors to Vocalscape, but it represents the largest and most active participants in this market:

Residential/SOHO VoIP System

Net2Phone

Net2Phone provides VoIP PacketCable, SIP and wireless solutions around the world. As leaders in service providers with turnkey hosted VoIP telephony services, Net2Phone has routed billions of retail VoIP minutes globally, servicing more than 100,000 users in the US as well as hundreds of thousands of more overseas. Net2Phone’s hosted SIP platform provides partners with residential broadband telephony, calling cards, prefix dialing and enterprise services in over 100 countries. Net2Phone’s PacketCable platform provides cable operators with the ability to deliver a primary line replacement service with guaranteed features such as 911.

Deltathree

Deltathree is a provider of Internet telephony solutions to consumers, resellers and service providers worldwide. Deltathree offers a wide range of VoIP services including broadband phone, PC to phone, virtual calling cards and more.

Deltathree sells outsourced platforms similar to that of Vocalscape for cable companies and a hosted solution for resellers.

VocalTec Communications Ltd.

VocalTec is a telecom equipment provider offering next generation network (“NGN”) VoIP carrier class call control and hosted telephony platforms. Their customer base includes Deutsche Telekom, Intelcom San Marino (a subsidiary of Telecom Italia Sparkle), RomTelecom and Hanoi Telecom. The company’s flagship Essentra® Softswitch Platform offers carriers a rich set of residential and enterprise telephony services, supporting both legacy and advanced IP based multimedia devices. VocalTec’s products provide carriers with call control, interface to legacy telephone systems as well as peering with other NGNs. VocalTec continues to offer innovative and advanced telecommunication solutions for carriers and service providers who migrate to NGN.

VocalTec competes with Vocalscape on supplying subscriber platforms and solutions to Telecom and ISP target markets. Their systems sales are over $100,000 per system and they target a very high-end clientele. Therefore the volume of their sales is low and their per quarter income is limited to handling a few clients at a time. It is our assumption that firms such as VocalTec will feel a decline in revenues based on competition by lower entry solutions such as Vocalscape.

The Company is headquartered in White Plains, New York and has an engineering and sales office in Vancouver, British Columbia, Canada

The company recognizes that, without additional financing, the continued development and subsequent market success of the Company is highly uncertain. Our auditors have expressed substantial doubt about our ability to continue as a going concern.

Our principal corporate and executive offices are located at 170 E. Post Road, Suite 206, White Plains, New York 10601. Our telephone number is (914) 448-7600. We maintain a website at www.vocalscape.com. Information contained on our website is not part of this prospectus.

ITEM 2. PROPERTY

Our principal corporate and executive offices, are located at 170 E. Post Road, Suite 206, White Plains, New York 10601, and our primary operations offices, which are located at 305 - 1847 West Broadway, Vancouver, British Columbia, Canada. We lease our offices located in White Plains, New York, and such offices are subject to a month-to-month lease and pay $2,500 per month for rent. We also lease our offices located in Vancouver, British Columbia, and such offices are subject to a five-year term lease, which expires June 30, 2010. We pay $4,380 Canadian (approximately $3,854 U.S. Dollars) per month for rent with escalation clauses. We do not currently maintain any investments in real estate, real estate mortgages or securities of persons primarily engaged in real estate activities, nor do we expect to do so in the foreseeable future. We have no affiliation with the owner of the property where we lease our corporate and executive offices. We believe that the existing facility will adequately meet its needs for now and the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

The Company is not currently subject to any legal proceedings. From time to time, the Company may become subjected to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS

None.

PART II

ITEM 5.

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, COMPANY PURCHASES OF EQUITY AND SECURITIES

Market Information

The Company’s common stock is traded in the Over-the-Counter market and is quoted on the Electronic Bulletin Board (“OTC Bulletin Board”) under the symbol “VOSC.” The following table represents the range of the high and the low closing bid prices, as quoted on the OTC Bulletin Board, for each fiscal quarter for the last two fiscal years ended December 31, 2007 and 2006. These quotations represent prices between dealers, and may not include retail mark-ups, markdowns or commissions, and may not necessarily represent actual transactions.

Fiscal Quarter Ended	Low		High
December 31, 2007	$	0.01	$	0.01
September 30, 2007	$	0.02	$	0.03
June 30, 2007	$	0.01	$	0.02
March 31, 2007	$	0.03	$	0.04
December 31, 2006	$	0.56	$	0.09
September 30, 2006	$	0.06	$	0.35
June 30, 2006	$	0.25	$	0.30
March 31, 2006	$	0.27	$	0.60

On May 14, 2008, the Company estimates that there were approximately 884 record holders of the Company’s common stock.

On May 14, 2008, the closing bid of Vocalscape’s common stock on the OTC Bulletin Board was $0.012 per share.

Dividends and Dividend Policy

The Company has not paid any cash dividends on its common stock during the last two fiscal years and it does not anticipate paying any cash dividends in the foreseeable future. The Company currently intends to retain any future earnings for reinvestment in the business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent on the Company’s financial condition, results of operations, capital requirements and other relevant factors.

Recent Sales of Unregistered Securities

All unregistered sales of the Company’s equity securities during fiscal 2008 were previously reported in the Company’s prior annual, quarterly and current reports filed with the SEC. Therefore, those disclosures are not duplicated in this report.

ITEM 6.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-KSB. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under “Disclosure Regarding Forward-Looking Statements” and elsewhere in this Annual Report on Form 10-KSB.

OVERVIEW

Vocalscape is a next generation communications provider that provides Voice over Internet Protocol (“VoIP”) solutions. The current business of Vocalscape is the result of a merger of Dtomi, Inc. with Vocalscape Networks, Inc. on October 4, 2005, a date prior to which Vocalscape Networks, Inc. was not affiliated with the Company, and the Company was named “Dtomi, Inc.” Until October 4, 2005, the Company was named “Dtomi, Inc”, and was a Florida-based, company that was developing the Air Spring Axle system, a suspension system for small and medium sized trailers (under 26,000lb GVWR) that allows the rear of the trailer to be lowered to ground level.

PRODUCTS AND SERVICES

Vocalscape provides VoIP telephony solutions and communications software for Internet Service Providers (“ISPs”), Internet Telephony Service Providers (“ITSPs”) and Telecommunications companies worldwide. Vocalscape develops VoIP and interactive communications software including Soft phone applications, Customer Acquisition and Billing Systems, SIP Servers, Gatekeepers and Virtual Calling Cards. Vocalscape’s strategy is to focus on VoIP software and Long Distance termination solutions that bring together a full range of communications solutions and services thereby providing a turn-key VoIP infrastructure for ISPs, ITSPs and Telecommunications companies.

COMPETITION

Vocalscape’s software solutions operate on the customer’s choice of hardware. Our software solutions will support our customer’s choice of business models including, pre-paid, post-paid or monthly subscriber billing systems. Vocalscape’s product offerings are designed to streamline subscriber provisioning and subscriber services online.

DEVELOPMENT

Vocalscape has a team of highly skilled and experienced engineers with significant software and systems industry experience. These senior engineers and management have significant experience in telecommunications, communication and control systems development. Vocalscape will be able to bring to market its products in a timely fashion while retaining the IP, and producing a superior product with high reliability and quality. Our core team is overseeing the development of: 1) a Seamless 911 Dashboard designed to integrate multiple 911 service providers and .2) an IP PBX subscriber system enabling resellers to service business customers online with a self-managed telephone system.

DISTRIBUTION & MARKETING

Vocalscape has a direct sales team and will build an indirect or reseller sales force. Direct resources will target the ISP’s, ITSP’s and Alternative Providers with the residential VoIP solution. Indirect channels will include VARs that supply the growing VoIP provider market with IP PBX solutions.

The direct sales force will also utilize web based leads (generated by search engine, blog, publication and email marketing) and outbound telemarketing to go directly after the solution sales clients. A select number of tradeshows will be attended to build the Vocalscape brand and the awareness of the solutions and product offerings from the company.

GOING CONCERN

Our independent registered public accounting firm have added an explanatory paragraph in connection with the December 31, 2007 consolidated financial statements, which states that our company has nominal revenues and has incurred net losses of $1,993,431 and net cash used in operations of $958,679 in the year ended December 31, 2007. Our current liabilities exceed our current assets by $5,320,350, and we have an accumulated deficit and stockholder’s deficit of $12,101,941 and $5,283,620, respectively, at December 31, 2007. In addition, we were in default on $276,746 debt evidenced by promissory notes at December 31, 2007 and $436,746 debt evidenced by promissory notes at March 31, 2008. These conditions give rise to substantial doubt about Vocalscape’s ability to continue as a going concern. Vocalscape’s ability to fully commence its operation and generate revenues or its ability to obtain additional funding will determine its ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

RESULTS OF OPERATIONS

The Consolidated Statement of Operations for 2007 and 2006 include the accounts for Vocalscape Networks, Inc. (formerly known as “Dtomi, Inc.”) and Vocalscape Networks Operating Subsidiary, Inc.

The company had $70,322 of recorded revenues for the year ending December 31, 2007, compared to $208,617 of revenues for the year ending December 31, 2006. Revenues decreased due to a general decrease in market demand for the company’s products and services.

Compensation expense for the year ending December 31, 2007 decreased to $825,845 compared to $2,727,926 for the year ending December 31, 2006. The compensation expense for 2007 involves stock-based compensation, as discussed below.

Consulting expenses for the year ending December 31, 2007 decreased to $331,729 compared to $2,718,638 for the year ending December 31, 2006. Consulting expenses were primarily comprised of fees paid to software development contractors and stock based fees, as discussed below.

Stock-based fees included in compensation and consulting for the year ending 2007 aggregated $283,342 compared to $4,466,363 in 2006.

Professional fees for the year ending December 31, 2007 decreased to $95,133 compared to $131,992 for the year ending December 31, 2006. Professional fees incurred in 2007 were accounting and audit fees of $105,710 and a credit for legal fees of $(10,677) which consisted of legal fees from one law firm of $32,194 offset by a credit from another related party law firm of $42,871.

General and Administrative expense is primarily comprised of rent, travel, entertainment and selling expenses and for the year ending December 31, 2007 such expenses decreased to $213,362 compared to $343,941 for the year ending December 31, 2006.

The net loss for the year ending December 31, 2007 is $1,993,431 (net loss per share of $0.01) compared to the year ending December 31, 2006, $7,684,413 (net loss per share of $0.35).

LIQUIDITY AND CAPITAL RESOURCES

The company does not currently have an adequate source of reliable, long-term revenue to fund operations. As a result, Vocalscape is reliant on outside sources of capital funding. There can be no assurance that the company will in the future achieve a consistent and reliable revenue stream adequate to support continued operations. In addition, there are no assurance that the company will be able to secure adequate sources of new capital funding, whether it is in the form of share capital, debt, or other financing sources.

Vocalscape has cash and cash equivalents of $236, total current liabilities of $5,320,586 and total assets of $36,966 at December 31, 2007. The Company continues to incur costs, but has not secured adequate new revenue to cover the costs.

TRANSACTIONS WITH RELATED PARTIES

On September 22, 2006 Vocalscape entered into an Employment Agreement (the “Employment Agreement”) with Robert Koch, Vocalscape’s current Chairman of the Board of Directors and former Chief Executive Officer, to be employed as Head of Business Development. The agreement provides for, among other things, a base salary of $360,000 per year, a 5% pay increase per year, a provision which requires that Mr. Koch hold a majority of the voting control of the Company, a stock grant of 15,000 shares of Series A Convertible Preferred Stock (which have been issued to Mr. Koch), discretionary bonuses, the option to convert unpaid salary into shares of common stock of the Company, the ability to participate in the Company’s 2006 Stock Option Plan, an indemnification agreement, and severance benefits. Another 10,000 shares of Series A convertible preferred stock was granted to Mr. Koch as compensation in October 2007.

A director of the Company controls a law firm that provides services to the Company. Vocalscape has an engagement agreement with the law firm, The Otto Law Group, PLLC (“OLG”), David Otto, a director of Vocalscape, holds all equity securities of OLG. Vocalscape believes that arrangement with OLG to be fair. At December 31, 2007 accounts payable to this law firm were $240,779 and presented as accounts payable, related party. In addition a loan payable to the law firm was $59,000 and included in loans and notes payable, related parties. Expenses incurred by the Company during 2007 to this law firm were $76,223, while we had a net expense of $33,352 in 2007 due to expenses of $76,223 offset by the credit of $42,871.

PLAN OF OPERATION FOR THE NEXT 12 MONTHS

Vocalscape currently operates through the willingness of its directors, officers, consultants and professional advisors willingness to continue working on behalf of Vocalscape for no cash compensation, though Vocalscape has an obligation to pay such cash compensation. Vocalscape has no cash and will only be able to satisfy its cash requirements through raising additional funds in the next 12 months.

The company recognizes that, without additional financing, the success of Vocalscape’s VOIP business is highly uncertain and Vocalscape must adapt its business operations to this reality. We are therefore seeking to broaden and transform our business base through the acquisition of innovative, value-differentiated products and services. Our focus is on revenue generating businesses poised for rapid growth that can benefit from being part of a public company but benefit from the sharing of resources and the sharing of costs associated with public filings and compliance.

We have limited funds with which to pursue the acquisition of new business opportunities, as we have generated losses since our inception. In our pursuit of acquiring new business opportunities, we anticipate needing additional funds to cover legal and accounting expenses, due diligence expenses and other costs. Subject to the availability of adequate financing, Vocalscape will continue to focus on providing services to our existing customers, marketing and selling our products to new customers and the continuous development of our products and services.

SUBSEQUENT EVENTS TO THE YEAR ENDING DECEMBER 31, 2007

In January 2008, the Company issued 37,350,000 shares of common stock in exchange for $74,196 net proceeds in reliance on the exclusion from registration afforded by Rule 903(b)(3) of Regulation S, promulgated pursuant to the Securities Act of 1933, as amended. offering. In March 2008 the Company issued 14,898,000 shares of common stock in exchange for $16,800 net proceeds under the Regulation S offering. In March 2008 the Company issued 12,095,000 common shares in exchange for $18,789 net proceeds under the Regulation S offering.

In March 2008, the Company granted 1,500,000 options and 3,500,000 shares of common stock to a consultant for services rendered. The options were valued at $21,002 using a Black-Sholes option pricing model with the following assumptions: stock price of $0.024 and exercise price of $0.01, volatility of 214%, term of 1 day and interest rate of 4.8%. The term of 1 day was used since the recipient exercised their options immediately on the grant date. The shares were valued at the $0.021 quoted trading price or $84,000 and both amounts were expensed as compensation.

In April 2008, the Company issued 7,500,000 and 16,000,000 shares of common stock to two consultants, respectively, pursuant to consulting agreements. The shares were valued at the $0.021 quoted trading price for a total of $493,500 and will be recognized over the service period.

In April 2008 the Company issued 10,000,000 options and 10,000,000 shares of common stock and another 20,000,000 options to purchase common stock to a related party director for services his law firm rendered. The options were valued at $0.021 per option or $470,000. The shares were valued at the $0.021 quoted trading price or $210,000 and both amounts are to be applied to accounts payable to this related party.

In April 2008, the Company granted 10,000 shares of Series A Preferred Stock to Robert Koch, the former CEO and current Chairman for $2,500.

In April 2008 the Company granted 46,500,000 shares of common stock to various employees and lenders. The shares were valued at the $0.013 quoted trading price or $604,000 and expensed.

ITEM 7. FINANCIAL STATEMENTS

Vocalscape Networks, Inc. and Subsidiary

Consolidated Financial Statements

For the Years ended December 31, 2007 and 2006

Vocalscape Networks, Inc. and Subsidiary

Index to Consolidated Financial Statements

		Page(s)
Report of Independent Registered Public Accounting Firm		F-1

Consolidated Balance Sheet		F-2

Consolidated Statements of Operations		F-3

Consolidated Statements of Changes in Stockholders’ Deficit		F-4

Consolidated Statements of Cash Flows		F-5

Notes to Consolidated Financial Statements		F-6

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of:

Vocalscape Networks, Inc.

We have audited the accompanying consolidated balance sheet of Vocalscape Networks, Inc. and subsidiary as of December 31, 2007 and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the years ended December 31, 2007 and 2006. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vocalscape Networks, Inc. and subsidiary as of December 31, 2007 and the consolidated results of its operations and its cash flows for the years ended December 31, 2007 and 2006 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company’s had a net loss in 2007 of $1,993,431, net cash used in operations in 2007 of $958,679, and working capital deficit of $5,320,350, accumulated deficit of $12,101,941 and stockholders’ deficit of $5,283,620 at December 31, 2007. In addition, the Company was in default on $276,746 and $436,746 of promissory notes and loans at December 31, 2007 and March 31, 2008, respectively. These matters raise substantial doubt about its ability to continue as a going concern. Management's plans as to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

SALBERG & COMPANY, P.A.

Boca Raton, Florida

May 14, 2008

F-1

Vocalscape Networks, Inc. and Subsidiary

Consolidated Balance Sheet

December 31, 2007

ASSETS
Current assets:
Cash and cash equivalents	$	236
Total current assets		236
Investment in non-marketable equity securities		18,656
Property and equipment, net		18,074
Development costs, net		-
Total assets	$	36,966

LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Loans and notes payable	$	1,767,000
Loans and notes payable, related parties		160,486
Loan payable due for software purchase, net of discount		131,746
Accounts payable		285,379
Accounts payable, related parties		240,779
Accrued expenses		1,270,289
Accrued expenses, related parties		272,304
Convertible debentures		84,912
Payable to shareholder		900,027
Embedded conversion option liability		193,375
Other liablilities		14,289
Total current liabilities		5,320,586

Commitments and contingencies (Note 11)

STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 25,000,000 authorized
Series A, voting convertible preferred stock, 100,000 shares authorized, 50,000 shares issued and outstanding (liquidation value $0.50 per share)		50
Common stock, $0.001 par value, 400,000,000 authorized, 272,935,968 issued and outstanding		272,937
Common stock issuable, at par value (8,004,969 shares)		8,005
Common stock , Class A non voting, $.001 par value, 100,000,000 shares authorized, 100,000,000 shares issued and outstanding		100,000
Common stock and Common Stock, Class A subscriptions receivable		(1,165,000	)
Additional paid-in capital		7,602,329
Accumulated deficit		(12,101,941	)
Total stockholders' deficit		(5,283,620	)
Total liabilities and stockholders' deficit	$	36,966

See accompanying notes to consolidated financial statements

F-2

Vocalscape Networks, Inc. and Subsidiary

Consolidated Statements of Operations

	2007			2006

Revenue	$	70,322		$	208,617
Cost of revenue		2,957			17,121
Gross profit		67,365			191,496

Costs and expenses:
Compensation		825,845			2,727,926
Consulting		331,729			2,718,638
Professional fees		95,133			131,992
General and administration		213,362			343,941
		1,466,069			5,922,497
Loss from operations		(1,398,704	)		(5,731,001	)

Other income (expense)
Loss on conversion		-			(220,000	)
Interest expense		(526,449	)		(308,327	)
Change in fair value of embedded conversion		-
option liability		(43,375	)		-
Settlement expense		(23,000	)		(1,414,000	)
Bad debt recovery		-			20,873
Writeoff		-			(22,602	)
Foreign currency transaction gain (loss), net		(1,903	)		(9,356	)
Total other income (expense)		(594,727	)		(1,953,412	)

Net loss	$	(1,993,431	)	$	(7,684,413	)

Net loss per share - basic and diluted	$	(0.01	)	$	(0.35	)

Weighted average shares outstanding during the period - basic and diluted		140,437,459			21,865,417

See accompanying notes to consolidated financial statements

F-3

Vocalscape Networks, Inc. and Subsidiary

Consolidated Statement of Changes in Stockholders’ Deficit

For the years ended December 31, 2007 and 2006

	Preferred Stock				Common Stock and Series A Common Stock Issued and Issuable						Additional Paid-in			Deferred			Stock
	Shares		Amount		Shares			Amount			Capital			Costs			Subscription			Deficit			Total
Balance December 31, 2005		-	$	-		1,389,018		$	1,389		$	(1,436,399	)	$	-		$	-		$	(2,424,097	)	$	(3,859,107	)

Debt converted to preferred and common stock		20,000		20		1,856,932			1,857			458,123			-			-			-			460,000
Beneficial conversion value of convertible debt		-		-		-			-			160,000			-			-			-			160,000
Conversion of a accrued license fees to common stock		-		-		5,000,000			5,000			1,495,000			-			-			-			1,500,000
Regulation S common shares sold for cash		-		-		12,699,180			12,699			440,506			-			-			-			453,205
Common stock sold for cash		-		-		2,000,000			2,000			253,000			-			-			-			255,000
Common stock options granted in exchange for services		-		-		-			-			355,500			(80,000	)		-			-			275,500
Exercise of stock options in exchange for services		-		-		1,500,000			1,500			69,000			-			-			-			70,500
Exercise of options for subscription note receivable		-		-		6,000,000			6,000			279,000			-			(285,000	)		-			-
Stock granted for services to legal provider		-		-		1,322,600			1,323			395,457			(180,000	)		-			-			216,780
Stock granted for services to employees and consultants		-		-		35,350,000			35,350			3,911,150			(46,667	)		-			-			3,899,833
Amortization of deferred costs		-		-		-			-			-			220,000			-			-			220,000
Preferred stock, Series A granted as compensation		15,000		15		-			-			3,735			-			-			-			3,750
Net loss		-		-		-			-			-			-			-			(7,684,413	)		(7,684,413	)

Balance December 31, 2006		35,000	$	35		67,117,730		$	67,118		$	6,384,072		$	(86,667	)	$	(285,000	)	$	(10,108,510	)	$	(4,028,952	)

Preferred stock issued for services		15,000		15		-			-			7,486			-			-			-			7,501
Common stock issued for cash		-		-		206,680,139			206,681			252,789			-			-			-			459,470
Common stock issued for services		-		-		5,000,000			5,000			110,000			-			-			-			115,000
Common stock Class A issued for subscription receivable		-		-		100,000,000			100,000			900,000			-			(1,000,000	)		-			-
Common stock issued upon exercise of options for cash		-		-		3,000,000			3,000			27,000			-			-			-			30,000
Common stock issued upon exercise of options for accounts payable		-		-		2,500,000			2,500			40,450			-			-			-			42,950
Common stock issued as settlement to investor		-		-		1,000,000			1,000			22,000			-			-			-			23,000
Reclassification pursuant to disputed conversion		-		-		(1,356,932	)		(1,357	)		(158,643	)		-			-			-			(160,000	)
Cancellation of stock subscription pursuant to settlement		-		-		(3,000,000	)		(3,000	)		(117,000	)		-			120,000			-			-
Stock options granted for services		-		-		-			-			74,175			(60,000	)		-			-			14,175
Amortization of deferred consulting fees		-		-		-			-			-			146,667			-			-			146,667
Value of beneficial conversion on convertible promissory note		-		-		-			-			60,000			-			-			-			60,000

Net loss		-		-		-			-			-			-			-			(1,993,431	)		(1,993,431	)

Balance at 12/31/07		50,000	$	50		380,940,937		$	380,942		$	7,602,329		$	-		$	(1,165,000	)	$	(12,101,941	)	$	(5,283,620	)

See accompanying notes to consolidated financial statements

F-4

Vocalscape Networks, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the years ended December 31, 2007 and 2006

	2007			2006
Cash flows from operating activities:
Net loss	$	(1,993,431	)	$	(7,684,413	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		9,703			9,703
Amortization of debt discount		210,000			160,000
Deferred consulting amortization		146,667			220,000
Stock issued in settlement to investor		23,000			-
Common stock granted for services		115,000			4,120,363
Preferred stock granted for services		7,500			275,500
Stock options exercises paid for with services		1,850			70,500
Stock options granted for services		14,175
Non cash loan fee		45,000			-
Non cash revenues		(18,656	)		-
Change in fair value of embedded conversion option liability		43,375			-
Loss on debt conversion		-			220,000
Loss on debt settlement		-			1,414,000
Changes in other assets and liabilities:
Deposits					2,500
Other assets		-			854
Deferred revenue		-			(45,000	)
Accounts payable		61,921			(99,644	)
Accounts payable, related party		33,352			(6,116	)
Other accrued liabilities		(88,845	)		89,663
Accrued interest - related party		9,893			14,318
Accrued expenses		172,724			124,762
Accrued expenses, related aprties		248,093			-
Net cash used in operations		(958,679	)		(1,113,010	)

Cash flows from financing activities:
Bank overdraft		(4,323	)		(9,086	)
Repayment of related party loans		(44,381	)		(59,412	)
Loan proceeds from related party		53,452			-
Proceeds from common stock sales		459,470			708,205
Proceeds from stock option exercise		30,000			-
Repayment of notes payable		-			(27,500	)
Loan proceeds		450,000			515,500
Net cash provided by financing activities		944,218			1,127,707
Net increase (decrease) in cash and cash equivalents		(14,461	)		14,697
Cash and cash equivalents, beginning of period		14,697			-
Cash and cash equivalents, end of period	$	236		$	14,697

Supplemental disclosure of cash flow information:

Cash paid during the period for:
Interest	$	-		$	-
Income taxes	$	-		$	-

Supplemental disclosure of non-cash investing and financing activities:
Conversion of debt to common stock	$	-		$	235,000
Conversion of debt to preferred stock	$	-		$	5,000
Assignment of debt from creditors to related party shareholder	$	-		$	900,027
Settlement of accrued liabilites with common stock	$	-		$	86,000
Recording of beneficial conversion value to debt discount and APIC	$	60,000		$	160,000
Record initial fair value of embedded conversion option as debt discount	$	150,000		$	-
Exchange of accounts payable for common stock on exercise of options	$	41,100		$	-
Recording of deferred consulting	$	60,000		$	306,667
Sale of common stock Class A for subscription receivable	$	1,000,000		$	-
Receipt of promissory notes for exercise of common options	$	-		$	285,000
Reclassification of common stock to loans payable	$	160,000		$	-
Cancellation of subscription receivable pursuant to settlement	$	120,000		$	-

See accompanying notes to consolidated financial statements

F-5

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

1.	NATURE OF BUSINESS AND GOING CONCERN

Nature of Business and Current Operations – VNOS is a developer of Voice over Internet Protocol (VoIP) telephony solutions. VNOS provides VoIP telephony solutions and communications software for Internet Service Providers (ISPs), Internet Telephony Service Providers (ITSPs) and Telecommunications companies worldwide. VNOS develops VoIP and interactive communications software, including Soft phone applications, Customer Acquisition and Billing Systems, SIP Servers, Gatekeepers and Virtual Calling Cards. VNOS’s strategy is to focus on VoIP software and Long Distance termination solutions that bring together a full range of communications solutions and services thereby providing a turn-key VoIP infrastructure for ISP’s, ITSP’s and Telecommunications companies.

Organization – VNI is a Nevada corporation, which was incorporated on June 12, 1998.

VNOS is a Nevada corporation, which was incorporated on February 5, 2003.

Recapitalization - On October 28, 2005, Vocalscape, Inc. (“VSI”) and Dtomi, Inc. (“Dtomi”) announced that on October 4, 2005, Dtomi and its wholly owned subsidiary Vocalscape Networks, Inc. (Subsidiary) (“VNI OLD”) effected a merger pursuant to that certain Agreement and Plan of Reorganization (the “Agreement”) by and between Dtomi and VSI dated August 25, 2005. Effective October 4, 2005, the date that Articles of Merger effecting the merger were filed with the Nevada Secretary of State, VNI OLD became a wholly owned subsidiary of Dtomi. Pursuant to the amended Agreement, Dtomi issued shares of its common stock with voting rights equal to 82% (1,138,889 common shares) of the voting power of the stockholders of Dtomi, to VSI in exchange for VNI OLD merging into a wholly owned subsidiary of Dtomi. The business of VNI OLD became the primary business of Dtomi. Subsequent to the recapitalization, Dtomi changed its name to Vocalscape Networks, Inc. and the subsidiary changed its name to Vocalscape Networks Operating Subsidiary, Inc.

Due to the change in control of Dtomi, the transaction was accounted for as a recapitalization of VNI OLD.

Accordingly, the financial statements of the Company consists of the historical operations of VNI OLD from its inception, and the operations of Dtomi from the recapitalization date. The Company assumed approximately $2.3 million of liabilities and deferred stock based costs of approximately $842,000 and is deemed to have issued 250,129 common shares to the existing pre-recapitalization shareholders of Dtomi. All share and per share data in the accompanying financial statements has been retroactively adjusted for the effect of the recapitalization.

F-6

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Going Concern – The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company had a net loss for the year 2007 of $1,993,431, net cash used in operations for the year 2007 of $958,679, and working capital deficit of $5,320,350, accumulated deficit of $12,101,941 and stockholders’ deficit of $5,283,620 at December 31, 2007. In addition, the Company was in default on $276,746 and $436,746 of promissory notes and loans at December 31, 2007 and March 31, 2008, respectively.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties.

In order to execute its business plan, the Company will need to raise additional working capital and generate additional revenues. There can be no assurance that the Company will be able to obtain the necessary working capital or generate additional revenues to execute its business plan. During 2007, the Company generated revenues from customer consulting agreements and raised capital through initiating a Regulation S offering by VSI and entering into additional Promissory Notes. Management believes the continuation of revenues combined with additional capital raises and additional promissory notes will provide the Company the ability to continue as a going concern.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Principles of Consolidation – The consolidated financial statements include the accounts of Vocalscape Networks, Inc. (the “Company” or “VNI” or “Vocalscape”) and it’s wholly owned subsidiary Vocalscape Networks Operating Subsidiary, Inc. (“VNOS”). All material intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents - The Company classifies as cash equivalents any investments which can be readily converted to cash and have an original maturity of less than three months. At times cash and cash equivalent balances at a limited number of banks and financial institutions may exceed insurable amounts. The Company believes it mitigates its risks by depositing cash or investing in cash equivalents in major financial institutions.

Investments - Certain securities that the Company may invest in may be determined to be non-marketable. Non-marketable securities where the Company owns less than 20% of the investee are accounted for at cost pursuant to APB No. 18, "The Equity Method of Accounting for Investments in Common Stock" ("APB 18").

F-7

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Management determines the appropriate classification of its investments at the time of acquisition and reevaluates such determination at each balance sheet date. The cost of investments sold is based on the specific identification method.

The Company periodically reviews its investments in non-marketable securities and impairs any securities whose value is considered non-recoverable. The Company's determination of whether a security is other than temporarily impaired incorporates both quantitative and qualitative information. GAAP requires the exercise of judgment in making this assessment for qualitative information, rather than the application of fixed mathematical criteria. The Company considers a number of factors including, but not limited to, the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, the reason for the decline in fair value, changes in fair value subsequent to the balance sheet date, and other factors specific to the individual investment. The Company's assessment involves a high degree of judgment and accordingly, actual results may differ materially from the Company's estimates and judgments.

Fair Value of Financial Instruments - The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amount reported in the balance sheet for cash approximates its fair value.

Accounts payable: Due to their short-term nature, the carrying amounts reported in the balance sheet for accounts payable approximate their fair value.

Notes payable: The carrying amount of the Company’s notes payable approximate their fair value.

Property and Equipment - Property and equipment are recorded at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is five to seven years for all categories except for internal use computer software, which is depreciated over three years. Leasehold improvements are amortized over the life of the lease if it is shorter than the estimated useful life. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of property and equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded in operations.

Impairment of Long-Lived Assets - The Company evaluates its long-lived assets and intangible assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the asset.

F-8

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Software Development Costs - Costs incurred in connection with the development of software products are accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins upon initial product shipment. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months), using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.

No software development costs were amortized during the years ended December 31, 2004 and 2003 as the product was not considered to be generally released until 2005. The sales recorded during 2004 occurred prior to the general release. Amortization was recorded in 2006 and 2007 and is included in cost of revenues.

Intangible Assets – The Company records goodwill and intangible assets arising from business combinations in accordance with SFAS No. 141 “Business Combinations” (“SFAS 141”) which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also specifies the criteria applicable to intangible assets acquired in a purchase method business combination to be recognized and reported apart from goodwill.

The Company accounts for goodwill and intangible assets in accordance with SFAS 142. In accordance with SFAS 142, the Company does not amortize goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested at least annually for impairment. SFAS 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and be reviewed for impairment.

Accounting for Derivatives – The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under Statement of Financial Accounting Standards 133 “Accounting for Derivative Instruments and Hedging Activities” and related interpretations including EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under SFAS 133 are reclassified to liability at the fair value of the instrument on the reclassification date.

F-9

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Contingencies - Certain conditions may exist as of the date financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Company management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable would be disclosed.

Revenue Recognition – The Company is engaged as a seller of VoIP telephony solutions. The Company generally recognizes revenue in accordance Securities and Exchange Commission Staff Accounting Bulletin 104, “Revenue Recognition” when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is probable. Specifically, the Company recognizes software revenue in accordance with Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-4, “Deferral of the Effective Date of a Provision of SOP 97-2,” and SOP 98-9, “Modification of SOP 97-2 With Respect to Certain Transactions” and EITF 00-21 “Revenue Arrangements with Multiple Deliverables”.

The Company sells bundled solutions which may consist of the software, configuration services, support services, customization and future upgrades. The Company defers recognition of the software sales until configuration is completed as they are considered one unit of accounting. Support services are considered a separate unit of accounting and such fees are recognized as services are provided. Future upgrades or enhancements and customizations are considered separate units of accounting and related fees are recognized as those upgrades or enhancements are provided.

F-10

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Stock Based Compensation – On January 1, 2006, the Company implemented Statement of Financial Accounting Standard 123 (revised 2004) (“SFAS 123(R)”), “Share-Based Payment” which replaced SFAS 123 “Accounting for Stock-Based Compensation” and superseded APB Opinion No. 25, “Accounting for Stock Issued to Employees.” In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) regarding its interpretation of SFAS 123R. SFAS 123(R) and related interpretations requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The statement also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at the date of adoption. The Company values any employee or non-employee stock based compensation at fair value using the Black Scholes Pricing Model. In adopting SFAS 123(R), the Company used the modified prospective application (“MPA”). MPA requires the Company to account for all new stock based compensation to employees using fair value, and for any portion of awards prior to January 1, 2006 for which the requisite service has not been rendered and the options remain outstanding as of January 1, 2006, the Company should recognize the compensation cost for that portion of the award that the requisite service was rendered on or after January 1, 2006. The fair value for these awards is determined based on the grant-date. There was no accounting effect of applying the MPA method.

Foreign Currency Transactions - The Company’s corporate offices are located in New York in the United States and its operating offices are located in Canada. Although the Company’s accounts are maintained in U.S. dollars, the Company does maintain one Canadian dollar bank account and engages in various transactions resulting in deposits and disbursements to and from that bank account. The Canadian dollar bank account was closed in the second quarter of 2007. The Company also holds one investment in non-marketable equity securities which is denominated in a foreign currency and translated to U.S dollars at each reporting date with any gain or loss recorded in operations.

Revenue and expense items transacted in Canadian dollars are translated using the average rate of exchange prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized in operations of the period incurred.

Income Taxes – The Company accounts for income taxes using the liability method, which requires the determination of deferred tax assets and liabilities based on the differences between the financial and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which differences are expected to reverse. Deferred tax assets are adjusted by a valuation allowance, if based on the weight of available evidence it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Use of Estimates in Financial Statements – The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates in 2007 and 2006 include the valuation of the investment in non-marketable equity securities, valuation of stock-based payments, valuation of beneficial conversion feature on convertible debt, fair value of the embedded conversion option liability, and valuation allowance on deferred tax assets.

F-11

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Net Earnings (Loss) Per Share - Basic earnings (loss) per common share is based on the weighted-average number of all common shares and Class A Common Shares outstanding. The computation of diluted earnings (loss) per share does not assume the conversion, exercise or contingent issuance of securities that would have an anti-dilutive effect on earnings (loss) per share.

The Class A common stock was issued in May and October 2007 with a majority of it issued into escrow. The subscription receivable has not been received as of December 31, 2007 nor as of May 14, 2008. Accordingly, for purposes of the computation of net loss per share, Class A common shares are not considered issued and outstanding and not included in the computation of weighted average shares outstanding for the year ended December 31, 2007.

As of December 31, 2007, there were warrants and options convertible to 1,250 and 2,276 common shares and there were promissory notes convertible into 39,189,266 common shares that may dilute future earnings per share.

Recently Issued Accounting Standards –

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109, Accounting for Income Taxes” (FIN 48) to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized. FIN 48 also provides guidance on derecognizing, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of adopting FIN 48 and do not expect the adoption of FIN 48 will have a material impact on our Consolidated Financial Statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value and applies to other accounting pronouncements that require or permit fair value measurements and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are currently evaluating the impact of adopting SFAS No. 157 on our Consolidated Financial Statements.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, to address diversity in practice in quantifying financial statement misstatements and the potential for the build up of improper amounts on the balance sheet. SAB No. 108 identifies the approach that registrants should take when evaluating the effects of unadjusted misstatements on each financial statement, the circumstances under which corrections of misstatements should result in a revision to financial statements, and disclosures related to the correction of misstatements. SAB No. 108 is effective for the fiscal year ending December 31, 2006. The adoption of SAB No. 108 did not have a material impact on our Consolidated Financial Statements.

F-12

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for us beginning January 1, 2009. We do not expect it to have a material effect on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as non-controlling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for us beginning January 1, 2009 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. We do not expect it to have a material effect on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.

Reclassifications

Certain amounts in the 2006 consolidated financial statements have been reclassified to conform with the 2007 presentation.

F-13

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

3.	INVESTMENT IN NON-MARKETABLE EQUITY SECURITIES

The composition of non-marketable securities at December 31, 2007 is as follows:

	Cost		Fair Value

Equity securities	$	18,656	$	18,656

During April 2007 the Company received 2.1 million equity securities of a customer based in Europe. These securities were received from this private company as payment for services rendered. The value of the securities could not be determined and the value of the services was also not determinable, therefore the Company valued the securities at a nominal value equal to the par value of the securities or $17,290 which the Company believes is below the value of services provided. This amount was recorded as revenues. At December 31, 2007 the cost and fair value were increased by $1,366 to reflect the increase due to changes in the exchange rates.

4.	PROPERTY AND EQUIPMENT

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

Office equipment	$	35,854
Accumulated depreciation		(17,780	)
Property and equipment, net	$	18,074

Depreciation during 2007 and 2006 was $6,745 and $6,745, respectively.

5.	DEVELOPMENT COSTS

Capitalized software development cost consists of the following at December 31, 2007:

Cost	$	8,869
Accumulated amortization		(8,869	)
Software, net	$	0

During January 2004 the Company capitalized $136,538 relating to a suite of software products purchased by a related party and assigned to the Company with the related liabilities (see Notes 7 and 10). The related liabilities due to the seller are collateralized by the purchased software. These products had already reached the point of technological feasibility prior to the Company’s purchase and needed some modifications by the Company to bring the product to market. Accordingly, no amortization had been charged to operations as of December 31, 2004. Due to the lack of available resources during 2004 and subsequent, the Company did not allocate the resources to this project and instead allocated resources to other software projects being developed internally. Accordingly, since the Company could not reliably project any positive cash flows from this asset, the Company had recorded an impairment loss of $136,538 at December 31, 2004. During December 2004, the Company recorded $8,869 of software costs for certain VoIP products, which it had been developing internally and had reached technological feasibility. During the year ended December 31, 2004, the Company had no amortization expense. During 2005 the Company recognized $ 2,956 of amortization expense, upon general release of the software product. During 2006 the Company recognized $2,956 of amortization expense. During 2007 the Company recognized $2,956 of amortization expense.

F-14

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

6.	NOTES PAYABLE, NOTES PAYABLE RELATED PARTIES AND CONVERTIBLE DEBENTURES

Notes payable to related and unrelated parties consists of the following at December 31, 2007:

Note payable to the related party principal shareholder and officer of the Parent and to companies owned or controlled by him; due on demand; unsecured; with interest at prime plus 2% to 3% (9.25% to 10.25% at December 31, 2007)	$	101,486
Note payable to law firm, due on demand, non-interest bearing		59,000
Subtotal – Notes payable related parties		160,486

Notes payable to two individuals – non interest bearing-in default		145,000
Notes payable to two individuals with interest at 10.50%-Due March 2008		160,000

Notes payable to two individuals with interest accruing at 10%		159,000
Notes payable to six individuals; due on demand; unsecured; with interest at prime plus 3% (10.25% at December 31, 2007)		1,303,000

Subtotal – Notes payable unrelated parties		1,767,000

Total Notes Payable	$	1,927,486

The weighted average interest rate on short term outstanding as of December 31, 2007 was 9.14 %.

At December 31, 2007, $145,000 of the above promissory notes were in default. At March 31, 2008, $305,000 of the above promissory notes were in default.

Convertible Debentures - In October 2005, upon recapitalization, the Company assumed four 10% one-year convertible debentures to four individuals for $11,698, $60,705, $6,121 and $6,388 cash. These debentures had been issued in October and November 2004. The debentures are convertible into 2,123 common shares based on a conversion rate of $40 per share. The embedded conversion options were determined not to be derivatives at the issuance date or as of December 31, 2007 since the debt qualifies as conventional convertible debt. Based upon the conversion rate at the issuance date, there was no beneficial conversion feature recorded.

F-15

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Convertible Promissory Notes and Conversions

In March 2006, the Company issued a convertible promissory note for $150,000 with interest payable at maturity at 10.5% per annum. The note matures and is due March 3, 2008. The note principal is convertible to common stock at a fixed price of $.118 per share which equates to 1,271,186 common shares. Management has determined that this note qualifies as conventional convertible debt pursuant to SFAS 133 and EITF 00-19 and accordingly the embedded conversion option is not a derivative. The convertible promissory note was converted into common stock in March 2006. The Company computed a beneficial conversion value of $150,000 based on the quoted stock price on the grant date of $.60 per share. The $150,000 was recorded as a debt discount and credited to additional paid-in capital. The debt discount was amortized to interest expense in March 2006 when the note was converted. The note is guaranteed by, Azatel Communications Inc. (the “Acquiree”) with the note holder holding a first security interest in substantially all assets of the Acquiree and the Company has guaranteed the conversion.

In March 2006, the Company issued a convertible promissory note for $10,000 with interest payable at maturity at 10.5% per annum. The note matures and is due March 15, 2008. The note principal is convertible to common stock at a fixed price of $.118 per share which equates to 85,746 common shares. Management has determined that this note qualifies as conventional convertible debt pursuant to SFAS 133 and EITF 00-19 and accordingly the embedded conversion option is not a derivative. The convertible promissory note was converted into common stock in March 2006. The Company computed a beneficial conversion value of $10,000 based on the quoted stock price on the grant date of $.60 per share. The $10,000 was recorded as a debt discount and credited to additional paid-in capital. The debt discount was amortized to interest expense in March 2006 when the note was converted.

In late 2007, the Company was notified by the above lenders that the lenders had not converted and the shares issued to them were pursuant to a collateral arrangement. Although management believes the conversion occurred, they have reclassified the $160,000 into loans payable and removed them from the issued and outstanding shares as of December 31, 2007

On January 9, 2007, the Company received cash and issued a promissory note for $30,000 which bears interest at prime plus three percent and is due within 90 day of written demand.

On January 10, 2007, the Company received cash and issued a promissory note for $30,000 which bears interest at prime plus three percent and due within 90 day of written demand.

F-16

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

In February 2007, the Company issued a convertible promissory note for $120,000 with no specified term or interest rate and thus it is considered due on demand. The note principal is convertible into 3,000,000 shares of common stock and collateralized by such shares which were to be issued as security. Management has determined that this note qualifies as conventional convertible debt pursuant to SFAS 133 and EITF 00-19 and accordingly the embedded conversion option is not a derivative. The Company computed a beneficial conversion value of $60,000 based on the quoted stock price on the grant date of $.06 per share. The $60,000 was recorded as a debt discount and credited to additional paid-in capital and then charged to interest expensed immediately since the note is due on demand. The Company received proceeds on the note of $100,000 and they were charged $20,000 as a loan fee. The loan fee was charged to interest expense in March 2007 since the note is due on demand.

On April 30, 2007 the Company issued a convertible promissory note for $150,000. The Company received $100,000 of the proceeds from this note during the second quarter and $50,000 in July 2007 (see below). The note bears interest at prime plus three percent, is due on demand and is collateralized by non-marketable equity securities owned by the Company (see Note 3). The note holder has the option to convert the note into Common Stock of the Company within 365 days of the note date at the lessor of 50% of the closing market price of the Common Stock on the date the written notice is provided by the holder of the note or $0.10 per share. Management of the Company has determined that the note is a derivative and contains an embedded conversion option since the variable conversion rate causes an inability to guarantee that there will be enough authorized shares available if the holder elects to convert. The Company recorded an embedded conversion option liability on this note of $169,596. This created a change in fair value of the embedded conversion options of $69,596 that was recorded as an other expense. Since the note is due on demand, the Company recognized $100,000 of interest expense on the debt discount. At June 30, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $5,816 due to changes in market value. The $5,816 was credited to expense in June 2007. The embedded conversion option was valued using the Black-Scholes model with the following assumptions in May 2007 and June 30, 2007: stock price $0.02 and $.015, exercise price of $.01 and $.0075, volatility of 242%, term of 1 year and .83 years, and interest rate of 4.8%. At September 30, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $21,945 due to changes in market value. The $21,945 was credited to expense in September 2007. At December 31, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $12,918 due to changes in market value. The $12,918 was credited to expense in December 2007.

F-17

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

On July 2, 2007 the Company received the $50,000 balance of the above note payable. Management of the Company has determined that the note is a derivative and contains an embedded conversion option since the variable conversion rate causes an inability to guarantee that there will be enough authorized shares available if the holder elects to convert. The Company recorded an embedded conversion option liability on this note of $81,825. This created a change in fair value of the embedded conversion option of $31,825 that was recorded as an other expense. Since the note is due on demand, the Company recognized $50,000 of interest expense on the debt discount. At September 30, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $10,908 due to changes in market value. The $10,908 was credited to expense in September 2007. The embedded conversion option was valued using the Black-Sholes model with the following assumptions in July 2007 and September 2007: stock price of $0.014 and $0.026, exercise price of $0.007 and $0.013, volatility of 204%, term of .83 and.58 years, and interest rate of 4.80%. At December 31, 2007 the Company adjusted the embedded conversion option liability to fair value and decreased it by $6,459 due to changes in market value. The $6,459 was credited to expense in December 2007.

The Company also determined that all other common stock equivalent securities including the convertible debentures, warrants and options, but excluding conventional convertible debt, may require classification as liabilities due to the authorized shares problem. However, due to the relatively large conversion and exercise prices of these other instruments, the fair value of the liabilities at all dates from April 2007 through December 31, 2007 was zero.

On October 11, 2007, the Company received $20,000 on a note payable. The Company was charged a $5,000 loan fee for the note. The note was due on November 11, 2007 and is in default at December 31, 2007. The note does not bear interest but is secured by a Pledge and Security agreement covering 1,500,000 shares of the capital stock of Vocalscape Networks, Inc.

On November 2, 2007, the Company received $100,000 and issued a promissory note for $120,000 which includes a $20,000 loan fee. The loan is non-interest bearing and due in 30-days or on December 2, 2007. At December 31, 2007 the loan was in default.

7.	LOAN PAYABLE FOR SOFTWARE PURCHASE

In 2004 a liability was recorded relating to a software purchase. The software purchase price was $200,000 Canadian dollars (“CA$”) payable with CA$26,096 down payment and CA$10,842 payable per quarter commencing May 1, 2004 and on August 1, November 1, February 1 and May 1 in each year thereafter until the purchase price is paid in full. In accordance with APB 21, “Interest on Receivables and Payables,” the Company imputed interest at 6% or CA$21,845 on this loan payable. This resulted in an initial loan payable balance translated to US dollars of $136,538, net of discount of $16,742, an initial payment made of $20,000 (recorded as a note payable to the related party assignor of the purchase agreement) and quarterly payments of approximately $8,309 as adjusted for foreign currency transaction gains or losses.

F-18

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

The loan payable balance at December 31, 2007 was as follows:

Loan payable	$	131,746
Debt discount		(0	)
Loan payable, net of discount	$	131,746

This loan payable is collateralized by the software asset. Additional interest in the amount of $7,698 was accrued in 2007. The loan is currently in default.

8.	STOCKHOLDERS’ DEFICIT

Recapitalization - In October 2005, VNI OLD was acquired by Dtomi, Inc., a public shell, in a transaction accounted for as a recapitalization of the Company. All authorized, issued and outstanding share and per share data in the accompanying consolidated financial statements has been retroactively adjusted to reflect the recapitalization. (See Note 1)

Authorized Shares – In January 2007, the Company amended its Articles of Incorporation to increase the number of authorized common shares to 400,000,000. The Company also authorized 100,000,000 new Class A common shares at a par value of $0.001 per share. The Class A has the same rights, terms, and preferences, as common stock except it is non-voting. The changes in capitalization are reflected retroactively in the accompanying consolidated Balance Sheet.

Preferred Stock - The Company has authorized 25,000,000 shares of preferred stock. The Board of Directors at its discretion may determine the rights and preferences of the preferred stock. In December 2005 the Company designated 100,000 shares as Series A Convertible Preferred Stock (“Series A shares”). The Series A shares upon issuance and consideration received by the Company is convertible to common stock on a one-for-one basis at a minimum of 50 shares per conversion. The conversion rate is not adjustable except for standard anti-dilution provisions, such as stock splits, reorganization or recapitalizations. Upon liquidation the Series A stockholders would receive $0.50 per share plus any unpaid dividends. Each Series A share has voting rights equal to 5,000 common shares. On January 20, 2006 the Company accepted a subscription from its CEO to purchase 20,000 Series A shares in exchange for a $5,000 portion of a promissory note due to the CEO. Such note was previously due to a controlled affiliate of the CEO and assigned to the CEO by that affiliate. In October 2006, the CEO resigned and executed an employment agreement as Head of Business Development. Among other compensation the employment agreement grants 15,000 Series A preferred shares as compensation. The shares were valued at $0.25, the same amount he previously paid and expensed immediately in 2006 since it was not material. In November 2007 another 10,000 Series A Preferred Shares were granted to this former CEO and 5,000 shares to another director for services rendered. The shares were valued at an estimated $.50 per share based on their liquidation value and expensed immediately.

F-19

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Common Stock and Class A Common Stock Issued for Cash and Subscriptions Receivable

During the third quarter of 2006, the Company received $210,000, which represented the balance due on a subscription agreement for 2,000,000 shares at $0.15 per share. The amount received was net of $45,000 in offering fees. A $45,000 down payment in May 2006 was paid directly to a service provider of the Company and had been recorded as other liabilities due to the investor as of June 30, 2006. As of September 30, 2006 this $45,000 other liabilities was reclassified to equity resulting in an equity amount of $255,000, net of the other $45,000 in offering fees.

During 2006, the Company sold 12,699,180 common shares for net proceeds of $453,205 pursuant to a Regulation S Stock Purchase Agreement.

During 2007, the Company sold 206,680,139 common shares for net proceeds of $459,470 pursuant to a Regulation S Stock Purchase Agreement.

In May 2007, the Company entered into a subscription agreement with an individual to purchase 100,000,000 shares of the Class A non voting common stock of the Company. The total sales price is $1,000,000. It is to be paid in four blocks. The Company issued the first block of 25,000,000 shares on July 11, 2007. The remaining 75,000,000 shares were issued on October 1, 2007. All 100,000,000 shares are reflected in the accompanying balance sheet as common stock Class A non-voting and a subscription receivable at December 31, 2007.

In September 2007, the Company executed a settlement agreement with an individual who had subscribed to 3,000,000 common shares for a $120,000 promissory note in 2006, which shares were issued to him, and never paid the subscription price. The settlement resulted in the return of the shares to the Company and cancellation of the subscription promissory note.

Common Stock Issued as Settlement

During the second quarter of 2006, 5,000,000 shares were issued to settle $86,000 of recorded and $300,000 of disputed liabilities. The settlement was valued at $1,500,000 based on the quoted trade price of $0.30 per share on the settlement date resulting in a loss of $1,414,000.

In late 2007, the Company agreed to issue an investor 2,000,000 shares that had been paid for in 2006 but never issued and are reflected as issuable in the accompanying statement of financial statements. As settlement compensation, the Company also issued the investor another 1,000,000. These were valued at the quoted trading price of $0.023 on the settlement date resulting in an expense of $23,000. The total 3,000,000 were issued by the transfer agent in 2008.

F-20

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Common Stock Issued for Services

During 2006, 1,322,600 shares were issued to a principal of a law firm for legal or consulting services pursuant to a legal services agreement and consulting agreement. The principal is also a director of the Company. The shares were valued at $396,780 based on the quoted trading prices on the various grant dates. The shares related to the consulting agreement were issued in the second quarter of 2006 and were deferred and amortized over a six month term with the related $240,000 value (based on quoted trading price of $.30 per share) fully amortized as of December 31, 2006. The remaining 522,600 shares valued at $156,780 (based on a quoted trading price of $0.30 per share) were expensed immediately as there is no term to the legal services agreement.

During the third quarter, 200,000 shares were issued pursuant to a consulting agreement that runs from July 15, 2006 through January 15, 2007. These shares were valued at $0.40 per share based on the quoted trading price on the agreement date and $33,333 was recorded as expense in the quarter and $46,667 was recorded as Deferred Consulting Fees. The Deferred Consulting was fully amortized during 2007.

In October 2006, the Company granted 35,150,000 common shares to employees and non-employees for services rendered. The shares were valued at $3,866,500 based on a quoted trading price on the grant date of $0.11 per share and expensed immediately since the shares were for past services.

Common Stock Issued for Exercise of Stock Options

In January 2007, the Company issued 225,000 common shares upon exercise of a stock option at $.04 per share. The exercise price of $9,000 was paid for with a payable that was due to the option holder. In May 2007, the company issued 575,000 common shares to the same option holder upon exercise of a stock option at $.01 per share in exchange for a payable of $5,750.

In March 2007, the Company issued 3,000,000 common shares upon exercise of stock options at $.01 per share and received the $30,000 exercise price in cash.

In March 2007, the Company issued 1,000,000 common shares upon exercise of stock options at $.02 per share which was paid for $18,150 with a payable due to the option holder and the remaining $1,850 was expensed as a professional fee.

In June 2007, the Company issued 500,000 common shares upon exercise of stock options at $.01 per share in exchange for a payable of $5,000.

In August 2007, the Company issued 200,000 common shares upon exercise of stock options at $0.016 per share in exchange for a payable of $3,200.

F-21

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Common Stock Issued Upon Conversion of Debt

During 2006 the Company note holders converted $235,000 of notes into 1,856,932 common shares. The shares were valued at the quoted trading prices on the conversion dates resulting in a loss on conversion of $220,000 relating to only one of the notes for $75,000 which shares of 500,000 were valued at $.59 per share.

Grants of Options to Purchase Common Stock

In October and December 2006, the Company granted 3,700,000 and 3,800,000 options, respectively, for services. The options were valued at $203,500 and $152,000 ($.055 and $.04 per option), respectively, using a Black-Scholes option pricing model with the following assumptions: stock price $0.11 and $0.04, exercise price of $.055 and $.04, volatility of 221%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended all recipients exercised their options immediately on the grant date. The value is to be recognized over the requisite service period and accordingly, $80,000 was deferred as of December 31, 2006. The exercise price was paid as follows: 700,000 and 800,000 was paid for with services resulting in an expense of $38,500 and $32,000, respectively and 3,000,000 and 3,000,000 were paid for with promissory notes of $165,000 and $120,000, respectively, which are reflected as an aggregate $285,000 in subscriptions receivable at December 31, 2006.

In January 2007, the Company granted 225,000 common stock options to a law firm for services provided. The options were valued at $7,876 ($.035 per option) using a Black-Scholes option pricing model with the following assumptions: stock price $0.075, exercise price of $.04, volatility of 282%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. (See above) The Company recognized $7,876 in expense.

In March 2007, the Company granted options for 3,000,000 common shares at an exercise price of $.01 per share pursuant to a consulting agreement. The options were valued at $60,000 ($.02 per option), using a Black-Scholes option pricing model with the following assumptions: stock price $0.03, exercise price of $.01, volatility of 282%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date (see above). The value is to be recognized over the requisite service period and accordingly, $50,000 was deferred as of March 31, 2007. During the second quarter of 2007 $50,000 of the deferred consulting was expensed.

In March 2007, the Company granted 1,000,000 common stock options to a consultant for services. The options were valued at $0.0018 per option or $1,763 using a Black-Scholes option pricing model with the following assumptions: stock price $0.021, exercise price of $.02, volatility of 282%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. (See above) The Company recognized $1,763 in expense.

F-22

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

In May 2007, the Company granted 575,000 options to a law firm for services provided. The options were valued at $2,877 ($.005 per option) using a Black-Scholes option pricing model with the following assumptions: stock price $0.015, exercise price of $.01, volatility of 242%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. The Company recognized $2,877 in expense

In June 2007, the Company granted 500,000 options to a consultant for services provided. The options were valued at $0.003 per option or $1,513 using a Black-Sholes Option Pricing Model with the following assumptions: stock price $0.013, exercise price of $.01, volatility of 242%, term of 1 day, and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. The Company recognized $1,513 in expense.

In August 2007, the Company granted 200,000 options to a consultant for services provided. The options were valued at $0.007 per option or $146 using a Black-Sholes Option Pricing Model with the following assumptions: stock price of $0.016, exercise price of $0.016, volatility of 220%, term of 1 day and interest rate of 4.8%. The term of 1 day was used since as intended the recipient exercised their options immediately on the grant date. The Company recognized $146 in expense.

Warrants - Upon the recapitalization in October 2005, the Company assumed outstanding warrants as follows: At December 31, 2005 there were warrants to purchase 41,347 shares at an exercise price of $72.00 expiring December 31, 2006; 214 shares at an exercise price of $.40 expiring December 31, 2006 and 1,250 shares at an exercise price of $100.00 expiring December 31, 2009. Total warrants outstanding at December 31, 2005 were 42,811. At December 31, 2005, 2,632 options exercisable at $72.00 had expired and are excluded from the above balance. As of December 31, 2006, all warrants had expired except for the 1,250 at an exercise price of $100 which expire December 31, 2009. (See Note 6)

F-23

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Options

A summary of the options issued to employees and assumed in the recapitalization and changes during the years ended December 31, 2007 and 2006 is presented below.

	Number of Options			Weighted Average Exercise Price
Balance at January 1, 2006		2,505		$	38.20
Granted		7,500,000			.0474
Exercised		(7,500,000	)	$	.0474
Expired		-		$	80.00
Balance at December 31, 2006		2,505		$	38.20

Weighted average fair value of options granted during the year				$	.0474
Balance at January 1, 2007		2,505			38.20
Granted		5,300,000			.014
Exercised		(5,300,000	)	$	.014
Expired		(229	)		40.00
Balance at December 31, 2007		2,276		$	38.00

Weighted average fair value of options granted during the year				$	.014

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

Options Outstanding								Options Exercisable
Range of Exercise Price		Number Outstanding at December 31, 2007		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable at December 31, 2007		Weighted Average Exercise Price
$	38		2,276		0.75 Years	$	38.00		2,276	$	38.00
			2,276			$	38.00		2,276	$	38.00

9.	INCOME TAXES

The Company files consolidated income tax returns for the U.S. operations of VNI & VNOS and a separate return for the Canadian operations of VNOS. There was no income tax expense for the years ended December 31, 2007 and 2006, due to the Company’s net losses.

The blended Canadian Federal and Provincial Corporate tax rate of 41.5% applies to loss before taxes of the Canadian subsidiary. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes for the years ended December 31, 2007 and 2006, (computed by applying the United States Federal Corporate tax rate of 34% to loss before taxes), as follows:

	Years Ended December 31,
	2007			2006
Computed “expected” tax benefit	$	(677,766	)	$	(2,612,700	)
Non-deductible stock based expense		127,132			1,851,984
Foreign income tax rate differences		(102,376	)		(446,572	)
Other non-deductible items		3,415			15,145
Change in deferred tax asset valuation allowance		649,595			1,192,143
	$	-		$	-

F-24

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2007 are as follows:

Deferred tax assets:
United States net operating loss carryforward	$	1,260,932
Canadian net operating loss carryforward		1,471,688
Total gross deferred tax assets		2,732,620
Less valuation allowance		(2,732,620	)
Net deferred tax assets	$	-

The valuation allowance at December 31, 2006 was $2,083,024. The net change in valuation allowance during the year ended December 31, 2007 was an increase of $649,595. The Company’s Canadian operations has net operating losses of approximately $3,546,235 at December 31, 2007 available to offset future Canadian net income through 2015 under Canadian Federal and Provincial tax laws and the United States operations has a net operating loss carryforward of approximately $3,708,624 available to offset future U.S. net income through 2027.

The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In addition, utilization of these carryforwards may be limited due to ownership changes as defined in the Internal Revenue Code.

10.

RELATED PARTY TRANSACTIONS

In October 2006, the Company accepted a $165,000 subscription promissory note from a Director (former officer) as payment for the exercise of his 3,000,000 stock options. Management believes this amount may be materially offset, with the director’s approval, against loans and accrued compensation due to this director or his controlled affiliates. Loans and accrued compensation due to this director at December 31, 2007 was $363,252.

Notes payable to a related party director or his affiliates were $101,486 at December 31, 2007.

At December 31, 2007, accrued expenses to related parties amounted to $261,766 which includes $24,211 of accrued interest

Certain officers and directors of the Company remain as officers and directors of the former parent, Vocalscape, Inc. now known as Nevstar.

F-25

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

The Company has an agreement with a related party director dated August 25, 2005 for legal services with his law firm whereby the related party is periodically issued vested non-forfeitable common shares of the Company so the director shall hold 4.9% of the issued and outstanding common shares and any proceeds from the sale of such shares by the related party are credited against invoice amounts due to that related party for legal services. The agreement has no stated term. Due to the contingent nature of the proceeds and the unstated term of the legal service agreement, the fair value of any shares issued will be expensed when issued. The related party invoices are accrued to accounts payable, periodically paid in cash and the accounts payable and legal expenses are credited for any proceeds in the period the proceeds are received by the related party and reported to the Company. As of September 30, 2007 proceeds in the amount of $ 42,871 were reported to the Company in 2007. These proceeds were credited to legal expenses and reduced the payable to the related party. No additional shares were issued as the director held in excess of 4.9% of the common stock of the Company. At December 31, 2007 accounts payable to this law firm were $240,779 and included in accounts payable, related parties. In addition a loan payable to the law firm was $59,000 and included in loans and notes payable, related parties. Expenses incurred by the Company during 2007 to this law firm were $33,352 after the $42,871 credit above. See Note 8 for common share grants to this related party.

11.

COMMITMENTS AND CONTINGENCIES

Commitments

The Company is a party to a five-year office lease agreement covering 2,238 square feet, which commenced July 1, 2005, for the office in Vancouver, British Columbia. The lease provides for 22 monthly payments of $2,238 Canadian dollars (“CDN”) with two free months during the first 24 months of the agreement; 24 monthly payments of $2,331 CDN during the third and fourth years of the agreement; and 12 monthly payments of $2,425 CDN during the final year of the agreement. In addition, the agreement provides for a monthly common area maintenance charge of $1,585 CDN.

The Company is a party to a second office lease agreement, with a two-year term, covering 1,435 square feet, which commenced March 1, 2005, for the office in White Plains, New York. The agreement calls for monthly rental of $2,350. The lease expired on February 28, 2007 and the Company pays $2,500 per month, on a month to month basis.

The Company enters into sales agent and distributor agreements to sell its products. These agreements are primarily commission based. There were no commissions payable as of December 31, 2007.

F-26

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

Legal Matters

The Company continues to receive claims from a prior director of Dtomi, Inc. relating to periods prior to the October 2005 recapitalization transaction with the Company. The cash amounts the director claims he is due total approximately $520,000 and the total shares he claims he is due are estimated by the Company to be approximately 6,300. These amounts appear to relate to prior license or other alleged agreements between the director and the Company. The Company has accrued $86,000 in prior license fees due and has accounted for, in a prior period of Dtomi, Inc. approximately 15,278 common shares issued by the transfer agent in the director’s name. The director claims he never received 2,778 of the 15,278 shares or other anti-dilution shares. Management of the Company disputes the remaining cash amounts and believes no anti-dilution shares are due (which would account for the remaining 3,522 shares) since the license agreement was terminated in early 2005 by the licensor. Management believes it will prevail in this matter. Accordingly, no accruals have been made for the disputed amounts. The termination of the Patent License Agreement terminates these and other obligations during 2005. In May of 2006 the director entered into an agreement with a third party whereby the director assigned his rights to any financial obligations made by the Company. In consideration of such assignment to such third party, the director was to receive a payment of $15,000.

In July and August 2005, the Company received correspondence from a former officer and former employee regarding threatened material litigation relating to alleged compensation due to each employee. Although the Company disputes such amounts, these amounts aggregating $ 687,407 had been previously accrued in a period prior to 2005 and are included in accrued expenses. (See Note 13)

12.

CONCENTRATIONS

Revenues - During 2007, the Company had revenues from 3 customers which were 58%, 27% and 15% of total revenues. During 2006, the Company had revenues from 5 customers of which 4 were each over 10% of revenues consisting of 37%, 24%, 24% and 12% of total revenues.

13.

ACCRUED EXPENSES

Accrued expenses at December 31, 2007 consist of the following:

Accrued license fees	$	36,000
Accrued interest		440,531
Accrued compensation		687,407
Accrued expenses – other		106,351

Total	$	1,270,289

F-27

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

14.

SHARE EXCHANGE AGREEMENT

On February 26, 2006, Vocalscape and Azatel Communications Inc., a British Columbia corporation (“Azatel”), and all of the shareholders of Azatel (the “Shareholders”), entered into a Share Exchange Agreement (the “Share Exchange Agreement”), pursuant to which Vocalscape shall acquire all of the issued and outstanding shares of common shares of Azatel in a transaction valued at approximately $118,000. Under the Share Exchange Agreement, Vocalscape shall issue 200,000 shares of its common stock to the Shareholders, who number three persons, in exchange for all of their respective shares of Azatel (the “Share Exchange”). Azatel had taken the position that the Share Exchange Agreement is terminated. Vocalscape did not believe that the Share Exchange Agreement is terminated. Therefore, the company had fully reserved $22,601, which is the amount advanced through March 31, 2006. On June 19, 2006 the Company received CAN$23,804 pursuant to a settlement agreement signed on May 23, 2006 wherein the Share Exchange Agreement was terminated. The company has recorded the amount received of $20,873 as a bad debt recovery in June 2006.

15.

PAYABLE TO SHAREHOLDER

During the second quarter of 2006 one of the shareholders of the Company, who is a former director who resigned during the second quarter, was assigned certain debts of the company pursuant to assignment agreements between the shareholder and creditors as follows:

Payable to Vocalscape, Inc. former parent (n.k.a. Nevstar)	$	265,617
Former officer note payable and accrued compensation		214,410
Accounts payable to related party attorney		420,000
Total	$	900,027

There was no consideration given by the Company to assign these debts. They were assigned from the vendors directly to the shareholder in a private transaction between those parties.

16.

SUBSEQUENT EVENTS

In January 2008, the Company issued 37,350,000 common shares in exchange for $74,196 net proceeds under the Regulation S offering. In March 2008 the Company issued 14,898,000 common shares in exchange for $16,800 net proceeds under the Regulation S offering. In March 2008 the Company issued 12,095,000 common shares in exchange for $18,789 net proceeds under the Regulation S offering.

In March 2008, the Company granted 1,500,000 options and 3,500,000 common shares to a consultant for services rendered. The options were valued at $21,002 using a Black-Sholes option pricing model with the following assumptions: stock price of $0.024 and exercise price of $0.01, volatility of 214%, term of 1 day and interest rate of 4.8%. The term of 1 day was used since the recipient exercised their options immediately on the grant date. The shares were valued at the $0.024 quoted trading price or $84,000 and both amounts were expensed as compensation.

F-28

Vocalscape Networks, Inc. and Subsidiary

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

In April 2008, the Company issued 7,500,000 and 16,000,000 common shares to two consultants, respectively, pursuant to consulting agreements. The shares were valued at the $0.021 quoted trading price for a total of $493,500 and will be recognized over the service period.

In April 2008 the Company issued 10,000,000 options and 10,000,000 shares and another 20,000,000 options to a related party director for services his law firm rendered. The options were valued at $470,000 using the Black-Sholes method with volatility of 214%, expected term of 5-years and interim rate of 4.8%. The shares were valued at the $0.021 quoted trading price or $210,000 and both amounts are to be applied to accounts payable to this related party.

In April 2008, the Company granted 10,000 Series A Preferred Shares to the former CEO and current Chairman for $2,500.

In April 2008 the Company granted 46,500,000 common shares to various employees and lenders. The shares were valued at the $0.013 quoted trading price or $604,000 and expensed.

F-29

ITEM 8A. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the periodic reports filed by us with the SEC is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management.

Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-(f) under the Securities Exchange Act of 1934). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of the end of the period covered by this report. Based on its assessment, our management determined that, as of the end of the period covered by this report, we maintained effective internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during our fiscal year ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

None.

PART III

ITEM 9.

DIRECTORS AND EXECUTIVE OFFICERS

Vocalscape’s directors and executive officers are as follows as of May 15, 2008:

Name	Position	Appointment
Robert W. Koch	Chief Executive Officer and Chairman of the Board	October 5, 2005
Ron McIntyre	President, Secretary and Director	August 25, 2005
David M. Otto	Director	January 21, 2002
Robert Koch, Sr.	Director	September 25, 2006

ROBERT W. KOCH, AGE 41, CHAIRMAN OF THE BOARD OF DIRECTORS AND HEAD OF BUSINESS DEVELOPMENT

Mr. Koch currently serves as Chairman of the Board of Directors, and the Head of Business Development, of Vocalscape, Inc. Following a ten year career as a stockbroker and a consultant for various Wall Street brokerage firms between 1989 and 1999, he founded Dailyfinancial.com, Inc. in March of 1999. Mr. Koch has served as Chairman of Dailyfinancial.com, which publishes “The Dailyfinancial Report”. Mr. Koch’s responsibilities included the handling of investor relations for publicly held companies and offering technical analysis for The Dailyfinancial Report which was sent to more than 50,000 investors.

In May of 2004, Mr. Koch also founded Bedford Investment Partners where he continues to serve as a Managing Director. He is a graduate from St John’s University in New York where he continues to support the school and his fraternity Tau Kappa Epsilon. Mr. Koch is also active in several non-profit organizations throughout New York and the Tri State Area.

RON MCINTYRE, AGE 59, PRESIDENT, SECRETARY AND DIRECTOR

Mr. McIntyre has management experience with technology companies and start-ups in the United States and Canada. Included in his experience are three corporate mergers/acquisitions. On March 19, 1998, as President of Visionary Solutions (VSI:ASE), Mr. McIntyre signed merger documents for an Agresso (UNI:Oslo) takeover bid. In 1992, Mr. McIntyre also served on the Board of Directors of Richmond Software (The Maximizer) until the company’s merger with Modatech (NASDAQ). In 1989, he joined Consumers Software Inc. as Director of Sales & Marketing and was instrumental in increasing software sales by more than 500% until the company was acquired by Microsoft on April 8, 1991.

During 13 years with A.B. Dick Co., Mr. McIntyre held positions as Branch Manager and Pacific Zone Manager, and then transferred to California to commence branch sales operations in Sacramento.

For 7 years, Mr. McIntyre worked for NBI, first to start up operations in Sacramento, Vancouver and Victoria, and then stepped up to Western Regional Manager. He joined Consumers Software Inc. in 1989 as Director of Sales & Marketing and was instrumental in increasing software sales by 500% prior to the purchase by Microsoft.

In addition, Mr. McIntyre was the owner/operator of VIPaging Services, Ltd., a licensed paging company in British Columbia. He was also President and CEO of Visionary Solutions. Visionary Solutions markets and delivers Agresso business software to growth-oriented companies in the mid-tiered markets (US $25 million - $1,000 million in annual sales). Agresso is world class business software with more than 20 modules that include core financial, logistics, purchasing, project costing billing, payroll and human resources. On March 19, 1998, merger documents were signed for an Agresso take-over bid.

Mr. McIntyre also served as Vice President, Sales & Marketing, Director of IT, and Vice President of Operations for Aimtronics Corporation. During his tenure, he had direct responsibility for increasing revenues to Cdn $57MM in 1999, $105MM in 2000, and $154MM for 2001, and managing 250,000 square feet of manufacturing operations in two countries with more than 1100 employees.

DAVID M. OTTO, AGE 49, DIRECTOR

Mr. Otto, an attorney by profession, began his law practice on Wall Street in New York, where he focused on significant corporate transactions and equity and debt offerings for investment banks, venture capital firms and Fortune 1000 companies. In 1991, Mr. Otto relocated to Seattle in order to dedicate his extensive experience in corporate law and finance, mergers and acquisitions, corporate governance, public and private securities offerings and venture capital financing to entrepreneurs, technology innovators, start-up and emerging growth businesses. In July of 1999, Mr. Otto founded his own firm, The Otto Law Group, PLLC, in Seattle, Washington, to better serve technology-based start-up and emerging growth companies with respect to corporate finance, securities, strategic development, corporate governance, mergers, acquisitions and venture capital and private equity matters. Mr. Otto has authored “Venture Capital Financing” and “Taking Your Company Public” and lectured to businessmen, accountants, lawyers, and graduate students at the University of Washington Business School on venture capital financing and public offerings of securities. He is currently a member of the Board of Directors of Saratoga Capital Partners, Inc., which provides consulting services to the Company in connection with the development of new business ventures and a member of the board of directors of Renaissance Window Fashions, Inc. He is also a member of the American Bar Association Committee on the Federal Regulation of Securities and Subcommittee on the 1933 Act and Chairman of the Legislation Subcommittee for the ABA’ s Venture Capital and Private Equity Committee. Mr. Otto is admitted to practice law in New York and Washington. Mr. Otto graduated from Harvard University in 1981 with his A.B. in Government - Political Philosophy and Fordham University School of Law in 1987 where he earned his Juris Doctorate and served as a Commentary Editor for the Fordham International Law Journal.

ROBERT KOCH, SR., AGE 65, DIRECTOR

Robert Koch, Sr., is the father of Robert W. Koch, the Company’s current Chairman of the Board.

Our directors are elected at the annual meeting of the shareholders and serve until their successors are elected and qualified, or their earlier resignation or removal. Officers are appointed by our Board of Directors and serve at the discretion of the Board of Directors or until their earlier resignation or removal.

None of our executive officers or key employees are related by blood, marriage or adoption to any other director or executive officer.

Director’s Compensation

Vocalscape’s directors do not receive any stated salary for their services as directors or members of committees of the Board of Directors, but by resolution of the board, a fixed fee may be allowed for attendance at each meeting. Directors may also serve the Company in other capacities as an officer, agent or otherwise, and may receive compensation for their services in such other capacity. Reasonable travel expenses of directors in connection with the performance of their duties for Vocalscape may be reimbursed upon approval of the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires directors and executive officers, and persons who own 10% or more of Vocalscape common stock, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% stockholders are required to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to the Company, Vocalscape believes that filings were timely made by Rick Girouard, David Otto, Robert W. Koch, Robert Koch, Sr., Ron McIntyre and Laurence Hartman.

Code of Ethics for Chief Executive Officer and Senior Financial Officers

The Company has adopted a code of ethics for the CEO and Senior Financial Officers (Code of Ethics) which is required to be signed by each such officer, and is maintained on file by the Company. A copy of the Code of Ethics will be provided to you, free of charge, upon your written request to the Company sent to the attention of Ron McIntyre, President, Vocalscape Networks, Inc., 170 E. Post Road, Suite 206, White Plains, New York. If the Company makes any substantive amendments to the Code of Ethics, or grants any waiver, including any implicit waiver, from a provision of the Code of Ethics to the Chief Executive Officer or the Chief Financial Officer (which position is currently vacant), the Company will disclose the nature of such amendment or wavier in a report on Form 8-K.

ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

The following tables set forth certain information about compensation paid, earned or accrued for services by our Chief Executive Officer and all other executive officers (collectively, the “Named Executive Officers”) in the fiscal years ended December 31, 2007, 2006 and 2005:

Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($) *	Option Awards ($) *	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation ($)	All Other Compensation ($)	Total ($)

Robert W. Koch, Chairman of the Board of Directors (1)	2007 2006 2005	$360,000 $180,000 -0-	-0- -0- -0-	$5,000 $1,265,000 -0-	$-0- $165,000 -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	$365,000 $1,610,000 -0-

Ron McIntyre, President, Secretary and Director (2)	2007 2006 2005	$86,400 $85,100 $78,000	-0- -0- -0-	$-0- $440,000 -0-	$-0- $46,000 -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	$86,400 $571,000 $78,000

Lawrence Hartman, Director (3)	2007 2006 2005	-0- -0- -0-	-0- -0- -0-	-0- $440,000 -0-	-0- $40,000 -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- $480,000 -0-

David M. Otto, Director (4)	2007 2006 2005	-0- -0- -0-	-0- -0- -0-	$-0- $440,000 -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	$-0- $440,000 -0-

Robert Koch, Sr, Director (5)	2007 2006 2005	-0- -0- -0-	-0- -0- -0-	$-0- $220,000 -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	$-0- $220,000 -0-

Ryan Gibson, Director (6)	2007 2006 2005	-0- $30,556 -0-	-0- -0- -0-	$-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- $30,556 -0-

Rick Girouard Director (7)	2007 2006 2005	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-

John Haddock (8)	2007 2006 2005	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-	-0- -0- -0-

(1) Mr. Koch was appointed Chairman of the Board of Directors on October 5, 2005 and has acted as Head of Business Development since September 22, 2006.

(2) Mr. McIntyre was appointed Director on August 25, 2005, was appointed President on October 5, 2005 and was appointed Secretary on December 15, 2005.

(3) Mr. Hartman was appointed Director on October 5, 2005 and resigned as Director on April 23, 2007.

(4) Mr. Otto was appointed as Secretary and Director on January 21, 2002. While Mr. Otto is not compensated for his services in his capacity as Director, on August 18, 2006, Vocalscape filed a registration statement on Form S-8 covering the registration of 1,322,000 shares of common stock issued to Mr. Otto, the proceeds of which are to be credited against accrued, unpaid legal fees for legal services performed by Mr. Otto for Vocalscape. Mr. Otto resigned his position as Secretary on November 8, 2005.

(5) Robert Koch, Sr., the father of Robert W. Koch, our Chairman of the Board, was appointed as Director on September 25, 2006.

(6) Mr. Gibson was appointed Director on October 5, 2005 and resigned as Director on June 1, 2006.

(7) Mr. Girouard was appointed Director on December 15, 2005 and resigned as Director on April 3, 2006.

(8) Mr. Haddock was appointed CEO and Director on September 22, 2003. Mr. Haddock resigned as Chief Executive Officer on May 31, 2005, and resigned as a Director on August 24, 2005.

Employment Agreements

On September 22, 2006, Vocalscape entered into an Employment Agreement (the “Employment Agreement”) with Robert Koch, Vocalscape’s current Chairman of the Board of Directors and former Chief Executive Officer, to be employed as Head of Business Development. The agreement provides for, among other things, a base salary of $360,000 per year, a 5% pay increase per year, a provision which requires that Mr. Koch hold a majority of the voting control of the Company, a stock grant of 15,000 shares of Series A Convertible Preferred Stock, discretionary bonuses, the option to convert unpaid salary into shares of common stock of the Company, the ability to participate in the Company’s 2006 Stock Option Plan, an indemnification agreement, and severance benefits.

Other Compensation

There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of our company in the event of retirement at normal retirement date as there was no existing plan as of December 31, 2007 provided for or contributed to by our company.

Director Compensation

The following table sets forth director compensation as of December 31, 2007:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($) *	Option Awards ($) *	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)

Robert W. Koch	-0-	-0-	-0-	-0-	-0-	-0-	-0-

Ron McIntyre	-0-	-0-	-0-	-0-	-0-	-0-	-0-

Laurence Hartman	-0-	-0-	-0-	-0-	-0-	-0-	-0-

David M. Otto	-0-	-0-	-0-	-0-	-0-	-0-	-0-

Robert Koch, Sr.	-0-	-0-	-0-	-0-	-0-	-0-	-0-

The compensation of each of our directors is fully furnished in the Summary Compensation Table above.

Directors of our company who are also employees do not receive cash compensation for their services as directors or members of the committees of the board of directors. All directors may be reimbursed for their reasonable expenses incurred in connection with attending meetings of the board of directors or management committees.

During the year ended December 31, 2007, we issued shares of our common stock to our officers and directors, or their nominees, as follows:

Robert W. Koch	-0- shares
Ron McIntyre	-0- shares
Laurence Hartman	-0- shares
David M. Otto	-0- shares
Robert Koch, Sr.	-0- shares

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information concerning outstanding stock awards held by the Named Executive Officers as of December 31, 2007:

	Option Awards					Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Robert W. Koch	-0-	-0-	-0-	N/A	N/A	-0-	-0-	-0-	-0-
Ron McIntyre	-0-	-0-	-0-	N/A	N/A	-0-	-0-	-0-	-0-
Laurence Hartman	-0-	-0-	-0-	N/A	N/A	-0-	-0-	-0-	-0-
David M. Otto	-0-	-0-	-0-	N/A	N/A	-0-	-0-	-0-	-0-
Robert Koch, Sr.	-0-	-0-	-0-	N/A	N/A	-0-	-0-	-0-	-0-

Securities Authorized for Issuance under Equity Compensation Plans

On November 2, 2006, the Vocalscape Networks, Inc. 2006 Stock Option Plan (the “Plan”) was adopted and approved by the Directors of the Company. 64,000,000 shares of common stock have been authorized for issuance under the Plan, at the discretion of the Administrator, to be granted as awards under the Plan. As of December 31, 2007, no options to purchase shares of common stock under the Plan are outstanding.

The Board of Directors currently administers the 2000 Stock Option Plan (the “2000 Plan”) and 2001 Stock Option Plan (the “2001 Plan”). Each of the 2000 Plan and the 2001 Plan provides for the grant of options (incentive and non-statutory), to officers, employees and independent contractors capable of contributing to the Company’s performance. The Company has reserved an aggregate of 5,000,000 shares of common stock for grants under the 2000 Plan and an aggregate of 5,000,000 shares of common stock for grants under the 2001 Plan. Incentive stock options may be granted only to employees eligible to receive them under the Internal Revenue Code of 1986, as amended. As of December 31, 2007, the Company had no outstanding non-statutory options under the 2000 Plan and the 2001 Plan.

ITEM 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information regarding the beneficial ownership of our shares of voting stock as of May 15, 2007 by: (i) each person who is known by us to beneficially own more than 5% of the issued and outstanding shares of common stock; (ii) Chief Executive Officer; (iii) the directors; and (iv) all of the executive officers and directors as a group. Unless otherwise indicated, the persons named below have sole voting and investment power with respect to all shares beneficially owned by them, subject to community property laws where applicable.

NAME AND ADDRESS OF BENEFICIAL OWNER	AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP	PERCENT OF CLASS (1)

Robert C. Koch 170 E. Post Road, Suite 206 White Plains, New York Canada V6J 1Y6	14,270,809 (common stock) 45,000 (Series A Convertible Preferred Stock)	3.72% 90%

Anthony Caridi 305 - 1847 West Broadway Vancouver, British Columbia Canada V6J 1Y6	6,532,711 (common stock) 5,000 (Series A Convertible Preferred Stock)	1.70% 10%

Ron McIntyre 305 - 1847 West Broadway Vancouver, British Columbia Canada V6J 1Y6	4,419,711 (common stock)	1.15%

Robert Koch, Sr. 170 E. Post Road, Suite 206 White Plains, New York Canada V6J 1Y6	2,000,000 (common stock)	.005%

Lawrence Hartman 305 - 1847 West Broadway Vancouver, British Columbia Canada V6J 1Y6	4,000,000 (common stock)	1.04%

David M. Otto 601 Union Street, Suite 4500 Seattle, Washington 98101	-0- (common stock)	-0-%

All officer and directors as a group (4 persons)	31,223,231 (common stock) 45,000 (Series A Convertible Preferred Stock)	8.14% (common stock) 100% (Series A Convertible Preferred Stock)

(1) This table is based on 383,783,937 shares of common stock, 45,000 shares of Series A Convertible Preferred Stock, and 100,000,000 shares of Class A Common Stock, issued and outstanding on May 15, 2008.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Vocalscape has an engagement agreement with the law firm, The Otto Law Group, PLLC (“OLG”), David Otto, a director of the Company holds all equity securities of OLG. Vocalscape has agreed to issue shares of common stock, registered for resale to Mr. Otto, the sales of which are to be credited against fees due and owing OLG. Vocalscape believes that arrangement with OLG to be fair because Vocalscape cannot pay cash to OLG, while OLG has agreed to provide legal services until such time a Vocalscape can compensate OLG for its services.

ITEM 13. EXHIBITS

The exhibits in the accompanying Exhibit Index are filed as part of this Report on Form 10-KSB or are incorporated by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Vocalscape was billed by its accountants approximately $75,000 and $65,000 during the years ended December 31, 2007 and 2006, respectively, for fees and expenses related to professional services rendered in connection with the year end audits of the consolidated financial statements and reviews of the quarterly consolidated financial statements.

Audit-Related Fees

Vocalscape was billed fees of approximately $200 and $16,500 for the years ended 2007 and 2006, respectively, for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements.

Tax Fees

Vocalscape was not billed any fees for tax compliance, tax advice and tax planning, including the preparation of certain tax returns for the years ended December 31, 2007 and 2006.

All Other Fees

There have been no other material fees charged for accounting products or services other than those described above for the years ended December 31, 2007 and 2006.

Audit Committee Pre-Approval Process, Policies and Procedures

The appointment of Salberg & Company, P.A.. was approved by the Board of Directors as the principal auditors for Vocalscape. All current members of the Company’s Board of Directors, currently serve as the audit committee. The board plans to establish, but has not yet established, pre-approval policies and procedures in connection with services to be rendered by the independent auditors.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, Vocalscape, Inc. has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.


	VOCALSCAPE NETWORKS, INC.

Date: May 15, 2008	By:	/s/ Ron McIntyre
		Ron McIntyre, President and principal financial officer
		Title

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on its behalf of Vocalscape Networks, Inc. And in the capacities indicated.

Signature	Title	Date

/s/ Robert W. Koch	Chairman of the Board of Directors	05/15/08
Robert W. Koch

/s/ Ron McIntyre	President, Secretary and Director	05/15/08
Ron McIntyre

/s/ Robert W. Koch	Director	05/15/08
Robert Koch, Sr.

/s/ David M. Otto	Director	05/15/08

David M. Otto

EXHIBIT INDEX

Exhibit Number	Description
2.1	Asset Purchase Agreement dated April 7, 2003, by and between Company and John Smith (incorporated by reference to the Company’s Current Report on Form 8-K filed on April 9, 2003)
2.2	Agreement and Plan of Reorganization dated August 25, 2005 by and between Dtomi, Inc., a Nevada corporation, and Vocalscape Networks, Inc., a Nevada corporation, as amended. (incorporated by reference to the Company’s Current Report on Form 8-K filed on September 1, 2005)
3.1.1	Articles of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999)
3.1.2	Certificate of Amendment to Articles of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999)
3.1.3	Certificate of Amendment to Articles of Incorporation of the Company filed October 25, 2001 (incorporated by reference to the Company’s Quarterly Report on Form 10-QSB filed on December 18, 2001)
3.1.4	Certificate of Amendment to Articles of Incorporation of the Company, filed November 6, 2005 (incorporated by reference to the Company’s Quarterly Report on Form 10-KSB filed on May 17, 2006)
3.1.5	Certificate of Amendment to Articles of Incorporation of the Company filed January 3, 2007
3.2.1	Bylaws of the Company (incorporated by reference to the Company’s Registration Statement on Form 10-SB 12G/A filed on November 26, 1999)
31.1	Certification of President of Vocalscape, Inc. required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2	Certification of principal financial officer of Vocalscape, Inc. required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32.1	Certification of President and principal financial officer of Vocalscape, Inc. required by Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350

Date: May 15, 2008			/s/ Ron McIntyre
			Ron McIntyre President (and principal executive officer)




	By:	/s/ Ron McIntyre
		Ron McIntyre President (and principal financial officer)
		Dated: May 15, 2008