S-1

As filed with the Securities and Exchange Commission on November 1, 2005

Registration No. 333-          

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AMERICAN TELECOM SERVICES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	5065	77-0602480
(State of Incorporation)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

2466 Peck Road

City of Industry, California 90601

(562) 692-3869

(Address and Telephone Number of Registrant’s Principal Executive Offices)

Bruce Hahn

Chief Executive Officer

American Telecom Services, Inc.

2466 Peck Road

City of Industry, California 90601

(562) 908-1287

(Name, Address and Telephone Number of Agent for Service)

Copies to:

Ira I. Roxland, Esq. Sonnenschein Nath & Rosenthal LLP 1221 Avenue of the Americas New York, New York 10020 (212) 768-6700 Fax: (212) 768-6800 David Alan Miller, Esq. Graubard Miller The Chrysler Building 405 Lexington Avenue New York, New York 10174-1901 (212) 818-8800 Fax: (212) 818-8881

Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.  ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered(1)	Amount to be Registered	Proposed Maximum Aggregate Price Per Security(2)		Proposed Maximum Aggregate Offering Price		Amount of Registration Fee
Common stock, par value $0.001 per share, to be sold by issuer in the offering(3)	3,220,000	$	5.05	$	16,261,000.00	$	1,913.92
Warrants to be sold by issuer in the offering(4)	3,220,000	$	0.05	$	161,000.00	$	18.95
Representative’s purchase option	1		—	$	100.00		(5	)
Common stock issuable upon exercise of the representative’s purchase option	280,000	$	5.555	$	1,555,400.00	$	183.07
Warrants issuable upon exercise of the representative’s purchase option	280,000	$	0.055	$	15,400.00	$	1.81
Common stock issuable upon exercise of the warrants sold by issuer in the offering (including the warrants underlying the representative’s purchase option)	3,500,000	$	5.05	$	17,675,000.00	$	2,080.35
Common stock to be sold by selling securityholders(6)	749,930	$	5.05	$	3,787,146.50	$	445.75
Warrants to be sold by selling securityholders(6)	1,475,666	$	0.05	$	73,783.30	$	8.68
Common stock to be sold by selling securityholders upon their exercise of warrants(6)	1,475,666	$	5.05	$	7,452,113.30	$	877.11
Common stock to be issued upon exercise of warrants after sale thereof in open market transactions(6)	1,475,666	$	5.05	$	7,452,113.30	$	877.11
Total				$	54,433,056.10	$	6,406.75

(1) Pursuant to Rule 416 under the Securities Act of 1933, this registration statement also covers any additional securities that may be offered or issued in connection with any stock split, stock dividend or similar transaction.

(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c).

(3) Includes 420,000 shares of common stock issuable upon exercise of the underwriters’ over-allotment option.

(4) Includes 420,000 warrants issuable upon exercise of the underwriters’ over-allotment option.

(5) No fee pursuant to Rule 457(g).

(6) Securities being sold by the selling securityholders identified in this registration statement.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

This registration statement contains two forms of prospectus: (a) one to be used in connection with an offering by the registrant of 2,800,000 shares of common stock and 2,800,000 redeemable warrants (the “Registrant’s Prospectus”) and (b) one to be used in connection with (i) the resale of up to 749,930 shares of common stock and 1,475,666 redeemable warrants (and the 1,475,666 shares of common stock underlying such warrants) by the holders named therein and (ii) the issuance by the registrant of up to 1,475,666 shares of common stock upon the exercise of redeemable warrants purchased by others in the open market from such selling securityholders (the “Selling Securityholders’ Prospectus”).

The complete Registrant’s Prospectus follows immediately. Following the Registrant’s Prospectus are certain pages of the Selling Securityholders’ Prospectus, which include: (i) an alternate front cover page, (ii) an alternate section entitled “Prospectus Summary — The Offering,” (iii) an alternate section entitled “Use of Proceeds,” (iv) an alternate section entitled “Selling Securityholders” and (v) an alternate section entitled “Plan of Distribution.”

All other pages of the Registrant’s Prospectus and the Selling Securityholders’ Prospectus are the same, except that the Selling Securityholders’ Prospectus will not have a section entitled “Underwriting.”

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

*  *  *  *  *  *

Subject to Completion, dated November 1, 2005

PROSPECTUS

2,800,000 shares of common stock

2,800,000 redeemable common stock purchase warrants

American Telecom Services, Inc.

This is an initial public offering of our securities. We are offering 2,800,000 shares of our common stock and 2,800,000 redeemable common stock purchase warrants. Each redeemable warrant entitles the holder to purchase one share of our common stock at a price of $5.05 and will expire on                     , 2010 [five years from the date of this prospectus], or earlier upon redemption. The redeemable warrants are redeemable at our option, with the consent of HCFP/Brenner Securities LLC, the representative of the underwriters, as set forth in this prospectus.

We have agreed to sell to the representative, for $100, an option to purchase up to 280,000 shares of our common stock at $5.555 per share and/or up to 280,000 of our redeemable warrants, identical to those offered by this prospectus, at $.055 per warrant. The purchase option and its underlying securities have been registered under the registration statement of which this prospectus forms a part.

There is presently no public market for our securities. We anticipate that our common stock and redeemable warrants will be quoted on The Nasdaq Capital Market under the symbols “ATEL” and “ATELW,” respectively, on or promptly after the date of this prospectus.

Investing in our securities involves a high degree of risk. See “ Risk Factors” beginning on page 6 of this prospectus for a discussion of information that should be considered in connection with an investment in our company.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share		Per Warrant		Total
Public offering prices	$	5.05	$	0.05	$	14,280,000
Underwriting discount and the representative’s 2% nonaccountable expense allowance	$	0.505	$	0.005	$	1,428,000
Proceeds to us (before expenses)	$	4.545	$	0.045	$	12,852,000

We have granted to the underwriters a 45-day option to purchase up to an additional 420,000 shares of our common stock and/or an additional 420,000 redeemable warrants from us at the public offering prices, less the underwriting discount, solely to cover over-allotments.

HCFP/Brenner Securities LLC, acting as representative of the underwriters, expects to deliver the shares of our common stock and the redeemable warrants to investors in this offering on or about                     , 2005.

HCFP/Brenner Securities LLC

                    , 2005

We offer broadband phone (Voice-over-Internet-Protocol

or “VolP”) and prepaid long distance communications services that are bundled

with our digital, cordless multi-handset phones. Our strategic

partners include SunRocket, Inc. and IDT Corporation.

PROSPECTUS SUMMARY

Our company

We offer broadband phone (Voice-over-Internet-Protocol or “VoIP”) and prepaid long distance communications services that are bundled with our digital, cordless multi-handset phones. We sell our phone/service bundles through major retailers under our “American Telecom”, “ATS” or “Pay N’ Talk” brand names. Our digital spread spectrum (“DSS”) telecom platform is designed to enable seamless access to the communications services provided by our strategic partners. Our strategic partners include SunRocket, Inc., an emerging leader in the provision of VoIP services, for our VoIP service offering, and IDT Corporation, a leading communications carrier, for our prepaid long distance service offering. Under the agreements with each of these service providers, we will receive a percentage of the monthly service revenues generated by users of our service offerings, in addition to the revenues we generate through the sale of our phone hardware. We are initially targeting the U.S. residential and small office/home office (“SOHO”) markets.

Since our formation, we have devoted our resources to creating our initial phone/service bundles and establishing contractual relationships with our strategic communications services and manufacturing partners. Recently, we commenced our initial marketing efforts, focusing on securing approved vendor status with numerous national and regional retail channels. We received our initial purchase orders in September 2005 and initial shipments of our phones bundled with our pre-paid long distance service offering arrived in retail stores in October 2005.

We expect to sell our phone/service bundles to retailers in the following categories, including, but not limited to, those named below (with which we have already secured approved vendor status):

• Office superstores, such as Staples;

• Electronics stores, such as Best Buy and Fry’s;

• Drugstore chains, such as Brooks/Eckerd;

• Do-it-yourself retailers, such as Home Depot;

• Mass retailers and department stores, such as Wal-Mart and JCPenney;

• Internet-based retail distribution outlets, such as Amazon.com, Target.com, Costco.com, JCPenney.com and Staples.com;

• Live shopping networks such as QVC; and

• Direct marketers, such as Tiger Direct.

Our VoIP offering

Our VoIP offering will provide customers with a DSS multi-handset, plug-and-play, broadband phone, a phone number and VoIP-based communications services, including inbound and outbound local calling service, long distance service, enhanced 911 emergency calling (which routes calls directly to emergency operators along with caller address information and automatic phone number identification) and other standard and competitive services. Technology research firm Jupiter Research reports that the number of users of VoIP telephony services has grown to approximately 3 million in the United States in 2005 and projects that there will be approximately 27 millions users in the United States by 2009.

The VoIP services accessible through our broadband phones will be provided in the United States by SunRocket. SunRocket is a growing VoIP communications service provider that was founded by former executives of MCI, Inc. Under the terms of our agreement with SunRocket, purchasers of our broadband phones will be offered an exclusive low-cost rate plan in addition to all other plans marketed by SunRocket to its customers. We will receive an agreed-upon percentage of SunRocket’s monthly service revenues generated by users of our broadband phones.

Most currently available VoIP services require some combination of an adaptor, modem and/or router and often require cable companies or other service providers to engage in varying degrees of rewiring in the customer location to establish VoIP service. Our cordless broadband phone, however, is plugged directly into a customer’s

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Internet router or modem, without use of an adaptor or additional hardware, and does not require any complex rewiring. Our VoIP phone/service bundle can easily be installed by customers and requires no installation appointments with the cable company or other service provider. Our broadband phone may be used in rooms other than those with an Internet connection by carrying the wireless handset from room to room in the same manner as traditional cordless phones. Our multi-handset design allows customers to add additional handsets to their system and place extensions in other rooms without any rewiring. SunRocket provides VoIP services at what we believe are among the lowest rates currently available. Accordingly, we believe our VoIP phone/service bundle represents one of the easiest and most cost-efficient means for customers to acquire VoIP service.

Our prepaid long distance offering

Our phones that are bundled with prepaid long distance services are branded as “Pay N’ Talk” and marketed in the United States. Prepaid long distance service on each of these phones is accessible, on demand, with the press of the LDS (Long Distance Service) auto-key on the handset dial pad. This process provides the user with an immediate and seamless connection to prepaid long distance services provided by IDT. As a promotion, we are providing a specified number of initial minutes of long distance service at no additional charge to purchasers of these phone/service bundles. According to a 2005 report on prepaid markets by Atlantic-ACM, a telecommunications industry research firm, prepaid long distance service is an $11.8 billion global market that has experienced steady growth over the last ten years.

Under our agreement with IDT, prepaid long distance service is offered to our customers at a current rate of 3.9 cents per minute for domestic calls, inclusive of all fees and taxes. International calling will be available at low, competitive per-minute rates under a rate plan that IDT created for our customers. Through IDT, our customers will be able to purchase a specified number of minutes or create an automatic recharge account by which additional minutes are added whenever their account balance falls below pre-set limits. We believe that the prepaid long distance rates available to users of our phones will be among the lowest available for such service. We will receive an agreed-upon percentage of IDT’s monthly service revenues generated by users of our phones.

Our strategy

We believe that currently there are a limited number of providers of bundled communications phone/service offerings. Our objective is to expand and become a leader in the market for bundled communications phone/service offerings by combining our phones with attractively priced service offerings, thereby creating a compelling proposition for value purchasers. Key elements of our strategy include:

• developing high-quality end user communications hardware that enhances the accessibility and utility of the communications services with which our hardware is bundled;

• expanding our existing relationships with SunRocket and IDT by expanding the communications services that are bundled with our hardware, expanding our joint marketing initiatives and increasing the retail distribution channels which we provide;

• establishing relationships with other providers of communications services inside and outside of the United States;

• obtaining retail shelf space and Internet presence for our bundled communications phone/service offerings by utilizing our management’s broad retail experience and providing retailers the opportunity to share in our service revenues; and

• utilizing our management’s extensive manufacturing and sourcing experience (particularly in China) to expand and diversify our supplier base for phone hardware, services and technology in order to maximize cost efficiency and support the diversification of our bundled communications phone/service offerings.

Additional information

We were incorporated under the laws of the State of Delaware on June 16, 2003. Our principal offices are located at 2466 Peck Road, City of Industry, California, 90601 and our telephone number is (562) 908-1287.

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THE OFFERING

Securities offered 2,800,000 shares of our common stock and 2,800,000 redeemable warrants.

Common stock:

Number of shares outstanding before this offering 2,749,930 shares, assuming, and giving effect to, the conversion of $2,163,500 principal amount of our outstanding notes (and all accrued and unpaid interest thereon, estimated at approximately $86,000) into 749,930 shares of our common stock upon the consummation of this offering.

Number of shares to be outstanding after this offering 5,549,930 shares.

Redeemable warrants:

Number of redeemable warrants outstanding before this offering 1,475,666 redeemable warrants, after giving effect to the issuance of such redeemable warrants in exchange for 1,475,666 of our outstanding private warrants.

Number of redeemable warrants to be outstanding after this offering 4,275,666 redeemable warrants.

Exercisability Each redeemable warrant is exercisable for the purchase of one share of our common stock.

Exercise price $5.05, subject to adjustment in the event of a stock dividend or split, reorganization, recapitalization or similar event.

Exercise period The redeemable warrants are exercisable immediately and will expire on                     , 2010 [five years from the date of this prospectus], or earlier upon redemption.

Redemption Subject to the prior consent of HCFP/Brenner Securities, we may redeem the outstanding redeemable warrants:

• in whole and not in part;

• at a price of $.05 per warrant;

• upon a minimum of 30 days’ advance written notice of redemption;

• if, and only if, the last sales price per share of our common stock equals or exceeds 190% (currently $9.60) during the first three months after the consummation of this offering, or 150% (currently $7.58) thereafter, of the then effective exercise price of the redeemable warrants for all 15 of the trading days ending within three business days before we send the notice of redemption; and

• if, and only if, we then have an effective registration statement covering the shares issuable upon exercise of the redeemable warrants.

Use of proceeds We intend to use the net proceeds from the sale of our securities in this offering for contract manufacturing and shipping and

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warehousing of inventory; for sales and marketing activities, including salaries and fees of sales and marketing personnel and consultants; for product enhancement and new product development; for the purchase and/or lease of tooling equipment; for the purchase and/or lease of office equipment; and for working capital and general corporate purposes. See “Use of Proceeds.”

Proposed Nasdaq Capital Market symbols for our:

Common stock “ATEL”

Warrants “ATELW”

Unless otherwise indicated, information contained in this prospectus regarding the number of shares of our common stock that will be outstanding after this offering includes the 749,930 shares of common stock issuable upon conversion of the outstanding principal of our notes and all accrued interest thereon concurrently with the consummation of this offering, but does not include up to an aggregate of 6,275,666 shares comprised of:

• 2,800,000 shares reserved for issuance upon exercise of the redeemable warrants to be sold in this offering;

• 1,475,666 shares reserved for issuance upon exercise of the redeemable warrants issued in exchange for the private warrants;

• 420,000 shares reserved for issuance upon exercise of the underwriters’ over-allotment option and 420,000 shares reserved for issuance upon exercise of the redeemable warrants issuable upon exercise of the underwriters’ over-allotment option;

• 280,000 shares reserved for issuance upon exercise of the representative’s purchase option and 280,000 shares reserved for issuance upon exercise of the redeemable warrants issuable upon exercise of the representative’s purchase option; and

• 600,000 shares reserved for the grant of restricted stock and issuance upon exercise of options that will or may be granted under our 2005 stock option plan, including (i) options exercisable for an aggregate of 195,000 shares that will be granted upon consummation of this offering, comprised of options exercisable for an aggregate of 150,000 shares that will be granted to our officers, employee-directors and certain affiliates and 45,000 of which will be granted to our non-employee directors, each with an exercise price of $5.05 per share and (ii) an aggregate of 325,000 shares of performance accelerated restricted stock to be granted to our executive officers, our Chairman and one consultant upon consummation of this offering. In addition, after consummation of this offering, each of our non-employee directors will receive options to purchase 5,000 shares per quarter at an exercise price per share equal to not less than the fair market value per share of our common stock at the time of grant.

In addition, unless otherwise indicated, information contained in this prospectus regarding the number of redeemable warrants that will be outstanding after this offering includes 1,475,666 redeemable warrants issuable in exchange for the private warrants, but does not include:

• the 420,000 redeemable warrants issuable upon exercise of the underwriters’ over-allotment option; or

• the 280,000 redeemable warrants issuable upon exercise of the representative’s purchase option.

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SUMMARY FINANCIAL INFORMATION

The table below provides summary financial information as of the date indicated. You should read this information with our financial statements and the related notes and the section entitled “Plan of Operations,” all of which are included in this prospectus.

Statement of Operations:	Fiscal year ended June 30, 2005			Fiscal year ended June 30, 2004			For the period from June 16, 2003 (inception) to June 30, 2005
Total revenues	$	—		$	—		$	—
Expenses:
Marketing and development		84,813			22,058			106,871
General and administrative		84,435			3,000			87,435
Interest expense		1,000			—			1,000
		170,248			25,058			195,306
Net loss	$	(170,248	)	$	(25,058	)	$	(195,306	)
Net loss per common share:
Basic and diluted	$	(0.09	)	$	(0.01	)
Weighted average shares outstanding:
Basic and diluted		1,920,870			1,729,610
	As of June 30, 2005
Balance Sheet Data:	Actual			Pro forma			Pro forma as adjusted
Working capital (deficit)	$	(60,877	)	$	1,671,503		$	13,889,985
Cash and cash equivalents	$	50,780		$	1,783,160		$	14,115,160
Total assets	$	164,298		$	1,896,678		$	14,115,160
Total liabilities	$	225,175		$	225,175		$	225,175
Shareholders’ equity (deficit)	$	(60,877	)	$	1,671,503		$	13,889,985

The “pro forma” information as of June 30, 2005 gives effect at that date to our sale after such date of $2,113,500 principal amount of our notes and 1,409,000 of our private warrants and our receipt of the net proceeds therefrom. The net proceeds of such notes ($1,732,380) have been recorded as additional paid in capital due to the value assigned to the private warrants issued with the notes and the value of the beneficial conversion feature of the notes.

The “pro forma as adjusted” information as of June 30, 2005 gives effect at that date to the pro forma adjustments and the following events:

• the conversion upon the consummation of this offering of all $2,163,500 principal amount of our outstanding notes and all accrued and unpaid interest thereon (approximately $86,000);

• our receipt of the estimated net proceeds (i.e., gross proceeds less the underwriting discount and the estimated offering expenses payable by us from the offering proceeds) from the sale of 2,800,000 shares of our common stock and 2,800,000 warrants in this offering and our anticipated application of those proceeds. See “Use of Proceeds.”

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should consider carefully all of the material risks described below, together with the other information contained in this prospectus before making a decision to invest in our securities.

Risks related to our business

We are only now commencing our commercial operations and have no operating history upon which you can base your investment decision.

We were incorporated in June 2003 and only recently completed the development of our first phones and secured our initial strategic relationships with communications service and manufacturing service providers. We have only recently received our first purchase orders. We generated no revenues in the fiscal year ended June 30, 2005 and, to date, have generated only nominal revenues in the first quarter of the fiscal year ending June 30, 2006. We have no real operating history upon which you can evaluate our business strategy or future prospects, and have negative working capital. As a result, our independent registered accountant has issued an explanatory paragraph in its opinion in connection with our financial statements included herein that expresses substantial doubt about our ability to continue as a going concern unless we obtain the financing sought in this offering. While this offering addresses such concern, our ability to generate revenues going forward that are capable of supporting our operations without other financing sources will depend on whether we can successfully commercialize our phones and make the transition from a development stage company to an operating company. We may not achieve and/or sustain profitability. In making your evaluation of our prospects, you should consider that we are an early-stage business engaged principally in the development and marketing of bundled communications phone/service offerings that have minimal, if any, proven market acceptance. We operate in a rapidly evolving industry. As a result, we may encounter many expenses, delays, problems and difficulties that we have not anticipated and for which we have not planned.

The agreements with the strategic partners that provide the communications services accessible through our phones require us to meet certain minimum requirements, which, if not met, could lead to our loss of certain material rights.

Under our agreements with SunRocket and IDT, users of our phones must activate certain minimum numbers of accounts with these providers within certain time periods. Some of these minimum requirements must be met by the end of 2005. If these minimums are not met or exceeded, we could lose some or all of the discounts or other financial incentives and rights we have negotiated with such service providers. Although arrangements similar to those we currently have with our strategic partners may be readily available from other communications providers, we cannot assure you that we would be able to secure such alternate arrangements on a timely basis or at all or efficiently configure our phones to work seamlessly with such services. Our failure to maintain our agreements with our current strategic partners or to secure alternate arrangements with other communications service providers if needed on substantially similar terms could materially adversely affect our ability to favorably price our offerings to customers and could harm our operating margins and financial results.

If we are unable to effectively manage the transition from development stage to commercial operations, our financial results will be negatively affected.

For the period from our inception in June 2003 through June 2005, we have incurred aggregate net losses in our development stage of $195,306 and had an accumulated deficit of $195,306 as of June 30, 2005. Upon consummation of our initial public offering such losses would increase by a non-cash interest charge of approximately $2.2 million resulting from the amortization of the original issue discount due to the immediate conversion of the notes issued in our private placement into shares of common stock. Our losses are expected to increase in the short term as we commence full scale manufacturing, marketing and deployment of our phone/service bundles and transition from a development stage company to an operating company. As we make such transition, we expect our business to grow significantly in size and complexity. This growth is expected to place significant additional demands on our management, systems, internal controls and financial and physical resources. As a result, we will need to expend additional funds to secure necessary assets and hire additional qualified personnel for our marketing activities, for the development of appropriate control systems and for the expansion of our information technology and operating infrastructures. Our inability to secure additional

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resources and personnel, as and when needed, or manage our growth effectively, if and when it occurs, would significantly hinder our transition to an operating company, as well as diminish our prospects of generating revenues and, ultimately, achieving profitability.

Our failure to quickly and positively distinguish our phone/service bundles from other available communications solutions and limit the adoption curve associated with their market acceptance could negatively affect our operations.

We may be slow to achieve, or may never achieve, market acceptance for our phone/service bundles. Failure to distinguish our phones and services from competing communications solutions would hinder market acceptance of our phone/service bundles. Meaningful numbers of customers may not be willing to adopt our phones and services until they have been proven, both initially and over time, to be viable communications solutions. There is also no way to determine the adoption curve that will be associated with our phone/service bundles. Non-acceptance or delayed acceptance of our phones and/or services could force reductions in contemplated sales prices of our phones, reduce our overall sales and gross margins and negatively affect our operations and prospects.

We may not be able to meet our future capital requirements solely through revenues generated from our operations, and the cost of additional equity or debt capital could be prohibitive or result in dilution to existing securityholders.

Our business model is capital intensive, requiring significant expenditures ahead of projected revenues. Based on our current operating plan, we anticipate that the net proceeds of our previous 2005 financings and this offering, together with anticipated revenues from operations and accounts receivable financing that we believe will be available to us, will allow us to meet our cash requirements for approximately 12 months following the date of this prospectus. If revenues from operations are not sufficient to meet all of our capital needs after such time, or we do not obtain accounts receivable financing, we will need to obtain additional sources of capital. Further, if the assumptions currently underlying our business plan prove incorrect, we may need to seek additional financing prior to that time. In addition, if and when we achieve initial market acceptance for our initial phone/service bundles, we may desire to accelerate our growth to take advantage of increasing demand. Accordingly, we may wish to raise additional capital to offset increased capital expenditures and costs associated with accelerated growth. Any source of additional capital could be in the form of public or private equity or debt financing. Such financing may not be available to us on commercially reasonable terms, or at all. If additional capital is needed and is either unavailable or cost prohibitive, we may need to change our business strategy or reduce or curtail our operations. In addition, if we raise additional funds by issuing equity securities, our securityholders will experience dilution.

Our business may be materially and adversely affected by our high level of debt.

In order to finance the potential growth of our business, we may incur debt, including loans or convertible debt financing, in the future. A high level of debt, arduous or restrictive terms and conditions related to accessing certain sources of funding, poor business performance or lower than expected cash inflows could materially and adversely affect our ability to fund the operation of our business. Other effects of a high level of debt include the following:

• we may have difficulty borrowing money in the future or accessing other sources of funding;

• we may need to use a large portion of our cash flow from operations to pay principal and interest on our indebtedness, which would reduce the amount of cash available to finance our operations and other business activities;

• a high debt level, arduous or restrictive terms and conditions, or lower than expected cash flows would make us more vulnerable to economic downturns and adverse developments in our business; and

• if operating cash flows are not sufficient to meet our operating expenses, capital expenditures and debt service requirements as they become due, we may be required, in order to meet our debt service obligations, to delay or reduce capital expenditures or the introduction of new phones, sell assets and/or forego business opportunities.

Our inability to establish cost-effective sales channels would negatively affect our revenue potential.

While we have secured approved vendor status with numerous national and regional retailers, there is no obligation for these retailers to purchase our phone/service bundles or open their distribution channels to us. We

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currently have only limited internal sales, marketing and distribution capabilities. In order to commercialize our phones and services, we will have to develop a sales and marketing infrastructure and/or rely on third parties to perform these functions. To market directly, we will have to develop a marketing and sales force with technical expertise, which would require the dedication of significant capital, management resources and time. We could also be required to expend significant capital and other resources in developing third-party distribution channels. Further, any agreement to sell our phones and services through a third party could hamper our ability to sell our phones and services to that third party’s competitors. Due to our limited financial resources, we may not be able to establish an appropriate sales force or make adequate third-party distribution arrangements. Our failure to do so would limit our ability to expand sales and would negatively affect our operations, financial results and long-term growth.

Failure to obtain satisfactory performance from our strategic and contract manufacturing partners and other third party vendors on whom we will be dependent for our phones and services could cause us to lose sales, incur additional costs and lose credibility in the market place.

We will rely on third-party sources to manufacture our phones and will rely on third-party communications service providers to provide users of our phones with communications services. The failure of any of these third party providers to perform satisfactorily or the loss of any of them could cause us to fail to meet customer expectations, lose sales and expose us to product and service quality issues. In turn, this could damage our relationships with customers and harm our reputation, business, financial condition and results of operations. If our third-party providers increase their prices and we do not have access to alternative providers, we could be required to raise the price of our phone/service bundles to customers to cover all or part of the increased costs. Our inability to obtain phones and services at the prices we desire could hurt our sales and lower our margins. Generally, we will not own or control the vast majority of the equipment, tools and molds used in the manufacturing process. As a result, difficulties encountered by our third-party manufacturers that result in product defects, production delays, cost overruns or the inability to fulfill orders on a timely basis could harm our operations. Our operations would be adversely affected if we were to lose our relationships with our primary suppliers, if our suppliers’ operations were interrupted or terminated, or if overseas or air transportation services were disrupted, even for a relatively short period of time. We do not expect to maintain a product inventory that is sufficient to provide protection for any significant period against an interruption of the supply of our hardware.

Since our hardware will be sourced from parties outside of the United States, we will face certain risks inherent in conducting business in foreign countries.

We will produce our phones under manufacturing arrangements with third-party manufacturers, including those located in China. Our reliance on our third-party manufacturers to provide personnel and facilities in their country of operations and the potential imposition of quota limitations on imported goods from certain Asian countries expose us to certain economic and political risks, including transportation delays and interruptions, political instability, the business and financial condition of our third party manufacturer, the possibility of expropriation, supply disruption, currency controls, and currency exchange fluctuations, changes in tax laws, tariffs, and freight rates, as well as strikes, work slow downs, or lockouts at ports where our phones arrive in the United States. Protectionist trade legislation in either the United States or foreign countries, such as a change in the current tariff structures, export compliance laws, or other trade policies, could adversely affect our ability to purchase our phones from foreign suppliers at a price that will enable us to sell those phones profitably.

We may not be successful if the Internet is not adopted by a significant number of users as a means of communications.

If the market for IP-based communications and the related services that we will make available does not grow at the rate we anticipate or at all, we will not be able to realize our anticipated revenues with respect to our broadband phones. To be successful, IP-based communications require validation as an effective means of communication and as a viable alternative to traditional phone service. Demand and market acceptance for newly introduced services are subject to a high level of uncertainty. The Internet may not prove to be a viable alternative to traditional phone service for reasons including:

• inconsistent quality or speed of service;

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• traffic congestion on the Internet;

• potentially inadequate development of the necessary infrastructure;

• lack of acceptable security technologies;

• lack of timely development and commercialization of performance improvements; and

• unavailability of cost-effective, high-speed access to the Internet.

A significant number of the companies with which we will compete have substantially greater resources and longer operating histories than we do, and we may not be able to compete with them effectively, even if our phones and services are technically superior.

We engage in an intensely competitive business that has been characterized by price erosion, rapid technological change and foreign competition. We will compete with major domestic and international companies. Many of our competitors have greater market recognition and substantially greater financial, technical, marketing, distribution, and other resources than we possess. Emerging companies also may increase their participation in the phone hardware or communications service markets. Our ability to compete successfully depends on a number of factors both within and outside our control, including:

• the quality, performance, reliability, features, ease of use, pricing, and diversity of our phones and the communications services accessed through them;

• our ability to address the evolving demands of our customers;

• our success in designing and manufacturing new phones, including those implementing new technologies and services;

• the availability of adequate sources of raw materials, finished components, and other supplies at acceptable prices;

• our suppliers’ efficiency of production;

• new product introductions by our competitors;

• the number, nature, and success of our competitors in a given market; and

• general market and economic conditions.

Decreasing telecommunications rates may diminish or eliminate any competitive pricing advantage we may have previously established.

International and domestic telecommunications rates have decreased significantly over the last few years in most of the markets in which we expect to operate, and we anticipate that rates will continue to be reduced in all of the markets in which we expect to do business. Decreasing telecommunications rates may diminish or eliminate any competitive pricing advantage we may have previously been able to establish for the communications services available to our hardware users. Purchasers who select our services to take advantage of the current pricing differential between our rates and rates otherwise available to them for the same service may not purchase our phones if such pricing differentials diminish or disappear. In addition, rate decreases would reduce our gross profit margin from the services we make available to purchasers of our phones and services.

Government regulation and legal uncertainties relating to VoIP telephony could harm our business.

Historically, voice communications services have been provided by regulated telecommunications common carriers. For some of our phones, we will offer voice communications to the public for international and domestic calls using VoIP telephony. Based on specific regulatory classifications and recent regulatory decisions, we believe such services qualify for certain exemptions from telecommunications common carrier regulation in many of our markets. However, the growth of VoIP telephony has led to close examination of its regulatory treatment in many jurisdictions, making the legal status of such services uncertain and subject to change as a result of future regulatory action, judicial decisions or legislation in the jurisdictions in which we expect to

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operate. Established regulated telecommunications carriers have sought and may continue to seek regulatory actions to restrict the ability of companies such as our communications service providers to provide services or to increase the cost of providing such services. In addition, such services may be subject to regulation if regulators distinguish between phone-to-phone telephony service using VoIP and other technologies over privately-managed networks, such as our services, and integrated PC-to-PC and PC-originated voice services over the Internet. Some regulators may decide to treat the former as regulated common carrier services and the latter as unregulated enhanced or information services. Application of new regulatory restrictions or requirements to our service providers could increase our cost of doing business or otherwise prevent or restrict us from delivering our services through our current arrangements. Such regulations could limit our service phone/service bundles, raise our costs and restrict our pricing flexibility, and potentially limit our ability to compete effectively.

If we don’t enhance our phone/service bundles and develop new phones and services to keep pace with rapid technological and consumer demand changes in the communications industry, we may lose any market share we were previously able to establish.

Our industry is subject to rapid changes in technology and consumer demand. We cannot predict the effect of technological changes or the changes of consumer demand on our business. In addition, widely accepted standards have not yet developed for the technologies we use, such as VoIP. We expect that new services and technologies will emerge over time in the markets in which we compete. These new services and technologies may be superior to the services and technologies that we make available, or these new services may render the services and technologies that we make available obsolete or less attractive to consumers. To be successful, we must adapt to our rapidly changing market by continually improving and expanding the scope of services we make available and by developing new services and technologies to meet consumer needs.

The loss of any of the members of our management or certain other key personnel could harm our business.

Our development and operations to date have been, and our proposed operations will be, substantially dependent upon the efforts and abilities of our senior management and technical personnel. Although, prior to the consummation of this offering, we will acquire $3,000,000 of key-person life insurance on the life of Bruce Hahn, our Chief Executive Officer, the loss of his services or the services of other existing key personnel or the failure to recruit and retain necessary additional personnel would adversely affect our business prospects. We cannot provide assurance that we will be able to retain our current personnel or that we will be able to attract and retain necessary additional personnel. Our internal growth and the expansion of our product lines will require additional expertise in such areas as product design, operational management, and sales and marketing. Such growth and expansion activities will increase further the demand on our resources and require the addition of new personnel and the development of additional expertise by existing personnel. Our failure to attract and retain personnel possessing the requisite expertise or to develop such expertise internally could adversely affect the prospects for our success.

Our business may suffer if it is alleged or found that our phones infringe the intellectual property rights of others.

Although we attempt to avoid infringing known proprietary rights of third parties in our product development efforts, from time to time we may receive notice that a third party believes that our phones may be infringing certain trademarks, patents or other intellectual property rights of that third party. We may also be contractually obligated to indemnify our customers or other third parties associated with our phones in the event they are alleged to infringe a third party’s intellectual property rights in connection with our phones. Responding to those claims, regardless of their merit, can be time consuming, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses. Thus, even if our phones do not infringe, we may elect to take a license or settle to avoid incurring such costs. In the event our phones are infringing upon the intellectual property rights of others, we may elect or be required to redesign our phones so that they do not incorporate any intellectual property to which the third party has or claims rights. As a result, some of our phone/service bundles could be delayed, or we could be required to cease distributing some of our phones. Alternatively, we could seek a license for the third party’s intellectual property, but it is possible that we would not be able to obtain such a license on reasonable terms, or at all. Any delays that we might then suffer or additional expenses that we might then incur could adversely affect our revenues, operating results and financial condition.

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Risks related to this offering

We anticipate that our common stock and redeemable warrants will be quoted on the Nasdaq Capital Market, which may limit the liquidity and price of our securities more than if our securities were quoted or listed on the Nasdaq National Market or a national exchange.

We anticipate that our common stock and redeemable warrants will be quoted on the Nasdaq Capital Market. Quotation of our securities on the Nasdaq Capital Market may limit the liquidity and price of our securities more than if our securities were quoted or listed on The Nasdaq National Market or a national exchange.

The representative of the underwriters in the offering will not make a market for our securities which could adversely affect the liquidity and price of our securities.

HCFP/Brenner Securities, the representative of the underwriters in this offering, does not make markets in securities and will not be making a market in our securities. However, we believe certain broker-dealers other than HCFP/Brenner Securities will be making a market in our securities. HCFP/Brenner Securities’ not acting as a market maker for our securities may adversely impact the liquidity and price of our securities.

If our common stock becomes subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be severely limited.

If at any time we have net tangible assets of $5,000,000 or less and our common stock has a market price per share of less than $5.00, transactions in our common stock may be subject to the “penny stock” rules promulgated under the Securities Exchange Act of 1934. Under these rules, broker-dealers who recommend such securities to persons other than institutional investors:

• must make a special written suitability determination for the purchaser;

• receive the purchaser’s written agreement to a transaction prior to sale;

• provide the purchaser with risk disclosure documents which identify risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and

• obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed.

As a result of these requirements, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our stock will be significantly limited. Accordingly, the market price of our stock may be depressed, and you may find it more difficult to sell your shares.

Future sales of our common stock may cause the prevailing market price to decrease and impair our capital raising abilities.

Immediately following this offering, we will have options and warrants outstanding that are exercisable for the purchase of an aggregate of 4,835,666 shares of our common stock, comprised of the 2,800,000 redeemable warrants issued in this offering, the 1,475,666 redeemable warrants that will be issued in exchange for our outstanding private warrants, the option to purchase 280,000 shares (and the 280,000 warrants purchasable under such option, which are exercisable for the purchase of an additional 280,000 shares) issued to the representative. Following this offering, we also will have granted or may grant options and other stock-based awards for up to an aggregate of 600,000 shares of our common stock under our 2005 stock option plan. If, and to the extent, outstanding options and warrants are exercised, you will experience dilution to your holdings. An aggregate of 2,225,597 shares of common stock and 1,475,666 warrants are being registered for resale under the registration of which this prospectus forms a part and such shares and warrants will be immediately saleable into the market. Our officers, directors and principal securityholders have entered into lock-up agreements with the representative by which they have agreed not to sell or otherwise dispose of any shares of our common stock (other than an aggregate of 200,000 shares as a group) for a period of 12 months after the later of the date of this prospectus and

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the date any state or regulatory agency imposed lockups placed upon them have expired. After this lock-up period, however, these securityholders may sell their shares. We cannot predict whether following this offering substantial amounts of our common stock and/or warrants will be sold in the open market in anticipation of, or following, any future divestiture of our shares by these or other of our officers, directors or principal securityholders. In addition, after this offering, we will have more than 28.8 million shares of our common stock authorized and not yet issued or reserved against. In general, we may issue all of these shares without any action or approval by our securityholders. If a large number of shares of our common stock are sold in the open market after this offering, or if the market perceives that such sales will occur as a result of any of the foregoing, the trading price of our common stock could decrease. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional common stock.

As we do not anticipate paying cash dividends, you should not expect any return on your investment except through appreciation, if any, in the value of our common stock.

You should not rely on an investment in our common stock to provide dividend income, as we have not paid any cash dividends on our common stock and do not plan to pay dividends on our common stock in the foreseeable future. Thus, if you are to receive any return on your investment in our common stock it will likely have to come from the appreciation, if any, in the value of our common stock. The payment of future cash dividends, if any, will be reviewed periodically by the board of directors and will depend upon, among other things, our financial condition, funds from operations, the level of our capital and development expenditures, any restrictions imposed by present or future debt instruments and changes in federal tax policies, if any.

Our officers, directors and affiliated entities own a large percentage of our company, and they could make business decisions with which you disagree that will affect the value of your investment.

We anticipate that our executive officers, directors and other 5% or greater securityholders will, in total, beneficially own approximately 28.4% of our outstanding common stock after this offering. These securityholders will be able to influence significantly all matters requiring approval by our securityholders, including the election of directors. Thus, actions might be taken even if other securityholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company, which could cause our stock price to decline.

Our management will have substantial discretion over the use of proceeds of this offering and may not apply them effectively.

Our management will have significant flexibility in applying the net proceeds of this offering and may apply the proceeds in ways with which you do not approve. Although the proposed allocation of the net proceeds of this offering represents our management’s best estimate of the expected utilization of funds to finance our activities in accordance with our management’s current objectives and market conditions, the failure of our management to apply these funds effectively could materially harm our business.

Our founders paid a nominal sum for their shares and, accordingly, you will experience immediate and substantial dilution from the purchase of our common stock.

The difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering constitutes the dilution to you and the other investors in this offering. The fact that our founders acquired their shares of common stock at a nominal price has significantly contributed to this dilution. New investors will incur an immediate and substantial dilution of approximately 50% or $2.55 per share (the difference between the pro forma as adjusted net tangible book value per share of $2.50 and the initial offering price of $5.05 per share).

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Provisions in our corporate documents and our certificate of incorporation and bylaws, as well as Delaware General Corporation Law, may hinder a change of control.

Provisions of our certificate of incorporation and bylaws, as well as provisions of the Delaware General Corporation Law, could discourage unsolicited proposals to acquire us, even though such proposals may be beneficial to you. These provisions include:

• a classified board of directors that cannot be replaced without cause by a majority vote of our securityholders;

• our board of director’s authorization to issue shares of preferred stock, on terms as the board of directors may determine, without securityholder approval; and

• provisions of Delaware General Corporation Law that restrict many business combinations.

We are also subject to the provisions of Section 203 of the Delaware General Corporation Law, which could prevent us from engaging in a business combination with a 15% or greater securityholder for a period of three years from the date it acquired that status unless appropriate board or securityholder approvals are obtained.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes “forward-looking statements” based on our current expectations, assumptions, estimates and projections about our business and our industry. They include statements relating to, among other things:

• future revenues, expenses and loss or profitability;

• the completion and commercialization of one or more of our phones;

• projected capital expenditures;

• competition;

• the effectiveness, quality and cost of our intended phones and services;

• anticipated trends in the telecommunications industry; and

• the marketability of our bundled communications solutions as a cost effective, easily deployable and comparable or higher quality alternative to existing solutions.

You can identify forward-looking statements by the use of words such as “may,” “should,” “will,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions which are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. In evaluating these forward-looking statements, you should carefully consider the risks and uncertainties described in “risk factors” and elsewhere in this prospectus. These forward-looking statements reflect our view only as of the date of this prospectus. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements and risk factors contained throughout this prospectus.

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USE OF PROCEEDS

We estimate that the aggregate net proceeds to us from the sale of the 2,800,000 shares of our common stock and 2,800,000 redeemable warrants in this offering will be approximately $12,332,000, after deducting the underwriting discount and expenses and approximately $520,000 of estimated offering expenses that will be payable by us from the proceeds of this offering.

We expect to use these net proceeds for the following purposes:

Contract manufacturing of phones and related components	$	9,250,000
Sales and marketing, including salaries of personnel		800,000
Product enhancement and new product development		350,000
Tooling		150,000
Purchase and/or lease of office equipment		150,000
Working capital and general corporate purposes		1,632,000
TOTAL	$	12,332,000

We expect that the net proceeds from this offering will enable us to:

• expand manufacturing and commercial distribution of our multi-handset, cordless phones bundled with Pay N’ Talk prepaid long distance provided by IDT and our digital, multi-handset broadband phones bundled with VoIP services provided by SunRocket;

• develop enhanced product features and additional service features and design and develop new phone/service bundles; and

• expand our sales and marketing capabilities.

We intend to use approximately $9,250,000 of the net proceeds of this offering for the contract manufacturing of our multi-handset cordless phones for bundling with Pay N’ Talk prepaid long distance services, and our digital, multi-handset broadband phones for bundling with VoIP services, as well as for the purchase of related components and the shipping and warehousing of completed inventory. Manufacturing of our phones and components will be done to our specifications based upon our designs and will be provided on a contract basis by overseas providers. Although we intend to carry inventory, the actual amount of proceeds expended on our design, engineering and manufacturing efforts and the allocation of such proceeds between our phone/service bundles will depend on actual demand for our phones.

We intend to use approximately $800,000 of the net proceeds of this offering to support and expand our sales and marketing infrastructure and activities. These expenses shall include (i) the payment of fees to Future Marketing, LLC (a multi-person marketing and sales company under common ownership with The Future, LLC, one of our founding shareholders) that, among other things, assists in the development and execution of our marketing plans, manages our accounts, assists in our product development and handles our back-office customer functions, (ii) the payment of salaries and benefits for existing and newly hired marketing, sales and project management personnel, including certain salaries accrued since July 1, 2005, (iii) costs associated with the development of packaging, advertising, retail displays and collateral marketing materials and (iv) costs related to the establishment of sales channels into targeted retail outlets.

We intend to use approximately $350,000 of the net proceeds of this offering for product enhancement and development and related activities. This amount includes approximately $275,000 for sourcing and internal design of product improvements and new phones, as well as for external engineering and product development conducted in China through companies we presently utilize for manufacturing services, and approximately $75,000 for technology and support services in the United States to coordinate our overseas development efforts.

We intend to use approximately $150,000 of the net proceeds of the offering for the design and development of tools (molds) in cooperation with our third-party contract manufacturers of our next generation of multi-handset Pay N’ Talk phones and multi-handset broadband phones.

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We intend to use approximately $150,000 of the net proceeds of this offering for the purchase and/or lease of computers and other equipment and for the installation of computer systems and office equipment at our offices in Atlanta, Georgia, City of Industry, California and our overseas office in Shanghai, China.

The remaining net proceeds of this offering will be allocated to working capital and general corporate purposes, including payments to our service providers, office space lease payments, directors and officers insurance premiums, salaries and benefits for executive and administrative personnel, including travel and associated expenses, and other general and administrative costs.

The above represents our best estimate of the allocation of net proceeds of this offering. We may, as our development and marketing efforts progress, find it necessary to reallocate a portion of the proceeds within the above-described categories or use portions of the proceeds for other purposes, including for acquisitions of complementary businesses, phones or technologies; however, we have no current agreements or commitments to make any potential acquisition. In addition, our estimates may prove to be inaccurate, new phones or product changes may be undertaken which may require us to modify manufacturing requirements and/or product delivery schedules, or which may require additional expenditures and/or unforeseen expenses may occur.

Based on current assumptions relating to our business plan, we anticipate that the net proceeds of this offering, together with certain baseline levels of anticipated revenues and accounts receivable financing, will satisfy our capital requirements for approximately 12 months following the consummation of this offering. These assumptions include the following:

• our initial phones are produced, shipped and delivered on schedule;

• expected customer purchase commitments for phones are received;

• end users who purchase our bundled services remain active users of such services at anticipated rates;

• we are able to secure necessary accounts receivable financing; and

• customers pay for our phones in a timely manner.

If we determine to accelerate our business plan or if our plans otherwise change or our assumptions prove inaccurate, we may need to seek financing sooner than currently anticipated, incur additional financing or reduce or curtail our operations. We cannot assure you that financing will become available as and when needed.

If the underwriters exercise their over-allotment option in full, we will realize additional net proceeds of approximately $1,970,640, which will be added to our working capital. All or a portion of these over-allotment proceeds may be used to acquire complementary businesses or technologies or otherwise obtain the right to use complementary technologies that could broaden or enhance our phones. However, we have no current agreements or commitments to make any potential acquisition. In addition, if the 2,800,000 redeemable warrants offered pursuant to this prospectus and the 1,475,666 redeemable warrants issued in exchange for our private warrants are exercised, we will realize proceeds related to their exercise of approximately $21,592,113 before payment of any solicitation fees that may be due. If and when we receive these additional proceeds, they are also expected to be allocated to our working capital. See “Underwriting.”

We will invest proceeds not immediately required for the purposes described above principally in United States government securities, short-term certificates of deposit, money market funds or other short-term interest-bearing investments.

DIVIDEND POLICY

We have never paid any cash dividends and intend, for the foreseeable future, to retain any future earnings for the development of our business. Our future dividend policy will be determined by the board of directors on the basis of various factors, including our results of operations, financial condition, capital requirements and investment opportunities.

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DILUTION

The difference between the public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering constitutes the dilution to investors in this offering. Net tangible book value per share is determined by dividing our net tangible book value, which is our total tangible assets less total liabilities, by the number of outstanding shares of our common stock.

At June 30, 2005, our net tangible book value was a deficit of approximately $(174,395), or $(0.09) per share of common stock. Pro forma tangible net book value per share at June 30, 2005 was $1,557,985 or approximately $0.78 per share of common stock.

After giving effect to the sale of 2,800,000 shares of our common stock and 2,800,000 redeemable warrants (and the deduction of the underwriting discount and expenses and estimated offering expenses of approximately $1,948,000), and the conversion of $2,163,500 principal amount of our outstanding notes (and all interest due thereon, estimated at approximately $86,000) into 749,930 shares of common stock, our net tangible book value as of June 30, 2005 would have been approximately $13,889,985 or $2.50 per share, representing an immediate increase in our net tangible book value of $1.72 per share to the existing securityholders and an immediate dilution of $2.55 per share or approximately 50% to new investors.

The following table illustrates the dilution to the new investors on a per-share basis:

Public offering price per share			$	5.05
Pro forma net tangible book value per share as of June 30, 2005	$	0.78
Increase per share attributable to new investors in this offering		1.72
Pro forma as adjusted net tangible book value per share after the offering				2.50
Dilution per share to new investors			$	2.55

The numbers in the above table do not take into consideration the common stock issuable upon the exercise of the redeemable warrants, the representative’s purchase option and the options and other stock-based awards granted under our 2005 stock option plan that will be outstanding after the offering.

The following table shows on an as adjusted basis, as of June 30, 2005, the total consideration paid and the average price per share paid by our existing stockholders (including for such purposes the shares to be issued upon the conversion of outstanding notes and accrued interest thereon upon completion of this offering) and by the investors in this offering, before deducting the underwriting discount and expenses and related offering expenses.

	Shares Purchased			Total Consideration				Average Price Per Share
	Number	Percentage		Amount		Percentage
Existing securityholders	2,749,930	49.5	%	$	2,257,929	13.8	%	$	0.82
New investors	2,800,000	50.5	%	$	14,140,000	86.2	%	$	5.05
	5,549,930	100.0	%	$	16,397,929	100.0	%

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization at June 30, 2005:

• on an actual basis;

• on a “pro forma” basis to give effect to our sale after such date of $2,113,500 principal amount of our notes and 1,409,000 private warrants and our receipt of the net proceeds therefrom; the net proceeds of $1,732,380 have been recorded as additional paid in capital due to the value assigned to the private warrants issued with the notes and the value of their beneficial conversion feature.

• on a “pro forma as adjusted” basis to give effect to the pro forma adjustments and to our receipt of the net proceeds from our sale of 2,800,000 shares of common stock and 2,800,000 redeemable warrants in this offering and the application of the net proceeds therefrom as described under “Use of Proceeds;” and the assumed conversion of $2,163,500 principal amount of our outstanding notes and all accrued interest thereon (estimated at approximately $86,000) into 749,930 shares of common stock. Accumulated deficit reflects additional interest expense of $2,249,000 (original issue discount) from the immediate conversion of the notes into common stock upon consummation of the initial public offering plus the write-off of deferred financing costs of $113,518.

In addition, the following table should be read in conjunction with our financial statements and the accompanying notes, which are contained later in this prospectus.

	As of June 30, 2005
	Actual			Pro forma			Pro forma as adjusted
Cash and cash equivalents	$	50,780		$	1,783,160		$	14,115,160
Stockholders’ equity:
Common stock, $.001 par value, 20,000,000 shares authorized; 2,000,000 shares issued and outstanding, actual; 2,000,000 shares issued and outstanding, pro forma; 5,549,930 shares issued and outstanding, pro forma as adjusted		2,000			2,000			5,550
Additional paid-in capital		132,429			1,864,809			16,442,259
Accumulated deficit		(195,306	)		(195,306	)		(2,557,824	)
Total stockholders’ equity (deficit)		(60,877	)		1,671,503			13,889,985
Total capitalization	$	(60,877	)	$	1,671,503		$	13,889,985

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SELECTED FINANCIAL DATA

The following selected financial data for the period from inception through June 30, 2005 and at June 30, 2005 is derived from our audited financial statements included elsewhere in this prospectus. You should read this information with our financial statements and the related notes and the section entitled “Plan of Operations,” all of which are included elsewhere in this prospectus.

Statement of Operations Data:	Fiscal year ended June 30, 2005			Fiscal year ended June 30, 2004			For the period from June 16, 2003 (inception) to June 30, 2005
Total revenues	$	—		$	—		$	—
Expenses:
Marketing and development		84,813			22,058			106,871
General and administrative		84,435			3,000			87,435
Interest expense		1,000			—			1,000
		170,248			25,058			195,306
Net loss	$	(170,248	)	$	(25,058	)	$	(195,306	)
Net loss per common share:
Basic and diluted	$	(0.09	)	$	(0.01	)
Weighted average shares outstanding:
Basic and diluted		1,920,870			1,729,610

	As of June 30, 2005
Balance Sheet Data:	Actual
Working capital (deficit)	$	(60,877	)
Cash and cash equivalents	$	50,780
Total assets	$	164,298
Total liabilities	$	225,175
Shareholders’ equity (deficit)	$	(60,877	)

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PLAN OF OPERATIONS

You should read the following plan of operations in conjunction with our financial statements and related notes and the other financial information included in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. These and other factors, including those set forth under “Risk Factors,” may cause actual results to differ materially from those projected in the forward-looking statements.

Overview

We are a development stage company that was incorporated in Delaware in June 2003. Our primary business is the marketing and sale of broadband phone communications (Voice-over-Internet-Protocol or “VoIP”) services and/or prepaid long distance services that are bundled with our digital, cordless multi-handset phones. We sell our communications phone/service bundles under our “American Telecom”, “ATS” or “Pay N’ Talk” brand names. Our digital spread spectrum (“DSS”) telecom platform is designed to enable seamless access to the communications services provided by our strategic partners. Our phones will be marketed to the retail mass market through a variety of distribution channels, including office superstores, electronics stores, mass retailers, department stores and Internet-based retail distribution outlets.

Since our inception, we have focused on development activities, principally in connection with creating customized communications services to be provided by our strategic partners to users of our phones, securing relationships with the third-party suppliers that will manufacture our phones to our specifications and developing retail and other distribution channels.

Recently, we directed our supplier to commence manufacturing of our initial VoIP and prepaid long distance service phones and have been funding these initial manufacturing efforts through our lender relationships and from the net proceeds of our private placements of notes and private warrants conducted during the period from June 2005 through September 2005. In September 2005, we received our first purchase orders, initiated production of our prepaid long distance service phones and shipped these phones to a national retailer. We expect that our prepaid long distance phones will be available at additional select retailers in limited quantities in October 2005. We expect that the initial production of our broadband phones will be completed and shipped and available at select retailers in limited quantities prior to the end of 2005. Since we only recently commenced commercial operations, we have not yet generated meaningful revenues. As a result, we have negative working capital and our auditors have issued an opinion in connection with our June 30, 2005 financial statements which expresses substantial doubt about our ability to continue as a going concern without adequate financing.

We will require the net proceeds of this offering (approximately $12,332,000) to continue and expand commercial distribution of our phone/service bundles, develop and enhance product and service features and expand our contract manufacturing, sales and marketing capabilities and to generally fund our operations. We believe that the proceeds of our prior private placements and this offering, together with certain minimum levels of anticipated revenues and accounts receivable financing that we believe will be available to us, will be sufficient to fund our capital requirements for approximately 12 months. If additional funds are required either because our plans change or our assumptions prove to be inaccurate or, if after 12 months, we are not generating revenues sufficient to meet our capital requirements, we would likely seek additional funds through equity or debt financings, including through a possible call of our redeemable warrants.

Manufacturing

Since our inception, we have concentrated our efforts on developing relationships with overseas suppliers that have extensive experience in manufacturing telecommunications hardware. We believe that we have secured ready access to sufficient production capacity to meet our anticipated requirements. We intend to use approximately $9,250,000 of the net proceeds of this offering for the contract manufacturing of our multi-handset cordless phones for bundling with Pay N’ Talk prepaid long distance services, and our digital, multi-handset broadband phones for bundling with VoIP services, as well as for the purchase of related components, and the shipping and warehousing of inventory.

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Manufacturing of our phones and components will be done to agreed upon specifications based upon our feature functions and will be provided on a contract basis by overseas providers. We or our agents intend to perform quality control testing at our manufacturer’s overseas production facilities. Although we intend to carry inventory to meet anticipated reorders, generally we expect to correlate our inventory with actual commitments and projections from retailers.

Sales and Marketing

Since our inception, we have concentrated our efforts on establishing retail sales channels through which we will sell our phones upon their commercial introduction. We have incurred aggregate expenses of $106,871 in connection with these efforts from our inception through June 30, 2005, and have continued and will continue to incur additional, material expenses in this regard. As of the date of this prospectus, we have secured approved vendor status with more than ten national and regional retail channels. However, there is no obligation for these retailers to purchase our phone/service bundles. We will sell our phones through these and other sales channels using our internal sales force, including our Chief Executive Officer, Bruce Hahn, through Future Marketing, a multi-person marketing and sales consulting firm which is an affiliate of our Company, and through independent sales representatives. We intend to support our sales efforts through strategic marketing programs with our source providers and through promotional campaigns with our potential customers, including co-op marketing programs, in-store special promotions and point-of-purchase displays. We intend to use approximately $800,000 of the net proceeds of this offering for our sales and marketing activities during the next 12 months, including:

• salaries for existing and newly hired sales and project management personnel;

• costs associated with the development of packaging, advertising, retail displays and collateral marketing materials;

• costs related to the establishment of sales channels into targeted retail outlets; and

• fees to Future Marketing.

We expect, however, that if our phones are successfully sold through our distribution channels, we will increase the allocation of our available funds in order to accelerate and enhance our marketing and sales efforts.

Design Enhancement and Product Development

Since our inception through June 30, 2005, we have incurred nominal expenses in connection with the design, engineering and development of our initial phones. However, we intend to use approximately $350,000 of the net proceeds of this offering for product enhancement and development and related activities. This amount includes approximately $275,000 for sourcing and internal design of product improvements and new phones, as well as for external engineering and product development conducted in China through companies we are utilizing for manufacturing services, and approximately $75,000 for technology and support services in the United States to coordinate our overseas development efforts.

Equipment and Tooling

To date, we have not incurred expenses in connection with the development of tools and molds for the production of our initial phones. However, we intend to use approximately $150,000 of the net proceeds of this offering for equipment necessary for our production activities, including the design and development of tools (molds) in cooperation with our third-party contract manufacturers. We also intend to use approximately $150,000 for the purchase and/or lease and installation of computer systems and other office equipment at our office in City of Industry, California and offices we intend to open in Atlanta, Georgia and Shanghai, China.

Product Revenue

We will market our phone/service bundles through major retail distribution outlets and expect to generate revenues through the sale of our phones and the receipt of a portion of the ongoing revenues generated by our customers’ use of the communications services bundled with our phones. As part of our relationship with our retail distribution channels, we will typically share with them a portion of our service revenues.

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General and Administrative Support

Although we were formed in June 2003, we only began to compensate our executives in June 2005 and have incurred nominal costs for administrative support. For the period from our inception (June 16, 2003) through June 30, 2005, we incurred $87,435 in general and administrative expenses. We have not incurred any expenses for leased space prior to this offering. We intend to use approximately $1,632,000 of the net proceeds of this offering for general corporate purposes, including salaries for executives and administrative personnel.

Results of Operations

Our efforts since inception have been focused on placing us in a position to make initial shipments of our phones, which we commenced in mid-September 2005. Since we did not generate any revenues through June 30, 2005 and have generated only nominal revenues since that date, our historical financial information is not indicative of our future financial performance.

For the period from our inception through June 30, 2005, we have incurred aggregate net losses in our development stage, and had an accumulated deficit of $195,306 as of June 30, 2005. We expect our losses to increase during the short term as we transition from development stage to commercial operations and initiate distribution of our phone/service bundles.

Liquidity and Capital Resources

In assessing our liquidity based upon the receipt of approximately $12,332,000 of net proceeds, we have reviewed our cash commitments, capital expenditures, available accounts receivable financing and our general working capital requirements. We currently estimate that the net proceeds of our prior private placements and this offering, together with certain minimum levels of anticipated revenues and accounts receivable financing that we believe will be available to us, will be sufficient to enable us to commence the shipment of our phones and implement our business plan for approximately 12 months.

In light of the competitive nature of the telecommunications industry and the evolution of new phones and services from time to time, any estimate as to our liquidity and overall financial condition may change over time. Some factors that could affect our liquidity and overall financial condition are the timing of our introduction of our phone/service bundles, customer acceptance and usage of our phone/service bundles and competition from existing service providers and other telecommunications companies. To the extent that circumstances evolve in an unfavorable manner, we may generate lower revenues then we currently anticipate and, as a result, we would experience reduced cash flow and our ability to obtain sufficient accounts receivable financing would be hampered. In such event, we may be required to seek additional equity and/or debt financing, which may not be available to us on satisfactory terms or at all. We also could be required to curtail or cease operations.

In June 2005, we issued and sold an aggregate of $50,000 in principal amount of our 6% notes to our Chairman of the Board and another unaffiliated person. During the period July 2005 through September 2005, we issued and sold in a series of private transactions an aggregate of $2,113,500 in principal amount of our 8% notes. All of the notes rank senior to all of our indebtedness, other than certain permitted indebtedness, which is defined as our financing arrangements with banks or other financial institutions existing or proposed as of June 28, 2005. Payment of the notes is collateralized by a lien upon, and security interest in, all of our assets, subject only to the prior lien of such permitted indebtedness. The notes are convertible, at any time, at the option of the holder, and automatically upon consummation of this offering, into shares of our common stock at a conversion price of $3.00 per share assuming this offering is consummated on the terms described in this prospectus. The purchasers of the 6% notes received an aggregate of 66,666 private warrants and the purchasers of the 8% notes received an aggregate of 1,409,000 private warrants in connection with their purchase of the notes. The private warrants are currently exercisable through July 14, 2011. Upon consummation of this offering, all of the private warrants will be automatically converted into a like number of warrants of the same class as the redeemable warrants sold in this offering. The net proceeds of such notes, $1,732,380, will be recorded as additional paid in capital due to the value assigned to the private warrants issued with the notes and the value of the beneficial conversion feature of the notes. A non-cash interest expense of approximately $2.2 million resulting from the amortization of the original issue discount will be incurred upon conversion of the notes into common stock at the consummation of the initial public offering.

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In order to facilitate the purchase and financing of our inventory, in June and July 2005 we entered into arrangements with Gain Star International Limited, a Hong Kong-based lender, and CIT Commercial Services, respectively. Under these arrangements, Gain Star acts as our agent for the purchase of our phones from manufacturers in China. Gain Star will fully finance these purchases if they are backed by accounts receivable that are approved and guaranteed by CIT. Under this arrangement, CIT does not advance funds to us or Gain Star. Instead, it makes payments to us and Gain Star only upon collection of the applicable accounts receivable. CIT guarantees payment to us and Gain Star only after a customer’s failure and inability to pay after the longest applicable maturity date.

For purchases that are not backed by CIT approved and guaranteed accounts receivable, Gain Star requires us to pay a 20% deposit to them in the form of a standby letter of credit or cash deposit towards the purchase price and requires us to pay the remaining amounts due and owing typically on shipment of our phones. Gain Star permits us to engage in this arrangement for up to approximately $500,000 in purchases.

In addition to its direct costs for the purchase of our inventory, Gain Star also requires us to pay certain fees, commissions and charges and to reimburse it for certain of its expenses as compensation for its services as our agent. As compensation for its services, CIT requires us to pay certain factoring fees and charges and to provide it with certain credits, allowances, trade discounts and cash discounts on the face value of the accounts receivable it guarantees.

Significant Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our significant accounting policies are described in Note 2 to the Financial Statements. The application of these policies requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis we will evaluate our estimates including those related to revenue recognition, research, engineering and development, bad debts.

Deferred financing costs

Deferred financing costs consist primarily of professional fees incurred through the balance sheet date that are related to the private debt placement and will be amortized over the expected term of the financing or expensed if not completed.

Revenue recognition

We are a development stage enterprise, did not generate any revenues through June 30, 2005 and only recently commenced shipment of our phones. Revenues from sales of phones will be recognized in the period the phones were shipped to customers. Revenue sharing income generated by subscriber usage and paid to us by carriers will be recognized in the period the usage occurred. Additionally, revenue resulting from carrier agent and co-op fees will be recognized in the period the subscriber activates the phone on the carrier’s network.

Advertising

Costs of advertising will be expensed as incurred, and recorded as marketing and development expenses.

Net loss per share

Basic loss per share includes no dilution and is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period.

Income taxes

We follow the liability approach under which deferred taxes are determined based upon the differences between the financial statement and tax base of assets and liabilities using enacted rates in effect in the years in which the differences are expected to reverse. Valuation allowances are provided against deferred tax assets when management is uncertain as to the ultimate realization of the asset.

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Use of estimates

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

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BUSINESS

General

We offer broadband phone (Voice-over-Internet-Protocol or “VoIP”) and prepaid long distance communications services that are bundled with our digital, cordless multi-handset phones. We sell our phone/service bundles through major retailers under our “American Telecom”, “ATS” or “Pay N’ Talk” brand names. Our digital spread spectrum (“DSS”) telecom platform is designed to enable seamless access to the communications services provided by our strategic partners. Our strategic partners include SunRocket, Inc., an emerging leader in the provision of VoIP services, for our VoIP service offering, and IDT Corporation, a leading communications carrier for our prepaid long distance service offerings. Under the agreements with each of these service providers, we will receive a percentage of their monthly service revenues generated by users of our service offerings, in addition to the revenues we generate through the sale of our phone hardware. We are initially targeting the U.S. residential and SOHO markets.

Since our formation in 2003, we devoted our resources to creating our initial phone/service bundles and establishing contractual relationships with our strategic communications services and manufacturing partners. Recently, we commenced our initial marketing efforts, focusing on securing approved vendor status with numerous national and regional retail channels. We received our initial purchase orders in September 2005 and initial shipments of our phones bundled with our prepaid long distance service offering arrived in retail stores in October 2005.

Industry Overview

The residential and SOHO communications service markets are characterized by a demand for cost-efficient and feature-added communications services. We believe that consumers in this marketplace readily seek to avail themselves of technologies and solutions that:

• drive down and/or control their communications costs; and

• serve to enhance their quality of life and productivity.

VoIP services

VoIP is a technology that can be used instead of the traditional phone network for the delivery of voice-based communications services. VoIP technology translates voice into data packets, transmits the packets over data networks, including the Internet, and converts the data packets into voice at the destination. Unlike traditional phone networks, VoIP does not use dedicated circuits for each phone call; instead, the same VoIP network can be shared by multiple users for voice, data and video simultaneously.

The VoIP industry has grown dramatically from the early days of calls made through personal computers. Technology research firm Jupiter Research reports that the number of users of VoIP telephony services has grown to approximately 3 million in the United States in 2005 and projects that there will be approximately 27 millions users in the United States by 2009.

We believe that the growth of VoIP will continue to be driven primarily by:

• increasing consumer demand worldwide for lower cost phone service;

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

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

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

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

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Prepaid long distance services

Prepaid long distance services, such as those available via debit and rechargeable calling cards, are well established and used throughout the world. We believe consumers that typically use prepaid long distance services as their primary means of making long distance phone calls do so because of the competitive rates and reliable service afforded thereby and because such prepaid services afford easy monitoring and budgeting of long distance spending. Industry research indicates that in the United States, prepaid long distance services are most frequently used by businesses seeking to control employee communications expense and immigrants and members of ethnic communities seeking to keep in touch with family members and friends located in their country of origin.

Our phones and services

Our VoIP offering

Our broadband phone/service bundle provides customers with a multi-handset, plug-and-play, broadband phone, a phone number and VoIP-based communications services, including inbound and outbound local calling service, long distance service, enhanced 911 emergency calling (which routes calls directly to emergency operators along with caller address information and automatic phone number identification) and other standard and competitive services.

Our VoIP services in the United States will be provided by SunRocket. SunRocket is an emerging VoIP communications service provider that was founded by former executives of MCI, Inc. Under the terms of our agreement with SunRocket, purchasers of our broadband phones will be afforded an exclusive, low-cost rate plan. Our customers will be offered additional low-cost rate plans marketed by SunRocket to its customers. We will receive an agreed-upon percentage of SunRocket’s monthly service revenues generated by users of our broadband phones, whether our customers utilize the exclusive plan afforded us by SunRocket or another SunRocket plan.

Most currently available VoIP services require a combination of an adaptor, modem and/or router and often require cable companies and other service providers to engage in varying degrees of rewiring in the customer location in order for the VoIP service to be accessible throughout such location. Our broadband phone, however, is plugged directly into a customer’s Internet router, without use of an adaptor or additional hardware, and does not require any complex rewiring. Our broadband phone may be used in rooms other than those with an Internet connection by carrying the wireless handset from room to room in the same manner as traditional cordless phones. Our multi-handset design allows customers to add additional handsets to their system and situate extensions in other rooms without any rewiring.

Our VoIP phone/service bundle can easily be installed by customers, requires no installation appointments with the cable company or other service provider and provides services at what we believe are among the lowest rates currently available. Accordingly, we believe our VoIP phone/service bundle represents one of the easiest and most cost-efficient means for customers to acquire VoIP service.

The multi-handset design allows customers to add additional handsets to their system with no additional wiring. The additional handsets communicate with the master handset’s base unit and only require an AC outlet for their base charger. In the future, we expect to have other broadband phones. We expect that these additional phones may include such features as an integrated router, additional ports for external phones and fax machines, Wi-Fi technologies and other technologies to simplify further the broadband phone experience of our customers.

Our prepaid long-distance offering

Our phones that are bundled with long distance service are marketed in the United States under the brand “Pay N’ Talk.” Prepaid long distance service on these phones is accessible, on demand, with the press of the LDS (Long Distance Service) auto-key on the handset dial pad. This process provides the user with an immediate and seamless connection to prepaid long distance services provided by IDT. As a promotion, we provide a specified number of initial minutes of long distance service at no additional charge to the customer as part of the phone/service bundle.

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Under our agreement with IDT, prepaid long distance service is offered to our customers at a current rate of 3.9 cents per minute for domestic calls, inclusive of all fees and taxes. International calling is available at low, competitive per-minute rates under a rate plan that IDT created for our customers. Through IDT, our customers will be able to purchase a specified number of minutes or create an automatic recharge account by which additional minutes are added whenever their account balance falls below pre-set limits.

Following activation the customer will be able to make long distance calls at no additional charge until the promotion balance reaches zero. The customer will have the option of adding a cash value to their account using a credit card or checking account, and IDT will give the customer the ability to set an automatic recharge for their account at a pre-set value each time their account balance falls below a pre-set limit in addition to pay-on-demand.

Each time the customer chooses to make a long distance call they simply press the LDS auto-key on the American Telecom phone. When the customer presses the LDS auto-key, the phone goes off-hook producing a dial-tone and the customer is instantly and seamlessly connected to the IDT prepaid platform. At that point, the customer will be able to make a call to the extent that the customer has a positive account balance. Whenever customer balances are low, they will be prompted to recharge their account and directed to the platform or a live operator to process their payment. This is an optional service that will not require the users to change their long distance carriers.

Strategic service providers

SunRocket

We have an agreement with SunRocket under which SunRocket will provide users of our broadband phones with VoIP communications services. Under our agreement with SunRocket, we design and configure our broadband phones to work with SunRocket’s VoIP communications services and have been granted the right to include, at our option, SunRocket’s marks and logos on our broadband phones and/or related packaging and marketing materials. These VoIP phone/service bundles will be marketed and distributed by us through mass market retail channels. During the term of this agreement, subject to certain conditions, SunRocket will not provide these services to any other manufacturer or distributor for use with cordless landline phones sold in specified retail outlets where our broadband phones are available or for which we have contracted for our broadband phones to be available. SunRocket will offer purchasers of these VoIP phone/service bundles at least a prescribed minimum number of different service plans at set rates, including plans that have been created exclusively for our customers. We retain the right to bundle similar communications services provided by other service providers with our phones.

For each VoIP services account activated by users of our broadband phones, we will receive a certain defined initial payment from SunRocket. In addition, we will receive ongoing monthly commissions equal to defined percentages of the net revenues received by SunRocket from end users of our broadband phones, as well as certain retail marketing co-op fees and contributions for consumer rebates in prescribed circumstances. We have the right to designate numerous identified retailers as “strategic accounts.” In the event we designate one or more retailers as “strategic accounts,” we and SunRocket may each be obligated to commit to fund certain prescribed amounts for marketing activities in connection with such strategic accounts that we select.

The initial term of this agreement expires on the third anniversary of the date of activation of the first account of an end user using one of these phones, or earlier in certain circumstances. We have the option to extend the term of this agreement for an additional one year if we deliver prescribed minimum service account activations during the initial term.

IDT

We have an agreement with IDT Puerto Rico & Co. under which IDT provides users of our prepaid long distance phone/service bundles with prepaid long distance communications services. During the term of this agreement, IDT will not provide these services to any other manufacturer or distributor for use with cordless landline phones sold in retail outlets where our phones are available or for which we have contracted for our phones to be available. Under our agreement with IDT, we design and configure these phones to work with IDT’s

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prepaid long distance communications services platform designed to our specifications and have been granted the royalty-free right to use IDT’s marks on related packaging and marketing materials. These bundled phone/prepaid long distance service offerings will be marketed and distributed by us in such manner and through such channels as we determine in our discretion. IDT will offer purchasers of these bundled phone/prepaid long distance service offerings calling rates which we believe to be among the lowest generally available.

Under the terms of this agreement, we have certain upfront payment obligations that we must make to IDT for promotional minutes upon activation of each customer account. IDT handles all customer service interaction, billing the customer for all services and remitting a portion of the net revenues to us on a regular basis. IDT is restricted from marketing any other services to our customers without our consent and cooperation, and we would expect to negotiate similar commission arrangements with respect to such other services in connection with giving our consent. We also must deliver certain minimum account activations, otherwise IDT will be entitled to, among other things, terminate the agreement. We retain the right to bundle similar communications services provided by other service providers with our phones. We will receive an agreed-upon percentage of IDT’s monthly service revenues generated by users of our telephones.

The initial term of this agreement expires on the second anniversary of the date of activation of the first account of an end user using one of these phones, or earlier in certain circumstances. The agreement will automatically and continually renew for additional one-year periods unless terminated by either party by written notice given at least 30 days prior to the end of the then current term.

Our strategy

We believe that currently there are a limited number of providers of bundled communications phone/service offerings through mass market retail. Our objective is to expand and become a leader in the market for bundled communications phone/service offerings by combining our phones with attractively priced service offerings, thereby creating a compelling proposition for value purchasers. Key elements of our strategy include:

• developing high-quality end user communications hardware that enhances the accessibility and utility of the communications services with which our hardware is bundled;

• expanding our existing relationships with SunRocket and IDT by expanding the communications services that are bundled with our hardware, expanding our joint marketing initiatives and increasing the retail distribution channels which we provide;

• establishing relationships with other providers of communications services inside and outside of the United States;

• obtaining retail shelf space and Internet presence for our bundled communications phone/service offerings by utilizing our management’s broad retail experience and providing retailers the opportunity to share in our service revenues; and

• utilizing our management’s extensive manufacturing and sourcing experience (particularly in China) to expand and diversify our supplier base for phone hardware, services and technology in order to maximize cost efficiency and support the diversification of our bundled communications phone/service offerings.

Design and development

Phones

Value-priced consumer electronics, including phones, typically have common technical features. Competition in this segment is therefore more dependent on product design, visual appeal and price. As such, we recognize that superior product design provides an important competitive advantage. We believe that, in addition to our bundled telecommunications services, the superior design and style of our phones will distinguish them from those of our competitors in the value-priced category and help drive consumer purchasing decisions.

We believe that the enhancement and extension of our existing phones and the development of new phones will contribute to our future growth and will be necessary for our success. In cooperation with our manufacturers, we will regularly focus on product design. We also will evaluate new ideas and seek to develop new phones and improvements to existing phones to satisfy industry requirements and changing consumer preferences.

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Our initial phones incorporate design and manufacturing specifications that adapt and implement available technology features in order to satisfy anticipated customers’ requirements for quality, product mix and pricing. We will work closely with both retailers and suppliers to identify trends in consumer preferences and to generate new product ideas as needed.

We also will highlight the design and style features of our phones with detailed descriptions and illustrations on packaging, which we believe will further distinguish our phones from those of our competitors. We believe that this packaging strategy will make our phones more attractive to consumers and will facilitate an understanding of the product features in retail locations where salespersons may not be available to provide detailed explanations and demonstrations.

Services

We have worked with SunRocket to develop new rate plans for VoIP service and enhance their service offering and capability to service our customers.

We have similarly worked with IDT to design our Pay N’ Talk prepaid long distance phone/service bundles. An important part of this joint effort was the development of a rate plan for our customers that offered a unique value proposition when bundled with our phones. We and IDT have taken IDT’s key expertise in customer service and back office services, and IDT’s low long distance and international calling rates, and used them as the foundation for the Pay N’ Talk offering. IDT’s back office systems provides refined payment and usage fraud control systems, bilingual and highly scalable call center infrastructure and economies of scale that allow us to offer our customers rates that, at this time, are among the lowest available in the industry.

We expect that as our relationships with SunRocket and IDT progress, we will work closely with these service providers to develop new service offerings and marketing programs based on our hardware bundles with their communications service offerings.

Sales and distribution

We expect to sell our phone/service bundles to retailers in the following categories, including, but not limited to, those named below (with which we have already secured approved vendor status):

• Office superstores, such as Staples;

• Electronics stores, such as Best Buy and Fry’s;

• Drugstore chains, such as Brooks/Eckerd;

• Do-it-yourself retailers, such as Home Depot;

• Mass retailers and department stores, such as Wal-Mart and JCPenney;

• Internet-based retail distribution outlets, such as Amazon.com, Target.com, Costco.com, JCPenney.com and Staples.com;

• Live shopping networks such as QVC; and

• Direct marketers, such as Tiger Direct.

We plan to offer some retailers a percentage of the service revenue commission we receive from our communications service providers and a percentage of the subscriber placement fees that we will receive from our VoIP service provider in connection with the purchase of VoIP services by users of our broadband phones. These payments to retailers will be in addition to any revenue they receive solely from the sale of our phones.

We are equipped to receive orders from our major accounts electronically or by the conventional modes of facsimile, phone, email or mail. Phones imported by us are shipped by ocean freight and stored in, and subsequently shipped to customers from, facilities maintained by Databyte Technology, Inc., an unaffiliated entity, which provides us with warehousing, distribution, customer support services and our executive offices under an agreement that will expire in October 2007, in exchange for two percent of our net sales (defined as our gross sales shipped and collected during a period less returns and allowances, cooperative advertising, promotional allowances, sales commissions and cash discounts) and our reimbursement of Databyte’s pre-approved actual packaging, customs, freight and toll-free telephone costs. If required, we may contract with public warehouse facilities. All product received by us are automatically updated into our inventory system.

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Marketing

Our strategy will be to initially gain entrance to new retail accounts with one or more phone/service bundles and thereafter introduce such accounts to additional phone/service bundles that we develop. Our goal is to become the primary supplier to retailers of phone/service bundles for the residential and SOHO markets.

We expect that our retail accounts will place advertisements that generally promote our brand names in newspapers and other publications, catalogs and flyers and by displaying point-of-purchase advertising. Under such co-op advertising arrangements, we would generally pay the retailer a percentage of the retailer’s sales of our product bundles featured in such advertising. We also expect to market our product bundles to retailers at trade shows, including the Consumer Electronics Show held in Las Vegas, Nevada in January of each year. We expect that our service providers will continue to invest heavily in their brands. The brands of our service providers will appear in our retailers’ ads for our bundles, through their purchase of television ads, radio ads, print ads, billboard ads and mailers. Each of our service providers has granted us the royalty-free use of its brand name. Some of our service providers will also contribute to one or several hardware rebates, co-op advertising arrangements, as well as key-city advertising funds.

Future Marketing, our affiliate, assists in the development and execution of our marketing plans, manages our accounts, assists in our product development and handles our back-office customer functions. In addition, a portion of our sales will also be made through independent sales representatives who will receive sales commissions and work closely with our sales personnel.

Manufacturing

We are responsible for the final design and specifications of all of our phones. Actual assembly is performed by one or more of our independent manufacturers in accordance with specifications mandated by us. Our primary independent manufacturer is Giant International, a subsidiary of the Elite Group, which is located in China and has been manufacturing telecommunications phones for more than 25 years. The Elite Group develops and manufactures phones for many companies, including British Telecom, Motorola and Avaya. We may change suppliers from time to time as market conditions require. We expect that our suppliers will assemble phones with components that they purchase from third parties who manufacture these types of components. We have no agreements or arrangements with component suppliers. We believe that this is the standard method of operating and contracting for the manufacture of phones in the consumer electronics industry. During production, our employees will coordinate with the independent manufacturers’ facilities to monitor and facilitate timely manufacture and delivery of phones produced to our specifications. Through Bruce Hahn, Chief Executive Officer, and Yu Wen Ching, our President of Manufacturing and Sourcing (who has more than 25 years of manufacturing experience in Asia), we believe we have established good relationships with our contract manufacturer and component suppliers and believe that, absent unusual circumstances affecting the supply of materials or the demand on manufacturing time, the supply of phones will be available. We do not currently maintain long-term purchase contracts with manufacturers and operate principally on a purchase order basis. We may, however, enter into such long-term contracts in the future. The loss of our primary supplier could, in the short-term, materially and adversely affect our business until alternative supply arrangements could be secured.

Quality control

We will employ and/or contract with a quality control inspector who inspects our phones before each shipment is sent from our manufacturers to ensure that such phones meet both our quality standards and industry standards. Additionally, our quality control team will randomly do a second quality control inspection when our phones arrive in the United States. If those persons conducting quality control for us believe that the tested phones do not meet our standards and industry standards, such phones will not be accepted by us for shipment to our customers and will be returned to the manufacturer.

Product returns and warranty claims

We expect to offer our customers a one-year warranty which is significantly better than the more limited warranties offered by our competitors. We will accept returns from our customers in accordance with customary

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industry practices. If an item is returned, we will generally not repair the item, but will generally return it to the manufacturer for either credit or exchange. We expect to have the ability to return defective phones to the manufacturer for either credit or exchange.

Backlog

From time-to-time, we expect to have substantial orders from customers on hand. Management believes, however, that if the proper funding is in place, that backlog should not be a significant factor in our operations. Notwithstanding the foregoing, the ability of management to accurately estimate and provide for inventory requirements will be essential to the successful operation of our business.

Intellectual property

We have applied to register “Pay N’ Talk” as a trademark. We also may seek business process patents for certain methodologies related to our prepaid long distance and broadband phone services.

Regulation

Regulation of IP telephony

The use of the Internet and private Internet protocol (IP) networks to provide phone service is a relatively recent market development. While the provision of voice communication services over the Internet and private IP networks is currently permitted under United States law, some foreign countries have laws or regulations that may prohibit voice communications over the Internet or using private IP networks. Increased regulation of the Internet may slow its growth, particularly if many countries impose restrictive regulations. Increased regulation of the Internet and/or IP telephony providers or the prohibition of Internet and IP telephony in one or more countries, more aggressive enforcement of existing regulations in such countries or the failure of our network partners to comply with applicable regulations could materially adversely affect our business, financial condition, operating results and future prospects.

United States regulatory environment

We believe that, under United States law, based on specific regulatory classifications and recent regulatory decisions, the IP communications services that we will make available to certain purchasers of our phones will constitute information services (as opposed to regulated telecommunications services). Therefore, such services are not currently regulated by the Federal Communications Commission (FCC) or state agencies charged with regulating telecommunications carriers. Nevertheless, aspects of the services we will make available may be subject to state or federal regulation, including regulation governing universal service funding, payment of access charges, disclosure of confidential communications and tax issues. We cannot assure you that such services will not be regulated in the future. Several efforts have been made or are currently being considered in the United States to enact federal legislation that would either regulate or exempt from regulation communications services provided over the Internet.

In addition, the FCC is currently considering reforms to universal service funding and may consider whether to impose various types of charges, other common carrier regulations and/or additional operational burdens upon some providers of Internet and IP telephony. On May 19, 2005, the FCC gave Internet phone companies four months to provide 911 service to their customers and ordered incumbent carriers to make emergency networks accessible to VoIP providers. The four-month period began from date of publication of the FCC’s order in the federal register in July 2005. SunRocket, our VoIP service provider, already provides such service to its customers. The FCC is also currently considering reforms to law-enforcement agency regulations and may consider whether to impose various types of charges, other common carrier regulations and/or additional operational burdens upon some providers of Internet and IP telephony. The FCC has stated that the development of new technologies, such as IP telephony, may increase the strain on universal service funding and emergency services provisioning and hinder law enforcement agencies activities. In that regard, the FCC is currently reviewing whether to extend universal service, emergency services provisioning, and/or law-enforcement agency assistance obligations to non-traditional providers such as facilities-based and non-facilities-based providers of broadband Internet services.

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Several carriers have asked the FCC to make definitive rulings regarding the classification of their IP telephony services. In response to one of those requests, the FCC determined that a particular free, peer-to-peer IP application is an interstate information service. The FCC’s ruling applies only to that particular application and does not affect the regulatory classification of the services we offer. The FCC also has determined that IP-enabled services with certain characteristics are interstate services subject to federal jurisdiction, rather than state regulation. We cannot predict, however, that services we will make available to certain purchasers of our phones would be found by the FCC to meet the characteristics established by the FCC. In addition, the FCC has initiated a generic proceeding to investigate the legal and regulatory framework for all IP-enabled services, including IP telephony services. Thus, the regulatory classification issue is now before the FCC. Any ruling by the FCC on the regulatory considerations affecting Internet and IP telephony services will affect our operations and revenues.

If the FCC were to determine that certain services are subject to FCC regulations as telecommunications services, the FCC might require providers of Internet and IP telephony services to be subject to traditional common carrier regulation, make universal service contributions, implement new hardware and/or software to aid emergency services response and aid law enforcement agencies and/or pay access charges. It is also possible that the FCC may adopt a regulatory framework other than traditional common carrier regulation, which would apply to Internet and IP telephony providers. Despite the FCC’s actions, state regulatory authorities may also retain jurisdiction to regulate the provision of, and impose charges on, intrastate Internet and IP telephony services. Several state regulatory authorities have initiated proceedings to examine the regulation of such. Many of the states that have looked at the regulation of IP telephony services have deferred consideration of the issue pending the outcome of the FCC’s proceedings.

However, at least one state has ordered that access charges apply to the termination of IP telephony calls provided by a particular carrier and another state has ordered an IP telephony provider to submit to state regulation. The latter decision later was overturned in federal district court and the district court’s decision was upheld by a federal court of appeals. Another federal district court also issued a preliminary injunction in response to another state’s attempt to force an IP telephony provider to submit to state regulation. A permanent injunction currently is being reviewed by the federal district court. In addition, several state commissions have participated in the FCC’s proceedings and have advocated imposing traditional common carrier regulation on Internet and IP telephony providers. Rulings by the state commissions on the regulatory considerations affecting Internet and IP telephony services could affect our operations and revenues.

International regulatory environment

The regulatory treatment of Internet and IP telephony outside of the United States varies widely from country to country. A number of countries that currently prohibit competition in the provision of voice telephony may also prohibit Internet and IP telephony. Other countries permit, but regulate, Internet and IP telephony. Some countries will evaluate proposed Internet and IP telephony service on a case-by-case basis and determine whether it should be regulated as a voice service or as another telecommunications service. Finally, in many countries Internet and IP telephony has not yet been addressed by legislation or regulatory action.

In 2003, the European Commission adopted directives for a new framework for electronic communications regulation that, in part, attempt to harmonize the regulations that apply to services regardless of the technology used by the provider. Under the New Regulatory Framework, there is no distinction in regulation made based upon technology between switched or packet-based networks. As a result, some types of IP telephony services may be regulated like traditional telephony services while others may remain free from regulation. The European Commission currently is reviewing how IP telephony services fit into the New Regulatory Framework. Although it has been suggested that a “light touch” to regulation be taken, we cannot predict what future actions the European Commission and courts reviewing the New Regulatory Framework may take regarding IP telephony and related matters, or what impact, if any, such actions may have on our business.

Electrical safety standards

Most of our retailers (as well as several state and local authorities) will require that our phones meet the electrical safety standards of the Underwriters Laboratories, Inc. or ETL Testing Laboratories. We will ensure that all of our phones sold in the United States which require electrical safety approval are registered with the

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Underwriters Laboratories, Inc. or ETL Testing Laboratories. Our phones sold for use in the United States must be registered with and approved by the Federal Communications Commission. We do not anticipate experiencing any difficulty in satisfying such standards.

Competition

The communications industry is extremely competitive and is dominated by large, well-capitalized companies. Our phones will compete with other phones for shelf space at retailers, advertising support and consumer dollars. The communications services accessible through our phones will compete with the communications services offered by numerous other companies. Such other communications providers may offer better features, lower cost or better quality services. Our competitors may introduce similar phone/service bundles, including in the VoIP category. Our competitors may not rely on external financing or relationships with independent manufacturers or communications services providers to the same extent as our company, which could provide them with greater competitive flexibility. Furthermore, our competitors may have cost advantages depending on labor costs, currency exchange rates and other factors in the countries where their manufacturing operations take place, relative to the countries where our phones are manufactured. We have adopted a marketing strategy that targets the value-priced segment of the communications market, which is particularly price sensitive.

Employees

As of October 31, 2005, we have 4 employees, including our executive officers. None of our employees is subject to collective bargaining agreements or represented by a union. We consider our relations with our employees to be good.

Facilities

Databyte currently provides us with warehousing, distribution, customer support services and our executive offices located at 2466 Peck Road, City of Industry, California comprising approximately 25,000 square feet in exchange for two percent of our net revenues. We believe this space is sufficient to meet our current and anticipated warehousing needs.

Upon consummation of this offering, we intend to establish offices in Atlanta, Georgia and Shanghai, China.

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MANAGEMENT

Executive officers and directors

Set forth below is information concerning each of our directors (and director nominees) and executive officers:

Name	Age	Position
Lawrence Burstein	63	Chairman of the Board
Bruce Hahn	56	Chief Executive Officer and Director
Bruce Layman	44	Chief Operating Officer and Chief Financial Officer
Adam Somer	33	President of Communications Services and Secretary
Yu Wen Ching	52	President of Manufacturing and Sourcing
Robert F. Doherty	41	Director Nominee
Elliott J. Kerbis	53	Director Nominee
Donald G. Norris	67	Director Nominee

Lawrence Burstein.  Mr. Burstein has been our Chairman of the Board since June 2005. Mr. Burstein has many years’ experience managing and financing public and private companies. Mr. Burstein has been President, Treasurer and a member of the board of directors of Trinity Partners Acquisition Company Inc. (“Trinity”) since its inception in April 2004. Trinity is an OTC Bulletin Board-listed company that was formed for the purpose of affecting a business combination with an attractive target business. In March 2005, Trinity announced that it had entered into a definitive agreement to merge with and into FreeSeas Inc., an owner and operator of dry bulk ocean carriers. Since March 1996, Mr. Burstein has been President and a principal securityholder of Unity Venture Capital Associates Ltd., a private investment company. For approximately ten years prior to 1996, Mr. Burstein was the President, a member of the board of directors and principal securityholder of Trinity Capital Corporation (“TCC”), a private investment company. TCC ceased operations prior to the formation of Unity Venture in 1996. Mr. Burstein is also a member of the board of directors of I.D. Systems, Inc., a Nasdaq National Market-listed designer, developer and producer of a wireless monitoring and tracking system that uses radio frequency technology; THQ, Inc., a Nasdaq National Market-listed developer and publisher of interactive entertainment software for the major hardware platforms in the home video industry; Traffix, Inc., a Nasdaq National Market-listed developer and operator of Internet-based marketing programs as well as direct marketing programs; CAS Medical Systems, Inc., an OTC Bulletin Board-listed manufacturer and marketer of blood pressure monitors and other disposable products principally for the neonatal market; and Medical Nutrition USA, Inc., an OTC Bulletin Board-listed manufacturer and distributor of nutritional products primarily for the elder care markets. Mr. Burstein received a BA from the University of Wisconsin and an LLB from Columbia Law School.

Bruce Hahn.  Mr. Hahn is our founder and has been our Chief Executive Officer since our inception in June 2003. Mr. Hahn has more than twenty-five years’ experience in leading consumer product companies in the development and expansion of their product offerings and related distribution channels. From November 1999 to June 2005, Mr. Hahn served as President of SMMI, a management consulting company, where he worked with leading communications and consumer products companies in securing and expanding distribution channels for their phones. From 1991 to 1999, he served as Chief Executive Officer of USCI, a cellular carrier which he built into the first consumer-focused, national one-rate cellular carrier in the United States using retail accounts such as Radio Shack and Wal-Mart. From 1985 to 1991, he served as Chief Executive Officer of International Consumer Brands (“ICB”), a consumer product development and distribution company and a leader in the rechargeable tool and kitchen aid industries. His efforts with ICB included building and diversifying that company’s product offerings, developing a personal care appliances company in partnership with Candies, Inc., a leading footwear and apparel provider, and launching a rechargeable power tools division, for which he secured distribution channels through major retail outlets, such as Home Depot. From 1984 to 1985, he served as an Executive Vice President of Cosmo Communications, a manufacturer of diversified products, including telecommunications hardware. From 1980 to 1984, he was Senior Vice President and General Manager at Conair Corporation, a manufacturer and

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distributor of diversified products, and one of the first companies to introduce phones into the marketplace following the divestiture of AT&T. At Conair, Mr. Hahn managed and directed their telecommunications, personal care appliances and healthcare phones businesses. Mr. Hahn received a BA from the University of Tennessee.

Bruce Layman.  Mr. Layman has been our Chief Operating Officer and Chief Financial Officer since September 2005. Mr. Layman has more than 15 years’ experience leading the operating and financial functions of communications and technology firms, including building and managing the systems and infrastructure to support operations including billing, customer service, carrier operations and inventory management. From March 2005 to September 2005, Mr. Layman was Vice-President of Account Management for Raptor Communications, Inc., a supplier of VoIP hardware. From January 2000 through February 2005, Mr. Layman served as Chief Financial Officer of Navigauge Inc., a telematics and radio ratings company whose customers include Coca-Cola, McDonalds and Kroger. Mr. Layman served as Chief Operating Officer of USCI from 1998 to 1999, and as that company’s Director of Corporate Development from 1996 to 1998. Mr. Layman served as Controller of Communications Central Inc., one of the country’s largest prison-phone and payphone operators, from 1992 to 1996 and as that company’s Director of Corporate Development from 1990 to 1992. During his tenure at Communications Central, he led that company’s acquisition program, consummating approximately ten acquisitions that added more than $100 million in revenues, and oversaw the consolidation of all the accounting and IT functions of the combined companies. Mr. Layman received a BBA from the University of Georgia.

Adam Somer.  Mr. Somer has been our President of Communications Services since June 2003. Mr. Somer has approximately ten years’ experience in the development, deployment and management of communications and technology products and services. From March 2001 to June 2005, Mr. Somer was the Chief Executive Officer of Madison Strategic Partners, LLC, a consulting firm that assists established and new communications and technology companies, including providers of VoIP and other communications services, in developing strategies for their business growth. Mr. Somer continues as a member of Madison Strategic Partners. From November 1997 to March 2001, he was at deltathree, Inc. (“deltathree”), a Nasdaq Capital Market-listed pioneer in VoIP and hosted broadband services and a provider of private label VoIP services to Verizon, SBC and other telecommunications companies. Mr. Somer’s final position at deltathree was Director of Strategic Development, in which capacity he oversaw the deployment of consumer VoIP services. From 1996 to 1997, Mr. Somer was at Net2Phone, a division of IDT Corporation, Inc., a New York Stock Exchange-listed communications company, where he developed and managed an operational support system for dealing with resellers and consumers for that company’s VoIP services. His final position at Net2Phone was Director of Operations. IDT’s VoIP division was taken public as Net2Phone in 1999 and is listed on the Nasdaq National Market. Mr. Somer received a BA from Yeshiva University.

Yu Wen Ching.  Mr. Ching has been our President of Manufacturing and Sourcing since June 2003. He has more than 25 years’ experience in the areas of product development, manufacturing and sourcing in Asia. From January 2003 until June 2003, Mr. Ching was involved in the development of our company. From 1999 to December 2002, he was the Managing Director of Yu’s Electronics, a manufacturer of satellite transceiver boxes for European communications companies. From 1995 to June 2001, he was the Managing Director of Yu’s Trading, a manufacturer of motorbikes for markets in Germany and Ireland. From 1993 to 1999, he was the Executive Vice President of Mobile Power of Taiwan, a manufacturer of cellular phone power accessories, including batteries and rechargers. In 1990, Mr. Ching founded Aztec Cellular (“Aztec”) and served as its Chief Executive Officer from 1990 until its sale in 1995. Aztec developed, manufactured and distributed cellular phones in China. From 1973 to 1990, he was the Chief Executive Officer of Yu’s Coop, a textile group that manufactured raw materials and finished goods for the apparel industry and distributed its products to leading brand manufacturers, including Healthtex and Gerber. From 1980 to 1989, he was the Chief Executive Officer of Yu’s Tool, a subsidiary of Yu’s Coop. Yu’s Tool developed and manufactured nickel cadmium-based rechargeable tools and other products distributed through Home Depot, Wal-Mart, Lowes and other major retailers. Mr. Ching received a business degree from the University of Taiwan.

Robert F. Doherty.  Mr. Doherty will become a member of the board of directors upon consummation of this offering. Since May 2005, he has been a financial consultant and President of Great Blue Consulting LLC, a corporate finance consulting firm he founded in October 2002. From February 2004 to May 2005, Mr. Doherty

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served as a Managing Director in the Investment Banking Division of Jefferies & Company. From October 2002 to February 2004, he was a financial consultant and President of Great Blue Consulting. From March 2002 to September 2002, he was Executive Vice President and Chief Financial Officer of Abovenet, Inc. (formerly Metromedia Fiber Network, Inc.), a provider of fiber connectivity solutions for businesses, having been hired as a financial restructuring expert. In May 2002, Metromedia Fiber Network initiated a voluntary insolvency proceeding under Chapter 11 of the Federal Bankruptcy Code. Mr. Doherty previously served as a Managing Director in the Investment Banking Division of Salomon Smith Barney Inc. from October 1996 to January 2002, and as a Vice President in the Investment Banking Division of PaineWebber Incorporated from March 1989 to October 1996. Mr. Doherty received a BA from the University of Pennsylvania and an MBA from the Stern School of Business of New York University.

Elliott J. Kerbis.  Mr. Kerbis will become a member of the board of directors upon consummation of this offering. Since June 2004, Mr. Kerbis has served as an independent retail consultant. From January 2002 to June 2004, Mr. Kerbis was President and Chief Merchandising Officer for The Sports Authority, a New York Stock Exchange-listed operator of sporting goods retail stores. He joined The Sports Authority in October 2000 as Executive Vice President-Merchandising and Sales Promotion and was promoted to President and Chief Merchandising Officer in January 2002. He previously served as Senior Vice President of Merchandise at Filene’s, a department store owned by The May Department Store Company, from May 1999 to August 2000, and as Executive Vice President of Merchandise for Hardlines of The Caldor Corporation, a discount retailer, from 1987 to 1999. Prior to joining The Caldor Corporation, Mr. Kerbis served in various capacities with R.H. Macy & Co. from 1977 to 1987. Mr. Kerbis received a BS from Baruch College.

Donald G. Norris.  Mr. Norris will become a member of the board of directors upon consummation of this offering. Since November 2003, Mr. Norris has served as President of Norrismen Sales and Marketing and has been a partner of Corporate Identity Network, Inc., each a marketing consulting firm. From January 2000 to November 2003, Mr. Norris was Director of OEM Sales for Earthlink, Inc., a Nasdaq National Market-listed Internet service provider. He previously served as President of Norris and Associates, a consulting firm, from January 1993 to January 2000, and as Director of Subscriber Marketing for Prodigy Services Company, an Internet service provider that was the first consumer online service, from July 1984 to January 1993. Mr. Norris received a BS from Oklahoma State University.

Upon consummation of this offering, our board will have an audit committee consisting of three independent directors initially comprised of Messrs. Doherty, Kerbis and Norris. Our board has determined that Mr. Doherty meets the SEC’s definition of an audit committee financial expert.

Upon consummation of this offering, our board will have a compensation committee initially comprised of Messrs. Doherty, Kerbis and Norris. The compensation committee members will be appointed for three-year terms and will be responsible for, among other things, reviewing and determining the compensation of all of our executive officers.

Our board of directors has adopted a code of ethics applicable to all of our employees, including our chief executive officer, chief financial officer and chief operating officer, and our directors.

All executive officers serve at the discretion of our board.

Compensation

No cash compensation was paid, or accrued to or for the benefit of, our executive officers prior to June 1, 2005. Accruals for compensation of our executive officers began on June 1, 2005. Upon consummation of this offering, compensation for executive officers, other than Mr. Burstein, will be as set forth in their employment agreements as described below. Upon consummation of this offering, Mr. Burstein will receive a salary of $80,000 per year in his capacity as chairman of the board of directors.

Employment Agreements

Effective as of the consummation of this offering, Messrs. Hahn, Layman, Somer and Ching will enter into employment agreements. Each of the employment agreements will be for a term through December 31, 2007.

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Messrs. Hahn, Layman, Somer and Ching will be paid monthly for the periods indicated on the basis of the following annualized base salaries:

	Period Ended June 30, 2006		Period Ended December 31, 2007
Bruce Hahn	$	200,000	$	230,000
Bruce Layman	$	125,000	$	137,500
Adam Somer	$	125,000	$	137,500
Yu Wen Ching	$	144,000	$	158,400

Messrs. Hahn, Layman, Somer and Ching will be entitled to the following bonuses based on our net sales (defined as our revenues collected during a period less allowances granted to retailers, markdowns, discounts, commissions, reserves for service outages, customer hold backs and expenses):

• one percent of the amount by which our net sales during our fiscal year ended June 30, 2006 exceed $5,000,000;

• one percent of the amount by which our net sales for the fiscal year ended June 30, 2007 exceed our net sales during our fiscal year ended June 30, 2006; and

• one percent of the amount by which our net sales for the six-month period ended December 31, 2007 exceed our net sales during the six-month period ended June 30, 2007.

The bonus described above will be limited to an amount no greater than 75% of the recipient’s then current base annual salary.

Messrs. Hahn, Layman, Somer and Ching will also be entitled to the following bonuses based on our net profits (defined as our net income, after taxes, as determined in accordance with GAAP):

• one percent of our net profits for each of our fiscal years ended June 30, 2006 and June 30, 2007, respectively; and

• one percent of our net profits for the six-month period ended December 31, 2007.

The employment agreements will further provide that Mr. Hahn’s aggregate bonuses from net sales and net profits for any bonus period will in no event exceed 150% of his base salary during such period and each of Messrs. Layman, Somer and Ching’s aggregate bonuses from net sales and net profits for any bonus period will in no event exceed 112% of his base salary during such period.

Compensation of Directors

Directors who are not employees will receive $1,250 (plus reimbursement for travel expenses) for each board of directors meeting attended in person and $500 for each board of directors meeting attended telephonically. Upon the consummation of this offering and the commencement of their term, each such director will receive a grant of options to purchase 15,000 shares of our common stock at an exercise price of $5.05 per share. Thereafter, each such director will receive quarterly during their term as a director grants of options to purchase 5,000 shares of our common stock at an exercise price per share equal to not less than the fair market value per share of our common stock at the time of grant. All directors’ options will vest in their entirety on the first anniversary of their respective grant dates.

2005 Stock Option Plan

The purpose of our 2005 stock option plan is (i) to align the interests of our shareholders and the recipients of options under the plan by increasing the proprietary interest of such recipients in our growth and success, (ii) to advance our interests by attracting and retaining officers, other employees, consultants, advisors and well-qualified persons who are neither our officers nor our employees for service as our directors, and (iii) to motivate such persons to act in the long-term best interests of our shareholders. In addition to options, we will also grant performance accelerated restricted stock (PARS) under the plan. The plan will become effective prior to consummation of this offering and will terminate ten years after the date of effectiveness.

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Under the plan, 600,000 shares of our common stock are available for stock-based award grants, subject to adjustment in the event of a stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change or event, or any distribution to stockholders other than a regular cash dividend. The number of available shares will be reduced by the sum of the aggregate number of shares of common stock which become subject to outstanding awards. To the extent that shares of common stock subject to an outstanding award are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award, then such shares of common stock will again be available under the plan.

Upon consummation of this offering, each of Messrs. Burstein, Hahn, Layman, Somer and Ching will receive 25,000 options under the plan, 12,500 of which will vest on the first anniversary of employment and the remaining 12,500 of which will vest on the second anniversary of employment. Future Marketing will receive 25,000 options upon consummation of this offering, 12,500 of which will vest on the first anniversary of its consulting relationship with us and the remaining 12,500 of which will vest on the second anniversary of its consulting relationship with us. The options will be exercisable at $5.05 per share.

Upon consummation of this offering, Mr. Hahn will receive PARS in the amount of 75,000 shares, and each of Messrs. Burstein, Layman, Somer and Ching and Future Marketing will receive PARS in the amount of 50,000 shares under the plan. Of the total PARS granted to each executive officer, Mr. Burstein and Future Marketing, 25% will vest only if net sales equal or exceed $20 million during fiscal 2006 and another 25% will vest only if net profits equal or exceed $1 million during fiscal 2006. An additional 25% will vest only if net sales equal or exceed $50 million in fiscal 2007 and the final 25% will vest only if net profits equal or exceed $5 million during fiscal 2007. If the performance conditions are not met in the first year, no PARS will vest in such year. If the performance conditions are not met in the second year but cumulative amounts are achieved by the second year representing 80% or more of the cumulative target amounts for both years for a respective condition, then a percentage of the unvested PARS for both years will nevertheless vest in the second year in respect of such condition. In such event, the percentage of unvested PARS that will vest in the second year in respect of a particular performance condition will equal the percentage that such aggregate amount achieved in the first and second years represents of the aggregate amount required to be met by the respective condition for both years.

Under the plan, the compensation committee will be authorized to grant options to members of our board of directors and our officers.

CERTAIN TRANSACTIONS

Mr. Burstein, our Chairman of the Board, purchased $25,000 principal amount of our 6% notes and $37,500 principal amount of our 8% notes in our 2005 private placements, and also received an aggregate of 58,333 private warrants in connection with such purchases. Mr. Burstein paid the same purchase price as all other investors in the private placements and received identical registration rights with respect to his securities.

Certain marketing services are being provided to us by Future Marketing, whose sole stockholder is also the sole stockholder of The Future, LLC, which owns 18.1% of our stock. Future Marketing, among other things, assists in the development and execution of our marketing plans, manages our accounts, assists in our product development and handles our back-office vendor functions.

As compensation for its services, effective as of the consummation of this offering, Future Marketing will be paid monthly for the periods indicated on the basis of the following annualized base fee schedule for the periods indicated:

Period ended June 30, 2006	$	164,000
July 1, 2006 through December 31, 2007	$	184,800

In addition to such monthly fees, Future Marketing will be entitled to the following fees based on our net sales (defined as our revenues collected during a period less allowances granted to retailers, markdowns, discounts, commissions, reserves for service outages, customer hold backs and expenses):

• one percent of the amount by which our net sales during our fiscal year ended June 30, 2006 exceed $5,000,000;

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• one percent of the amount by which our net sales for our fiscal year ended June 30, 2007 exceed our net sales for our fiscal year ended June 30, 2006; and

• one percent of the amount by which our net sales for the six-month period ended December 31, 2007 exceed our net sales during the six-month period ended June 30, 2007.

The fees described above for any period will be limited to an amount no greater than 75% of Future Marketing’s base fees paid during such period.

Future Marketing will also be entitled to the following fees based on our net profits (defined as our net income, after taxes, as determined in accordance with GAAP):

• one percent of our net profits for each of our fiscal years ended June 30, 2006 and June 30, 2007, respectively; and

• one percent of our net profits for the six-month period ended December 31, 2007.

In no event may the aggregate supplemental fees paid to Future Marketing from net sales and net profits during any period described above exceed 112% of the base fees paid during such period.

Future Marketing will receive 25,000 options and 50,000 PARS pursuant to our 2005 stock option plan.

We have entered into a five-year agreement with David Feuerstein, a principal stockholder of our company, pursuant to which, in consideration for helping to establish our service provider relationship with IDT and, going forward, maintaining and expanding our relationships with each of IDT and SunRocket, we will pay him one quarter of one percent of all net revenues collected by us during each year of the term of the agreement directly attributable to the sale of (i) digital cordless multi-handset phone systems, (ii) multi-handset VOIP telephones and (iii) related telephone hardware components ((i), (ii) and (iii), collectively, “Hardware”), subject to a maximum aggregate amount of $250,000 for such year. Under our agreement, such net revenues mean our gross amounts of billing on Hardware sold to retailers less (I) sales and other taxes, postage, cost of freight and disbursements included in such bills and (II) allowances granted to such retailers including, without limitation, advertising and promotional allowances, markdowns, discounts, returns and commissions.

We will also pay to Mr. Feuerstein five percent of all net revenues collected by us from IDT Puerto Rico & Co (“IDT”) during each year of the term of and directly attributable to our service agreement dated as of November 25, 2003 with IDT (the “IDT Agreement”), subject to a maximum aggregate amount of $250,000 for such year. Under our agreement, such net revenues mean payments to which we are entitled and collect under the IDT Agreement less service provider deductions provided under our agreement including, without limitation, reserves for service outages, customer hold backs and expenses.

We will also pay to Mr. Feuerstein two percent of all net revenues collected by us from SunRocket during each year of the term of and directly attributable to our June 7, 2005 service agreement with SunRocket, subject to a maximum aggregate amount of $250,000 for such year; provided, however, that any revenues attributable under the SunRocket agreement from the provision of Internet-based communications services relating to “subscriber bounty,” “advertising co-op” and “key-city funds” are excluded in any computation of such net revenues. Under our agreement, such net revenues mean payments to us to which we are entitled from SunRocket less service provider deductions provided under the SunRocket agreement including, without limitation, reserves for service outages, customer hold backs and expenses.

Our agreement may be extended for an additional five-year term if we are profitable for three of the first five years of the initial term. If so extended, Mr. Feuerstein will be entitled to a reduced revenue sharing allocation. Our agreement also provides for certain revenue sharing allocation reductions if certain conditions are not satisfied during the initial term.

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PRINCIPAL SECURITYHOLDERS

The following table sets forth certain information, as of the date of this prospectus, with respect to the beneficial ownership of shares of our common stock held by: (i) each director and director nominee; (ii) each person known by us to beneficially own 5% or more of our common stock; (iii) each named executive officer; and (iv) all directors (and director nominees) and executive officers as a group. Unless otherwise indicated, the address for each securityholder is c/o American Telecom Services Inc., 2466 Peck Road, City of Industry, California 90601.

Name and Address of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned(1)				Percent of Class
	Prior to Offering		Post Closing		Prior to Offering		Post Closing
Lawrence Burstein	199,958	(2)	199,958	(2)(3)(4)	9.6	%	3.6	%
Bruce Hahn	794,000	(5)(6)	794,000	(3)(5)(6)(7)	39.7	%	14.3	%
Adam Somer	235,000		235,000	(3)(4)	11.8	%	4.2	%
Yu Wen Ching	674,000	(5)	674,000	(3)(4)(5)	33.7	%	12.1	%
Elliott J. Kerbis	—		—	(8)	—		—
Donald G. Norris	—		—	(8)	—		—
Robert F. Doherty	—		—	(8)	—		—
Shih-Chi Ma Floor 6-7, No. 221 Tin Zhou Rd., Sec. 3 Taipei, Taiwan, R.O.C.	125,000		125,000		6.3	%	2.3	%
I NET Financial Management, Ltd. No. 17-1, Alley 3, Lane 217 Chung Hsiao E. Road Sec. 3, Taipei, Taiwan, R.O.C.	674,000	(5)	674,000	(5)	33.7	%	12.1	%
David Feuerstein P.O. Box 10255 Jerusalem, Israel 91102	235,000		235,000		11.8	%	4.2	%
The Future, LLC(9) 417 Lucy Street Henderson, Nevada 89015	361,000		361,000	(3)(4)	18.1	%	6.5	%
BLA Opportunities LLC 2300 Holcombridge Road Roswell, Georgia 30076	120,000	(6)	120,000	(6)	6.0	%	2.2	%
All current executive officers, directors and director nominees as a group (8 persons)	1,228,958	(2)(5)(6)	1,228,958	(2)(5)(6)(10)	59.1	%	21.9	%

 * Less than 1%.

(1) As used in this table, beneficial ownership means the sole or shared power to vote, or direct the voting of, a security, or the sole or shared power to invest or dispose, or direct the investment or disposition, of a security. Except as otherwise indicated, based on information provided by the named individuals, all persons named herein have sole voting power and investment power with respect to their respective shares of our common stock, except to the extent that authority is shared by spouses under applicable law, and record and beneficial ownership with respect to their respective shares of our common stock. With respect to each securityholder, any shares issuable upon exercise of options and warrants held by such securityholder that are currently exercisable or will become exercisable within 60 days of the date of this prospectus are deemed outstanding for computing the percentage of the person holding such options, but are not deemed outstanding for computing the percentage of any other person.

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(2) Includes 38,000 shares of common stock owned by Unity Venture Capital Associates Ltd., of which Mr. Burstein is President. Also includes 58,333 shares of common stock issuable upon exercise of warrants. Also includes 21,625 shares of common stock, which are issuable upon conversion of the principal amount of notes (and accrued interest thereon) held by Mr. Burstein at the closing of the offering.

(3) Does not include 25,000 shares of common stock issuable upon the exercise of options, which are being granted upon the closing of the offering, but are not exercisable within 60 days thereof.

(4) Does not include 50,000 shares of common stock that are the subject of PARS, which will not vest within 60 days hereof.

(5) Includes 674,000 shares of common stock owned by I NET Financial Management, Ltd., which is 51% owned by Mr. Yu and 49% owned by Mr. Hahn. Each disclaims beneficial ownership of the other’s interest.

(6) Includes 120,000 shares held by BLA Opportunities LLC, which is controlled by Bruce Hahn’s wife for the benefit of Mr. Hahn’s adult and minor children. Mr. Hahn disclaims any beneficial ownership in these shares.

(7) Does not include 75,000 shares of common stock that are the subject of PARS, which will not vest within 60 days hereof.

(8) Does not include 15,000 shares of common stock issuable upon the exercise of options, which are being issued upon the closing of this offering, but are not exercisable within 60 days thereof.

(9) The Future, LLC is wholly-owned by Tonda Mullis.

(10) Does not include 170,000 shares of common stock issuable upon the exercise of options, which are being granted upon the closing of the offering or 275,000 shares of common stock that are the subject of PARS.

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DESCRIPTION OF SECURITIES

General

We are authorized to issue 40,000,000 shares of common stock, par value $0.001, and 5,000 shares of preferred stock, par value $0.001 per share. As of the date of this prospectus, 2,000,000 shares of our common stock are outstanding, held by five holders of record. No shares of our preferred stock are currently outstanding.

Common Stock

Holders of our common stock are entitled to one vote for each share held of record on all matters to be voted on by securityholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Our securityholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the common stock.

Holders of shares of our common stock are entitled to such dividends as may be declared from time to time by the board in its discretion, on a ratable basis, out of funds legally available therefrom, and to a pro rata share of all assets available for distribution upon liquidation, dissolution or other winding up of our affairs. All of the outstanding shares of our common stock are fully paid and non-assessable.

Preferred Stock

Our certificate of incorporation authorizes the issuance of 5,000 shares of blank check preferred stock with such designation, rights and preferences as may be determined from time to time by our board of directors. No shares of preferred stock are being issued or registered in this offering. Accordingly, our board of directors is empowered, without securityholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of common stock. The preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.

Private Warrants

Each private warrant entitles the registered holder to purchase one share of our common stock at a price equal to the lower of (i) $5.05 and (ii) the price per share at which our common stock is sold in this offering, subject to adjustment. If the price per share at which our common stock is sold in this offering is less than $5.05, then the number of warrants will be proportionally adjusted upward. The private warrants expire six years from the date of their issuance. Upon consummation of this offering, the private warrants are exchangeable into a like number of redeemable warrants.

Redeemable Warrants

Each redeemable warrant entitles the registered holder to purchase one share of our common stock at a price of $5.05 per share, subject to adjustment as discussed below, at any time commencing on the date of this prospectus. The redeemable warrants will expire five years from the date of this prospectus at 5:00 p.m., New York City time.

We may call the redeemable warrants, with HCFP/Brenner Securities’ prior consent, for redemption,

• in whole and not in part;

• at a price of $0.05 per warrant;

• upon a minimum of 30 days’ prior written notice of redemption;

• if, and only if, the last sales price per share of our common stock equals or exceeds 190% (currently $9.60) during the first three months after the consummation of this offering, or 150% (currently $7.58) thereafter, of the then effective exercise price of the redeemable warrants for all 15 of the trading days ending within three business days before we send the notice of redemption; and

• if, and only if, we then have an effective registration statement covering the shares issuable upon exercise of the redeemable warrants.

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The redemption criteria for our redeemable warrants have been established at prices which are intended to provide warrant holders a reasonable premium to the initial exercise prices and provide a sufficient degree of liquidity to cushion the market reaction to our redemption call.

Since we may redeem the redeemable warrants only with the prior written consent of HCFP/Brenner Securities and HCFP/Brenner Securities may hold the redeemable warrants subject to redemption, HCFP/Brenner Securities may have a conflict of interest in determining whether or not to consent to such redemption. We cannot assure you that HCFP/Brenner Securities will consent to such redemption if it is not in its best interest even if it is in our best interest.

The redeemable warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. You should review a copy of the warrant agreement, which has been filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the redeemable warrants.

The exercise price and number of shares of common stock issuable on exercise of the redeemable warrants may be adjusted in certain circumstances including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. However, the redeemable warrants will not be adjusted for issuances of common stock at a price below their respective exercise prices.

The redeemable warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified check payable to us, for the number of redeemable warrants being exercised. The warrantholders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their redeemable warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the redeemable warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by securityholders.

No redeemable warrants will be exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of the redeemable warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the redeemable warrants. Under the terms of the warrant agreement, we have agreed to meet these conditions and to maintain a current prospectus relating to common stock issuable upon exercise of the redeemable warrants until the expiration of the redeemable warrants. However, we cannot assure you that we will be able to do so. The redeemable warrants may be deprived of any value and the market for the redeemable warrants may be limited if the prospectus relating to the common stock issuable upon the exercise of the redeemable warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the redeemable warrants reside.

No fractional shares will be issued upon exercise of the redeemable warrants. However, we will pay to the warrantholder, in lieu of the issuance of any fractional share which is otherwise issuable to the warrantholder, an amount in cash based on the market value of the common stock on the last trading day prior to the exercise date.

Limitation of Liability

As permitted by the General Corporation Law of the State of Delaware, our restated certificate of incorporation provides that our directors shall not be personally liable to us or our securityholders for monetary damages for breach of fiduciary duty as a director, except for liability:

• for any breach of the director’s duty of loyalty to us or our securityholders;

• for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

• under section 174 of the Delaware law, relating to unlawful payment of dividends or unlawful stock purchases or redemption of stock; and

• for any transaction from which the director derives an improper personal benefit.

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As a result of this provision, we and our securityholders may be unable to obtain monetary damages from a director for breach of his or her duty of care.

Our restated certificate of incorporation provides for the indemnification of our directors and officers, and, to the extent authorized by our board in its sole and absolute discretion, employees and agents, to the full extent authorized by, and subject to the conditions set forth in the Delaware law.

Delaware Anti-Takeover Law

We are subject to the provisions of section 203 of the Delaware law. Section 203 prohibits publicly held Delaware corporations from engaging in a “business combination” with an “interested securityholder” for a period of three years after the date of the transaction in which the person became an interested securityholder, unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested securityholder. Subject to certain exceptions, an “interested securityholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s voting stock. These provisions could have the effect of delaying, deferring or preventing a change of control of us or reducing the price that certain investors might be willing to pay in the future for shares of our common stock.

Our Transfer Agent and Warrant Agent

The transfer agent for our securities and warrant agent for our redeemable warrants is Continental Stock Transfer & Trust Company, New York, New York.

Shares Eligible for Future Sale

Immediately after this offering, we will have 5,549,930 shares of common stock outstanding, or 5,969,930 shares of common stock if the representative’s over-allotment option is exercised in full. All of these shares, except for the 2,000,000 shares of common stock outstanding prior to this offering, will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our affiliates within the meaning of Rule 144 under the Securities Act. The remaining 2,000,000 shares of common stock are restricted securities under Rule 144, in that they were issued in private transactions not involving a public offering and have not been registered for resale. None of the 2,000,000 shares will be eligible for sale under Rule 144 prior to                         .

Rule 144

In general, under Rule 144 as currently in effect, a person who has beneficially owned restricted shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of either of the following:

• 1% of the number of shares of common stock then outstanding, which will equal 55,499 shares of common stock immediately after this offering (or 59,699 if the representative of the underwriters exercises its over-allotment option); and

• if the common stock is listed on a national securities exchange or on The Nasdaq Stock Market, the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our affiliates at the time of or at any time during the three months preceding a sale, and who has beneficially owned the restricted shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate, is entitled to sell their shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

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Lock-ups

We will not permit or cause a private or public sale or private or public offering of any of our securities (in any manner, including pursuant to Rule 144 under the Act or pursuant to a Rule 10b-5(1) trading plan) owned or to be owned of record, or beneficially by any of our officers, directors or shareholders owning one percent or more of the outstanding shares of common stock on the date of this prospectus, or by any family member or affiliate of any of the foregoing persons, or by any option holder who would have the ability to sell the shares underlying his option under Rule 701 under the Act (collectively, “Insiders”) for a period of 12 months following the later of the (a) date of this prospectus and (b) the date after the date of this prospectus that all investors in our 2005 Private Placement are freed from any lock-up imposed by any regulatory agency, without obtaining the prior written consent of the representative (and, if required by applicable state blue sky laws, the securities commissions in any such states). Each of our Insiders has executed an agreement with the representative regarding such restrictions. Notwithstanding the foregoing, the Insiders, as a group, shall be entitled to sell up to an aggregate of 200,000 shares of common stock (with no individual Insider selling more than 10% of the total number of shares owned by him or her) prior to the expiration of such twelve-month period if at the time of such sale there are no longer any redeemable warrants.

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UNDERWRITING

In accordance with the terms and conditions contained in the underwriting agreement, we have agreed to sell to each of the underwriters named below, and each of the underwriters, for which HCFP/Brenner Securities is acting as representative, have severally, and not jointly, agreed to purchase from us on a firm commitment basis the number of the shares of our common stock and number of our redeemable redeemable warrants offered in this offering set forth opposite their respective names below:

Underwriters	Number of Shares	Number of Warrants
HCFP/Brenner Securities LLC
Total	2,800,000	2,800,000

A copy of the underwriting agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.

We have been advised by the representative that the underwriters propose to offer shares of our common stock and redeemable warrants directly to the public at the public offering price set forth on the cover page of this prospectus. Any shares and redeemable warrants sold by the underwriters to securities dealers will be sold at the public offering price less a selling concession not in excess of $             per share and $             per warrant. The underwriters may allow, and these selected dealers may re-allow, a concession of not more than $             per share and $             per warrant to other brokers and dealers.

The underwriting agreement provides that the underwriters’ obligations to purchase shares of our common stock and redeemable warrants are subject to conditions contained in the underwriting agreement. The underwriters are obligated to purchase and pay for all of the common stock and redeemable warrants offered by this prospectus other than those covered by the over-allotment option, if any of these securities are purchased.

No action has been taken by us or the underwriters that would permit a public offering of the shares of our common stock or the redeemable warrants included in this offering in any jurisdiction where action for that purpose is required. None of our securities included in this offering may be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sales of any of our common stock or redeemable warrants be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons who receive this prospectus are advised to inform themselves about and to observe any restrictions relating to this offering of our common stock and redeemable warrants and the distribution of this prospectus. This prospectus is neither an offer to sell nor a solicitation of any offer to buy any of our common stock or redeemable warrants included in this offering in any jurisdiction where that would not be permitted or legal.

The underwriters have advised us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority.

Underwriting discount and expenses

The following table summarizes the underwriting discount to be paid to the underwriters by us.

	Total, without over-allotment		Total, with over-allotment
Underwriting discount to be paid to the underwriters by us for the common stock	$	1,131,200	$	1,300,880
Underwriting discount to be paid to the underwriters by us for the redeemable warrants	$	11,200	$	12,880

We have agreed to pay to the representative a nonaccountable expense allowance equal to 2% of the gross proceeds from the sale of the shares of common stock and redeemable warrants offered by us of which $50,000 has been paid by us as of the date of this prospectus. We have also agreed to pay all expenses in connection with qualifying the shares and redeemable warrants offered hereby under the laws of the states designated by the underwriters, including expenses of counsel retained for this purpose by the underwriters. We have also agreed to

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pay the fees of counsel retained by the underwriters for purposes of filing this offering with the NASD, which are estimated not to exceed $5,000. We estimate the expenses payable by us for this offering to be $1,948,000, including the underwriting discount, or $2,119,630 if the underwriters’ over-allotment option is exercised in full.

We have agreed to sell to the representative, for an aggregate of $100, an option to purchase up to 280,000 shares of our common stock and/or up to 280,000 redeemable warrants identical to those offered by this prospectus. This option is exercisable at any time, in whole or in part, during the five-year period commencing on the date of this prospectus at an exercise price of $5.555 per share of common stock, 110% of the public offering price per share of common stock, and $.055 per warrant, 110% of the public offering price per warrant. We estimate the fair value of this option to be approximately $1.3 million, which will be charged to additional paid in capital upon consummation of the offering as a direct cost of the transaction. Management estimated volatility of 50%, no dividend and a discount rate of 4.21%. During the first year following the date of this prospectus, the representative’s purchase option may not be sold, transferred, pledged or hypothecated, except that it may be assigned or transferred to any underwriter and selected dealer participating in this offering and any of their bona fide officers or partners (but not directors). Although the purchase option and its underlying securities have been registered under the registration statement of which this prospectus forms a part, the option grants to holders demand and “piggy back” rights with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option. The exercise prices and number of securities issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of common stock or redeemable warrants at prices below the option’s exercise prices.

Warrant solicitation fees

We have engaged HCFP/Brenner Securities, the representative of the underwriters, on a non-exclusive basis, as our agent for the solicitation of the exercise of the redeemable warrants. To the extent not inconsistent with the guidelines of the NASD and the rules and regulations of the SEC, we have agreed to pay the representative, for bona fide services rendered, a commission equal to 5% of the exercise price for each warrant exercised more than one year after the date of this prospectus if the exercise was solicited by the representative. In addition to soliciting, either orally or in writing, the exercise of the redeemable warrants, the representative’s services may also include disseminating information, either orally or in writing, to warrantholders about us or the market for our securities, and assisting in the processing of the exercise of redeemable warrants. No compensation will be paid to the representative upon the exercise of the redeemable warrants if:

• the market price of the underlying shares of common stock is lower than the exercise price;

• the holder of the redeemable warrants has not confirmed in writing that the representative solicited the holder’s exercise;

• the redeemable warrants are held in a discretionary account;

• the redeemable warrants are exercised in an unsolicited transaction; or

• the arrangement to pay the commission is not disclosed in the prospectus provided to warrantholders at the time of exercise.

Over-allotment option

We have granted to the underwriters an option, exercisable not later than 45 days after the date of this prospectus, to purchase up to 420,000 additional shares of our common stock and/or up to 420,000 additional redeemable warrants at the public offering prices, less the underwriting discount, set forth on the cover page of this prospectus. The underwriters may exercise the option solely to cover over-allotments, if any, made in connection with this offering. If any additional shares of our common stock or redeemable warrants are purchased pursuant to the over-allotment option, the underwriters will offer these additional shares and redeemable warrants on the same terms as those on which the other shares and redeemable warrants are being offered hereby.

Right of first refusal

The representative has the right to serve as managing underwriter, managing placement agent or managing arranger for any financing we undertake during the three years following the date of this prospectus that has aggregate gross proceeds of less than $25,000,000, on terms then competitive in the market for transactions of that

47

type. If the representative elects not to exercise this right, or for any financing for which the representative would be entitled to exercise this right but for the fact that the gross proceeds are $25,000,000 or more, the representative is entitled to act as a co-managing underwriter, co-managing agent or co-managing arranger for the financing and assist us in identifying, selecting and negotiating with the lead underwriter, agent or arranger for the financing. The representative, in its discretion, also has the opportunity to purchase, place or arrange, as a member of the underwriting syndicate, selling group or arranging group for the financing, the largest allocation to any member of the underwriting syndicate, selling group or arranging group. During the three-year period following the date of this prospectus, the representative will also have the right to purchase for its own account, or to sell for the accounts of our affiliates, any securities sold by our affiliates pursuant to Rule 144 of the Securities Act.

Director designee

For a period of three years from the date of this prospectus, the representative shall be entitled to designate (a) one person who is reasonably acceptable to us to serve on our board of directors, provided such designee would be deemed an independent director under Nasdaq rules, and we will appoint such person as a member of our board of directors and (b) one representative (who need not be the same individual from meeting to meeting) to observe each meeting of the board of directors. Each designee and representative shall be entitled to receive reimbursement for all reasonable costs incurred in attending such meetings, including, but not limited to, food, lodging and transportation.

Advisory fee

We have engaged the representative as our financial advisor for a period of six months following the date of this prospectus, at a monthly fee of $10,000, all $60,000 of which will be payable in advance upon the consummation of this offering. Additionally, we will enter into an agreement that will provide that we will pay the representative a fee in the event that the representative originates a merger, acquisition, joint venture or other transaction to which we are a party.

Determination of offering prices

Before this offering, there has been no public market for any of our securities. The public offering price of the securities and the terms of the redeemable warrants were negotiated between us and the representative of the underwriters. Factors considered in determining the prices and terms of the securities include the history and prospects of companies whose principal business is the production of residential and small business communications hardware generally and cordless phones and VoIP equipment specifically, the development stage nature of our business, an assessment of our management and their experience in the communications industry, general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.

Stabilization, short positions and penalty bids

The underwriters may engage in over-allotment, syndicate covering transactions, stabilizing transactions and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of our common stock or redeemable warrants:

• Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by an underwriter is not greater than the number of shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. An underwriter may close out any short position by either exercising its over-allotment option, in whole or in part, or purchasing shares or redeemable warrants in the open market.

• Syndicate covering transactions involve purchases of securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities needed to close out the short position, the representative will consider, among other things, the price of the securities available for purchase in the open market as compared to the price at which it may purchase

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the securities through the over-allotment option. If the underwriters sell more shares or redeemable warrants than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the representative is concerned that there could be downward pressure on the price of the shares or redeemable warrants in the open market after pricing that could adversely affect investors who purchase in the offering.

• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specific maximum.

• Penalty bids permit the representative to reclaim a selling concession from a syndicate member when the securities originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These syndicate covering transactions, stabilizing transactions and penalty bids may have the effect of raising or maintaining the market prices of our securities or preventing or retarding a decline in the market prices of our securities. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the Nasdaq Capital Market, the OTC Bulletin Board, in the over-the-counter market or on any trading market and, if commenced, may be discontinued at any time.

Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the prices of our securities. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make with respect to any of these liabilities.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will be passed upon for our company by Sonnenschein Nath & Rosenthal LLP, New York, New York. Certain legal matters in connection with the securities offered in this prospectus will be passed upon for the underwriters by Graubard Miller, New York, New York.

EXPERTS

The financial statements of American Telecom Services, Inc. at June 30, 2004 and June 30, 2005 and for the period from June 16, 2003 (date of inception) through June 30, 2005 appearing in this prospectus and in the registration statement have been included herein in reliance upon the report, which includes an explanatory paragraph relating to the ability of American Telecom Services, Inc. to continue as a going concern, of BDO Seidman, LLP, an independent registered public accounting firm, given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1, which includes exhibits, schedules and amendments, under the Securities Act, with respect to this offering of our securities. Although this prospectus, which forms a part of the registration statement, contains all material information included in the registration statement, parts of the registration statement have been omitted as permitted by rules and regulations of the SEC. We refer you to the registration statement and its exhibits for further information about us, our securities and this offering. The registration statement and its exhibits, as well as our other reports filed with the SEC, can be inspected and copied at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information about the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site at http://www.sec.gov which contains the Form S-1 and other reports, proxy and information statements and information regarding issuers that file electronically with the SEC.

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AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

JUNE 30, 2005 and 2004

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets	F-3
Statements of Operations	F-4
Statements of Stockholders’ Deficit	F-5
Statements of Cash Flows	F-6
Notes to Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

American Telecom Services, Inc.

City of Industry, California

We have audited the accompanying balance sheets of American Telecom Services, Inc. (a development stage company) (the “Company”) as of June 30, 2005 and 2004, the related statements of operations and cash flows for each of the two years in the period ended June 30, 2005 and for the period from June 16, 2003 (inception) to June 30, 2005, and the related statements of stockholders’ deficit for the period from June 16, 2003 (inception) to June 30, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Telecom Services, Inc. as of June 30, 2005 and 2004, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2005 and for the period from June 16, 2003 (inception) to June 30, 2005, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses from its development stage operations since inception and has working capital and shareholders’ deficiencies that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

BDO Seidman, LLP

New York, New York

September 30, 2005

F-2

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

	June 30, 2005			June 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	50,780		$	—
Deferred financing costs (Note 2)		113,518			—
Total assets	$	164,298		$	—
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accrued expenses and other (Note 8)	$	101,657		$	—
Accrued financing costs		123,518			—
Total current liabilities		225,175			—
Commitments (Notes 4 and 6)
Stockholders’ deficit:
Preferred stock, $.001 par value, authorized 5,000,000 shares, issued and outstanding -0- shares (Note 6)		—			—
Common stock, $.001 par value, authorized 20,000,000 shares; issued and outstanding 2,000,000 shares and 1,805,000 shares (Note 5 and 7)		2,000			1,805
Additional paid-in capital (Note 8)		132,429			23,253
Deficit accumulated during the development stage		(195,306	)		(25,058	)
Total stockholders’ deficit		(60,877	)		—
Total liabilities and stockholders’ deficit	$	164,298		$	—

The accompanying notes are an integral part of these financial statements

F-3

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

	For the Year Ended June 30, 2005			For the Year Ended June 30, 2004			For the Period from June 16, 2003 (inception) to June 30, 2005
Total revenues	$	—		$	—		$	—
Expenses:
Marketing and development		84,813			22,058			106,871
General and administrative		84,435			3,000			87,435
Interest expense		1,000			—			1,000
		170,248			25,058			195,306
Net loss	$	(170,248	)	$	(25,058	)	$	(195,306	)
Net loss per common share:
Basic and diluted	$	(0.09	)	$	(0.01	)
Weighted average shares outstanding:
Basic and diluted		1,920,870			1,729,610

The accompanying notes are an integral part of these financial statements

F-4

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS’ DEFICIT

	Common stock			Additional paid in capital		Deficit accumulated during the development stage			Total stockholders’ deficit
	Shares	Amount
Balance, June 16, 2003 (inception)	—	$	—	$	—	$	—		$	—
Issuance of common stock, June 16, 2004	1,765,000		1,765		—		—			1,765
Issuance of common stock, June 22, 2004	40,000		40		—		—			40
Capital contribution	—		—		23,253		—			23,253
Net loss							(25,058	)		(25,058	)
Balance, June 30, 2004	1,805,000	$	1,805	$	23,253	$	(25,058	)	$	—
Issuance of common stock, July 7, 2004	195,000		195		—		—			195
Capital contribution	—		—		69,176		—			69,176
Value allocated to warrants issued and beneficial conversion feature of convertible notes issued on June 20, 2005	—		—		40,000		—			40,000
Net loss							(170,248	)		(170,248	)
Balance, June 30, 2005	2,000,000	$	2,000	$	132,429	$	(195,306	)	$	(60,877	)

The accompanying notes are an integral part of these financial statements

F-5

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

	For the Year Ended June 30, 2005			For the Year Ended June 30, 2004			For the Period from June 16, 2003 (inception) to June 30, 2005
Cash flows from operating activities:
Net loss	$	(170,248	)	$	(25,058	)	$	(195,306	)
Adjustment to reconcile net loss to net cash provided by operating activities
Common stock and capital contributed for services		69,371			25,058			94,429
Changes in operating assets and liabilities:
Accrued expenses		101,657			—			101,657
Net cash provided by operating activities		780			—			780
Cash flows from financing activities:
Proceeds from convertible notes		50,000			—			50,000
Net increase in cash and cash equivalents		50,780			—			50,780
Cash and cash equivalents — beginning of period		—			—			—
Cash and cash equivalents — end of period	$	50,780		$	—		$	50,780
Supplementary disclosure of cash flow information:
Non-cash financing activity:
Deferred financing costs	$	123,518		$	—		$	123,518

The accompanying notes are an integral part of these financial statements

F-6

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

1.  Description of the business and basis of presentation:

American Telecom Services, Inc. (the “Company”) was incorporated in the state of Delaware on June 16, 2003. The Company’s fiscal year ends on June 30. The Company is a development stage company in accordance with Statement of Financial Accounting Standards No. 7.

The Company was formed to design, distribute and market product bundles that include multi-handset phones and low-cost, high value telecommunication services for sale through retail channels. The Company expects to generate revenues through the sale of phones into the retail market and share in a portion of revenues generated by communications service providers.

Primary activities to date have consisted of securing financing, developing strategic alliances associated with the development of its technology, design and development and initial sales and marketing.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company is in the development stage and has incurred losses from operations from inception through June 30, 2005, and had working capital and stockholders’ deficiencies that raise substantial doubt about the Company’s ability to continue as a going concern unless it is able to obtain financing. Subsequent to June 30, 2005, the Company has issued convertible notes in the aggregate principal amount of $2,113,500 (Note 9) and is pursuing an initial public offering of its common shares and redeemable warrants, which is expected to generate gross proceeds of $14.3 million. However, there can be no assurance that the Company will consummate the initial public offering or that it will emerge from the development stage and generate sufficient revenues to sustain its business objectives. The accompanying financial statements do not include any adjustments to the carrying amounts or classifications of assets and liabilities that may result from the outcome of this uncertainty.

2.  Summary of significant accounting policies:

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Deferred financing costs

Deferred financing costs consist of direct expenses incurred through June 30, 2005 that are related to the issuance of convertible notes (Note 9) subsequent to year end and will be amortized over the expected term of the financing.

Revenue recognition

The Company is a development stage enterprise and did not generate any revenues through June 30, 2005. Subsequent to June 30, 2005, limited shipments of phones have commenced. Revenues from sales of phones will be recognized in the period the phones are shipped to customers. Revenue sharing income generated by subscriber usage and paid to the Company by carriers will be recognized in the period the usage occurred. Additionally, revenue resulting from carrier agent and co-op fees will be recognized in the period the subscriber activates the phone on the carrier’s network.

Advertising

Costs of advertising will be expensed as incurred, and recorded as marketing and development expenses.

Net loss per share

Basic loss per share includes no dilution and is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share reflect, in periods in

F-7

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS — (Continued)

2.  Summary of significant accounting policies: — (Continued)

which they have a dilutive effect, the effect of common shares issuable upon exercise of stock options and warrants. The 91.9271 for one and two for one splits in June 2004 and March 2005, respectively, effected as a stock dividend have been reflected retroactively for all periods.

Income taxes

The Company follows the liability approach under which deferred income taxes are determined based upon the differences between the financial statement and tax bases of assets and liabilities using enacted rates in effect in the years in which the differences are expected to reverse. Valuation allowances are provided against deferred tax assets when management is uncertain as to the ultimate realization of the asset.

Use of estimates

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

3.  Income taxes:

From inception through June 30, 2005, the Company has generated net losses from operations, therefore no provisions for income taxes have been recorded. Deferred tax assets of approximately $10,000 and $72,000 at June 30, 2004 and 2005, respectively, arose primarily from net operating tax losses that expire in 2024 and 2025, respectively. In recognition of the uncertainty regarding the ultimate amount of income tax benefits to be derived, the Company has recorded a full valuation allowance against such deferred tax assets at June 30, 2004 and 2005.

4.  Related party transactions:

A related party purchased $25,000 principal amount of 6% notes on June 20, 2005 and $37,500 principal amount of 8% notes subsequent to June 30, 2005 in the private placement, and also received an aggregate of 58,333 private warrants in connection with such purchases for the same purchase price as all other investors in the private placements and received identical registration rights with respect to his securities (Note 8 and 9).

Certain marketing services are being provided to the Company by Future Marketing whose sole stockholder is also the sole stockholder of The Future, LLC, which owns 18.1% of the Company’s stock. Future Marketing, among other things, assists in the development and execution of the Company’s marketing plans, manages the accounts, assists in product development and handles back-office vendor functions.

As compensation for its services, effective as of the consummation of the IPO, Future Marketing will be paid monthly for the periods indicated on the basis of the following annualized base fee schedule beginning on the consummation of the IPO:

Period ended June 30, 2006	$	164,000
July 1, 2006 through December 31, 2007	$	184,800

In addition to such monthly fees, Future Marketing will be entitled to the following fees based on net sales (defined as revenues collected during a period less allowances granted to retailers, markdowns, discounts, commissions, reserves for service outages, customer hold backs and expenses):

• one percent of the amount by which net sales during fiscal year ended June 30, 2006 exceed $5,000,000;

• one percent of the amount by which net sales for fiscal year ended June 30, 2007 exceed net sales for fiscal year ended June 30, 2006; and

F-8

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS — (Continued)

4.  Related party transactions: — (Continued)

• one percent of the amount by which net sales for the six-month period ended December 31, 2007 exceed net sales during the six-month period ended June 30, 2007.

The fees described above for any period will be limited to an amount no greater than 75% of Future Marketing’s base fees paid during such period.

Future Marketing will also be entitled to the following fees based on net profits defined as net income, after taxes, as determined in accordance with GAAP:

• one percent of net profits for each of the fiscal years ended June 30, 2006 and June 30, 2007, respectively; and

• one percent of net profits for the six-month period ended December 31, 2007.

In no event may the aggregate supplemental fees paid to Future Marketing from net sales and net profits during any period described above exceed 112% of the base fees paid during such period.

Future Marketing will receive 25,000 options and 50,000 performance accelerated restricted stock (PARS) pursuant to the Company’s 2005 stock option plan.

The Company has entered into a five-year agreement with David Feuerstein (a principal stockholder of the Company) pursuant to which, in consideration for helping to establish its service provider relationship with IDT and, going forward, maintaining and expanding its relationship with each of IDT and SunRocket, the Company will pay him one quarter of one percent of all net revenues collected by the Company during each year of the term of the agreement directly attributable to the sale of (i) digital cordless multi-handset phone systems, (ii) multi-handset VOIP telephones and (iii) related telephone hardware components ((i), (ii) and (iii), collectively, “Hardware”), subject to a maximum aggregate amount of $250,000 for such year. Under the agreement, such net revenues mean gross amounts of billing on Hardware sold to retailers less (I) sales and other taxes, postage, cost of freight and disbursements included in such bills and (II) allowances granted to such retailers including, without limitation, advertising and promotional allowances, markdowns, discounts, returns and commissions. The Company will also pay to Mr. Feuerstein five percent of all net revenues collected by the Company from IDT Puerto Rico & Co (“IDT”) during each year of the term of and directly attributable to the Company’s service agreement dated as of November 25, 2003 with IDT (the “IDT Agreement”), subject to a maximum aggregate amount of $250,000 for such year. Under the agreement, such net revenues mean payments to which the Company is entitled and collect under the IDT Agreement less service provider deductions provided such under agreement including, without limitation, reserves for service outages, customer hold backs and expenses. The Company will also pay to Mr. Feuerstein two percent of all net revenues collected by the Company from SunRocket during each year of the term of and directly attributable to the Company’s June 7, 2005 service agreement with SunRocket, subject to a maximum aggregate amount of $250,000 for such year; provided, however, that any revenues attributable under the SunRocket agreement from the provision of Internet-based communications services relating to “subscriber bounty,” “advertising co-op” and “key-city funds” are excluded in any computation of such net revenues. Under the agreement, such net revenues mean payments to the Company to which the Company is entitled from SunRocket less service provider deductions provided under the SunRocket agreement including, without limitation, reserves for service outages, customer hold backs and expenses. The agreement may be extended for an additional five-year term if the Company is profitable for three of the first five years of the initial term. If so extended, Mr. Feuerstein will be entitled to a reduced revenue sharing allocation. The agreement also provides for certain revenue sharing allocation reductions if certain conditions are not satisfied during the initial term.

F-9

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS — (Continued)

5.  Issuances of common stock:

During the years ended June 30, 2005 and 2004, the Company issued 195,000 and 1,805,000 shares of common stock at par value to its principal shareholders as well as others who provided services to the Company. The Company estimated fair values of common stock issued for services as of the grant dates which were immaterial in the aggregate. Capital contributions of $69,176 and $23,253 in 2005 and 2004, respectively, represent expenses paid on behalf of the Company by its principal shareholders.

6.  Commitments:

Employment Agreements

Effective as of the consummation of this offering, Messrs. Hahn, Layman, Somer and Ching will enter into employment agreements. Each of the employment agreements will be for a term through December 31, 2007.

Messrs. Hahn, Layman, Somer and Ching will be paid monthly for the periods indicated on the basis of the following annualized base salaries:

	Period Ended June 30, 2006		Period Ended December 31, 2007
Bruce Hahn	$	200,000	$	230,000
Bruce Layman	$	125,000	$	137,500
Adam Somer	$	125,000	$	137,500
Yu Wen Ching	$	144,000	$	158,400

Messrs. Hahn, Layman, Somer and Ching will be entitled to the following bonuses based on the Company’s net sales (defined as the Company’s revenues collected during a period less allowances granted to retailers, markdowns, discounts, commissions, reserves for service outages, customer hold backs and expenses):

• one percent of the amount by which net sales during fiscal year ended June 30, 2006 exceed $5,000,000;

• one percent of the amount by which net sales for the fiscal year ended June 30, 2007 exceed net sales during the Company’s fiscal year ended June 30, 2006; and

• one percent of the amount by which net sales for the six-month period ended December 31, 2007 exceed net sales during the six-month period ended June 30, 2007.

The bonus described above will be limited to an amount no greater than 75% of the recipient’s then current base annual salary.

Messrs. Hahn, Layman, Somer and Ching will also be entitled to the following bonuses based on net profits (defined as net income, after taxes, as determined in accordance with GAAP):

• one percent of net profits for each of fiscal years ended June 30, 2006 and June 30, 2007, respectively; and

• one percent of net profits for the six-month period ended December 31, 2007.

The employment agreements will further provide that Mr. Hahn’s aggregate bonuses from net sales and net profits for any bonus period will in no event exceed 150% of his base salary during such period and each of Messrs. Layman, Somer and Ching’s aggregate bonuses from net sales and net profits for any bonus period will in no event exceed 112% of his base salary during such period.

Upon consummation of this offering, Mr. Burstein will receive a salary of $80,000 per year in his capacity as chairman of the board of directors.

7.  Stock Options:

The Company has adopted the 2005 stock option plan. In addition to stock options, the Company may also grant performance accelerated restricted stock (PARS) under the plan. The plan will become effective prior to consummation of this offering and will terminate ten years after the date of effectiveness.

F-10

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS — (Continued)

7.  Stock Options: — (Continued)

Under the plan, 600,000 shares of the Company’s common stock are available for stock-based award grants, subject to adjustment.

Upon consummation of the IPO, each of Messrs. Burstein, Hahn, Layman, Somer and Ching will receive 25,000 options under the plan, 12,500 of which will vest on the first anniversary of employment and the remaining 12,500 of which will vest on the second anniversary of employment. Future Marketing will receive 25,000 options upon consummation of this offering, 12,500 of which will vest on the first anniversary of its consulting relationship with us and the remaining 12,500 of which will vest on the second anniversary of its consulting relationship with us. The options will be exercisable at $5.05 per share. The Company estimates the fair value of the stock options vesting in each year of employment at $183,000 at the grant date. The Company will remeasure the fair value of the stock options vesting in the second year of employment. The fair values of the stock options will be amortized over their vesting period. Management estimated volatility of 50%, no dividend and a discount rate of 4.21%.

Upon consummation of this offering, Mr. Hahn will receive PARS in the amount of 75,000 shares, and each of Messrs. Burstein, Layman, Somer and Ching and Future Marketing will receive PARS in the amount of 50,000 shares under the plan. Of the total PARS granted to each executive officer, Mr. Burstein and Future Marketing, 25% will vest only if net sales equal or exceed $20 million during fiscal 2006 and another 25% will vest only if net profits equal or exceed $1 million during fiscal 2006. An additional 25% will vest only if net sales equal or exceed $50 million in fiscal 2007 and the final 25% will vest only if net profits equal or exceed $5 million during fiscal 2007. If the performance conditions are not met in the first year, no PARS will vest in such year. If the performance conditions are not met in the second year but cumulative amounts are achieved by the second year representing 80% or more of the cumulative target amounts for both years for a respective condition, then a percentage of the unvested PARS for both years will nevertheless vest in the second year in respect of such condition. In such event, the percentage of unvested PARS that will vest in the second year in respect of a particular performance condition will equal the percentage that such aggregate amount achieved in the first and second years represents of the aggregate amount required to be met by the respective condition for both years. The Company will record stock based compensation expense equal to the fair value of the PARS over the earnings period.

8.  Convertible Note:

On June 20, 2005, the Company issued convertible notes aggregating $50,000, including $25,000 to a related party (see Note 4), with an interest rate of 6%. The convertible notes included 1.3334 warrants for each dollar of principal which are convertible at the option of holders at the lower of $3.00 or the IPO price. The Company incurred $10,000 of direct costs in connection with the issuance of these notes. Additionally, $40,000 of relative fair value was ascribed to warrants issued with the notes and a beneficial conversion feature attributable to such notes. Management estimated volatility of 50%, no dividend and a discount rate of 4.21%. The amortization of the issuance cost, including the fair value of warrants and beneficial conversion feature, was $1,000 for the year ended June 30, 2005 (Note 9). The net amount of the notes included in accrued expenses and other at June 30, 2005 was $1,000.

9.  Subsequent event:

During the period from July 2005 through September 2005, the Company issued and sold in a series of private transactions an aggregate of $2,113,500 principal amount of its 8% senior convertible notes due July 14, 2007. The notes bear interest at the rate of 8% per annum, and are ranked senior to all indebtedness of the Company, other than permitted indebtedness, as defined. Repayment of the convertible notes is collateralized by a lien upon, and security interest in, all of the Company’s assets, subject only to the prior lien of the permitted indebtedness.

F-11

AMERICAN TELECOM SERVICES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS — (Continued)

9.  Subsequent event: — (Continued)

The notes are convertible, at any time, at the option of the holder, into shares of the Company’s common stock at a conversion price equal to the lower of (i) $3.00 per share or (ii) the per share price at which the common stock is sold to the public in the Company’s contemplated initial public offering. In the event that the Company consummates its initial public offering at a price that exceeds the then applicable conversion price by at least 130%, then the principal amount of the notes and accrued interest thereon shall automatically convert into shares of the Company’s common stock at the conversion price.

The purchasers of the convertible notes received redeemable warrants at a rate of 0.667 of a redeemable warrant for each $1.00 in principal amount of the convertible notes, covering an aggregate total of 1,409,000 shares of the Company’s common stock. The redeemable warrants are exercisable through July 14, 2011 at an exercise price equal to the lesser of (i) $5.05 or (ii) the IPO Price, if the IPO price is less than $5.05.

The carrying value of the convertible notes at their issuance date will be reduced by direct issuance costs and, the fair value of the redeemable warrants and beneficial conversion feature of the notes. The fair value of the redeemable warrants and beneficial conversion feature amounting to approximately $1.6 million will be credited to additional paid in capital. The deferred debt issuance cost will be amortized as interest expense in the statement of operations over the life of the notes.

F-12

You should rely only on the information contained in this document or other documents to which we have referred you. We have not authorized anyone to provide you with different information. This document may only be used where it is legal to sell these securities. The information contained in this document is current only as of its date.

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Summary Financial Information	5
Risk Factors	6
Cautionary Statement Regarding Forward-Looking Statements	14
Use of Proceeds	15
Dividend Policy	16
Dilution	17
Capitalization	18
Selected Financial Data	19
Plan of Operations	20
Business	25
Management	34
Certain Transactions	38
Principal Securityholders	40
Description of Securities	42
Underwriting	46
Legal Matters	49
Experts	49
Where You Can Find More Information	49
Index to Financial Statements	F-1

Until                     , all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

2,800,000 shares of

common stock

2,800,000 redeemable

warrants to purchase shares

of common stock

PROSPECTUS

HCFP/Brenner Securities LLC

                    , 2005

[Alternate Page for Selling Securityholders’ Prospectus]

The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

*  *  *  *  *  *

Subject to Completion, dated November 1, 2005

Preliminary Prospectus

American Telecom Services, Inc.

2,225,596 Shares of Common Stock

1,475,666 Warrants

This prospectus relates to the offer and sale from time to time of up to 2,225,596 shares of our common stock and up to 1,475,666 warrants by the persons described in this prospectus, whom we call the “selling securityholders.” Of such 2,225,596 shares, 749,930 shares are being offered for resale by current securityholders and 1,475,666 shares are being offered for resale upon exercise of warrants held by certain of the selling securityholders. We are registering these shares as required by the terms of registration rights agreements between the selling securityholders and us. Such registration does not mean that the selling securityholders will actually offer or sell any of these shares. We will receive no proceeds from the sale of any of these shares by the selling securityholders.

We are also offering 1,475,666 shares of our common stock for issuance upon the exercise of warrants originally purchased by one or more selling securityholders but held at the time of exercise by persons other than the selling securityholders.

Each warrant entitles the holder to purchase one share of our common stock at a price of $5.05. Each warrant is exercisable from the date of this prospectus until                      , 2010 [five years from the date of this prospectus], or earlier upon redemption. The warrants are redeemable at the Company’s option, with the consent of the representative of the underwriters, as set forth in this prospectus.

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page [    ] of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                    , 2005

[Alternate Page for Selling Securityholders’ Prospectus]

Prospectus Summary

* * *

The Offering

Common stock offered by us 1,475,666 shares(1)

Common stock offered by selling securityholders 2,225,596 shares(1)

Common stock to be outstanding after this offering 7,025,596 shares(2)

Warrants offered 1,475,666 warrants

Warrants to be outstanding after this offering 3,975,666 warrants(3)

Warrant Terms

Exercisability Each redeemable warrant is exercisable for the purchase of one share of our common stock.

Exercise price $5.05 per share, subject to adjustment in the event of a stock dividend or split, reorganization, recapitalization or similar event.

Exercise period The warrants are exercisable immediately and will expire on                     , 2010 [five years from the date of this prospectus], or earlier upon redemption

Redemption Subject to the prior consent of HCFP/Brenner Securities, we may redeem the outstanding redeemable warrants:

• in whole and not in part;

• at a price of $0.05 per warrant;

• upon a minimum of 30 days’ advance written notice of redemption;

• if, and only if, the last sales price per share of our common stock equals or exceeds 190% (currently $9.60) during the first three months after consummation of this offering, or 150% (currently, $7.58) thereafter, of the then effective exercise price of the redeemable warrants for all 15 of the trading days ending within three business days before we send the notice of redemption; and

• if, and only if, we then have an effective registration statement covering the shares issuable upon exercise of the redeemable warrants.

Proposed Nasdaq Capital Market symbols for our:

Common stock “ATEL”

Warrants “ATELW”

(1) We are offering our common stock for issuance upon the exercise of warrants originally purchased by one or more selling securityholders but held at the time of exercise by persons other than the selling

1

securityholders. The number of shares issued by us upon the exercise of such warrants will reduce by a like number the number of shares of common stock being offered by the selling securityholders.

(2) Based upon our issued and outstanding shares of common stock as of June 30, 2005, as adjusted to reflect the assumed conversion of $2,163,500 principal amount of our outstanding notes (and all interest due thereon) into 749,930 shares of common stock subsequent to June 30, 2005, and as further adjusted to reflect the issuance of 2,800,000 shares of common stock in our initial public offering. This number excludes 600,000 shares reserved for option grants and other stock-based awards under our 2005 stock option plan.

(3) Assumes no warrants are exercised.

2

[Alternate Page for Selling Securityholders’ Prospectus]

Use of Proceeds

We will not receive any proceeds from the sale of our common stock offered and warrants by the selling securityholders. If all of the warrants are exercised, we will receive proceeds of $7,452,113 before payment of any solicitation fees that may become due. We intend to use such proceeds for working capital and other general corporate purposes.

3

[Alternate Page for Selling Securityholders’ Prospectus]

SELLING STOCKHOLDERS

This prospectus relates to our registration, for the account of the selling securityholders indicated below, of an aggregate of 2,225,596 shares of our common stock and 1,475,666 warrants. The 2,225,596 shares of common stock includes 1,475,666 shares underlying warrants. Such securities are being registered for resale pursuant to registration rights granted by us to the selling securityholders. We have agreed to pay all expenses and costs to comply with our obligation to register the selling securityholders’ shares of common stock. We have also agreed to indemnify and hold harmless the selling securityholders against certain losses, claims, damages or liabilities, joint or several, arising under the Securities Act of 1933.

Selling Securityholders of Common Stock

The following table presents information concerning the common stock offered for resale by the selling securityholders. We believe, based on information supplied by the following persons, that the persons named in this table have sole voting and investment power with respect to all shares of common stock that they beneficially own. The last column of this table assumes the sale of all of our shares offered by this prospectus. The registration of the offered shares does not mean that any or all of the selling securityholders will offer or sell any of these shares. Except as set forth in the notes to this table, there is not nor has there been a material relationship between us and any of the selling securityholders within the past three years.

Name of Selling Securityholder	Number of Shares Beneficially Owned	Common Stock Offered by Selling Securityholder	Shares Beneficially Owned After Offering
			Number	Percent
Jim and Lynn Scoroposki Foundation	126,666	126,666	0
Burton Koffman	253,333	253,333	0
Israel Feit	101,334	101,334	0
Silverman Partners, LLC	506,666	506,666	0
Meadowbrook Opportunity Fund, LLC	253,333	253,333	0
Joseph Catalano	30,400	30,400	0
Melvin Paikoff	30,400	30,400	0
John F. Cattier	15,200	15,200	0
Barry Lawrence Goldin IRA	25,334	25,334	0
HRG Trust	51,680	51,680	0
Lawrence Burstein (1)	79,958	79,958	0
Steven Millner	41,958	41,958	0
Norman Leben	25,334	25,334	0
MG Realty Investors, Inc.	25,334	25,334	0
William Feldman	25,334	25,334	0
Roni Rosenstock	76,000	76,000	0
David Thalheim	76,000	76,000	0
Jack Kane	25,334	25,334	0
Gutman Family Foundation	152,000	152,000	0
Ed Gutman IRA	152,000	152,000	0
Harry Pelz	50,666	50,666	0
Dov Schwartz	50,666	50,666	0
Allan R. Lyons	50,666	50,666	0

(1) Mr. Burstein is Chairman of our Board of Directors.

4

[Alternate Page for Selling Securityholders’ Prospectus]

Selling Securityholders of Warrants

The following table presents information concerning the warrants offered for resale by the selling securityholders. The last column of this table assumes the sale of all of our warrants offered by this prospectus. The registration of the offered warrants does not mean that any or all of the selling securityholders will offer or sell any of these warrants. Except as set forth in the notes to this table, there is not nor has there been a material relationship between us and any of the selling securityholders within the past three years.

Name of Selling Securityholder	Number of Warrants Beneficially Owned	Warrants Offered by Selling Securityholder	Warrants Beneficially Owned After Offering
			Number	Percent
Jim and Lynn Scoroposki Foundation	83,333	83,333	0
Burton Koffman	166,666	166,666	0
Israel Feit	66,667	66,667	0
Silverman Partners, LLC	333,333	333,333	0
Meadowbrook Opportunity Fund, LLC	166,666	166,666	0
Joseph Catalano	20,000	20,000	0
Melvin Paikoff	20,000	20,000	0
John F. Cattier	10,000	10,000	0
Barry Lawrence Goldin IRA	16,667	16,667	0
HRG Trust	34,000	34,000	0
Lawrence Burstein (1)	58,333	58,333	0
Steven Millner	33,333	33,333	0
Norman Leben	16,667	16,667	0
MG Realty Investors, Inc.	16,667	16,667	0
William Feldman	16,667	16,667	0
Roni Rosenstock	50,000	50,000	0
David Thalheim	50,000	50,000	0
Jack Kane	16,667	16,667	0
Gutman Family Foundation	100,000	100,000	0
Ed Gutman IRA	100,000	100,000	0
Harry Pelz	33,333	33,333	0
Dov Schwartz	33,333	33,333	0
Allan R. Lyons	33,333	33,333	0

(1) Mr. Burstein is Chairman of our Board of Directors.

5

[Alternate Page for Selling Securityholders’ Prospectus]

PLAN OF DISTRIBUTION

We are registering the common stock and warrants on behalf of the selling securityholders, as well as on behalf of their donees, pledgees, transferees or other successors-in-interest, if any, who may sell such securities received as gifts, pledges, partnership distributions or other non-sale related transfers. All costs, expenses and fees in connection with the registration of the common stock and warrants offered hereby will be borne by us. Brokerage commissions and similar selling expenses, if any, attributable to the sale of the common stock and warrants will be borne by the selling securityholders.

Sales of the common stock and warrants may be effected by the selling securityholders from time to time in one or more types of transactions (which may include block transactions) on any securities exchange, in the over-the-counter market, in negotiated transactions, through put or call option transactions relating to the common stock and warrants, through short sales of such securities, short sales versus the box, or a combination of such methods of sale, at fixed prices, market prices prevailing at the time of sale, prices related to market prices, varying prices determined at the time of sale or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling securityholders have advised us that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of the common stock and warrants by the selling securityholders.

The selling securityholders may effect such transactions by selling the common stock and warrants directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the selling securityholders and/or the purchasers of the common stock and warrants for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). In effecting sales, broker-dealers engaged by the selling securityholders may arrange for other broker-dealers to participate.

The selling securityholders and any broker-dealers that act in connection with the sale of the common stock and warrants might be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act of 1933, and any commissions received by such broker-dealers and any profit on the resale of the common stock and warrants sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. The selling securityholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the common stock and warrants against certain liabilities, including liabilities arising under the Securities Act.

Because selling securityholders may be deemed to be “underwriters” within the meaning of Section 2(11) of the Securities Act, the selling securityholders will be subject to the prospectus delivery requirements of the Securities Act. We have informed the selling securityholders that the anti-manipulative provisions of Regulation M promulgated under the Securities Exchange Act of 1934 may apply to their sales in the market.

The selling securityholders also may resell all or a portion of the common stock and warrants in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of such Rule.

Sales of any common stock and warrants by the selling securityholders may depress the price of the common stock and/or warrants in any market that may develop for such securities.

If we are notified by a selling securityholder that any material arrangement has been entered into with a broker-dealer for the sale of the common stock and warrants through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, we will, if required, file a supplement to this prospectus or a post-effective amendment to the registration statement of which this prospectus is a part under the Securities Act, disclosing:

• the name of each such selling securityholder and of the participating broker-dealer(s);

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• the number of common stock and/or warrants involved;

• the price at which such common stock and/or warrants were sold;

• the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable;

• that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and

• other facts material to the transaction.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth various expenses that will be incurred in connection with this offering as it relates to this Registration Statement:

SEC filing fee	$	6,407
NASD filing fee		5,943
Nasdaq SmallCap Entry and Application fees		40,000
Printing and engraving expenses		100,000
Blue sky fees and expenses (including legal fees)		50,000
Legal fees and expenses		200,000
Accounting fees and expenses		100,000
Transfer Agent fees		5,000
Miscellaneous expenses		12,650
Total	$	520,000

Item 14. Indemnification of Directors and Officers

The Registrant’s certificate of incorporation provides that all directors, officers, employees and agents of the registrant shall be entitled to be indemnified by us to the fullest extent permitted by Section 145 of the Delaware General Corporation Law.

Paragraph SEVENTH of Registrant’s certificate of incorporation provides:

“(a) The Corporation shall, to the full extent permitted by Section 145 of the GCL [Delaware General Corporation Law, as amended], from time to time, indemnify all persons whom it may indemnify pursuant thereto.

(b) A director of the Corporation shall not be personally liable to the Corporation and to its securityholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its securityholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit.

(c) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the GCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided,

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however, that except as provided in paragraph (d) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Paragraph SEVENTH shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the GCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Paragraph SEVENTH or otherwise. The Corporation may, by action of its board of directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.

(d) If a claim under sub-paragraph (c) of this Paragraph SEVENTH is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the GCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its securityholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its securityholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(e) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Paragraph SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of securityholders or disinterested directors or otherwise.

(f) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the GCL.”

Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement, the Registrant has agreed to indemnify the Underwriters and the Underwriters have agreed to indemnify the Registrant against certain civil liabilities that may be incurred in connection with this offering, including certain liabilities under the Securities Act of 1933.

Item 15. Recent Sales of Unregistered Securities

Since its inception on June 16, 2003, the Registrant has issued the following securities that were not registered under the Securities Act of 1933:

Upon our inception in June 2003, we issued a total of 9,600 shares of our common stock, including 5,280 shares to I Net Financial Management Ltd, 2,400 shares to Madison SP Holdings, LLC, a Nevada limited liability company 50% owned by Adam Somer and 50% by David Feuerstein, and 1,920 shares to The Future, LLC, all at $.001 per share.

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On June 22, 2004, we effected a stock split in the form of a stock dividend at the rate of 91.9271 shares of our common stock for each then issued and outstanding share of our common stock.

On June 22, 2004, we issued 20,000 shares to Lawrence Ho for services rendered.

On July 7, 2004, we issued 60,000 shares of our common stock to Lawrence Burstein at $.001 per share.

On July 7, 2004, we issued 37,500 shares to Larry E. Verbit in consideration of his agreement to allow us to defer payment of legal fees then owing to him and his law firm.

On March 22, 2005, we effected a stock split in the form of a stock dividend at the rate of two shares of our common stock for each then issued and outstanding share of our common stock.

On June 20, 2005, we issued $50,000 in 6% Convertible Notes and 66,666 Warrants including $25,000 of such notes and 33,333 of such warrants to Lawrence Burstein.

On July 14, 2005, we issued $125,000 of 8% Convertible Notes and 83,333 Warrants to Jim and Lynn Scoroposki Foundation.

On July 19, 2005, we issued $350,000 in 8% Convertible Notes and 233,333 Warrants, including $250,000 of such notes and 166,666 of such warrants to Burton Koffman and $100,000 of such notes and 66,666 of such warrants to Israel Feit.

On August, 3, 2005 we issued $825,000 in 8% Convertible Notes and 550,000 Warrants, including $500,000 of such notes and 333,333 of such warrants to Silverman Partners, LLC; $250,000 of such notes and 166,667 of such warrants to Meadowbrook Opportunity Fund, LLC; $30,000 of such notes and 20,000 of such warrants to Joseph Catalano; $30,000 of such notes and 20,000 of such warrants to Melvin Paikoff; and $15,000 of such notes and 10,000 of such warrants to John F. Cattier.

On August 12, 2005, we issued $475,000 of 8% Convertible Notes and 316,666 Warrants, including $150,000 of such notes and 100,000 of such warrants to each of the Gutman Family Foundation and the Ed Gutman IRA; $50,000 of such notes and 33,333 of such warrants to each of Harry Pelz, Dov Schwartz and Allan R. Lyons; and $25,000 of such notes and 16,667 of such warrants to Barry Lawrence Goldin IRA.

On September 1, 2005, we issued $188,500 of 8% Convertible Notes and 125,668 Warrants, including $51,000 of such notes and 34,000 of such warrants to HRG Trust; $37,500 of such notes and 25,000 of such warrants to Lawrence Burstein; and $25,000 of such notes and 16,667 of such warrants to each of Norman Leben, MG Realty Investors, Inc. and William Feldman

On September 27, 2005, we issued $175,000 of 8% Convertible Notes and 116,667 Warrants, including $75,000 of such notes and 50,000 of such warrants to each of Roni Rosenstock and David Thalheim and $25,000 of such notes and 16,667 of such warrants to Jack Kane.

Item 16. Exhibits and Financial Statement Schedules

(a) The following is a list of Exhibits filed herewith as part of the registration statement:

Exhibit Number	Description of Exhibit
1.1	Underwriting Agreement by and between registrant and HCFP/Brenner Securities LLC
3.1	Amended and Restated Certificate of Incorporation of Registrant
3.2	Bylaws of Registrant
3.3	Audit Committee Charter
4.1*	Specimen of Common Stock Certificate

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Exhibit Number	Description of Exhibit
4.2*	Specimen of Redeemable Warrant Certificate
4.3	Form of Securities Purchase Option to be granted to the Representative
4.4	Form of Warrant Agreement between Continental Stock Transfer & Trust Company and Registrant
5.1*	Opinion of Sonnenschein Nath & Rosenthal LLP, including consent
10.1	2005 Stock Option Plan of Registrant
10.2*	Form of Employment Agreement between each of Bruce Hahn, Bruce Layman, Adam Somer and Yu Wen Ching and Registrant
10.3*	Marketing Agreement between Future Marketing, LLC and Registrant
10.4**	Letter Agreement between IDT Puerto Rico & Co. and Registrant, dated November 25, 2003.
10.5**	Letter Agreement between SunRocket, Inc. and Registrant, dated September 28, 2005
10.6	Agreement between Gain Star International Limited and Registrant, dated June 22, 2005
10.7	Trust Account Agreement between Gain Star International Limited and Registrant, dated June 27, 2005
10.8	Sales Contract between Gain Star International Limited and Registrant, dated June 27, 2005
10.9	Factoring Agreement between CIT Commercial Services and Registrant, dated July 6, 2005
10.10	Assignment Agreement among The CIT Group, Commercial Services, Inc., Gain Star International Limited and Registrant, dated July 7, 2005
10.11	Form of Common Stock Purchase Warrant
10.12	Form of Senior Convertible Note
10.13	Form of Subscription/Registration Rights Agreement between each holder of Convertible Notes and Registrant
10.14	Agreement between David Feuerstein and Registrant, dated October 22, 2005
10.15	Form of Financial Advisory Agreement between HCFP/Brenner Securities, LLC and Registrant
10.16	Form of Merger, Acquisition and other Business Arrangement Agreement between HCFP/Brenner Securities, LLC and Registrant
10.17	Services and Distribution Agreement between Databyte Technology, Inc. and Registrant, dated October 24, 2003, inclusive of Amendments dated October 12, 2004 and September 6, 2005.
23.1	Consent of BDO Seidman, LLP
23.2*	Consent of Sonnenschein Nath & Rosenthal LLP (contained in their opinion included under Exhibit 5.1)
23.3	Consent of Elliot J. Kerbis
23.4	Consent of Donald G. Norris
23.5	Consent of Robert F. Doherty
24.1	Power of Attorney (comprises a portion of the signature page of this Registration Statement)

* To be filed by amendment to this Registration Statement

** Confidential treatment requested for certain portions of this Exhibit pursuant to Rule 406 under the Securities Exchange Act of 1934, as amended, which portions are omitted and filed separately with the Securities and Exchange Commission.

(b) Financial Statement Schedules—Not Applicable

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Item 17. Undertakings

The undersigned registrant hereby undertakes:

(1) That for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) That for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Registrant as described in Item 14 of this Part II to the registration statement, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Industry, State of California, on the 31st day of October, 2005.

AMERICAN TELECOM SERVICES INC.
By:	/s/    BRUCE HAHN
	Bruce Hahn Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Bruce Hahn and Lawrence Burstein, and each or either of them, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities to approve, sign and file with the U.S. Securities and Exchange Commission and any other appropriate authorities the original of any and all amendments (including post-effective amendments) to this Registration Statement and any other documents in connection therewith, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, this Registration Statement was signed by the following persons in the capacities and on the dates stated.

SIGNATURE	TITLE	DATE
/s/    LAWRENCE BURSTEIN         Lawrence Burstein	Chairman	October 31, 2005
/s/    BRUCE HAHN         Bruce Hahn	Chief Executive Officer and Director (Principal Executive Officer)	October 31, 2005
/s/    BRUCE LAYMAN         Bruce Layman	Chief Financial Officer (Principal Financial and Accounting Officer)	October 31, 2005

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EX-1.1

Exhibit 1.1

FORM OF

UNDERWRITING AGREEMENT

Between

AMERICAN TELECOM SERVICES INC.

and

HCFP/BRENNER SECURITIES LLC

Dated:                     , 2005

AMERICAN TELECOM SERVICES INC.

2,800,000 SHARES OF COMMON STOCK

AND

2,800,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS

UNDERWRITING AGREEMENT

New York, New York

                        , 2005

HCFP/Brenner Securities, LLC

888 Seventh Avenue

17^th Floor

New York, New York 10106

Ladies and Gentlemen:

The undersigned, American Telecom Services Inc., a Delaware corporation (the “Company”), hereby confirms its agreement with HCFP/Brenner Securities, LLC (being referred to herein variously as “you,” “HCFP” or the “Representative”) and with the other underwriters named on Schedule I hereto for which HCFP is acting as Representative (the Representative and the other Underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as follows:

1. Purchase and Sale of Securities.

1.1 Firm Securities.

1.1.1 Purchase of Firm Securities. On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell, severally and not jointly, to the several Underwriters an aggregate of 2,800,000 shares of the Company’s common stock, par value $.             per share (“Common Stock”) at a purchase price (net of discounts and commissions) of $             per share, and 2,800,000 Redeemable Common Stock Purchase Warrants (“Warrant(s)”) at a purchase price (net of discounts and commissions) of $.             per Warrant. Each Warrant will entitle the holder thereof to purchase one share of Common Stock at a purchase price of $5.05 per share during the period beginning on the Effective Date (as hereinafter defined) and ending on the fifth anniversary of the Effective Date. The foregoing shares of Common Stock and Warrants are referred to herein as the “Firm Securities.” The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Securities set forth opposite their respective names on Schedule I attached hereto and made a part hereof.

1.1.2 Delivery and Payment. Delivery and payment for the Firm Securities shall be made at 10:00 A.M., New York time, on or before the third business day following the date that the Firm Securities commence trading or at such earlier time as the

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Representative shall determine, or at such other time as shall be agreed upon by the Representative and the Company, at the offices of counsel to the Representative or at such other place as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Securities are called the “Closing Date.” Payment for the Firm Securities shall be made on the Closing Date by wire transfer in immediately available funds, payable to the order of the Company upon delivery to you of certificates (in form and substance reasonably satisfactory to the Underwriters) representing the Firm Securities for the account of the Underwriters. The certificates representing the Firm Securities shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two full business days prior to the Closing Date. The Company will permit the Representative to examine and package the Firm Securities for delivery at least one full business day prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Securities except upon tender of payment by the Representative for all the Firm Securities.

1.2 Over-Allotment Option.

1.2.1 Option Securities. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Securities, the Underwriters are hereby granted an option to purchase up to an additional 420,000 shares of Common Stock and/or 420,000 Warrants from the Company (“Over-allotment Option”). Such additional 420,000 shares of Common Stock and 420,000 Warrants are hereinafter referred to as the “Option Securities.” The Firm Securities and the Option Securities, together with the shares of Common Stock issuable upon exercise of the Warrants, are hereinafter referred to collectively as the “Public Securities.” The purchase price to be paid for the Option Securities will be the same price per Option Security as the price per Firm Security set forth in Section 1.1.1 hereof.

1.2.2 Exercise of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Securities within 45 days after the Effective Date. The Underwriters will not be under any obligation to purchase any Option Securities prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company by the Representative, which must be confirmed in writing by overnight mail or facsimile transmission setting forth the number of Option Securities to be purchased and the date and time for delivery of and payment for the Option Securities (the “Option Closing Date”), which will not be later than five full business days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of the Representative or at such other place as shall be agreed upon by the Company and the Representative. Upon exercise of the Over-allotment Option, the Company will become obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to purchase, the number of Option Securities specified in such notice.

1.2.3 Payment and Delivery. Payment for the Option Securities will be at the Representative’s election by wire transfer in immediately available funds, payable to the order of the Company at the offices of the Representative or at such other place as shall be agreed upon by the Representative and the Company upon delivery to you of certificates representing such securities for the Underwriters. The certificates representing the Option Securities to be delivered will be in such denominations and registered in such names as the Representative requests not less than two full business days prior to the Closing Date or the

2

Option Closing Date, as the case may be. The Company will permit the Representative to examine and package the Option Securities for delivery not less than one full business day prior to such Closing Date.

1.3 Representative’s Purchase Option.

1.3.1 Purchase Option. The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Closing Date for an aggregate purchase price of $100, an option (“Representative’s Purchase Option”) for the purchase of an aggregate of 280,000 shares of Common Stock (“Representative’s Shares”) at an initial exercise price of 110% of the initial offering price of a share of common stock (i.e, $5.555 per share of Common Stock) and/or 280,000 Warrants (“Representative’s Warrants”) at an initial exercise price of 110% of the initial offering price of a Warrant (i.e., $.055 per Warrant). Each of the Representative’s Shares and the Representative’s Warrants is identical to the Common Stock and Warrants constituting the Firm Securities. The Representative’s Purchase Option shall be exercisable, in whole or part, for a period of four years commencing one year from the Effective Date. The Representative’s Purchase Option, the Representative’s Shares, the Representative’s Warrants and the shares of Common Stock issuable upon exercise of the Representative’s Warrants are hereinafter referred to collectively as the “Representative’s Securities.” The Public Securities and the Representative’s Securities are hereinafter referred to collectively as the “Securities.”

1.3.2 Payment and Delivery. Delivery and payment for the Representative’s Purchase Option shall be made on the Closing Date. The Company shall deliver to the Underwriters, upon payment therefor, certificates for the Representative’s Purchase Option in the name or names and in such authorized denominations as the Representative may request.

2. Representations and Warranties of the Company. The Company represents and warrants to the Underwriters as follows:

2.1 Filing of Registration Statement.

2.1.1 Pursuant to the Act. The Company has filed with the Securities and Exchange Commission (“Commission”) a registration statement on Form S-1 and an amendment or amendments thereto on Form S-1 (No.                     ), including any related preliminary prospectus (“Preliminary Prospectus”), for the registration of the Public Securities under the Securities Act of 1933, as amended (“Act”), which registration statement and amendment or amendments have been prepared by the Company in conformity with the requirements of the Act, and the rules and regulations (“Regulations”) of the Commission under the Act. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement becomes effective (including the prospectus, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule 430A of the Regulations), is hereinafter called the “Registration Statement,” and the form of the final prospectus dated the Effective Date or such later date as may be determined by the Representative (or, if applicable, the form of final prospectus filed with the Commission pursuant to Rule 424 of the Regulations), is hereinafter called the “Prospectus.” The Registration Statement has been declared effective by the Commission on the date hereof.

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2.1.2 Pursuant to the Exchange Act. The Company has filed with the Commission a registration statement on Form 8-A (No.             ) providing for the registration under the Securities Exchange Act of 1934, as amended (“Exchange Act”), of the Common Stock and Warrants. Such registration of the Common Stock and Warrants has been declared effective by the Commission on the date hereof.

2.2 No Stop Orders, Etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute any proceedings with respect to such an order.

2.3 Disclosures in Registration Statement.

2.3.1 Securities Act Representation. At the time the Registration Statement becomes effective and at the Closing Date and the Option Closing Date, if any, the Registration Statement and the Prospectus and any amendment or supplement thereto, and will conform in all material respects to the requirements of the Act and the Regulations; neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, on such dates, will contain any untrue statement of a material fact or will omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. When any Preliminary Prospectus was first filed with the Commission (whether filed as part of the Registration Statement or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Act and the Regulations. The representation and warranty made in this Section 2.3.1 does not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished (or not furnished in the case of an omission) to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement or Prospectus or any amendment thereof or supplement thereto.

2.3.2 Disclosure of Contracts. The description in the Registration Statement and the Prospectus of contracts and other documents is accurate in all material respects and presents fairly the information required to be disclosed and there are no contracts or other documents required to be described in the Registration Statement or the Prospectus or to be filed with the Commission as exhibits to the Registration Statement that have not been so described or filed. Each contract or other instrument (however characterized or described) to which the Company is a party or by which its property or business is or may be bound or affected and that is (i) referred to in the Prospectus, or (ii) material to the Company’s business, has been duly and validly executed by the Company and, to the Company’s knowledge, the other parties thereto, is in full force and effect and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, moratorium, fraudulent transfer, fraudulent conveyance, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and

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other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such contracts or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder. None of the material provisions of such contracts or instruments violates or will result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court having jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and regulations.

2.3.3 Prior Securities Transactions. No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by, or under common control with the Company within the three years prior to the date hereof, except as disclosed in the Registration Statement.

2.4 Changes After Dates in Registration Statement.

2.4.1 No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise specifically stated therein, (i) there has been no material adverse change in the condition, financial or otherwise, or in the results of operations, business or business prospects of the Company and (ii) there have been no transactions entered into by the Company, other than those in the ordinary course of business, that are material with respect to the condition, financial or otherwise, or to the results of operations, business or business prospects of the Company.

2.4.2 Recent Securities Transactions, Etc. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as may otherwise be indicated or contemplated herein or therein, the Company has not (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.

2.5 Independent Accountants. BDO Seidman, LLP (“BDO”), whose report is filed with the Commission as part of the Registration Statement, are independent accountants as required by the Act and the Regulations. BDO has not, during the periods covered by the financial statements included in the Prospectus, provided to the Company any prohibited non-audit services, as such term is used in Section 10A(g) of the Exchange Act.

2.6 Financial Statements. The financial statements, together with the notes thereto and supporting schedules included in the Registration Statement and Prospectus, present fairly the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with United States generally accepted accounting principles, consistently applied throughout the periods involved; and the supporting schedules, if any, included in the Registration Statement present fairly the information required to be stated therein. The pro forma financial information set forth in the Registration Statement and Prospectus reflects all significant assumptions and adjustments relating to the business and operations of the Company.

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2.7 Authorized Capital; Options; Etc. The Company had at the date or dates indicated in the Prospectus duly authorized, issued and outstanding capitalization as set forth in the Registration Statement and the Prospectus. Based on the assumptions and adjustments stated in the Registration Statement and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in the Registration Statement and the Prospectus, on the Effective Date and on the Closing Date there will be no outstanding or authorized subscriptions, options, warrants or other rights to purchase or otherwise acquire, or preemptive rights with respect to the issuance or sale of any Common Stock of the Company, including any obligations to issue any shares pursuant to anti-dilution provisions, or any security convertible into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities.

2.8 Valid Issuance of Securities; Etc.

2.8.1 Outstanding Securities. All issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability solely by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The outstanding options and warrants to purchase shares of Common Stock constitute valid and binding obligations of the Company, enforceable in accordance with their terms. The authorized Common Stock and outstanding options and warrants to purchase shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement and the Prospectus. The offers and sales by the Company of the outstanding Common Stock, options and warrants to purchase shares of Common Stock, and securities convertible into shares of Common Stock, were at all relevant times registered under the Act and registered or qualified under the applicable state securities or Blue Sky laws or exempt from such registration or qualification requirements.

2.8.2 Securities Sold Pursuant to this Agreement. The Securities have been duly authorized and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability solely by reason of being such holders; the Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Securities has been duly and validly taken. The Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement. When issued, the Representative’s Purchase Option, the Representative’s Warrants and the Warrants will constitute valid and binding obligations of the Company to issue and sell, upon exercise thereof and payment therefor, the number and type of securities of the Company called for thereby and the Representative’s Purchase Option, the Representative’s Warrants and the Warrants will be enforceable against the Company in accordance with their respective terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

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2.9 Registration Rights of Third Parties. Except as set forth in the Prospectus, no holders of any securities of the Company or of any options or warrants of the Company or other rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Act or to include any such securities in the Registration Statement.

2.10 Validity and Binding Effect of Agreements. This Agreement and the Warrant Agreement (as hereinafter defined) have been duly and validly authorized by the Company and constitute, and the Representative’s Purchase Option, the Financial Advisory Agreement and the Merger and Acquisition Agreement have been duly and validly authorized by the Company and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

2.11 No Conflicts, Etc. The execution, delivery, and performance by the Company of this Agreement, the Representative’s Purchase Option, the Warrant Agreement, the Financial Advisory Agreement and the Merger and Acquisition Agreement, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both, (i) result in a breach of, or conflict with any of the terms and provisions of, or constitute a default under, or result in the creation, modification, termination or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, note, loan or credit agreement or any other agreement or instrument evidencing an obligation for borrowed money, or any other agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the property or assets of the Company is subject, except which could not reasonably be expected to have a material adverse effect on the Company; (ii) result in any violation of the provisions of the Certificate of Incorporation or the By-Laws of the Company; (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its properties or businesses, except where such violation could not reasonably be expected to have a material adverse effect on the Company; or (iv) have a material adverse effect on any permit, license, certificate, registration, approval, consent, license or franchise of or concerning the Company.

2.12 No Defaults; Violations. Except as described in the Prospectus, no material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject.

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Except as described in the Prospectus, the Company is not in violation of any term or provision of its Certificate of Incorporation or By-Laws or in violation of any material franchise, license, permit, applicable law, rule, regulation, judgment or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its properties or businesses.

2.13 Corporate Power; Licenses; Consents.

2.13.1 Conduct of Business. The Company has all requisite corporate power and authority, and has all necessary and material authorizations, approvals, orders, licenses, certificates and permits of and from all applicable governmental regulatory officials and bodies to own or lease its properties and conduct its business as described in the Prospectus, and the Company is and has been doing business in compliance with all such material authorizations, approvals, orders, licenses, certificates and permits and all federal, state and local laws, rules and regulations. The disclosures in the Registration Statement concerning the effects of federal, state and local regulation on the Company’s business as currently contemplated are correct in all material respects and do not omit to state a material fact.

2.13.2 Transactions Contemplated Herein. The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, approval, authorization or order of, and no filing with, any court, government agency or other body is required for the valid authorization, issuance, sale and delivery, of the Securities and the consummation of the transactions and agreements contemplated by this Agreement, the Warrant Agreement, the Representative’s Purchase Option, the Financial Advisory Agreement and the Merger and Acquisition Agreement and the Prospectus, except with respect to applicable federal and state securities laws.

2.14 Title to Property; Insurance. The Company has good and marketable title to, or valid and enforceable leasehold estates in, all items of real and personal property (tangible and intangible) owned or leased by it, free and clear of all liens, encumbrances, claims, security interests, defects and restrictions of any material nature whatsoever, other than (i) those referred to in the Prospectus, (ii) liens for taxes not yet due and payable or (iii) those which do not materially effect the value of such property and do not materially interfere with the use made of such property by the Company. The Company has adequately insured its properties against loss or damage by fire or other casualty and maintains, in adequate amounts, such other insurance as is usually maintained by companies engaged in the same or similar business.

2.15 Litigation; Governmental Proceedings. Except as set forth in the Prospectus, there is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the properties or business of, the Company that might materially and adversely affect the financial position, value or the operation of the properties or the business of the Company, or that questions the validity of the capital stock of the Company or this Agreement or of any action taken or to be taken by the Company pursuant to, or in connection with, this Agreement. There are no outstanding orders, judgments or decrees of any court, governmental agency or other tribunal, domestic or foreign, naming the Company and enjoining the Company from taking, or requiring the Company to take, any action, or to which the Company, its properties or business is bound or subject.

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2.16 Good Standing. The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the state of its incorporation. The Company is duly qualified and licensed and in good standing as a foreign corporation in each jurisdiction in which ownership or leasing of any properties or the character of its operations requires such qualification or licensing, except where the failure to qualify would not have a material adverse effect on the financial position or value or the operation of the properties or the business of the Company.

2.17 Taxes. The Company has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. The Company has paid all undisputed portions of all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriter, (i) to the Company’s knowledge, no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company. The term “taxes” mean all federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments, or charges of any kind whatever, together with any interest and any penalties, additions to tax, or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements, and other documents required to be filed in respect to taxes.

2.18 Employees’ Options. No shares of Common Stock (underlying outstanding options to purchase Common Stock) are eligible for sale pursuant to Rule 701 promulgated under the Act in the 12-month period following the Effective Date.

2.19 Transactions Affecting Disclosure to NASD.

2.19.1 Finder’s Fees. The Company has not received any notice of claims, payments, issuances, arrangements or understandings for services in the nature of a finder’s, consulting or origination fee with respect to the introduction of the Company to the Underwriters or the sale of the Securities hereunder or any other arrangements, agreements, understandings, payments or issuances with respect to the Company that may affect the Underwriters’ compensation, as determined by the National Association of Securities Dealers, Inc. (“NASD”).

2.19.2 Payments Within Twelve Months. Other than payments to the Representative, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to (i) any person, as a finder’s fee, investing fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who provided capital to the Company, (ii) any NASD member, or (iii) any person or entity that has any direct or indirect affiliation or association with any NASD member within the 12-month period prior to the date on which the Registration Statement was filed with the Commission (“Filing Date”) or thereafter, assuming the accuracy of the information contained in the NASD questionnaires received from each of the Company’s security holders.

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2.19.3 Use of Proceeds. None of the net proceeds of the offering will be paid by the Company to any participating NASD member or any affiliate or associate of any participating NASD member, except as specifically authorized herein.

2.19.4 Insiders’ NASD Affiliation. Except as set forth on Schedule 2.19.4, no officer or director of the Company or owner of any of the Company’s unregistered securities has any direct or indirect affiliation or association with any NASD member. The Company will advise the Representative and the NASD if prior to the Closing Date or Option Closing Date, if any, it learns that any officer, director or stockholder of the Company is or becomes an affiliate or associated person of an NASD member participating in the offering.

2.20 Foreign Corrupt Practices Act. None of the Company or any of its officers, directors, or, to its knowledge, any of its employees, agents or any other person acting on behalf of the Company has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a material adverse effect on the assets, business or operations of the Company as reflected in any of the financial statements contained in the Prospectus or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company’s internal accounting controls and procedures are sufficient to cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as amended.

2.21 Bulletin Board Eligibility. As of the commencement of trading of the Public Securities, the Public Securities will have been approved for quotation on the Nasdaq SmallCap Market.

2.22 Intangibles. The Company owns or possesses the requisite licenses or rights to use all trademarks, service marks, service names, trade names, patents and patent applications, copyrights and other rights (collectively, “Intangibles”) described as being licensed to or owned by it in the Registration Statement. Except as described in the Prospectus, there is no claim or action by any person pertaining to, or proceeding pending or, to the Company’s knowledge, threatened relating to, and the Company has not received any notice of conflict with the asserted rights of others, that challenges the exclusive right of the Company with respect to, any Intangibles used in the conduct of the Company’s business. To the Company’s knowledge, after due inquiry, the Intangibles and the Company’s current products, services and processes do not infringe on any Intangibles held by any third party. To the Company’s knowledge, no others have infringed upon the Intangibles of the Company.

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2.23 Relations With Employees.

2.23.1 Employee Matters. The Company is in compliance in all material respects with all federal, state and local laws and regulations respecting the employment of its employees and employment practices, terms and conditions of employment and wages and hours relating thereto. To the Company’s knowledge, there are no pending investigations involving the Company by the U.S. Department of Labor, or any other governmental agency responsible for the enforcement of such federal, state and local laws and regulations. To the Company’s knowledge, there is no unfair labor practice charge or complaint against the Company pending before the National Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened against or involving the Company or any predecessor entity, and none has ever occurred. To the Company’s knowledge, no question concerning representation exists respecting the employees of the Company and no collective bargaining agreement or modification thereof is currently being negotiated by the Company. No grievance or arbitration proceeding is pending under any expired or existing collective bargaining agreements of the Company, if any.

2.23.2 Employee Benefit Plans. Other than as set forth in the Registration Statement, the Company neither maintains, sponsors nor contributes to, nor is it required to contribute to, any program or arrangement that is an “employee pension benefit plan,” an “employee welfare benefit plan,” or a, “multi-employer plan” as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (“ERISA Plans”). The Company does not maintain or contribute to, and has at no time maintained or contributed to, a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a “prohibited transaction” within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (“Code”), that could subject the Company to any material tax penalty for prohibited transactions and that has not adequately been corrected. Each ERISA Plan is in compliance with all material reporting, disclosure and other requirements of the Code and ERISA as they relate to any such ERISA Plan. Determination letters have been received from the Internal Revenue Service with respect to each ERISA Plan that is intended to comply with Code Section 401(a), stating that such ERISA Plan and the attendant trust are qualified thereunder. The Company has never completely or partially withdrawn from a “multi-employer plan.”

2.24 Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered directly to you or to your counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby and as of the date given.

2.25 Warrant Agreement. On the Closing Date, the Company will enter into a warrant agreement, effective as of the Effective Date, with respect to the Warrants and the Representative’s Warrants substantially in the form filed as an exhibit to the Registration Statement (“Warrant Agreement”) with Continental Stock Transfer & Trust Company, providing for, among other things, (i) no redemption of the Warrants without the consent of the Representative and (ii) for the payment of a warrant solicitation fee as contemplated by Section 3.9 hereof.

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2.26 Lock-Up Agreements. Except as set forth on Schedule 2.26, the Company has caused to be duly executed legally binding and enforceable agreements pursuant to which all of the officers and directors of the Company and all holders of the outstanding Common Stock of the Company or warrants or options to purchase, or other securities convertible into, shares of Common Stock (including their family members and affiliates) (collectively, the “Insiders”), agree not to sell any shares of Common Stock or warrants or options to purchase, or other securities convertible into Common Stock owned by them (either pursuant to Rule 144 of the Regulations or otherwise) for a period of 12 months following the later of the (a) Effective Date and (b) the date after the Effective Date that all investors in the Private Placement are freed from any lock-up imposed by any regulatory agency, without obtaining the prior written consent of the Representative (and, if required by applicable state blue sky laws, the securities commissions in any such states). Notwithstanding the foregoing, the Insiders, as a group, shall be entitled to sell up to an aggregate of 200,000 shares of Common Stock (with no individual Insider selling more than 10% of the total number of shares owned by him or her) prior to the expiration of such twelve-month period if at the time of such sale there are no longer any Warrants (and such sale is otherwise allowable by the state securities commissions).

2.27 Subsidiaries. The Company does not own an interest in any corporation, partnership, limited liability company, joint venture, trust or other business entity. The Company has no subsidiaries.

2.28 Environmental Matters. The Company has complied in all material respects with all applicable environmental laws.

2.29 Product Liability Insurance. The Company maintains product liability insurance of the type and in the amounts typically maintained by similar companies operating in the industry in which the Company operates.

2.30 Conversion of 10% Notes. As of the Closing Date, all of the Company’s outstanding 10% convertible promissory notes (in the aggregate principal amount of $2,500,000) held by Ameristock Corp. and/or its affiliates will automatically convert into 495,050 shares of Common Stock by such notes’ terms.

2.31 Related Party Transactions. There are no business relationships or related party transactions involving the Company or any other person required to be described in the Prospectus that have not been described as required.

2.32 Standard & Poor’s Listing. The Company has applied for coverage in Standard & Poor’s Corporation Records Corporate Description.

2.33 Regulatory Compliance. The Company’s products, operations and ownership are in compliance in all material respects with all federal, state and agency standards, rules, regulations and requirements that are applicable to the Company as of the Effective Date, including but not limited to those promulgated by the Federal Communications Commission.

2.34 Board of Directors. The Board of Directors of the Company is comprised of the persons set forth under the caption “Management” in the Prospectus. The qualifications of the persons serving as Board members and the overall composition of the Board comply with the

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Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder and with the listing requirements of the Nasdaq SmallCap Market (including those requirements that have been finalized or issued as of the date hereof with a date certain for effectiveness, but which are not yet effective). At least one member of the Board qualifies as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.

2.35 No Stop Orders. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus or Prospectus or any part thereof.

2.36 Non-Competition Obligations. No director, officer or other employee of the Company is subject to any noncompetition agreement or non-solicitation agreement with any employer or prior employer that could materially affect his ability to be an employee, officer and/or director of the Company.

3. Covenants of the Company. The Company covenants and agrees as follows:

3.1 Amendments to Registration Statement. The Company will deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.

3.2 Federal Securities Laws.

3.2.1 Compliance. During the time when a Prospectus is required to be delivered under the Act, the Company will use all reasonable efforts to comply with all requirements imposed upon it by the Act, the Regulations and the Exchange Act and by the regulations under the Exchange Act, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Public Securities in accordance with the provisions hereof, and the Prospectus. If at any time when a Prospectus relating to the Public Securities is required to be delivered under the Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or counsel for the Underwriters, the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will notify the Representative promptly and prepare and file with the Commission, subject to Section 3.1 hereof, an appropriate amendment or supplement in accordance with Section 10 of the Act.

3.2.2 Filing of Final Prospectus. The Company will file the Prospectus (in form and substance reasonably satisfactory to the Representative) with the Commission pursuant to the requirements of Rule 424 of the Regulations.

3.2.3 Exchange Act Registration. For a period of five years from the Effective Date, the Company will use its best efforts to maintain the registration of the Common Stock and Warrants under the provisions of Section 12 of the Exchange Act.

3.3 Blue Sky Filings. The Company will endeavor in good faith, in cooperation with the Representative, at or prior to the time the Registration Statement becomes effective, to qualify the Public Securities for offering and sale under the securities laws of such

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jurisdictions as the Representative may reasonably designate, provided that no such qualification shall be required in any jurisdiction where, as a result thereof, the Company would be subject to service of general process or to taxation as a foreign corporation doing business in such jurisdiction. In each jurisdiction where such qualification shall be effected, the Company will, unless the Representative agrees that such action is not at the time necessary or advisable, use all reasonable efforts to file and make such statements or reports at such times as are or may be required by the laws of such jurisdiction.

3.4 Delivery to the Underwriters of Prospectuses. The Company will deliver to each of the several Underwriters, without charge, from time to time during the period when the Prospectus is required to be delivered under the Act or the Exchange Act such number of copies of each Preliminary Prospectus and the Prospectus as such Underwriter may reasonably request.

3.5 Events Requiring Notice to the Representative. The Company will notify the Representative immediately and confirm the notice in writing (i) of the effectiveness of the Registration Statement and any amendment thereto, (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose, (iii) if it becomes aware of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose, (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus, (v) of the receipt of any comments or request for any additional information from the Commission, and (vi) of the happening of any event during the period described in Section 3.4 hereof that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement or the Prospectus untrue or that requires the making of any changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company will make every reasonable effort to obtain promptly the lifting of such order.

3.6 Review of Financial Statements. For a period of five years from the Effective Date, the Company, at its expense, shall cause its regularly engaged independent certified public accountants to participate to review (as described in Statement on Audited Standards No. 71 — Interim Financial Information) (but not audit) the Company’s financial statements for each of the first three fiscal quarters prior to the announcement of quarterly financial information, the filing of the Company’s Form 10-Q or Form 10-QSB quarterly reports and the mailing of any quarterly financial information to stockholders.

3.7 Exchange Maintenance. For a period of five years from the date hereof, the Company will use its best efforts to maintain the listing by the Nasdaq Stock Market or a national securities exchange of the Common Stock, and, if outstanding, the Warrants.

3.8 Standard & Poor’s and Secondary Market Trading. The Company will take all necessary action to maintain coverage in Standard & Poor’s Corporation Records Corporate Descriptions until the three-year anniversary of the Effective Date, including the payment of any necessary fees and expenses and the delivery to Standard & Poor’s of updated quarterly information. The Company shall take such action as may be reasonably requested by

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the Representative to obtain a secondary market trading exemption in such states as may be reasonably requested by the Representative, including the payment of any necessary fees and expenses and the filing of requisite forms (e.g., Form 25101(b) for secondary market trading in the State of California).

3.9 Warrant Solicitation and Registration of Common Stock Underlying the Warrants.

3.9.1 Warrant Solicitation Fees. The Company hereby engages HCFP, on a non-exclusive basis, as its agent for the solicitation of the exercise of the Warrants. The Company, at its cost, will (i) assist HCFP with respect to such solicitation, if requested by HCFP and will (ii) provide to HCFP, and direct the Company’s transfer and warrant agent to provide to HCFP, lists of the record and, to the extent known, beneficial owners of the Company’s Warrants. Commencing one year from the Effective Date, the Company will pay to HCFP a commission of five percent of the Warrant exercise price for each Warrant exercised, payable on the date of such exercise, on the terms provided for in the Warrant Agreement, if allowed under the rules and regulations of the NASD and only if HCFP has provided bona fide services to the Company in connection with the exercise of Warrants and has received written confirmation from the holder that HCFP has solicited such exercise. In addition to soliciting the exercise of Warrants, either orally or in writing, such services also may include disseminating information supplied to HCFP by the Company, either orally or in writing, to Warrantholders about the Company or the market for the Company’s securities, and assisting in the processing of the exercise of Warrants. HCFP may engage sub-agents reasonably acceptable to the Company in its solicitation efforts. The Company will disclose the arrangement to pay such solicitation fees to HCFP in any prospectus used by the Company in connection with the registration of the shares of Common Stock underlying the Warrants.

3.9.2 Registration of Common Stock. The Company agrees that so long as the Warrants are exercisable, it shall file with the Commission post-effective amendments to the registration statement as necessary to maintain effectiveness of the Registration Statement (or new Registration Statements covering the Warrants and the Common Stock issuable upon exercise thereof) and it shall take such action as is necessary to qualify and/or maintain qualification for sale, in those states in which the Warrants were initially offered by the Company, the Common Stock issuable upon exercise of the Warrants. The Company shall maintain the effectiveness of such registration statement and keep current a prospectus thereunder and maintain such qualification until the expiration of the Warrants in accordance with the provisions of the Warrant Agreement. The provisions of this Section 3.9.2 may not be modified, amended or deleted without the prior written consent of the Underwriter.

3.10 Reports to the Representative.

3.10.1 Periodic Reports, Etc. For a period of five years from the Effective Date, the Company will promptly furnish to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time files with any governmental authority or furnishes generally to holders of any class of its securities, and promptly furnish to the Representative (i) a copy of each periodic report the Company shall be required to file with the Commission, (ii) a copy of every press release and every news item and article with respect to the Company or its affairs that was released by the Company and (iii) a copy of each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the Company.

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3.10.2 Transfer Sheets and Weekly Position Listings. Until the earlier of (i) the date the Company’s securities are listed on the New York Stock Exchange or the Nasdaq National Market, and (ii) the third anniversary of the Closing Date, the Company will furnish to the Representative at the Company’s sole expense such transfer sheets and position listings of the Company’s securities as the Representative may request, including the daily, weekly and monthly consolidated transfer sheets of the transfer agent of the Company and the weekly position listings of the Depository Trust Company.

3.10.3 Secondary Market Trading Memorandum. The Company hereby requests that the Underwriters’ legal counsel deliver to the Underwriters, at the Effective Date, a written memorandum detailing those states in which the Common Stock and the Warrants may be traded in non-issuer transactions under the Blue Sky laws of the fifty states (“Secondary Market Trading Memorandum”) and that such counsel update such memorandum as reasonably requested by the Representative. The Company shall pay to the Underwriters’ legal counsel a one-time fee of $5,000 for such services.

3.11 Agreements between the Representative and the Company.

3.11.1 Merger and Acquisition Agreement. On the Closing Date, the Company will enter into a Merger and Acquisition Agreement with the Representative in the form filed with the Commission as an exhibit to the Registration Statement providing for a finder’s fee to be paid to the Representative if the Company participates in any merger, consolidation, or other transaction in which the Representative introduced the Company to the other party for a period of three years from the Closing Date (“Merger and Acquisition Agreement”).

3.11.2 Financial Advisory Agreement. On the Closing Date, the Company will enter into a Financial Advisory Agreement with the Representative in the form filed with the Commission as an exhibit to the Registration Statement pursuant to which the Representative shall receive an aggregate consulting fee of $60,000 for a six-month period following the Effective Date (“Financial Consulting Agreement”). These fees shall be paid in advance on the Closing Date.

3.11.3 Representative’s Purchase Option. On the Closing Date, the Company will execute and deliver the Representative’s Purchase Option to the Representative or its designees in the form filed as an exhibit to the Registration Statement.

3.12 Disqualification of Form SB-2 or Form S-1 (or other appropriate form). For a period equal to seven (7) years from the date hereof, the Company will not take any action or actions that may prevent or disqualify the Company’s use of Form SB-2 or Form S-1 (or other appropriate form) for the registration of the Warrants and the Representative’s Securities and the securities issuable upon exercise of those securities under the Act.

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3.13 Payment of Expenses.

3.13.1 General Expenses. The Company hereby agrees to pay on the Closing Date and, to the extent not paid on the Closing Date, on the Option Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including but not limited to (i) the preparation, printing, filing, delivery and mailing (including the payment of postage with respect to such mailing) of the Registration Statement, the Prospectus and the Preliminary Prospectuses and the printing and mailing of this Agreement and related documents, including the cost of all copies thereof and any amendments thereof or supplements thereto supplied to the Underwriters in quantities as may be reasonably required by the Underwriters, (ii) the printing, engraving, issuance and delivery of the shares of Common Stock, the Warrants and the Representative’s Purchase Option, including any transfer or other taxes payable thereon, (iii) the qualification of the Public Securities under state or foreign securities or Blue Sky laws, including the filing fees under such Blue Sky laws, the costs of printing and mailing the “Preliminary Blue Sky Memorandum,” and all amendments and supplements thereto, the fees (equal to $35,000, of which $15,000 has been previously paid) and disbursements of the Underwriters’ counsel, and fees and disbursements of local counsel, if any, retained for such purpose (provided that all such disbursements have been approved in advance by the Company) and a one-time fee of $5,000 payable to Underwriters’ counsel for the preparation of the Secondary Market Trading Memorandum pursuant to Section 3.10.3 hereof, (iv) costs associated with applications for assignments of a rating of the Public Securities by qualified rating agencies, if applicable, (v) filing fees, costs and expenses (including fees and disbursements for the Underwriters’ counsel) incurred in registering the offering with the NASD, (vi) costs of placing “tombstone” advertisements in The Wall Street Journal, The New York Times or other publications to be selected by the Representative, the total costs of such advertisements not to exceed $12,000, (vii) fees and disbursements of the transfer and warrant agent, (viii) the Company’s expenses associated with “due diligence” meetings arranged by the Representative, (ix) the preparation, binding and delivery of two transaction “bibles” for the Representative, (x) fees and expenses for any listing of the Public Securities on any securities exchange or any coverage or listing in Standard & Poor’s and (xi) all other costs and expenses incident to the performance of its obligations hereunder that are not otherwise specifically provided for in this Section 3.13.1. The Company also agrees to engage and pay for an investigative search firm of the Representative’s choice (International Business Research (U.S.A.), Inc.) to conduct an investigation of the officers and directors of the Company, which amount will be credited against the Representative’s non-accountable expense allowance if the offering is consummated as provided herein. The Representative may deduct from the net proceeds of the offering payable to the Company on the Closing Date, or the Option Closing Date, if any, the expenses set forth herein and elsewhere in this Agreement to be paid by the Company to the Representative and/or to third parties.

3.13.2 Non-Accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.13.1, it will pay to the Representative a non-accountable expense allowance equal to two percent (2%) of the gross proceeds received by the Company from the sale of the Firm Securities (but not the Option Securities), of which $50,000 has been paid to date, and the Company will pay the balance on the Closing Date by certified or bank cashier’s check or, at the election of the Representative, by deduction from the proceeds of the offering contemplated herein. If the offering contemplated by this Agreement is not consummated for any reason whatsoever then the following provisions shall apply: The

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Company’s liability for payment to the Representative of the non-accountable expense allowance shall be equal to the sum of the Representative’s actual out-of-pocket expenses (including, but not limited to, counsel fees, “road-show” and due diligence expenses). The Representative shall retain such part of the non-accountable expense allowance previously paid as shall equal such actual out-of-pocket expenses. If the amount previously paid is insufficient to cover such actual out-of-pocket expenses, the Company shall remain liable for and promptly pay any other actual out-of-pocket expenses. If the amount previously paid exceeds the amount of actual out-of-pocket expenses, the Representative shall promptly remit to the Company any such excess.

3.14 Application of Net Proceeds. The Company will apply the net proceeds from the offering received by it in a manner consistent with the application described under the caption “Use of Proceeds” in the Prospectus. The Company hereby agrees that, without the express prior written consent of the Representative, the Company will not apply any net proceeds from the offering to pay (i) any debt for borrowed funds or (ii) any debt or obligation owed to any Insider, except as described in the “Use of Proceeds” section of the Prospectus.

3.15 Delivery of Earnings Statements to Security Holders. The Company will make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth full calendar month following the Effective Date, an earnings statement (which need not be certified by independent certified public accountants unless required by the Act or the Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Act) covering a period of at least twelve consecutive months beginning after the Effective Date.

3.16 Key Person Life Insurance. The Company will maintain key person life insurance in an amount not less than $3,000,000 on the life of Bruce Hahn to be in effect as of the Effective Date, and pay the annual premiums therefor and name the Company as the sole beneficiary thereof for at least three years following the Effective Date.

3.17 Stabilization. Neither the Company, nor, to its knowledge, any of its employees, directors or stockholders has taken or will take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.

3.18 Internal Controls. The Company maintains and will continue to maintain a system of internal accounting controls that comply with the requirements of the Sarbanes-Oxley Act of 2002 (and the rules promulgated thereunder) and which are sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with generally accepted accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

3.19 Accountants and Lawyers. For a period of five years from the Effective Date, the Company shall retain independent public accountants and securities lawyers reasonably acceptable to the Representative. BDO Seidman LLP and Blank Rome LLP are acceptable to the Representative.

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3.20 Transfer Agent. For a period of three years from the Effective Date, the Company shall retain a transfer agent (“Transfer Agent”) for the Common Stock and Warrants reasonably acceptable to the Representative. Continental Stock Transfer & Trust Company is acceptable to the Representative.

3.21 NASD. The Company shall advise the Representative if it is aware that any 5% or greater stockholder of the Company becomes an affiliate or associated person of an NASD member participating in the distribution of the Company’s Public Securities.

3.22 Sale of Securities. Subject to Section 2.26 hereof, the Company agrees not to permit or cause a private or public sale or private or public offering of any of its securities (in any manner, including pursuant to Rule 144 under the Act) owned nominally or beneficially by the Insiders for the time periods set forth in Section 2.26 following the Effective Date without obtaining the prior written consent of the Representative. By way of clarification and avoidance of doubt, except with the prior consent of the Representative, the Company agrees that for a period of twelve months following the Effective Date, it will not permit the sale by any holder of shares of Common stock or securities convertible into Common Stock prior to the Effective Date who agreed with the Company not to sell such securities for a period of twelve months following the Effective Date.

4. Conditions of the Underwriters’ Obligations. The obligations of the several Underwriters to purchase and pay for the Securities, as provided herein, shall be subject to the continuing accuracy (in all material respects) of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any, to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof and to the performance by the Company of its obligations hereunder and to the following conditions:

4.1 Regulatory Matters.

4.1.1 Effectiveness of Registration Statement. The Registration Statement has been declared effective on the date of this Agreement and, at each of the Closing Date and the Option Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for such purpose shall have been instituted or shall be pending or, to the Company’s knowledge, contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of Graubard Miller, counsel to the Underwriters.

4.1.2 NASD Clearance. By the Effective Date, the Representative shall have received clearance from the NASD as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.

4.1.3 No Blue Sky Stop Orders. No order suspending the sale of the Securities in any jurisdiction designated by the Representative pursuant to Section 3.3 hereof shall have been issued on or before either the Closing Date or the Option Closing Date, and no

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proceedings for that purpose shall have been instituted or, to the Company’s knowledge, shall be contemplated.

4.2 Company Counsel Matters.

4.2.1 Effective Date Opinion of Counsel. On the Effective Date, the Representative shall have received the opinion of Sonnenschein Nath & Rosenthal, general counsel to the Company, dated the Effective Date, addressed to the Underwriter and in form and substance satisfactory to Graubard Miller, counsel to the Underwriter.

4.2.2 Closing Date and Option Closing Date Opinion of Counsel. On each of the Closing Date and the Option Closing Date, if any, the Representative shall have received the opinions of Sonnenschein Nath & Rosenthal, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Representative and in form and substance satisfactory to Graubard Miller, counsel to the Underwriters, confirming as of the Closing Date and, if applicable, the Option Closing Date, the statements made by it in its opinion delivered on the Effective Date.

4.2.3 Reliance. In rendering such opinion, such counsel may rely (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters’ counsel) of other counsel reasonably acceptable to Underwriter’s counsel, familiar with the applicable laws, and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of departments of various jurisdiction having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Underwriters’ counsel if requested. The opinion of counsel for the Company shall include a statement to the effect that it may be relied upon by counsel for the Underwriters in its opinion delivered to the Underwriters.

4.2.4 [Intentionally Omitted].

4.3 Cold Comfort Letter. At the time this Agreement is executed, and at each of the Closing Date and the Option Closing Date, if any, you shall have received a letter, addressed to the Representative and in form and substance satisfactory in all respects (including the non-material nature of the changes or decreases, if any, referred to in clause (iii) below) to you and to Graubard Miller, counsel for the Underwriters, from BDO Seidman, dated, respectively, as of the date of this Agreement and as of the Closing Date and the Option Closing Date, if any:

(i) confirming that they are independent accountants with respect to the Company within the meaning of the Act and the applicable Regulations;

(ii) stating that, based on the performance of procedures specified by the American Institute of Certified Public Accountants for a review of the latest available unaudited interim financial statements of the Company (as described in Statement on Auditing Standards (“SAS”) No. 100 — “Interim Financial Information”), with an indication of the date of the latest available unaudited interim financial statements, a reading of the latest

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available minutes of the stockholders and board of directors and the various committees of the board of directors, consultations with officers and other employees of the Company responsible for financial and accounting matters and other specified procedures and inquiries, nothing has come to their attention that would lead them to believe that at a date not later than five days prior to the Effective Date, Closing Date or Option Closing Date, as the case may be, there was any change in the capital stock or long-term debt of the Company, or any decrease in the stockholders’ equity of the Company as compared with amounts shown in the                     , 2005 balance sheet included in the Registration Statement, other than as set forth in or contemplated by the Registration Statement, or, if there was any decrease, setting forth the amount of such decrease, and (c) during the period from                     , 2005 to a specified date not later than five days prior to the Effective Date, Closing Date or Option Closing Date, as the case may be, there was any decrease in revenues, net earnings or net earnings per share of Common Stock, in each case as compared with the corresponding period in the preceding year and as compared with the corresponding period in the preceding quarter, other than as set forth in or contemplated by the Registration Statement, or, in the case of clauses (b) and (c), if there was any such change or decrease, setting forth the amount of such decrease;

(iii) stating that they have compared specific dollar amounts, numbers of shares, percentages of revenues and earnings, statements and other financial information pertaining to the Company set forth in the Prospectus in each case to the extent that such amounts, numbers, percentages, statements and information may be derived from the general accounting records, and work sheets, of the Company with the results obtained from the application of specified readings, inquiries and other appropriate procedures (which procedures do not constitute an examination in accordance with generally accepted auditing standards) set forth in the letter and found them to be in agreement; and

(iv) statements as to such other matters incident to the transaction contemplated hereby as you may reasonably request and as are typically included in auditor’s “comfort letters” to underwriters.

4.4 Officers’ Certificates.

4.4.1 Officers’ Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate, that is true and correct in fact, of the Company signed by the Chairman of the Board, Chief Executive Officer and Secretary and Chief Financial Officer of the Company, dated the Closing Date or the Option Closing Date, as the case may be, respectively, to the effect that the Company has performed all covenants and complied with all conditions (subject to any materiality qualifications in any such covenants and conditions and in the representations and warranties) required by this Agreement to be performed or complied with by the Company prior to and as of the Closing Date, or the Option Closing Date, as the case may be, and that the conditions set forth in Section 4.5 hereof have been satisfied as of such date and that, as of Closing Date and the Option Closing Date, as the case may be, the representations and warranties of the Company set forth in Section 2 hereof are true and correct. In addition, the Representative will have received such other and further certificates of officers of the Company as the Representative may reasonably request.

4.4.2 Secretary’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Date, as the case

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may be, respectively, certifying (i) that the Amended and Restated By-Laws and Amended and Restated Certificate of Incorporation of the Company are true and complete, have not been modified and are in full force and effect, (ii) that the resolutions relating to the public offering contemplated by this Agreement are in full force and effect and have not been modified, (iii) all correspondence between the Company or its counsel and the Commission and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.

4.5 No Material Changes. Prior to and on each of the Closing Date and the Option Closing Date, if any, (i) there shall have been no material adverse change or development involving a prospective material change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement and Prospectus, (ii) there shall have been no transaction, not in the ordinary course of business, entered into by the Company from the latest date as of which the financial condition of the Company is set forth in the Registration Statement and Prospectus which is materially adverse to the Company, taken as a whole, (iii) the Company shall not be in default under any provision of any instrument relating to any outstanding indebtedness which default would have a material adverse effect on the Company, (iv) no material amount of the assets of the Company shall have been pledged or mortgaged, except as set forth in the Registration Statement and Prospectus, (v) no action suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Initial Stockholders or affecting any of the Company’s property or business before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement and Prospectus, (vi) no stop order shall have been issued under the Act and no proceedings therefor shall have been initiated or threatened by the Commission, and (vii) the Registration Statement and the Prospectus and any amendments or supplements thereto contain all material statements that are required to be stated therein in accordance with the Act and the Regulations and conform in all material respects to the requirements of the Act and the Regulations, and neither the Registration Statement nor the Prospectus nor any amendment or supplement thereto contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.6 Delivery of Agreements. The Company has delivered to the Representative an executed copy of the Representative’s Purchase Option, the Merger and Acquisition Agreement and the Financial Consulting Agreement.

4.7 Opinion of Counsel for the Underwriters. All proceedings taken in connection with the authorization, issuance or sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to you and to Graubard Miller, counsel to the Underwriters, and you shall have received from such counsel a favorable opinion, dated the Closing Date and the Option Closing Date, if any, with respect to such of these proceedings as you may reasonably require. On or prior to the Effective Date, the Closing Date and the Option Closing Date, as the case may be, counsel for the Underwriters shall have been furnished such documents, certificates and opinions as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in this Section 4.7, or in order to evidence the accuracy, completeness or satisfaction of any of the representations, warranties or conditions herein contained.

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4.8 Unaudited Financials. The Company shall have furnished to the Underwriter a copy of the latest available audited or unaudited interim financial statements for the period ended                         , 2005 (“Unaudited Financials”) of the Company which have been read by BDO Seidman LLP, as stated in their letter dated as of the Closing Date to be furnished pursuant to Section 4.3 hereof.

5. Indemnification.

5.1 Indemnification of Underwriters.

5.1.1 General. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each of the Underwriters, their respective directors, officers and employees and each person, if any, who controls any such Underwriter (“controlling person”) within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriters and the Company or between any of the Underwriters and any third party or otherwise) to which they or any of them may become subject under the Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement or the Prospectus (as from time to time each may be amended and supplemented); (ii) in any post-effective amendment or amendments or any new registration statement and prospectus in which is included securities of the Company issued or issuable upon exercise of the Representative’s Purchase Option; or (iii) any application or other document or written communication (in this Section 5 collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Units under the securities laws thereof or filed with the Commission, any state securities commission or agency, Nasdaq or any securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon and in conformity with written information furnished (or not furnished in the case of an omission) to the Company with respect to an Underwriter by or on behalf of such Underwriter expressly for use in any Preliminary Prospectus, the Registration Statement or Prospectus, or any amendment or supplement thereof, or in any application, as the case may be. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or controlling persons in connection with the issue and sale of the Securities or in connection with the Registration Statement or Prospectus.

5.1.2 Procedure. If any action is brought against an Underwriter or controlling person in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter) and

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payment of actual expenses. Such Underwriter or controlling person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Underwriter and/or controlling person shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if the Underwriter or controlling person shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, except where such settlement provides for the full release of the Company.

5.1.3 Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, officers and employees and agents who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in any Preliminary Prospectus, the Registration Statement or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, written information furnished (or not furnished in the case of an omission or alleged omission) to the Company with respect to such Underwriter by or on behalf of the Underwriter expressly for use in such Preliminary Prospectus, the Registration Statement or Prospectus or any amendment or supplement thereto or in any such application. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2.

5.2 Contribution.

5.2.1 Contribution Rights. In order to provide for just and equitable contribution under the Act in any case in which (i) any person entitled to indemnification under this Section 5 makes claim for indemnification pursuant hereto but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 5 provides for indemnification in such case, or (ii) contribution under the Act, the Exchange Act or otherwise may be required on the part of any such person in circumstances for which indemnification is provided under this Section 5, then, and in each such case, the Company and the Underwriters shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreement incurred by the Company and the Underwriters, as incurred, in such

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proportions that the Underwriters are responsible for that portion represented by the percentage that the underwriting discount appearing on the cover page of the Prospectus bears to the initial offering price appearing thereon and the Company is responsible for the balance; provided, that, no person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding the provisions of this Section 5.3.1, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Public Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay in respect of such losses, liabilities, claims, damages and expenses. For purposes of this Section, each director, officer and employee of an Underwriter or the Company, as applicable, and each person, if any, who controls an Underwriter or the Company, as applicable, within the meaning of Section 15 of the Act shall have the same rights to contribution as the Underwriters or the Company, as applicable.

5.2.2 Contribution Procedure. Within fifteen days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the omission to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid fifteen days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding effected by such party seeking contribution on account of any settlement of any claim, action or proceeding effected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section are intended to supersede, to the extent permitted by law, any right to contribution under the Act, the Exchange Act or otherwise available. The Underwriters’ obligations to contribute pursuant to this Section 5.3 are several and not joint.

6. Default by an Underwriter.

6.1 Default Not Exceeding 10% of Firm Securities or Option Securities. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Securities or the Option Securities, if the over-allotment option is exercised, hereunder, and if the number of the Firm Securities or Option Securities with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Securities or Option Securities that all Underwriters have agreed to purchase hereunder, then such Firm Securities or Option Securities to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.

6.2 Default Exceeding 10% of Firm Securities or Option Securities. In the event that the default addressed in Section 6.1 above relates to more than 10% of the Firm Securities or Option Securities, you may in your discretion arrange for yourself or for another party or parties to purchase such Firm Securities or Option Securities to which such default relates on the terms contained herein. If within one business day after such default relating to

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more than 10% of the Firm Securities or Option Securities you do not arrange for the purchase of such Firm Securities or Option Securities, then the Company shall be entitled to a further period of one business day within which to procure another party or parties satisfactory to you to purchase said Firm Securities or Option Securities on such terms. In the event that neither you nor the Company arrange for the purchase of the Firm Securities or Option Securities to which a default relates as provided in this Section 6, this Agreement may be terminated by you or the Company without liability on the part of the Company (except as provided in Sections 3.15 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Securities, this Agreement will not terminate as to the Firm Securities; and provided further that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other several Underwriters and to the Company for damages occasioned by its default hereunder.

6.3 Postponement of Closing Date. In the event that the Firm Securities or Option Securities to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement or the Prospectus that in the opinion of counsel for the Underwriter may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such Securities.

7. Right to Appoint Representative. In the event HCFP has not exercised its option to designate a member of the Company’s Board of Directors in accordance with Section 8.1(b) below, for a period of three years from the Effective Date, upon notice from HCFP to the Company, HCFP shall have the right to send a representative (who need not be the same individual from meeting to meeting) to observe each meeting of the Board of Directors of the Company; provided that such representative shall sign a Regulation FD compliant confidentiality agreement which is reasonably acceptable to HCFP and its counsel in connection with such representative’s attendance at meetings of the Board of Directors; and provided further that upon written notice to HCFP, the Company may exclude the representative from meetings (i) for the portions of the meeting held in “executive session” and (ii) where, in the written opinion of counsel for the Company, the representative’s presence would jeopardize the attorney-client privilege. The Company agrees to give HCFP written notice of each such meeting and to provide HCFP with an agenda and minutes of the meeting no later than it gives such notice and provides such items to the other directors, and reimburse the representative of HCFP for its reasonable out-of-pocket expenses incurred in connection with its attendance at the meeting, including but not limited to, food, lodging and transportation.

8. Additional Covenants.

8.1 Board Composition and Board Designations.

(a) For a period of three years from the Effective Date, the Company shall ensure that (i) the qualifications of the persons serving as board members and the overall composition of the board comply with the Sarbanes-Oxley Act of 2002 and the rules

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promulgated thereunder and with the listing requirements of Nasdaq and (ii) at least one member of the board of directors qualifies as a “financial expert” as such term is defined under the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.

(b) For a period of three years from the Effective Date, the Company will appoint a designee of HCFP (reasonably acceptable to the Company) as a member of the Board of Directors of the Company. HCFP has appointed             as its initial designee. Such designee shall receive no more or less compensation than is paid to other non-management directors of the Company. To the extent permitted by law, the Company will agree to indemnify HCFP and its designee for the actions of such designee as a director of the Company. In addition, the Company will obtain and maintain a liability insurance policy affording coverage for the acts of its officers and directors in an amount not less than $3,000,000 and will include HCFP’s designee as an insured under such policy.

8.2 Management Rights. During the three-year period commencing on the Effective Date, HCFP shall have the right (“Management Right”) to serve as managing underwriter, managing placement agent or managing arranger for any financing for the Company or any subsidiary or successor of the Company with aggregate gross proceeds of less than $25,000,000 (each, a “Proposed Financing”) on terms then competitive in the market for transactions of such type. If HCFP elects not to exercise its Management Right with respect to any Proposed Financing, and for any financing for which HCFP would be entitled to the Management Right but for the fact that its gross proceeds are $25 million or more, HCFP shall be entitled to (i) act as a co-managing underwriter, co-managing agent or co-managing arranger for such financing (“Co-Manager”) or at such other level as HCFP shall reasonably elect and (ii) assist the Company in identifying, selecting and negotiating with the lead underwriter, agent or arranger for such financing. HCFP, in its discretion, also shall be afforded the opportunity to purchase, place or arrange, as a member of the underwriting syndicate, selling group or arranging group for such financing, the largest allocation provided to any member thereof. In addition, during the three-year period following the Effective Date, HCFP shall have the right to purchase for its own account or to sell for the account of the Insiders any securities sold by the Insiders pursuant to Rule 144, including pursuant to a 10b-5(1) trading plan.

8.3 Employment and Compensation Matters. Prior to the Effective Date, the Company will have entered into an employment agreement with Bruce Hahn, the terms of which shall be satisfactory to the Representative, including a covenant not to compete for a period of two years after termination of employment. The Company agrees that for a period of three years from the Effective Date, all compensation and other arrangements between the Company and its officers, directors and affiliates shall be approved by the Compensation Committee of the Company’s Board of Directors, a majority of the members of which shall have no affiliation or other relationship with the Company other than as directors.

8.4 Press Releases. The Company will not issue a press release or engage in any other publicity until 45 days after the Effective Date without the Representative’s prior written consent.

8.5 Prospectus Combination. [The Company will file a new registration statement for the purpose of combining the prospectus utilized for the Selling Security holders (as defined in Registration Statement No. 333-            ) and the outstanding prospectus used for the offering no later than                     , so as to otherwise reduce the number of outstanding prospectuses from two to one.]

9. Representations and Agreements to Survive Delivery. Except as the context otherwise requires, all representations, warranties and agreements contained in this Agreement shall be deemed to be representations, warranties and agreements at the Closing Dates and such representations, warranties and agreements of the Underwriters and Company, including the

27

indemnity agreements contained in Section 5 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Underwriters, the Company or any controlling person, and shall survive termination of this Agreement or the issuance and delivery of the Securities to the several Underwriters until the earlier of the expiration of any applicable statute of limitations and the seventh anniversary of the later of the Closing Date or the Option Closing Date, if any, at which time the representations, warranties and agreements shall terminate and be of no further force and effect.

10. Effective Date of This Agreement and Termination Thereof.

10.1 Effective Date. This Agreement shall become effective on the Effective Date at the time that the Registration Statement is declared effective (the “Effective Date”).

10.2 Termination. The Underwriters shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in the Representative’s opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange, the American Stock Exchange or in the over-the-counter market shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been fixed, or maximum ranges for prices for securities shall have been required on the over-the-counter market by the NASD or by order of the Commission or any other government authority having jurisdiction, or (iii) if the United States shall have become involved in a war other than in Afghanistan or Iraqi or there are other major hostilities in or outside those countries, or (iv) if a banking moratorium has been declared by a New York State or federal authority, or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities market, or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your opinion, make it inadvisable to proceed with the delivery of the Securities, or (vii) if Bruce Hahn shall no longer serve the Company in his present capacity, or (viii) if the Company has breached any of its representations, warranties or obligations hereunder (subject to any materiality qualifications contained therein), or (ix) if the Underwriter shall have become aware after the date hereof of such a material adverse change in the condition (financial or otherwise), business, or prospects of the Company, or such adverse material change in general market conditions as in the Representative’s reasonable judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Securities or to enforce contracts made by the Underwriters for the sale of the Securities.

10.3 Notice. If you elect to prevent this Agreement from becoming effective or to terminate this Agreement as provided in this Section 9, the Company shall be notified on the same day as such election is made by you by telephone or telecopy, confirmed by letter.

10.4 Expenses. In the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms hereof, the obligations of the Company to pay the expenses related to the transactions contemplated herein shall be governed by Section 3.14 hereof.

10.5 Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this

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Agreement is otherwise carried out, the provisions of Section 5 shall not be in any way effected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.

11. Miscellaneous.

11.1 Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed, delivered or telecopied and confirmed

If to the Representative:

HCFP/Brenner Securities LLC

888 Seventh Avenue

17^th Floor

New York, New York 10106

Attention: Ira S. Greenspan

Telecopier: (212) 707-0378

Copy to:

Graubard Miller

The Chrysler Building

405 Lexington Avenue, 19^th Floor

New York, New York 10174

Attention: David Alan Miller, Esq.

Telecopier: (212) 818-8881

If to the Company:

American Telecom Services Inc.

2466 Peck Road

City of Industry, California 90601

Attention: Mr. Bruce Hahn

Telecopier: (770) 518-1236

Copy to:

Sonnenschein Nath & Rosenthal

1221 Avenue of the Americas

New York, NY 10020

Attention: Ira Roxland, Esq.

Telecopier: (212) 768-6800

11.2 Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.

11.3 Amendment. This Agreement may be amended only by a written instrument executed by each of the parties hereto.

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11.4 Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

11.5 Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon, the Representative, the other Underwriter, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained.

11.6 Governing Law, Jurisdiction. This Agreement shall be governed by and construed and enforced in accordance with the law of the State of New York, without giving effect to conflicts of law. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 10.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The parties agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.

11.7 Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto.

11.8 Waiver, Etc. The failure of any of the parties hereto at any time to enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor in any way to affect the validity of this Agreement or any provision hereof or the right of any of the parties hereto thereafter to enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.

Very truly yours,
AMERICAN TELECOM SERVICES INC.
By:
Name:	Bruce Hahn
Title:	Chief Executive Officer

Accepted as of the date first

above written.

New York, New York

HCFP/BRENNER SECURITIES LLC

By:

Name:

Title:

31

SCHEDULE I

AMERICAN TELECOM SERVICES INC.

Underwriter	Number of Firm Securities to be Purchased
HCFP/Brenner Securities, LLC

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EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

AMERICAN TELECOM SERVICES, INC.

AMERICAN TELECOM SERVICES, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

1. The name of the corporation is “American Telecom Services, Inc.” (hereinafter sometimes referred to as the “Corporation”).

2. The Corporation’s Certificate of Incorporation was filed in the Office of the Secretary of State of Delaware on June 16, 2003.

3. This Amended and Restated Certificate of Incorporation restates, integrates and amends the Certificate of Incorporation of the Corporation.

4. The text of the Certificate of Incorporation of the Corporation, as heretofore amended, is hereby amended and restated to read in full as follows:

FIRST: The name of the corporation is American Telecom Services, Inc. (hereinafter sometimes referred to as the “Corporation”).

SECOND: The registered office of the Corporation is located at 615 South DuPont Highway, Dover, Delaware 19901; County of Kent. The name of its registered agent at that address is National Corporate Research, Ltd.

THIRD: The purpose of the Corporation shall be to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (“GCL”).

FOURTH: (a) The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 40,005,000, of which:

(i) 40,000,000 shares shall be Common Stock of the par value of $.001 per share; and

(ii) 5,000 shares shall be Preferred Stock of the par value of $.001 per share.

(b) Preferred Stock. Shares of Preferred Stock may be issued from time to time in series or otherwise and the Board of Directors of the Corporation is hereby authorized, subject to the limitations provided by law, to establish and designate series, if any, of the Preferred Stock, to fix the number of shares constituting any such series, and to fix the voting powers, designations, and relative, participating, optional, conversion, redemption and other rights of the shares of Preferred Stock or series thereof, and the qualifications, limitations and restrictions thereof, and to increase and to decrease the number of shares of Preferred Stock constituting any such series. The authority of the Board of Directors of the Corporation with respect to shares of Preferred Stock or any series thereof shall include but shall not be limited to the authority to determine the following:

I. The designation of any series.

II. The number of shares initially constituting any such series.

III. The rate or rates and the times at which dividends on the shares of Preferred Stock or any series thereof shall be paid, and whether or not such dividends shall be cumulative, and, if such dividends shall be cumulative, the date or dates from and after which they shall accumulate.

IV. Whether or not shares of the Preferred Stock or series thereof shall be redeemable, and, if such shares shall be redeemable, the terms and conditions of such redemption, including but not limited to the date or dates upon or after which such shares shall be redeemable and the amount per share which shall be payable upon such redemption, which amount may vary under different conditions and at different redemption dates.

V. The amount payable on the shares of Preferred Stock or series thereof in the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided, however, that the holders of such shares shall be entitled to be paid, or to have set apart for payment, not less than $0.001 per share before the holders of shares of the Common Stock or the holders of any other class of stock ranking junior to the Preferred Stock as to rights on liquidation shall be entitled to be paid any amount or to have any amount set apart for payment; provided, further, that, if the amounts payable on liquidation are not paid in full, the shares of all series of the Preferred Stock shall share ratably in any distribution of assets other than by way of dividends in accordance with the sums which would be payable in such distribution if all sums payable were discharged in full.

VI. Whether or not the shares of Preferred Stock or series thereof shall have voting rights, in addition to the voting rights provided by law, and, if such shares shall have such voting rights, the terms and conditions thereof, including but not limited to the right of the holders of such shares to vote as a separate class either alone or with the holders of shares of one or more other class or series of Preferred Stock and the right to have more than one vote per share.

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VII. Whether or not a sinking fund shall be provided for the redemption of the shares of Preferred Stock or series thereof, and, if such a sinking fund shall be provided, the terms and conditions thereof.

VIII. Whether or not a purchase fund shall be provided for the shares of Preferred Stock or series thereof, and, if such a purchase fund shall be provided, the terms and conditions thereof.

IX. Whether or not the shares of Preferred Stock or series thereof shall have conversion privileges, and, if such shares shall have conversion privileges, the terms and conditions of conversion, including but not limited to any provision for the adjustment of the conversion rate or the conversion price.

X. Any other relative rights, preferences, qualifications, limitations and restrictions.

(c) Common Stock.

1. Voting Rights. Except as otherwise required by statute or as otherwise provided in this Certificate of Incorporation, each outstanding share of Common Stock shall be entitled to vote on each matter on which the stockholders of the Corporation shall be entitled to vote, and each holder of Common Stock shall be entitled to one vote for each share of such stock held by such holder.

2. Dividends. Subject to the preferential dividend rights applicable to shares of Preferred Stock, the holders of shares of Common Stock shall be entitled to receive only such dividends as may be declared by the Board of Directors.

3. Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after distribution in full of the preferential amounts to be distributed to the holders of shares of Preferred Stock, the holders of shares of Common Stock shall be entitled, ratably, in proportion to the number of shares held by them, to receive all of the remaining assets of the Corporation available for distribution to holders of Common Stock.

FIFTH: The corporation is to have perpetual existence.

SIXTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:

A. Election of directors need not be by ballot unless the by-laws of the Corporation so provide.

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B. The Board of Directors shall have the power, without the assent or vote of the stockholders, to make, alter, amend, change, add to or repeal the by-laws of the Corporation as provided in the by-laws of the Corporation.

C. The directors in their discretion may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the Corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and binding upon the Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of the Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors’ interests, or for any other reason.

D. In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this Certificate of Incorporation, and to any by-laws from time to time made by the stockholders; provided, however, that no by-law so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made.

SEVENTH: A. The Corporation shall, to the full extent permitted by Section 145 of the GCL, from time to time, indemnify all persons whom it may indemnify pursuant thereto.

B. A director of the Corporation shall not be personally liable to the Corporation and to its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit.

C. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is

4

alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the GCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in sub-paragraph (d) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Paragraph SEVENTH shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the GCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Paragraph SEVENTH or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.

D. If a claim under sub-paragraph (c) of this Paragraph SEVENTH is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the GCL for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the GCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

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E. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Paragraph SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.

F. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the GCL.

EIGHTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the provisions of paragraph (7) of subsection (b) of Section 102 of the GCL.

NINTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

5. This Amended and Restated Certificate of Incorporation was duly adopted by the unanimous written consent of the directors and by the written consent of the holders of at least a majority of the issued and outstanding shares of capital stock of the Corporation in accordance with the applicable provisions of Sections 242 and 228, respectively, of the GCL.

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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by Lawrence Burstein, its Chairman, this 26^th day of October, 2005.

/s/ Lawrence Burstein

Lawrence Burstein, Chairman

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EX-3.2

Exhibit 3.2

BY-LAWS

OF

AMERICAN TELECOM SERVICES, INC.

ARTICLE I

Offices

Section 1. Registered Office. The registered office of American Telecom Services, Inc. (the “Corporation”) shall be in the City of Dover, County of Kent, State of Delaware. The name of its registered agent at that location is National Corporate Research, Ltd.

Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

Stockholders

Section 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors; provided, however, the Board of Directors may, in its sole discretion, determine that a meeting shall not be held at any place, but may instead by held solely by means of remote communication in a manner specified in procedures and guidelines adopted by the Board of Directors that are consistent with the Delaware General Corporation Law, as amended (the “DGCL”).

Section 2. Annual Meetings. Annual meetings of stockholders shall be held on such date and at such time as shall be designated by the Board of Directors from time to time and stated in the notice of the meeting. If any annual meeting for the election of directors shall not be held on the date designated therefor, the Board of Directors shall cause the meeting to be held as soon thereafter as is convenient. Stockholders shall elect the Board of Directors at such annual meeting by a plurality vote and transact such other business as may properly be brought before the meeting.

Section 3. Advance Notice of Stockholder Proposed Business. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the

Board of Directors or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 90 days nor more than 120 days prior to the anniversary of the prior year’s annual meeting; provided, however, in the event that the date of the annual meeting is more than 30 days before or after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120^th day prior to such annual meeting and not later than the close of business on the later of the 90^th day prior to such annual meeting or the 10^th day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting, or such adjournment, commence a new time period for the giving of a stockholder notice as described above.

A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is being made, (iii) the class and number of shares of capital stock of the Corporation which are owned of record and beneficially owned by each of such stockholder and such beneficial owner, and (iv) any material interest of such stockholder and such beneficial owner in such business.

Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 3 (and with respect to the nomination and election of directors, Section 2 of Article III); provided, however, that nothing in this Section 3 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with such procedures.

The chairman of an annual meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 3 (and Section 2 of Article III with respect to the nomination and election of directors), and if the chairman should so determine, the chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

Section 4. Meeting Notices. Written notice of stockholder meetings, whether annual or special, stating the place, if any, date and hour of the meeting and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be given to each stockholder entitled to vote at such meeting not less than 10 or more than 60 days before the date of the meeting. Written notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.

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Section 5. Voting Lists. The officer who has charge of the stock ledger of the Corporation shall prepare and make or cause to be prepared and made through a transfer agent appointed by the Board of Directors, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contract information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is to be held at a place, the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

Section 6. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may only be called by the Chairman of the Board of Directors or by the Chief Executive Officer and shall be called by the Chairman or the Chief Executive Officer at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting.

Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. The chairman of a special meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 6 and if he or she shall so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

Section 7. Quorum; Adjournment. Except as otherwise provided by statute or by the Certificate of Incorporation, the holders of a majority of the then outstanding shares of the capital stock issued and outstanding which are entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion or represented by proxy, shall have power to adjourn the meeting from time to time, until a quorum shall be present or represented.

When any meeting is convened, the chairman of the meeting, if directed by the Board of Directors, may adjourn the meeting without a vote of stockholders if (a) no quorum is present for the transaction of business, or (b) the Board of Directors determines that adjournment is necessary or appropriate to enable the stockholders (i) to consider fully information which the Board of Directors determines has not been made sufficiently or timely available to stockholders, or (ii) otherwise to exercise effectively their voting rights. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue to transact business until adjournment.

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At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. Notice of any meeting of stockholders following an adjournment shall not be required to be given if the time, place, if any, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting which is adjourned. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

When a quorum is present at any meeting, the vote of a plurality of the outstanding shares of the capital stock of the Corporation having voting power, present in person or represented by proxy, is necessary to elect directors and the holders of a majority of the then outstanding shares of the capital stock of the Corporation having voting power, present in person or represented by proxy, shall decide any other question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question.

Section 8. Voting of Shares. Unless otherwise specifically provided by statute or the Certificate of Incorporation, or these By-Laws, each stockholder shall at every meeting of the stockholders be entitled to one vote for each share of the capital stock having voting power held by such stockholder.

Section 9. Proxies. Each stockholder entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for him or her by proxy executed or transmitted in a manner permitted by the DGCL by the stockholder or such stockholder’s authorized agent. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period, but no proxy shall confer authority to vote with respect to more than one meeting (and any adjournment thereof).

Section 10. Informal Action by Stockholders.

(a) Taking of Action by Consent. Any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted. Except as otherwise provided by the Certificate of Incorporation, stockholders may act by written consent to elect directors; provided, however, that if such consent is less than unanimous, such action by written consent may be in lieu of holding an annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of such action are vacant and are filled by such action.

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(b) Electronic Transmission of Consents. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the Corporation can determine (i) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (ii) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded in the manner specified in Section 228 of the DGCL.

(c) Notice of Taking of Corporate Action. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation.

Section 11. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled for any proper purpose to examine the stock ledger, the list required by Section 5 of this Article II or the books of the Corporation, or to vote in person or by proxy or, if applicable, by means of remote communication at any meeting of stockholders.

Section 12. Fixing Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors, in its discretion, may fix a new record date for the adjourned meeting in accordance with the DGCL and these By-Laws. If the Board of Directors fixes a record date in accordance with the DGCL and these By-Laws, only stockholders determined to be stockholders of record on the record date so fixed shall be entitled to notice of, or to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend or other distribution, or allotment of rights, or to exercise such rights in respect of such change, conversion or exchange of stock, or to participate in any such other lawful action, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid.

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Section 13. Conduct of Meeting. Meetings of stockholders shall be presided over by the Chairman of the Board of Directors, if any, or in the Chairman’s absence by the Vice Chairman of the Board of Directors, if any, or in the Vice Chairman’s absence by the President, or in the President’s absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen by vote of the stockholders at the meeting. The Secretary shall act as secretary of the meeting, but in the absence of the Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting. The Board of Directors of the Corporation may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the Corporation as it shall deem appropriate. Except to the extent inconsistent with such rules, regulations and procedures as may be adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting.

Section 14. Ballots. The vote on any matter, including the election of directors, shall be by written ballot or, if approved in advance by the Board of Directors of the Corporation, by electronically transmitted ballot submitted in accordance with the requirements adopted and authorized by the Board of Directors of the Corporation in accordance with the DGCL. Each written ballot shall be signed (or deemed signed with respect to any electronically transmitted ballot submitted in accordance with the requirements adopted and authorized by the Board of Directors of the Corporation) by the stockholder voting, or by such stockholder’s proxy, and shall state the number of shares voted.

Section 15. Inspectors of Election. The Corporation, in advance of each meeting of stockholders, may appoint one or more inspectors of election to act thereat. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act and, if no inspector or alternate is able to act at a meeting of stockholders, the chairman shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the DGCL.

Section 16. Preferred Stock Election Rights. Nothing in this Article II shall be deemed to affect any rights of the holders of any series of preferred stock, if any, to elect directors in accordance with the terms thereof.

Section 17. Procedural Matters.

(a) At each meeting of stockholders, the chairman of the meeting shall fix and announce the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting and shall determine the order of business and all other matters of procedure.

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(b) Except to the extent inconsistent with any such rules and regulations as are adopted by the Board of Directors, the chairman of the meeting may establish rules, which need not be in writing, to maintain order for the conduct of the meeting, including, without limitation, restricting attendance to bona fide stockholders of record and their proxies and other persons in attendance at the invitation of the chairman of the meeting and making rules governing speeches and debates. The chairman of the meeting acts in his or her absolute discretion and his or her rulings are not subject to appeal.

ARTICLE III

Directors

Section 1. Number, Tenure and Qualifications. The number of directors which shall constitute the whole Board of Directors shall be not less than one nor more than fifteen; provided, that, subject thereto, the number of directors shall be established from time to time by resolution of the Board of Directors, which resolution shall in no event have the effect of terminating the term of any incumbent director. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3 of this Article III, and each director elected shall hold office until the next annual meeting and until his or her successor is duly elected and qualified, or until his or her earlier death, retirement, resignation or removal. Directors need not be stockholders of the Corporation.

Section 2. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors at a meeting of stockholders. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors, or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2. Such nominations by stockholders shall be made pursuant to timely written notice to the Secretary of the Corporation. To be timely, a stockholder’s notice of a nomination to be made by such stockholder at an annual meeting shall be delivered to or mailed and received at the principal executive offices of the Corporation during the applicable period pursuant to Section 3 of Article II for a timely stockholder’s notice of a matter proposed to be brought before such annual meeting. Such stockholder’s notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) all other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice (i) the name and record address of the stockholder and the name and address of the beneficial owner, if any, on whose behalf the nomination is being made and (ii) the class and number of shares of capital stock of the Corporation which are owned of record and beneficially owned by each of such stockholder and such beneficial owner. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director.

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Notwithstanding anything in the fourth sentence of the preceding paragraph of this Section 2 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least one hundred days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 2 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not more than ten (10) days after the day on which such public announcement is first made by the Corporation. For purposes of this Section 2, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, Reuters or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended.

The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the foregoing procedure, and if the chairman should so determine, the chairman shall so declare to the stockholders present at the meeting and the defective nomination shall be disregarded.

Section 3. Vacancies. Except as otherwise provided by law or the Certificate of Incorporation and subject to the rights of the holders of any class of capital stock of the Corporation (other than Common Stock) then outstanding, any vacancy or newly created directorship on the Board of Directors (whether because of death, retirement, resignation, removal, an increase in the number of directors, or any other cause) may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and any director so chosen shall hold office until the next annual meeting and until his or her successor is duly elected and shall qualify, or until his or her earlier death, retirement, resignation or removal. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or newly created directorship, the directors then in office shall constitute less than a majority of the whole Board of Directors (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten per cent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.

Section 4. General Powers. The business of the Corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.

Section 5. Resignation. Any director may resign at any time upon written notice to the Corporation. Such written resignation shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman of the Board of Directors and Chief Executive Officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective.

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Section 6. Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.

Section 7. First Meeting. The first meeting of each newly elected Board of Directors shall be held without notice other than this By-Law immediately following the annual meeting of stockholders at the place of such meeting.

Section 8. Regular Meetings. Regular meetings of the Board of Directors, other than the annual meeting, may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.

Section 9. Special Meetings. Special meetings of the Board of Directors may be called by, or on behalf of, either the Chairman of the Board of Directors, the President, two directors (upon stating the purpose or purposes of such meeting), or by one director in the event that there is only a single director in office.

Section 10. Notice of Special Meeting. Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 24 hours in advance of the meeting; (ii) by sending a telegram, telecopy or electronic mail, or delivering written notice by hand, to such director’s last known business, home or electronic mail address at least one business day (during business hours) in advance of the meeting; or (iii) by sending written notice, via a reputable overnight courier delivered during business hours, to such director’s last known business or home address at least 72 hours in advance of the meeting. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given if all the directors shall be present thereat or if notice thereof shall be waived either before or after such meeting in writing by all absentees therefrom provided a quorum be present thereat. Notice of any adjourned meeting need not be given.

Section 11. Quorum. Except as may be otherwise specifically provided by statute or by the Certificate of Incorporation, at all meetings of the Board of Directors, a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 12. Organization. At each meeting of the Board of Directors, the Chairman of the Board of Directors, or in his or her absence, the Chief Executive Officer of the Corporation, or in his or her absence, a Vice-Chairman, or in the absence of all of said officers, a chairman chosen by a majority of the directors present, shall preside. The Secretary of the Corporation, or in his or her absence, an assistant Secretary, if any, or, in the absence of both the Secretary and assistant secretaries, any person whom the chairman of the meeting shall appoint, shall act as Secretary of the meeting.

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Section 13. Informal Action by Directors. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or electronic transmissions are filed with the minutes of proceedings of the Board of Directors or such committee.

Section 14. Participation by Conference Telephone. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 14 shall constitute presence in person at such meeting.

Section 15. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee; provided, however, that, if the resolution of the Board of Directors so provides, in the absence or disqualification of any such member or alternate member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member or alternate member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, except such powers and authorities which may not be delegated to a committee pursuant to the DGCL. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. A majority of those entitled to vote at any meeting of any committee shall constitute a quorum for the transaction of business at that meeting.

Except to the extent otherwise provided in the resolution of the Board of Directors authorizing a particular committee, a majority of the members of the Board of Directors then in office shall have the power to change the membership of any committee at any time, to fill vacancies therein, and to discharge any such committee or to remove any member thereof, either with or without cause, at any time.

Section 16. Committee Meetings.

Meetings of the committees of the Board of Directors may be held at any place, within or without the State of Delaware, as shall from time to time be designated by the Board of Directors or the committee in question. Regular meetings of any committee shall be held at such times as may be determined by resolution of the Board of Directors or the committee in question and no notice shall be required for any regular meeting. A special meeting of any committee shall be called by resolution of the Board of Directors, or by the Secretary or an Assistant Secretary upon the request of any member of the committee or, in addition, as otherwise provided in the resolutions establishing such committee. Notices of special meetings shall be mailed to each

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member of the committee in questions no later than two days before the day on which the meeting is to be held, or shall be sent by telecopy, electronic transmission or be delivered to such member personally or by telephone, no later than three hours before such meeting. Notices of any such meeting need not be given to any such member, however, who shall be present at the meeting and participate in the business transacted thereat; and all business transacted at any meeting of any committee shall be fully effective without any notice thereof having been given, if all the members of the committee shall be present thereat. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. Unless limited by law, the Certificate of Incorporation, these By-Laws, the resolutions establishing such committee or by the terms of the notice thereof, any and all business may be transacted at any such special meeting without the notice thereof having so specifically enumerated the matters to be acted upon.

Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if all members of such committee consent thereto in writing and such writing or writings are filed with the minutes of proceedings of the committee.

Section 17. Audit Committee. The size of the Audit Committee shall be set from time to time by the Board of Directors, but will always consist of at least three directors. The members of Audit Committee shall not be officers or employees of the Corporation or any of its affiliates. The Audit Committee shall perform those functions set forth in an Audit Committee Charter adopted by the Board of Directors.

Section 18. Compensation Committee. The size of the Compensation Committee shall be set from time to time by the Board of Directors, but will always consist of at least two directors. The members of the Compensation Committee shall not be officers or employees of the Corporation or any of its affiliates. The Compensation Committee shall make recommendations to the Board of Directors with respect to the administration of the salaries, bonuses and other compensation to be paid to key employees and officers of the Corporation, including the terms and conditions of their employment, and shall administer all stock option and other benefit plans (except with respect to participation by executive officers and unless otherwise specified in plan documents) affecting key employees’ and officers’ direct and indirect remuneration. The Compensation Committee shall perform such other duties as the Board of Directors may from time to time prescribe.

Section 19. Compensation. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation (including reimbursement of expenses) of directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

ARTICLE IV

Notices

Section 1. Written Notice. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, notice is required to be given to any director or

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stockholder, such notice shall be in writing and shall be given in person or by mail to such director or stockholder. If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the director or stockholder at such director’s or stockholder’s address as it appears on the records of the Corporation. Notice to directors may also be given by electronic transmission such as by facsimile, electronic mail or other form of electronic transmission. If notice is given by electronic transmission, such notice shall be deemed given: (1) if by facsimile telecommunication, when directed to a number at which the director has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the director has consented to receive notice; and (3) if by any other form of electronic transmission, when directed to the director. Except as otherwise required by law, notice of any meeting of stockholders following an adjournment shall not be required to be given if the time and place thereof are announced at the meeting which is adjourned.

Section 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE V

Officers

Section 1. Number. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Chief Financial Officer, a Vice-President, a Treasurer and a Secretary. In the event there are two or more vice presidents, then one or more may be designated as a executive vice president, senior vice president or other similar or dissimilar title. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors and one or more Vice Chairmen of the Board of Directors from among their members and additional Vice-Presidents, and one or more Assistant Treasurers and Assistant Secretaries. The Board of Directors may appoint or may empower the Chief Executive Officer to appoint such other officers of the Corporation as it shall deem desirable who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these By-Laws otherwise provide. The officers of the Corporation need not be stockholders of the Corporation.

Section 2. Election and Term of Office. The Board of Directors at its first meeting after each annual meeting of stockholders shall elect the officers of the Corporation. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, the officers of the Corporation shall hold office until their successors are elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer’s earlier death, retirement, resignation or removal as hereafter provided.

Section 3. Resignation and Removal. Any officer may resign by delivering a written resignation to the Corporation at its principal office or to the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event.

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Any officer elected or appointed by the Board of Directors may be removed, with or without cause, at any time by the affirmative vote of a majority of the Board of Directors or by any committee or superior officer upon whom such power of removal may be conferred by the Board of Directors.

Section 4. Vacancies. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is elected and qualified, or until such officer’s earlier death, retirement, resignation or removal.

Section 5. Chairman of the Board of Directors. The Chairman of the Board of Directors shall preside, if present, at all meetings of the Board of Directors. Except where by law the signature of the Chief Executive Officer is required, the Chairman of the Board of Directors shall possess the same power as the Chief Executive Officer to sign all documents of the Corporation which the Chief Executive Officer may be authorized to sign by these By-Laws. The Chairman of the Board of Directors shall see that all orders and resolutions of the Board of Directors are carried into effect and shall from time to time report to the Board of Directors all matters within his or her knowledge which the interests of the Corporation may require to be brought to their notice. During the absence or disability of the Chief Executive Officer, the Chairman of the Board of Directors shall exercise all the powers and discharge all the duties of the Chief Executive Officer unless the Board of Directors shall designate another officer to exercise such powers and discharge such duties. The Chairman of the Board of Directors shall also perform such other duties and he or she may exercise such other powers as from time to time may be prescribed by these By-Laws or by the Board of Directors.

Section 6. Vice Chairmen of the Board of Directors. The Vice-Chairmen of the Board of Directors, if any, shall perform such duties and may exercise such powers as from time to time may be prescribed by the Board of Directors.

Section 7. President. Unless the Board of Directors has designated the Chairman of the Board of Directors or another person as the Corporation’s Chief Executive Officer, the President shall be the Chief Executive Officer of the Corporation, and shall have general and active management of the business, subject to the control of the Board of Directors. The President shall vote all shares of stock of any other Corporation standing in the name of this Corporation except where the voting thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. The President shall also perform all duties incident to the office of the President and such other duties as may be prescribed by these By-Laws or by the Board of Directors from time to time.

Section 8. Chief Financial Officer. The Chief Financial Officer shall, under the direction of the Chairman of the Board of Directors and the Chief Executive Officer, be responsible for all financial and accounting matters of the Corporation. The Chief Financial Officer shall have such other powers and perform such other duties as the Board of Directors, the Chairman of the Board of Directors or these By-Laws may, from time to time, prescribe.

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Section 9. The Vice-Presidents. Each Vice-President shall perform such duties and have such powers as the Board of Directors or Chief Executive Officer may from time to time prescribe. At the request of the Board of Directors, the Vice-President (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.

Section 10. The Treasurer and Assistant Treasurers. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board of Directors or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the officer of Treasurer, including, without limitation, the duty and power to (a) keep and be responsible for all funds and securities of the Corporation; (b) deposit funds of the Corporation in depositories designated by the Board of Directors or the Chief Executive Officer, (c) disburse such funds as authorized by the Board of Directors; (d) make proper accounts of such funds; and (e) render as required by the Board of Directors statements of all such transactions and of the financial condition of the Corporation.

The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the power of the Treasurer.

Section 11. The Secretary and Assistant Secretaries. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the Secretary, including, without limitation, the duty and power to (a) keep the minutes of the stockholders’ and of the Board of Directors’ meetings in one or more books provided for that purpose; and at the request of the Board of Directors shall also perform like duties for the standing committees thereof when required; (b) see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) be custodian of the corporate records; (d) keep a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder; (e) have general charge of the stock transfer books of the Corporation; and (f) sign (unless the treasurer or other proper officer thereunto duly authorized by the Board of Directors shall sign), with the Chairman of the Board of Directors, or President, or a Vice President, certificates for shares of the capital stock of the Corporation the issue of which shall have been authorized by resolution of the Board of Directors, provided that the signatures of the officers of the Corporation thereon may be facsimile as provided in these By-Laws.

Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary.

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In the absence of the Secretary or any Assistant Secretary at any meeting of the stockholders or directors, the chairman of the meeting shall designate a temporary secretary to keep a record of the meeting.

Section 12. Other Positions. The Chief Executive Officer may authorize the use of titles, including the titles of Chairman, President and Vice President, by individuals who hold management positions with the business groups, divisions or other operational units of the Corporation, but who are not and shall not be deemed officers of the Corporation. Individuals in such positions shall hold such titles at the discretion of the appointing officer, who shall be the Chief Executive Officer or any officer to whom the Chief Executive Officer delegates such appointing authority, and shall have such powers and perform such duties as such appointing officer may from time to time determine.

Section 13. Salaries. The compensation of the officers shall be fixed from time to time by the Board of Directors, or by one or more committees or officers to the extent so authorized from time to time by the Board of Directors, and no officer shall be prevented from receiving such compensation by reason of the fact that he or she is also a director of the Corporation.

ARTICLE VI

Indemnification of Directors and Officers

Section 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in or called as a witness in any Proceeding (as hereinafter defined) because he or she is an Indemnified Person (as hereinafter defined), shall be indemnified and held harmless by the Corporation to the fullest extent permitted under the DGCL, as the same now exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the DGCL permitted the Corporation to provide prior to such amendment). Such indemnification shall cover all expenses incurred by an Indemnified Person (including, but not limited to, attorneys’ fees and other expenses of litigation) and all liabilities and losses (including, but not limited to, judgments, fines, ERISA or other excise taxes or penalties and amounts paid or to be paid in settlement) incurred by such person in connection therewith.

Notwithstanding the foregoing, except with respect to indemnification specified in Section 3 of this Article VI, the Corporation shall not be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) initiated by such person unless the Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

For purposes of this Article VI:

(i) a “Proceeding” is an action, suit or proceeding, whether civil, criminal, administrative or investigative, and any appeal therefrom;

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(ii) an “Indemnified Person” is a person who is, was, or had agreed to become a director or an officer or a Delegate, as defined herein, of the Corporation or the legal representative of any of the foregoing; and

(iii) a “Delegate” is a person serving at the request of the Corporation or a subsidiary of the Corporation as a director, trustee, fiduciary, or officer of such subsidiary or of another Corporation, partnership, joint venture, trust or other enterprise.

Section 2. Expenses. Expenses, including attorneys’ fees, incurred by a person indemnified pursuant to Section 1 of this Article VI in defending or otherwise being involved in a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding, including any appeal therefrom, upon receipt of an undertaking (the “Undertaking”) by or on behalf of such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation; provided, that in connection with a Proceeding (or part thereof) initiated by such person, except a Proceeding authorized by Section 3 of this Article VI, the Corporation shall pay said expenses in advance of final disposition only if such Proceeding (or part thereof) was authorized by the Board of Directors. A person to whom expenses are advanced pursuant hereto shall not be obligated to repay pursuant to the Undertaking until the final determination, not subject to further appeal, of any pending Proceeding in a court of competent jurisdiction concerning the right of such person to be indemnified or the obligation of such person to repay pursuant to the Undertaking.

Section 3. Protection of Rights. If a claim under Section 1 of this Article VI is not promptly paid in full by the Corporation after a written claim has been received by the Corporation or if expenses pursuant to Section 2 of this Article VI have not been promptly advanced after a written request for such advancement accompanied by the Undertaking has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim or the advancement of expenses. If successful, in whole or in part, in such suit, such claimant shall also be entitled to be paid the reasonable expense thereof (including without limitation attorneys’ fees). It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required Undertaking has been tendered to the Corporation) that indemnification of the claimant is prohibited by law, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination, if required, prior to the commencement of such action that indemnification of the claimant is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that indemnification of the claimant is prohibited, shall be a defense to the action or create a presumption that indemnification of the claimant is prohibited.

Section 4. Miscellaneous.

(i) Non-Exclusivity of Rights. The rights conferred on any person by this Article VI shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. The Board of Directors shall have the authority, by resolution, to provide for such indemnification of employees or agents of the Corporation or others and for such other indemnification of directors, officers or Delegates as it shall deem appropriate.

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(ii) Insurance, Contracts and Funding. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, or agent of, or person serving in any other capacity with, the Corporation or another Corporation, partnership, joint venture, trust or other enterprise against any expenses, liabilities or losses, whether or not the Corporation would have the power to indemnify such person against such expenses, liabilities or losses under the DGCL. The Corporation may enter into contracts with any director, officer or Delegate of the Corporation in furtherance of the provisions of this Article VI and/or to otherwise provide indemnification and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect the advancing of expenses and indemnification as provided in this Article VI.

(iii) Contractual Nature. The provisions of this Article VI shall be applicable to all Proceedings commenced or continuing after its adoption, whether such arise out of events, acts or omissions which occurred prior or subsequent to such adoption, and shall continue as to a person who has ceased to be a director, officer or Delegate and shall inure to the benefit of the heirs, executors and administrators of such person. This Article VI shall be deemed to be a contract between the Corporation and each person who, at any time that this Article VI is in effect, serves or agrees to serve in any capacity which entitles him to indemnification hereunder and any repeal or other modification of this Article VI or any repeal or modification of the DGCL or any other applicable law shall not limit any Indemnified Person’s entitlement to the advancement of expenses or indemnification under this Article VI for Proceedings then existing or later arising out of events, acts or omissions occurring prior to such repeal or modification, including, without limitation, the right to indemnification for Proceedings commenced after such repeal or modification to enforce this Article VI with regard to Proceedings arising out of acts, omissions or events occurring prior to such repeal or modification.

(iv) Severability. If this Article VI or any portion hereof shall be invalidated or held to be unenforceable on any ground by any court of competent jurisdiction, the decision of which shall not have been reversed on appeal, such invalidity or unenforceability shall not affect the other provisions hereof, and this Article VI shall be construed in all respects as if such invalid or unenforceable provisions had been omitted therefrom. In the event that any provision hereof shall be found to be invalid or unenforceable, such provision shall be interpreted in a manner which most closely reflects the purpose, intent and effect of such provision, but which is valid and enforceable.

(v) Subrogation. In the event of payment under this Article VI, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnified Person, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.

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ARTICLE VII

Certificates of Stock and Their Transfer

Section 1. Certificates of Stock. Every holder of stock in the Corporation shall be entitled to have a certificate, in such form as may be prescribed by the DGCL and by the Board of Directors, certifying the number and class of shares and the series designation, if any, which the certificate represents and owned by such holder in the Corporation. Each such certificate shall be signed by, or in the name of the Corporation, by the Chairman or Vice-Chairman, if any, of the Board of Directors, or the President or a Vice-President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation. Any of or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these By-Laws, applicable securities laws or any agreement among any number of stockholders or among such holders and the Corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.

Section 2. Records of Certificates. A record shall be kept of the name of the person, firm or corporation of record holding the stock represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 3 of this Article VII.

Section 3. Lost, Stolen or Destroyed Certificates. The Chief Executive Officer, Chief Financial Officer or Secretary may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Chief Executive Officer, Chief Financial Officer or Secretary may, in his discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation or any transfer agent or registrar with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, and with such proof of authority or the

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authenticity of signature as the Corporation or its transfer agent may reasonably require, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 5. Transfer and Registry Agents. The Corporation may maintain a transfer office or agency where its stock shall be directly transferable and a registry office, which may be identical with the transfer or agency, where its stock shall be registered; and the Corporation may, from time to time, maintain one or more other transfer offices or agencies, and registry offices; and the Board of Directors may from time to time, define the duties of such transfer agents and registrars and make such rules and regulations as it may deem expedient, not inconsistent with these By-Laws, concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation.

Section 6. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VIII

General Provisions

Section 1. Execution of Documents. The Chief Executive Officer, or any other officer, employee or agent of the Corporation designated by the Board of Directors or designated in accordance with corporate policy approved by the Board of Directors, shall have the power to execute and deliver proxies, stock powers, deeds, leases, contracts, mortgages, bonds, debentures, notes, checks, drafts and other orders for payment of money and other documents for and in the name of the Corporation, and such power may be delegated (including the power to redelegate) by the Chief Executive Officer or to the extent provided in such corporate policy by written instrument to other officers, employees or agents of the Corporation.

Section 2. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

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Section 3. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of July of each year and end on the last day of June in each year unless otherwise fixed by resolution of the Board of Directors.

Section 4. Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation. The Secretary shall have charge of the seal (if any). Such seal may be used by causing it or a facsimile or reproduction thereof to be affixed to or placed upon the document to be sealed. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by the Assistant Secretary or Assistant Treasurer.

Section 5. Certificate of Incorporation. All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and in effect.

Section 6. Construction. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these By-Laws. Without limiting the generality of this provision, all pronouns used in these By-Laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

Section 7. Severability. In the event that any of the provisions of these By-Laws is held by a court of competent jurisdiction to be invalid void or otherwise unenforceable, the remaining provisions are severable and shall remain enforceable to the full extent permitted by law.

ARTICLE IX

Amendments

Section 1. By the Board of Directors. Except as otherwise provided in the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted, without the vote or assent of stockholders, by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present.

Section 2. By the Stockholders. Except as otherwise provided in the Certificate of Incorporation, these By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the affirmative vote of the holders of not less than two-thirds of the voting power of all of the then outstanding shares of the capital stock of the Corporation issued and outstanding and entitled to vote generally in the election of directors, voting together as a single class.

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EX-3.3

Exhibit 3.3

AMERICAN TELECOM SERVICES, INC.

Audit Committee Charter

Organization. This charter governs the operations of the Audit Committee (the “Committee”) of American Telecom Services, Inc. (the “Company”). The Committee shall review and reassess the charter at least annually and recommend any changes to the charter to the full Board of Directors of the Company (the “Board”). The Committee shall be comprised of at least three directors determined by the Board to meet the independence and financial literacy requirements of The Nasdaq Stock Market, Inc. and applicable federal law. Appointment to the Committee, including the designation of the Chair of the Committee and designation of any Committee members as “audit committee financial experts,” shall be made on an annual basis by the full Board.

Statement of Policy. The Committee’s purpose is to represent and provide assistance to the Board of Directors in fulfilling its oversight responsibility to the stockholders, potential stockholders, the investment community and others of the Company’s accounting and financial reporting processes and the audits of the Company’s financial statements. In so doing, it is the responsibility of the Committee to maintain free and open communication between the Committee, the auditors and management of the Company. In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company. The Committee shall have the authority to engage independent legal, accounting and other advisers, as it determines necessary to carry out its duties. The Committee shall have sole authority to approve related fees and retention terms of such advisers.

Responsibilities and Processes. The primary responsibility of the Committee is to oversee the Company’s financial reporting process on behalf of the Board and report the results of its activities to the Board. Management is responsible for preparing the Company’s financial statements, and the independent auditors are responsible for auditing those financial statements. The Committee in carrying out its responsibilities believes its policies and procedures should remain flexible, in order to best react to changing conditions and circumstances. The Committee should take the appropriate actions to set the overall corporate “tone” for quality financial reporting, sound business risk practices, and ethical behavior.

The following shall be the principal recurring processes of the Committee in carrying out its oversight responsibilities. The processes are set forth as a guide with the understanding that the Committee may supplement them as appropriate.

• The Committee shall have a clear understanding with management and the independent auditors that the independent auditors are ultimately accountable to the Board and the Committee, as representatives of the Company’s stockholders.

• The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors (including resolution of disagreements between management and the independent auditors regarding financial reporting). The independent auditors shall report directly to the Committee.

• The Committee shall ensure receipt from the independent auditors of a formal written statement delineating all relationships between such independent auditors and the Company or any other relationships that may adversely affect their independence, and, based on such review, shall assess their independence consistent with Independence Standards Board 1. The Committee shall actively engage in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact their objectivity and independence and take, or recommend that the Board take, appropriate action to oversee the independence of the independent auditors.

• Annually, the Committee will review the experience and qualifications of the key members of the independent auditors and the independent auditors’ quality control procedures.

• The Committee shall review and pre-approve all audit services and all permissible non-audit services. The Committee may delegate the authority to grant pre-approvals to one or more designated members of the Committee with any such pre-approval reported to the Committee at its next regularly scheduled meeting.

• The Committee shall establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

• The Committee shall discuss with the auditors the overall scope and plans for their audits including the adequacy of staffing and compensation. Also, the Committee shall discuss with management and the auditors the adequacy and effectiveness of the accounting and financial controls, including the Company’s system to monitor and manage business risk, and legal and ethical compliance programs. Further, the Committee shall meet separately with the auditors, with and without management present, to discuss the results of their examinations and any report prepared by the auditors and delivered to the Committee.

• The Committee shall review and discuss with management and the independent auditors (a) any material financial or non-financial arrangements of the Company that do not appear on the financial statements of the Company, and (b) any transaction with parties related to the Company.

• The Committee shall review the interim financial statements with management and the independent auditors prior to the filing of the Company’s Quarterly Reports on Form 10-Q. Also, the Committee shall discuss the results of the quarterly review and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards.

• The Committee shall review with management and the independent auditors the financial statements to be included in the Company’s Annual Report on Form 10-K (or the annual report to stockholders if distributed prior to the filing of the Form 10-K), including their judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. Also, the Committee shall discuss the results of the annual audit and any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards.

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EX-4.3

Exhibit 4.3

THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT AS HEREIN PROVIDED.

VOID AFTER 5:00 P.M. EASTERN TIME,                             , 2010.

PURCHASE OPTION

For the Purchase of up to

280,000 Shares of Common Stock

and/or

280,000 Common Stock Purchase Warrants

of

AMERICAN TELECOM SERVICES INC.

(A Delaware Corporation)

1. Purchase Option.

THIS CERTIFIES THAT, in consideration of $100.00 duly paid by or on behalf of                                          (“Holder”), as registered owner of this Purchase Option, to American Telecom Services Inc. (“Company”), Holder is entitled, at any time or from time to time at or after                         , 200   (“Commencement Date”), and at or before 5:00 p.m., Eastern Time, October 13, 2009 (“Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to Two Hundred Eighty Thousand (280,000) shares of Common Stock of the Company, $.001 par value (“Common Stock”) and/or Two Hundred Eighty Thousand (280,000) Redeemable Common Stock Purchase Warrants, each to purchase one share of Common Stock (“Warrants”). Each Warrant is the same as the Redeemable Common Stock Purchase Warrants (“Public Warrants”) that have been registered by the Company for sale to the public pursuant to the Registration Statement on Form S-1 (No.333-            ) (“Registration Statement”), which was declared effective on                         , 200   (“Effective Date”). The shares of Common Stock and Warrants are sometimes collectively referred to herein as the “Securities.” The Holder can purchase, upon exercise of the Purchase Option, either shares of Common Stock or Warrants or both. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Option may be exercised on the next succeeding day that is not such a day in accordance with the terms herein. This Purchase Option is initially exercisable at $5.555 per share of Common Stock and $0.055 per Warrant purchased; provided, however, that upon the occurrence of any of the events

specified in Section 6 hereof, the rights granted by this Purchase Option, including the exercise price and the number of shares of Common Stock and Warrants to be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending on the context of a share of Common Stock or a Warrant.

2. Exercise.

2.1 Exercise Form. In order to exercise this Purchase Option, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Option and payment of the Exercise Price in cash or by certified check or official bank check for the Securities being purchased. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Option shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.

2.2 Legend. Each certificate for Securities purchased under this Purchase Option shall bear a legend as follows (as a substantially similar legend) unless such Securities have been registered under the Securities Act of 1933, as amended:

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (“Act”) or applicable state law. The securities may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act and applicable state law.”

2.3 Conversion Right.

2.3.1 Determination of Amount. In lieu of the payment of the Exercise Price in the manner required by Section 2.1, the Holder shall have the right (but not the obligation) to convert any exercisable but unexercised portion of this Purchase Option into either Common Stock or Warrants (“Conversion Right”) as provided in this Section 2 below.

2.3.2 Common Stock. Upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any of the Exercise Price in cash) that number of shares of Common Stock equal to the quotient obtained by dividing (x) the “Stock Value” (as defined below), at the close of trading on the next to last trading day immediately preceding the exercise of the Conversion Right, of the portion of the Purchase Option being converted by (y) the Market Price at that same time. The “Stock Value” of the portion of the Purchase Option being converted shall equal the remainder derived from subtracting (a) the Exercise Price multiplied by the number of shares of Common Stock underlying that portion of the Purchase Option being converted from (b) the Market Price of the Common Stock multiplied

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by the number of shares of Common Stock underlying that portion of the Purchase Option being converted. As used in this Section 2.3.2, the term “Market Price” at any date shall be deemed to be the average of the last reported sale price of the Common Stock for the three consecutive trading days ending on such date, as officially reported by the principal securities exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or if any such exchange on which the Common Stock is listed is not its principal trading market, the last reported sale price for the three consecutive trading days ending on such date as furnished by the NASD through the Nasdaq National Market or SmallCap Market, or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed or admitted to trading on any of the foregoing markets, or similar organization, as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it.

2.3.3 Mechanics of Conversion. The Conversion Right may be exercised by the Holder on any business day on or after the Commencement Date and not later than the Expiration Date by delivering the Purchase Option with a duly executed exercise form attached hereto with the conversion right section completed to the Company, exercising the Conversion Right and specifying the total number of shares of Common Stock and/or Warrants that the Holder will purchase pursuant to such Conversion Right.

3. Transfer.

3.1 General Restrictions. The registered Holder of this Purchase Option, by its acceptance hereof, agrees that it will not sell, transfer or assign or hypothecate this Purchase Option prior to the Commencement Date to anyone other than (i) an officer or partner of such Holder, (ii) an officer of HCFP/Brenner Securities LLC (“Underwriter”) or an officer or partner of any Selected Dealer or member of the underwriting syndicate in connection with the Company’s public offering with respect to which this Purchase Option has been issued, or (iii) any Selected Dealer or member of the underwriting syndicate. On and after the Commencement Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Option and payment of all transfer taxes, if any, payable in connection therewith. The Company shall immediately transfer this Purchase Option on the books of the Company and shall execute and deliver a new Purchase Option or Purchase Options of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of shares of Common Stock and Warrants purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.

3.2 Restrictions Imposed by the Act. This Purchase Option and the Securities underlying this Purchase Option shall not be transferred unless and until (i) the Company has received the opinion of counsel for the Holder that this Purchase Option or the Securities, as the case may be, may be transferred pursuant to an exemption from registration under the Act and

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applicable state law, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that an opinion of Graubard Miller in form and substance reasonably satisfactory to the Company or its counsel shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement relating to such Purchase Option or Securities, as the case may be, has been filed by the Company and declared effective by the Securities and Exchange Commission and compliance with applicable state law.

4. New Purchase Options to be Issued.

4.1 Partial Exercise or Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Option may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Option for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax, the Company shall cause to be delivered to the Holder without charge a new Purchase Option of like tenor to this Purchase Option in the name of the Holder evidencing the right of the Holder to purchase the aggregate number of shares of Common Stock and Warrants purchasable hereunder as to which this Purchase Option has not been exercised or assigned.

4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Option and of reasonably satisfactory indemnification, the Company shall execute and deliver a new Purchase Option of like tenor and date. Any such new Purchase Option executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.

5. Registration Rights.

5.1 Demand Registration.

5.1.1 Grant of Right. The Company, upon written demand (“Initial Demand Notice”) of the Holder(s) of at least 51% of the Purchase Options and/or the underlying shares of Common Stock and Warrants (“Majority Holders”), agrees to register on one occasion, all of the Securities underlying such Purchase Options, including the Common Stock, the Warrants and the Common Stock underlying the Warrants (collectively the “Registrable Securities”). On such occasion, the Company will file a registration statement covering the Registrable Securities within sixty (60) days after receipt of the Initial Demand Notice and use its reasonable best efforts to have the registration statement declared effective promptly thereafter. If the Company fails to comply with the provisions of this Section 5.1.1, the Company shall, in addition to any other equitable or other relief available to the Holder(s), be liable for any and all incidental, special and consequential damages sustained by the Holder(s). The demand for registration may be made at any time during a period of four years beginning one year from the Effective Date. The Company covenants and agrees to give written notice of its receipt of any Initial Demand

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Notice by any Holder(s) to all other registered Holders of the Purchase Options and/or the Registrable Securities within ten days from the date of the receipt of any such Initial Demand Notice.

5.1.2 Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities, but the Holders shall pay any and all underwriting and brokerage commissions discounts and fees, the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its reasonable best efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such States as are reasonably requested by the Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause (i) the Company to be obligated to register or license to do business in such State or submit to general service of process in such State, or (ii) the principal stockholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 5.1.1 to remain effective for a period of at least twelve consecutive months from the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities.

5.2 “Piggy-Back” Registration.

5.2.1 Grant of Right. In addition to the demand right of registration, the Holders of the Purchase Options shall have the right for a period of six (6) years commencing one year from the Effective Date, to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, in the determination of the Company’s managing underwriter or underwriters, if any, for such offering, the inclusion of the Registrable Securities, when added to the securities being registered by the Company or the selling stockholder(s), will exceed the maximum amount of the Company’s securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without adversely affecting the entire offering, the Company shall not be obligated to negotiate such Registrable Securities.

5.2.2 Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities, but the Holders shall pay any and all underwriting and brokerage commissions, discounts and fees and the expenses of any legal counsel and other professionals selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than ten (10) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as the Holder has sold all of the Registrable Securities. The holders of the Registrable

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Securities shall exercise the “piggy-back” rights provided for herein by giving written notice, within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement.

5.3 General Terms.

5.3.1 Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriter contained in Section 5 of the Underwriting Agreement between the Underwriter and the Company, dated the Effective Date (but not with respect to information furnished (or not furnished in the case of an omission) by the Holders. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished (or not furnished in the case of an omission or alleged omission) by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5 of the Underwriting Agreement pursuant to which the Underwriter has agreed to indemnify the Company.

5.3.2 Exercise of Warrants. Nothing contained in this Purchase Option shall be construed as requiring the Holder(s) to exercise their Purchase Options or Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.

5.3.3 Documents Delivered to Holders. Subject to the execution of appropriate confidentiality agreements, the Company shall deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of the National Association of Securities Dealers, Inc. (“NASD”). Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors,

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all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request, provided that all such persons sign a confidentiality agreement.

5.3.4 Documents to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling securityholders as a condition to the inclusion of such Holder’s Registrable Securities in any registration statement.

6. Adjustments.

6.1 Adjustments to Exercise Price and Number of Securities. The Exercise Price and the number of shares of Common Stock underlying the Purchase Option and underlying the Warrants underlying the Purchase Option shall be subject to adjustment from time to time as hereinafter set forth:

6.1.1 Stock Dividends - Recapitalization, Reclassification, Split-Ups. If after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock or by a split-up, recapitalization or reclassification of shares of Common Stock or other similar event, then, on the effective date thereof, the number of shares of Common Stock issuable on exercise of the Purchase Option and the Warrants underlying the Purchase Option shall be increased in proportion to such increase in outstanding shares; provided, however, that nothing in this Section 6.1 is intended to provide for an adjustment with respect to the Warrants beyond that provided for in the Warrant Agreement between the Company and Continental Stock Transfer & Trust Company. For example, if the Company declares a two-for-one stock dividend and at the time of such dividend the Purchase Option is for the purchase of 1,000 shares of Common Stock at $5.505 per share and 1,000 Warrants at $0.055 per Warrant (each Warrant exercisable for $5.05 per share), upon effectiveness of the dividend, the Purchase Option will be adjusted (disregarding for purposes of this example that adjustments shall be rounded to the nearest cent, as provided in Section 6.1.3) to allow for the purchase of 2,000 shares at $2.7525 per share and 2,000 Warrants at $0.0275 (each Warrant exercisable for $2.525 per share).

6.1.2 Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 6.3, the number of outstanding shares of Common Stock is decreased by a consolidation, combination or reclassification of shares of Common Stock or other similar event, then, upon the effective date thereof, the number of shares of Common Stock issuable on exercise of the Purchase Option and the Warrants underlying the Purchase Option shall be decreased in proportion to such decrease in outstanding shares.

6.1.3 Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise of this Purchase Option is adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted (to the nearest cent) by multiplying such

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Exercise Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of this Purchase Option immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. If it is determined that such Exercise Price and number of shares of Common Stock must be adjusted, then the Exercise Price of the Purchase Option with respect to the underlying Warrants and the number of Warrants purchasable hereunder shall also be similarly adjusted.

6.1.4 Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of Common Stock other than a change covered by Section 6.1.1 hereof or which solely affects the par value of such shares of Common Stock, or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Option shall have the right thereafter (until the expiration of the right of exercise of this Purchase Option) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or other transfer, by a Holder of the number of shares of Common Stock of the Company obtainable upon exercise of this Purchase Option immediately prior to such event; and if any reclassification also results in a change in shares of Common Stock covered by Section 6.1.1, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.3 and this Section 6.1.4. The provisions of this Section 6.1.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.

6.1.5 Changes in Form of Purchase Option. This form of Purchase Option need not be changed because of any change pursuant to this Section, and Purchase Options issued after such change may state the same Exercise Price and the same number of shares of Common Stock and Warrants as are stated in the Purchase Options initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Options reflecting a required or permissive change shall not be deemed to waive any rights to a prior adjustment or the computation thereof.

6.2 [Intentionally Omitted]

6.3 Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of shares of Common Stock or Warrants upon the exercise or transfer of the Purchase Option, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down to the nearest whole number of Warrants, shares of Common Stock or other securities, properties or rights.

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7. Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon exercise of the Purchase Options or the Warrants, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Options and payment of the Exercise Price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. The Company further covenants and agrees that upon exercise of the Warrants underlying the Purchase Options and payment of the respective Warrant exercise price therefor, all shares of Common Stock and other securities issuable upon such exercises shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as the Purchase Options shall be outstanding, the Company shall use its reasonable best efforts to cause all (i) shares of Common Stock issuable upon exercise of the Purchase Options and the Warrants, and (ii) the Warrants underlying the Purchase Options to be listed (subject to official notice of issuance) on all securities exchanges (or, if applicable on Nasdaq) on which the Common Stock or the Public Warrants issued to the public in connection herewith are then listed and/or quoted.

8. Certain Notice Requirements.

8.1 Holder’s Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Purchase Options and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least ten (10) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be.

8.2 Events Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, or (ii) the Company shall offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the

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Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business shall be proposed.

8.3 Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s President and Chief Financial Officer.

8.4 Transmittal of Notices. All notices, requests, consents and other communications under this Purchase Option shall be in writing and shall be deemed to have been duly made on the date of delivery if delivered personally or sent by overnight courier, with acknowledgement of receipt to the party to which notice is given, or on the fifth day after mailing if mailed to the party to whom notice is to be given, by registered or certified mail, return receipt requested, postage prepaid and properly addressed as follows: (i) if to the registered Holder of the Purchase Option, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to its principal executive office.

9. Miscellaneous.

9.1 Amendments. The Company and the Underwriter may from time to time supplement or amend this Purchase Option without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Underwriter may deem necessary or desirable and which the Company and the Underwriter deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of the party against whom enforcement of the modification or amendment is sought.

9.2 Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Option.

9.3 Entire Agreement. This Purchase Option (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Option) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

9.4 Binding Effect. This Purchase Option shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their respective successors, legal

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representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Option or any provisions herein contained.

9.5 Governing Law; Submission to Jurisdiction. This Purchase Option shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Option shall be brought and enforced in the courts of the State of New York or of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder, by acceptance hereof, agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor.

9.6 Waiver, Etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Option shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Option or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Option. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Option shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

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IN WITNESS WHEREOF, the Company has caused this Purchase Option to be signed by its duly authorized officer as of the      day of                         , 200  .

AMERICAN TELECOM SERVICES INC.
By:
	Bruce Hahn
	Chief Executive Officer

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Form to be used to exercise Purchase Option:

American Telecom Services Inc.

Date:                         , 200  

The undersigned hereby elects irrevocably to exercise the within Purchase Option and to purchase                      shares of Common Stock and/or Warrants to purchase shares of Common Stock of American Telecom Services Inc. and hereby makes payment of $             (at the rate of $             per share of Common Stock and $ per Warrant) in payment of the Exercise Price pursuant thereto. Please issue the Common Stock and Warrants as to which this Purchase Option is exercised in accordance with the instructions given below.

or

The undersigned hereby elects irrevocably to exercise the within Purchase Option and to purchase                      shares of Common Stock and/or Warrants to purchase                      shares of Common Stock of American Telecom Services Inc. by surrender of the unexercised portion of the within Purchase Option (with a “Stock Value” of $             based on a “Market Price” of $             and a “Warrant Value” of                      based on a “Market Price” of $            ). Please issue the Common Stock and Warrants as to which this Purchase Option is exercised in accordance with the instructions given below.

Signature

NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Option in every particular without alteration or enlargement or any change whatsoever.

INSTRUCTIONS FOR REGISTRATION OF SECURITIES

Name
	(Print in Block Letters)
Address

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Form to be used to assign Purchase Option:

ASSIGNMENT

(To be executed by the registered Holder to effect a transfer of the within Purchase Option):

FOR VALUE RECEIVED,                                          does hereby sell, assign and transfer unto                              the right to purchase                      shares of Common Stock and/or Warrants to purchase                      shares of Common Stock of American Telecom Services Inc. (“Company”) evidenced by the within Purchase Option and does hereby authorize the Company to transfer such right on the books of the Company.

Dated:                        , 200  

Signature

Signature Guaranteed

NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Option in every particular without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.

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EX-4.4

Exhibit 4.4

WARRANT AGREEMENT

Agreement made as of                 , 200  , between American Telecom Services Inc., a Delaware corporation with offices at 2466 Peck Road, City of Industry, California 90601 (“Company”), and Continental Stock Transfer & Trust Company, a New York corporation with offices at 17 Battery Place, New York, New York 10004, a New York corporation, (herein called “Warrant Agent”).

WHEREAS, the Company is engaged in a public offering (“Public Offering”) of Common Stock and Redeemable Common Stock Purchase Warrants (“Public Warrants”) and in connection therewith, has determined to issue and deliver up to (i) 3,220,000 Public Warrants (including up to 420,000 Public Warrants that may be issued pursuant to the Underwriter’s over-allotment option) to the public investors, (ii) an aggregate of 280,000 Warrants that may be issued to HCFP/Brenner Securities, LLC as representative of the several underwriters (“Representative”) or its respective designees (“Representative’s Warrants”), up on exercise of a purchase option being granted by the Company to the Representative, (iii) 1,475,666 additional Public Warrants that will be issued upon automatic conversion of 1,475,666 outstanding private warrants upon consummation of the Public Offering (“Exchange Warrants” and, together with the Public Warrants, the “Warrant(s)”), and (iv) any and all warrants issued hereafter that are of the same class as the Warrants. Each Warrant evidences the right of the holder thereof to purchase one share of the Company’s common stock, $.001 par value per share (“Common Stock”), for $5.05; and

WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration Statement (No. 333-            ) on Form SB-2 (“Registration Statement”), for the registration under the Securities Act of 1933, as amended, of, among others, the Warrants and the Common Stock issuable upon exercise of the Warrants; and

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants; and

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.

2. Warrants.

2.1 Form of Warrant. Each Warrant certificate shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein and shall be signed by, or bear the facsimile signature of, the Chairman of the Board, President and/or Vice President and Secretary or Assistant Secretary of the Company and shall bear a facsimile of the Company’s seal. In the event the person whose facsimile signature has been placed upon any Warrant certificate shall have ceased to be Chairman of the Board, Chief Executive Officer and/or President and Secretary or Assistant Secretary of the Company before such Warrant certificate is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance. The Warrants represented by a Warrant certificate may not be exercised until such certificate has been countersigned by the Warrant Agent as provided in Section 2.3 hereof.

2.2 Effect of Countersignature. Unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant certificate shall be invalid and of no effect.

2.3 Events for Countersignature. The Warrant Agent shall countersign a Warrant certificate only upon the occurrence of either of the following events:

(a) if the Warrant certificate is to be issued in exchange or substitution for one or more previously countersigned Warrant certificates, as hereinafter provided, or

(b) if the Company instructs the Warrant Agent to do so.

2.4 Registration.

2.4.1 Warrant Register. The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.

2.4.2 Registered Holder. Prior to due presentment for registration of transfer of any Warrant certificate, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant certificate shall be registered upon the Warrant Register (“registered holder”), as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

2.5 Detachability of Warrants. The Warrant Agent understands that until the completion of the Public Offering, the Warrants may only be purchased and sold together with the Common Stock and, upon completion of the Public Offering, are immediately separately transferable.

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3. Terms and Exercise of Warrants.

3.1 Warrant Price. Each Warrant certificate shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the provisions of such Warrant certificate and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $5.05 per whole share, subject to the adjustments provided in Section 4 hereof. The term “Warrant Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a Warrant is exercised.

3.2 Duration of Warrants. A Warrant may be exercised only during the period (“Exercise Period”) commencing on                     , 200  , and terminating on the earlier of                     , 20    , or the date fixed for redemption of the Warrant as provided in Section 6 of this Agreement (“Expiration Date”). Each Warrant not exercised on or before its expiration date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at the close of business on its Expiration Date. The Company in its sole discretion may extend the duration of the Warrants by delaying the Expiration Date.

3.3 Exercise of Warrants.

3.3.1 Payment. A Warrant, when countersigned by the Warrant Agent, may be exercised by the registered holder thereof by surrendering the certificate representing such Warrant, at the office of the Warrant Agent, or at the office of its successor as Warrant Agent, in the Borough of Manhattan, City and State of New York, with the purchase form, as set forth on the Warrant certificate and in substantially the form of Exhibit A hereto, duly executed, and by paying in full, in lawful money of the United States, in cash, good certified check or bank draft payable to the order of the Company, the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the Warrant for the Common Stock, and the issuance of the Common Stock.

3.3.2 Issuance of Certificates. As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment of the Warrant Price, the Company shall issue to the registered holder of such Warrant a certificate or certificates for the number of full shares of Common Stock to which he is entitled, registered in such name or names as may be directed by him, and if such Warrant shall not have been exercised in full, a new countersigned Warrant certificate for the number of shares as to which such Warrant shall not have been exercised. Notwithstanding the foregoing, the Company shall not be obligated to deliver any securities pursuant to the exercise of a Warrant unless a registration statement under the Securities Act of 1933 with respect to the securities is effective. Warrants may not be exercised by, or securities issued to, any registered holder in any state in which such exercise would be unlawful.

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3.3.3 Valid Issuance. All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued.

3.3.4 Date of Issuance. Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant certificate was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

3.3.5 Warrant Solicitation and Warrant Solicitation Fee.

(a) The Company has engaged the Representative, on a non-exclusive basis, as its agent for the solicitation of the exercise of the Warrants. The Company, at its cost, will (i) assist the Representative with respect to such solicitation, if requested by the Representative and (ii) provide to the Representative, and direct the Company’s transfer and warrant agent to deliver to the Representative, lists of the record, and to the extent known, beneficial owners of the Company’s Warrants. Accordingly, the Company hereby instructs the Warrant Agent to cooperate with the Representative in every respect in connection with the Representative’s solicitation activities, including, but not limited to, providing to the Representative, at the Company’s cost, a list of record and beneficial holders of the Warrants and circulating a prospectus or offering circular disclosing the compensation arrangements referenced in Section 3.3.5(b) to holders of the Warrants at the time of exercise of the Warrants. In addition to the conditions set forth in Section 3.3.5(b), the Representative shall accept payment of the warrant solicitation fee provided in Section 3.3.5(b) only if it has provided bona fide services in connection with the exercise of the Warrants. In addition to soliciting, either orally or in writing, the exercise of Warrants by a Warrant holder, such services also may include disseminating information, either orally or in writing, to Warrant holders about the Company or the market for the Company’s securities, or assisting in the processing of the exercise of Warrants.

(b) In each instance in which a Warrant is exercised, the Warrant Agent shall promptly give written notice of such exercise to the Company and the Representative (“Warrant Agent’s Exercise Notice”). If, upon the exercise of any Warrant after the first anniversary of the effective date of the Registration Statement, (i) the market price of the Company’s Common Stock is greater than the Warrant Price, (ii) disclosure of compensation arrangements was made both at the time of the original offering and at the time of exercise (by delivery of the Prospectus or as otherwise required by applicable law, rule or regulation), (iii) the exercise of the Warrant was solicited by the Representative, (iv) the Warrant was not held in a discretionary account, (v) the solicitation of the exercise of the Warrant was not in violation of Regulation M (as such rule or any successor rule may be in effect as of such time of exercise) promulgated under the Securities Exchange Act of 1934, and (vi) the Representative is a member of the National Association of Securities Dealers, Inc., then the Warrant Agent, simultaneously with the issuance of the common stock underlying the Warrant(s), shall, on behalf of the Company, pay from the proceeds received upon exercise of the Warrant(s), a fee of 5% of the Warrant Price to the Representative in accordance with its actual solicitation of a Warrant holder,

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provided that the Representative delivers to the Warrant Agent within three (3) business days from the date on which the Representative received the Warrant Agent’s Exercise Notice, a certificate that the conditions set forth in the preceding clauses (iii), (iv) and (v) have been satisfied. The Representative and the Company may, at any time during business hours, examine the records of the Warrant Agent, including its ledger of original Warrant certificates returned to the Warrant Agent upon exercise of Warrants.

(c) The provisions of this Section 3.3.5 may not be modified, amended or deleted without the prior written consent of the Representative.

4. Adjustments.

4.1 Stock Dividends – Split-Ups. If after the date hereof, and subject to the provisions of Section 4.5, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock or by a split-up of shares of Common Stock or other similar event, then, on the effective date thereof, the number of shares issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares and the then applicable Warrant Price shall be correspondingly decreased.

4.2 Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 4.5, the number of outstanding shares of Common Stock is decreased by a consolidation, combination or reclassification of shares of Common Stock or other similar event, then, upon the effective date of such consolidation, combination or reclassification, the number of shares issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares and the then applicable Warrant Price shall be correspondingly increased.

4.3 Replacement of Securities Upon Reorganization, etc. If after the date hereof any capital reorganization or reclassification of the Common Stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation or other similar event shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, or sale, lawful and fair provision shall be made whereby the Warrant holders shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, such shares of stock, securities, or assets as may be issued or payable with respect to or in exchange for the number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented by the Warrants, had such reorganization, reclassification, consolidation, merger, or sale not taken place and in such event appropriate provision shall be made with respect to the rights and interests of the Warrant holders to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Warrant Price and of the number of shares purchasable upon the exercise of the Warrants) shall thereafter be applicable, as nearly as may be in relation to any share of stock, securities, or assets thereafter deliverable upon the exercise hereof. The Company shall not effect any such consolidation, merger, or sale unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such

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consolidation or merger, or the corporation purchasing such assets, shall assume by written instrument executed and delivered to the Warrant Agent the obligation to deliver to the Warrant holders such shares of stock, securities, or assets as, in accordance with the foregoing provisions, such holders may be entitled to purchase.

4.4 Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable on exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1, 4.2, or 4.3, then, in any such event, the Company shall give written notice in the manner set forth above of the record date for such dividend, distribution, or subscription rights, or the effective date of such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up or issuance. Such notice shall also specify the date as of which the holders of Common Stock of record shall participate in such dividend, distribution, or subscription rights, or shall be entitled to exchange their Common Stock for stock, securities, or other assets deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up or issuance. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

4.5 No Fractional Shares. Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the number of shares of Common Stock to be received shall be rounded off to the nearest whole number.

4.6 Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Agreement. However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

5. Transfer and Exchange of Warrants.

5.1 Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of a Warrant certificate for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant certificate representing an equal aggregate number of Warrants shall be issued and the old Warrant certificate shall be canceled by the Warrant Agent. The Warrant certificate so canceled shall be delivered by the Warrant Agent to the Company from time to time upon request.

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5.2 Procedure for Surrender of Warrants. Warrant certificates may be surrendered to the Warrant Agent, together with a written request for exchange, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrant certificates as requested by the registered holder of the Warrant certificates so surrendered, representing an equal aggregate number of Warrants; provided, however, that in the event that a Warrant certificate surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant certificate and issue new Warrant certificates in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrant certificates also must bear a restrictive legend.

5.3 Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a warrant certificate for a fraction of a warrant. The number of Warrants to be delivered shall be rounded off to the nearest whole number.

5.4 Service Charges. No service charge shall be made for any exchange or registration of transfer of Warrants.

5.5 Warrant Execution and Countersignature. The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Agreement, the Warrants required to be issued pursuant to the provisions hereof, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrant certificates duly executed on behalf of the Company for such purpose.

6. Redemption.

6.1 Redemption. Not less than all of the outstanding Warrants may be redeemed, at the option of the Company, prior to the Expiration Date, at the office of the Warrant Agent, upon the notice referred to in Section 6.2, at the price of $.05 per Warrant (“Redemption Price”), provided that (i) during the first three months after consummation of the Public Offering, the last sale price of the Common Stock has been at least one hundred and ninety percent (190%) of the then effective exercise price of the Public Warrants on each of the fifteen (15) consecutive trading days ending within three business days prior to the date on which notice of redemption is given or (ii) thereafter, the last sale price of the Common Stock has been at least one hundred and fifty percent (150%) of the then effective exercise price of the Public Warrants on each of the fifteen (15) consecutive trading days ending within three business days prior to the date on which notice of redemption is given (the satisfaction of the applicable foregoing condition shall be certified by the Company), and (iii) the Company has obtained the prior written consent of the Representative. The provisions of this Section 6.1 may not be modified, amended or deleted without the prior written consent of the Representative.

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6.2 Date Fixed for, and Notice of, Redemption. In the event the Company shall elect to redeem all or any part of the outstanding Warrants, the Company shall fix a date for the redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company or the Company’s agent at its direction not less than 30 days from the date fixed for redemption to the registered holders of the outstanding Warrants to be redeemed at their last address as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the registered holder received such notice.

6.3 Exercise After Notice of Redemption. The outstanding Warrants may be exercised in accordance with Section 3 of this Agreement at any time after notice of redemption shall have been given by the Company pursuant to Section 6.2 hereof and prior to the date fixed for redemption. On and after the redemption date, the record holder of the outstanding Warrants shall have no further rights except to receive, upon surrender of the outstanding Warrants, the Redemption Price.

6.4 Outstanding Warrants Only. The Company understands that the redemption rights provided for by this Section 6 apply only to outstanding Warrants. To the extent a person holds rights to purchase Warrants, such purchase rights shall not be extinguished by redemption. However, once such purchase rights are exercised, the Company may redeem the Warrants issued upon such exercise provided that the criteria for redemption is met. The provisions of this Section 6.4 may not be modified, amended or deleted without the prior written consent of the Representative.

7. Other Provisions Relating to Rights of Holders of Warrants.

7.1 No Rights as Stockholder. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.

7.2 Lost, Stolen, Mutilated, or Destroyed Warrants. If any Warrant certificate is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may, on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant certificate, include the surrender thereof), issue a new Warrant certificate of like denomination, tenor, and date as the Warrant certificate so lost, stolen, mutilated, or destroyed. Any such new Warrant certificate shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant certificate shall be at any time enforceable by anyone.

7.3 Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.

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7.4 Registration of Common Stock. The Company agrees that, during such time as the Public Warrants and Representative’s Warrants remain outstanding and exercisable, it shall file with the Securities and Exchange Commission a post-effective amendment to the Registration Statement, if possible, or a new registration statement, to maintain registration under the Securities Act of 1933 of such Warrants and shares underlying such Warrants, and it shall take such action as is necessary to qualify for sale, in those states in which the Warrants were initially offered by the Company, the Common Stock issuable upon exercise of the Warrants. The Company shall maintain the effectiveness of such registration statement and keep current a prospectus thereunder and maintain such qualification until the expiration of the Public Warrants and the Representative’s Warrants in accordance with the provisions of this Agreement. The provisions of this Section 7.4 may not be modified, amended or deleted without the prior written consent of the Representative.

8. Concerning the Warrant Agent and Other Matters.

8.1 Payment of Taxes. The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.

8.2 Resignation, Consolidation, or Merger of Warrant Agent.

8.2.1 Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities (other than those incurred prior to such resignation or discharge) hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by a holder of Warrants (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized, existing and in good standing and authorized under the laws of the state in which it was incorporated to exercise corporate trust powers, shall maintain an office in the Borough of Manhattan, City and State of New York for the transfer of the Warrants and, if not incorporated in the State of New York, shall be authorized to do business in the State of New York as a foreign corporation, and subject to supervision or examination by federal or state authority and shall be authorized to serve as Warrant Agent for the Warrants under the Securities Exchange Act of 1934, as amended. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any

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successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

8.2.2 Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.

8.2.3 Merger or Consolidation of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, if it shall be eligible to serve as Warrant Agent under Section 8.2.1, shall be the successor Warrant Agent under this Agreement without any further act.

8.3 Fees and Expenses of Warrant Agent.

8.3.1 Remuneration. The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.

8.3.2 Further Assurances. The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement.

8.4 Liability of Warrant Agent.

8.4.1 Reliance on Company Statement. Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement.

8.4.2 Indemnity. The Warrant Agent shall be liable hereunder only for its own negligence or willful misconduct. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of the Warrant Agent’s negligence, willful misconduct, or bad faith.

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8.4.3 Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant; nor shall it be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.

8.5 Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of the Company’s Common Stock through the exercise of Warrants.

9. Miscellaneous Provisions.

9.1 Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

9.2 Notices. Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or by the Company shall be sufficiently given or made if sent by certified mail, or private courier service, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

American Telecom Services Inc.

2466 Peck Road

City of Industry, California 90601

Attention: Mr. Bruce Hahn

with a copy to:

Sonnenschein Nath & Rosenthal

1221 Avenue of the Americas

New York, NY 10020

Attention: Ira Roxland, Esq.

Any notice, statement or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given or made

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if sent by certified mail or private courier service, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

9.3 Applicable law; Jurisdiction. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by the law of the State of New York, without giving effect to principles of conflicts of law. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenience forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.2 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.

9.4 Persons Having Rights Under This Agreement. Nothing in this Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants and, for the purposes of Sections 3.3.5, 6.1 through 6.4 and 7.4 hereof, the Representative, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. The Representative shall be deemed to be a third-party beneficiary of this Agreement with respect to such Sections. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto (and the Representative to the extent set forth above) and their successors and assigns and of the registered holders of the Warrants.

9.5 Examination of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the registered holder of any Warrant. The Warrant Agent may require any such holder to submit his or her Warrant for inspection by it.

9.6 Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

9.7 Effect of Headings. The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto under their respective corporate seals as of the day and year first above written.

Attest:	AMERICAN TELECOM SERVICES INC.
	By:
Name:	Name:	Bruce Hahn
Title:	Title:	Chief Executive Officer
Attest:	CONTINENTAL STOCK TRANSFER & TRUST COMPANY
	By:
Name:	Name:
Title:	Title:

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EX-10.1

Exhibit 10.1

AMERICAN TELECOM SERVICES, INC. 2005

STOCK OPTION PLAN

I. INTRODUCTION

1.1. Purposes. The purposes of the 2005 Stock Option Plan (this “Plan”) of AMERICAN TELECOM SERVICES, INC. (the “Company”), and its subsidiaries (individually a “Subsidiary” and collectively the “Subsidiaries”) are (i) to align the interests of the Company’s stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Company’s growth and success, (ii) to advance the interests of the Company by attracting and retaining officers, other employees, consultants, advisors and well-qualified persons who are not officers or employees of the Company for service as directors of the Company, and (iii) to motivate such persons to act in the long-term best interests of the Company’s stockholders. For purposes of this Plan, references to employment by the Company shall also mean employment by a Subsidiary and, in the case of a consultant or advisor who is not an employee, the rendering of services to the Company or a Subsidiary.

1.2. Administration. This Plan shall be administered either by the Board of Directors of the Company (the “Board”) or by a committee (the “Committee”) designated by the Board consisting of two or more members of the Board each of whom shall be a “Non-Employee Director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (if the Board wishes to qualify awards under the Plan as qualified performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”)) an “outside director” within the meaning of Section 162(m) of the Code. As used herein, the term “Committee” shall mean the Board if no such committee is designated, and shall mean such committee during such times as it is so designated.

The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan and shall determine the type of award and the number of shares of Common Stock subject to each award granted hereunder, the exercise price of each option award, the time and conditions of vesting or exercisability of each award and all other terms and conditions of each award, including, without limitation, the form of the written award agreement between the Company and the recipient that evidences each award and sets forth the terms and conditions of such award (the “Agreement”). The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish such rules and regulations it deems necessary or desirable for the administration of this Plan and may impose, incidental to the grant of an award, conditions with respect to the grant, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be final, binding and conclusive. The Committee may, in its sole discretion and for any reason at any time, subject to the requirements imposed under Section 162(m) of the Code and regulations promulgated thereunder in the case of an award intended to be qualified performance-based compensation, take action such that any or all outstanding awards shall become vested or exercisable in part or in full.

The Committee may delegate some or all of its power and authority hereunder to the Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority with regard to the selection for participation in this Plan of an officer or other person subject to

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Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award grant to such an officer or other person.

No member of the Board of Directors or the Committee, and neither the Chief Executive Officer nor other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board of Directors and the Committee and the Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law and under any directors’ and officers’ liability insurance that may be in effect from time to time.

A majority of the Committee shall constitute a quorum. The acts of the Committee shall be either (i) acts of a majority the members of the Committee present at any meeting at which a quorum is present or (ii) acts approved in writing by all of the members of the Committee without a meeting.

1.3. Eligibility. Participants in this Plan shall consist of such officers, other employees, consultants and advisors of the Company and its Subsidiaries from time to time as the Committee in its sole discretion may select from time to time. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Non-employee directors of the Company shall be eligible to participate in this Plan in accordance with Articles III and IV.

1.4. Shares Available. Subject to adjustment as provided in Section 5.7, 600,000 shares of the common stock, par value $0.001 per share, of the Company (“Common Stock”), shall be available for issuance pursuant to grants of awards under this Plan. To the extent that shares of Common Stock subject to an outstanding award are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award, then such shares of Common Stock shall again be available under this Plan. If any shares of Common Stock subject to an award granted hereunder are withheld or applied as payment in connection with the exercise of an award or the withholding or payment of taxes related thereto (“Returned Shares”), such Returned Shares, shall again be available for under this Plan.

Shares of Common Stock shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof.

1.5. Section 162(m) Compliance. To the extent the Committee intends to grant a qualified performance-based award, this Section 1.5 shall apply. Each award that is intended to be qualified performance-based compensation and is granted to a person the Committee believes likely to be a covered employee (as defined in Section 162(m)(3) of the Code) shall comply with the requirements of the performance-based compensation exception from the tax deductibility limitations of Code Section 162(m) contained in Code Section 162(m)(4)(C) and the regulations issued thereunder. Notwithstanding the foregoing, to the extent Code Section 162(m) requires periodic shareholder approval of performance measures, such approval shall not be required for the continuation of this Plan or as a condition to grant any award hereunder after such approval is

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required. The performance measures for awards other than stock options are specified in Section 3.1(c).

Except as otherwise provided in Article IV, no person may be granted awards for options and/or performance vested stock in any calendar year with respect to more than             shares of Common Stock; provided, however, that these awards shall be subject to adjustment as provided in Section 5.7 or 5.8.

II. STOCK OPTIONS

2.1. Grants of Stock Options. The Committee may, in its discretion, grant options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. Each option, or portion thereof, that is not an incentive stock option, shall be a non-qualified stock option. An incentive stock option shall mean an option to purchase shares of Common Stock that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an incentive stock option. Each incentive stock option shall be granted within ten years of the effective date of this Plan. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which options designated as incentive stock options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any Subsidiary as defined in Section 424 of the Code) exceeds the amount (currently $100,000) established by the Code, such options shall constitute non-qualified stock options. “Fair Market Value” shall mean the closing transaction price of a share of Common Stock as reported in the NASDAQ National Market System, or other exchange where the Common Stock is listed, on the date as of which such value is being determined or, if there shall be no reported transactions on such date, on the next preceding date for which transactions were reported; provided that if Fair Market Value for any date cannot be determined as above provided, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate.

2.2. Terms of Stock Options. Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:

(a) Number of Shares and Purchase Price. The number of shares of Common Stock subject to an option and the purchase price per share of Common Stock purchasable upon exercise of the option shall be determined by the Committee; provided, however, that such purchase price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such option; provided further, that if an incentive stock option shall be granted to any person who, at the time such option is granted, owns capital stock possessing more than ten percent of the total combined voting power of all classes of capital stock of the Company (or of any Subsidiary) (a “Ten Percent Holder”), the purchase price per share of Common Stock shall be the price (currently 110% of Fair Market Value) required by the Code in order to constitute an incentive stock option.

(b) Option Period and Exercisability. The period during which an option may be exercised shall be determined by the Committee; provided, however, that no stock option shall be exercisable later than five years after its date of grant. The Committee may, in its discretion,

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establish performance measures or other criteria which shall satisfied or met as a condition to the grant of an option or to the exercisability of all or a portion of an option. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. An exercisable option, or portion thereof, may be exercised only with respect to whole shares of Common Stock.

(c) Method of Exercise. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanied by payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash, (B) by delivery of previously owned whole shares of Common Stock (which the optionee has held for at least six months prior to the delivery of such shares or which the optionee purchased on the open market and in each case for which the optionee has good title, free and clear of all liens and encumbrances) having an aggregate Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) in cash by a broker-dealer acceptable to the Company to whom the optionee has submitted an irrevocable notice of exercise, or (D) a combination of (A), (B) and (C), in each case to the extent not prohibited by the Agreement relating to the option and (ii) by executing such documents as the Company may reasonably request; provided, however, that notwithstanding the foregoing or anything in the Agreement relating to such option to the contrary, the Company shall have sole discretion to disapprove of an election pursuant to clauses (B)-(D). Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the optionee. No certificate representing Common Stock shall be delivered until the full purchase price therefor has been paid (or arrangement made for such payment to the Company’s satisfaction).

2.3. Termination of Employment.

(a) Total Disability. Unless otherwise specified in the Agreement relating to an option, if an optionee’s employment with the Company terminates by reason of Total Disability, each option held by such optionee shall be exercisable only to the extent that such option is exercisable on the effective date of such optionee’s termination of employment and may thereafter be exercised by such optionee (or such optionee’s legal representative or similar person) until and including the earliest to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option) after the effective date of such optionee’s termination of employment, and (ii) the expiration date of the term of such option. For purposes of this Plan, “Total Disability” shall, with respect to any award recipient who at such time has a written employment agreement with the Company, mean the permanent and total disability of such award recipient as described in such agreement; and otherwise shall mean the inability of such award recipient substantially to perform such award recipient’s duties and responsibilities for a continuous period of six months.

(b) Death. Unless otherwise specified in the Agreement relating to an option, if an optionee’s employment with the Company terminates by reason of death, each option held by such optionee shall be exercisable only to the extent that such option is exercisable on the date of such optionee’s death and may thereafter be exercised by such optionee’s executor, administrator, legal representative, beneficiary or similar person until and including the earliest to occur of (i) the date which is one year (or such other period as set forth in the Agreement

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relating to such option) after the date of death and (ii) the expiration date of the term of such option.

(c) Other Termination by Optionee. Unless otherwise specified in the Agreement relating to an option, if an optionee’s employment with the Company is terminated by the optionee for any reason other than Total Disability or death, each option held by such optionee shall be exercisable only to the extent that such option is exercisable on the effective date of such optionee’s termination of employment and may thereafter be exercised by such optionee (or such optionee’s legal representative or similar person) until and including the earliest to occur of (i) the date which is 90 days (or such other period as set forth in the Agreement relating to such option) after the effective date of such optionee’s termination of employment, and (ii) the expiration date of the term of such option.

(d) Termination by Company for Cause. Unless otherwise specified in the Agreement relating to an option, if an optionee’s employment is terminated by the Company for Cause, each option held by such optionee shall terminate automatically on the date of such termination. For purposes of this Plan, “Cause” shall, with respect to any award recipient who at such time has a written employment agreement with the Company, have the meaning ascribed thereto in such agreement, but shall not include termination by reason of an award recipient’s Total Disability notwithstanding any language to the contrary in such employment agreement; and otherwise shall mean the willful and continued failure to substantially perform the duties with the Company (other than a failure resulting from the award recipient’s Total Disability), the willful engaging in conduct which is demonstrably injurious to the Company or any Subsidiary, monetarily or otherwise, including conduct that, in the reasonable judgment of the Company, does not conform to the standard of the Company’s executives, any act of dishonesty, commission of a felony or a significant violation of any statutory or common law duty of loyalty to the Company.

(e) Termination by Company Without Cause. Unless otherwise specified in the Agreement relating to an option, if an optionee’s employment with the Company is terminated by the Company without Cause, each option held by such optionee shall be exercisable only to the extent that such option is exercisable on the effective date of such optionee’s termination of employment and may thereafter be exercised by such optionee (or such optionee’s legal representative or similar person) until and including the earliest to occur of (i) the date which is 90 days (or such other period as set forth in the Agreement relating to such option) after the effective date of such optionee’s termination of employment, and (ii) the expiration date of the term of such option; provided, however, that if the optionee’s employment with the Company is terminated by the Company without Cause within the nine-month period following the consummation of a Transaction (as defined in Section 5.8(a)), each option held by such optionee shall become fully exercisable, and may thereafter be exercised by such holder (or such holder’s legal representative or similar person) until and including the earliest to occur of (i) the date which is 90 days after the effective date of such optionee’s termination of employment and (ii) the expiration date of the term of such option; provided further, that if the optionee’s employment with the Company is terminated by the Company without Cause at any other time, the Committee may, in its sole and absolute discretion, provide that each option held by such optionee shall become fully exercisable and may thereafter be exercised by such holder (or such holder’s legal representative or similar person) until and including the earliest to occur

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of (i) the date which is 90 days after the effective date of such optionee’s termination of employment and (ii) the expiration date of the term of such option.

(f) Death Following Termination of Employment. Unless otherwise specified in the Agreement relating to an option, if an optionee dies during the period set forth in Section 2.3(a) following termination of employment by reason of Total Disability, or if an optionee dies during the period set forth in Section 2.3(c) or 2.3(e) following termination of employment by the optionee for any reason other than Total Disability or death or termination by the Company without Cause, each option held by such optionee shall be exercisable only to the extent that such option is exercisable on the date of such optionee’s death and may thereafter be exercised by such optionee’s executor, administrator, legal representative, beneficiary or similar person, as the case may be, until and including the earliest to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option) after the date of death and (ii) the expiration date of the term of such option.

III. PERFORMANCE VESTED STOCK

3.1. Grants of Performance Vested Stock. The Committee may, in its discretion, grant performance Vested stock awards with respect to shares of Common Stock to such non-employee directors, officers, consultants and advisors as may be selected by the Committee. Such awards may at the discretion of the Committee be either current grants of shares of Common Stock or deferred grants of Common Stock. A current grant is an award of shares of Common Stock, which are subject to a substantial risk of forfeiture if the vesting conditions are not met. A deferred grant is an award, which provides that shares of Common Stock will be issued in the future if the vesting conditions are met.

3.2. Terms of Performance Vested Stock Awards. Performance Vested stock awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:

(a) Number of Shares. The number of shares of Common Stock subject to a performance vested stock award shall be determined by the Committee, subject to the limitations in Section 1.5.

(b) Restriction Period. The period during which the transfer of shares of Common Stock subject to a performance vested stock award are limited in some way, and are subject to a substantial risk of forfeiture.

(c) Performance Vesting Measures and Targets. The performance measures and targets which shall be satisfied or met as a condition to the accelerated vesting of a performance vested stock award shall be determined by the Committee. The performance measures shall be chosen from among the following business criteria, or such other business criteria as the Committee deems appropriate:

(i) earnings before interest, taxes, depreciation and amortization (“EBITDA”);

(ii) consolidated pre-tax earnings;

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(iii) revenues;

(iv) net earnings;

(v) operating income;

(vi) earnings before interest and taxes;

(vii) cash flow measures;

(viii) return on equity;

(ix) return on net assets employed;

(x) earnings per share;

(xi) net income excluding special or non-recurring items;

(xii) total shareholder return; and

(xiii) operating margin.

The Committee shall have the discretion to change such performance measures, to establish the performance targets applicable to such performance measures on a grant-by-grant basis and to adjust the determinations of the degree of attainment of preestablished performance targets.

(d) Voting Rights. Except as otherwise provided in the Agreement relating to a performance vested stock award, the recipient of a current performance vested stock award granted hereunder shall have the right to exercise full voting rights with respect to the shares of Common Stock subject to such performance vested stock award during the period of restriction.

(e) Dividends and Other Distributions. Except as otherwise provided in the Agreement relating to a performance vested stock award, during the period of restriction, the recipient of a current performance vested stock award granted hereunder shall be credited with regular cash dividends paid with respect to the underlying shares of Common Stock subject to such performance vested stock award. The Committee may apply any restrictions to the dividends that the Committee deems appropriate.

3.3. Termination of Employment

(a) Disability, Death and Termination Without Cause. Except to the extent otherwise set forth in the Agreement relating to a performance vested stock award, if the employment of the recipient of a performance vested stock award or his or her service as a consultant or advisor terminates by reason of Total Disability, death or termination by the Company without Cause, the period of restriction shall terminate as of the effective date of such recipient’s termination of employment or service, and any applicable performance measures shall be computed through such date.

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(b) Other Termination. Except to the extent otherwise set forth in the Agreement relating to a performance vested stock award, if the recipient’s employment with the Company or service as a consultant or advisor terminates for any reason other than Total Disability, death or involuntary termination without Cause, the portion of such award which is subject to a period of restriction on the effective date of such recipient’s termination of employment or service shall be forfeited to and canceled by the Company.

IV. QUARTERLY OPTION GRANTS TO NON-EMPLOYEE DIRECTORS

4.1. Eligibility. Each member of the Board of Directors of the Company who is not an employee, either full-time or part-time, of the Company or any Subsidiary (a “non-employee director”) shall be granted options to purchase shares of Common Stock in accordance with this Article IV. All options granted under this Article IV shall constitute non-qualified stock options.

4.2. Grants of Stock Options. Each non-employee director shall be granted non-qualified stock options as follows:

(a) Upon consummation of the Company’s initial public offering (the “IPO Date”), each person who is a non-employee director on such date shall be granted an option to purchase 15,000 shares of Common Stock at a purchase price per share of the greater of $5.05 or the Fair Market Value of a share of Common Stock on the date of grant of such options.

(b) Time of Grant. Commencing on April 1, 2006 (or, if later, on the date on which a person is first elected or begins to serve as a non-employee director other than by reason of termination of employment with the Company or any Subsidiary), and, in each successive quarter thereafter, each person who is a non-employee director on such date shall be granted an option to purchase 5,000 shares of Common Stock (which amount shall be pro-rated if such person is first elected or begins to serve as a non-employee director on a date other than the dates set forth above) at a purchase price per share equal to the Fair Market Value of the Common Stock on the date of grant of such option.

(c) Option Period and Exercisability. Each option granted under this Article IV shall be fully exercisable on and after its date of grant. Each option granted under this Article IV shall expire five years after its date of grant. An exercisable option, or portion thereof, may be exercised in whole or in part only with respect to whole shares of Common Stock. Options granted under this Article IV shall be exercisable in accordance with this Section 4.2(b) and Section 4.2(c), as applicable.

(d) Termination of Directorship.

(i) Total Disability. Unless otherwise specified in the Agreement relating to an option, if a non-employee director’s directorship with the Company terminates by reason of Total Disability, each option held by such non-employee director shall be exercisable only to the extent that such option is exercisable on the effective date of such non-employee director’s termination of directorship and may thereafter be exercised by such non-employee director (or such non-employee director’s legal representative or similar person) until and including the earliest to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option) after the effective date of such non-

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employee director’s termination of directorship and (ii) the expiration date of the term of such option. For purposes of this Plan, “Total Disability” of a non-employee director shall mean the inability of such non-employee director substantially to perform such non-employee director’s duties and responsibilities as a director for a continuous period of six months.

(ii) Death. Unless otherwise specified in the Agreement relating to an option, if a non-employee director’s directorship with the Company terminates by reason of death, each option held by such non-employee director shall be exercisable only to the extent that such option is exercisable on the date of such non-employee director’s death and may thereafter be exercised by such non-employee director’s executor, administrator, legal representative, beneficiary or similar person until and including the earliest to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option) after the date of death and (ii) the expiration date of the term of such option.

(iii) Other Termination by Non-Employee Director. Unless otherwise specified in the Agreement relating to an option, if a non-employee director’s directorship with the Company is terminated by the non-employee director for any reason other than Total Disability or death, each option held by such non-employee director shall be exercisable only to the extent that such option is exercisable on the effective date of such non-employee director’s termination of directorship and may thereafter be exercised by such non-employee director (or such non-employee director’s legal representative or similar person) until and including the earliest to occur of (i) the date which is 90 days (or such other period as set forth in the Agreement relating to such option) after the effective date of such non-employee director’s termination of directorship and (ii) the expiration date of the term of such option.

(iv) Termination for Cause. Unless otherwise specified in the Agreement relating to an option granted to a non-employee director, if the non-employee director is removed from the Board of Directors for Cause, such option shall terminate automatically on the date of such termination.

(v) Termination by Company Without Cause. Unless otherwise specified in the Agreement relating to an option, if a non-employee director’s directorship with the Company is terminated by the Company without Cause, each option held by such non-employee director shall be exercisable only to the extent that such option is exercisable on the effective date of such non-employee director’s termination of directorship and may thereafter be exercised by such non-employee director (or such non-employee director’s legal representative or similar person) until and including the earliest to occur of (i) the date which is 90 days (or such other period as set forth in the Agreement relating to such option) after the effective date of such non-employee director’s termination of directorship and (ii) the expiration date of the term of such option.

(vi) Death Following Termination. Unless otherwise specified in the Agreement relating to an option, if a non-employee director dies during the period

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set forth in Section 4.2(c)(i) following termination of directorship by reason of Total Disability, or if a non-employee director dies during the period set forth in Section 4.2(c)(iii) or 4.2(c)(v) following termination of directorship by the non-employee director for any reason other than Total Disability or death or termination of directorship by the Company without Cause, each option held by such non-employee director shall be exercisable only to the extent that such option is exercisable on the date of such non-employee director’s death and may thereafter be exercised by such non-employee director’s executor, administrator, legal representative, beneficiary or similar person, as the case may be, until and including the earliest to occur of (i) the date which is one year (or such other period as set forth in the Agreement relating to such option) after the date of death and (ii) the expiration date of the term of such option.

V. GENERAL

5.1. Effective Date and Term of Plan. This Plan became effective as of September             , 2005, the date of approval of this Plan by the Board of Directors. This Plan shall terminate ten years after its effective date, unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination.

5.2. Amendments.

(a) The Board may amend this Plan as it shall deem advisable, subject to any requirement of stockholder approval required by applicable law, rule or regulation; provided, however, that no amendment shall be made without stockholder approval if such amendment would (a) increase the maximum number of shares of Common Stock available under this Plan (subject to Section 5.7), or (b) extend the term of this Plan. No amendment may impair the rights of a recipient of an outstanding award without the consent of such recipient or, in the case of an outstanding incentive stock option, effect any change inconsistent with Section 422 of the Code; provided further, that the terms of Article IV (pertaining to grants to non-employee directors) shall not be amended more than once every six months, other than to comply with changes required by applicable law, rules or regulations or changes required to retain or obtain favorable tax treatment under the Code, or the rules and regulations thereunder. Without the prior approval of the stockholders of the Company, except as provided in Section 5.7 or 5.8 hereof, no option issued under this Plan shall be repriced or regranted at a lower option price or replaced by an option with a lower option price.

5.3. Agreement. No award shall be valid until an Agreement is executed by the Company and the award recipient and, upon execution by the Company and the award recipient and delivery of the Agreement to the Company, such award shall be effective as of the effective date set forth in the Agreement.

5.4. Non-Transferability.

(a) Except as provided in subsection (b) below,, no award hereunder shall be transferable other than (i) by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or (ii) pursuant to a binding domestic relations order. . Except to the extent permitted by the foregoing sentence, each option

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may be exercised during the optionee’s lifetime only by the optionee or the optionee’s legal representative or similar person. Except as permitted by the second preceding sentence, no award hereunder shall be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any award hereunder, such award and all rights thereunder shall immediately become null and void.

(b) Notwithstanding subsection (a) above, to the extent provided in the Agreement or otherwise permitted by the Committee, an award may be transferred, without consideration, to a Permitted Transferee. For this purpose, a “Permitted Transferee” in respect of any grantee of an award means any member of the Immediate Family (as defined below) of such grantee, any trust of which all of the primary beneficiaries are such grantee or members of his or her Immediate Family, or any partnership (including limited liability companies and similar entities) of which all of the partners or members are such grantee or members of his or her Immediate Family; and the “Immediate Family” of a grantee means the grantee’s spouse, children, stepchildren, grandchildren, parents, stepparents, siblings, grandparents, nieces and nephews or the spouse of any of the foregoing individuals. Such award may be exercised by such transferee in accordance with the terms of such award.

5.5. Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock, payment by the award recipient of any Federal, state, local or other taxes which may be required to be withheld or paid in connection with an award hereunder. Unless otherwise provided in an Agreement relating to an award, (i) the recipient may elect that the Company shall withhold whole shares of Common Stock which would otherwise be delivered upon exercise or vesting of the award having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with the award (the “Tax Date”) in the minimum statutory amount necessary to satisfy any such obligation or (ii) the recipient may satisfy any such obligation by any of the following means: (A) a cash payment to the Company, (B) delivery to the Company of previously owned whole shares of Common Stock (which the recipient has held for at least six months prior to the delivery of such shares or which the recipient purchased on the open market and in each case for which the recipient has good title, free and clear of all liens and encumbrances) having an aggregate Fair Market Value determined as of the Tax Date, equal to the minimum statutory amount necessary to satisfy any such obligation, (C) a cash payment by a broker-dealer acceptable to the Company to whom the recipient of an option has submitted an irrevocable notice of exercise, or (D) any combination of (A), (B) and (C), in each case to the extent not prohibited by the Agreement relating to the award. Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the recipient; provided, however, that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (i) or (ii)(B)-(D) and that in the case of a recipient who is subject to Section 16 of the Exchange Act, the Company may require that the method of satisfying any such obligation be in compliance with Section 16 and the rules and regulations thereunder. Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the recipient.

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5.6. Restrictions on Shares. Each award hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any award hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.

5.7. Adjustment. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a regular cash dividend, the number and class of securities available under this Plan, the limitation on award grants set forth in Sections 1.4 and 1.5, the number and class of securities for which options are to be granted to non-employee directors pursuant to Article IV, the number and class of securities subject to each outstanding award and the purchase price per security subject to an option shall be appropriately adjusted by the Committee. In the case of an adjustments to outstanding options pursuant to this Section 5.7 (i) such adjustments shall not result in an increase in the aggregate purchase price of such options and (ii) the ratio of the purchase price of the securities subject to such options to the Fair Market Value of the securities subject to such options immediately after such adjustment shall be no greater than the ratio of the purchase price of the Common Stock subject to such options to the Fair Market Value of the Common Stock immediately prior to such adjustment. The decision of the Committee regarding any such adjustment shall be final and binding. If any adjustment would result in a fractional security being (a) available under this Plan, such fractional security shall be disregarded, or (b) subject to an option under this Plan, the Company shall pay the recipient, in connection with the first exercise of the option in whole or in part occurring after such adjustment, an amount in cash determined by multiplying (A) the fraction of such security (rounded to the nearest hundredth) by (B) the excess, if any, of (x) the Fair Market Value on the exercise date over (y) the exercise price of the option.

5.8. Effect of Certain Transactions.

(a) In the event that the Company enters into an agreement (a) to dispose of all or substantially all of its assets, in contemplation of the distribution of the net proceeds of such sale to the Company’s shareholders, or (b) to consummate a merger or consolidation in which the Company is not the surviving or resulting corporation, or in the event the persons who, as of the date of the adoption of this Plan by the Board of Directors, hold 60% or more of the outstanding capital stock of the Company enter into an agreement to sell all of such stock (such distribution, merger, consolidation or sale being hereinafter referred to as a “Transaction”), then (unless otherwise specified in the Agreement relating to an option), the Committee shall provide, at its election made in its sole and absolute discretion, for one or more of the following: (i) for each outstanding award, whether or not then vested or exercisable, to be replaced with a comparable award with respect to shares of capital stock of a successor or purchasing

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corporation or parent thereof (in the manner described in Section 5.7), or (ii) for each outstanding award, whether or not then vested or exercisable, to be assumed by a successor or purchasing corporation or parent thereof (and, in the event of such assumption, each outstanding award shall continue to be vested or exercisable, on the terms and subject to the conditions set forth in, and in cumulative amounts at the times provided in, the Agreement relating to such award but shall, from and after the consummation of such Transaction, be with respect to the capital stock, cash and/or other property received by the common stockholders of the Company in such Transaction in an amount equal to what the recipient of such award would have received had the award vested or been exercised immediately prior to the consummation of such Transaction), or (iii) for each outstanding award, whether or not then vested or exercisable, to become vested or exercisable during such period prior to the scheduled consummation of such Transaction as may be specified by the Committee; provided, however, that such elections of the Committee shall apply identically, by their terms, to all recipients of awards granted under this Plan (unless otherwise required by an Agreement). In the event the Committee elects to cause the options not then otherwise exercisable to become exercisable prior to such Transaction (an “Accelerated Option”), any exercise of an Accelerated Option shall be conditioned upon, and shall be effective only concurrently with, the consummation of such Transaction; and if such Transaction is not consummated, the exercise of such Accelerated Options shall be of no further force or effect (and an optionee may elect, with respect to the exercise during such period of an option that was otherwise exercisable, to so condition such exercise upon the consummation of the Transaction). All options not exercised prior to the consummation of such Transaction (and which are not being assumed by a successor or purchasing corporation or parent thereof) shall terminate and be of no further force or effect as of the consummation of such Transaction.

(b) With respect to any optionee who is subject to Section 16 of the Exchange Act, (i) notwithstanding the exercise periods set forth in Section 2.3 and 4.2(c), or as set forth pursuant to such Section in any Agreement to which such optionee is a party, and (ii) notwithstanding the expiration date of the term of such option, in the event the Company is involved in a business combination pursuant to which such optionee receives a substitute option with respect to securities of any entity, including an entity directly or indirectly acquiring the Company, then each outstanding option held by such optionee immediately prior to such Transaction (or any option in substitution thereof) shall be exercisable to the extent set forth in the Agreement evidencing such option until and including the latest of (x) the date set forth pursuant to the then applicable paragraph of Section 2.3, 4.2 (c) or the expiration date of the term of the option, as the case may be, and (y) the date which is six months and one day after the consummation of such business combination.

5.9. No Right of Participation or Employment. No person shall have any right to participate in this Plan. Neither this Plan nor any award granted hereunder shall confer upon any person any right to continued employment by the Company, any Subsidiary or any affiliate of the Company or affect in any manner the right of the Company, any Subsidiary or any affiliate of the Company to terminate the employment of any person at any time without liability hereunder.

5.10. Rights as Stockholder. No person shall have any rights as a stockholder of the Company with respect to any shares of Common Stock which are subject to an award hereunder until such person becomes a stockholder of record with respect to such shares of Common Stock.

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5.11. Designation of Beneficiary. If permitted by the Company, an award recipient may file with the Committee a written designation of one or more persons as such recipient’s beneficiary or beneficiaries (both primary and contingent) in the event of the recipient’s death. To the extent an outstanding option granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option.

Each beneficiary designation shall become effective only when filed in writing with the Committee during the recipient’s lifetime on a form prescribed by the Committee. The spouse of a married recipient domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Committee of a new beneficiary designation shall cancel all previously filed beneficiary designations.

If an optionee fails to designate a beneficiary, or if all designated beneficiaries of an optionee predecease the optionee, then each outstanding option hereunder held by such optionee, to the extent exercisable, may be exercised by such optionee’s executor, administrator, legal representative or similar person.

5.12. Governing Law. This Plan, each award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.

5.13. Foreign Employees. Without amending this Plan, the Committee may grant awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.

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EX-10.4

Exhibit 10.4

IDT Puerto Rico & Co. 5108 Ganges Street, El Paraiso Industrial Park, Rio Piedras, Puerto Rico 00926 P (787) 620-0440 F (787) 620-0431

CONFIDENTIAL

November 26, 2003

Mr. Yu Wen Ching

American Telecom Services Corporation

1191 Huntington Drive, Suite 311

Duarte, CA 91010-2400

Re: Letter Agreement

Our Reference# 15995:

Dear Mr. Yu:

This Letter Agreement (“Agreement”), effective as of the date executed by the last to sign of the parties (“Effective Date”), between IDT Puerto Rico & Co. (“IDT”), a Puerto Rico corporation, located at Ganges Plaza, 108 Ganges Street, El Paraiso Industrial Park, Rio Piedras, Puerto Rico 00926, and American Telecom Services Corporation a Delaware corporation (“Customer”) located at 1191 Huntington Drive, Suite 311, Duarte CA 91010-2400 memorializes the obligations of the parties in connection with cordless landline telephone sets including a pre-programmed prepaid residential service account button (“Telephones”) provided by Customer. IDT, through one or more of its Affiliates, provides long distance telecommunication and debit platform services, customer services and wholesale minutes (“Services”) to support prepaid long distance telecommunication services accounts (“Account” or “Accounts”). Customer desires to purchase Accounts from IDT with such Services. The Telephones shall be linked to the Services through a programmed key on the Telephone sets. The Telephones shall be distributed to Customer’s retail outlets and subsequent resale to consumers (“End Users”). The term “Affiliate” means an entity controlling, controlled by, or under common control with the specified Party, with control meaning (a) owning directly or indirectly more than 50% of the outstanding voting equity interests of an entity or (b) having the right directly or indirectly to appoint a majority of members of the board or other body which directs the management and policies of an entity.

1. CUSTOMER OBLIGATIONS.

(a) Upon execution of this Agreement, Customer will use commercially reasonable efforts to provide the product functionality for the Telephones as set forth in the attached Exhibit D. Subject to Section 5 below, Customer further agrees to design the packaging for the Telephones combined with the Accounts provided by IDT as mutually agreed upon by the parties. Customer acknowledges that the Accounts and any retail packaging or materials relating to the same shall include information necessary to comply with FCC regulations as mutually agreed upon by the parties and provided for by IDT.

(b) Customer agrees to provide all End User customer and technical support relating to the Telephones and any related hardware functionality.

IDT Legal Forms; Letter Agreement

Letter to Mr. Yu

November 26, 2003

Page 2 of 11

(c) Customer shall specify, in writing from time to time, to IDT (the “Account Order”) the aggregate number of initial Accounts to be produced by IDT, the denominations of the Accounts, the number of each such denomination to be produced by account value, and Customer’s production centers to which IDT shall deliver the Accounts to be packaged with the Telephone sets.

(d) If at the point of termination of the Agreement under Section 12 or 13 below, the number of Accounts unactivated is more than [Subject to a request for confidential treatment; Separately filed with the Commission] Accounts, then for all Accounts above [Subject to a request for confidential treatment; Separately filed with the Commission] the charge shall be [Subject to a request for confidential treatment; Separately filed with the Commission] per Account up to a maximum charge of [Subject to a request for confidential treatment; Separately filed with the Commission].

(e) Customer will reimburse IDT for active Accounts lost due to theft, loss or other casualty occurring following delivery of the Accounts to Customer based on the wholesale value of the Promotional Minutes. Upon notification of Accounts being stolen, IDT shall terminate the account and. any unused value in the Account will not be billed to Customer.

(f) Customer will use commercially reasonable efforts to resolve all End User disputes regarding Telephones within a commercially reasonable amount of time.

2. IDT OBLIGATIONS.

(a) During the term and subject to the terms and conditions contained herein, IDT agrees to provide Customer with the functionality as described in the technical requirements schedule at Exhibit D, which is executed and delivered by the Parties (the “Technical Requirements”). Customer or IDT may deem it necessary or appropriate from time to time to add other functionality, reduce, or change the scope of IDT’s responsibilities (a “Service Change”). Either Party may make a proposal for a Service Change, whereupon the Parties shall mutually evaluate feasibility, manner and timing for implementation, impact on pricing, impact on performance requirements and all other relevant matters. A Service Change shall not be implemented unless and until the Service Change is approved by both Parties. If the Service Change is approved by the Parties, the Service Change shall be implemented by IDT within a timeframe mutually agreed upon by the parties. An approved Service Change shall be set forth in a written amendment to the applicable Technical Requirements, which amendment shall be signed by authorized representatives of the Parties.

(b) In compliance with regulatory requirements, IDT will provide End Users with notice that Services are being provided by IDT, as follows: “Services provided by IDT” or “Service powered by IDT,” at IDT’s discretion.

(c) IDT will use commercially reasonable efforts to resolve all End User disputes regarding Services within a commercially reasonable amount of time.

(d) Subject to FCC and other applicable regulations and compliance with Customer notice and consent requirements, IDT agrees to use commercially reasonable efforts to provide Customer with End User information. Neither party shall market additional products or services to the End Users using the information collected from End Users, as set forth in the Technical Requirements under this Agreement, without the prior written agreement of the other party.

Letter to Mr. Yu

November 26, 2003

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3. REPORTS. IDT shall provide to Customer the reports described in the Technical Requirements at the frequencies provided therein. In addition, from time to time, Customer may identify additional reports to be generated by IDT and delivered to Customer on an ad hoc or periodic basis. To the extent IDT must dedicate significant labor or resources to the preparation of additional reports that can only be manually generated or to the implementation of system changes to permit such reports to be electronically generated (other than those set forth in the Technical Requirements), Customer shall reimburse IDT at IDT’s standard time and material rates for costs incurred by IDT in connection therewith.

4. DEACTIVATION. IDT reserves the right to terminate Services to any Account if it determines, in its sole discretion, that End-Users of such Accounts are actually or allegedly engaged in activities that are illegal, fraudulent or wrongful or which may be harmful to IDT in any way. Customer will be entitled to a refund for the value of the unused portion of any such terminated Accounts. Customer shall receive a monthly report of all such deactivated Accounts, as set forth in the Technical Requirements.

5. MARKETING AND DISTRIBUTION. Customer will use its best efforts to promote, market and distribute the Services in conjunction with Customer’s Telephones under this Agreement. Customer shall have discretion to decide the methods and channels used to market, promote and distribute the Services. Nothing herein shall limit Customers right to promote, market and distribute other Telephones that are not bundled with the Services provided by IDT. Customer shall be solely responsible for any expenses associated with marketing and distributing the Accounts and shall submit all promotional, marketing, inserts at Exhibit B and advertising materials (“Materials”) to IDT for review and approval prior to any use or dissemination. IDT will review and respond to approval requests on Materials in writing within a reasonable period of time, not to exceed five (5) business days, and will provide the reasons for any rejection. Without limiting the foregoing, IDT shall have the right to approve or reject any marketing or promotional initiatives that require a financial contribution from IDT. Customer acknowledges that the provision of Services by IDT is regulated by the Federal Communications Commission and applicable state regulatory commissions (“Regulatory Authorities”). Any such materials used or disseminated by Customer must comply with IDT’s tariffs filed with such Regulatory Authorities, all regulations promulgated by such Regulatory Authorities and any other applicable laws or regulations. IDT agrees to provide Customer with all disclosures required by Regulatory Authorities that are to be included with the Telephones in a timeframe sufficient to permit Customer to include the disclosures with the Telephones.

6. EXCLUSIVITY. IDT agrees that during the Term of this Agreement, IDT will sell Services for use with cordless landline phones in retail outlets where the Customer has received a purchase order or has a pending agreement for the distribution of the Services in conjunction with the Telephones only in cooperation with Customer. Subject to the above limitation, IDT reserves the right to sell Services to a competitor of Customer provided that IDT does not create its own brand for such purposes.

9. RATES. For each Prepaid Calling Minute used by an End User, IDT shall deduct from such End User’s account a flat fee per minute of Service used (the “Flat Fee”).

Letter to Mr. Yu

November 26, 2003

Page 4 of 11

(a) For domestic calls originating within the Continental United States and terminating anywhere within the Continental United States, the Flat Fee shall be $.039 per Prepaid Calling Minute, exclusive of any payphone surcharge and any charge for calls made by End Users from other than their home telephone number. Other than the Flat Fee, and unless otherwise agreed to by the parties, no additional charges, costs or fees of any type may be levied or charged on the Service, including, but not limited to, federal, state or local taxes or fees, shall be charged to the End User or Customer (all state, federal and local taxes or fees are included in the Flat Fee and any such obligations shall the responsibility of IDT).

(b) For international calls originating in the United States and terminating outside the United States, the Flat Fee per minute shall be determined according to the destination called, as set forth on Exhibit C hereto. The Parties may change said international rates on mutual agreement from time to time. Recognizing that the international rates may fluctuate due to factors beyond the parties’ control, Customer agrees that IDT may from time to time submit notice of proportionate changes to the international rates set forth in Exhibit C with explanation in writing to Customer and may only change such rates when IDT corporate-wide cost change dictates that such change must be made. IDT must immediately notify Customer in writing of all changes affecting the 25 highest traffic volume countries. Rates for other jurisdictions shall be as set forth at Exhibit C. Other than the Flat Fee for international calls, and unless otherwise agreed to by the parties, no additional charges, costs or fees of any type which may be levied or charged on the Service, including, but no limited to, federal, stat or local taxes or fees, shall be charged to the End User or Customer (all state, federal and local taxes are included in the Flat Fee and any such obligations shall be the responsibility of IDT).

10. FEES AND INVOICING.

(a) Upon activation by an End User, Customer agrees to pay IDT a sum equal to [Subject to a request for confidential treatment; Separately filed with the Commission] of the total value of minutes made available to an End User (“Promotional Minutes”). IDT will invoice Customer for Promotional Minutes every two (2) weeks for the initial value of the activated Accounts, less the discount applied. Payment from Customer shall be due within fourteen (14) days from date of invoice (“Due Date”). Invoices will be based upon data collected by IDT relating to number of activated Accounts, and the dollar face value of activated Accounts. All payments shall be made to IDT via wire transfer or, with Customer’s consent, by IDT initiated ACH transfer. Any non-disputed payments not received by the Due Date will bear interest at a rate of one and one-half percent (1 ¹/2 %) per month from the Due Date until paid in full. A deposit (“Deposit”) in an amount to be mutually agreed upon shall be due from Customer before any Accounts are activated. If a payment is not made within fourteen (14) days of the Due Date, then, in addition to any other remedy available to IDT under this Agreement or at law or equity, IDT may deduct or offset the payment amount from the Deposit and Recharge Amount due to Customer, provided that the payment is not the subject of a good faith dispute between the parties. Promotional Minutes shall expire not later than ninety (90) days after first use if the End User does not recharge the Account within that period.

(b) With regard to Accounts that are recharged by End Users (“Recharge Accounts”), IDT shall be responsible for maintaining all billing, collection and transaction records with respect to the End User’s renewal and use of the Service, including, but not limited to, all records with respect to payment by a End User through adding cash value to such End User’s Account. IDT agrees to

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November 26, 2003

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pay Customer [Subject to a request for confidential treatment; Separately filed with the Commission] of the Net Revenues collected from End Users on Recharge Accounts. The term “Net Revenues” means gross revenues less any documented chargebacks, refunds, losses due to fraud and any transaction fees as detailed in the attached Schedule 10(b) incurred by IDT. All payments to Customer on Recharge Accounts shall be made to Customer via wire transfer within seven (7) days of collection from End Users, provided that no such payment shall be made for a sum less than $1,000, in which case the amount shall be accrued in an account earmarked for Customer and paid with the next payment due to Customer.

(c) Each party hereto shall maintain reasonably complete, clear and accurate records of all information required to determine the amounts of any payments or transactions under the Agreement. Each party hereto, upon giving thirty (30) days prior written notice to the other party hereto, and no more than once during any twelve (12) month period, may conduct, at reasonable times during regular business hours and subject to the Confidentiality Obligations of Section 20, and inspection and audit of the portions of such books and records of the other party as is necessary to verify that such payments, including the amounts thereof, have been made in accordance with the terms hereof.

12. TERM. This Agreement shall continue from the date this Agreement was entered into until the second anniversary of the date on which the first Account is activated (“Initial Term”) and shall automatically renew for one (1) year terms unless terminated by either party upon at least thirty (30) days written notice prior to the expiration of the Initial Term or any subsequent term (the Initial Term and any subsequent terms shall collectively be referred to as the “Term”). IDT will be ready to provide Services to support a commercial launch by October 31, 2003.

13. TERMINATION. This Agreement may be terminated prior to its expiration upon the occurrence of any of the following: (a) by either party, if one of the parties shall be declared insolvent or bankrupt; (b) by the non-breaching party, if the other party materially breaches this Agreement which breach is not cured within thirty (30) days of written notice thereof to the breaching party (except for non-payment by Customer, which is addressed in Section 9 hereof); (c) by IDT or Customer, upon a determination by any governmental authority with jurisdiction over the parties that the provision of the Telephones and/or Services under this Agreement in the jurisdictions in which the Telephones are being distributed is contrary to existing laws, rules or regulations; (d) by either party if the functionality required under the Technical Requirements at Exhibit D is impossible or highly impractical, provided that prior to terminating the Agreement pursuant to subsection (c) or (d), the party electing to terminate shall provide written notice to the other party setting forth in reasonable detail the factual basis for such termination and the parties agree in good faith to attempt to create a solution or workaround, or modify the Technical Requirements or the Services to eliminate the requirement creating the basis for such termination in a manner mutually agreeable for a period of no less than ten (10) business days after the receipt of such notice and if such agreement is reached or the factual basis for such termination is otherwise resolved, then the Agreement shall not be terminated. Upon termination of this Agreement for any reason, Customer shall immediately cease production of the Telephones with Service provided by IDT. Should Customer decide, in its sole discretion, to have IDT continue to activate promotional minutes in Inventory, Customer shall provide IDT with a final accounting setting forth the number of units in retail inventory (“Inventory Units”). IDT will continue to support promotional minutes on Inventory Units until all units are sold, provided that Customer shall retain the sum of $50,000 in escrow with an escrow agent mutually agreed upon by the parties to cover the cost of the promotional minutes (less a fifteen percent discount) due and payable to IDT.

Letter to Mr. Yu

November 26, 2003

Page 6 of 11

Subject to Section 2(d), and with the exception of promotional minutes on Inventory Units, Customer and IDT further agree to use commercially reasonable efforts to migrate service on Telephones to another licensed telecommunications provider. IDT will migrate programs by either porting over 800 access if there will be a full migration, or by providing new 800 number for customers calling to recharge. ATS, at its sole cost and expense, shall notify all recharge customers in writing of the change in providers. Notwithstanding anything to the contrary in this Agreement, Customer’s payment obligations under Section 10(a) above shall survive termination until all Inventory Units are sold and IDT is paid in full for promotional minutes. Should Customer decide, in its sole discretion, to have IDT discontinue activation of promotional minutes in Inventory, then Customer shall immediately recall all Inventory Units as of the date of said election and shall agree to indemnify and hold IDT as set forth in Section 19 below.

14. COMMITMENT LEVEL. The Customer agrees that, in aggregate, the Accounts under this Agreement shall yield the following minimum units commitment for the relevant time periods (“Commitment Level”) specified herein:

Milestone	Unit Sold
[Subject to a request for confidential treatment; Separately filed with the Commission]	[Subject to a request for confidential treatment; Separately filed with the Commission]
[Subject to a request for confidential treatment; Separately filed with the Commission]	[Subject to a request for confidential treatment; Separately filed with the Commission]

In the event that the Customer fails to achieve the minimum Commitment Level for the relevant time period, then IDT, at its sole discretion, shall have the right to (i) terminate the Agreement without further obligation or (ii) re-negotiate the Agreement or specific terms (pricing).

15. OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS. IDT shall be the sole and exclusive owner of all right, title and interest in and to all patents, copyrights, trademarks, trade secrets or other proprietary rights (“Intellectual Property Right”) its owns, including those relating to the Services, the prepaid calling card platform (“IDT System”) and all enhancements made thereto as a result of this Agreement and any Technical Requirements. Customer acknowledges that the IDT System constitutes valuable trade secrets of IDT and constitutes Confidential Information under this Agreement. Customer shall be the sole and exclusive owner of all right, title and interest (including, without limitation, all Intellectual Property Rights) in and to the Telephones (“Customer System”). IDT acknowledges that the Customer System constitutes valuable trade secrets of Customer and Confidential Information under this Agreement. Nothing in this Agreement shall be deemed to grant to one party, by implication, estoppel or otherwise, license rights, ownership rights or any other Intellectual Property Rights in any materials owned by the other Party or any affiliate of the other Party. Neither Party shall attempt to register the Intellectual Property Rights of the other Party, or cause any claim, lien or encumbrance to attach to any Intellectual Property Rights of the other Party nor decompile or reverse engineer any proprietary of the other Party. To the extent that Customer

Letter to Mr. Yu

November 26, 2003

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acquires any patent or other Intellectual Property Rights, Customer shall grant to IDT a royalty-free, nonexclusive, nontransferable right and license under any such patent or resulting patent for the term of the Agreement.

16. INSURANCE. Each Party shall obtain and maintain, at its own cost, the insurance coverages that are described on Schedule 16 as being its respective responsibility. These insurance coverages do not create or imply any limitation of liability. The Party which is responsible for obtaining and maintaining certain insurance coverages shall provide the other Party with certificates of such insurance coverages promptly following the date that this Agreement has been executed by both Parties. Each insurance certificate shall provide that the insurance policy shall not be subject to termination without at least thirty (30) days prior written notice to the certificate holder. A Party responsible for obtaining and maintaining property insurance coverage shall use all reasonable efforts to ensure that the policy contains a provision or endorsement which waives the insurance company’s right of subrogation against the other Party and its employees, agents, directors and officers in the event of any loss or damage from events within the coverage of the insurance policy.

17. USE OF MARKS. Any and all trademarks and trade names that IDT uses are and shall remain the exclusive property of IDT. Customer has no rights therein and shall not reproduce or use any corporate names, trademarks, service marks, trade names or logos of IDT (collectively “Marks”) without IDT’s express prior written consent. IDT hereby grants Customer a license to use IDT’s name and logo for the purpose of marketing the Products during the Term or for the period during which IDT provides Services, as contemplated by this Agreement.

18. REPRESENTATIONS & WARRANTIES. Each party represents and warrants that: (a) it is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (b) it has all necessary power and authority to enter into this Agreement and to perform all its obligations hereunder; (c) neither the execution, deliver, or performance of this Agreement will (i) result in the breach of, or constitute a default under, the terms of any material contract to which it is a party or by which it is bound; (ii) violate its charter or by-laws; or (iii) require the consent or approval of any third party; and (d) it will perform its obligations hereunder in compliance with all applicable laws, rules and regulations. Customer further represents and warrants that the Telephones do not infringe any Intellectual Property Rights of any third party. EXCEPT FOR WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT, EACH OF IDT AND CUSTOMER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, TO CUSTOMER OR IDT (AS APPLICABLE), OR TO ANY OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING THE MERCHANTABILITY, SUITABILITY, ORIGINALITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OR OTHERWISE (IRRESPECTIVE OF ANY PREVIOUS COURSE OF DEALINGS BETWEEN THE PARTIES OR CUSTOM OR USAGE OF TRADE), OR RESULTS TO BE DERIVED FROM THE USE OF ANY SOFTWARE, SERVICES, HARDWARE OR OTHER MATERIALS PROVIDED UNDER THIS AGREEMENT.

19. INDEMNIFICATION. Customer shall defend, indemnify and hold IDT at its affiliates harmless from any claims, demands, liabilities, losses, damages, judgments or expenses related thereto arising out of (i) its breach of the terms of this Agreement, (ii) Customer’s marketing or distribution of the Telephones and/or the Services, including, without limitation, claims of fraud, misrepresentation or theft arising there from, (iii) any misconduct on the part of Customer, (iv) Customer’s misuse or unauthorized use of the Marks, (v) the design and packaging of the Telephones, and (vi) any claim by

Letter to Mr. Yu

November 26, 2003

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a third party that the Telephones, or any portion or combination thereof contemplated under this Agreement, infringes any patent, copyright, trademark, trade secret, or other proprietary right of a third party, and (vi) any claim by a third party relating to failure to activate promotional minutes following Termination under Section 13, where Customer has elected to have IDT discontinue service on promotional minutes relating to Inventory Units. In the event IDT acts in good faith in the Customer’s best interest to fulfill the terms of this Agreement in compliance with a request by Customer or to protect Customer from any loss due to fraudulent use, theft of services or harm to Customer’s reputation, Customer shall indemnify and hold IDT harmless from any claims, demands, liabilities, losses, damages, judgments or expenses related thereto. IDT shall defend, indemnify and hold Customer harmless from any claims, demands, liabilities, losses, damages, judgments or expenses related thereto arising out of (i) its breach of the terms of this Agreement, (ii) IDT’s misuse or unauthorized use of the Customer’s Marks, and (iiiv) any claim by a third party that the Services infringe any Intellectual Property Right of a third party.

20. CONFIDENTIALITY. Each of Customer and IDT acknowledges that, in the course of dealings between the parties, it will acquire information about the other party, its business activities and operations, its technical and rate information, of a highly confidential and proprietary nature (“Confidential Information”). Each of Customer and IDT shall hold such Confidential Information in strict confidence and shall not reveal the same for a period of five (5) years after the termination of this Agreement, except for any information which is: generally available to or known to the public; known to such party prior to the negotiations leading to this Agreement; or independently developed by such party outside the scope of this Agreement. Neither party shall be in breach of its confidentiality obligations hereunder if the Confidential Information is disclosed pursuant to a subpoena, judicial or governmental order or requirement, provided that the disclosing party= only makes such disclosure to the extent required and, prior to making such disclosure, takes all reasonable steps to provide prompt and sufficient notice to the other party so that the other party may contest and/or limit such requirement, subpoena or order. Each of Customer and IDT shall safeguard the Confidential Information of the disclosing party to the same extent that it safeguards its own confidential materials or data relating to its own business. Except as provided above, neither Customer nor IDT shall reveal any such Confidential Information without the disclosing party’s express prior written consent. The parties agree that an impending or existing violation of these confidentiality provisions would cause to the disclosing party irreparable injury for which it would have no adequate remedy at law and the disclosing party may be entitled to obtain immediate injunctive relief prohibiting such violation, in addition to any other rights and remedies available to it.

21. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY IN ANY RESPECT FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, RELIANCE OR PUNITIVE DAMAGES, WHETHER IN TORT, CONTRACT OR PRODUCT LIABILITY, NOR SHALL EITHER PARTY BE LIABLE FOR ANY LOSS OF PROFITS, REVENUE, DATA, GOODWILL, BUSINESS OPPORTUNITIES OR ANY OTHER COMMERCIAL DAMAGE OF ANY KIND OR NATURE WHATSOEVER. EXCEPT WITH REGARD TO ANY INTENTIONAL MISCONDUCT BY A PARTY, INDEMNIFICATION OR CONFIDENTIALITY OBLIGATIONS OF EITHER PARTY. IN NO EVENT SHALL THE LIABILITY OF EITHER PARTY WITH RESPECT TO ANY TELEPHONES OR SERVICES PROVIDED HEREUNDER EXCEED THE AGGREGATE AMOUNT PAYABLE UNDER THE TERMS OF THIS AGREEMENT RELATING TO THE SPECIFIC CARDS GIVING RISE TO ANY CLAIM, WHETHER IN CONTRACT, TORT OR OTHER LEGAL THEORY.

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November 26, 2003

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22. APPROVAL. Whenever prior approval or consent is required in this Agreement, the approval or consent shall be memorialized in writing.

23. PUBLICITY. Neither party, without the prior written consent of the other party, will make any news release or other public statement or disclosure regarding the existence of the terms and conditions of all or any part of this Agreement or any discussions or negotiations relating thereto, except as may be required by applicable securities laws, but only upon reasonable advance notice to, and consultation with, the other party.

24. FORCE MAJEURE. IDT shall not be liable or deemed to be in default for any delay or failure in performance under this Agreement or interruption of Services resulting, directly or indirectly, from any cause beyond its reasonable control. Neither Party shall be liable to the other Party or be deemed to be in breach of this Agreement (other than Customer’s obligation to pay Charges owed IDT pursuant to this Agreement) by reason of any Excusable Delay. A Party experiencing an Excusable Delay in its performance shall immediately notify the other Party by telephone (to be confirmed in writing within three days after the inception of the Excusable Delay) and shall describe in reasonable detail the circumstances causing such Excusable Delay. The Party experiencing Excusable Delay shall be excused from performance of such obligations so affected by the Excusable Delay event for the period during which the Excusable Delay event continues and for such time thereafter as is reasonably necessary to overcome the effects of such Excusable Delay. Both Parties shall use all reasonable efforts to overcome or work around the Excusable Delay event as soon as reasonably practicable. The term “Excusable Delay” shall mean a delay in performance or failure to perform which is due to an event beyond the reasonable control of a Party and shall include, without limitation, (a) acts of God, weather conditions, explosion, flood, earthquake, or fire; (b) war or threat of war, sabotaging, riot, revolution, civil disturbance or requisition; (c) acts, restrictions, regulations, prohibitions or measures of any kind on the part of any governmental authority; (d) import and export regulations or embargos; or (e) strikes, lockouts, or other industrial actions or trade disputes.

25. CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey for contracts executed and to be performed entirely in such State. Subject to and without limiting the provisions of Paragraph 25, exclusive jurisdiction for litigation of any dispute, controversy or claim arising out of, in connection with, or in relation to this Agreement, or the breach thereof, shall be only in the New Jersey state or federal court having competent jurisdiction.

26. ARBITRATION. The parties shall use their best efforts to resolve any disputes between them within a thirty (30) day period, with respect to any disputed amount of payment due hereunder, payment in full of such amount within ninety (90) days shall be deemed to satisfactorily resolve such dispute. Disputes arising out of this Agreement shall be submitted to binding arbitration pursuant to the rules of the American Arbitration Association before one arbitrator selected jointly by the Customer and IDT; provided, however, that if the parties fail to select an arbitrator within thirty (30) days after initiation of arbitration, the American Arbitration Association shall make such selection. The arbitrator shall be governed by the laws of the State of New York in the settlement of any dispute submitted to him or her. The arbitration shall be held in the County and City of New York. The arbitrator’s award shall be final and judgment may be entered upon it in any court having jurisdiction thereof.

Letter to Mr. Yu

November 26, 2003

Page 10 of 11

27. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments writings and all other communications between the parties, both oral and written. No change, amendment, modification, termination or attempted waiver of any of the provisions hereof shall be binding unless in writing and signed by an authorized signatory of both parties hereto.

28. NOTICE. Any notice required to be given by either party to the other shall be deemed given upon receipt only when mailed first class mail or by nationally recognized overnight courier service, duly addressed and with proper postage, if in writing addressed to the party to whom notice is being given at the address of such party set forth above.

29. ASSIGNMENT. This Agreement is not assignable by either party hereto without the consent of the other party. Notwithstanding the foregoing, either party may assign this Agreement to any of its affiliates or subsidiaries without Customer’s consent; provided that the party assigning the Agreement shall remain liable for the performance of such affiliate or subsidiary.

30. SEVERABILITY/WAIVER. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the validity or enforceability of any other part or provision of this Agreement. No waiver by any party of any breach of any provision hereof shall constitute a waiver of any other breach of that or any other provision hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Letter to Mr. Yu

November 26, 2003

Page 11 of 11

Please acknowledge your acceptance of the above Agreement by signing where indicated below.

Sincerely,

IDT PUERTO RICO & CO.

/s/

By

    President and CEO

Name, Title, Date

Enclosure (as stated)

AGREED TO AND ACCEPTED:

AMERICAN TELECOM SERVICES CORPORATION

/s/ Yu Wen Ching

By

Yu Wen Ching, President

Name, Title, Date

By

Name, Title, Date

EXHIBIT A

GENERAL INFORMATION

1. SERVICES

Dialing Capabilities:    X Domestic         X International

Account Type:             XRetail X Promotional                X Rechargeable

Account Denomination: Promotional offerings shall be in minute denominations and retail recharges shall be in dollar denominations.

2. EXPIRATION DATES

Activated Accounts will be deactivated three (3) months following their last use unless End User has made any form of Payment on their Account.

3. DISCOUNT

Customer’s discount is [Subject to a request for confidential treatment; Separately filed with the Commission] of the retail face value of an Account. Account Discounts given by Customer to its Customers shall not impact Customer’s payments to IDT.

4. CARD ORDER PROTOCALS

Customer shall submit all Account orders to IDT via email.

5. OTHER

End Users may request and be provided with printed call detail and payment records by IDT at a cost agreed to by the parties. This will be paid for by the End User and shall not be a liability for Customer.

SCHEDULE 10(b)

TRANSACTION FEES

Fee Schedule
Transaction Type	Fee
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*
*	*

* [Subject to a request for confidential treatment; Separately filed with the Commission]

	Account (SE) Number	Company Name	Discount Rate - Contract	Payment Frequency Description
*			*	*
*			*	*
*			*	*
*
	*		*	*
	*		*
	*		*
	*		*
*
	*		*	*
	*		*
	*		*
	*		*

* [Subject to a request for confidential treatment; Separately filed with the Commission]

SCHEDULE 16

INSURANCE

EXHIBIT B

INSTRUCTIONAL INSERTS

ATC/IDT Service Instructions and Instructional Inserts

Payment Instructions

Activating the free service

Setup instructions for promotional prepaid residential long distance service:

Step 1: Plug telephone into wall-jack and charge handset for 24 hours.

Step 2: Press the “Talk” button for dial tone and then press the “LDS” button for immediate connection to service platform

Step 3: Provide the customer service representative or automated system with activation information (confirmation of home telephone number, the name of the retailer where the telephone was purchased and the PIN number that is included on the accompanying calling card).

Once you have provided the required information, you will be able to use your promotional minutes as prepaid residential long distance service, directly from your new telephone, or as a calling card from any other telephone¹.

Making the first payment

Each time that you make a call during the promotional period, you will be told the amount of minutes left for promotional calling; when the balance on your promotional minutes reaches zero, or at any time thereafter, you will be automatically routed to an IDT customer service representative where you will have the opportunity to make a payment in the amount that you choose (between $10 and $100), allowing for continued use of your prepaid residential long distance service and the accompanying calling card.

You may choose then to make a payment at any time, in order to continue to recharge your prepaid residential long distance service.

If you opt to continue using the service, you will speak with a live customer service representative or interact with an automated system that will take your credit card information, name, and billing address. This information will be used to process your initial payment and will be stored in our system for all future payments. You will have the opportunity to change the information that we have on record at any time.

recharge: Adding funds to the account

¹ A service charge will be applied to all calls made from any telephone outside of the home.

Following your initial payment or at any time of your choosing, you may instruct the customer service representative to automatically charge your credit card for a prescribed amount between $10 and $50 after the balance falls below $5.00, allowing for uninterrupted service.

As an alternative, you will be notified when your prepaid balance falls below $5.00 and will then be able to access an automated system to manually add funds to your account. Adding promotional services that are bundled with an expansion handset

Some expansion handsets that you purchase will come with additional free minutes. To add these free minutes to your existing account, simply choose the customer service option after pressing your LDS button and give the representative your expansion set PIN and the telephone number that is associated with your account. They will immediately credit your account with the appropriate value.

Moving?

Just press the LDS button and speak with a customer service representative. They will verify your existing information and set your service up to work at your new location.

Calling

Calling from the phone

Dialing instructions for Prepaid Residential Long Distance Service:

Step 1: Press the “Talk” button to hear dial tone

Step 2: Press the “LDS” button to access the prepaid residential long distance platform

Step 3: At prompt, dial:

For Domestic calls and calls to Canada, dial 1 + Area Code + Local Number.

For International calls, dial 011 + Country Code + City Code + Local Number.

Calling from a remote location

Dialing Instructions for the Mobile Calling Card:

1. Dial 1-800-837-5780, wait for greeting.

2. Enter PIN # from your Mobile Calling Card when prompted:

3. At prompt, dial:

For Domestic calls and calls to Canada, dial 1 + Area Code + Local Number.

For International calls, dial 011 + Country Code + City Code + Local Number.

For additional calls, don’t hang up. Just press the [#] key 3 times and wait for prompt, then dial as described in step 3.

Inserts and Language

Back of the calling card

The following image is the standard back of an IDT calling card. It should be used as a model for the travel card. The “XXXXX Card,” in the sample image should be replaced with “Mobile Calling Card.”

Note: Please ignore the text that is contained in the image as the image is in place for the purpose of displaying the suggested layout. The text that should be used is typed below the image. You will notice that it is very similar to that which is contained in the image.

The text to be used is as follows:

Dialing Instructions for the IDT Card:

1. Dial 1-800-837-5780, wait for greeting.

2. Enter PIN # from your IDT card when prompted:

PIN #: XXX-XXX-XXXX

3. At prompt, dial:

For Domestic calls and calls to Canada, dial 1 + Area Code + Local Number.

For International calls, dial 011 + Country Code + City Code + Local Number.

For additional calls, don’t hang up. Just press the [#] key 3 times and wait for prompt, then dial as described in step 3.

Service provided by IDT^®. The IDT logo is a registered trademark of IDT Corporation. Card expires 90 days from last use or payment. Calls must be made from a touch-tone phone. Payphone surcharge is 65 cents. All calls made from telephones other than that registered as the home location will be charged a 25 cent access fee. Prepaid fees are non-refundable. Not responsible for loss, theft or unauthorized use of card or PIN number. Directory Assistance Surcharge is 75 cents. If you are unable to resolve a complaint with IDT, you have the right to contact the state regulatory agency which has jurisdiction where this card was purchased. ^©2003 IDT Corporation. All rights reserved.

For Customer Service, call 1-888-757-6545.

S/N #: XXXXXXXXX

Expansion Set Insert

Note: this text will appear as an insert in the packaging of a stand-alone expansion handset.

Your new expansion handset comes with    50        minutes of free calling. To add these minutes to your existing account, simply choose the customer service option after pressing the LDS button (on any handset). Once connected, tell the representative that you have purchased a new handset and would like to add the free minutes to your account. The representative will ask you for you handset PIN and the telephone number that is associated with your account. Your handset PIN is XXX-XXXX-XXXX. The minutes will be credited to your account.

THIS IS NOT A CALLING CARD

Privacy disclaimer

An insert in the packaging will include the following text:

Important Information:

Recent changes in government regulations allow IDT Corporation, its subsidiaries and affiliates to use information about your current telecommunications services to make recommendations on the products and services that will best meet your communications needs in the future, unless you notify us otherwise.

What information are we talking about? We are talking about certain information regarding the telecommunications services that you buy from IDT Corporation; Including, the types of services you receive, the way we provide these services to you, and calling and billing records.

How can we use this information to help you? IDT Corporation will be able to use the information about your current service to let you know about innovative service proposals that can enhance or replace your current services. Using that information, IDT Corporation may even be able to make you one of the first to know about emerging technology or new offerings, including local service, long distance, wireless, Internet and many other services. You may also receive savings on these products and services, and you may be able to combine all these items on one monthly bill. Unless you notify us that you do not approve, we can use this information to your benefit!

Who will use this information? Only those companies or subsidiaries that now or in the future sell IDT Corporation services, including our agents and authorized sales representatives will use this information. For your convenience, we refer to all of those companies and subsidiaries as “IDT Corporation,” including IDT Communications and American Telecom Corporation, and any other current or future direct or indirect subsidiaries of IDT Corporation.

Will IDT Corporation protect this information? Absolutely. Regardless of whether you approve or disapprove our use of this information, you have a right to have your account treated confidentially and IDT Corporation has a duty, under federal law to protect the confidentiality of that information. Here is one other thing you need to know. You can always change your mind about IDT Corporation’s use of this information simply by calling us. Your instructions to us will remain in effect until you tell us you have changed your mind. Whatever your choice, IDT Corporation will continue to provide you with the same high quality of service you currently receive.

What do you have to do? Nothing. Unless you call us to tell us not to use your information, we will use your information selectively to send you news and updates on the IDT Corporation products and services specifically designed to add ease and convenience to your unique lifestyle. However, if you prefer that we use your information only to provide you with information on the types of IDT Corporation products and services to which you already subscribe, give us a call at 1-888-757-6545 within the next 30 days. After 30 days, you may still contact our business office at any time to register your choice regarding information sharing between IDT Corporation companies or subsidiaries, for IDT Corporation marketing purposes. Whatever you decide will not affect the IDT Corporation products and services that you now use. Nor will it impact the quality of your service. But it may make you ineligible to receive information about IDT Corporation’s new products and services, promotions, and packaged offerings.

We look forward to serving you even more effectively with new communications opportunities and solutions from IDT Communications, the company you know you can rely on.

IDT Corporation, its affiliates and authorized agents are changing the way we use customer information in order to offer you products and services. Customer information includes where, when, and to whom a customer places a call, as well as the types of telecommunications services to which the customer subscribes and the extent to which the service is used. Your customer information also includes how you use those services and the related billing of those services. For example, we could use your customer information to advise you of products that may be of interest to you, like DSL with Internet or long distance, even if you do not currently have any services from those IDT Corporation affiliates. If these uses of your customer information are acceptable, then no further action on your part is required.

Protecting the privacy of your service and usage records is your right and our duty under federal law. We are required to inform you that you can direct us not to use any of the information about the services you receive from IDT Corporation or its affiliates to offer additional products and services, please call 1-888-757-6545 and follow the prompts within 30 days or receiving this notice. If you do not restrict our use of your customer information by calling 1-888-757-6545 within 30 days, we can use your customer information to offer you products and services that you may find valuable based on your existing services. You may also call this number at any time after the initial 30-day period to restrict the use of your customer information. There is no charge for electing to restrict your information. Restricting your information will not affect the products you currently have from IDT Corporation and may not eliminate all marketing contacts. Even if you restrict the use of your information, it may be used to market services to you when you call us to inquire about such services. Your election is valid until after you affirmatively revoke or limit it.

IDT Corporation, its affiliates and authorized agents will not sell, trade, or share your customer information with anyone outside of IDT Corporation, or others authorized to represent us to offer products and services, except as authorized by law.

The employees and management of all the IDT Corporation companies would like to thank you for your continued business. We are proud to carry on our long tradition of providing our community with reliable, technologically advanced and affordable telecommunications services.

International calling rates

Note: an insert will include this rate information and some of it may appear on the outside packaging. In each place where it appears, we must footnote the disclaimer below stating that they are subject to change.

The following rates apply to the              most frequently called international destinations:

Country Rate per min.
Country
Rate per min.

* This price list is effective as of              and is subject to change at any time without notice. You may receive the most current international rates by calling customer service at 1-888-757-6545

EXHIBIT C

RATES

Assumptions
*	*
*	*	*
*	*	*
*	*
*	*
*	*
*	*
*	*	*	*
*	*
*  [Subject to a request for confidential treatment; Separately filed with the Commission] RETAIL RATES TO END-USER

		Originating From the U.S.:
*	*	Rate		minutes p/$5 card	minutes p/$10 card	minutes p/$20 card
*	*	$	0.8749	5	11	22
*	*	$	0.2275	21	43	87
*	*	$	0.2371	21	42	84
*	*	$	0.1998	25	50	100
*	*	$	0.2549	19	39	78
*	*	$	0.1488	33	67	134
*	*	$	0.1128	44	88	177
*	*	$	0.3281	15	30	60
*	*	$	0.2685	18	37	74
*	*	$	0.3173	15	31	63
*	*	$	0.0984	50	101	203
*	*	$	0.1158	43	86	172
*	*	$	0.0653	76	153	306
*	*	$	0.1002	49	99	199
*	*	$	0.3121	16	32	64
*	*	$	0.3736	13	26	53
*	*	$	0.2125	23	47	94
*	*	$	0.2079	24	48	96
*	*	$	0.8508	5	11	23
*	*	$	6.0852	—	1	3
*	*	$	5.3866	—	1	3
*	*	$	0.0684	73	146	292
*	*	$	0.2635	18	37	75
*	*	$	0.0684	73	146	292
*	*	$	0.0681	73	146	293
*	*	$	0.0682	73	146	293
*	*	$	0.0702	71	142	284
*	*	$	0.0682	73	146	293
*	*	$	0.0679	73	147	294
*	*	$	0.0669	74	149	299
*	*	$	0.3241	15	30	61
*	*	$	0.0593	84	168	337
*	*	$	0.2616	19	38	76
*	*	$	0.2811	17	35	71
*	*	$	0.1765	28	56	113

*	*	$	0.3256	15	30	61
*	*	$	0.3197	15	31	62
*	*	$	0.3527	14	28	56
*	*	$	0.3358	14	29	59
*	*	$	0.3256	15	30	61
*	*	$	0.1970	25	50	101
*	*	$	0.3140	15	31	63
*	*	$	0.3066	16	32	65
*	*	$	0.3070	16	32	65
*	*	$	0.3100	16	32	64
*	*	$	0.3577	13	27	55
*	*	$	0.0636	78	157	314
*	*	$	0.3279	15	30	60
*	*	$	0.0659	75	151	303
*	*	$	0.0616	81	162	324
*	*	$	0.3099	16	32	64
*	*	$	0.3095	16	32	64
*	*	$	0.2801	17	35	71
*	*	$	0.1713	29	58	116
*	*	$	0.2327	21	42	85
*	*	$	0.3407	14	29	58
*	*	$	0.3447	14	29	58
*	*	$	0.1702	29	58	117
*	*	$	0.1814	27	55	110
*	*	$	0.2037	24	49	98
*	*	$	0.2700	18	37	74
*	*	$	0.2913	17	34	68
*	*	$	0.1567	31	63	127
*	*	$	0.1890	26	52	105
*	*	$	0.3797	13	26	52
*	*	$	0.1439	34	69	138
*	*	$	0.3598	13	27	55
*	*	$	0.0781	63	127	255
*	*	$	0.2212	22	45	90
*	*	$	0.0702	71	142	284
*	*	$	0.2245	22	44	89
*	*	$	0.2336	21	42	85
*	*	$	0.1465	34	68	136
*	*	$	0.1476	33	67	135
*	*	$	0.1604	31	62	124
*	*	$	0.3090	16	32	64
*	*	$	0.0857	58	116	233
*	*	$	0.3402	14	29	58
*	*	$	0.2426	20	41	82
*	*	$	0.2518	19	39	79
*	*	$	0.5368	9	18	37
*	*	$	0.5802	8	17	34
*	*	$	0.5073	9	19	39
*	*	$	0.3809	13	26	52
*	*	$	0.3895	12	25	51
*	*	$	0.3446	14	29	58
*	*	$	0.0585	85	170	341
*	*	$	0.4695	10	21	42
*	*	$	0.2266	22	44	88

*	*	$	0.3597	13	27	55
*	*	$	0.4762	10	21	42
*	*	$	0.0816	61	122	245
*	*	$	0.2239	22	44	89
*	*	$	0.0759	65	131	263
*	*	$	0.0961	52	104	208
*	*	$	0.0736	67	135	271
*	*	$	0.0770	64	129	259
*	*	$	0.0849	58	117	235
*	*	$	0.0706	70	141	283
*	*	$	0.0757	66	132	264
*	*	$	0.0752	66	132	265
*	*	$	0.0789	63	126	253
*	*	$	0.0788	63	126	253
*	*	$	0.0745	67	134	268
*	*	$	0.0749	66	133	266
*	*	$	0.0838	59	119	238
*	*	$	0.1557	32	64	128
*	*	$	0.1593	31	62	125
*	*	$	0.1121	44	89	178
*	*	$	0.4123	12	24	48
*	*	$	0.2856	17	35	70
*	*	$	0.9397	5	10	21
*	*	$	0.1425	35	70	140
*	*	$	0.1536	32	65	130
*	*	$	0.1430	34	69	139
*	*	$	0.1225	40	81	163
*	*	$	0.3553	14	28	56
*	*	$	1.0269	4	9	19
*	*	$	0.5887	8	16	33
*	*	$	0.1963	25	50	101
*	*	$	0.2994	16	33	66
*	*	$	0.0904	55	110	221
*	*	$	0.2733	18	36	73
*	*	$	0.0767	65	130	260
*	*	$	0.0677	73	147	295
*	*	$	0.2674	18	37	74
*	*	$	0.0685	73	146	292
*	*	$	1.0379	4	9	19
*	*	$	0.4722	10	21	42
*	*	$	0.3173	15	31	63
*	*	$	0.1408	35	71	142
*	*	$	0.1435	34	69	139
*	*	$	0.1417	35	70	141
*	*	$	0.2357	21	42	84
*	*	$	0.2638	18	37	75
*	*	$	0.2597	19	38	77
*	*	$	0.2628	19	38	76
*	*	$	0.2054	24	48	97
*	*	$	0.2075	24	48	96
*	*	$	0.2178	22	45	91
*	*	$	0.2639	18	37	75
*	*	$	0.3641	13	27	54
*	*	$	0.3203	15	31	62

*	*	$	0.3644	13	27	54
*	*	$	0.3618	13	27	55
*	*	$	0.2205	22	45	90
*	*	$	0.2361	21	42	84
*	*	$	0.3885	12	25	51
*	*	$	0.6903	7	14	28
*	*	$	0.0934	53	107	214
*	*	$	0.2398	20	41	83
*	*	$	0.0757	66	132	264
*	*	$	0.5651	8	17	35
*	*	$	0.3301	15	30	60
*	*	$	0.6580	7	15	30
*	*	$	0.1648	30	60	121
*	*	$	0.6920	7	14	28
*	*	$	0.4367	11	22	45
*	*	$	0.0758	65	131	263
*	*	$	0.2385	20	41	83
*	*	$	0.0758	66	132	264
*	*	$	0.0619	80	161	322
*	*	$	0.2831	17	35	70
*	*	$	0.0593	84	168	337
*	*	$	0.2896	17	34	69
*	*	$	0.3048	16	32	65
*	*	$	0.4070	12	24	49
*	*	$	0.2566	19	38	77
*	*	$	0.2960	16	33	67
*	*	$	0.1693	29	59	118
*	*	$	0.1489	33	67	134
*	*	$	0.1100	45	90	181
*	*	$	0.0640	78	156	312
*	*	$	0.2889	17	34	69
*	*	$	0.2889	17	34	69
*	*	$	0.2886	17	34	69
*	*	$	0.3027	16	33	66
*	*	$	0.2845	17	35	70
*	*	$	0.0650	76	153	307
*	*	$	0.0696	71	143	287
*	*	$	0.0620	80	161	322
*	*	$	0.0640	78	156	312
*	*	$	0.1708	29	58	117
*	*	$	0.2495	20	40	80
*	*	$	0.1397	35	71	143
*	*	$	0.1658	30	60	120
*	*	$	0.1575	31	63	127
*	*	$	0.1233	40	81	162
*	*	$	0.1100	45	90	181
*	*	$	0.2500	20	40	80
*	*	$	0.0976	51	102	204
*	*	$	0.1001	49	99	199
*	*	$	0.5433	9	18	36
*	*	$	0.3280	15	30	60
*	*	$	0.2702	18	37	74
*	*	$	0.2528	19	39	79
*	*	$	0.1113	44	89	179

*	*	$	0.2545	19	39	78
*	*	$	0.2756	18	36	72
*	*	$	0.2581	19	38	77
*	*	$	0.2791	17	35	71
*	*	$	0.2376	21	42	84
*	*	$	0.7988	6	12	25
*	*	$	0.4827	10	20	41
*	*	$	0.5193	9	19	38
*	*	$	0.4870	10	20	41
*	*	$	0.2972	16	33	67
*	*	$	0.4565	10	21	43
*	*	$	0.2989	16	33	66
*	*	$	0.5103	9	19	39
*	*	$	0.5272	9	18	37
*	*	$	0.0678	73	147	294
*	*	$	0.0674	74	148	296
*	*	$	0.0680	73	147	294
*	*	$	0.0677	73	147	295
*	*	$	0.0680	73	147	294
*	*	$	0.1141	43	87	175
*	*	$	0.3000	16	33	66
*	*	$	0.0994	50	100	201
*	*	$	0.1526	32	65	131
*	*	$	0.2158	23	46	92
*	*	$	0.5071	9	19	39
*	*	$	0.5123	9	19	39
*	*	$	0.5106	9	19	39
*	*	$	0.4238	11	23	47
*	*	$	0.3219	15	31	62
*	*	$	0.5250	9	19	38
*	*	$	0.3612	13	27	55
*	*	$	0.5160	9	19	38
*	*	$	0.3680	13	27	54
*	*	$	0.5077	9	19	39
*	*	$	0.4127	12	24	48
*	*	$	0.5084	9	19	39
*	*	$	0.5198	9	19	38
*	*	$	0.4836	10	20	41
*	*	$	0.5181	9	19	38
*	*	$	0.2791	17	35	71
*	*	$	0.3383	14	29	59
*	*	$	0.5026	9	19	39
*	*	$	0.4922	10	20	40
*	*	$	2.8338	1	3	7
*	*	$	0.1687	29	59	118
*	*	$	0.2872	17	34	69
*	*	$	0.1011	49	98	197
*	*	$	0.1432	34	69	139
*	*	$	0.1737	28	57	115
*	*	$	0.2532	19	39	78
*	*	$	0.1440	34	69	138
*	*	$	0.6640	7	15	30
*	*	$	0.0623	80	160	320
*	*	$	0.3041	16	32	65

*	*	$	0.0629	79	158	317
*	*	$	0.0803	62	124	248
*	*	$	0.1994	25	50	100
*	*	$	0.1986	25	50	100
*	*	$	0.0803	62	124	249
*	*	$	0.0803	62	124	249
*	*	$	0.0650	76	153	307
*	*	$	0.3156	15	31	63
*	*	$	0.0643	77	155	311
*	*	$	0.0648	77	154	308
*	*	$	0.2967	16	33	67
*	*	$	0.2118	23	47	94
*	*	$	0.2993	16	33	66
*	*	$	0.3336	14	29	59
*	*	$	0.2983	16	33	67
*	*	$	0.0807	61	123	247
*	*	$	0.2651	18	37	75
*	*	$	0.0815	61	122	245
*	*	$	0.0853	58	117	234
*	*	$	0.0909	55	110	220
*	*	$	0.0853	58	117	234
*	*	$	0.0821	60	121	243
*	*	$	0.0758	65	131	263
*	*	$	0.0788	63	126	253
*	*	$	0.2703	18	36	73
*	*	$	0.2724	18	36	73
*	*	$	0.2635	18	37	75
*	*	$	0.2695	18	37	74
*	*	$	0.3033	16	32	65
*	*	$	0.3420	14	29	58
*	*	$	0.2744	18	36	72
*	*	$	0.1630	30	61	122
*	*	$	0.9750	5	10	20
*	*	$	0.2022	24	49	98
*	*	$	0.2024	24	49	98
*	*	$	0.2678	18	37	74
*	*	$	0.2689	18	37	74
*	*	$	0.3727	13	26	53
*	*	$	0.2701	18	37	74
*	*	$	0.5345	9	18	37
*	*	$	0.2376	21	42	84
*	*	$	0.3864	12	25	51
*	*	$	0.1459	34	68	137
*	*	$	0.2538	19	39	78
*	*	$	0.2403	20	41	83
*	*	$	0.4288	11	23	46
*	*	$	0.1901	26	52	105
*	*	$	0.2442	20	40	81
*	*	$	0.1057	47	94	189
*	*	$	0.1704	29	58	117
*	*	$	0.2099	23	47	95
*	*	$	0.2122	23	47	94
*	*	$	0.3223	15	31	62
*	*	$	0.3313	15	30	60

*	*	$	0.4505	11	22	44
*	*	$	0.4936	10	20	40
*	*	$	0.1542	32	64	129
*	*	$	0.1682	29	59	118
*	*	$	0.0837	59	119	239
*	*	$	0.0965	51	103	207
*	*	$	0.0836	59	119	239
*	*	$	0.0839	59	119	238
*	*	$	0.0835	59	119	239
*	*	$	0.4636	10	21	43
*	*	$	0.3765	13	26	53
*	*	$	0.2107	23	47	94
*	*	$	0.2384	20	41	83
*	*	$	0.6318	7	15	31
*	*	$	0.3723	13	26	53
*	*	$	0.4214	11	23	47
*	*	$	0.2050	24	48	97
*	*	$	0.0750	66	133	266
*	*	$	0.0776	64	128	257
*	*	$	0.1063	47	94	188
*	*	$	0.1055	47	94	189
*	*	$	0.5753	8	17	34
*	*	$	0.1926	25	51	103
*	*	$	0.1926	25	51	103
*	*	$	0.2385	20	41	83
*	*	$	0.2402	20	41	83
*	*	$	0.3369	14	29	59
*	*	$	0.4042	12	24	49
*	*	$	0.3923	12	25	50
*	*	$	0.3955	12	25	50
*	*	$	0.4590	10	21	43
*	*	$	0.3707	13	26	53
*	*	$	0.4147	12	24	48
*	*	$	0.3824	13	26	52
*	*	$	0.3207	15	31	62
*	*	$	0.3304	15	30	60
*	*	$	0.6149	8	16	32
*	*	$	0.1586	31	63	126
*	*	$	0.5708	8	17	35
*	*	$	0.4791	10	20	41
*	*	$	0.5179	9	19	38
*	*	$	0.4112	12	24	48
*	*	$	0.3218	15	31	62
*	*	$	0.0609	82	164	328
*	*	$	0.2591	19	38	77
*	*	$	0.2854	17	35	70
*	*	$	0.3211	15	31	62
*	*	$	0.2146	23	46	93
*	*	$	0.3559	14	28	56
*	*	$	0.0609	82	164	328
*	*	$	0.0615	81	162	325
*	*	$	0.4374	11	22	45
*	*	$	0.4255	11	23	47
*	*	$	0.0732	68	136	273

*	*	$	0.3092	16	32	64
*	*	$	0.0721	69	138	277
*	*	$	0.3362	14	29	59
*	*	$	0.3343	14	29	59
*	*	$	0.4278	11	23	46
*	*	$	0.3020	16	33	66
*	*	$	0.3175	15	31	62
*	*	$	0.3918	12	25	51
*	*	$	0.4870	10	20	41
*	*	$	0.3907	12	25	51
*	*	$	0.1861	26	53	107
*	*	$	0.1782	28	56	112
*	*	$	0.1873	26	53	106
*	*	$	0.3745	13	26	53
*	*	$	0.8748	5	11	22
*	*	$	0.2838	17	35	70
*	*	$	0.7452	6	13	26
*	*	$	0.0635	78	157	314
*	*	$	0.2838	17	35	70
*	*	$	0.4535	11	22	44
*	*	$	0.5084	9	19	39
*	*	$	0.5184	9	19	38
*	*	$	0.5134	9	19	38
*	*	$	0.5060	9	19	39
*	*	$	0.4863	10	20	41
*	*	$	0.4900	10	20	40
*	*	$	0.5047	9	19	39
*	*	$	0.5551	9	18	36
*	*	$	0.1083	46	92	184
*	*	$	0.2661	18	37	75
*	*	$	0.4184	11	23	47
*	*	$	0.2655	18	37	75
*	*	$	0.2501	19	39	79
*	*	$	0.2510	19	39	79
*	*	$	0.3564	14	28	56
*	*	$	0.1627	30	61	122
*	*	$	0.2828	17	35	70
*	*	$	0.1918	26	52	104
*	*	$	0.3793	13	26	52
*	*	$	0.0906	55	110	220
*	*	$	0.3509	14	28	56
*	*	$	0.2054	24	48	97
*	*	$	0.4360	11	22	45
*	*	$	0.2071	24	48	96
*	*	$	0.2051	24	48	97
*	*	$	0.2051	24	48	97
*	*	$	0.2049	24	48	97
*	*	$	0.1576	31	63	126
*	*	$	0.3507	14	28	57
*	*	$	0.1523	32	65	131
*	*	$	0.0863	57	115	231
*	*	$	0.3351	14	29	59
*	*	$	0.0775	64	129	258
*	*	$	0.0830	60	120	240

*	*	$	0.0822	60	121	243
*	*	$	0.0848	58	117	235
*	*	$	0.5238	9	19	38
*	*	$	0.5661	8	17	35
*	*	$	0.6224	8	16	32
*	*	$	0.2351	21	42	85
*	*	$	0.2866	17	34	69
*	*	$	0.1301	38	76	153
*	*	$	0.1288	38	77	155
*	*	$	0.1335	37	74	149
*	*	$	0.1447	34	69	138
*	*	$	0.0600	83	166	333
*	*	$	0.0802	62	124	249
*	*	$	0.0737	67	135	271
*	*	$	0.1322	37	75	151
*	*	$	0.0689	72	145	290
*	*	$	0.2699	18	37	74
*	*	$	0.1036	48	96	192
*	*	$	1.3363	3	7	14
*	*	$	0.3199	15	31	62
*	*	$	0.3500	14	28	57
*	*	$	0.2057	24	48	97
*	*	$	0.1244	40	80	160
*	*	$	0.1297	38	77	154
*	*	$	0.3537	14	28	56
*	*	$	0.3527	14	28	56
*	*	$	0.3146	15	31	63
*	*	$	0.2043	24	48	97
*	*	$	0.2661	18	37	75
*	*	$	0.2030	24	49	98
*	*	$	0.4261	11	23	46
*	*	$	0.4813	10	20	41
*	*	$	0.4384	11	22	45
*	*	$	0.0554	90	180	361
*	*	$	0.0601	83	166	332
*	*	$	0.1393	35	71	143
*	*	$	0.2819	17	35	70
*	*	$	0.1166	42	85	171
*	*	$	0.1531	32	65	130
*	*	$	0.2844	17	35	70
*	*	$	1.1972	4	8	16
*	*	$	0.9379	5	10	21
*	*	$	0.1403	35	71	142
*	*	$	0.3155	15	31	63
*	*	$	0.1382	36	72	144
*	*	$	0.1382	36	72	144
*	*	$	0.1380	36	72	144
*	*	$	0.0766	65	130	261
*	*	$	0.1649	30	60	121
*	*	$	0.0767	65	130	260
*	*	$	0.0811	61	123	246
*	*	$	0.0611	81	163	327
*	*	$	0.3190	15	31	62
*	*	$	0.0614	81	162	325

*	*	$	0.0571	87	175	350
*	*	$	0.3897	12	25	51
*	*	$	0.4179	11	23	47
*	*	$	0.4024	12	24	49
*	*	$	0.7869	6	12	25
*	*	$	0.3645	13	27	54
*	*	$	0.3516	14	28	56
*	*	$	0.2888	17	34	69
*	*	$	0.3988	12	25	50
*	*	$	0.4487	11	22	44
*	*	$	0.4706	10	21	42
*	*	$	0.4799	10	20	41
*	*	$	0.2342	21	42	85
*	*	$	0.1115	44	89	179
*	*	$	0.2771	18	36	72
*	*	$	0.0602	83	166	332
*	*	$	0.0678	73	147	295
*	*	$	0.3297	15	30	60
*	*	$	0.0670	74	149	298
*	*	$	0.5192	9	19	38
*	*	$	0.0758	65	131	263
*	*	$	0.2526	19	39	79
*	*	$	0.0730	68	137	274
*	*	$	0.2911	17	34	68
*	*	$	0.3840	13	26	52
*	*	$	0.2863	17	34	69
*	*	$	0.1895	26	52	105
*	*	$	0.2049	24	48	97
*	*	$	0.1033	48	96	193
*	*	$	0.3608	13	27	55
*	*	$	0.8051	6	12	24
*	*	$	0.5890	8	16	33
*	*	$	0.2358	21	42	84
*	*	$	0.2383	20	41	83
*	*	$	0.2394	20	41	83
*	*	$	0.2331	21	42	85
*	*	$	0.3740	13	26	53
*	*	$	0.3838	13	26	52
*	*	$	0.2599	19	38	76
*	*	$	0.3139	15	31	63
*	*	$	0.1648	30	60	121
*	*	$	0.1333	37	74	149
*	*	$	0.3173	15	31	63
*	*	$	0.3041	16	32	65
*	*	$	1.9806	2	5	10
*	*	$	0.2450	20	40	81
*	*	$	0.2444	20	40	81
*	*	$	0.2472	20	40	80
*	*	$	0.2421	20	41	82
*	*	$	0.2140	23	46	93
*	*	$	0.2036	24	49	98
*	*	$	0.1594	31	62	125
*	*	$	0.1590	31	62	125
*	*	$	0.1990	25	50	100

*	*	$	0.1915	26	52	104
*	*	$	0.3507	14	28	57
*	*	$	0.3585	13	27	55
*	*	$	0.0563	88	177	355
*	*	$	0.2506	19	39	79
*	*	$	0.0567	88	176	352
*		$	0.058
*		$	0.058
*	*	$	0.2631	19	38	76
*	*	$	0.3313	15	30	60
*	*	$	0.1810	27	55	110
	*	$	0.0829	60	120	241
*	*	$	0.2304	21	43	86
*	*	$	1.1181	4	8	17
*	*	$	0.2376	21	42	84
*	*	$	0.3744	13	26	53
*	*	$	0.1226	40	81	163
*	*	$	0.1244	40	80	160
*	*	$	0.2180	22	45	91
*	*	$	0.1905	26	52	105
*	*	$	0.1770	28	56	113
*	*	$	0.7045	7	14	28
*	*	$	0.7166	6	13	27
*	*	$	0.7246	6	13	27
*	*	$	0.7334	6	13	27
*	*	$	0.7448	6	13	26
*	*	$	0.6852	7	14	29
*	*	$	0.6926	7	14	28
*	*	$	0.6556	7	15	30
*	*	$	0.6957	7	14	28
*	*	$	0.5103	9	19	39
*	*	$	0.4289	11	23	46
*	*	$	0.3369	14	29	59
*	*	$	0.3855	12	25	51
*	*	$	0.2085	23	47	95
*	*	$	0.2051	24	48	97
*	*	$	0.1910	26	52	104
*	*	$	0.1043	47	95	191
*	*	$	0.1176	42	85	170
*	*	$	0.1032	48	96	193

* [Subject to a request for confidential treatment; Separately filed with the Commission]

EXHIBIT D

TECHNICAL REQUIREMENTS

IDT

ATS phone product Version 3

Project outline

Product functionality:

ATC will sell cordless phones utilized in homes and small businesses. These phones will come packaged with an inactive calling card; additionally the phone will feature a L.D.S (Long Distance Service) button. When the user presses the LDS button the phone will automatically dial the IDT platform.

When using the platform for the first time the user will be prompted for:

1) A store name/Vendor (supplied by End User)

2) An account number (11 digit number supplied by IDT and printed and packaged by ATC)

3) The phone ANI.

Once this information is captured, and provided that Customer orders a minimum of [Subject to a request for confidential treatment; Separately filed with the Commission], the user will be allowed to use a value of promotional minutes determined by Customer (promotional minutes billed to ATC at 3.9 cents per minute [Subject to a request for confidential treatment; Separately filed with the Commission]) that have been pre-provisioned on the account, not added at activation. The user will then be able to use the “LDS” button and/or calling card until promotional minute depletion. The user will be prompted via standard IVR to recharge when the balance reaches five dollars. The amount of the promo minutes will be less then the amount of the threshold, therefore, all calls made with promo minutes will be prompted for recharge.

Below are the responsibilities for each party. Underlined items are potentially possible are not currently in place. These items will be discussed in further detail at the end of the document.

IDT Responsibilities:

a. Customer Service or IVR

a. Collect ANI, PIN, and Store name

b. Join pre-created PIN and ANI

c. Activate 100 free promo minutes

d. Accept and facilitate incoming activation and recharge PINs via IVR or Customer Service.

e. Track Calls

i. This paid service is available for a fee at customer request.

ii. ATC outbound surveys are available for a fee at customer request.

f. Charge and accept payment

i. Post activation

1. Accept and charge users account via credit card

a. Setup Auto recharge at users request

b. Setup ability for IVR recharge

2. Accept and charge users account via ECP

b. Platform

a. Set target balance and notification prompt for recharging the account

b. Transfer user to CS rep or IVR for recharging.

i. After 1^st time charge setup the account ability to recharge via IVR.

c. Recharging

i. Auto Recharge

1. Preset amount recharged when account hits preset threshold

ii. IVR Recharge

1. User interacts with IVR to recharge account

iii. Assisted Recharge

1. User interacts with CS rep to recharge account

d. Setup Account expiration:

i. Utilizing existing expiration policies

e. Setup Surcharge for all calls made via calling card with appropriate surcharges as required and directed

i. DNIS Surcharge

f. Upon Calling from ATC phone

i. After a customer activates the phone/account but has not charged the account

1. User is prompted via IVR to recharge the account

a. If yes, the user is transferred to Customer Service or IVR so the billing information can be captured

b. If no, the user is prompted to enter the number they wish to call

ii. After a customer has charged and/or recharged the account

1. User is prompted to enter the number they wish to dial or press a predetermined keypad button to go to customer service.

g. Upon Calling from any phone via calling card (see “f” above as procedure is the same)

c. Debit/Operations

a. Utilize appropriate Anti-Fraud procedures to catch fraud

b. Utilize existing reports.

i. How many accounts have been activated by Vendor by user

ii. How many accounts have been recharged by Vendor by user

i.e.

Vendor	Customer Area- code &Exchange	$ Charged (period)	$ Charged (Total-life of account)
*	*	*	*

* [Subject to a request for confidential treatment; Separately filed with the Commission]

c. Creation of program

d. Creation of 2 access numbers

i. Branded IDT service access number hard coded into phone hardware (number TBD)

ii. Branded IDT service access number printed on calling card (number TBD)

e. Generate Calling Card PINs

ATC Responsibilities

a. Product Creation

a. Create Hardware, including hard coding preset LDS button pointed to our platform

b. Produce Packaging and IDT marketing

c. Produce physical calling card with our pins

d. Supply number of Pin’s to create

e. If Pin’s have different values ATC must manage accounts

b. Promotional card

a. Purchase promotional cards/accounts at 3.9 cents per minute less negotiated [Subject to a request for confidential treatment; Separately filed with the Commission] discount.

c. Customer Experience

a. Give general guidelines and script for Customer Service to follow

d. Reporting

a. Supply any and all detailed specifications for reports required by them.

e. Vendor List

a. All vendors selling product.

Customer Experience – FLOW (phone activation)

a. Customer purchases ATC cordless phone with IDT (LDS) feature built in.

b. Customer presses the “talk” button followed by the LDS button on the ATC phone.

a. Customer is automatically directed to the IDT platform (DNIS)

i. Customer chooses to “charge” the product (via rep or IVR)

ii. Customer enters all necessary information.

b. Customer hangs up and is now allowed to utilize free promotional minutes

i. Customer presses LDS button

1. The phone automatically calls the platform

2. ANI recognition allows the user to directly enter the number they wish to dial or be transferred to a rep for account “Charging”.

3. Call completes as standard until promotional minutes run out

a. Prompted with each call to “charge” the account.

ii. Customer goes to another phone and utilizes the phone card provided.

1. The incoming call IVR requests the PIN

a. User enters information

2. The incoming call IVR requests the number to dial or transfer to CS.

a. User enters information

b. Call completes as standard until promotional minutes run out

c. Each call into the platform this way is surcharged $.025

c. Customer balance hits targeted point

i. IVR prompts user to recharge the account

ii. Platform gives user the option to recharge at this point

1. If Yes, Call is directed to CS where necessary information is collected.

2. If validate via fraud procedure account is credited

iii. User declines to recharge

1. Continues to use up remainder of balance, prompted to recharge with each call

d. Users balance runs out.

i. Upon hitting the “LDS” button is automatically transferred to CS

ii. Upon utilizing the calling card is automatically transferred to CS

Current Issues

Issue	Proposed Solution * - Denotes item is not currently available	Development Impact
Store Name (or ID) Capture	Customer Service rep verbally receives information and enters it to d-base	Create drop down menu with all known vendors, from which a rep can select
Automated Activation	Develop IVR* Utilize customer service to capture activation information	*Phase II upon development
Track Calls	Integrate UDB for call tracking purposes * Rep manual logging *	*At customer purchase
Reporting	Text, comma delimited or Excel Spreadsheet depending on report as currently done*	*Phase II will customize if volume warrants
Expiration	Expirations will not be altered.	*Phase II if volume warrants
Additional promo minutes - added when an existing customer buys an extension phone	Have a customer service rep add credit or select a pre-defined field to add 100 additional promo minutes. This is as opposed to adding a new account	*Phase II if volume warrants

PHASE II

- Custom Expiration

- Automated Activation

Custom reporting

EX-10.5

Exhibit 10.5

This Agreement (“Agreement”), effective as of the date executed by the last to sign of the parties (“Effective Date”), between SunRocket, Inc. (“Service Provider” hereinafter referred to as “SP”), a Delaware corporation, located at 8615 Westwood Center Drive, Vienna, Virginia 22182, and American Telecom Services, Inc., a Delaware corporation (“ATS”) located at 2466 Peck Road, City of Industry, CA 90601 memorializes the obligations of the parties in connection with VoIP hardware (“Telephones” and/or “Telephone”) provided by ATS, associated with the ATS System (“ATS System”) as described in Appendix A and future versions of the Telephone to be continuously reviewed and approved by the Parties from time to time. Such approval may not be unreasonably withheld or delayed. SP provides Internet Phone services to consumers, including communications and customer services (“Services”) to support customer accounts (“Account” or “Accounts”). The Telephones shall be preconfigured to support an SP Service Account. The Telephones shall be distributed to retail outlets and subsequent resale to consumers (“End Users”) throughout the United States.

1. ATS Obligations.

a. Upon execution of this Agreement, ATS will use commercially reasonable efforts to configure its Telephones to work with the SP Services. ATS will use commercially reasonable efforts to provide engineering and technical configuration support to SP as necessary to ensure its Telephones can support SP service features and quality standards. ATS will also ensure that the appropriate SP mark or marks (as determined by SP) are placed on each of the Telephones and any supporting equipment when inventory considerations and design specifications permit, at ATS’s sole discretion.

b. ATS further agrees to design the packaging and packaging inserts for the Telephones. ATS will ensure that the appropriate SP mark or marks (as determined by SP) will be placed on all packaging and packaging inserts. SunRocket, with ATS cooperation and guidance, will provide all information and design for service offering inserts and information pertaining to the service offering for the packaging. ATS acknowledges that any retail packaging or materials shall include any information necessary to comply with FCC and FTC regulations as mutually agreed upon by the parties and provided for by SP.

c. ATS will provide SP with all documentation and training materials associated with its Telephones so that SP can provide first level customer support. ATS further agrees to provide second level support and troubleshooting assistance for SP technical support. The account servicing obligations of each party, including the hours during which each party must provide such support, are described in Appendix E.

d. ATS shall specify, via email from time to time, to SP (the “Account Order”) the aggregate number of initial “Activation Codes” to be provisioned by SP to be included on the packaging inserts. The Activation Codes will be the unique identifier entered into the SP database prior to activation and will be used by ATS to associate the hardware unique identifier and the retailer as well as the rate plans to be made available to ATS End Users by SP as set forth in Appendix B. Once the request is made, SP will make commercially reasonable efforts to provide the Activation Codes within ten (10) business days following the request. ATS will match the Activation Codes with a unique identifier to be designated to each individual Telephone “MAC Address” that will be returned to SP in a mutually agreed-upon file format. SP will make commercially reasonable efforts to match and activate each Activation Code to the corresponding MAC Address within twenty-one (21) business days of the receipt of the MAC addresses.

e. ATS will use commercially reasonable efforts to resolve all End User disputes regarding Telephones within a commercially reasonable amount of time.

2. SP Obligations.

a. During the term and subject to the terms and conditions contained herein, SP agrees to provide Telephone users with Services.

b. SP will use commercially reasonable efforts to resolve all End User disputes regarding Services within a commercially reasonable amount of time.

c. Subject to FCC and FTC requirements, SP agrees to provide ATS with End User information as described in Appendix D, section 3.

d. SP at its sole discretion may offer non-ATS hardware to End Users provided that (i) ATS does not make similar functioning hardware available to SP within [Subject to a request for confidential treatment; Separately filed with the Commission] of availability date of the similar functioning non-ATS hardware, or (ii) it is not within [Subject to a request for confidential treatment; Separately filed with the Commission] of the Account activation and ATS has not provided such hardware to SP as prescribed in section (d) (i). SP agrees to notify ATS in writing and in a timely manner if SP is pursuing or considering to pursue new End User hardware which may be made available to End Users to support current or future Services.

e. SP may offer additional telecom services or Services to ATS generated End Users provided that the applicable Commission as set forth in Section

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9 below shall apply to any revenues associated with such a sale, during the period in which such a Commission would apply pursuant to the terms herein, in the event that it markets additional telecom services or Services to such End Users without the expressed written consent of ATS. Services may include, but will not be limited to those set forth in Appendix F, but SP shall make commercially reasonable efforts to make those services available to ATS at the same time to market to new End Users through its approved channels.

3. Reports. SP shall provide to ATS the reports described in Appendix D, section 3 at the frequencies provided therein. In addition, from time to time, ATS may identify additional reports to be generated by SP and delivered to ATS on an ad hoc or periodic basis.

4. Deactivation. SP reserves the right to terminate Services to any Account if it determines, in its sole discretion, that End-Users of such Accounts are actually or allegedly engaged in activities that are illegal, fraudulent or wrongful or which may be harmful to SP in any way. ATS shall receive a monthly report of all such deactivated Accounts and SP shall make commercially reasonable efforts to provide reasons for such deactivations. SP may also terminate End Users for non-payment or if they are violating the terms of SP’s “Terms of Service” as set forth on the SunRocket.com website and as may change from time to time as set forth in Appendix I herein.

5. Marketing and Distribution. ATS will use its commercially reasonable efforts to promote, market and distribute the Services in conjunction with the ATS System under this Agreement. ATS shall have discretion to decide the methods and channels used to market, promote and distribute the Services through those retailers set forth in Appendix G although ATS may distribute the Services in conjunction with ATS Telephones through retailers not set forth in Appendix G, subject to SP written approval that may not be unreasonably withheld or delayed. Nothing herein shall limit ATS’ right to promote, market and distribute other Telephones that are not bundled with the Services provided by SP, nor SP’s right to promote and distribute other hardware or Services not bundled with the ATS System, subject to any exclusivity provisions contained in Section 12 below except as provided in Section 2(d). ATS shall be solely responsible for the development of all promotional and marketing materials, inserts and advertising materials (“Materials”) except as set forth in section 1 (b) above. Without limiting the foregoing, ATS may not produce or utilize any marketing materials, promotional initiatives or advertisements for the Service unless approved by SP in writing in advance, and such approval or rejection must take place in a timely manner and approval may not be unreasonably withheld or delayed. Should SP require certain disclosures required by Regulatory Authorities to be included with the Telephones in the packaging, SP agrees to provide ATS with such information in a timeframe sufficient to permit ATS to include the disclosures with the Telephones.

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6. PAYMENT METHODS FOR SUBSCRIBERS. SP agrees to accept payment via credit card and debit card. More payment methodologies such as ACH and Pay Pal may be added in the future, but may require an additional fee, paid by the End User, for the use of Services.

7. MARKETING CO-OP PAYMENTS. SP agrees to pay [Subject to a request for confidential treatment; Separately filed with the Commission] for each activated Account to ATS as a “Marketing Co-op Payment.” Such payments will be allocated by ATS for the promotion and marketing of Services at ATS’ sole discretion. On a regular and timely basis, ATS will provide SP in advance with a summary plan for spending allocations and purposes, plus regular performance reports when specified. SP shall have the right to approve or reject all marketing or promotional materials that include the SP Marks as defined in Section 18 below, such approval must be made within 48 hours of acknowledged receipt of the materials and may not be unreasonably delayed or withheld. At ATS’ sole discretion, ATS may allocate up to [Subject to a request for confidential treatment; Separately filed with the Commission] of the Agent Fees as set forth in section 10 below as an additional Marketing Co-op Payment. ATS and SP agree to establish a joint interest bearing operating bank account where these funds will be maintained, from which ATS may disburse funds and SP may audit such disbursements.

8. KEY CITY FUNDS. ATS may designate up to [Subject to a request for confidential treatment; Separately filed with the Commission] retailers (“Strategic Accounts”) from Appendix G, for which “Key City Funds” and special Agent Fees (as defined in Section 10 and Appendix B) would apply. Upon acceptable notification of the shipment of Telephones and related equipment to and their arrival at a Strategic Account, SP and ATS agree to each commit [Subject to a request for confidential treatment; Separately filed with the Commission] to service the initial Strategic Accounts as “Key City Funds” to be allocated by ATS, at its sole discretion, for marketing purposes designated for Strategic Accounts. For each of the Strategic Accounts, the Parties agree to each allocate an [Subject to a request for confidential treatment; Separately filed with the Commission] (“Additional Key City Funds”) within thirty (30) days following the activation of the [Subject to a request for confidential treatment; Separately filed with the Commission] Account sold through that Strategic Account. Key City Funds will be contributed into the joint bank account referenced in Section 7, from which ATS may disburse funds and SP may audit such disbursements.

9. SERVICE COMMISSIONS. SP shall be responsible for maintaining all billing, collection and transaction records with respect to the End User’s use of the Service. For the first [Subject to a request for confidential treatment; Separately filed with the Commission] in monthly Net Revenue per End User, SP agrees to pay ATS [Subject to a request for confidential treatment;

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Separately filed with the Commission] of the Net Revenues for any Account activated in the first year following the Effective Date and [Subject to a request for confidential treatment; Separately filed with the Commission] for all Accounts created thereafter (“Commission”). For monthly Net Revenue per End User exceeding [Subject to a request for confidential treatment; Separately filed with the Commission], SP agrees to pay ATS [Subject to a request for confidential treatment; Separately filed with the Commission] of the Net Revenue in excess of [Subject to a request for confidential treatment; Separately filed with the Commission]. The term “Net Revenues” means gross revenues less any service credits and taxes and regulatory mandated fees incurred by SP. All payments to ATS shall be made via wire transfer on the 25^th day of each month for the prior month’s activity, provided that no such payment shall be made for a sum less than $10,000, in which case the amount shall be accrued in an account earmarked for ATS and paid with the next payment due to ATS. Each payment shall be accompanied by a detailed report that includes a month-to-date activity summary for the covered period, listed by Account as formatted in Appendix D.

10. AGENT FEES. SP agrees to pay ATS an Agent Fee (“Agent Fee”) for each activated Account according to the table as set forth in Appendix B. All payments to ATS shall be made to ATS via wire transfer on the 25^th day of each month for the prior month’s activity, provided that no such payment shall be made for a sum less than $10,000, in which case the amount shall be accrued in an account earmarked for ATS and paid with the next payment due to ATS. ATS agrees that the Agent Fee will be refunded for End Users who cancel their Service within thirty-one (31) days following activation. Any such returned Agent Fee will be offset from payments due in the next payment period. Each payment shall be accompanied by a detailed report that includes a month-to-date activity summary for the covered period, listed by Account.

11. RATES AND SERVICE PLANS. SP agrees to make at least [Subject to a request for confidential treatment; Separately filed with the Commission] Service plans available to End Users as set forth in Appendix C. The parties may agree to offer End Users additional Service plans from time to time and will reach an agreed upon Agent Fee prior to the introduction of that plan that provides ATS with an Agent Fee, Marketing Coop Payment, Commission and Rebate that is no less than that which is set forth for the lowest Service plan herein.

12. EXCLUSIVITY.

a. SP acknowledges that the Limited Edition service plan as set forth in Appendix C, or any other similar [Subject to a request for confidential treatment; Separately filed with the Commission] plan, will be made available exclusively with the ATS Telephone from the Effective Date until the end of 2005. However, should SP determine to continue to offer the Limited Edition plan or any similar [Subject to a request for

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confidential treatment; Separately filed with the Commission] plan, whether directly or indirectly, ATS will have the right to promote the same plan for the period in which SP offers it, subject to the Term of this Agreement and any other limitations herein. If a total of [Subject to a request for confidential treatment; Separately filed with the Commission] or more Accounts are activated between the Effective Date and December 31, 2005 because of ATS efforts pursuant to this Agreement, ATS will be granted the exclusive right to market such [Subject to a request for confidential treatment; Separately filed with the Commission] plan through the retailers listed in Appendix G through June 30, 2006. If a total of [Subject to a request for confidential treatment; Separately filed with the Commission] or more accounts are activated between the Effective Date and June 30, 2006 because of ATS efforts pursuant to this Agreement, ATS will be granted the exclusive right to market such [Subject to a request for confidential treatment; Separately filed with the Commission] plan through the retailers listed in Appendix G through December 31, 2006. Should SP’s costs shift upward at a rate that is greater than [Subject to a request for confidential treatment; Separately filed with the Commission] that they can document for ATS , the parties will work together to modify the [Subject to a request for confidential treatment; Separately filed with the Commission] plan to create an alternate promotional service plan. Provided that ATS is still entitled to exclusivity on the [Subject to a request for confidential treatment; Separately filed with the Commission] plan, such exclusivity would be applied to the alternate service plan.

b. ATS will be granted the exclusive right to market those rate plans specified in Appendix C to those retail chains specified in Appendix G for a period beginning on the Effective Date and lasting [Subject to a request for confidential treatment; Separately filed with the Commission]. If an average of at least [Subject to a request for confidential treatment; Separately filed with the Commission] Account is being activated per week per store in a particular retail chain during [Subject to a request for confidential treatment; Separately filed with the Commission] and [Subject to a request for confidential treatment; Separately filed with the Commission] of this period, ATS will be granted an extension of this exclusivity period for that particular chain for an additional [Subject to a request for confidential treatment; Separately filed with the Commission]. After the [Subject to a request for confidential treatment; Separately filed with the Commission] period, ATS will be granted an extension of exclusivity in the account that performs with a [Subject to a request for confidential treatment; Separately filed with the Commission] increase in the number of Accounts from the prior [Subject to a request for confidential treatment; Separately filed with the Commission] period. The volume for calculating the [Subject to a

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request for confidential treatment; Separately filed with the Commission] period will be calculated by taking [Subject to a request for confidential treatment; Separately filed with the Commission] of the Account activations during the prior [Subject to a request for confidential treatment; Separately filed with the Commission] period.

13. REBATES. SunRocket agrees to pay ATS [Subject to a request for confidential treatment; Separately filed with the Commission] of the redemption value of any rebates offered on phone master base station units and/or combination package containing the master base station unit and any number of expansion units up to a maximum advertised rebate of [Subject to a request for confidential treatment; Separately filed with the Commission]. SunRocket agrees to pay ATS [Subject to a request for confidential treatment; Separately filed with the Commission] of the redemption value of any rebates offered on phone expansion units up to a maximum advertised rebate of [Subject to a request for confidential treatment; Separately filed with the Commission] (“Rebate”). ATS will invoice SP for the Rebate deposit prior to SP making any Rebate redemption payments. All payments to ATS shall be made to ATS via wire transfer on a bi-weekly basis, based on documented redemption.

14. RECORDS. Each party hereto shall maintain reasonably complete, clear and accurate records of all information required to determine the amounts of any payments or transactions under the Agreement. Each party hereto, upon giving thirty (30) days prior written notice to the other party hereto, and no more than once during any twelve (12) month period, may conduct, at reasonable times during regular business hours and subject to the Confidentiality Obligations of Section 21, an inspection and audit of the portions of such books and records of the other party as is necessary to verify that such payments, including the amounts thereof, have been made in accordance with the terms hereof.

15. TERM. This Agreement shall continue from the date this Agreement was entered into until the third anniversary of the date on which the first Account is activated (“Initial Term”). If at least [Subject to a request for confidential treatment; Separately filed with the Commission] Accounts have been activated between the Effective Date and the last day of the Initial Term because of ATS efforts pursuant to this Agreement, ATS shall have the option to extend the Initial Term for one year, subject to written notice to SP. Should ATS exercise this option, section 16 (b) (relating to certain SP payments prior to the expiration of the Term of this Agreement) shall be considered null and void, and SP shall not be required to make any payments to ATS pursuant thereto. SP will make commercially reasonable efforts to provide Services to support a pilot program supporting not more than five thousand (5,000) End Users by August 15, 2005 and a full commercial launch by September 30, 2005.

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16. TERMINATION.

a. This Agreement may be terminated prior to its expiration upon the occurrence of any of the following: (a) by the non-breaching party, if the other party materially breaches this Agreement which breach is not cured within thirty (30) days of written notice thereof to the breaching party; (b) by SP or ATS, upon a determination by any governmental authority with jurisdiction over the parties that the provision of the Telephones and/or Services under this Agreement in the jurisdictions in which the Telephones are being distributed is contrary to existing laws, rules or regulations; the party electing to terminate shall provide written notice to the other party setting forth in reasonable detail the factual basis for such termination and the parties agree in good faith to attempt to create a solution or workaround, or modify the Services to eliminate the requirement creating the basis for such termination in a manner mutually agreeable for a period of no less than ten (10) business days after the receipt of such notice and if such agreement is reached or the factual basis for such termination is otherwise resolved, then the Agreement shall not be terminated. Upon termination of this Agreement for any reason, ATS shall immediately cease production of the Telephones with Service provided by SP. Should ATS decide, in its sole discretion, to have SP continue to activate Accounts in Inventory, ATS shall provide SP with a final accounting setting forth the number of units in retail inventory (“Inventory Units”). SP will continue to support such promotional minutes on Inventory Units until all units are sold, ATS and SP further agree to use commercially reasonable efforts to migrate service on Telephones to another service provider including the transfer of all relevant and needed user records and any phone numbers used to fulfill any obligations under this Agreement. Should ATS decide, in its sole discretion, to have SP discontinue activation of Accounts in Inventory, then ATS shall immediately recall all Inventory Units as of the date of said election and shall agree to indemnify and hold SP harmless as set forth in Section 20 below.

b. SP agrees to pay ATS a fee equal to [Subject to a request for confidential treatment; Separately filed with the Commission] of Service revenues for the preceding two (2) months prior to the date of the Termination or expiry of the Term of this Agreement. For those End Users who activated their Services in the preceding twelve (12) months prior to the date of the Termination or expiry of the Term of this Agreement, SP agrees to pay ATS an additional [Subject to a request for confidential treatment; Separately filed with the Commission] of Service revenues for the preceding two (2) months, unless ATS materially breaches this Agreement.

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17. OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS. SP shall be the sole and exclusive owner of all right, title and interest in and to all patents, copyrights, trademarks, trade secrets or other proprietary rights (“Intellectual Property Rights”) its owns. ATS acknowledges that the SP System constitutes valuable trade secrets of SP and constitutes Confidential Information under this Agreement. ATS shall be the sole and exclusive owner of all right, title and interest (including, without limitation, all Intellectual Property Rights) in and to the ATS System. SP acknowledges that the ATS System constitutes valuable trade secrets of ATS and Confidential Information under this Agreement. Nothing in this Agreement shall be deemed to grant to one party, by implication, estoppel or otherwise, license rights, ownership rights or any other Intellectual Property Rights in any materials owned by the other Party or any affiliate of the other Party. Neither Party shall attempt to register the Intellectual Property Rights of the other Party, or cause any claim, lien or encumbrance to attach to any Intellectual Property Rights of the other Party nor decompile or reverse engineer any proprietary of the other Party. To the extent that ATS acquires any patent or other Intellectual Property Rights, ATS shall grant to SP a royalty-free, nonexclusive, nontransferable right and license under any such patent or resulting patent for the term of the Agreement.

18. INSURANCE. Each Party shall obtain and maintain, at its own cost, the insurance coverages that are described in Appendix H as being its respective responsibility. These insurance coverages do not create or imply any limitation of liability. The Party which is responsible for obtaining and maintaining certain insurance coverages shall provide the other Party with certificates of such insurance coverages promptly following the date that this Agreement has been executed by both Parties. Each insurance certificate shall provide that the insurance policy shall not be subject to termination without at least thirty (30) days prior written notice to the certificate holder. A Party responsible for obtaining and maintaining property insurance coverage shall use all commercially reasonable efforts to ensure that the policy contains a provision or endorsement which waives the insurance company’s right of subrogation against the other Party and its employees, agents, directors and officers in the event of any loss or damage from events within the coverage of the insurance policy.

19. USE OF MARKS. Any and all trademarks and trade names that SP uses are and shall remain the exclusive property of SP. ATS has no rights therein and shall not reproduce or use any corporate names, trademarks, service marks, trade names or logos of SP (collectively “Marks”) without SP’s express prior written consent. SP hereby grants ATS a limited, royalty-free license to use SP’s name and logo for the purpose of marketing the Products and Services during the Term of this Agreement, on all inserts, advertising, packaging, product and point of purchase, subject to the requirement of SP’s prior written approval as specified above.

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20. REPRESENTATIONS & WARRANTIES. Each party represents and warrants that: (a) it is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized; (b) it has all necessary power and authority to enter into this Agreement and to perform all its obligations hereunder; (c) neither the execution, delivery, or performance of this Agreement will (i) result in the breach of, or constitute a default under, the terms of any material contract to which it is a party or by which it is bound; (ii) violate its charter or by-laws; or (iii) require the consent or approval of any third party; and (d) it will perform its obligations hereunder in compliance with all applicable laws, rules and regulations. ATS further represents and warrants that the Telephones do not infringe any Intellectual Property Rights of any third party. EXCEPT FOR WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT, EACH OF SP AND ATS MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, TO ATS OR SP (AS APPLICABLE), OR TO ANY OTHER PERSON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING THE MERCHANTABILITY, SUITABILITY, ORIGINALITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OR OTHERWISE (IRRESPECTIVE OF ANY PREVIOUS COURSE OF DEALINGS BETWEEN THE PARTIES OR CUSTOM OR USAGE OF TRADE), OR RESULTS TO BE DERIVED FROM THE USE OF ANY SOFTWARE, SERVICES, HARDWARE OR OTHER MATERIALS PROVIDED UNDER THIS AGREEMENT.

21. INDEMNIFICATION. Each of ATS and SP shall defend, indemnify and hold the other and its affiliates harmless from any claims, demands, liabilities, losses, damages, judgments or expenses related thereto arising out of (i) its breach of the terms of this Agreement, (ii) its marketing or facilitation of the Services or provision of the Telephones or the ATS System, including, without limitation, claims of fraud, misrepresentation or theft arising there from, (iii) any misconduct on its part, (iv) its misuse or unauthorized use of the Marks, (v) any claim by a third party that the Services (in which case SP indemnifies), Telephones (in which case ATS indemnifies), or ATS System (in which case ATS indemnifies), or any portion or combination thereof contemplated under this Agreement, infringes any patent, copyright, trademark, trade secret, or other proprietary right of a third party , and (vi) its violation of FCC, trademark, telemarketing or privacy laws. In the event each acts in good faith in the other’s best interest to fulfill the terms of this Agreement in compliance with a request by the other or to protect the other from any loss due to fraudulent use, theft of services or harm to the other’s reputation, each party shall indemnify and hold the other harmless from any claims, demands, liabilities, losses, damages, judgments or expenses related thereto.

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22. MANNER OF CONDUCTING BUSINESS. ATS and SP agree that, at all times during the term of this Agreement, each party shall: conduct its business in a manner that reflects favorably on the Services and the ATS System; make no false or misleading representation with regard to each other or the Services or ATS System; and conduct its business and the performance of its obligations under this Agreement in compliance with all applicable laws and regulations including all laws relating to tax, currency exchange, export, and commercial corrupt practices.

23. CONFIDENTIALITY. “Confidential Information” means and all information which is of a confidential, proprietary, or trade secret nature, whether or not marked as confidential, that is furnished or disclosed by either party (“Disclosing Party”) to the other Party (“Receiving Party”) under this Agreement, including the specific business terms of the Agreement, business plans, technical data, performance data, programs, contracts, client lists, financial information, sales and marketing plans, business information, and any other information that is marked as “Confidential,” “Proprietary,” “Trade Secret,” or in some other manner to indicate its confidential, proprietary, or trade secret nature. Each of ATS and SP shall hold such Confidential Information in strict confidence and shall not reveal the same for a period of five (5) years after the termination of this Agreement, except for any information which is: generally available to or known to the public without violation of this Agreement; known to such party prior to the negotiations leading to this Agreement; or independently developed by such party outside the scope of this Agreement. Neither party shall be in breach of its confidentiality obligations hereunder if the Confidential Information is disclosed pursuant to a subpoena, judicial or governmental order or requirement (including the applicable disclosure requirements of the Federal securities laws and the rules and regulations of the Securities and Exchange Commission promulgated thereunder in the event that SP or ATS, as applicable, shall file a registration statement to initiate a public offering of its securities during the term of this Agreement), provided that the disclosing party only makes such disclosure to the extent required and, prior to making such disclosure, takes all reasonable steps to provide prompt and sufficient notice to the other party so that the other party may contest and/or limit such requirement, subpoena or order. Each of ATS and SP shall safeguard the Confidential Information of the disclosing party to the same extent that it safeguards its own confidential materials or data relating to its own business, and in any event with no less than a reasonable standard of care. Except as provided above, neither ATS nor SP shall reveal any such Confidential Information without the disclosing party’s express prior written consent. The parties agree that an impending or existing violation of these confidentiality provisions would cause to the disclosing party irreparable injury for which it would have no adequate remedy at law and the disclosing party may be entitled to obtain immediate injunctive relief prohibiting such violation, in addition to any other rights and remedies available to it.

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24. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY IN ANY RESPECT FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, RELIANCE OR PUNITIVE DAMAGES, WHETHER IN TORT, CONTRACT OR PRODUCT LIABILITY, NOR SHALL EITHER PARTY BE LIABLE FOR ANY LOSS OF PROFITS, REVENUE, DATA, GOODWILL, BUSINESS OPPORTUNITIES OR ANY OTHER COMMERCIAL DAMAGE OF ANY KIND OR NATURE WHATSOEVER. EXCEPT WITH REGARD TO ANY LIABILITY THAT RESULTS FROM INTENTIONAL MISCONDUCT BY A PARTY, INTELLECTUAL PROPERTY INDEMNIFICATION OBLIGATIONS, OR BREACH OF CONFIDENTIALITY OBLIGATIONS, IN NO EVENT SHALL THE LIABILITY OF EITHER PARTY WITH RESPECT TO ANY TELEPHONES OR SERVICES PROVIDED HEREUNDER EXCEED THE AGGREGATE AMOUNT PAYABLE UNDER THE TERMS OF THIS AGREEMENT RELATING TO THE SPECIFIC ACCOUNTS GIVING RISE TO ANY CLAIM, WHETHER IN CONTRACT, TORT OR OTHER LEGAL THEORY. IN THE EVENT THAT EITHER PARTY PROVES THAT A FRIVOLOUS LAW SUIT HAS BEEN INITIATED, THEN SUBJECT TO THE RULING OF AN ARBITRATOR, RULE 11 MAY APPLY.

25. APPROVAL. Whenever prior approval or consent is required in this Agreement, the approval or consent shall be memorialized in writing.

26. PUBLICITY. Neither party, without the prior written consent of the other party, will make any news release or other public statement or disclosure regarding the existence of the terms and conditions of all or any part of this Agreement or any discussions or negotiations relating thereto, except as may be required by applicable securities laws, but only upon reasonable advance notice to, and consultation with, the other party.

27. FORCE MAJEURE. Neither Party shall be liable to the other Party or be deemed to be in breach of this Agreement by reason of any Excusable Delay. A Party experiencing an Excusable Delay in its performance shall immediately notify the other Party by telephone (to be confirmed in writing within three days after the inception of the Excusable Delay) and shall describe in reasonable detail the circumstances causing such Excusable Delay. The Party experiencing Excusable Delay shall be excused from performance of such obligations so affected by the Excusable Delay event for the period during which the Excusable Delay event continues and for such time thereafter as is reasonably necessary to overcome the effects of such Excusable Delay. Both Parties shall use all commercially reasonable efforts to overcome or work around the Excusable Delay event as soon as reasonably practicable. The term “Excusable Delay” shall mean a delay in

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performance or failure to perform which is due to an event beyond the reasonable control of a Party and shall include, without limitation, (a) acts of God, weather conditions, explosion, flood, earthquake, or fire; (b) war or threat of war, sabotaging, riot, revolution, civil disturbance or requisition; (c) acts, restrictions, regulations, prohibitions or measures of any kind on the part of any governmental authority; (d) import and export regulations or embargos; or (e) strikes, lockouts, or other industrial actions or trade disputes.

28. CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York for contracts executed and to be performed entirely in such State.

29. ARBITRATION. The parties shall use their commercially reasonable efforts to resolve any disputes, controversies or claims arising out of, in connection with, or in relation to this Agreement, or the breach thereof (each, a “Dispute”). If SP and ATS cannot resolve any Dispute to their mutual satisfaction within a thirty (30) day period after the commencement of such efforts, then, in each such instance, the Dispute shall be submitted to binding arbitration pursuant to the rules of the American Arbitration Association before one arbitrator selected jointly by the ATS and SP; provided, however, that if the parties fail to select an arbitrator within thirty (30) days after initiation of arbitration, the American Arbitration Association shall make such selection. The arbitrator shall be governed by the laws of the State of New York in the settlement of any dispute submitted to him or her. The arbitration shall be held in the County and City of New York. The arbitrator’s award shall be final and judgment may be entered upon it in any court having jurisdiction thereof. Arbitration as provided in this paragraph 29 shall be the sole and exclusive remedy for any Dispute.

30. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments writings and all other communications between the parties, both oral and written. No change, amendment, modification, termination or attempted waiver of any of the provisions hereof shall be binding unless in writing and signed by an authorized signatory of both parties hereto.

31. NOTICE. Any notice required to be given by either party to the other shall be deemed given upon receipt only when mailed first class mail or by nationally recognized overnight courier service, duly addressed and with proper postage, if in writing addressed to the party to whom notice is being given at the address of such party set forth above.

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32. ASSIGNMENT. This Agreement is not assignable by either party hereto without the consent of the other party. Notwithstanding the foregoing, either party may assign this Agreement to any of its affiliates or subsidiaries without the consent of the other Party; provided that the party assigning the Agreement shall remain liable for the performance of such affiliate or subsidiary.

33. SEVERABILITY/WAIVER. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the validity or enforceability of any other part or provision of this Agreement. No waiver by any party of any breach of any provision hereof shall constitute a waiver of any other breach of that or any other provision hereof.

34. EXPORT COMPLIANCE. ATS agrees to comply with all applicable export control legislation. Certain parts of the ATS System may be subject to United States export laws prior to import to or export from another country in accordance with the Export Administration Regulations. ATS agrees to comply with such laws and regulations. Diversion contrary to U.S. law is prohibited and will be a breach of this Agreement.

35. SURVIVAL. The representations, warranties, limitations of liability, confidentiality, accrued payment obligations, and indemnities set forth in this Agreement shall survive the expiration or other termination hereof.

36. EXECUTION. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all counterparts shall constitute but one and the same instrument, sufficient evidence of which for all purposes shall be any set containing counterparts executed by both Parties. The Parties agree that such counterparts may delivered by facsimile and that such facsimile counterparts shall evidence a binding agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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Please acknowledge your acceptance of the above Agreement by signing where indicated below.

Sincerely,
American Telecom Services Inc.
By:	/s/ Adam Somer
Adam Somer, President Communications Services

Date:

AGREED TO AND ACCEPTED:

SUNROCKET, INC.

By: /s/ Kevin Bennis

Name, Title: CEO

Date: June 7, 2005

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Appendix A: The ATS System

The ATS System is a multi-handset cordless broadband phone. The master unit connects directly, using an RJ-45 connection, into the End User’s modem or router. Each master unit is able to connect with multiple extension handsets. The extension handsets receive their network connection by communicating with the master unit using radio. Their bases only serve to re-charge their battery. This phone, and future phones within this classification includes systems that have multiple handset configurations regardless of the radio technology that is used.

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Appendix B: Agent Fees

[Subject to a request for confidential treatment; Separately filed with the Commission]

*	*	*
*	*	*
*	*	*

*	*	*
*	*	*
*	*	*

*  [Subject to a request for confidential treatment; Separately filed with the Commission]

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Appendix C: Rate Plans

The following rate plans will be available to SP and ATS Service users on the Effective Date:

[Subject to a request for confidential treatment; Separately filed with the Commission]

Signature Edition: $24.95 per month

· Unlimited outbound minutes to U.S. & Canada

· $3 monthly allowance for International calls

· Unlimited inbound minutes

· Two U.S. phone numbers with voicemail

· 12+ free calling features**

· Two free Directory Assistance calls each month

· Enhanced 911 (where available)

· Bottom-Line Pricing (no extra charges for taxes or fees)

· Options:

· Extra phone number with voicemail ($3/month)

Annual Edition: $199.00 per year*

· Unlimited outbound minutes to U.S. & Canada

· $3 monthly allowance for International calls

· Unlimited inbound minutes

· Two U.S. phone numbers with voicemail

· 12+ free calling features**

· Two free Directory Assistance calls each month

· Enhanced 911 (where available)

· Bottom-Line Pricing (no extra charges for taxes or fees)

· Options:

· Extra phone number with voicemail ($30/year)

E    Customer canceling early will receive a prorated credit card refund for full unused months.

[Subject to a request for confidential treatment; Separately filed with the Commission]

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Appendix D: General Functions

1. Incoming Call Rate Centers, Area Codes and Geographic Availability

The Service is designed for End Users who use the Service in geographic locations for which SP can provide Enhanced 911 (E911) emergency support, which will initially be limited to the geographic coverage region for the rate centers associated with the available SP phone numbers. Enhanced 911 provides access to emergency dispatch operators, who will automatically receive location and call-back information with the call.

By the date of the pilot program described in Section 14, SP will provide coverage to a minimum of 1,500 rate centers in the U.S. By the date of the full commercial launch described in Section 14, SP will provide coverage to a minimum of 2,500 rate centers in the U.S. At the request of ATS, SP will make commercially reasonable efforts to expand the service coverage to geographic areas associated with key retailer locations.

2. Local Number Portability

Local number portability (the service that allows consumers to have their phone number moved from their previous service provider to SP) is currently available to all users in serviceable areas provided that the consumer’s existing provider supports this function. Local number portability will continue to be made available to all users in serviceable areas and will be made available to existing users as it becomes possible in their area.

3. Reporting

a. Service Usage

SP will provide ATS with reports, bi-weekly, available online, in an extensible format, reporting the vendor, the customer area code and exchange, the amount that the customer charged during that period and the total amount charged by that user in a month to date and year to date report. Charges will be broken down to show what charges are related to the basic service plan and which charges are related to additional services.

The following diagram shows the expected view to be represented in the report:

Vendor	Customer Area-code & Exchange	Basic services $ Charged (period) Below *	Basic services $ Charged (Total-life of account) Below *	Additional services $ Charged (period) Below *	Additional services $ Charged (Total-life of account) Below *	Basic services $ Charged (period) Above *	Basic services $ Charged (Total-life of account) Above *	Additional services $ Charged (period) Above *	Additional services $ Charged (Total-life of account) Above *
*	*	*	*	*	*	*	*	*	*

*  [Subject to a request for confidential treatment; Separately filed with the Commission]

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In addition, from time to time, ATS may identify additional reports to be generated by SP and delivered to ATS on an ad hoc or periodic basis.

b. Deactivated Accounts

SP will provide ATS with a report, bi-weekly, available online, in extensible format, detailing the number of deactivated Accounts and specifying to the best of its ability, the reason for each deactivation.

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Appendix E: Service Obligations

All customer services issues will first be directed to SR customer service via web, email or telephone. SR will handle all issues related to technical support, billing and general customer service and will use its commercially reasonable efforts to provide this service in accordance with its current service level standards of operation. SR’s current customer service level standards are as follows:

Hours of operation:

Billing, General Customer And Technical issues:	8 a.m. to 12 p.m. Monday to Friday 8 a.m. to 12 p.m. Saturday 8 a.m. to 12 p.m. Sunday
Hold times:	80% of all customer calls will be answered within 90 seconds with a maximum hold time average in any 24 hour period of 10 minutes
E-mail response time:	Max: 24 Hours (not including auto-responder)

In the event that for any reason SR provided customer service does not comply with the levels of service described above, SR will take immediate action to rectify and improve the level of service to be consistent with existing standards. Maximum “hold times” above mentioned will not include aggregate hold times as a result of a required transfer of customer service to ATS as described below.

When a customer inquiry is received that involves issues or problems related to the products provided by ATS, SR will use its commercially reasonable efforts to troubleshoot the problem using troubleshooting guidelines provided by ATS. ATS aggress to provide ongoing training and support to SR customer service representatives in an effort to equip them to answers questions related to ATS products.

Product (ATS) Returns:

ATS agrees to handle all aspects of ATS product returns regardless of the reason for the return. In no instance shall SR be required to take physical possession of or remedy defects or other issues related to ATS devices or products. In the event SR inadvertently receives ATS product returns, SR will immediately forward the returns to ATS at the location specified by ATS. Additionally, in the event SR receives a request to accept return of an ATS product, the request will be forwarded to ATS for resolution following the 2^nd level support escalation described above.

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Appendix F: Services

· Additional local numbers

· Additional remote numbers

· Enhanced fax

· International calling

· Mobile services

· Ring tones

· Directory assistance

· Broadband data

· Voice mail

· Extra domestic minutes (long distance and local)

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Appendix G: Retailers

[Subject to a request for confidential treatment; Separately filed with the Commission]

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Appendix H: Insurance

Within ten (10) business days of Effective Date:

· $1 million minimum per occurrence

· Aggregate of not less than $2 million

Each Party will name the other Party as an insured party under this policy by the date stipulated above.

By September 1, 2005:

· $3 million minimum per occurrence

· Aggregate of not less than $20 million

Each Party will name the other Party as an insured party under this policy by the date stipulated above.

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Appendix I: SunRocket Terms of Service

SunRocket Subscriber Agreement

This is an agreement (“Agreement”) between SunRocket, Inc. (“we”, “us” or “SunRocket”) and you, an end user (“you” or “user”) of SunRocket’s Personal Internet Phone Service (the “Service”) as described herein. By establishing, activating, using or paying for the Service, you acknowledge that you have read and understood these terms, you agree to the terms and conditions in this Agreement, and you represent that you are of legal age to enter this Agreement and become bound by its terms, including those pertinent to 911 Emergency Dialing, and to the prices, charges and conditions provided to you in association with your enrollment, including marketing materials and the SunRocket website, which are incorporated herein by reference. This Agreement governs the Service and any device, website or software used in conjunction with the Service.

Service Requirements. The Service requires a telephone adapter (the “Adapter”) obtained through SunRocket or a third party that allows you to place and receive calls through a regular telephone by using your high-speed Internet connection. SunRocket does not provide or support your high-speed Internet connection, which you need to supply at your own expense. We recommend that your high-speed connection has a capacity of at least 90 Kbps upstream and downstream. Since the Service depends on your high-speed connection, the correct configuration of the Adapter, and an adequate power supply, SunRocket does not guarantee continuous availability. You acknowledge and understand that the Service will not function in the absence of electrical power or if there is an interruption of your high-speed Internet connection. A power failure may require you to reset or reconfigure equipment in order to restore the Service.

Service Limitations. You understand and acknowledge that the Service may not be compatible with all non-voice communications equipment, including but not limited to, home security systems, medical monitoring equipment, fax machines, satellite television systems and computer modems. You waive any claim against SunRocket for interference or disruption of such services and equipment.

Service Term. The Service is offered on a month-to-month basis, beginning on the date SunRocket activates Service, and terms of this Agreement automatically renew on a monthly basis. SunRocket also offers the Service for twelve consecutive months pursuant to the optional SunRocket Annual EditionSM, described in greater detail below. You may cancel the Service at any time by contacting SunRocket according to the procedure described on the SunRocket website. If you cancel Service prior to the end of a monthly term, you will be responsible for paying the full month’s charges to the end of the then-current monthly term, including applicable fees and usage charges. Expiration of the term or cancellation of Service does not excuse you from paying all unpaid, accrued charges due in relation to the Agreement. You will not receive a partial credit for any prepaid monthly service charge for any days remaining in your cancellation month.

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Your Responsibility. You acknowledge and agree that you are fully responsible for all use on your account, and you accept full liability and responsibility for the actions of anyone who uses the Service via your account with or without your permission. You should safeguard your usernames and passwords, as well as the identifier of the Adapter (referred to as the “MAC address”) which SunRocket uses to authenticate usage on your account. Some of your calls may be transmitted over the public Internet, and you acknowledge that you are aware that the Internet is not a secure network, and that third parties may be able to intercept, monitor, or corrupt information you transmit over the Internet.

911 EMERGENCY DIALING

PLEASE READ THIS INFORMATION REGARDING 911 VERY CAREFULLY. BY ACTIVATING AND PAYING FOR THE SERVICE, YOU ACKNOWLEDGE AND AGREE TO THE LIMITATIONS OF SUNROCKET 911 EMERGENCY DIALING SERVICE, AND UNDERSTAND THE DISTINCTIONS BETWEEN SUCH SERVICE AND TRADITIONAL 911 or E911 CALLS. You agree to notify any user who may place calls using your Service, including any household residents or guests who may be present in your household, of the limitations of SunRocket 911 Emergency Dialing. We recommend that you maintain an alternative means of accessing emergency services in the event of Service disruption for any reason.

SunRocket 911 Service. SunRocket 911 Emergency Dialing is not available in all areas. To activate this service where available, you must register the physical location of your Adapter with SunRocket, and that location must be within the geographic serving area of a Public Safety Answering Point (“PSAP”) to which SunRocket has enabled for this service. If you fail to activate and properly configure 911 Emergency Dialing, the Service will not support 911 Emergency Dialing, and you acknowledge and agree to this requirement. 911 Emergency Dialing will not function until you receive notification from SunRocket, via electronic mail, website notation or some other means, that 911 Emergency Dialing has been successfully enabled for your Service, and you acknowledge and agree to this requirement.

Service Address. You provide the address for which you are ordering the Service (“Service Address”) during the registration process, which will be utilized by SunRocket in the establishment and operation of 911 Emergency Dialing as part of the Service. Failure to provide the correct and proper Service Address may result in misdirecting 911 calls to the incorrect PSAP or emergency operator and/or the failure to reach the correct location and render emergency service when requested. You acknowledge that 911 dialing will not function properly if you move your Adapter to another Service Address, either temporarily or permanently, unless the new Service Address has been properly recorded and is in an area for which SunRocket provides 911 Emergency Dialing. You may change your Service Address by following the procedures specified on the SunRocket website. The change of Service Address will not be effective until the change has been confirmed to you by SunRocket, via email or other written correspondence.

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Change of Service Address will take a minimum of ten business days to properly update the 911 emergency databases.

Enhanced 911 (“E911”). In certain areas in which SunRocket provides 911 Emergency Dialing, SunRocket provides E911 capabilities, if you have activated and properly configured 911 Emergency Dialing. When the caller dials 911 on a SunRocket-enabled phone with E911 service, SunRocket will automatically deliver the location information you provided at the time of activation, or as subsequently and properly updated, validated and acknowledged by SunRocket, to the PSAP with the 911 call. If the location information you provided is incorrect, the emergency call may be misdirected to a PSAP that does not serve your location, which as a result may be unable to render sufficient emergency service. You acknowledge that you are solely responsible for maintaining accurate physical location information on your SunRocket account. If you move your SunRocket equipment to another location, you must update your Service Address in accordance with the instructions on the SunRocket website.

Basic 911. In some areas in which SunRocket provides 911 Emergency Dialing, SunRocket may not support E911, and your physical location information may not be automatically delivered to the PSAP with the 911 call. The PSAP or local emergency dispatcher receiving a non-E911 emergency call may not be able to capture and/or retain automatic number or location information. This means that the dispatcher may not know the phone number or physical location of the person who is making the 911 call. Therefore, a caller dialing 911 using SunRocket may need to immediately tell the dispatcher the location of the emergency, and the caller must not prematurely disconnect the line, since the dispatcher may not have the phone number to call back the caller. If the caller is unable to speak or sufficiently describe the location, the emergency dispatcher may not be able to render emergency service to the appropriate location.

911 Service Limitations. 911 Emergency Dialing will not function if the Adapter is not configured correctly or if your SunRocket Service is not functioning for any reason, including, but not limited to, a power outage, high-speed service outage, or any suspension or disconnection of your SunRocket Service. If there is a power outage, you may be required to reset or reconfigure your equipment in order to reactivate SunRocket Service, including 911 Emergency Dialing. For technical reasons associated with the possibility of network congestion in the event of a local disaster, there is a greater possibility that a SunRocket 911 call will produce a busy signal, fail to be completed, or experience longer connection times, as compared to traditional 911 calls.

Acknowledgement. You understand and acknowledge that SunRocket 911 Emergency Dialing has certain characteristics that distinguish it from traditional, legacy, circuit-switched 911 service. These characteristics may make SunRocket unsuitable to some users. You should carefully evaluate your circumstances when deciding to activate SunRocket service. You acknowledge that it is your responsibility to determine the technology or combination of technologies best suited to meet your emergency calling needs, and to make the necessary provisions for access to emergency calling services,

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such as maintaining a conventional phone line or wireless phone as a backup means of completing emergency calls.

Suspension of Your Account. You acknowledge and understand that a Service outage due to suspension of your account as a result of billing issues or any other reason, including, but not limited to, those reasons described elsewhere in this Agreement, will prevent all service, including Emergency 911 Dialing.

Indemnification. You acknowledge and understand that SunRocket will not be liable for any Service outage and/or inability to dial 911 using SunRocket or to access an emergency service personnel due to the characteristics and limitation of SunRocket Service set forth in this document. You agree to defend, indemnify, and hold harmless SunRocket, its officers, directors, employees, affiliates and agents and any other service provider who furnishes services to you in connection with the Service, from any and all claims, losses, damages, fines, penalties, costs and expenses (including, without limitation, reasonable attorney fees) by, or on behalf of, you or any third party user of the Service relating to the failure or outage of the Service, including those related to 911 dialing. You acknowledge that SunRocket does not offer Lifeline service, and that we strongly recommend that you always have an alternative means of accessing emergency service. This provision supplements the general indemnification provision found below.

USE OF SERVICE

Resale and Transfer. You are expressly prohibited from reselling or transferring the Service, equipment and/or software to any other person for any purpose, without express written permission from SunRocket in advance.

Residential Use. The Service is intended for residential use. You are expressly prohibited from using the Service for autodialing, telemarketing (including without limitation charitable or political solicitation or polling), continuous or extensive call forwarding, fax broadcast, fax blasting or any other activity that results in excessive usage inconsistent with normal residential or home office usage patterns. If SunRocket determines, in its sole discretion, that you are reselling the Service, allowing persons residing outside of your household to regularly use the Service, or that your Service is being used for any of the aforementioned activities, SunRocket reserves the right to immediately terminate without notice or modify the Service and to assess additional charges for each month in which excessive usage occurred.

Calling Limitations. SunRocket does not support certain call types offered by traditional phone services, including, but not limited to, 0+ calling (including without limitation collect or third party billing), 900 and 976 calls and 10-10 “dial-around” calls. The Service may not support 311, 511 and/or other x11 services (other than 911 and 411) in some or all Service areas.

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Local Number Portability. If you transfer an existing phone number which is currently subscribed to a carrier other than SunRocket, the following terms and conditions apply: (1) you hereby authorize SunRocket to notify your local telephone company of your decision to switch your local services to SunRocket and to transfer your telephone number, and represent that you are authorized to take this action; (2) you acknowledge and agree that you must successfully install and activate your Adapter prior to the date that the number switch becomes effective; and (3) SunRocket has the right to refuse to import a number if, in its sole discretion, it does not have the infrastructure to support the number.

Network Disruption. You are expressly prohibited from any use of the Service or any other action that causes a disruption in the network integrity of SunRocket or its vendors, whether directly or indirectly. SunRocket, in its sole discretion, may terminate your Service without advance notice if it determines you are responsible for such disruptions.

Telephone Number. You may not sell any telephone number assigned by SunRocket (“Number”). Upon termination of the Service, SunRocket may, in its sole discretion, release a Number that was ported in from a previous service provider to SunRocket by you and used in connection with your Service provisioned by SunRocket to your new service provider, if such new service provider is able to accept such Number, provided that your entire account has been terminated, that you have paid all charges due to SunRocket, and that you request the transfer upon terminating your account.

Use Outside the United States. The Service is intended for use in the United States. If you remove the Adapter to a country other than the United States, you do so at your sole risk, including the risk that such activity violates local laws in the country where you do so. Use of the Service is expressly prohibited wherever its use violates local laws, and you are personally liable for any such violations. SunRocket reserves the right to terminate your Service immediately and without notice if it determines that you are using the Service in violation of applicable local laws.

Unlawful Use. You agree to use the Service only for lawful purposes. You are expressly prohibited from using the Service to transmit or receive any communication or material of any kind when in SunRocket’s sole judgment the transmission, receipt or possession of such communication or material would constitute, or encourages conduct that would constitute, a criminal offense, give rise to a civil liability, or otherwise violate any applicable laws. You are expressly prohibited from using the Service or Adapter for any abusive or fraudulent purpose, including using the Service in a way that interferes with our ability to provide Service to you or other customers or avoids your obligation to pay for communications services. SunRocket, in its sole discretion, may terminate your Service without advance notice if it believes you have violated the aforementioned restrictions. You are liable for any and all use of the Service by any person using the Service provided to you and agree to indemnify and hold harmless SunRocket against any and all liability for any such use. If SunRocket, in its sole discretion, believes that you have violated the aforementioned restrictions, SunRocket may forward personally

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identifiable information to the appropriate authorities for investigation and prosecution and you hereby consent to such forwarding.

Tampering. You agree not to change the electronic serial number or equipment identifier of the Adapter, or to perform a factory reset of the Adapter, without express written permission from SunRocket in each instance which SunRocket, in its sole discretion, may deny. You agree not to disrupt the Service or make any use of the Service that is inconsistent with its intended purpose or to attempt to do so. SunRocket, in its sole discretion, may terminate your Service without advance notice should you tamper with the device. Theft of Service. You agree to notify SunRocket immediately if the Adapter is stolen or if you become aware at any time that your Service is being stolen or fraudulently used. You must provide a detailed description of the circumstances of the theft or stolen or fraudulent use of the Service and supply any additional documentation reasonably requested by SunRocket. Failure to do so in a timely manner may result in the termination of your Service and additional charges.

Alternative Interface Devices. If you decide to use the Service through an interface device not provided or supported by SunRocket, which SunRocket reserves the exclusive right to prohibit, you warrant and represent that you possess all required rights, including software and/or firmware licenses, to use that interface device with the Service and you will indemnify and hold harmless SunRocket and its vendors against any and all liability arising out of your use of such alternative interface device with the Service. SunRocket has no obligation to support or service the use of such alternative interface devices in any way, and in its sole discretion may decline to provide the configuration information required to allow the device to effectuate the Service.

Copyright, Trademark, and Unauthorized Use. The Service and Adapter and any firmware or software used to provide the Service or provided to you in conjunction with providing the Service, or embedded in the Adapter, and all Services, information, documents and materials on SunRocket’s website are protected by copyright, trademark or other intellectual property laws and international treaty provisions. All websites, corporate names, service marks, trademarks, trade names, logos and domain names (collectively “Marks”) of SunRocket are and shall remain the exclusive property of SunRocket and nothing in this Agreement shall grant you the right or license to use such Marks. You acknowledge that you are not given any license to use the firmware or software used to provide the Service or provided to you in conjunction with providing the Service, or embedded in the Adapter, other than a nontransferable, revocable license to use such firmware or software strictly in accordance with the terms and conditions of the Agreement, and that the Adapter is exclusively for use in connection with the Service.

Audit and Law Enforcement. SunRocket reserves the right to audit your use of the Service to enforce the provisions of this Agreement. SunRocket reserves the right to track and monitor your Service and usage subject to the requirements of the United States Patriot Act and other laws and appropriate law enforcement processes. You acknowledge and agree that this Agreement is sufficient notice to you of such monitoring to the extent any notice is required under applicable federal or state law.

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CHARGES AND PAYMENTS

Billing. You must provide a valid credit card number when the Service is activated. You authorize SunRocket to charge automatically to your credit card any amounts payable by you in connection with your use of the Service. Your right to use the Service is subject to any limits established by your credit card issuer. Your charges and credits issued will appear on an online billing statement that you may access from the SunRocket website. You give SunRocket permission to obtain authorization for use of your credit card from your credit card issuer. If the card expires, you close your credit card account, your billing address changes, or the card is cancelled and replaced owing to loss or theft, you must advise SunRocket at once. Your initial use of the Service authorizes SunRocket to charge the credit card account number on file with SunRocket, updated by any changed information related to card expiration, replacement, or substitution. This authorization remains valid until 30 days after SunRocket receives your notice to terminate SunRocket’s authority to charge your credit card, whereupon SunRocket will charge you for any outstanding charges and terminate the Service. SunRocket bills all charges and applicable taxes monthly in advance (except for usage-based charges, which will be billed monthly in arrears, plus any other charges which SunRocket chooses to bill in arrears) to your credit card or other then-authorized payment option. SunRocket reserves the right to bill at more frequent intervals if the amount due at any time exceeds $50. All charges will be billed according to the rates and terms set forth in published materials and found on the SunRocket website.

Commencement of Billing. You understand that you are responsible for self-installation of the Adapter and any configuration of the Service once you receive the Adapter. If the Adapter is shipped to you by SunRocket, your Service is considered active five days after the shipment date or on the day you activate the Service, whichever comes first (the “Activation Date”). You are encouraged to promptly complete installation of the Service since you will be responsible for full payment for the charges on your SunRocket bill even if you have not yet installed the Adapter and used the Service at the time the bill is rendered.

Risk-Free Trial Guarantee. From time to time, SunRocket may offer a Risk-Free Trial Guarantee (“Trial Guarantee”), the duration (the “Trial Period”) and terms of which may vary according to the terms of specific sales promotions as described in the promotional literature or on the website, which is applicable only to your first-ordered account. (You will not qualify for the Trial Guarantee program if you cancel and subsequently re-establish a SunRocket account at the same or another location.) Under the terms of this Trial Guarantee, if it applies, SunRocket may refund some or all charges, excluding applicable taxes, provided the terms described below are satisfied. SunRocket reserves the right to terminate or revoke this Trial Guarantee at any time, without prior notice. In order to be entitled to this program, you must: (1) cancel the Service within the specified number of days in the Trial Period after the Activation Date; and (2) return the Adapter(s) undamaged and in original condition within seven days of Service cancellation, with all original packaging, documentation and accessory materials. No refund of usage charges will apply, including but not limited to, international calling and directory assistance

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charges. Equipment must be returned with a valid return authorization number obtained from SunRocket customer service, following prescribed procedures. You are responsible for the cost and risk of return shipping, unless otherwise specified in the terms of the promotional offer that applied to your enrollment and activation.

SunRocket Annual Edition^SM. The annual service fee associated with the optional SunRocket Annual EditionSM plan represents payment for twelve consecutive months of Service commencing on the Activation Date. You will be responsible for any additional charges for services or usage not covered by the plan, billed on a monthly basis. If you cancel the Service prior to the end of the annual period, you will receive a refund on a prorated fee basis for remaining full month periods, less outstanding charges. At the conclusion of the annual period, your Service will automatically revert to the month-to-month plan covering the equivalent service features, unless you choose to renew the SunRocket Annual EditionSM at the then-current renewal price.

Price and Price Changes. Prices and charges relating to the Service are posted on the SunRocket website. We may change the prices and charges for the Service from time to time. We may decrease prices without providing advance notice. Increases to the prices or charges for the Service are effective no sooner than fifteen days (1) after posted on the SunRocket website or (2) you are otherwise notified of the changes.

Failure to Pay. We may suspend, restrict, or cancel the Services and this Agreement, if you do not make payments for current or prior bills by the required due date. Service suspension or cancellation will result in your loss of the number associated with the Service.

Late Payment Charge. We may add interest charges to any past-due amounts at the lower of 1.5% per month or the maximum rate allowed by law, prorated for each day payment is past due. Acceptance of late or partial payments (even if marked “Paid in Full” or with other restrictions) shall not waive any of our rights to collect the full amount of your charges for the Service. You agree to reimburse us for reasonable attorneys’ fees and any other costs associated with collecting delinquent or dishonored payments. If charges cannot be processed through your credit card, we will charge you an additional $15.00. If the state where you receive the Service requires a different fee, we will charge you that amount.

Taxes. You are responsible for, and must pay, any applicable federal, state, local or other governmental sales, use, excise, public utility or other taxes, fees or charges now in force or enacted in the future, that arise from or as a result of your subscription or use or payment for the Service or associated equipment. These amounts are in addition to payment for the Service or equipment and will be billed to your credit card as set forth in this Agreement. If you are exempt from payment of such charges, you must provide documentation satisfactory to us that you are exempt. Tax exemption will only apply from and after the date SunRocket receives this documentation. Taxes will be in the amounts specified by federal, state and local authorities.

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Private and Confidential

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SunRocket Bottom-Line Pricing^SM. If your service plan qualifies for SunRocket Bottom-Line PricingSM, all applicable federal, state, local or other governmental taxes and charges will be included in the Bottom-Line Price specified for your service plan. The specified Bottom-Line Price represents the sum of SunRocket effective charges and all applicable governmental charges. Service plans qualifying for SunRocket Bottom-Line PricingSM are not available where prohibited by law. Service Interruption. You acknowledge and agree that credit allowances for interruption of the Service will not be provided.

Billing Disputes. You must notify SunRocket within seven days after receiving your credit card statement if you dispute any SunRocket charges on that statement or such dispute will be deemed waived.

SERVICE CANCELLATION

You may cancel the Service at any time by notifying SunRocket according to the procedures given on the SunRocket website. You remain fully liable for accrued charges outstanding at the time of termination, and you authorize SunRocket to process these charges to your credit card. If you received an Adapter directly from SunRocket at no additional charge and you cancel your SunRocket Service within one year of the Activation Date, SunRocket reserves the right to request that you return the equipment to us at our expense.

INDEMNIFICATION

You agree to defend, indemnify, and hold SunRocket, its affiliates, and agents and any other service provider who furnishes services to you or enables us to furnish services to you in connection with this Agreement or the Service, harmless from claims or damages relating to or arising out of the Service, the Adapter or its installation, or this Agreement, including, but not limited to, 911 Emergency Dialing or dialing associated with a security system.

You agree that SunRocket should not be and is not responsible for any third party claims against us that arise from your use of the Service. Further, you agree to reimburse us for all of our costs and expenses related to the defense of any such claims, including attorneys’ fees, unless such claims are based on our willful misconduct or gross negligence.

LIMITATIONS OF LIABILITY

BY ENROLLING IN, ACTIVATING, USING OR PAYING FOR THE SERVICE, YOU AGREE THAT YOU HAVE READ THIS AGREEMENT AND UNDERSTAND THE LIMITATIONS OF SUNROCKET SERVICE DESCRIBED HEREIN.

SUNROCKET’S LIABILITY TO YOU ON ACCOUNT OF ANY ACT OR OMISSION OF SUNROCKET RELATED TO THIS AGREEMENT, INCLUDING ACTS OR

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OMISSIONS RELATED TO 911 EMERGENCY DIALING, SHALL BE LIMITED TO ACTUAL DAMAGE TO REAL OR TANGIBLE PERSONAL PROPERTY, OR BODILY INJURY OR DEATH PROXIMATELY CAUSED BY SUNROCKET’S INTENTIONAL MISCONDUCT OR RECKLESSNESS. EXCEPT FOR DAMAGES THAT ARE THE DIRECT RESULT OF SUNROCKET’S WILLFUL OR INTENTIONAL MISCONDUCT, YOU WILL NOT BE ENTITLED TO ANY OTHER DAMAGES, INCLUDING INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES, REGARDLESS OF THE FORM OF ACTION. SUNROCKET AND OUR OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, CONTRACTORS AND REPRESENTATIVES WILL HAVE NO LIABILITY WHATSOEVER FOR ANY DAMAGES OR MODIFICATIONS TO, OR LOSS OR DESTRUCTION OF, ANY OF YOUR SOFTWARE, FILES, DATA OR PERIPHERALS. FURTHERMORE, AND NOTWITHSTANDING THE FOREGOING, IN NO CIRCUMSTANCES WILL THE AGGREGATE LIABILITY OF SUNROCKET OR ITS AFFILIATES ARISING WITH RESPECT TO THIS AGREEMENT EXCEED THE TOTAL AMOUNTS PAID BY USER IN THE TWELVE MONTHS UNDER THIS AGREEMENT IMMEDIATELY PRECEDING THE CLAIM.

WARRANTY LIMITATIONS

EXCEPT FOR THE LIMITED WARRANTY SET FORTH IN THE MATERIALS ACCOMPANYING THE EQUIPMENT, WE MAKE NO WARRANTIES OF ANY KIND REGARDING THE SERVICE, ADAPTER, OR ANY OTHER EQUIPMENT AND EXPRESSLY DISCLAIM ANY IMPLIED WARRANTIES, INCLUDING ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NON-INFRINGEMENT, OR ANY WARRANTIES THAT THE SERVICE WILL MEET CUSTOMER REQUIREMENTS. WE ALSO MAKE NO WARRANTY THAT THE SERVICE WILL BE UNINTERRUPTED OR ERROR FREE. WE DO NOT AUTHORIZE ANYONE, INCLUDING, BUT NOT LIMITED TO, SUNROCKET EMPLOYEES, AGENTS, OR REPRESENTATIVES, TO MAKE A WARRANTY OF ANY KIND ON OUR BEHALF AND YOU SHOULD NOT RELY ON ANY SUCH STATEMENT.

DISPUTE RESOLUTION BY BINDING ARBITRATION

IT IS IMPORTANT THAT YOU READ THIS ENTIRE SECTION CAREFULLY. THIS SECTION PROVIDES FOR RESOLUTION OF DISPUTES THROUGH FINAL AND BINDING ARBITRATION BEFORE A NEUTRAL ARBITRATOR INSTEAD OF IN A COURT BY A JUDGE OR JURY OR THROUGH A CLASS ACTION.

Any dispute or claim between you and SunRocket arising out of or relating in any way to the Service or the Adapter provided in connection with this Agreement shall be resolved by arbitration before a single arbitrator administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules. The arbitrator’s decision shall be final and binding. In conducting the arbitration and making any award,

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the arbitrator shall be bound by and strictly enforce the terms of this Agreement and may not limit, expand, or otherwise modify its terms. Without limiting the foregoing, the parties agree that no arbitrator has the authority to award relief in excess of what this Agreement provides.

NO DISPUTE MAY BE JOINED WITH ANOTHER LAWSUIT, OR IN AN ARBITRATION WITH A DISPUTE OF ANY OTHER PERSON, OR RESOLVED ON A CLASS-WIDE BASIS. THE ARBITRATOR MAY NOT AWARD DAMAGES THAT ARE BARRED BY THIS AGREEMENT, INCLUDING PUNITIVE OR EXEMPLARY DAMAGES OR ATTORNEYS’ FEES. YOU AND SUNROCKET BOTH WAIVE ANY CLAIMS FOR AN AWARD OF DAMAGES THAT ARE EXCLUDED UNDER THIS AGREEMENT.

The arbitration shall be conducted in English in the Commonwealth of Virginia and judgment on the arbitration award may be entered into any court having jurisdiction thereof. Either you or SunRocket may seek any interim or preliminary relief from a court of competent jurisdiction in the Commonwealth of Virginia, necessary to protect the rights or property of you or SunRocket pending the completion of arbitration.

YOU ACKNOWLEDGE THAT THIS ARBITRATION PROVISION CONSTITUTES A WAIVER OF ANY RIGHT TO A JURY TRIAL.

MISCELLANEOUS

General Provisions. This Agreement does not provide any third party with a remedy, claim, or right of reimbursement. Failure by SunRocket to enforce any provision(s) of this Agreement shall not be construed as a waiver of any provision or right. This Agreement, and all other aspects of the use of the Service and the SunRocket website, shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without regard to its choice of law rules. This governing law provision applies no matter where you reside, or where you use or pay for the Service. This Agreement constitutes the entire agreement between us and supersedes all prior agreements, understandings, statements or proposals concerning the Service, including representations, whether written or oral. No written or oral statement, advertisement, or service description not expressly contained in the Agreement will be allowed to contradict, explain, or supplement it. Neither you nor SunRocket is relying on any representations or statements by the other party or any other person that are not included in this Agreement. If any provision in this Agreement is found to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.

Events Beyond Our Control. SunRocket will not be responsible to you for any delay, failure in performance, loss or damage due to fire, explosion, power blackout, earthquake, volcanic action, flood, the weather elements, strike, embargo, labor disputes, civil or military authority, war, acts of God, acts or omissions of carriers or suppliers, acts of regulatory or governmental agencies, or other causes beyond our reasonable control.

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Assignment. We can assign all or part of our rights or duties under this Agreement without notifying you. If we do that, we have no further obligations to you. You may not assign this Agreement or the Service without our prior written consent.

Privacy. SunRocket Service utilizes, in whole or in part, the public Internet and third party networks to transmit voice and other communications. SunRocket is not liable for any lack of privacy which may be experienced with regard to the Service. Please refer to our Privacy Policy applicable to you on the SunRocket website for additional information.

Survival. The provisions of this Agreement relating to indemnification (including those relating to 911 Emergency Dialing), limitations on liability, warranty limitations, billings and your obligations to pay for the Service provided, including any additional usage charges, shall survive any termination of this Agreement or termination of the Service.

Changes to this Agreement. SunRocket may change this Agreement from time to time. Any changes will be posted at the Terms of Service section of the SunRocket website, currently located at www.sunrocket.com. Notice will be considered received by you and any such changes will become binding and effective on the date the changes are posted to the SunRocket website, except in the case of changes to the prices or charges, when we will comply with our notice commitments described above. IF YOU CONTINUE TO BE ENROLLED IN, USE, OR PAY FOR THE SERVICE AFTER ANY CHANGES IN THE PRICES, CHARGES, TERMS OR CONDITIONS, YOU AGREE TO THE CHANGES. The Agreement as posted supersedes all previously agreed to electronic and written terms of service.

Where required by law, customers who cancel their service within the first three days, or seven days, as applicable, following acceptance of this Agreement will be refunded all charges incurred with respect to their account.

SunRocket, Inc.

8615 Westwood Center Drive

Vienna, VA 22182

American Telecom Services, Inc.

Private and Confidential

Page 36 of 36

EX-10.6

Exhibit 10.6

[Letterhead of Gain Star International Limited]

TO:	American Telecom Services Inc.
ATTN:	Mr. Bruce
DATE:	June 22, 2005

Further to our previous discussions, we would like to put forward the proposal as below to accommodate your request to start business before you get PO from the customers or chain stores:

Gain Star International Limited will grant ATS an LC facility up to US$500K on a 20% cash deposit books or standby LC. That is, ATS shall put 20% of the LC amount into Gain Star’s bank account as deposit or issue a standby LC to Gain Star and then Gain Star will open 100% LC to the manufacturer when it receives ATS’ deposit. As preconditions, ATS shall sign the sales contract with Gain Star before the LC is opened and a sample LC form shall be provided for Gain Star’s approval.

The afore-said deposit shall only be released and/or the standby LC shall be allower to expire in the event that any of the following occurs: 1) ATS shall get CIT-approved PO and the Sales Contract along with the Assignment Agreement between ATS and Gain Star covers the goods under relative LC; 2) ATS pays in full the LC amount plus the initial charges as stated in the Sales Contract to Gain Star. In such case, Gain Star agrees to return the deposit within 3 working days after ATS written notification of the above mentioned occurrences and/or to allow the standby LC to expire.

Before the manufacturer effects delivery of the goods, ATS should receive approved PO from its customers and/or chain stores; the manufacturer shall never make delivery before ATS gets CIT-approved PO.

If the manufacture fails to make delivery or ATS fails to get CIT-approved PO within 90 days after the LC issuing date, Gain Star shall still be entitled to the initial charges as stated in the Sales Contract.

As this is an accommodation for ATS before Pos are received, Gain Star can stop issuing the LC when it, by its own discretion, thinks appropriate. All these transactions under this letter should be subject to the terms and conditions of the Sales Contract as well.

For and On Behalf of

GAIN STAR INTERNATIONAL LIMITED

Authorized Signature(s)

EX-10.7

Exhibit 10.7

Trust Account Agreement

This Trust Account Agreement, dated as of June 27, 2005 (“AGREEMENT”), is made by and between AMERICAN TELECOM SERVICES, INC. (“ATS”), a Delaware corporation with its business address at 2433 PECK ROAD, CITY OF INDUSTRY, CA 90601, hereby acting as Trustor, and GAIN STAR INTERNATIONAL LIMITED (“Gain Star”), a Hong Kong registered corporation with its business address at 20/F., The Sun’s Group Centre, 200 Gloucester Road, Hong Kong, hereby acting as Beneficiary.

WHEREAS, ATS and Gain Star have entered into a Sales Contract (“Sales Contract”), dated as of June 27, 2005, by which ATS shall purchase consumer products from Gain Star to be distributed in the United States, and ATS shall hire the CIT GROUP/ COMMERCIAL SERVICES, INC. (“CIT”) as a factoring company to collect the sales proceeds from its buyer(s).

WHEREAS, upon receipt of the sales proceeds, CIT shall deposit 10% of it into this Trust Account as a contingency fund to deal with any returned or rejected products from ATS’ buyer(s);

WHEREAS, this Trust Account Agreement shall be incorporated into, and made part of the Sales Contract by this reference;

WHEREAS, pursuant to the terms and conditions of the Sales Contract, ATS shall create a Trust Account for the benefit of Gain Star with a bank to be approved by Gain Star;

WHEREAS, Bank has agreed to accept ATS as its customer to open an trust account for the beneficiary of Gain Star, and

WHEREFORE, in order to properly maintain, manage and use the Trust Account to serve the above purposes, all the parties hereto have entered into this Trust Account Agreement as follows:

Article 1:

Two Signatories Required At All Times for Disposition of the Fund In the Trust Account

1.01. At the time when the Trust Account is set up, there shall be designated two signatories to act jointly and concurrently in order to dispose of the fund within the Trust Account. One of the co-signatories shall be designated by Gain Star, and shall not be removed for any reasons without Gain Star’s prior written consent. The other co-signatories shall be designated by ATS.

1.02. At all times while the Trust Account exists, any instructions to the Bank to withdraw, transfer, make payment, wire out, cancel or stop payment, or in any other way to dispose of the fund (collectively “Disposition of the Fund”) within the Trust Account must be in writing and bearing both the two designated co-signatories’ original signatures at the same time. No one single signatory can order the Bank to make any Disposition of the Fund within the Trust Account. Any written instructions bearing only one signatory’s original signature are void and invalid.

1.03. Any instructions to the Bank concerning the closing of the Trust Account, or changing the service of the Trust Account in any manner, must be made by a joint written instruction bearing both the two co-signatories’ original signatures at the same time.

1.04. Despite of the above, however, either of the two co-signatories has the right to make unilateral inquiries with the Bank concerning the balance or the movement of the fund within the Trust Account.

1.05. ATS shall take appropriate action to assure that the co-signatory designated by Gain Star shall remain as one of the two co-signatories on the Bank’s record at all times, and shall refrain from doing anything to change, replace, remove, repudiate, or otherwise to invalidate Gain Stat’s designated signatory from the Bank’s record on the Trust Account. If Gain Star desires to change its designated signatory at any time, Gain Star shall give written notice to ATS, and upon receipt of such written notice from Gain Star, ATS shall take prompt action to notify the Bank to change the Gain Star’s designated signatory accordingly.

Article 2:

Initial Designation of the Two Co-signatories to the Trust Account

2.01. Gain Star hereby appoints the following person to be its designated signatory to the Trust Account:

Name of the signatory: 

Address:

Telephone Number:

Facsimile Number:

E-Mail Address:

Signature Specimen:

2.02. ATS hereby appoints the following person to be its designated signatory to the Trust Account:

Name of the signatory: 

Address:

Telephone Number:

Facsimile Number:

E-Mail Address:

Signature Specimen:

Article 3:

Recipient’s Address for Receiving Bank Statements, Notices and Other Communication

3.01. All the bank statements, notices or other communication regarding the Trust Account (collectively “Trust Account Documents”) shall be sent directly to Gain Star’s designated signatory at the following address:

Name of the Recipient:	AMERICAN TELECOM SERVICES, INC. c/o
Address:
Telephone Number:
Facsimile Number:
E-Mail Address:

3.02. Upon request, the recipient of the Trust Account Documents shall make a copy of the documents received and deliver the same to ATS for its record.

Article 4:

Use of the Trust Account

4.01. As specified in Section 11 of the Sales Contract, ATS and Gain Star hereby agree to instruct CIT to wire automatically 10% of each lot of payment (“Proceeds”) that CIT collects from customers or chain stores to the Trust Account; provided, however, that in the event the actual rate of returned or rejected goods is less than 10% after completion of the first six (6) months calculated from the date that Gain Star receives its first payment pursuant to the Sales Contract, then Gain Star and ATS will mutually agree to reduce the percentage payment to the Trust Account called for by this Section 4.01 and will notify CIT of such reduction within three (3) working days thereafter.

4.02. The Trust Account is a contingency fund to deal with any returned or rejected goods from customers or chain stores. Each 10% of Proceeds (or such lesser percentage as shall be agreed to by Gain Star and ATS) shall be released ninety (90) days after it is deposited into the Trust Account by wire or other electronic transmittal method to a bank account to be specified by ATS except as hereinafter provided:

4.02.1. In the event funds wired to Gain Star by CIT for a specific transaction are insufficient to cover the requisite Letter of Credit plus the Initial Charges during the requisite payment term period for that transaction, all as stated in Section 17 of the Sales Contract, then Gain Star, in its discretion, may request ATS to pay the deficiency from the Trust Account upon presentment to ATS of Gain Star’s documented statement of account with respect to that transaction, whereupon ATS shall do so within seven (7) working days thereafter.

4.02.2. If the balance in the Trust Account Fund is insufficient to cover the deficiency for a specific transaction in its entirety, as contemplated by Section 4.02.1., then, in such event, ATS shall pay that portion of the deficiency not covered by the Trust Account Fund to Gain Star, upon

Gain Star’s presentment to ATS of its documented statement of account with respect to that transaction, within seven (7) working days after partial payment thereon has been made to Gain Star from the Trust Account Fund. If, however, no payment shall have been made from the Trust Account Fund to Gain Star due to a lack of funds therein, then ATS shall pay the deficiency in its entirety to Gain Star within seven (7) working days after Gain Star’s presentment of its documented statement of account to ATS as contemplated in the immediately proceeding sentence. An extra of 0.5 will be charged to ATS on a daily basis until payment is received by Gain Star if ATS does not pay Gain Star within the applicable seven (7) working day period.

Article 5:

Miscellaneous Provisions

5.01. This Trust Account Agreement shall be governed by and construed in accordance with the applicable laws of the Hong Kong Special Administrative Region. Should any provision or condition in this Agreement be declared void for any reason, it shall not affect the validity of other provisions, as if the invalid part, clause, provision, or condition had not been included.

5.02. This Trust Account Agreement constitutes the entire agreement between ATS and Gain Star concerning their rights and obligations with respect to the opening, maintaining and using the Trust Account with the Bank. Any other prior negotiations, understandings, or agreements or representations not expressly set forth in this Agreement shall have no effect, except for a subsequent written modification signed by all the parties hereto. No modifications or changes in this Trust Account Agreement shall be valid or binding unless made in writing and signed by all the parties hereto.

5.03. In the event that any party to this Trust Account Agreement brings any legal action or seeks arbitration regarding the enforcement of this Trust Account Agreement, the prevailing party in the litigation or arbitration shall be entitled to recover reasonable attorneys’ fees from the other party, in addition to any other relief that may be granted.

5.04. This Trust Account Agreement is and shall be binding upon and inure to the benefit of the parties hereto and their respective officers, directors, shareholders, owners, attorney, heirs, assigns and successors in interest.

WHEREAS, the representatives signing below represent that they are the authorized officers of each of the respective corporations herein, and they each are empowered to act on behalf of each respective corporations to enter this Agreement. They each acknowledge that they have read and understand the contents and meaning of the terms and conditions of the above Trust Account Agreement, and they have opportunities to seek independent legal opinions regarding the legal effect of the terms and conditions of the Agreement, and they agree and accept the Agreement in its entirety. Witness their respective powers and authorities by their signatures executed herein below.

Dated:		Dated:
AMERICAN TELECOM SERVICES, INC.		GAIN STAR INTERNATIONAL LIMITED
By:		By:
	Print Name and Title of the Officer		Print Name and Title of the Officer

EX-10.8

Exhibit 10.8

SALES CONTRACT

1. Preamble

AMERICAN TELECOM SERVICES, INC., a Delaware corporation with a registered business office at 2433 PECK ROAD, CITY OF INDUSTRY, CA 90601 (hereinafter called “the buyer”), agrees to buy and GAIN STAR INTERNATIONAL LIMITED, with a registered office at 20/F., THE SUN’S GROUP CENTRE, 200 GLOUCESTER ROAD, HONG KONG (hereinafter called “the seller”) agrees to sell, certain products based upon a Sales Contract (hereinafter called “the contract”) which contains the terms and conditions in the following:

2. Source of Goods

The buyer shall source certain goods at buyer’s specifications (hereinafter called “the goods”) from manufacturer (hereinafter called “the manufacturer”) directly. Specifications, including but not limited to quantity, packaging and delivery schedule of the goods shall be negotiated between the buyer and the manufacturer directly, under no circumstance shall the seller be responsible for the Quality, Specification and the Performance of the Manufacturer. Seller will authorize Manufacturer to handle all the QA and QC issues and return issues direct with the buyer in writing and will notify the Manufacturer of this document as it pertains to the QA, QC and specifications responsibility. In the event there are returned goods, the buyer will instruct the seller to deduct the amount designated and documented by the buyer from those purchase orders that the Letter of Credit hasn’t been opened yet, if authorized by the manufacturer. And if there is a discrepancy in the existing Letter of Credit opened to the manufacturer when the documents are presented, the seller will hold the payment until the Letter of Credit expires or the discrepancy is cured. The seller will use this leverage to support the buyer in a best efforts basis to deduct the amount.

3. Independent Transactions

Each source contract of the goods between the seller and the manufacturer shall form an independent transaction under the contract. Unless otherwise stated, the terms of each transaction hereunder shall follow all terms and conditions and amendments in the said source contracts concurrently.

4. Market of Goods

Unless otherwise agreed, the buyer agrees to resell the goods to customers and/or chain stores in the North America who to be approved one by one by THE CIT GROUP/ COMMERCIAL SERVICES, INC. (“CIT”) and at open account within the credit limit approved by CIT. The buyer will authorize the seller to have full access to CIT’s online service system which CIT grants to the buyer, as the information provided on CIT’s online service system pertains only to the seller’s specific transaction.

5. The Buyer’s Sales Price

The buyer’s sales price of the goods shall be determined at costs to the manufacturer plus the Charges in term 17(“Initial Charges”). The Initial Charges may be altered from time to time subject to written mutual agreement with 30 days notification in writing and will not effect any current transaction opened prior to the written notification.

The wholesale selling price of the goods shall be determined by the buyer only. The seller shall inform the buyer immediately in written notice of the wholesale selling price change and any such change will not effect any current transaction opened prior to the written notice. The seller shall take appropriate action to assure that the percentage payable to the seller can cover the buyer’s sales price. Schedule I represents the standard wholesale selling price the buyer will offer. In the event the price changes up or down on an existing product or a new product, the buyer and seller agree to notify CIT and to instruct CIT to amend or create a new three party agreement that will amend the percentage payable to the seller. This percentage may go up or down as it relates to the price changes and/or new products prices where the cost of goods is representing a different ratio to the wholesale selling price.

6. Payment

Payment due dates may vary from time to time to be determined by the seller in invoices. However, the payment will always be at a minimum of 90 days after the shipping date as shown on the Bill of Lading.

7. Returned or Rejected Goods

Under no circumstances, shall the seller refund to the buyer any money arising from returned or rejected goods without collecting the same from the manufacturer. In the event the manufacturer pays the seller for any returns, product allowances, or discounts and not limited to these categories or any payment that pertains to the buyer, then the it will be required by the seller to remit the funds within 5 days of receipt to the buyer. In the event the manufacturer violates the agreement with the buyer in any material way or there is an epidemic issue on any transaction, then upon buyer’s notification the seller shall help the buyer to suspend opening a new Letter of Credit and, only when the documents are presented with a discrepancy for an existing Letter of Credit, to hold the acceptance procedure until the situation is reconciled with the acceptance of both the buyer and the seller. Any catastrophic issue must be settled to the mutual written and signed satisfaction by and of all three parties.

8. Hold Harmless

The buyer shall insure, defend indemnify and hold the seller harmless from and against any and all claims arising out of this contract, provided the seller did not contribute in any material way to a breach, including but not limited to attorney’s fees and costs and also agrees to reimburse the seller on demand all direct expenses documented and listed in section 17. And the buyer agrees to add the seller as an additional insured on the Product Liability Insurance that the buyer purchases from the insurance company.

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9. Condition Precedents to the Contract

9.1 Factoring Agreement

The buyer shall factor its invoices or account receivables with CIT as an approved factor by the seller.

9.2 Assignment Agreement

The buyer shall assign 70% of the proceeds of the total account receivable collected by CIT from each transaction as it applies to the order according to mutual agreement between the buyer and the seller prior to the transaction. CIT will participate in a three party agreement between the seller and the buyer to guarantee their payment upon collection from the bank and or retail channel to the seller. The amount payable to the seller may never exceed the buyer’s sales price plus all expenses to land the product to the US warehouse.

10. Condition Precedents to Each Transaction

10.1. The seller must receive a purchase order from the buyer.

10.2. The seller must receive a copy of purchase order from approved customers or chain stores by CIT.

10.2.1. The order Amount must be approved by CIT used by the buyer and submitted to the seller.

10.2.2. The seller must receive a copy of source contract which will be evidenced by the actual PO submitted to the manufacturer through the seller relating to the above purchase order; and

10.2.3. The seller must receive a sample wording of the required letter of credit required by the buyer and the manufacturer.

11. Trust Account

The Buyer shall create a Trust Account for the benefit of the Seller and the buyer with WESTERN STATES BANK IN, DUARTE CA, except when the buyer notifies the seller that a bank change will be made prior to a transaction. The seller will not withhold acceptance of this change at any time as long as all rights and guidelines remain the same as designated in the Trust Account Agreement and Section 11 of this contract.

The Trust Account is a contingency fund to deal with any returned or rejected goods from customers or chain stores. Upon receipt of the sales proceeds, the buyer and the seller agree to instruct CIT to wire automatically 10% of each lot of payment (“Proceeds”) that CIT collects from customers or chain store to the Trust Account, except in the event the actual rate of returned or rejected goods is less than 10%, after evaluation in the first 6 months calculated from the date that the seller receives the first payment. Then both parties will agree to reduce the percentage required for the Trust Account by the amount

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documented on future transactions and will notify CIT within 3 (three) working days of this conclusion, of the change in the Trust Account percentage to be wired by CIT in each of the seller’s transaction. Such 10% of Proceeds can be released 90 days after it is deposited into the Trust Account by wire or other electronic transmittal methods to a bank account specified by the buyer unless the followings occur:

A. In case the amount CIT the factor wires to the seller is not sufficient to cover amount under the Letter of Credit plus the Initial Charges as stated in Section 17 of this contract in the required payment term period, then the seller may request the buyer to pay upon the seller’s documented statement of the account, and the buyer shall not refuse to pay the seller within 7 (seven) working days the difference from the Trust Account and the balance due within the terms of the specific transaction.

B. In case the amount in the Trust Account is not sufficient to cover the difference, within the payment term period, as it relates to the specific transaction from the seller and the requirements of the sale contract as agreed upon, the buyer shall then have the obligation under the Sales Contract to pay to the seller after receiving the seller’s documented statement of account as it pertains to the specific transaction, the remaining balance within 7 (seven) working days after the amount in the Trust Account is paid to the seller in accordance with the terms as stated in the sales contract and as it relates to the specific transaction designated. An Extra of 0.5 every day will be charged in case the buyer effects payment of the remaining balance after 7 (seven) working days.

12. Right of Refusal

The seller has the absolute discretion to decline a particular transaction without an obligation to advise the buyer the reasons to the final decision except where all requirements are followed in accordance with this agreement, such decision must be given in writing within 7 (seven) days after the seller receives a proposal of transaction or a purchase order.

13. Governing Law

The contract shall be governed by the laws of the Hong Kong Special Administrative Region.

14. Arbitration

Any dispute, controversy or claim arising out of or relating to the contract, or the breach termination or invalidity thereof, shall be settled by arbitration or litigation in Hong Kong or in Los Angeles California USA under the laws of the Hong Kong Special Administrative Region. In case of arbitration, there shall be only one arbitrator in the arbitral tribunal to be appointed by Hong Kong International Arbitration Centre.

Both parties agree that arbitral proceedings in the above may be consolidated with other arbitral proceedings if they exist and that the power to order consolidation of proceedings shall be conferred on the arbitral tribunal.

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15. Commencement and Termination

The contract shall commence on [            ], 2005 and be perpetual subject to written notice of cancellation tendered by either party at any time in 30 (seven) days in the future. Termination of the contract shall not relieve the liabilities of both parties hereunder until their natural expiration on existing transactions.

16. Communication

Any written notices regarding the contract shall be sent by mail or fax, return receipt requested and shall be deemed received three business days after delivery, addressed as follows:

The Buyer’s Address:

American Telecom Services, Inc.

2433 PECK ROAD, CITY OF INDUSTRY, CA 90601

Tel: 562-205-1080             Fax: 562-205-1088

The Seller’s Address:

Gain Star International Limited

20/F., The Sun’s Group Centre, 200 Gloucester Road, Hong Kong

Tel: 852-2721 6699            Fax: 852-2721 4383

17. Initial Charges

• Handling Charge

The Seller’s Handling Charge is 1.5% of the amount of the Letter of Credit , a minimum margin of [US$1,500] is required for each transaction. If a usance Letter of Credit is required to be opened to the manufacturer, the seller is entitled to charge the buyer an extra of 0.2% for Letter of Credit after 30 days sight or 0.4% for Letter of Credit after 60 days sight and so on.

• Banking Charge

• Commission on Letter of Credit, current at [0.5]% of the amount of Letter of Credit;

• Commission in lieu of exchange, [0.25]% of amount of the amount of Letter of Credit;

• Interests are to be calculated from Bills of lading issuing date to the date that the seller receives payment of full invoice value. The Prime Rate of US dollars on the date of Bill of lading as shown on website: www.bloomberg.com/markets/rates/ shall be applicable when interests are calculated.

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• Legal expenses in establishing security required by the seller. The seller may not file any first position security interest as CIT will have the first position on all assets.

In witness whereof, the contract is hereby executed by their respective authorized representatives in duplicate.

For and on behalf of	For and on behalf of
American Telecom Services, Inc.	Gain Star International Limited
Authorized Signature	Authorized Signature
Date:	Date:
Reference:	Reference:

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EX-10.9

Exhibit 10.9

CIT COMMERCIAL SERVICES

300 South Grand Avenue

Los Angeles, California 90071

Date: July 6, 05

American Telecom Services, Inc.

2466 Peck Road

City of Industry, California 90601

FACTORING AGREEMENT

Ladies and Gentlemen:

We are pleased to confirm the terms and conditions that will govern our funds in use accounting, non-borrowing, notification factoring arrangement with you (the “Agreement”).

1. Sale Of Accounts. You sell and assign to us, and we purchase as absolute owner, all accounts arising from your sales of inventory or rendition of services, including those under any trade names, through any divisions and through any selling agent (collectively, the “Accounts” and individually, an “Account”).

2. Credit Approval.

2.1. Requests for credit approval for all of your orders must be submitted to our Credit Department via computer by either: (a) On-Line Terminal Access, or (b) Electronic Batch Transmission. If you are unable to submit orders via computer, then orders can be submitted over the phone, by fax or in writing. All credit decisions by our Credit Department (including approvals, declines and holds) will be sent to you daily by a Credit Decisions Report, which constitutes the official record of our credit decisions. Credit approvals will be effective only if shipment is made or services are rendered within thirty (30) days from the completion date specified in our credit approval. Credit approval of any Account may be withdrawn by us any time before (a) such time that shipment is made or services are rendered and (b) title to the goods being sold has passed to your customer.

2.2. We assume the Credit Risk on each Account approved in the Credit Decision Report. “Credit Risk” means the customer’s failure to pay the Account in full when due on its longest maturity solely because of its financial inability to pay. If there is any change in the amount, terms, shipping date or delivery date for any shipment of goods or rendition of services (other than accepting returns and granting allowances as provided in Section 8 below), you must submit a change of terms request to us, and, if such pertains to a Factor Risk Account, then we shall advise you of our decision either to retain the Credit Risk or to withdraw the credit approval. Accounts on which we bear the Credit Risk are referred to collectively as “Factor Risk Accounts”, and individually as a “Factor Risk Account”. Accounts on which you bear some or

all of the risk as to credit are referred to collectively as “Client Risk Accounts”, and individually as a “Client Risk Account”.

2.3. We shall have no liability to you or to any person, firm or entity for declining, withholding or withdrawing credit approval on any order. If we decline to credit approve an order and we furnish to you any information regarding the credit standing of that customer, such information is confidential and you agree not to reveal same to the customer, your sales agent or any third party. You agree that we have no obligation to perform, in any respect, any contracts relating to any Accounts.

3. Invoicing. You agree to place a notice (in form and content acceptable to us) on each invoice and invoice equivalent that the Account is sold, assigned and payable only to us, and to take all necessary steps so that payments and remittance information are directed to us. All invoices, or their equivalents, will be promptly mailed or otherwise transmitted by you to your customers at your expense. You will provide us with copies of all invoices (or the equivalent thereof if the invoices were sent electronically), confirmation of the sale of the Accounts to us and proof of shipment or delivery, all as we may reasonably request. If you fail to provide us with copies of such invoices (or equivalents) or such proofs when requested by us, we will not bear any Credit Risk as to those Accounts.

4. Representations And Warranties.

4.1. You represent and warrant that: each Account is based upon a bona fide sale and delivery of inventory or rendition of services made by you in the ordinary course of business; the inventory being sold and the Accounts created are your exclusive property and are not, and will not be, subject to any lien, consignment arrangement, encumbrance or security interest other than in our favor; all amounts are due in United States Dollars; all original invoices bear notice of the sale and assignment to us; any taxes or fees relating to your Accounts or inventory are solely your responsibility; and none of the Accounts factored with us hereunder represent sales to any subsidiary, affiliate or parent company. You also warrant and represent that: your customers have accepted the goods or services and owe and are obligated to pay the full amounts stated in the invoices according to their terms, without dispute, claim, offset, defense, deduction, rejection, recoupment, counterclaim or contra account, other than as to returns and allowances as provided in Section 8 below (the foregoing being referred to in this Agreement as “Customer Claims”).

4.2. You further represent and warrant that: your legal name is exactly as set forth on the signature page of this Agreement, you are a duly organized and validly existing business organization incorporated or registered in the state of Delaware, and are qualified to do business in all states where required; the most recent financial statements provided by you to us accurately reflect your financial condition as of that date and there has been no material adverse change in your financial condition since the date of those financial statements. You agree to furnish us with such information concerning your business affairs and financial condition as we may reasonably request from time to time, including financial statements as of the end of each fiscal year.

4.3. You agree that you will promptly notify us of any change in your: name, state of incorporation or registration, location of your chief executive office, place(s) of business,

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and legal or business structure. Further, you agree that you will promptly notify us of any change in control of the ownership of your business organization, and of significant lawsuits or proceedings against you.

5. Purchase Of Accounts. We shall purchase the Accounts for the gross amount of the respective invoices, less: factoring fees or charges, trade and cash discounts allowable to, or taken by, your customers, credits, cash on account and allowances (“Purchase Price”). Our purchase of the Accounts will be reflected on the Statement of Account (defined in Section 10 below), which we shall render to you, which will also reflect all credits and discounts made available to your customers.

6. Advances. We do not expect to advance funds to you prior to the collection of the Accounts, but we may do so at your request in our sole discretion, subject to such additional terms and conditions as we may reasonably request. We have the right, at any time and from time to time, to hold any reserves we deem reasonably necessary as security for the payment and performance of any and all of your Obligations (defined in Section 12 below). All amounts you owe us, including all advances to you and any debit balance in your Client Position Account (defined in Section 10 below), and any Obligations, are payable on demand and may be charged to your account at any time.

7. Payment Of Accounts.

7.1. All payments received by us on the Accounts will be promptly applied to your account with us after crediting your customer’s account. The Purchase Price for Accounts with respect to which such remittances have been received and applied by us during a week, less any amounts due us, will be transferred and disbursed to you on Thursday of the following week, or on the next business day thereafter, if said Thursday is not a business day. No checks, drafts or other instruments received by us will constitute final payment of an Account unless and until such items have actually been collected.

7.2. The amount of the Purchase Price of any Factor Risk Account which remains unpaid will be deemed collected and will be credited to your account as of the earlier of the following dates:

(a) the date of the Account’s longest maturity if a proceeding or petition is filed by or against the customer under any state or federal bankruptcy or insolvency law, or if a receiver or trustee is appointed for the customer; or

(b) the last day of the third month following the Account’s longest maturity date if such Account remains unpaid as of said date without the occurrence of any of the events specified in clause (a) above.

If any Factor Risk Account credited to you was not paid for any reason other than Credit Risk, we shall reverse the credit and charge your account accordingly, and such Account is then deemed to be a Client Risk Account.

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8. Customer Claims And Charge Backs.

8.1. You must notify us promptly of any matter affecting the value, enforceability or collectibility of any Account and of all Customer Claims. You agree to promptly issue credit memoranda or otherwise adjust the customer’s account upon accepting returns or granting allowances. For full invoice credit memoranda, you agree to send duplicate copies thereof to us and to confirm their assignment to us. We shall cooperate with you in the adjustment of Customer Claims, but we retain the right to adjust Customer Claims on Factor Risk Accounts directly with customers, upon such terms as we in our sole discretion may deem advisable.

8.2. We may at any time charge back to your account the amount of: (a) any Factor Risk Account which is not paid in full when due for any reason other than Credit Risk; (b) any Factor Risk Account which is not paid in full when due because of an act of God, civil strife, or war; (c) anticipation (interest) deducted by a customer on any Account; (d) Customer Claims; (e) any Client Risk Account which is not paid in full when due; and (f) any Account for which there is a breach of any representation or warranty. A charge back does not constitute a reassignment of an Account. We shall immediately charge any deduction taken by a customer to your account.

8.3. We may at any time charge to your account the amount of: (a) payments we receive on client risk Accounts which we are required at any time to turnover or return (including preference claims); (b) all remittance expenses (including incoming wire charges, currency conversion fees and stop payment fees), other than stop payment fees on Factor Risk Accounts; (c) expenses, collection agency fees and attorneys’ fees incurred by us in collecting or attempting to collect any Client Risk Account or any Obligation (defined in Section 12 below); and (d) our fees for handling collections on client risk Accounts which you have requested us to process, as provided in the Guide (see Section 18.2 below).

9. Handling And Collecting Accounts; Returned Goods.

9.1. As owners of the Factor Risk Accounts, we have the right to: (a) bring suit, or otherwise enforce collection, in your name or ours; (b) modify the terms of payment (c) settle, compromise or release, in whole or in part, any amounts owing, and (d) issue credits in your name or ours. To the extent applicable, you waive any and all claims and defenses based on suretyship. If moneys are due and owing from a customer for both Factor Risk Accounts and Client Risk Accounts, you agree that any payments or recoveries received on such Accounts may be applied first to any Factor Risk Accounts. Once you have granted or issued a discount, credit or allowance on any Account, you have no further interest therein. Any checks, cash, notes or other documents or instruments, proceeds or property received with respect to the Accounts must be held by you in trust for us, separate from your own property, and immediately turned over to us with proper endorsements. We may endorse your name or ours on any such check, draft, instrument or document.

9.2. As owners and assignees of the Accounts and all proceeds thereof, upon our written notice, you will, at your expense, comply with our instructions relative to any and all returned, rejected, reclaimed or repossessed inventory (“Returned Goods”).

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10. Statement Of Account. After the end of each month, we shall send you certain reports reflecting Accounts purchased, advances made, if any, fees and charges and all other financial transactions between us during that month (“Reports”). The Reports sent to you each month include a Statement of Account reflecting transactions in three sections: Accounts Receivable, Client Position Account and Funds In Use. The Reports shall be deemed correct and binding upon you and shall constitute an account stated between us unless we receive your written statement of exceptions within thirty (30) days after same are mailed to you.

11. Grant Of Security Interest.

11.1. You hereby assign and grant to us a continuing security interest in all of your right, title and interest in and to all of your now existing and future (herein collectively the “Collateral”): (a) accounts (including the Accounts), instruments, documents, chattel paper (including electronic chattel paper), and any other obligations owing to you; (b) unpaid seller’s rights (including rescission, repossession, replevin, reclamation and stoppage in transit); (c) rights to any inventory represented by the foregoing, including Returned Goods; (d) reserves and credit balances arising hereunder; (e) guarantees, collateral, supporting obligations and letter of credit rights with respect to the foregoing; (f) insurance policies, proceeds or rights relating to the foregoing; (g) general intangibles (including all payment intangibles and all other rights to payment); (h) cash and non-cash proceeds of the foregoing; and (h) Books and Records (defined in Section 13 below) evidencing or pertaining to the foregoing.

11.2. You agree to comply with all applicable laws to perfect our security interest in collateral pledged to us hereunder, and to execute such documents as we may require to effectuate the foregoing and to implement this Agreement. You irrevocably authorize us to file financing statements, and all amendments and continuations with respect thereto, all in order to create, perfect or maintain our security interest in the Collateral, and you hereby ratify and confirm any and all financing statements, amendments and continuations with respect thereto heretofore and hereafter filed by us pursuant to the foregoing authorization.

12. Obligations Secured. The security interest granted hereunder and any lien or security interest that we now or hereafter have in any of your other assets, collateral or property, secure the payment and performance of all of your now existing and future indebtedness and obligations to us, whether absolute or contingent, whether arising under this Agreement or any other agreement or arrangement between us, by operation of law or otherwise (“Obligations”). Obligations also includes ledger debt (which means indebtedness for goods and services purchased by you from any party whose accounts receivable are factored or financed by us), and indebtedness arising under any guaranty, credit enhancement or other credit support granted by you in our favor. Any reserves or balances to your credit and any other assets, collateral or property of yours in our possession constitutes security for any and all Obligations.

13. Books And Records And Examinations.

13.1. You agree to maintain such Books and Records concerning the Accounts as we may reasonably request and to reflect our ownership of the Accounts therein. “Books and Records” means your accounting and financial records (whether paper, computer or electronic), data, tapes, discs, or other media, and all programs, files, records and procedure manuals relating thereto, wherever located.

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13.2. Upon our reasonable request, you agree to make your Books and Records available to us for examination and to permit us to make copies or extracts thereof. Also, you agree to permit us to visit your premises during your business hours and to conduct such examinations as we deem reasonably necessary. To cover our costs and expenses of any such examinations, we shall charge you a fee for each day, or part thereof, during which such examination is conducted, plus any out-of-pocket costs and expenses incurred by us, as provided in the Guide (see Section 18.2 below).

14. Interest.

14.1. Interest is charged on any adjustments under this Agreement and on any advances that may be made under section 6 above, as of the last day of each month based on the daily debit balances in your Funds In Use account for that month, at a rate equal to the greater of: (a) the sum of 1.5% plus the JPMorgan Rate (defined below), or (b) 5% per annum. The JPMorgan Rate is the per annum rate of interest publicly announced by JPMorgan Chase Bank (or its successor) in New York, New York from time to time as its prime rate, and is not intended to be the lowest rate of interest charged by JPMorgan Chase Bank to its borrowers. Any change in the rate of interest hereunder due to a change in the JPMorgan Rate will take effect as of the first of the month following such change in the JPMorgan Rate. All interest is calculated on a 360 day year.

14.2. If you, as a client of ours, purchase goods or services from another client of ours and your payments on these invoices are not timely received, a late interest payment, at our then late interest rate, will be charged to your account with us and shall be deemed an Obligation under this Agreement.

14.3. In no event will interest charged hereunder exceed the highest lawful rate. In the event, however, that we do receive interest in excess of the highest lawful rate, you agree that your sole remedy would be to seek repayment of such excess, and you irrevocably waive any and all other rights and remedies which may be available to you under law or in equity.

15. Factoring Fees And Other Charges.

15.1. For our services hereunder, you will pay us a factoring fee or charge as set forth below on the gross face amount of all Accounts factored with us, but in no event less than $5.00 per invoice.

The factoring fee will be as follows:

(a) 1.25% on the gross face amount of all Accounts factored with us during each calendar month on the first Five Million Dollars ($5,000,000.00) of Accounts during any Contract Year; and

(b) 1% on the gross face amount of all Accounts factored with us during each calendar month on Accounts in excess of Five Million Dollars ($5,000,000.00) up to Ten Million Dollars ($10,000,000.00) during such Contract Year; and

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(c) 0.9% on the gross face amount of all Accounts factored with us during each calendar month on Accounts in excess of Ten Million Dollars ($10,000,000.00) during such Contract Year.

The term “Contract Year” shall mean the twelve-month period commencing July 1, 2005 and each consecutive twelve-month period thereafter.

In addition, you will pay a fee of one-quarter of one percent ( ¹/4 of 1%) of the gross face amount of each Account for each thirty (30) day period or part thereof by which the longest terms of sale applicable to such Account exceed sixty (60) days (whether as originally stated or as a result of a change of terms requested by you or the customer). For Accounts arising from sales to customers located outside the fifty states of the United States of America, you will pay us an additional factoring fee of 1% of the gross face amount of all such Accounts. All factoring fees or charges are due and charged to your account upon our purchase of the underlying Account. Commencing July 1, 2005, if the actual factoring fees or charges paid to us by you during any quarter or part thereof (“Period”) is less than $12,500.00 (“Minimum Factoring Fees”), we shall charge your account as of the end of such Period with an amount equal to the difference between the actual factoring fees or charges paid during such Period and said Minimum Factoring Fees.

15.2. You agree to pay all costs and expenses incurred by us in connection with or in any way related to: (i) this Agreement or (ii) the preparation, execution, administration and enforcement of this Agreement, including all reasonable fees and expenses attributable to the services of our attorneys (whether in-house or outside), search fees and public record filing fees. Furthermore, you agree to pay to us our fees (as more fully set forth in the Guide, see section 18.2 below) including fees for: (a) special reports prepared by us at your request; (b) wire transfers; (c) handling change of terms requests relating to Accounts; and (d) your usage of our on-line computer services. Beginning on the first of the month six months from the date hereof, you also agree to pay us our fees for: (i) each new customer set-up on our customer accounts receivable data base and each new customer relationship established for you; (ii) crediting your account with proceeds of non-factored invoices received by us; and (iii) charge backs of invoices factored with us that were paid directly to you. All such fees will be charged to your account when incurred. We may change our fees from time to time upon notice to you; however, any failure to give you such notice does not constitute a breach of this Agreement and does not impair our ability to institute any such change.

15.3. Any tax or fee of any governmental authority imposed on or arising from any transactions between us, any sales made by you, or any inventory relating to such sales is your sole responsibility (other than income and franchise taxes imposed on us which are not related to any specific transaction between us). If we are required to withhold or pay any such tax or fee, or any interest or penalties thereon, you hereby indemnify and hold us harmless therefor and we shall charge your account with the full amount thereof.

15.4. In addition to the fees and charges under this Agreement, you will pay us, as of the date hereof, a facility fee in the amount of $3,000.00 for the initial setup and implementation of your account with us including the fees and expenses of our legal department for the initial preparation and execution of this Agreement.

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15.5. If during the next six (6) months from the date hereof, you have not begun to process all invoices with us by means of Electronic Batch Transmission, then we will charge you a factoring fee of 1.125% instead of the fee provided in Section 15.1, until such time as your invoices are processed by means of Electronic Batch Transmission.

16. Termination.

16.1. You may terminate this Agreement only as of an Anniversary Date and then only by giving us at least sixty (60) days prior written notice of termination Upon any termination of this Agreement, we shall be entitled to the unpaid portion of the Minimum Factoring Fees, if any, for such Period or Periods for the remainder of the term of this Agreement as applicable and as provided in Section 15.1 above, as of the effective date of termination. “Anniversary Date” means the last day of the month occurring one year from the date hereof, and the same date in each year thereafter. Except as otherwise provided, we may terminate this Agreement at any time by giving you at least sixty (60) days prior written notice of termination. However, we may terminate this Agreement immediately, without prior notice to you, upon the occurrence of an Event of Default (defined in Section 17.1 below).

16.2. This Agreement remains effective between us until terminated as herein provided. Unless sooner demanded, all Obligations will become immediately due and payable upon any termination of this Agreement.

16.3. All of our rights, liens and security interests hereunder continue and remain in full force and effect after any termination of this Agreement and pending a final accounting, we may withhold any balances in your account unless we are supplied with an indemnity satisfactory to us to cover all Obligations. You agree to continue to assign accounts receivable to us and to remit to us all collections on accounts receivable, until all Obligations have been paid in full or we have been supplied with an indemnity satisfactory to us to cover all Obligations.

17. Events Of Default And Remedies Upon Default.

17.1. It is an “Event of Default” under this Agreement if: (a) your business ceases or a meeting of your creditors is called; (b) any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceeding is commenced by or against you under any federal or state law; (c) you breach any representation, warranty or covenant contained in this Agreement; (d) you fail to pay any Obligation when due, or (e) any default shall have occurred under any other agreement or arrangement between us which remains uncured for seven (7) days.

17.2. After the occurrence of an Event of Default which is not waived by us, we may terminate this Agreement without notice to you. We shall then have immediate access to any and all Books and Records as may pertain to the Accounts, Returned Goods and any other collateral hereunder. Furthermore, as may be necessary to administer and enforce our rights in the Accounts, Returned Goods and any other collateral hereunder, or to facilitate the collection or realization thereof, we have your permission to use (at your expense) your personnel, supplies, equipment, computers and space, at your place of business or elsewhere.

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17.3. After the occurrence of an Event of Default which is not waived by us, with respect to any other property or collateral in which we have a security interest, we shall have all of the rights and remedies of a secured party under Article 9 of the Uniform Commercial Code. If notice of intended disposition of any such property or collateral is required by law, it is agreed that five (5) days notice constitutes reasonable notice. The net cash proceeds resulting from the exercise of any of the foregoing rights, after deducting all charges, costs and expenses (including reasonable attorneys’ fees) will be applied by us to the payment or satisfaction of the Obligations, whether due or to become due, in such order as we may elect. You remain liable to us for any deficiencies. With respect to Factor Risk Accounts and Returned Goods relating thereto, you hereby confirm that we are the owners thereof, and that our rights of ownership permit us to deal with this property as owner and you confirm that you have no interest therein.

18. Miscellaneous Provisions.

18.1. This Agreement, and all attendant documentation, as the same may be amended from time to time, constitutes the entire agreement between us with regard to the subject matter hereof, and supersedes any prior agreements or understandings. This Agreement can be changed only by a writing signed by both of us. Our failure or delay in exercising any right hereunder will not constitute a waiver thereof or bar us from exercising any of our rights at any time. The validity, interpretation and enforcement of this Agreement is governed by the laws of the State of California, excluding the conflict laws of such State.

18.2. The Client Service Guide, as supplemented and amended from time to time (the “Guide”) has been furnished to you or is being furnished to you concurrently with the signing of this Agreement, and by your signature below you acknowledge receipt thereof. The Guide provides information on credit approval processes, accounting procedures and fees. The procedures for Electronic Batch Transmission are covered in supplemental instructions to the Guide. From time to time, we may provide you with amendments, additions, modifications, revisions or supplements to the Guide, which will be operative for transactions between us. All information and exhibits contained in the Guide, on any screen accessed by you, and on any print-outs, reports, statements or notices received by you are, and will be, our exclusive property and are not to be disclosed to, or used by, anyone other than you, your employees or your professional advisors, in whole or in part, unless we have consented in writing.

18.3. This Agreement binds and benefits each of us and our respective successors and assigns, provided, however, that you may not assign this Agreement or your rights hereunder without our prior written consent.

18.4. Section headings are for convenience only and are not controlling. The use of “including” means “including without limitation”.

18.5. If any provision of this Agreement is contrary to, prohibited by, or deemed invalid under applicable laws or regulations, such provision will be inapplicable and deemed omitted to such extent, but the remainder will not be invalidated thereby and will be given effect so far as possible.

[Remainder of this page intentionally left blank]

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19. Jury Trial Waiver. TO THE EXTENT PERMITTED BY APPLICABLE LAW, WE EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, OR ANY OTHER AGREEMENT OR TRANSACTION BETWEEN US OR TO WHICH WE ARE PARTIES.

If the foregoing is in accordance with your understanding, please so indicate by signing and returning to us the original and one copy of this Agreement. This Agreement will take effect as of the date set forth above but only after being accepted below by one of our officers in Los Angeles, California, after which we shall forward a fully executed copy to you for your files.

Very truly yours,
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By:	/s/Vivian Lee
	Name:	Vivian Lee
	Title:	Vice President and Director of Business Development - Asian Pacific

Read and Agreed to:

AMERICAN TELECOM SERVICES, INC.

By:	/s/Bruce Hahn
	Name:	Bruce Hahn
	Title:	CEO

Accepted at Los Angeles, California:
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By:	/s/Peggy Joyce
	Name:	Peggy Joyce
	Title:	Vice President Client Service Director

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American Telecom Services, Inc.

2466 Peck Road

City of Industry, California 90601

CUSTOMER SURCHARGE LETTER AGREEMENT

Ladies and Gentlemen:

We refer to the Factoring Agreement between us, as supplemented and amended (the “Agreement”). Capitalized terms used herein without definition shall have the meanings ascribed to them in the Agreement.

This shall confirm our mutual understanding and agreement that, notwithstanding anything to the contrary contained in the Agreement, all of your accounts receivable arising from your sales to any of the customers listed on the attached Schedule and their respective divisions, trade names, affiliates and subsidiaries including, but not limited to, those listed on the attached Schedule (collectively, the “Customers”; all such accounts receivable being referred to herein as “Customer Accounts”) shall be subject to the following express terms and conditions:

A. Only those sales to the Customers that are made by you on terms of sale which do not exceed the terms listed on the attached Schedule will be eligible for credit approval under the Agreement.

B. We shall charge your account with a Surcharge based on the gross face amount of each Customer Account approved by us as to credit whose terms of sale do not exceed the days listed, at the Surcharge Rate applicable to the Customer involved, all as set forth on the attached Schedule. The Surcharge shall be in addition to any other fees or commissions we are entitled to charge you under the Agreement, and shall be due and charged to your account in the same manner as factoring fees or commissions are charged thereunder, and shall not be included in the calculation of any minimum fees or commissions under the Agreement.

C. You shall continue to request credit approvals from our Credit Department on all orders from each Customer as per the Agreement. Any Customer Account whose terms of sale exceed the terms listed on the Schedule, or which has not been credit approved by us, shall be at your sole Credit Risk.

D. All payments that we receive from any Customer prior to the commencement of any liquidation of all or substantially all of its assets, or prior to the commencement by or against it of any case under Chapter 7 or Chapter 11 (as applicable) of the Bankruptcy Code (herein a “Liquidation”), shall be applied by us in accordance with our normal procedures. If at the commencement of a Liquidation with respect to any Customer, there are any Customer Accounts on our books at your Credit Risk, as well as Customer Accounts on our books at our Credit Risk, then any dividends or other payments that we receive relating to any such Customer Accounts shall be applied in reduction of the

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outstanding amounts of all such Customer Accounts at your and our Credit Risk, in proportion to the percentage of your and our Credit Risk on such Customer Accounts.

Except as herein specifically provided, the Agreement remains in full force and effect in accordance with its terms. If you are in agreement with the foregoing, please so indicate by signing and returning to us the enclosed copy of this letter.

Very truly yours,
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By:
	Name:
	Title:

Read and Agreed to:

AMERICAN TELECOM SERVICES, INC.

By:
	Name:
	Title:

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EX-10.10

Exhibit 10.10

ASSIGNMENT AGREEMENT

KNOW ALL PERSONS BY THESE PRESENTS:

THAT, on this 7th day of July, 2005, AMERICAN TELECOM SERVICES, INC. (the “Client”) with offices at 2466 Peck Road, City of Industry, California 90601, for good and valuable consideration paid to and acknowledged by GAIN STAR INTERNATIONAL LIMITED (the “Supplier”) with offices at 20/F, The Sun’s Group Centre, 200 Gloucester Road, Hong Kong, does hereby irrevocably assign and transfer to Supplier, a percentage as described below of the net amounts (“Supplier’s Share”) due or otherwise made available to Client under the Factoring Agreement attributable to Factor’s purchase price obligation to Client for accounts traceable to the sale of inventory sold by Supplier to Client (the “Supplier Goods”), under the Factoring Agreement between Client and THE CIT GROUP/COMMERCIAL SERVICES, INC., with address at 300 S. Grand Avenue, 12^th Floor, Los Angeles, California 90071 (herein the “Factor”), dated                               , and any amendments, supplements, modifications, extensions and renewals thereof (herein the “Factoring Agreement”). Payment of Supplier’s Share shall be made to Supplier’s account located at The Hong Kong and Shanghai Banking Corporation Limited, Tsimshatsui Branch, with offices at 82-84 Nathan Road, Tsimshatsui, Hong Kong, account number 636-393373-274 (USD); 636-393373-001 (HKD), by wire transfer instructions provided to Factor by Supplier. Supplier’s Share includes amounts payable by Factor to Client for Factor Risk Accounts traceable to sales of the Supplier Goods not paid by a customer due solely to such customer’s financial inability to pay.

This assignment and transfer is made to the Supplier, its successors, endorsers or assigns, to assure the payment of any and all liabilities and obligations of Client to the Supplier, and any claims of the Supplier against Client, whether now existing or thereafter incurred, and whether absolute or contingent, secured or unsecured, matured or unmatured (all of the foregoing being herein called “Obligations”).

The Factor is hereby authorized and directed to: remit Supplier’s Share when due and payable under the Factoring Agreement (subject to all of Factor’s rights under the Factoring Agreement, including Factor’s right to charge back); and to recognize Supplier’s claims and rights hereunder without investigating the reason for any action taken by the Supplier, or the validity of the amount of any Obligations, or the existence of any default or the application to be made by the Supplier of any of the sums paid hereunder. Checks or other transfers for all or any part of the sums payable under this Assignment shall be to the sole and exclusive order of the Supplier and the Factor shall be released and discharged to the extent of any payment made to the Supplier hereunder.

All payments received and made available to Client for Accounts pursuant to the Factoring Agreement traceable to the Supplier Goods will be promptly applied where Client is entitled thirty percent (30%) and Supplier is entitled to receive the remaining seventy percent (70%) to be applied first to any amounts due to the Factor and the balance to be paid thereafter.

The Undersigned and Supplier warrant and represent to the Factor that this Assignment, transfer and direction to pay the Supplier is valid in all respects pursuant to applicable law, and Supplier alone is entitled to receive the Supplier’s Share otherwise available to Client, pursuant to the aforementioned. Supplier and Client each hereby agrees to indemnify and to hold the Factor

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harmless from any and all liability or expense which may be incurred by reason of: the Factor’s recognition of the Assignment and interest herein contained and the making of remittances to Supplier as herein provided.

Client and Supplier understand that the Client’s customers may make payment on Accounts after having taken discounts or deductions against goods supplied by Suppliers other than Supplier and this will effectively diminish Supplier’s Share. Further, that Factor will have no ability to independently verify whether the discounts/deductions are otherwise applicable to Supplier Goods and thus Factor will have no ability to determine the actual amount attributable to Supplier’s Share. Notwithstanding, Client and Supplier hereby confirm their instruction and authorize Factor to make payments to Supplier hereunder without having to independently verify the accuracy of such discounts/deductions, exonerate Factor from any obligation to verify the application of discounts/deductions, and indemnify Factor from any liability created by Factor making payments hereunder regardless of whether any customer takes or claims any such discount/deduction.

This Assignment is to continue in effect until the Obligations due from Client to Supplier have been indefeasibly paid in full provided, however, in no event shall the foregoing affect the right of the Factor to terminate the Factoring Agreement in accordance with the terms and provisions thereof. Factor and Client agree to provide Supplier with written notice of any termination or modification of the Factoring Agreement.

This Agreement is not in any way intended to limit any agreement contained in any note or other instrument taken in connection with any of the Obligations of Client to Supplier, and shall in all respects be cumulative thereto. No executory agreement shall be effective to change, modify or discharge, in whole or in part, this Assignment unless such executory agreement is in writing and signed by all parties hereunder.

This Agreement will be effective as against and for the benefit of the Client and the Supplier only after each such party has provided the other parties hereto with a written and notarized resolution of its Board of Directors approving the terms and authorizing the execution of this Agreement.

This Agreement shall be governed by the laws of the State of California and the parties submit to the jurisdiction of the state and federal courts in Los Angeles County for the resolution of disputes. THE PARTIES HERETO WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT HEREUNDER.

AMERICAN TELECOM SERVICES, INC.
By:	/s/ Bruce Hahn
	Name: Bruce Hahn
	Title:   CEO

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ACKNOWLEDGMENT OF CLIENT

On July 5, 2005, we, ____________________ and ____________________ personally witnessed the signature of ____________________, a person

x personally known to me or

¨ proved to me on the basis of satisfactory evidence

to be the person(s) whose name(s) is/are subscribed to the within instrument and who acknowledged to me that he/she/they executed the same is his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.

Witness my hand.	/s/ Menat Guimei
	Name:
Witness my hand.
	Notary Public

[Notarial Seal]

[Acceptances, acknowledgments and notarizations appear on following pages]

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Assignment Accepted:

Dated at ________________________________, on this _______ day of 2005.

GAIN STAR INTERNATIONAL LIMITED

By:
	Name: Title:

[signature must be notarized]

ACKNOWLEDGMENT OF SUPPLIER

On ______________________, 2005, we, _________________________ and _________________________ personally witnessed the signature of _________________________, a person

¨ personally known to me or

¨ proved to me on the basis of satisfactory evidence

to be the person(s) whose name(s) is/are subscribed to the within instrument and who acknowledged to me that he/she/they executed the same is his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.

Witness my hand.	Name:
Witness my hand.	Name:

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Assignment Acknowledged:

Dated at ________________________________, on this _______ day of 2005.

RECEIPT is hereby acknowledged of a signed copy of the Assignment Agreement between AMERICAN TELECOM SERVICES, INC. and GAIN STAR INTERNATIONAL LIMITED, and we hereby agree to honor same.

THE CIT GROUP/COMMERCIAL SERVICES, INC.
By:
	Name: Title:

EX-10.11

Exhibit 10.11

THE SECURITIES REPRESENTED BY THIS WARRANT CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OR UNDER STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS OF THIS WARRANT CERTIFICATE, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE BEEN COMPLIED WITH.

Date of Issuance:                         , 2005

AMERICAN TELECOM SERVICES, INC.

                     Common Stock Purchase Warrants

(Void after July 14, 2011)

American Telecom Services Inc., a Delaware corporation (the “Company”), for value received, hereby certifies and agrees that                      or its registered assigns (the “Registered Holder”), is entitled to receive, subject to the terms set forth below, to purchase from the Company, at any time or from time to time on or after the date hereof (the “Date of Exercisability”) and on or before July 14, 2011 at not later than 5:00 p.m. New York time (such date and time, the “Expiration Time”), upon exercise of each Warrant represented hereby, one (1) duly authorized, validly issued, fully paid and nonassessable share of the Company’s common stock, $.001 par value per share (the “Common Stock”) at an exercise price equal to the lesser of (a) $5.05 and (b) the price per share (“VPO Price”) at which Common Stock is sold in the Company’s venture public offering (as described in the Memorandum (as defined), subject to adjustment in certain cases as described herein. The shares purchasable upon exercise of the Warrants represented by this Warrant Certificate, and the purchase price per share, are hereinafter referred to as the “Warrant Shares” and the “Exercise Price,” respectively. The term “Warrants” as used herein shall include the Warrants represented by this Warrant Certificate and any other warrants delivered in substitution or exchange therefor, as provided herein. In the event that the VPO Price is less than $5.05, the number of Warrants (“Old Warrant Quantity”) represented by this Warrant Certificate shall be adjusted upward to a new number (“New Warranty Quantity”) such that the (a) Exercise Price multiplied by the New Warrant Quantity is equal to (b) $5.05 multiplied by the Old Warrant Quantity.

The Warrants have been issued, together with the Company’s 8% senior secured promissory notes (“Notes”), in an offering (“Offering”) described in the confidential private placement memorandum of the Company dated June 28, 2005 (“Memorandum) and pursuant to that certain Subscription/Registration Rights Agreement of even date herewith between the Company and the Registered Holder (the “Subscription Agreement”), and the Registered Holder is entitled to the benefits set forth therein, including certain registration rights with respect to the

Warrants and the Warrant Shares. Following the date hereof, the Company may issue additional Notes (“Additional Notes”) and Warrants (“Additional Warrants”) in the Offering. The term of the Warrants shall be extended for any period in which the Company fails to achieve and/or maintain effectiveness of the registration statement as required by the Subscription Agreement and for any period during which the registration statement is not otherwise made available for use by the Registered Holder of the Warrants. If the VPO is successfully consummated, the Warrants will be exchanged for a like number of the class of warrants sold in the VPO.

1. Exercise.

1.1 Method of Exercise.

1.1.1 The Warrants may be exercised by the Registered Holder, in whole or in part, by surrendering this Warrant Certificate, with a Notice of Exercise in the form of Annex A hereto (the “Notice of Exercise”) duly executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the Company set forth in Section 12 hereof, or at such other office or agency as the Company may designate in writing pursuant to Section 12 hereof (the “Company’s Office”), accompanied by payment in full with good, cleared funds, in lawful money of the United States, of the Exercise Price payable in respect of the number of Warrant Shares purchased upon such exercise or by surrendering Warrants pursuant to Section 1.2 below.

1.1.2 Each exercise of Warrants shall be deemed to have been effected immediately prior to the close of business on the day on which the Notice of Exercise shall be dated and directed to the Company (as evidenced by the applicable postmark or other evidence of transmittal) as provided in Section 1.1.1 hereof. At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

1.1.3 As soon as practicable after the exercise of the Warrants, in full or in part, and in any event within ten (10) days thereafter, the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct:

(a) a certificate or certificates for the number of full Warrant Shares to which such Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 3 hereof; and

(b) in case such exercise is in part only, a new certificate or certificates (dated the date hereof) of like tenor, representing in the aggregate on the face or faces thereof such number of Warrants as equal (without giving effect to any adjustment therein) the number of Warrants set forth on the face of this Certificate minus the number of Warrants (i) exercised in accordance with this Section 1.1 or (ii) surrender in accordance with Section 1.2 hereof.

1.2 Exercise by Surrender of Warrants. If, after a VPO Abandonment (as defined in Schedule 1 of the Subscription Agreement), the Resale Registration Statement (as

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defined in Schedule 1 of the Subscription Agreement) is not declared effective on or prior to the 180^th day after the date of the VPO Abandonment Notice (as defined in Schedule 1 of the Subscription Agreement), then, in addition to the method of payment set forth in Section 1.1 and in lieu of any cash payment required thereunder, the Warrants may be exercised by surrendering this Warrant Certificate in the manner specified in this Section 1, together with irrevocable instructions to the Company to issue in exchange for the Warrants represented by this Warrant Certificate (or portion thereof) the number of shares of Common Stock equal to the product of (x) the number of Warrants being surrendered multiplied by (y) a fraction, the numerator of which is the Market Value (as defined below) of the Common Stock on the last trading day prior to the date of exercise less the Exercise Price and the denominator of which is such Market Value. As used herein, the phrase “Market Value” at any date shall be deemed to be the average of the last reported sale prices for the last ten (10) trading days as officially reported by the principal securities exchange or “over the counter” (including on the pink sheets or bulletin board) exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange or sold “over the counter,” the average closing sale price as furnished by the NASD through Nasdaq or similar organization if Nasdaq is no longer reporting such information, or if the Common Stock is not quoted on Nasdaq, as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it.

2. Shares to be Fully Paid; Reservation of Shares. The Company covenants that all shares of Common Stock which may be issued upon the exercise of the rights represented by this Warrant Certificate will, upon issuance by the Company, be duly and validly issued, fully paid and nonassessable, and free from preemptive rights and free from all taxes, liens, duties and charges with respect thereto and, in addition, the Company covenants that it will from time to time take all such action as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the effective Exercise Price. The Company further covenants that, from and after the date hereof (the “Date of Issuance”) and during the period within which the rights represented by this Warrant Certificate may be exercised, the Company will at all times have authorized and reserved, free from preemptive rights, out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant Certificate. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to affect the exercise of the Warrants, the Company shall take any and all corporate action as is necessary to increase it’s authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. The Company will take all such action within its control as may be necessary on its part to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirements of any national securities exchange upon which the Common Stock of the Company may be listed.

3. Fractional Shares. The Company shall not be required upon the exercise of the Warrants to issue any fractional shares, but shall make an adjustment therefor in cash on the basis of the Market Value for each fractional share of the Company’s Common Stock which would be issuable upon exercise of the Warrants.

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4. Requirements for Transfer.

4.1 Warrant Register. The Company will maintain a register (the “Warrant Register”) containing the names and addresses of the Registered Holder or Registered Holders. Any Registered Holder of the Warrants or any portion thereof may change its address as shown on the Warrant Register by written notice to the Company requesting such change, and the Company shall promptly make such change. Until any of the Warrants are transferred on the Warrant Register of the Company, the Company may treat the Registered Holder as shown on the Warrant Register as the absolute owner of such Warrants for all purposes, notwithstanding any notice to the contrary, provided, however, that if and when any such Warrants are properly assigned in blank, the Company may, but shall not be obligated to, treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

4.2 Warrant Agent. Effective as of the Listing Date, the Company will appoint Continental Stock Transfer & Trust Company or similar entity, as agent (“Warrant Agent”) for the purpose of maintaining the Warrant Register referred to in Section 4.1 hereof, issuing the Common Stock issuable upon the exercise of the Warrants, exchanging the Warrants, replacing the Warrants or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, may be made at the office of such agent.

4.3 Transfer. Subject to the provisions of this Section 4, the Warrants and all rights hereunder are transferable, in whole or in part, upon the surrender of this Warrant Certificate with a properly executed Assignment Form in substantially the form attached hereto as Annex B (the “Assignment”) at the principal office of the Company.

4.4 Exchange of Warrants upon a Transfer.

4.4.1 On surrender of this Warrant Certificate for exchange, properly endorsed on the Assignment and subject to the provisions of this Warrant Certificate and limitations on assignments and transfers as contained in this Section 4, the Company at its expense shall issue to or on the order of the Registered Holder a new certificate or certificates of like tenor, in the name of the Registered Holder or as the Registered Holder (on payment by the Registered Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof.

4.4.2 Any Warrants submitted to the Warrant Agent after the Listing Date for transfer shall be replaced and issued to the directed recipient with a new form of warrant certificate and subject to the terms of the certain warrant agreement between the Company and the Warrant Agent dated as of July 14, 2005, as amended through the date hereof and attached hereto as Annex C (as such exhibit may be amended prior to the Listing Date by mutual consent of the Company and the placement agent in the Offering).

5. Adjustments of Exercise Price and Number of Securities. The following adjustments apply to the Exercise Price of the Warrants and the number of Warrant Shares purchasable upon exercise of the Warrants.

5.1 Computation of Adjusted Price. Except as hereinafter provided, in case the Company shall, at any time after the date hereof and prior to the Listing Date, issue or sell

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any Additional Stock (as defined below) (other than the issuances or sales of Common Stock pursuant to rights to subscribe for such Common Stock distributed to all the shareholders of the Company and holders of Warrants pursuant to Section 5.7 hereof and shares of Common Stock issued upon the direct or indirect conversion or exchange of securities for shares of Common Stock), for a consideration per share less than the Exercise Price in effect immediately prior to the issuance, or without consideration, the Exercise Price shall (until another adjustment is required to be made pursuant to this Section 5) be reduced to the lowest price (calculated to the nearest full cent) at which such Additional Stock was issued (or would be deemed to be issued); provided, however, that in no event shall the Exercise Price be adjusted pursuant to this computation to an amount in excess of the Exercise Price in effect immediately prior to such computation, except in the case of a combination of outstanding shares of Common Stock, as provided by Section 5.3 hereof.

“Additional Stock” shall mean Common Stock or options, warrants or other rights to acquire or securities convertible into or exchangeable for shares of Common Stock, including shares held in the Company’s treasury, and shares of Common Stock and shares of Common Stock issued upon the direct or indirect conversion or exchange of securities for shares of Common Stock, other than:

(a) the issuance or sale of Additional Notes and/or Additional Warrants;

(b) the issuance or sale of shares of Common Stock (i) issuable upon the exercise of Warrants and Additional Warrants, (ii) issuable upon conversion of the Notes or (iii) issuable upon the conversion of, or in respect of, notes or warrants issued prior to the date hereof;

(c) the issuance of options or other stock-based awards pursuant to the Company’s employee stock option plan in effect on the date hereof or subsequently adopted and approved by the Company’s stockholders or the issuance by the Company of any shares of Common Stock pursuant to the exercise of any such options or other stock-based awards, or (ii) the issuance by the Company of any shares of Common Stock pursuant to the exercise of any options or warrants or conversion or exchange of convertible or exchangeable securities previously issued and outstanding on the date hereof;

(d) the issuance of shares of Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock (and the shares of Common Stock issuable upon the conversion, exercise or exchange thereof) in connection with any future acquisition, merger or other business combination, purchase of assets or of all or a portion of a business or other strategic relationship entered, by the Company or any of its subsidiaries; and

(e) the issuance of any shares of Common Stock, or any options, warrants or convertible or exchangeable securities (or any shares of Common Stock upon exercise, conversion or exchange thereof) to HCFP/Brenner Securities LLC or any other broker-dealer in connection with the sale of the Notes and Warrants or Additional Notes and Additional Warrants.

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For the purposes of any computation to be made in accordance with this Section 1.1, the following provisions shall be applicable:

(a) In case of the issuance or sale of shares of Common Stock for a consideration part or all of which shall be cash, the amount of the cash consideration therefor shall be deemed to be the amount of cash received by the Company for such shares (or, if shares of Common Stock are offered by the Company for subscription, the subscription price, or, if such securities shall be sold to underwriters or dealers for public offering without a subscription offering, the initial public offering price) before deducting therefrom any compensation paid or discount allowed in the sale, underwriting or purchase thereof by underwriters or dealers or others performing similar services, or any expenses incurred in connection therewith.

(b) In case of the issuance or sale (otherwise than as a dividend or other distribution on any stock of the Company) of shares of Common Stock for a consideration part or all of which shall be other than cash, the amount of the consideration therefor other than cash shall be deemed to be the value of such consideration as determined in good faith by the Board of Directors of the Company.

(c) Shares of Common Stock issuable by way of dividend or other distribution on any stock of the Company shall be deemed to have been issued immediately after the opening of business on the day following the record date for the determination of shareholders entitled to receive such dividend or other distribution and shall be deemed to have been issued without consideration.

(d) The reclassification of securities of the Company other than shares of Common Stock into securities including shares of Common Stock shall be deemed to involve the issuance of such shares of Common Stock for a consideration other than cash immediately prior to the close of business on the date fixed for the determination of security holders entitled to receive such shares, and the value of the consideration allocable to such shares of Common Stock shall be determined as provided in subsection (b) above.

(e) The number of shares of Common Stock at any one time outstanding shall include the aggregate number of shares issued or issuable upon the exercise of options, rights, and warrants and upon the conversion or exchange of convertible or exchangeable debt or equity securities.

5.2 Options, Rights, Warrants and Convertible and Exchangeable Securities. Except in the case of the Company issuing rights to subscribe for shares of Common Stock distributed to all the shareholders of the Company and Holders of Warrants pursuant to Section 5.7 hereof, if the Company shall at any time after the date hereof and prior to the Listing Date, issue options, rights or warrants to subscribe for shares of Common Stock, or issue any securities convertible into or exchangeable for shares of Common Stock, in which the applicable exercise or conversion price per share is less than the Exercise Price in effect immediately prior to the issuance of such options, rights or warrants, or such convertible or exchangeable securities, the Exercise Price in effect immediately prior to the issuance of such options, rights or warrants, or such convertible or exchangeable securities, as the case may be, shall be reduced to a price determined by making a computation in accordance with the provisions of Section 5.1 hereof, provided that:

(a) The aggregate maximum number of shares of Common Stock, as the case may be, issuable under all the outstanding options, rights or warrants shall be deemed to be issued and outstanding at the time all the outstanding options, rights or warrants

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were issued, and for a consideration equal to the purchase price per share provided for in the options, rights or warrants at the time of issuance, plus the consideration (determined in the same manner as consideration received on the issue or sale of shares in accordance with the terms of the Warrants), if any, received by the Company for the options, rights or warrants, and if no minimum price is provided in the options, rights or warrants, then the consideration shall be equal to zero; provided, however, that upon the expiration or other termination of the options, rights or warrants, if any thereof shall not have been exercised, the number of shares of Common Stock deemed to be issued and outstanding pursuant to this subsection (a) (and for the purposes of subsection (e) of Section 5.1 hereof) shall be reduced by such number of shares as to which options, warrants and/or rights shall have expired or terminated unexercised, and such number of shares shall no longer be deemed to be issued and outstanding, and the Exercise Price then in effect shall forthwith be readjusted and thereafter be the price which it would have been had adjustment been made on the basis of the issuance only of shares actually issued or issuable upon the exercise of those options, rights or warrants as to which the exercise rights shall not have expired or terminated unexercised.

(b) The aggregate maximum number of shares of Common Stock issuable upon conversion or exchange of any convertible or exchangeable securities shall be deemed to be issued and outstanding at the time of issuance of such securities, and for a consideration equal to the consideration (determined in the same manner as consideration received on the issue or sale of shares of Common Stock in accordance with the terms of the Warrants) received by the Company for such securities, plus the minimum consideration, if any, receivable by the Company upon the conversion or exchange thereof; provided, however, that upon the termination of the right to convert or exchange such convertible or exchangeable securities (whether by reason of redemption or otherwise), the number of shares deemed to be issued and outstanding pursuant to this subsection (b) (and for the purpose of subsection (e) of Section 5.1 hereof) shall be reduced by such number of shares as to which the conversion or exchange rights shall have expired or terminated unexercised, and such number of shares shall no longer be deemed to be issued and outstanding and the Exercise Price then in effect shall forthwith be readjusted and thereafter be the price which it would have been had adjustment been made on the basis of the issuance only of the shares actually issued or issuable upon the conversion or exchange of those convertible or exchangeable securities as to which the conversion or exchange rights shall not have expired or terminated unexercised.

(c) If any change shall occur in the price per share provided for in any of the options, rights or warrants referred to in subsection (a) of this Section 5.2, or in the price per share at which the securities referred to in subsection (b) of this Section 5.2 are convertible or exchangeable, the options, rights or warrants or conversion or exchange rights, as the case may be, shall be deemed to have expired or terminated on the date when such price change became effective in respect of shares not theretofore issued pursuant to the exercise or conversion or exchange thereof, and the Company shall be deemed to have issued upon such date new options, rights or warrants or convertible or exchangeable securities at the new price in respect of the number of shares issuable upon the exercise of such options, rights or warrants or the conversion or exchange of such convertible or exchangeable securities.

5.3 Subdivision and Combination. In case the Company shall at any time split, subdivide, reverse split or combine the outstanding Common Shares, the Exercise Price shall forthwith be proportionately decreased in the case of a split or subdivision or increased in the case of a reverse split or combination.

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5.4 Reclassification, Consolidation, Merger, etc. In case of any reclassification or change of the outstanding Common Shares (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding Common Shares, except a change as a result of a subdivision or combination of such shares or a change in nominal value, as aforesaid), or in the case of a sale or conveyance to another corporation of the property of the Company as an entirety, the Holder shall thereafter have the right to purchase the kind and number of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance as if the Holder were the owner of the Warrant Shares issuable upon exercise of the Warrants immediately prior to any such events at a price equal to the product of (x) the number of Warrant Shares issuable upon exercise of the Warrants and (y) the Exercise Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance as if such Holder had exercised the Warrants.

5.5 Dividends and Distributions. In case the Company shall at any time after the date hereof pay a dividend in Common Shares or make a distribution in Common Shares, then upon such dividend or distribution, the Exercise Price in effect immediately prior to such dividend or distribution shall be reduced to a price determined by dividing an amount equal to the total number of Common Shares outstanding immediately prior to such dividend or distribution multiplied by the Exercise Price in effect immediately prior to such dividend or distribution, by the total number of Common Shares outstanding immediately after such issuance or sale. For purposes of any computation to be made in accordance with the provisions of this Section 5.5, the Common Shares issuable by way of dividend or distribution shall be deemed to have been issued immediately after the opening of business on the date following the date fixed for determination of shareholders entitled to receive such dividend or distribution.

5.6 Adjustment in Number of Warrant Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Article 1, the number of Warrant Shares issuable upon the exercise of each Warrant shall be adjusted to the nearest full Common Share by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price.

5.7 Subscription Rights for Shares of Common Stock or Other Securities. In the case that the Company or an affiliate of the Company shall at any time after the date hereof and prior to the exercise of all the Warrants issue any rights to subscribe for shares of Common Stock or any other securities of the Company or of such affiliate to all the shareholders of the Company (other than as set forth in Section 8 hereof), the Holders of the unexercised Warrants shall be entitled, in addition to the shares of Common Stock or other securities receivable upon the exercise of the Warrants, to receive such rights at the time such rights are distributed to the other shareholders of the Company.

5.8 Determination of Outstanding Shares. The number of Common Shares at any one time outstanding shall include the aggregate number of shares issued or issuable upon the exercise of outstanding options, rights, warrants and upon the conversion or exchange of outstanding convertible or exchangeable securities.

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6. Payment of Taxes. The Company will pay all taxes (other than taxes based upon income or other taxes required by law to be paid by the holder) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon exercise of the Warrants, excluding any tax or other charge imposed in connection with any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Warrants so exercised were registered.

7. No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, sale or transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant Certificate but will at all times in good faith carry out all such terms and take all such actions as may be reasonably necessary or appropriate in order to protect the rights herein of the holder of the Warrants against dilution or other impairment.

8. Liquidating Dividends and Other Distributions. If the Company pays a dividend or makes a distribution on the Common Stock payable otherwise than in cash out of earnings or earned surplus (determined in accordance with generally accepted accounting principles) except for a stock dividend payable in shares of Common Stock (a “Liquidating Dividend”) or otherwise distributes to its stockholders any assets, properties, rights, evidence of indebtedness, securities whether issued by the Company or by another, or any other thing of value, then the Company will pay or distribute to the Registered Holder of the Warrants, upon the exercise of the Warrants, in addition to the Warrant Shares purchased upon such exercise, either or both of, as the case may be (i) the Liquidating Dividend that would have been paid to such Registered Holder if he had been the owner of record of such Warrant Shares immediately prior to the date on which a record is taken for such Liquidating Dividend or, if no record is taken, the date as of which the record holders of Common Stock entitled to such dividends or distribution are to be determined and (ii) the same property, assets, rights, evidences of indebtedness, securities or any other thing of value that the Registered Holder would have been entitled to receive at the time of such distribution as if such Warrants had been exercised immediately prior to such distribution.

9. Notices of Record Date, Etc. In case the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of the Warrants) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right; or of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company; or of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of the Warrants a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or

9

winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of the Warrants) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. The Company will cause such notice to be mailed at least twenty (20) business days prior to the record date or effective date for the event specified in such notice unless such prior notice is waived by the Registered Holder.

10. No Rights of Stockholders. Subject to other Sections of this Warrant Certificate, the Registered Holder shall not be entitled to vote, to receive dividends or subscription rights, nor shall anything contained herein be construed to confer upon the Registered Holder, as such, any of the rights of a stockholder of the Company, including without limitation any right to vote for the election of directors or upon any matter submitted to stockholders, to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance, or otherwise), to receive notices, or otherwise, until the Warrants shall have been exercised as provided herein.

11. Replacement of Warrant Certificate. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant Certificate, the Company will issue, in lieu thereof, a new warrant certificate of like tenor.

12. Mailing of Notices, Etc.

(a) All notices, requests, consents, and other communications in connection with these Warrants shall be in writing and shall be deemed delivered (i) three (3) business days after being sent by registered or certified mail, return receipt requested, postage prepaid, (ii) one (1) business day after being sent via a reputable overnight courier service guaranteeing next business day delivery in the Holder’s country or region, or (iii) on actual receipt if delivered by telecopier, in each case delivery shall be made to the intended recipient as set forth below:

If to the Company:

American Telecom Services Inc.

2466 Peck Road

City of Industry, California 90601

Attention: Mr. Bruce Hahn

Telecopier No.: (770) 518-1236

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With a copy to:

Sonnenschein Nath & Rosenthal

1221 Avenue of the Americas

New York, NY 10020

Telecopier No.: (212) 768-6999

Attention: Ira Roxland, Esq.

If to the Registered Holder:

To the address set forth in the Warrant Register as described in Section 4 hereof.

(b) All notices and other communications from the Company to the Registered Holder of the Warrants shall be (x) mailed by first-class certified or registered mail, postage prepaid, and (y) sent by telecopier delivery, to the address and telecopier number furnished to the Company in writing by the last Registered Holder of these Warrants who shall have furnished an address to the Company in writing. In the case of a Redemption Notice pursuant to Section 8, such notice shall be provided by (x) telecopier delivery and (y) courier or hand delivery, and not by first class certified or registered mail as prescribed above. All notices and other communications from the Registered Holder of the Warrants or in connection herewith to the Company shall be mailed by first-class certified or registered mail, postage prepaid, to the Company’s office set forth above. If the Company should at any time change the location of its principal office to a place other than as set forth below, then it shall give prompt written notice to the Registered Holder of the Warrants and thereafter all references in the Warrants to the location of its principal office at the particular time shall be as so specified in such notice.

13. Change or Waiver. Any term of this Warrant Certificate may be changed or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought.

14. Headings. The headings in this Warrant Certificate are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant Certificate.

15. Severability. If any provision of this Warrant Certificate shall be held to be invalid and unenforceable, such invalidity or unenforceability shall not affect any other provision of this Warrant Certificate.

16. Governing Law and Submission to Jurisdiction. This Warrant Certificate will be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict or choice of laws of any jurisdiction, except to the extent that the Delaware and General Corporation Law is mandatorily applicable. The parties hereby agree that any action, proceeding or claim against it arising out of, or relating in any way to this Warrant Certificate shall be brought and enforced in the courts of the State of New York, and irrevocably submit to such jurisdiction, which jurisdiction shall be exclusive.

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17. Certificate. Upon request by the Registered Holder of the Warrants, the Company shall promptly deliver to such holder a certificate executed by its President or Chief Financial Officer setting forth the total number of outstanding shares of capital stock, convertible debt instruments and options, rights, warrants or other agreements relating to the purchase of such capital stock or convertible debt instruments, together with its calculation of the number of shares remaining available for issuance upon exercise of the Warrants, and a certificate of the accuracy of the statements set forth therein.

18. Supplements and Amendments. The Company may from time to time supplement or amend this Warrant Certificate in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Registered Holder may deem necessary or desirable.

19. Successors. All the covenants and provisions of this Warrant Certificate shall be binding upon and inure to the benefit of the Company and the Registered Holder and their respective successors and assigns hereunder.

20. Benefits of these Warrants. Nothing in this Warrant Certificate shall be construed to give to any person, entity or corporation other than the Company and the Registered Holder of the Warrants any legal or equitable right, remedy or claim under this Warrant Certificate; and the rights under this Warrant Certificate shall be for the sole and exclusive benefit of the Company and the Registered Holder of the Warrants.

IN WITNESS WHEREOF, AMERICAN TELECOM SERVICES, INC. has caused this Warrant Certificate to be signed by its duly authorized officers under its corporate seal and to be dated on the day and year first written above.

AMERICAN TELECOM SERVICES, INC.
By:
Name:	Adam Somer
Title:	Co-President

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ANNEX A

NOTICE OF EXERCISE FORM

To: Dated:                                         

In accordance with the Warrant Certificate enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase                      shares of common stock (“Common Stock”), $.001 par value per share, of American Telecom Services Inc. (“Company”) and encloses herewith $             in cash, certified or official bank check or checks or other immediately available funds, which sum represents the aggregate Exercise Price (as defined in the Warrant Certificate) for the number of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant Certificate.

or

In accordance with the Warrant Certificate enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase                      shares of common stock (“Common Stock”), $.001 par value per share, of American Telecom Services Inc. (“Company”) by surrender of Warrants to purchase                      shares of Common Stock (with a “Market Value” of $            ).

The undersigned hereby represents, warrants to, and agrees with, the Company that:

(i) The undersigned is acquiring the Warrant Shares for its own account and not with a view towards the distribution thereof;

(ii) The undersigned has received a copy of all reports and documents required to be filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended, within the last 12 months and all reports issued by the Company to its stockholders;

(iii) The undersigned understands that it must bear the economic risk of the investment in the Warrant Shares, which cannot be sold unless they are registered under the Securities Act of 1933 (the “1933 Act”) or an exemption therefrom is available thereunder;

(iv) The undersigned is aware that the Company shall place stop transfer orders with its transfer agent against the transfer of the Warrant Shares in the absence of registration under the 1933 Act or an exemption therefrom as provided herein;

Signature:

Address:

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ANNEX B

ASSIGNMENT FORM

FOR VALUE RECEIVED,                                          hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant Certificate with respect to the number of shares of Common Stock covered thereby set forth below, unto:

Name of Assignee Address No. of Shares

Dated:

Signature:

Dated:

Witness:

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ANNEX C

WARRANT AGREEMENT

15

EX-10.12

Exhibit 10.12

THIS PROMISSORY NOTE AND THE SECURITIES OBTAINABLE UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE ACT”), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

SENIOR CONVERTIBLE NOTE

U.S. $ 2005

FOR VALUE RECEIVED, American Telecom Services Inc., a Delaware corporation (the “Company”), hereby unconditionally promises to pay to the order of              (the “Holder”) the                              ($            ) dollars (the “Principal Amount”), together with all accrued but unpaid interest on this Note on             , 2007 (the “Maturity Date”), subject to conversion as provided herein. The outstanding Principal Amount of this Note shall bear interest at the rate of eight percent (8%) per annum (calculated daily on the basis of a 360-day year and actual calendar days elapsed), payable on the Maturity Date (except as otherwise provided herein in cases of conversion of this Note into shares (“Note Shares”) of the Company’s common stock (“Common Stock”)).

Subject to the conversion provisions of Section 2 hereof, both the Principal Amount and accrued interest thereon shall be paid in lawful money of the United States of America to the Holder at                             , or at such other address as the Holder may designate by notice in writing to the Company, in immediately available funds. If any payment hereunder falls due on a Saturday, Sunday or legal holiday, it shall be payable on the next succeeding business day and such additional time shall be included in the computation of interest.

This Note is one of a series of senior convertible notes (“Senior Notes” or “Notes”) containing substantially identical terms and conditions and issued in an offering (“Offering”) pursuant to a Confidential Private Placement Memorandum, dated June 28, 2005 (“Memorandum”), and Subscription/Registration Rights Agreements between the Company and each investor in the Offering (“Investors”). This Note is entitled to the benefits of that certain General Security Agreement (“Security Agreement”), dated as of July 14, 2005, between the Company and HCFP/Brenner Securities LLC, the collateral agent for the ratable benefit of the Holder and the other Investors, covering certain collateral of the Company (“Collateral”), as set forth in the Security Agreement. The issuance of this Note and the granting of the security interest in the Collateral to the Holder pursuant to the Security Agreement are intended by the Company and Holder to be a contemporaneous exchange for new value given by Holder to the Company in an amount equivalent to the value given by the Company to Holder. Capitalized terms used but not defined herein shall have their respective meanings assigned in the Memorandum and/or Subscription/Registration Rights Agreement and/or Security Agreement. The Security Agreement, the Uniform Commercial Code Financing Statements to be filed in connection with the Security Agreement and any and all other documents executed and delivered

by the Company to the Holder under which the Holder is granted liens on assets of the Company are collectively referred to herein as the “Security Documents.” The Note Shares are also referred to in, and entitled to the benefits of, those certain registration rights granted by the Company pursuant to the Subscription/Registration Rights Agreement.

1. Ranking. The indebtedness evidenced by this Note and the other Senior Notes and the payment of the principal amount (including the Principal Amount) hereof and thereof and interest hereon and thereon shall be Senior (as hereinafter defined) to, and have priority in right of payment over, all indebtedness of the Company, other than Permitted Indebtedness (defined below). “Senior” shall be deemed to mean that, in the event of any default in the payment of the obligations represented by the Senior Notes or of any liquidation, insolvency, bankruptcy, reorganization, or similar proceedings relating to the Company, all sums payable on the Senior Notes, shall first be paid in full, with interest, if any, before any payment is made upon any other indebtedness, now outstanding or hereinafter incurred, and, in any such event, any payment or distribution of any character which shall be made in respect of any other indebtedness of the Company shall be paid over to the holders of the Senior Notes for application to the payment thereof, unless and until the obligations under the Senior Notes (which shall mean the principal amount thereof and other obligations arising out of, premium, if any, on, interest on, and any costs and expenses payable under, the Senior Notes) shall have been paid and satisfied in full.

“Permitted Indebtedness” means the Company’s (i) financing arrangements with banks and institutions existing or proposed as of June 28, 2005, including the Company’s proposed factoring arrangement for accounts receivable with CIT, as described in the Memorandum (“Current Financing”) and (ii) any future financing with banks or institutions undertaken to replace (but not increase) any Current Financing at rates more favorable than those afforded under such Current Financing (“Replacement Financing”). The Company may not incur any other indebtedness senior to or pari passu with the Senior Notes without the prior written approval of the holders of at least 50% of the then outstanding aggregate Principal Amount of the Senior Notes.

2. Conversion.

(a) Optional Conversion. The Principal Amount of this Note and the accrued interest thereon may be converted at any time, in whole or part, at the option of the Holder (“Optional Conversion”), into shares of Common Stock at a conversion price (“Conversion Price”) equal to the lower of (i) $3.00 per share and (ii) the per-share price (“VPO Price”) at which the Common Stock is sold to the public in the Company’s venture public offering described in the Memorandum (“VPO”). To make an Optional Conversion, the Holder shall surrender this Note, duly endorsed, together with a written conversion notice to the Company at its principal office setting forth (i) that the Holder is electing to exercise its conversion rights and (ii) that portion of the Principal Amount that the Holder is electing to convert. In the case of an Optional Conversion, this Note shall be deemed to have been converted immediately prior to the close of business on the date of receipt of such conversion notice by the Company. At its expense, the Company will, as soon as practicable thereafter, issue and deliver to the Holder, at its address, a certificate or certificates for the number of Note Shares to which the Holder is entitled upon such conversion and will issue a new Note for the remaining Principal Amount that was not converted.

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(b) Automatic Conversion. In the event the Company consummates a VPO at a VPO Price that exceeds the then-applicable Conversion Price by at least 130%, all of the Principal Amount of this Note and accrued interest thereon shall automatically convert into shares of Common Stock at the Conversion Price (“Automatic Conversion”). The Automatic Conversion shall be effective on the later to occur of (1) the closing of the VPO and (2) the expiration of any lock-up or resale restriction imposed by a regulatory agency. At its expense, the Company will, as soon as practicable thereafter, notify each holder in writing of the Automatic Conversion and shall issue and deliver to the Holder, at its address, a certificate or certificates for the number of Note Shares to which the Holder is entitled upon such conversion.

(c) Mandatory Conversion. In the event the Company achieves a public market for its Common Stock other than through a VPO, the Company may force conversion of the Principal Amount of the Notes and accrued interest thereon at the Conversion Price (“Mandatory Conversion”) upon prior written notice to the Holder (“Mandatory Conversion Notice”), but only if (i) the last sale price of the Common Stock for the 20 consecutive trading days ending two business days prior to the date of the Mandatory Conversion Notice equals or exceeds 150% of the then applicable Conversion Price and (ii) a registration statement covering the resale of the Note Shares is in effect on the date of conversion (and has been continuously in effect for at least 25 business days prior to the effective date of conversion). The Mandatory Conversion shall be effective on the date of the Mandatory Conversion Notice. At its expense, the Company will issue and deliver to the Holder, at its address, a certificate or certificates for the number of Note Shares to which the Holder is entitled upon such conversion.

(d) Interest. In the case of any conversion of the Principal Amount into Note Shares under this Section 2, the Holder shall receive payment of interest due on the Principal Amount through the effective date of conversion in the form of shares of Common Stock (“Interest Shares”). The number of Interest Shares to be issued in a conversion under this Section shall be equal to (i) the amount of interest accrued through the effective conversion date on the Principal Amount being converted divided by (ii) the average last sale price of a share of Common Stock on the ten consecutive trading days ending on the third day prior to the effective date of conversion.

(e) No fractional Note Shares. In lieu of any fractional Note Shares otherwise issuable upon conversion, the number of Note Shares issued upon conversion shall be rounded up to the nearest whole number.

(f) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 2 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder of this Note against impairment.

3. Reservation of Shares. The Company shall at all times have authorized and reserved for issuance a sufficient number of shares of its capital stock to provide for the full conversion of this Note (including interest thereon) into Note Shares.

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4. Change of Control. In the event of (i) any transaction or series of related transactions (including any reorganization, merger or consolidation) that results in the transfer of 50% or more of the outstanding voting power of the Company or (ii) a sale of all or substantially all of the assets of the Company to another person, the Principal Amount of this Note (and all interest accrued thereon) shall be automatically due and payable. The Company will give the Holder not less than ten (10) business days prior written notice of the occurrence of any events referred to in this Section 4. Failure to give such notice shall not effect the validity of any such transaction.

5. Certain Adjustments. The number and class or series of Note Shares into which this Note may be converted under Section 2 shall be subject to adjustment in accordance with the following provisions:

(a) Adjustment for Reorganization or Recapitalization. If, at any time while this Note, or any portion hereof, remains outstanding and has not been converted, there shall be a reorganization or recapitalization (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), all necessary or appropriate lawful provisions shall be made so that the Holder shall thereafter be entitled to receive upon conversion of this Note, the number of shares of stock or other securities or property that a holder of the class of securities deliverable upon conversion of this Note would have been entitled to receive in such reorganization or recapitalization if this Note had been converted immediately prior to such reorganization or recapitalization, all subject to further adjustment as provided in this Section 5. If the per share consideration payable to the Holder for such class of securities in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. The foregoing provisions of this paragraph shall similarly apply to successive reorganizations or recapitalizations and to the stock or securities of any other corporation that are at the time receivable upon the conversion of this Note. In all events, appropriate adjustment shall be made in the application of the provisions of this Note (including adjustment of the conversion price and number of shares into which this Note is then convertible pursuant to the terms and conditions of this Note) with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Note shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable or issuable after such reorganization or recapitalization upon conversion of this Note.

(b) Adjustments for Split, Subdivision or Combination of Shares. If, at any time while this Note, or any portion hereof, remains outstanding and has not been converted, there shall be a split or subdivision of any class of securities into which this Note (or the remaining portion thereof) may be converted into a different number of securities of the same class, the number of shares of such class issuable upon conversion of this Note (or the remaining portion thereof) immediately prior to such split or subdivision shall be proportionately increased and the conversion price for such class of securities shall be proportionately decreased. If, at any time while this Note, or any portion hereof, remains outstanding and has not been converted, there shall be a combination of any class of securities into which this Note (or the remaining portion hereof) may be converted, into a different number of securities of the same class, the number of shares of such class issuable upon conversion of this Note (or the remaining portion thereof) immediately prior to such combination shall be proportionately decreased and the conversion price for such class of securities shall be proportionately increased.

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(c) Adjustments for Dividends in Stock or Other Securities or Property. If, at any time while this Note, or any portion hereof, remains outstanding and has not been converted, the holders of any class of securities as to which conversion rights under this Note (or the remaining portion thereof) exist at such time shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Company by way of dividend, then and in each case, this Note (or the remaining portion thereof) shall represent the right to acquire, in addition to the number of shares of such class of security receivable upon conversion of this Note (or the remaining portion thereof), and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Company that such holder would hold on the date of such conversion had it been the holder of record of the class of security receivable upon conversion of this Note (or the remaining portion thereof) on the date hereof and had thereafter, during the period from the date hereof to and including the date of such conversion, retained such shares and/or all other additional stock available by it as aforesaid during said period, giving effect to all adjustments called for during such period by the provisions of this Section 5.

6. Special Adjustments. If, at any time while this Note, or any portion hereof, remains outstanding and has not been converted, the Company issues any securities at a per common share price (“Issuance Price”) that is less than the then applicable Conversion Price (other than to the Managing Placement Agent in the Offering), the Conversion Price shall be, immediately and automatically, adjusted downward to such Issuance Price. The adjustments required by this Section shall not apply to issuances of shares of Common Stock under the other Senior Notes or the granting or exercise of options under the Company’s currently existing employee stock option plan.

7. Further Adjustments. In case at any time or, from time to time, the Company shall take any action that effects the class of securities into which this Note may be converted under Section 2, other than an action described herein, then, unless such action will not have a material adverse effect upon the rights of the Holder, the number of shares of such class of securities (or other securities) into which this Note is convertible shall be adjusted in such a manner and at such time as shall be equitable in the circumstances.

8. Redemption. Prior to such time as the Common Stock is publicly traded as a result of the VPO, VPO Abandonment (as defined in the Memorandum) or otherwise, if the Company shall consummate any other offering of securities for a per share equivalent price that is less than the then-existing Conversion Price for aggregate gross proceeds of at least $5 million (“Qualifying Financing”), the Company shall have the right to call all, but not less than all, of the Senior Notes and the Holder shall be required to sell this Note back to the Company (“Note Redemption”) or convert all Principal Amount (and accrued interest) of this Note into Common Stock under Section 2(a) prior to the Redemption Date (as defined). The Company shall effect the Note Redemption by providing the Holder with written notice (“Redemption Notice”) after the date of consummation of the Qualifying Financing advising the Holder of the Company’s election to engage in the Note Redemption and the effective date of the Note Redemption (which date shall not be less than 20 days after the date of the Redemption Notice and shall be referred to as the “Redemption Date”).

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9. Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to Sections 5, 6 or 7 hereof, the Company at its sole expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish or cause to be furnished to Holder a like certificate setting forth (i) such adjustments and readjustments, and (ii) the number and class of securities and the amount, if any, of other property which at the time would be received upon the conversion of this Note under Section 2 hereof.

10. Covenants of Company.

(a) The Company covenants and agrees that so long as this Note is outstanding, it will comply with the affirmative and negative covenants set forth in Article III of the Security Agreement.

(b) Without the prior written approval of the holders of 50% or more of the principal amount of the Senior Notes then outstanding, the Company shall not incur any indebtedness for borrowed money that is Senior to or pari passu with, in any respect, to the Senior Notes, other than Permitted Indebtedness.

11. Events of Default. Upon the occurrence of an Event of Default (as defined in the Security Agreement), the Holder may by notice to the Company take any or all of the following actions, without prejudice to the rights of the holder of any other Senior Note to enforce its claims against the Company: (i) declare the Principal Amount and any accrued interest and all other amounts payable under this Note to be due and payable, whereupon the same shall become forthwith due and payable without presentment, demand protest or other notice of any kind, all of which are hereby waived by the Company, (ii) proceed to enforce or cause to be enforced any remedy provided under any of the Security Documents, and/or (iii) exercise any other remedies available at law or in equity, including specific performance of any covenant or other agreement contained in this Note; provided, that upon the occurrence of any Event of Default referred to in Article IV of the Security Agreement, then (without prejudice to the rights and remedies specified in clause (iii) above) automatically, without notice, demand or any other act by the Holder, the Principal Amount of this Note and any accrued interest thereon and all other amounts payable under this Note shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company, anything contained in this Note to the contrary notwithstanding. No remedy conferred in this Note upon the Holder is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy conferred herein or now or hereinafter existing at law or in equity or by statute or otherwise.

12. Amendments and Waivers. Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and the holders of more than 50% of the then outstanding aggregate principal amount under the Senior Notes.

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13. Notices. All notices, requests, consents, and other communications under this Note shall be in writing, by registered or certified mail, return receipt requested, postage prepaid or via a reputable nationwide overnight courier service guaranteeing next business day delivery, in each case to the intended recipient as set forth below:

If to the Company:

American Telecom Services, Inc.

2466 Peck Road

City of Industry, California 90601

Telecopier No.: (770) 518-1236

Attention: Bruce Hahn

With a copy to:

Sonnenschein Nath & Rosenthal

1221 Avenue of the Americas

New York, New York 10020

Telecopier No.: (212) 768-6800

Attention: Ira Roxland, Esq.

If to the Holder:

To the address set forth on the front page of this Note

With a copy to:

Graubard Miller

405 Lexington Avenue - 19^th Floor

New York, New York 10174

Telecopier No.: (212) 818-8881

Attention: David Alan Miller, Esq.

In either case, with a copy to:

HCFP/Brenner Securities, LLC

888 Seventh Avenue - 17^th Floor

New York, New York 10106

Telecopier No.: (212) 707-0378

Attention: Ira Scott Greenspan

Any party may give any notice, request, consent or other communication under this Note using other means (including, without limitation, personal delivery, messenger service, telecopy or first class mail), but no such notice, request, consent or other communication shall be deemed to have been duly given unless and until it is actually received by the party for whom it is intended. Any party may change the address to which notices, requests, consents or other communications hereunder are to be delivered by giving the other parties notice in the manner set forth in this Section.

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14. Conflicting Agreements. In the event of any inconsistencies between the terms of this Note and the terms of any other document related to the loan evidenced by this Note, the terms of this Note shall prevail.

15. Severability. The unenforceability or invalidity of any provision or provisions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable.

16. Governing Law. This Note shall be governed by and construed under the internal law of the State of New York as applied to agreements among New York residents entered into and to be performed entirely within New York, except to the extent that the Delaware General Corporation Law is mandatorily applicable. The Company (1) agrees that any legal suit, action or proceeding arising out of or relating to this Note shall be instituted exclusively in New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (2) waives any objection which the Company may have now or hereafter to the venue of any such suit, action or proceeding, and (3) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. The Company further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agrees that service of process upon the Company mailed by certified mail to the Company’s address shall be deemed in every respect effective service of process upon the Company, in any such suit, action or proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

17. Waivers. The nonexercise by either party of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

18. Attorneys’ fees. If any action at law or equity, including an action for declaratory relief, is brought to enforce or interpret any provision of this Note, the prevailing party shall be entitled to recover reasonable attorneys’ fees and expenses from the other party, which fees and expenses shall be in addition to any other relief which may be awarded.

19. Waiver of Demand for Payment, etc. The Company waives demand for payment, presentment for payment, protest, notice of protest, notice of dishonor, notice of nonpayment, notice of acceleration of maturity and diligence in taking any action to collect sums owing under this Note.

20. Lost Documents. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note or any Note exchanged for it, and (in the case of loss, theft or destruction) of indemnity satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Note, if mutilated, the Company will make and deliver in lieu of such Note a new Note of like tenor and unpaid principal amount and dated as of the original date of this Note.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Note as of the date first written above.

AMERICAN TELECOM SERVICES INC.
By
	Adam Somer, Co-President

EX-10.13

Exhibit 10.13

Print Name of Subscriber                              

Social Security or EIN Number                    

SUBSCRIPTION/REGISTRATION RIGHTS AGREEMENT

American Telecom Services, Inc. (“Company”) and the Investor hereby agree as follows:

1. Subscription for Securities. I (sometimes referred to herein as the “Investor”) hereby subscribe for and agree to purchase $             principal amount of the Company’s 8% senior convertible notes due 2007 (“Notes”) as offered by the Company as part of an offering (“Offering”) for aggregate gross proceeds of up to $2.5 million of Notes under the terms of the confidential private placement memorandum dated June 28, 2005 (collectively with the appendices thereto, the “Confidential Memorandum”). The Notes will be issued with non-redeemable six-year warrants (the “Warrants”) to purchase a number of shares of the Company’s Common Stock equal to 200% of the shares of Common Stock issuable upon conversion of the Notes (based on a $3.00 Conversion Price). The maximum aggregate principal amount of Notes to be sold in the Offering may be increased at the mutual discretion of the Company and the Managing Placement Agent (as defined). HCFP/Brenner Securities LLC shall act as the exclusive managing placement agent in this Offering (“Managing Placement Agent”). The minimum investment is $100,000 principal amount of Notes, or such lesser amount to which the Managing Placement Agent and the Company may mutually agree.

2. Terms of the Securities; General Security Agreement. The terms of the Notes are as set forth in the form of Note attached as Exhibit A to the Confidential Memorandum, and the terms of the Warrants are as set forth in the form of Warrant Certificate attached as Exhibit B to the Confidential Memorandum (“Warrant Certificate”) and the Warrant Agreement attached as Exhibit C to the Confidential Memorandum (“Warrant Agreement”). The Notes and the shares of common stock (“Common Stock”) issuable upon conversion thereof (“Note Shares”) and the Warrants and the shares of Common Stock underlying the Warrants (“Warrant Shares”) are collectively referred to herein as the “Securities.” The Notes shall be secured by a senior, subordinated lien on all of the assets of the Company as provided by the General Security Agreement attached as Exhibit D to the Confidential Memorandum (“Security Agreement”). By executing this Agreement, I hereby appoint the Agent (as defined in the Security Agreement) as my attorney-in-fact to execute and deliver the Security Agreement on my behalf and to perform certain actions on my behalf as set forth therein.

3. Offering Period; Maximum. In the event that all $2.5 million principal amount of the Notes have not been sold on or prior to August 11, 2005, the Company may terminate the uncompleted portion of the Offering upon 15 days’ written notice to the Placement Agent (the date the Offering is effectively terminated is referred to as the “Termination Date”). The Offering is being conducted on a “best-efforts” basis. There is no minimum amount of aggregate investment that must be received by the Company in order for there to be a closing. It is hereby acknowledged by the parties that the Managing Placement Agent and broker/dealers selected by the Managing Placement Agent and/or certain of their affiliates, as well as directors, officers and employees of the Company, shall be permitted to purchase Notes and Warrants in the Offering.

4. Closings. The Company and the Placement Agent may hold an initial closing (“Initial Closing”) at any time after the receipt of one or more accepted subscriptions prior to the Termination Date. After the Initial Closing, subsequent closings with respect the sale of additional Notes and Warrants may take place at any time, as determined jointly by the Company and the Placement Agent, with respect to subscriptions accepted prior to the Termination Date (each such closing, together with the Initial Closing, being referred to as a “Closing”).

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5. Investor Delivery of Payment and Documents.

5.1 I have tendered the full purchase price for the Notes and Warrants by one or a combination of the following means:

(a) wiring funds in accordance with the instructions set forth in Section 1 to Schedule 1; or

(b) by delivery of a check in accordance with the instructions set forth in Section 2 of Schedule 1.

5.2 I hereby tender to the Placement Agent an executed copy of this Subscription/Registration Rights Agreement and the accompanying NASD/Selling Securityholder Questionnaire.

5.3 In the event that a Closing does not take place with respect to any subscription for any reason or if my subscription is otherwise rejected, all cash proceeds delivered by me in accordance with the foregoing shall be returned to me as soon as practicable, without interest, offset or deduction.

5.4 In the event my subscription is accepted and there is a Closing, the Notes and Warrants for which I am subscribing will be delivered promptly to me along with a copy of a fully executed version of this Agreement.

6. Acceptance or Rejection of Subscription/Registration Rights Agreement. Each of the Company and the Placement Agent have the right to reject this subscription for the Securities, in whole or in part, for any reason and at any time prior to the Closing, notwithstanding prior receipt by me of notice of acceptance of my subscription. The Notes and Warrants subscribed for herein will not be deemed issued to or owned by me until a copy of this Subscription/Registration Rights Agreement has been executed by me and countersigned by the Company, and a Closing with respect to my subscription has occurred.

7. Offering to Accredited Investors. This Offering is limited to accredited investors as defined in Section 2(15) of the Securities Act of 1933, as amended (“Securities Act”), and Rule 501 promulgated thereunder, and is being made without registration under the Securities Act in reliance upon the exemptions contained in Sections 3(b), 4(2) and/or 4(6) of the Securities Act and applicable state securities laws. As indicated by my responses herein, I am an “accredited investor” within the meaning of Section 2(15) of the Securities Act and Rule 501 promulgated thereunder.

8. Investor Representations and Warranties. I acknowledge, represent and warrant to the Company and the Placement Agent as follows:

8.1 Obligations of the Company and the Investor. The Company has no obligation to me other than as set forth in this Agreement. I am aware that, except for any rescission rights that may be provided under applicable laws, I am not entitled to cancel, terminate or revoke this subscription, and any agreements made in connection herewith will survive my death or disability. In order to induce the Company to issue and sell the Notes and Warrants to me, I represent and warrant that the information relating to me stated herein and in the NASD/Selling Securityholder Questionnaire is true and complete as of the date hereof and will be true

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and complete as of the date on which my purchase of Notes and Warrants becomes effective. If, prior to the termination of the Offering and the date the Registration Statement (defined in Schedule 1) is declared effective by the Securities and Exchange Commission, there should be any change in such information or any of such information becomes incorrect or incomplete, I agree to notify the Company and supply the Company promptly with corrective information.

8.2 Information About the Company.

(a) I have been given reasonable opportunity to meet with officers of the Company for the purpose of asking reasonable questions of such officers concerning the terms and conditions of the Offering and the business and operations of the Company and all such questions have been answered to my full satisfaction. I have also been given an opportunity to obtain any additional relevant information to the extent reasonably available to the Company. I have received all information regarding the Company that I have reasonably requested. I understand that there is no assurance as to the future performance of the Company.

(b) I have read and fully understand the Confidential Memorandum. I have read and fully understand the risks regarding the Company set forth under the caption “Risk Factors” in the Confidential Memorandum.

8.3 No assurances; No general solicitation. I have received no representation or warranty from the Company or any of its officers, directors, employees or agents in respect of my investment in the Company. I am not participating in the Offering as a result of or subsequent to: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or the Internet or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

8.4 Speculative Investment. I am aware that my purchase of the Notes and Warrants is a speculative investment. I acknowledge that I can lose the entire amount of my investment in the Company. I have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Notes and Warrants and have obtained, in my judgment, sufficient information from the Company to evaluate the merits and risks of an investment in the Company. I have not utilized any person as my purchaser representative (as defined in Regulation D) in connection with evaluating such merits and risks and have relied solely upon my own investigation in making a decision to invest in the Company. I have been urged to seek independent advice from my professional advisors relating to the suitability of an investment in the Company in view of my overall financial needs and with respect to the legal and tax implications of such investment. I believe that the investment in the Company represented by my purchase of Notes and Warrants in the Offering is suitable for me based upon my investment objectives and financial needs, and I have adequate means for providing for my current financial needs and contingencies and have no need for liquidity with respect to my investment in the Company. My investment in the Company does not constitute all, or substantially all, of my investment portfolio.

8.5 Restrictions on Transfer. I understand that (i) the Notes and Warrants (and the shares of Common Stock underlying such securities) have not been registered under the Securities Act or the securities laws of certain states in reliance on specific exemptions from registration, (ii) no securities administrator of any state or the federal government has recommended or endorsed this Offering or made any finding or determination relating to the fairness of an investment in the Company and (iii) the Company is relying on my representations and agreements for the purpose of determining whether this transaction meets the requirements of the exemptions afforded by the Securities Act and certain state securities laws. I acknowledge that the Notes and Warrants are (and the shares of Common Stock issuable upon conversion or exercise thereof, when issued, will be) subject to restrictions on transferability and may not be resold, assigned or

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otherwise disposed of unless they are subsequently registered under the Securities Act and under applicable securities laws of certain states or an exemption from such registration is available. I further acknowledge that, although the Company has agreed to file a registration statement covering the resale by me of the Note Shares, Warrants and Warrant Shares, (i) there is no assurance that the Company will do so, (ii) such registration statement, if filed, may not be declared effective or (iii) if declared effective, the Company may not be able to keep it effective until I effect the resale of securities registered thereby. I understand that each certificate evidencing each of the Securities will bear the legend set forth below:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”) OR APPLICABLE STATE LAW. THE SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.”

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A SUBSCRIPTION/REGISTRATION RIGHTS AGREEMENT BETWEEN THE HOLDER HEREOF AND THE COMPANY, A COPY OF WHICH IS ON FILE IN THE PRINCIPAL OFFICES OF THE COMPANY.”

8.6 No Market for the Notes, Common Stock and Warrants. I am purchasing the Securities for my own account for investment and not with a view to, or for sale in connection with, any subsequent distribution of the Securities, nor with any present intention of selling or otherwise disposing of all or any part of the Securities. I understand that there is a currently no market for the Notes, Common Stock or Warrants and there may not be any market for the Notes, Common Stock or Warrants in the future. I agree that (i) the purchase of the Securities is a long-term investment and (ii) I may have to bear the economic risk of investment for an indefinite period of time because the Securities have not been registered under the Securities Act and may never be registered and, cannot be resold, pledged, assigned, or otherwise disposed of unless they are subsequently registered under the Securities Act and under applicable securities laws of certain states or an exemption from such registration is available. I understand that the Company is under no obligation to register the Securities, except as may be set forth in Schedule 1, or to assist me in complying with any exemption from such registration under the Securities Act or any state securities laws.

8.7 Entity Authority.

(a) If the Investor is a corporation, partnership, company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other tax-exempt entity, it is authorized and qualified to become an investor in the Company and the person signing this Subscription/Registration Rights Agreement and NASD/Selling Securityholder Questionnaire on behalf of such entity has been duly authorized by such entity to do so.

(b) The undersigned represents and warrants to the Company that (i) if an entity, its principal place of business and executive offices are located in the State set forth on the Signature Page for Entity Investors and (ii) if an individual, his or her state of residency is the State set forth on the Signature Page for Individual Investors.

8.8 Accredited Investor Status for Individuals. (INVESTORS THAT ARE CORPORATIONS, LIMITED LIABILITY COMPANIES, PARTNERSHIPS, REVOCABLE TRUSTS, IRREVOCABLE TRUSTS, EMPLOYEE BENEFIT PLAN TRUSTS AND INDIVIDUAL RETIREMENT ACCOUNTS SHOULD IGNORE THE FOLLOWING QUESTIONS AND PROCEED TO SECTION 8.9).

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(a)         I am an accredited investor within the meaning of Section 2(15) of the Securities Act and Rule 501 promulgated thereunder because (please check the applicable responses):

¨ My individual annual income during each of the two most recent years exceeded $200,000 and I expect my annual income during the current year will exceed $200,000.

¨ If I am married, my joint annual income with my spouse during each of the two most recent years exceeded $300,000 and I expect my joint annual income with my spouse during the current year will exceed $300,000.

¨ My individual or joint (together with my spouse) net worth (including my home, home furnishings and automobiles) exceeds $1,000,000.

(b) The aggregate value of my assets is approximately $            .

(c) My aggregate liabilities are approximately $            .

(d) My current and expected income is:

YEAR	INCOME
2005 (Estimated)	$
2004 (Actual)	$
2003 (Actual)	$

Individual Investors must sign below and then should skip to Section 8.9. Each person associated with an Entity Investor who is required under Section 8.9 to separately complete the questions in this Section 8.8 must sign the below confirmation:

I hereby confirm the answers to Section 8.8 are true and correct in all respects as of the date hereof and will be on the date of the purchase of Securities.

Executed this      day of                     , 2005

Signature:

Print Name:

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8.9 Accredited Investor Status for Entities. (INVESTORS WHO ARE INDIVIDUALS SHOULD IGNORE THESE QUESTIONS.)

(a) The entity is a (please check the applicable response):

¨ Corporation

¨ Limited Liability Company

¨ Partnership

¨ Revocable Trust

¨ Irrevocable Trust (If the Investor is an Irrevocable Trust, a supplemental questionnaire, which is contained on the page following the Entity Investor signature page of this Subscription/Registration Rights Agreement, must be completed by the person directing the investment decision for the trust.)

¨ Employee Benefit Plan Trust

¨ Individual Retirement Account (If you are an IRA, skip (b))

(b) Check all responses that apply:

¨ The Entity was not formed for the specific purpose of investing in the Company

¨ The Entity has total assets in excess of $5 million dollars

¨ For Employee Benefit Plan Trusts Only: The decision to invest in the Company was made by a plan fiduciary, as defined in Section 3(21) of ERISA, who is either a bank, insurance company or registered investment advisor.

(c)         If you did not check the first two of the three boxes in Question (b) or if the Entity is an Individual Retirement Account or a Self-directed Employee Benefit Plan Trust, list the name of each person who:

(i) owns an equity interest in the Entity (i.e., each shareholder if the Entity is a corporation, each member if the Entity is a limited liability company and each partner if the Entity is a partnership); or

(ii) is a grantor for the revocable trust or Individual Retirement Account; or

(iii) is the person making the investment decision for a self-directed Employee Benefit Plan Trust.

EACH PERSON LISTED ABOVE MUST SEPARATELY COMPLETE AND SUBMIT TO THE

COMPANY THE ANSWERS TO QUESTION 8.8 AND SIGN THE WRITTEN

CONFIRMATION AT THE END OF SECTION 8.8.

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8.10 No Offer Until Determination of Suitability. I acknowledge that any delivery to me of the documents relating to the offering of the Securities prior to the determination by the Company of my suitability will not constitute an offer of the Securities until such determination of suitability is made.

8.11 For Florida Residents. The Securities have not been registered under the Securities Act or the Florida Securities Act, by reason of specific exemptions thereunder relating to the limited availability of the Offering. The Securities cannot be sold, transferred, or otherwise disposed of to any person or entity unless subsequently registered under the Securities Act or the Securities Act of Florida, if such registration is required. Pursuant to Section 517.061(11) of the Florida Securities Act, when sales are made to five (5) or more persons in Florida, any sale made pursuant to Subsection 517.061(11) of the Florida Securities Act will be voidable by such Florida purchaser either within three days after the first tender of consideration is made by the purchaser to the issuer, an agent of the issuer, or an escrow agent, or within three days after the availability of the privilege is communicated to such purchaser, whichever occurs later. In addition, as required by Section 517.061(11)(a)(3), Florida Statutes and by Rule 3-500.05(a) thereunder, if I am a Florida resident I may have, at the offices of the Company, at any reasonable hour, after reasonable notice, access to certain prescribed materials that the Company can obtain without unreasonable effort or expense.

9. Company Representations and Warranties. The Company hereby represents and warrants to the Investor and the Placement Agent as follows:

9.1 Authority. The Company has all necessary corporate power and authority to enter into this Agreement and the other documents attached to the Confidential Memorandum as Appendices and to consummate the transactions contemplated hereby and thereby. Except as set forth on Schedule1, all corporate action necessary to be taken by the Company to authorize the execution, delivery and performance of this Agreement and all other agreements and instruments delivered by the Company in connection with the transactions contemplated hereby and thereby has been duly and validly taken and this Agreement has been duly executed and delivered by the Company. Subject to the terms and conditions of this Agreement, the Agreement constitutes the valid, binding and enforceable obligation of the Company, enforceable in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity); and (ii) the applicability of the federal and state securities laws and public policy as to the enforceability of the indemnification provisions of this Agreement. The sale by the Company of the Securities does not conflict with the certificate of incorporation or by-laws of the Company or any material contract by which the Company or its property is bound, or any federal or state laws or regulations or decree, ruling or judgment of any United States or state court applicable to the Company or its property. The sale of the Securities will not trigger any pre-emptive or, to the knowledge of the Company, other rights held by any party and no governmental or regulatory consent required for the consummation of the transactions contemplated by this Agreement, except (a) approval of the listing of the Common Stock and Warrants on the OTC Bulletin Board (or AMEX, Nasdaq, or other exchange or market, as mutually agreed upon by the Company and the Managing Placement Agent) as contemplated on Schedule 1, (b) the SEC’s declaration of effectiveness of the Registration Statement and (c) the NASD’s approval of Forms 211 filed by or on behalf of parties desiring to act as market makers for the Common Stock and Warrants (if OTC listing is sought).

9.2 Confidential Memorandum. The Confidential Memorandum does not contain any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

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10. Indemnification. I hereby agree to indemnify and hold harmless the Company and the Placement Agent, their respective officers, directors, stockholders, employees, agents, and attorneys against any and all losses, claims, demands, liabilities, and expenses (including reasonable legal or other expenses incurred by each such person in connection with defending or investigating any such claims or liabilities, whether or not resulting in any liability to such person or whether incurred by the indemnified party in any action or proceeding between the indemnitor and indemnified party or between the indemnified party and any third party) to which any such indemnified party may become subject, insofar as such losses, claims, demands, liabilities and expenses (a) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made by me and contained herein or in the NASD/Selling Securityholder Questionnaire, or (b) arise out of or are based upon any breach by me of any representation, warranty, or agreement made by me contained herein or in the NASD/Selling Securityholder Questionnaire. The Placement Agent is a third-party beneficiary of this Section and this Section may not be modified or amended without the prior written agreement of the Placement Agent.

11. Severability; Remedies. In the event any parts of this Subscription/Registration Rights Agreement are found to be void, the remaining provisions of this Subscription/Registration Rights Agreement are nevertheless binding with the same effect as though the void parts were deleted.

12. Governing Law and Jurisdiction. This Subscription/Registration Rights Agreement will be deemed to have been made and delivered in New York City and will be governed as to validity, interpretation, construction, effect and in all other respects by the internal laws of the State of New York. Each of the Company and the Investor hereby (i) agrees that any legal suit, action or proceeding arising out of or relating to this Subscription/Registration Rights Agreement will be instituted exclusively in New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection to the venue of any such suit, action or proceeding and the right to assert that such forum is not a convenient forum for such suit, action or proceeding, (iii) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding, (iv) agrees to accept and acknowledge service of any and all process that may be served in any such suit, action or proceeding in New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York and (v) agrees that service of process upon it mailed by certified mail to its address set forth on my signature page will be deemed in every respect effective service of process upon it in any suit, action or proceeding.

13. Counterparts. This Subscription/Registration Rights Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. The execution of this Subscription/Registration Rights Agreement may be by actual or facsimile signature.

14. Benefit. This Subscription/Registration Rights Agreement is binding upon and inures to the benefit of the parties hereto (and the Placement Agent to the extent it is a third-party beneficiary hereof) and their respective heirs, executors, personal representatives, successors and assigns. The Placement Agent is a third-party beneficiary with respect to any sections hereof that so state or that otherwise indicate that the Placement Agent would be entitled to rely on the representations, warranties or covenants made by me therein.

15. Notices. All notices, offers, acceptance and any other acts under this Subscription/Registration Rights Agreement (except payment) must be in writing, and are sufficiently given if delivered to the addressees in person, by overnight courier service, or, if mailed, postage prepaid, by certified mail (return receipt requested), and will be effective three days after being placed in the mail if mailed, or upon receipt or refusal of receipt, if delivered personally or by courier or confirmed telecopy, in each case addressed to a party. All communications to me should be sent to my preferred address on the signature page hereto. All communications to the Company should be sent to the addresses set forth on Schedule 1. Each party may designate another address by notice to the other parties.

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16. Oral Evidence. This Subscription/Registration Rights Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. This Subscription/Registration Rights Agreement may not be changed, waived, discharged, or terminated orally, but rather, only by a statement in writing signed by the party or parties against which enforcement or the change, waiver, discharge or termination is sought.

17. Section Headings. Section headings herein have been inserted for reference only and will not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part, any of the terms or provisions of this Subscription/Registration Rights Agreement.

18. Survival of Representations, Warranties and Agreements. The representations, warranties and agreements contained herein will survive the delivery of, and the payment for, the Securities.

19. Acceptance of Subscription. The Company may accept this Subscription/Registration Rights Agreement at any time for all or any portion of the Securities subscribed for by executing a copy hereof as provided and notifying me within a reasonable time thereafter.

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SIGNATURE PAGE FOR INDIVIDUAL INVESTORS - COMPLETE ALL INFORMATION

Name:	Name of Joint Investor (if any):
Residence Address:
Telephone: (H)	(W)	Fax
Occupation:	Employer:
Business Address:
Send communications to:	¨  Home                        ¨  Office                    ¨  E-Mail
	E-mail address:
Age:	Social Security Number:
Check manner in which securities are to be held:
Individual	Tenants in	Joint Tenants with Right of Survivorship
¨  Ownership	¨  Common	¨  (both parties must sign)
¨  Community Property		¨  Other (please indicate):

The foregoing subscription is accepted and the Company hereby agrees to be bound by its terms.

INVESTOR MUST SIGN AND PRINT NAME BELOW:		The foregoing subscription is accepted and the Company hereby agrees to be bound by its terms.
Signature:		AMERICAN TELECOM SERVICES, INC.
Print Name:
Signature:	By:
Print Name:		Name: Title: Date:

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SIGNATURE PAGE FOR ENTITY INVESTORS—COMPLETE ALL INFORMATION

Name of Entity:
Address of Principal Office:
Telephone:	Fax:
Taxpayer Identification Number:
Check type of Entity:

Employee Benefit ¨     Plan Trust	Limited ¨    Partnership	General ¨    Partnership	Individual Retirement ¨    Account
Limited Liability			Other (please indicate)
¨    Company	¨    Trust	¨    Corporation

Date of Formation or incorporation:                      State of Formation or incorporation:                                                                                                

Describe the business of the Entity:                                                                                                                                                                                                 

List the names and positions of the executive officers, managing members, partners or trustees authorized to act with respect to investments by the Entity generally and specify who has the authority to act with respect to this investment.

Name Position Authority for this investment

INVESTOR:		The foregoing subscription is accepted and the Company hereby agrees to be bound by its terms.
		AMERICAN TELECOM SERVICES, INC.
Signature of Authorized Signatory
	By:
Name:		Name:
Title:		Title:
Date:		Date:

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SUPPLEMENTAL QUESTIONNAIRE FOR IRREVOCABLE TRUSTS

This Supplemental Questionnaire must be completed by the person directing the investment decision for an irrevocable trust. No other person needs to complete this Supplemental Questionnaire.

Please respond to the following questions, supplying as much detail as possible in order to make your answers complete:

1. Name of Trustee (“Trustee”) who is directing the decision for the Trust to invest in the Company                     . The remaining questions should be answered by the Trustee.

2. Does the Trustee have sufficient knowledge and experience in financial and business matters to enable it to evaluate the merits and risks of an investment in the Company?

Yes                         No    

3. During the last three years, the Trustee has made the following investments:

Year Nature of Investment Amount

4. Please list all the educational institutions the Trustee has attended (including high schools, colleges, and specialized training schools), and indicate the dates attended and the degree(s) (if any) obtained from each.

From To Institution Degree

5. Please list any professional licenses the Trustee has.

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6. Indicate the Trustee’s principal business experience or occupation during the last three years. (Please list present, or most recent, position first and the others in reverse chronological order).

From To Name of Employer Position

7. Indicate by check mark which of the following categories best describes the extent of the Trustee’s prior experience in the areas of investment listed below:

	Substantial Experience or Knowledge	No Experience
Marketable securities
Government securities
Municipal (tax-exempt) securities
Commodities
Options (stock or commodities)
Securities for which no market exists
Limited partnerships
Real estate or oil and gas programs
Tax deferred investment generally

8. Does the Trustee make his own investment decisions with respect to investments?

Always	Frequently
Usually	Rarely

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9. What is the Trustee’s principal sources of investment knowledge or advice? (The Trustee may check more than one).

               First hand experience with industry

               Financial publication(s)

               Trade or industry publication(s)

               Banker(s)

               Broker(s)

               Investment Advisor(s)

               Attorney(s)

               Accountant(s)

10. Please provide in the space below any additional information which would indicate that the Trustee has sufficient knowledge and experience in financial and business matters so that the Trustee are capable of evaluating the merits and risks of investing in restricted securities for which no market exists, such as those being offered by the Company.

14

SCHEDULE 1

1. Wiring Instructions.

Please instruct your bank to wire funds to Graubard Miller as follows:

Citibank N.A.

153 East 53rd Street

New York, NY 10022

ABA 021000089

For further credit to:

Graubard Miller

Attorney Business Account

Account No. 59240615

2. Instructions for payment by check.

When delivering your completed subscription documents, please also deliver a check to Graubard Miller in the applicable amount, payable to “Graubard Miller as Escrow Agent.” The proceeds thereof shall be held by the escrow agent in a noninterest bearing account pending closing.

3. General Rights and Obligations

A. Registration of Common Stock and Warrants under the Exchange Act. In connection with its VPO (or other initial public offering) or the filing and effectiveness of the Resale Registration Statement, the Company will take all necessary action at its expense to cause the registration of the Common Stock and Warrants under the Securities Exchange Act of 1934, as amended.

B. Registration Rights.

(i) (a) The Company agrees to include for resale the Note Shares, the Warrant Shares, the Warrants, the Placement Agent Warrants (as hereinafter defined) and the shares of Common Stock underlying the Placement Agent Warrants and the Purchase Option (as hereinafter defined) in the registration statement filed in connection with the Company’s VPO (the “Registration Statement”), which shall be filed as soon as practicable following the closing of the Financing.

     (b) If the VPO is terminated because it is determined that market conditions are unsuitable for a VPO or because of other specified reasons described in the Engagement Letter (as defined in the Confidential Memorandum) (any such termination being referred to herein as a “VPO Abandonment”), the Placement Agent shall deliver written notice of such event to the Company (“VPO Abandonment Notice”), the Company shall cause such registration statement then on file with the Securities and Exchange Commission for the VPO to be immediately converted into a registration statement for the (i) resale of the Note Shares, the Warrant Shares, the Warrants, the Placement Agent Warrants, and the shares of Common Stock underlying the Placement Agent Warrants and Purchase Option and (ii) the issuance by the Company of shares of Common Stock upon exercise of Warrants and Placement Agent Warrants that are purchased in the open market (“Resale Registration Statement”). Simultaneously with the effectiveness under the 1933 Act, the Company shall cause its securities to be registered under the 1934 Act. The Company also shall use its commercially reasonable best efforts to cause broker dealers to file a 15c2-11 for trading of the Common Stock and Warrants on the OTC-BB (or an exchange or market mutually determined by the Company and the Managing Placement Agent). If the Resale Registration Statement is not declared effective on or prior to the 180th day after the date

S-1

of the VPO Abandonment Notice, then on the 181st day after the date of the VPO Abandonment Notice (i) the exercise price of the Warrants, the Placement Agent Warrants and the Purchase Option shall be reduced by 33%, (ii) the Conversion Price of the Notes shall be reduced by 33%, (iii) the interest rate on the Note shall be increased to 11%, (iv) the Warrants shall become subject to a “cashless exercise” feature and (v) the Company shall remain obligated to cause the Resale Registration Statement to be declared effective as soon as practicable.

(ii) “Piggy-back” Rights. If at any time the Company files a registration statement (excluding registration statements on Forms S-4 and S-8), the Holders of Registrable Securities have the right to include in such registration statement their Registrable Securities, if such Securities are not then included on a current and effective registration statement; provided, however, that if, in the written opinion of the Company’s managing underwriter or underwriters, if any, for such offering (the “Underwriter”), the inclusion of such Registrable Securities, when added to the securities being registered by the Company or the selling stockholder(s), will exceed the maximum amount of the Company’s securities which can be marketed (i) at a price reasonably related to their then current market value, or (ii) without materially and adversely affecting the entire offering, the number of securities to be sold by all stockholders in such public offering (if any) shall be apportioned pro rata among all such selling stockholders, including all holders of the Registrable Securities, according to the total amount of securities of the Company proposed to be sold by said selling stockholders, including all holders of the Registrable Securities.

(iii) Procedures. In the event the Company proposes to file a registration statement as described under subsection (ii), the Company will promptly give written notice of such proposed registration to all Holders of the Registrable Securities. Such Holders will then have the right, by giving written notice to the Company within ten days after the Company provides its notice, to elect to have included in such registration such of their Registrable Securities as such Holders may request in such notice of election.

(iv) Effective and Current. The Company will keep any registration statement which registers the Registrable Securities pursuant hereto effective and current until the earlier of the date by which all the registered Registrable Securities have been sold and the date that the Registrable Securities may be sold pursuant to Rule 144 without any volume restrictions and, subject to the Black-Out Periods (defined below), the date all of the Warrants are either exercised, redeemed or otherwise expired.

(v) Amended Prospectus. The Company will notify each Holder of such Registrable Securities as expeditiously as possible following the effectiveness of any Registration Statement filed pursuant to this section, and/or of any request by the Commission for the amending or supplementing of such Registration Statement or prospectus included in the Registration Statement (“Prospectus”). If the Prospectus is amended to comply with the requirements of the Securities Act, the Holders, if requested by the Company, will immediately cease making offers of the Registrable Securities and the Company will promptly provide the Holders with revised Prospectuses to enable the Holders to resume making offers of the Registrable Securities. The Company will promptly notify the Holders, if after delivery of a Prospectus to the Holders, that, in the judgment of the Company, it is advisable to suspend use of the Prospectus delivered to the Holders due to pending material developments or other events that have not yet been publicly disclosed and as to which the Company believes public disclosure would be detrimental to the Company. Upon receipt of such notice, each such Holder will immediately discontinue any sales of Registrable Securities pursuant to such Registration Statement until such Holder has received copies of a supplemented or amended Prospectus or until such Holder is advised in writing by the Company that the then current Prospectus may be used and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus (such period of discontinuance is referred to herein as a “Black-Out Period”). Notwithstanding anything to the contrary herein, the Company will not exercise its rights under this subsection to suspend sales of Registrable Securities for a period in excess of 90 days in any 365-day period.

S-2

(vi) Covenants. If and whenever the Company is required by the provisions of this Agreement to affect the registration of any Registrable Securities under the Securities Act, the Company will:

(a) as expeditiously as possible furnish to each Holder such reasonable numbers of copies of the Prospectus, including any preliminary Prospectus, in conformity with the requirements of the Securities Act, and such other documents as such Holder may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by such Holder; and

(b) as expeditiously as possible, notify each Holder, promptly after it receives notice thereof, of the time when such Registration Statement has become effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed.

(vii) Fees and Expenses. In any registration statement in which Registrable Securities are included, the Company will bear all expenses and pay all fees incurred in connection therewith, excluding underwriting discounts and commissions payable with respect to the Registrable Securities, and fees and expenses of counsel and/or other experts retained by the Holders of the Registrable Securities (except as set forth below) but including the expenses of preparing the Registration Statement, filing it with the SEC and NASD and having it declared effective (or cleared) by such agencies, providing a reasonable number of copies of the prospectus contained therein to the Holders, and the fees of Graubard Miller, as special counsel for all of the Holders of the Securities issued in this Offering.

(viii) Indemnification.

(a) The Company shall indemnify the Holder of the Registrable Securities to be sold or resold pursuant to any registration statement hereunder and any underwriter or person deemed to be an underwriter under the Securities Act and each person, if any, who controls such Holder or underwriters or persons deemed to be underwriters within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which the Holder may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement, except to the extent (a) arising from information furnished (or omitted to be furnished) by or on behalf of the Holder, in writing, for specific inclusion in such registration statement or (b) because the Holder failed to suspend the use of such registration statement and discontinue any sales of Registrable Securities during a Black-Out Period (of which it was reasonably made aware by the Company) or failed to timely deliver a final prospectus to the purchasers of such Holder’s Registrable Securities. The Holder of the Registrable Securities to be sold or resold pursuant to such registration statement, and their successors and assigns, shall indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which the Company may become subject under the Securities Act, the Exchange Act or otherwise, (a) arising from information furnished (or omitted to be furnished) by or on behalf of the Holder, in writing, for specific inclusion in such registration statement or (b) because the Holder failed to suspend the use of such registration statement and discontinue any sales of Registrable Securities during a Black-Out Period (of which it was reasonably made aware by the Company) or failed to timely deliver a final prospectus to the purchasers of such Holder’s Registrable Securities.

(b) If any action is brought against a party hereto, (“Indemnified Party”) in respect of which indemnity may be sought against the other party (“Indemnifying Party”), such Indemnified Party shall promptly notify Indemnifying Party in writing of the institution of such action and Indemnifying Party shall assume the defense of such action, including the employment and fees of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Indemnified

S-3

Party unless (i) the employment of such counsel shall have been authorized in writing by Indemnifying Party in connection with the defense of such action, or (ii) Indemnifying Party shall not have employed counsel to defend such action, or (iii) such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which may result in a conflict between the Indemnified Party and Indemnifying Party (in which case Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events, the reasonable fees and expenses of not more than one additional firm of attorneys designated in writing by the Indemnified Party shall be borne by Indemnifying Party. Notwithstanding anything to the contrary contained herein, if Indemnified Party shall assume the defense of such action as provided above, Indemnifying Party shall not be liable for any settlement of any such action effected without its written consent.

(c) If the indemnification or reimbursement provided for hereunder is finally judicially determined by a court of competent jurisdiction to be unavailable to an Indemnified Party (other than as a consequence of a final judicial determination of willful misconduct, bad faith or gross negligence of such Indemnified Party), then Indemnifying Party agrees, in lieu of indemnifying such Indemnified Party, to contribute to the amount paid or payable by such Indemnified Party (i) in such proportion as is appropriate to reflect the relative benefits received, or sought to be received, by Indemnifying Party on the one hand and by such Indemnified Party on the other or (ii) if (but only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of Indemnifying Party and of such Indemnified Party; provided, however, that in no event shall the aggregate amount contributed by the Holder exceed the profit, if any, earned by the Holder as a result of the exercise by him of the Warrants and the sale or resale by him of the Registrable Securities.

(d) The rights accorded to Indemnified Parties hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise.

D. Listing of Common Stock and Warrants on the OTC or other Exchange or Market. Concurrently with the effectiveness of the Registration Statement or Resale Registration Statement (whichever is declared effective first), the Company shall use its best efforts to (1) to cause the Common Stock and Warrants to be listed on the OTC Bulletin Board (subject to the willingness of market makers to file Form 211 as required) or (2) to cause the Common Stock and Warrants to be listed and/or quoted on such other trading market or exchange as the Company and the Managing Placement Agent may mutually determine.

4. Use of Proceeds. 60% of the net proceeds of the Offering will be used for inventory purchases (“Inventory Proceeds”) and the remainder will be used for non-inventory related working capital. Notwithstanding the foregoing, in the event less than $2.5 million of gross proceeds are raised in the Offering, the Company shall be entitled to utilize up to 75% of the net proceeds as Inventory Proceeds, if its other working capital requirements allow. None of the proceeds of the Offering shall be used to pay any indebtedness to any director, officer, shareholder or affiliate of the Company (collectively, the “Insiders”), including accrued salaries payable thereto; provided, however, that, after consummation of the VPO (as defined), the Company may use a portion of the proceeds of the Offering to pay accrued salaries that were earned after June 1, 2005 (with no such salary for any person exceeding $150,000 per annum and no more than an aggregate of $40,000 per month of the proceeds of this Financing and the VPO, together, being used for the payment of salaries to officers and consultants as a group).

5. No Short Sales. The Investor hereby agrees not to (and use its best effort not to permit any of its affiliates to) “short sell” the Company’s securities through the date of effectiveness of the Registration Statement and shall not permit any securities owed by such Investor to be loaned or used by any broker or other person for short selling activities.

S-4

6. 9.9% Limitation. The number of shares acquired by any investor in the Offering upon the exercise of the Warrants or conversion of the Notes shall not exceed a number that, when added to the total number of shares of common stock beneficially owned by the investor, would result in beneficial ownership by such investor of more than 9.9% of the shares of common stock for purposes of Section 13(d) or Section 16 of the 1934 Act.

7. Notices. All communications to the Company should be sent to:

American Telecom Services, Inc.

2466 Peck Road

City of Industry, California 90601

Attn: Mr. Bruce Hahn

Tel.: (404) 234-0046

Fax: (770) 518-1236

with copies to:

Sonnenschein Nath & Rosenthal

1221 Avenue of the Americas

New York, New York 10020

Attn: Ira Roxland, Esq.

Tel.: (212) 768-6999

Fax: (212) 768-6800

and

HCFP/Brenner Securities LLC

888 Seventh Avenue

New York, New York 10106

Attn: Ira Scott Greenspan

Tel: (212) 707-0355

Fax: (212) 707-0378

and

Graubard Miller

405 Lexington Avenue, 19^th Floor

New York, New York 10174

Attn: David Alan Miller, Esq.

Tel: (212) 818-8661

Fax: (212) 818-8881

S-5

AMERICAN TELECOM SERVICES, INC.

NASD/SELLING SECURITYHOLDER QUESTIONNAIRE

INSTRUCTIONS

IMPORTANT: PLEASE READ CAREFULLY BEFORE SIGNING. SIGNIFICANT REPRESENTATIONS ARE CONTAINED IN THIS QUESTIONNAIRE.

1. READ ALL DEFINITIONS ON PAGE (B) BEFORE ANSWERING ANY QUESTIONS.

2. EVERY PERSON MUST ANSWER QUESTIONS 1 THROUGH 11 AND SIGN ON PAGE (I).

If you have any questions regarding this questionnaire, please call Brian L. Ross, Esq. at Graubard Miller, (212) 818-8610.

(A)

DEFINITIONS FOR NASD/SELLING SECURITYHOLDERS QUESTIONNAIRE

Affiliate: An Affiliate of any person (for purposes hereof a “person” includes a partnership, corporation or other legal entity such as a trust or estate) is a person which controls, is controlled by or is under common control with such person.

For purposes of determining affiliation with an NASD Member:

(i) a person should be presumed to control a Member of the NASD if the person beneficially owns 10% or more of the outstanding voting securities of a Member of the NASD which is a corporation, or beneficially owns a partnership interest in 10% or more of the distributable profits or losses of a Member of the NASD which is a partnership;

(ii) a Member of the NASD should be presumed to control a person if the Member of the NASD and Persons Associated with a Member of the NASD beneficially own 10% or more of the outstanding voting securities of a person which is a corporation, or beneficially own a partnership interest in 10% or more of the distributable profits or losses of a person which is a partnership; and

(iii) a person should be presumed to be under common control with a Member of the NASD if:

(1) the same person controls both the Member of the NASD and such person by beneficially owning 10% or more of the outstanding voting securities of the Member of the NASD and other such person which is a corporation, or by beneficially owning a partnership interest in 10% or more of the distributable profits or losses of the Member of the NASD and other such person which is a partnership; or

(2) a person having the power to direct or cause the direction of the management or policies of the Member of the NASD also has the power to direct or cause the direction of the management or policies of the other entity in question.

Immediate Family:	The “Immediate Family” of any person, including an employee of or Person Associated with a Member of the NASD, includes the parents, mother-in-law, father-in-law, husband or wife, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children of such person or any other individual who is supported, directly or indirectly, to a material extent by such person.
Member of the NASD:	A “Member of the NASD” is any broker or dealer admitted to membership in the NASD.
NASD:	The National Association of Securities Dealers, Inc.
Person Associated with a Member of the NASD:	A “Person Associated with a Member of the NASD” is every sole proprietor, partner, officer, director or branch manager of any Member of the NASD, or any natural person occupying a similar status or performing similar functions, or any natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by such Member of the NASD (for example, any employee), whether or not any such person is registered or exempt from registration with the NASD.

(B)

1. Identity and Background of the Records and Beneficial Owner of the Registrable Securities.

(a) Full legal name or names of all parties having record or beneficial ownership of the Registrable Securities:

(b) Business address (including street address) (or residence if no business address), telephone number and facsimile number and email address of such holders:

Address:

Telephone:

Fax:

E-mail:

(c) Are you a broker-dealer registered pursuant to Section 15 of the Exchange Act?

¨  Yes.                                                  ¨  No.

(d) If your response to Item 1(c) above is no, are you an “affiliate” of a broker-dealer registered pursuant to Section 15 of the Exchange Act?

¨  Yes.                                                  ¨  No.

(e) Full legal name of person through which you hold the Registrable Securities (i.e. name of your broker or the DTC participant, if applicable, through which your Registrable Securities will be held):

Name of entity:

DTC No.:

Contact person:

Telephone:

2. Your Relationship with the Company.

(a) Have you or any of your affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the undersigned) held any position or office or have you had any other material relationship with the Company (or its predecessors or affiliates) within the past three years?

¨  Yes.                                                  ¨  No.

(C)

(b) If your response to Item 2(a) above is yes, please state the nature and duration of your relationship with the Company:

3. Nature of your beneficial ownership.

(a) If the name of the beneficial owner of the Registrable Securities set forth in your response to Item 1(a) above is that of a limited partnership, state the names of the general partners of such limited partnership:

(b) With respect to each general partner listed in Item 3(a) above who is not a natural person, and is not publicly held, name each shareholder (or holder of partnership interests, if applicable) of such general partner. If any of these named shareholders are not natural persons or publicly held entities, please provide the same information. This process should be repeated until you reach natural persons or a publicly held entity.

(c) Name each person or entity that will have sole or shared voting or dispositive power over the shares purchased pursuant to the Agreements (the “Controlling Entity”). If the Controlling Entity is not a natural person and is not a publicly held entity, name each shareholder of such Controlling Entity. If any of these named shareholders are not natural persons or publicly held entities, please provide the same information. This process should be repeated until you reach natural persons or a publicly held entity.

(i)(A) Full legal name of Controlling Entity(ies) or natural person(s) with who have sole or shared voting or dispositive power over the Registrable Securities:

(B) Business address (including street address) (or residence if no business address), telephone number and facsimile number of such person(s):

Address:                                                                                                                                                                                                                      

Telephone:                                                                                                                                                                                                                 

Fax:                                                                                                                                                                                                                              

(C) Name of shareholders:

(D)

3. State whether you or any of your Affiliates or any members of your Immediate Family are

(a) a Member of the NASD;

¨  Yes                                                  ¨  No

(b) a Person Associated with a Member of the NASD; or

¨  Yes                                                  ¨  No

(c) an Affiliate of a Member of the NASD.

¨  Yes                                                  ¨  No

4. State whether you or any of your Affiliates own stock or other securities of any Member of the NASD or an Affiliate of a Member of the NASD.

¨  Yes                                                  ¨  No

5. State whether you or any of your Affiliates have made a subordinated loan to any Member of the NASD.

¨  Yes                                                  ¨  No

6. If you marked “Yes” to any of the questions above, please briefly describe the facts below, giving the names of the Members of the NASD to which your answer refers (including, for example, percentage of ownership, amount of loan and interest payable, applicable dates, names of Affiliates, immediate family, etc.).

7. State whether you are an Immediate Family member or a partner of Sonnenschein Nath & Rosenthal, counsel to American Telecom Services, Inc. (“Company”), or Graubard Miller, counsel to HCFP/Brenner Securities LLC (“Placement Agent”).

¨  Yes                                                  ¨  No

(E)

8. State whether you provide any consulting or other services to the Company.

¨  Yes                                                  ¨  No

If you marked “Yes”, please briefly describe such services, including cash and non-cash compensation received and attach copies of written agreements or correspondence describing such services.

9. Please identify any of the following relationships you have with the Placement Agent or any Member of the NASD.

None	¨
Advisor	¨
Officer	¨
Director	¨
Trustee	¨
Founder	¨
Registered Representative	¨
5% Stockholder	¨
Employee	¨
Immediate Family	¨
Broker/Dealer	¨
Promoter	¨
Consultant	¨
Finder	¨
Bridge Lender	¨
General Partner	¨
Limited Partner	¨
Equity Investor	¨
Client or Customer	¨
Subordinated Debt Holder	¨
Other	¨

Please describe the nature of any relationship identified above. For example, if you are an advisor, promoter, consultant or finder, describe the compensation you received; if you are an equity investor, state the class of securities and percentage interest you hold; and if you are an Immediate Family Member, describe the exact relationship, including the name of the person to whom you are related and the position such person holds with Underwriter or such other Member of the NASD. Identify the Member of the NASD:

(F)

10. State whether you have any oral and/or written agreements with any Member of the NASD or Person Associated with a Member of the NASD concerning the disposition of your securities of the Company.

¨  Yes                                                  ¨  No

If you marked “Yes”, please briefly describe such agreement and attach copies of written agreements or correspondence describing such arrangement.

I hereby affirm that the answers to the above NASD Questionnaire are true and correct as of the date set forth below.

Date:
	(Sign Name)	(Print Name)

11. Please list the other securities of the Company which you beneficially owned, including the name of the security, the number thereof, and the name of the entity though which you beneficially own such securities:

12. Plan of Distribution. By executing this questionnaire, you affirm the following plan of distribution with respect to your Registrable Securities.

Except as set forth below, the undersigned (including its donees or pledgees) intends to distribute the Registrable Securities pursuant to the Registration Statement only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned or, alternatively, through underwriters, broker-dealers or agents. If the Registrable Securities are sold through underwriters, broker-dealers or agents, the selling securityholder will be responsible for underwriting discounts or commissions or agents’ commissions. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such sales may be effected in transactions (which may involve block transactions) (i) on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the undersigned may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging positions they assume.

(G)

The undersigned acknowledges that its obligation to comply with the provisions of the Securities Exchange Act of 1934, as amended and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Registrable Securities. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

(Signature)

Print Name:

(H)

EX-10.14

Exhibit 10.14

AMERICAN TELECOM SERVICES, INC.

October 22, 2005

Mr. David Feuerstein

29 Revadim

Jerusalem, Israel 93391

Dear David:

As discussed, we are prepared to allow you to participate in certain revenue sharing arrangements on the terms and subject to the conditions set forth below.

1. American Telecom Services, Inc. (“we” or “ATS”) shall pay to you (“you” or “Feuerstein”) (each of ATS and Feuerstein, a “Party” and collectively, the “Parties”) during the Term (as defined):

(a) one quarter of one percent (0.25%) of all net revenues collected by ATS during each year of the Term directly attributable to the sale of (i) digital cordless multi-handset phone systems, (ii) multi-handset VOIP telephones and (iii) related telephone hardware components ((i),(ii) and (iii), collectively, “Hardware”), subject to a maximum aggregate amount of two hundred and fifty thousand dollars ($250,000) for such year. For purposes of this subparagraph 2(a), “net revenue” shall mean ATS’s gross amounts of billing on Hardware sold to retailers less (I) sales and other taxes, postage, cost of freight and disbursements included in such bills and (II) allowances granted to such retailers including, without limitation, advertising and promotional allowances, markdowns, discounts, returns and commissions.

(b) five percent (5%) of all net revenues collected by ATS from IDT Puerto Rico & Co. (“IDT”) (or any assignee of IDT under the IDT Agreement (as defined)) during each year of the Term directly attributable to that certain agreement dated as of November 25, 2003 by and between ATS and IDT for the provision of long distance communications services (the agreement, as amended or replaced by a future agreement relating to the same subject matter between the parties, but only to the extent it relates to the provision of long-distance communications services, the “IDT Agreement”), subject to a maximum aggregate amount of two hundred and fifty thousand dollars ($250,000) for such year. For purposes of this subparagraph 2(b), “net revenues” shall mean payments to which ATS is entitled under the IDT Agreement less service provider deductions provided under the IDT Agreement including, without limitation, reserves for service outages, customer hold backs and expenses. The revenue sharing allocation described in the subparagraph 1(b) shall hereinafter be referred to as the “IDT Revenue Sharing Allocation.”

(c) two percent (2%) of all net revenues collected by ATS from Sunrocket, Inc. (“Sunrocket”) (or any assignee of Sunrocket under the Sunrocket Agreement (as defined)) during each year of the Term directly attributable to that certain agreement dated as of June 7, 2005 by and between ATS and Sunrocket for the provision of Internet-based communications services (the agreement, as amended or replaced by a future agreement relating to the same subject matter between the parties, but only to the extent it relates to the provision of Internet-based communications services, the “Sunrocket Agreement”), subject to a maximum aggregate amount of two hundred and fifty thousand dollars ($250,000) for such year; provided, however, that any revenues attributable under the Sunrocket Agreement from the provision of Internet-based communications services relating to “subscriber bounty,” “advertising coop” and “key-city funds” shall be excluded in any computation of net revenues pursuant to this subparagraph 2(c). For purposes of this subparagraph 2(c), “net revenues” shall mean payments to which ATS is entitled under the Sunrocket Agreement less service provider deductions provided under the Sunrocket Agreement including, without limitation, reserves for service outages, customer hold backs and expenses.

2. Payments to Feuerstein by ATS shall be made monthly and shall be due and payable on the 25^th day (or if a holiday or weekend, the following business day) of each month with respect to net revenues collected during the immediately preceding month; provided, however, that ATS may, at its discretion, pay Feuerstein on the 25^th day of each month following each calendar quarter if the cumulative amount due and payable for the months during such preceding calendar quarter is less than $25,000. Payments shall be by wire transfer of immediately available funds in accordance with written wiring instructions given to ATS by Feuerstein.

3. This Agreement is for a term of five years from the date hereof (the “Term”) and will be automatically extended for an additional five year term (the “Extended Term”) if and only if ATS produces net income, after taxes, as determined in accordance with GAAP during any three of the five years of the Term. If so extended, the following revenue sharing allocation reductions shall be applicable throughout the Extended Term:

• The revenue allocation under subparagraph (2)(a) shall be reduced to one eighth of one percent (0.125%);

• The revenue allocation under subparagraph (2)(b) shall be reduced to two and one half percent (2.5%); and

• The revenue allocation under subparagraph (2)(c) shall be reduced to one percent (1%);

it being understood that all other terms of such provisions shall otherwise remain unchanged during the Extended Term.

4. Reserved.

5. ATS desires to employ Mr. Adam Somer and wishes to have Mr. Somer execute an employment agreement (the “Employment Agreement”) with ATS on or before November 15, 2005; provided, however, that if the Employment Agreement is not delivered for execution to Mr. Somer prior to November 15, 2005, Mr. Somer shall have seven days to execute the Employment Agreement from the date of such delivery (but in no event later than ATS’s first responsive amendment to the SEC’s comments to ATS’s Registration Statement on Form S-1

scheduled to be filed with the SEC). The Employment Agreement shall (i) contain all the terms (or substantially similar terms) agreed upon by all other founding executive officers of ATS, (ii) be for a term of two years, and (iii) provide that if Mr. Somer leaves his employment or terminates his employment prior to the expiration of the Employment Agreement, Mr. Somer shall, at ATS’s request, continue to manage ATS’s business relationship with each of Sunrocket and IDT, help ensure that such carriers are performing under the Sunrocket Agreement and IDT Agreement, respectively and assist in the adoption of new or incremental technology with respect to the provision of communications services from Sunrocket and IDT.

(a) If Mr. Somer fails to execute the Employment Agreement in accordance with the paragraph above, all terms of this Agreement will remain in full force and effect; provided that in lieu of your payments under Paragraph 1 and Paragraph 3 (to which you shall not be entitled) you shall be paid (A) during each year of the Term, the sum of (i) the applicable IDT Revenue Sharing Allocation and (ii) two percent (2%) of all “net revenues” (as defined in subparagraph 1(a) hereof) collected by ATS such year of the Term but only to the extent directly attributable to the initial sale (and expressly excluding reorders from existing customers) of Hardware used only in connection with the provision of long distance communication services provided by IDT; and (B) during each year of the Extended Term, if applicable, the sum of (i) one half of the applicable IDT Revenue Sharing Allocation and (ii) one percent (1%) of all “net revenues” (as defined in subparagraph 1(a) hereof) collected by ATS such year of the Term but only to the extent directly attributable to the initial sale (and expressly excluding reorders from existing customers) of Hardware used only in connection with the provision of long distance communication services provided by IDT.

(b) If Mr. Somer leaves his employment with ATS or if Mr. Somer’s employment with ATS under the Employment Agreement is terminated for any reason (including Mr. Somer’s resignation from his employment) prior to the second anniversary of such employment, you shall have the right to designate of one of the two following alternatives (which designation shall be in writing):

(A) you may opt to keep this Agreement in full force and effect; provided however, that the revenue sharing allocations under Paragraphs 2 and 3 above shall be reduced by the product of the applicable revenue sharing allocation and a fraction the numerator of which shall be the number of completed months of employment and the denominator of which shall be twenty four (24); or

(B) you may opt to be paid in accordance with subparagraph 5(a) above.

6. You will during the Term and the Extended Term, if applicable, provide advisory and consulting services to ATS as follows:

(a) generally, at ATS’s request and upon reasonable notice by ATS, but subject to your agreement, you will advise ATS with respect to specific corporate opportunities as they pertain to carriers both domestically and internationally (“Corporate Opportunities”);

(b) Upon receipt of at least One Hundred and Twenty Thousand Dollars ($125,000) under any of the revenue sharing arrangements above during any one year, you agree to actively identify and advise ATS with respect to Corporate Opportunities during the duration of such year.

7. This Agreement contains the entire understanding of the undersigned hereto and replaces and supercedes any and all other agreements between or among ATS or any of its affiliates on the one hand and you or any of your affiliates on the other hand with respect to the subject matter hereof.

8. All notices, requests, instructions, consents and other communications to be given pursuant to this Agreement shall be in writing and shall be deemed received (i) on the same day if delivered in person, by same-day courier or by telegraph, telex or facsimile transmission, (ii) on the next day if delivered by overnight mail or courier, or (iii) on the date indicated on the return receipt, or if there is no such receipt, on the third calendar day (excluding Sundays) after being sent by certified or registered mail, postage prepaid, to the party for whom intended to the following addresses:

If to ATS:

American Telecom Services, Inc.

2466 Peck Road

City of Industry, California 90601

With a copy to:

Ira Roxland, Esq.

Sonnenschein Nath & Rosenthal LLP

1221 Avenue of the Americas

New York, NY 10020

If to Feuerstein

David Feuerstein

29 Revadim

Jerusalem, Israel 93391

9. Each Party’s aggregate liability for damages in connection with this Agreement, regardless of the form of action giving rise to such liability (under any theory, whether in contract, tort, statutory or otherwise) shall not exceed the aggregate fees paid to Feuerstein hereunder. To the extent permitted by applicable law and notwithstanding anything in this Agreement to the contrary or any failure of essential purpose of any limited remedy or limitation of liability, neither Party shall be liable for any indirect, exemplary, special, consequential or incidental damages of any kind, or for any damages resulting from loss or interruption of business, lost data or lost profits, arising out of or relating to this Agreement or the subject matter hereof, however caused, even if such Party has been advised of or should have know of the possibility of such damages.

10. You may assign this Agreement to any entity formed in the United States if (i) you hold a controlling interest in such entity which for purposes hereof shall include the sole power to manage the entity and holding over 51% of the equity of such entity, (ii) you remain the principal acting on behalf of the entity at all times and all obligations hereunder that are intended to be performed by you personally shall in fact be performed by you personally, and (iii) the entity shall not be engaged in and shall thereafter covenant not to engage in businesses or operations that compete with the businesses or operations of ATS.

11. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York and shall be binding upon the respective successors and assigns of the parties hereto.

12. Any dispute which may arise between the Parties under or arising out of this Agreement shall be submitted to arbitration in New York in the United States of America, under the rules of the American Arbitration Association. All costs and expenses in connection with the arbitration proceedings shall be borne by the Parties as the arbitrators may decide; each of the Parties shall appoint one arbitrator and the two so appointed shall select a competent and disinterested additional arbitrator. All decisions required by arbitrators hereunder shall be rendered promptly and the decision of the majority of the three arbitrators shall be final and binding upon the parties and may be enforced in any court having jurisdiction. Each Party in such arbitration shall pay its own attorneys fees and expenses.

[THIS SPACE LEFT INTENTIONALLY BLANK]

If the foregoing correctly reflects our agreement, please so indicate by signing where indicated below.

Very truly yours,
American Telecom Services, Inc.
By:	/s/ Bruce Hahn
Name:	Bruce Hahn
Title:	Chief Executive Officer

AGREED and ACCEPTED

this 22^nd day of October, 2005:

/s/ David Feuerstein

David Feuerstein

EX-10.15

Exhibit 10.15

FINANCIAL ADVISORY AGREEMENT

AGREEMENT made the              day of                     , 200   , by and between HCFP/Brenner Securities, LLC, a New York limited liability company, having an address at 888 Seventh Avenue, 17^th Floor, New York, New York 10106 (“HCFP”), and American Telecom Services, Inc., a Delaware corporation, having an address at 2466 Peck Road, City of Industry, California 90601 (the “Company”).

WHEREAS, the Company has filed a registration statement with the Securities and Exchange Commission for a proposed public offering of its securities to be underwritten by HCFP (“IPO”); and

WHEREAS, pursuant to the Underwriting Agreement between the Company and HCFP, the Company has agreed to retain HCFP as a financial advisor;

NOW, THEREFORE, the parties hereto agree as follows:

1. The Company retains HCFP as a nonexclusive financial advisor to provide to the Company when requested by the Company from time to time, during normal business hours, upon reasonable notice, advice concerning shareholder relations, including advice regarding the preparation of reports and other releases, long-term financial planning, corporate reorganization and expansion, capital structure, borrowings and other financial assistance. These services shall be rendered by HCFP without any direct supervision by the Company and at such time and place and in such manner (whether by conference, telephone, letter or otherwise) as HCFP may reasonably determine. HCFP shall make available such time as it, in its sole and reasonable discretion, shall deem appropriate for the performance of its obligations under this Agreement.

2. This Agreement shall become effective as of the effective date of the IPO and shall continue for a period of six months thereafter.

3. As compensation for its services, the Company shall pay HCFP an advisory fee of $10,000 per month, for an aggregate fee of $60,000, all of which shall be payable in advance, at the closing of the IPO.

4. HCFP covenants that all proprietary or confidential information that it obtains knowledge of as a result of the services rendered pursuant to this Agreement shall be kept confidential and shall not be used by HCFP or disclosed by HCFP to any third party without the prior written approval of the Company, except as otherwise required by law. HCFP hereby acknowledges that it is aware (and that its representatives will be advised) that the United States securities laws prohibit any person who is in

possession of material non-public information about a company from (i) purchasing or selling securities of that company or (ii) communicating such information to any other person, under circumstances under which it is reasonably foreseeable that such person is likely to purchase or sell securities of such company.

5. HCFP shall bear all costs and expenses incurred by HCFP directly in connection with the performance of its services hereunder, unless otherwise agreed to by the Company.

6. HCFP and the Company acknowledge that HCFP is an independent contractor. HCFP shall not hold itself out as, nor shall it take any action from which others might infer that it is, a partner, agent or joint venturer of the Company. HCFP shall not take any action which binds, or purports to bind, the Company.

7. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof. It may not be changed except by agreement in writing signed by the party against whom enforcement or any waiver, change, discharge, or modification is sought. Waiver of or failure to exercise any rights provided by this Agreement in any respect shall not be deemed a waiver of any further or future rights.

8. In the event of any dispute under this Agreement, then and in such event, each party hereto agrees that the dispute shall be submitted to the American Arbitration Association in New York, New York, for its decision and determination in accordance with its rules and regulations then in effect. Each of the parties agrees that the decision and/or award made by the Association may be entered as judgment of the courts of the State of New York, and shall be enforceable as such.

9. This Agreement shall be construed and enforced in accordance with the laws of the State of New York without giving effect to conflict of laws.

10. This Agreement may not be assigned by either party without the written consent of the other. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and, except where prohibited, to their successors and assigns.

11. Nothing herein shall be deemed to restrict or prohibit the engagement by the Company of other consultants providing the same or similar services or the payment by the Company of fees to such parties.

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12. This Agreement may be terminated by the Company at any time upon prior written notice to HCFP; provided, however, that no such termination shall reduce the amount payable under Section 3 or result in any refund of amounts previously paid under Section 3, which latter amounts shall be deemed earned in all respects prior to termination of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

AMERICAN TELECOM SERVICES, INC.

By:

HCFP/BRENNER SECURITIES, LLC

By:

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EX-10.16

Exhibit 10.16

HCFP/BRENNER SECURITIES, LLC

888 Seventh Avenue, 17^th Floor

New York, New York 10106

MERGER, ACQUISITION AND

OTHER BUSINESS ARRANGEMENT

AGREEMENT

                    , 2005

American Telecom Services Inc.

2466 Peck Road

City of Industry, California 90601

Attn: Bruce Hahn, Chief Executive Officer

Gentlemen:

This is to confirm our agreement whereby American Telecom Services Inc. (“Company”) will compensate HCFP/Brenner Securities, LLC (“HCFP”) if the Company engages in transactions with persons introduced to it by HCFP:

1. Agreement Regarding Mergers, Acquisitions and Other Business Arrangements

(a) In the event that any acquisition of and/or merger with other companies or joint ventures or other transaction with any third parties including, without limitation, (i) the sale of the business, assets or stock of the Company or any its subsidiaries or affiliates or any significant portion thereof, (ii) the purchase of the business, assets or stock of a third party or any significant portion thereof or (iii) entering into a commercial relationship with a third party not involving a transaction of the type referred to in clauses (i) or (ii) (collectively, a “Transaction”), occur which result from or are caused by introductions made by HCFP within twelve (12) months prior thereto, the Company shall pay HCFP 5% of the first $5 million of Legal Consideration (hereinafter defined), 4% of the next $1 million of Legal Consideration, 3% of the next $1 million of Legal Consideration, 2% of the next $1 million of Legal Consideration and 1% of the excess Legal Consideration, if any, over $8 million paid in any such Transaction.

For purposes of this Agreement, the phrase “Legal Consideration” shall mean the total value of the securities (valued as determined in the applicable agreement governing the terms of the Transaction or, if not so valued, at market on the day of closing, or if there is no public market, valued as set forth herein for other property), cash and assets and property or other benefits exchanged by the Company or received by the Company or its shareholders as consideration as a result of or arising out of the Transaction, irrespective of the period of payment or terms (all valued at fair market present value as agreed or, if not, by an independent appraiser selected by the Company in good faith).

(b) All fees payable under this Section 1 are due and payable to HCFP, in cash or by certified check, at the closing or closings of any Transaction; provided, that if the Legal Consideration on any Transaction is other than all cash, the payment to HCFP shall be, at the option of the Company, either the cash equivalent or such other consideration proportionate with the types of Legal Consideration paid on such Transaction; and provided, however, that if any Legal Consideration is to be paid or received at a future date or is contingent upon a future event, the related fees shall be due and payable on the business day after receipt or payment by the Company. No fees shall be payable under this Section 1 or otherwise if, for any reason, the Transaction is not consummated.

2. Term of Agreement

This Agreement shall be for a term of three years from the date hereof.

3. Expenses

HCFP shall bear all costs and expenses incurred by HCFP directly in connection with the introduction or attempted introduction(s) made by HCFP in connection with Transactions and otherwise in connection with the performance of its services hereunder, unless otherwise agreed to by the Company.

4. Use of Name and Reports

Use of HCFP’s name in annual reports or any other reports of the Company or press releases issued by the Company shall require the prior written approval of HCFP, which shall not be unreasonably withheld or delayed.

5. Status as Independent Contractor

HCFP shall perform its services as an independent contractor and not as an employee of the Company or affiliate thereof. It is expressly understood and agreed to by the parties that HCFP, and any individual or entity that HCFP shall employ in order to perform its services hereunder, shall have no authority to act for, represent or bind the Company or any affiliate thereof in any manner, except as may be expressly agreed to by the Company in writing from time to time.

6. Entire Agreement

This Agreement constitutes the entire understanding between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect thereto. This Agreement may not be modified or terminated orally or in any manner other than by an agreement in writing signed by the parties hereto.

7. Notices

Any notices required or permitted to be given hereunder shall be in writing and shall be deemed given when mailed by certified mail or private courier service, return receipt requested, addressed to each party at its respective addresses set forth above, or such other address as may be given by either party in a notice given pursuant to this Section 7.

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8. Successors and Assigns

This Agreement may not be assigned by either party without the written consent of the other. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and, except where prohibited, to their successors and assigns.

9. Non-Exclusivity

Nothing herein shall be deemed to restrict or prohibit the engagement by the Company of other consultants providing the same or similar services or the payment by the Company of fees to such parties.

10. Applicable Law

This Agreement shall be construed and enforced in accordance with the laws of the State of New York without giving effect to conflict of laws.

11. Arbitration

In the event of any dispute under this Agreement, then and in such event, each party hereto agrees that the dispute shall be submitted to the American Arbitration Association in New York, New York, for its decision and determination in accordance with its rules and regulations then in effect. Each of the parties agrees that the decision and/or award made by the Association may be entered as judgment of the courts of the State of New York, as shall be enforceable as such.

If the foregoing correctly sets forth the understanding between HCFP and the Company with respect to the foregoing, please so indicate your agreement by signing in the place provided below, at which time this letter shall become a binding contract.

HCFP/BRENNER SECURITIES, LLC.
By:
	Ira Scott Greenspan
	Vice Chairman

AGREED AND ACCEPTED BY:
AMERICAN TELECOM SERVICES INC.
By:
	Bruce Hahn
	Chief Executive Officer

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EX-10.17

Exhibit 10.17

SERVICES AND DISTRIBUTION AGREEMENT

THIS AGREEMENT is entered into by and between American Telecom Services, Inc., a Delaware corporation, with offices located at 1191 Huntington Drive, Suite 311, Duarte, CA 91010-2400 (“Supplier”), and Databyte Technology, Inc., a                  corporation, with offices located at 11836 Clark Street, Arcadia, CA 91006 (“Vendor”).

WHEREAS, Supplier is engaged in the business of producing certain products (“Product(s)”) and offers such Product to third parties; and

WHEREAS, Vendor is engaged in the business of receiving, warehousing and distributing merchandise and also renders customer services and billing services in connection with such merchandise and desires to render each of the foregoing services to Supplier in connection with the Products;

NOW, THEREFORE, the parties hereby enter into this Agreement and agree to all of the terms and conditions as follows:

1. Services.

A. Vendor shall provide facilities in Arcadia, California, or such other location approved by Supplier, to receive, warehouse and distribute the Products and, Vendor also will render customer and billing services in connection with all sales distributed by Vendor, including but not limited to maintaining complete records with respect to importation and related costs, to sales, accounts receivable, receipts, shipping and returns. The manner and method of the customer and billing services to be rendered by Vendor will be subject to Supplier’s direction and approval.

i. Vendor shall provide written monthly reports to Supplier’s designee, presently Mr. Corey Fischer, with a copy to Mr. Bruce Hahn, which reports shall include detailed information with respect to importation and related costs, to sales, accounts receivable, receipts, shipping, returns, and inventory. Vendor agrees to implement a reporting system such that Supplier will have twenty-four hour access via the Internet to examine the up to the minute current status of the information to be included in the reports to be provided by Supplier.

B. Vendor is prohibited from making any copies, archival or otherwise, of the Products or any component thereof. Vendor is further prohibited from using the Products in any manner other than as specifically authorized herein. Any unauthorized use shall be deemed a material breach of this Agreement by Vendor and shall entitle Supplier to immediately terminate this Agreement for cause pursuant to Section 8.B. below.

2.      TERM. Subject to earlier termination pursuant to the terms hereof, the term of this Agreement shall be as follows (with the Initial Term and all Extended Terms, if any, referred to hereinafter collectively as the “Term”):

A. Initial Term. This Agreement shall be effective as of the date of execution by both parties (“Effective Date”) and shall extend for the period of one year thereafter (“Initial Term”).

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B. Extended Term. This Agreement shall be automatically renewed and shall continue for additional successive periods of two years each (each an “Extended Term”), on an ongoing basis, unless and until either party gives the other party written notice of its intention not to renew the Agreement, said notice to be provided at least 90 days prior to the expiration of the then current Term.

3. FEES.

A. Services Fee. In consideration for the services rendered by Vendor hereunder and during the Initial Term of the Agreement and each Extended Term, and provided Vendor is not in breach of this Agreement, Vendor agrees to pay to Supplier a Services Fee equal to three percent (3%) of “Net Sales” actually collected. For the purposes of this Agreement, Net Sales is defined as gross sales shipped less returns and allowances, cooperative advertising, promotional allowances, sales commissions and cash discounts.

i. The Services Fee shall be payable on the 15^th of each month for the prior month’s collections on shipments. An allowance of 10% of each month’s collectibles may be held back for returns, and after the deduction of any such month’s returns, the balance remaining, if any, from the 10% will be paid to Vendor not later than ninety days after the original monthly payment from which the funds were held back.

4. COSTS AND EXPENSES. Vendor shall be reimbursed for pre-approved actual and direct costs and expenses expressly related to return packaging and case packaging, customs, freight, outbound shipping costs, and toll free telephone line. Supplier shall invoice Vendor for such costs and expenses and Vendor agrees to pay said invoices within thirty days of receipt of such invoices.

5. CONFIDENTIALITY; NON-CIRCUMVENTION

A. Vendor acknowledges and agrees that this Agreement and all elements in connection with the Products including but not limited to and any and all other materials, software, hardware, manuals, documentation, marketing and promotional materials relating to this Agreement and the Products and each of the components and elements thereof (hereinafter referred to collectively as the “Materials”), whether or not actually created by Supplier, are all the proprietary and confidential property of Supplier. Furthermore, the parties recognize that during the course of their relationship, Vendor may have occasion to receive additional Materials or information that is considered to be confidential or proprietary to Supplier, including information relating to inventions, patents, trademarks, copyrights, ideas, know-how, specifications, drawings, software, programming, business practices or policies, cost or pricing Product, customer or vendor lists and/or any other material referring to same (collectively, “Confidential Information”). Confidential Information shall include, without limitation, any information or material that Supplier designates as such or which under the circumstances of disclosure to Vendor reasonably ought to be treated as such. For instance, the terms of this Agreement shall be considered confidential.

B. Accordingly, both during the Term of this Agreement and thereafter, Vendor agrees to maintain in strictest confidence, and will not use, disclose, reveal or make available to any third party or utilize for its own benefit (other than as authorized pursuant to this Agreement) any of the Product, Materials or any Confidential Information, without the prior express written

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consent of Supplier unless Vendor is obligated by court order or other valid legal means to divulge the Confidential Information. Vendor further agrees to take all reasonable precautions to preserve the confidentiality of Supplier’s Products and the Materials and Confidential Information provided in connection therewith and shall assume sole responsibility that its directors, officers, employees and agents, the persons and entities to which Vendor makes the Product available and Vendor’s permitted Vendors and assigns will similarly preserve the confidential nature of the information against unauthorized uses and/or unauthorized third parties. Vendor shall include a confidentiality provision in all of its employment agreements and agreements relating to the use of the Product. The provisions of this section shall survive expiration or termination of this Agreement.

C. Non-Circumvention. Vendor agrees not to circumvent Supplier and that it shall not enter into any discussions, negotiations, communications, agreements, contracts, or any other agreements regarding any type of project utilizing the ideas, plans and concepts or any elements similar to that which are encompassed in the Products, Materials and Confidential Information provided by Supplier. Specifically, Vendor agrees that: (a) Supplier has a substantial and material interest in the Products, Materials and Confidential Information; (b) Supplier may be entitled to equitable and legal remedies in the event Vendor consummates a transaction or enters into a business arrangement, utilizing, arising out of or related to any of the Products, Materials or Confidential Information; and (c) Supplier may suffer irreparable harm and significant damages if Vendor communicates, negotiates or enters into any business arrangement for any project with elements similar to that which are encompassed in the Products, Materials and Confidential Information.

6. RIGHTS.

A. Ownership. Nothing in this Agreement shall act to grant or transfer from Supplier to Vendor any ownership right, title or interest whatsoever in or to any of the Products or Materials (specifically including, without limitation, all of the copyrights, service marks trademarks and all elements and components thereof). Furthermore, all Products and Materials shall be and remain the sole property of Supplier, except with respect to each particular physical Product upon consummation of a sales transaction.

B. Post-Term. Upon the expiration or termination of this Agreement, all rights granted or licensed to Vendor under this Agreement shall forthwith terminate and immediately and automatically revert solely to Supplier and Vendor shall immediately discontinue all exploitation of any rights which are owned by Supplier and all use of the Materials. Furthermore, upon expiration or termination of this Agreement, Supplier may require Vendor to send to Supplier, at no cost to Supplier, any or all of the Products and Materials and/or require Vendor to destroy any or all of the Products and Materials then in Vendor’s custody, and provide Supplier with a certificate or affidavit testifying to said destruction.

7. LIMITATION OF LIABILITY; REMEDIES.

A. VENDOR ACKNOWLEDGES AND AGREES THAT VENDOR’S SOLE REMEDY AGAINST SUPPLIER ARISING FROM OR IN CONNECTION WITH ANY BREACH OR FAILURE BY SUPPLIER TO MEET THE TERMS OF THIS AGREEMENT, SHALL BE THOSE EXPRESSLY SET FORTH IN THE DISPUTE RESOLUTION AND TERMINATION

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PROVISIONS OF THIS AGREEMENT. SUPPLIER DISCLAIMS ANY AND ALL OTHER LIABILITIES OR REMEDIES WHATSOEVER AND VENDOR HEREBY WAIVES ITS RIGHTS TO ALL OTHER REMEDIES WHATSOEVER.

B. NOTWITHSTANDING ANYTHING TO THE CONTRARY, ALL LIABILITY ARISING UNDER THIS AGREEMENT, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL BE LIMITED TO DIRECT, OBJECTIVELY MEASURABLE MONETARY DAMAGES. NEITHER PARTY NOR THEIR SERVICE PROVIDERS OR SUPPLIERS, SHALL HAVE ANY LIABILITY TO THE OTHER PARTY OR TO ANY THIRD PARTY FOR ANY INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS, LOSS OF PRODUCT, LOSS OF BUSINESS, LOSS OF GOOD WILL OR REPUTATION, INTERRUPTION OF BUSINESS, OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.

C. THE PARTIES ACKNOWLEDGE THAT THE LIMITATIONS REFERENCED IN THIS SECTION ARE MATERIAL TERMS AND OF THE ESSENCE TO THIS AGREEMENT.

D. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 7: (i) THE AGGREGATE LIABILITY OF SUPPLIER UNDER THIS AGREEMENT SHALL NOT EXCEED THE LESSER OF (A) THE TOTAL AMOUNTS PAID BY VENDOR TO SUPPLIER HEREUNDER DURING THE SIX-MONTH PERIOD IMMEDIATELY PRECEDING THE EVENT THAT GAVE RISE TO THE CLAIMS OR (B) ONE HUNDRED THOUSAND DOLLARS ($100,000.00); AND (ii) THE REMEDIES LIMITATIONS IN THIS SECTION 7 SHALL NOT APPLY IN THE EVENT OF A BREACH BY VENDOR OF THE NON-CIRCUMVENTION PROVISIONS SET FORTH IN SECTION 5.C ABOVE.

8. TERMINATION. The following termination rights are in addition to the termination rights that may be provided elsewhere in the Agreement:

A. Without Cause. After the Initial Term, either party may terminate this Agreement without cause by giving the other party at least 90 days prior written notice of such termination (“Termination Notice”) before the end of any Extended Term.

B. For Cause. Either party may terminate this Agreement at any time due to a material breach by the other party by giving the breaching party a Termination Notice stating the basis for such termination; provided, however, Vendor may not so terminate if Supplier cures such breach within 90 days following receipt of Vendor’s Termination Notice. Subject to said cure provision, the effective date of any such termination-for-cause shall be the last day of the regular billing cycle following receipt of the Termination Notice by the breaching party.

9. INDEMNITIES.

A. Each party hereby agrees to indemnify and hold harmless the other party and its parent, subsidiary and affiliated entities, and its and their owners, directors, officers, employees and representatives (collectively, “Indemnitees”) from and against any and all claims, actions,

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proceedings, liabilities, damages, judgments, costs and expenses (including, without limitation, reasonable outside attorneys fees and legal costs, whether or not in connection with litigation) (collectively, “Claims”) arising out of or in connection with a material breach of this Agreement by such party.

B. Vendor shall separately indemnify Supplier and its Indemnitees in connection with any Claims relating to: (i) any aspect of Vendor’s business or financial dealings which do not directly involve Supplier; (ii) any use by Vendor or any third party in connection with the services and/or Products supplied by Supplier; (iii) any decisions made by Vendor with respect to Vendor’s own computer system, software, hardware and/or communications services; (iv) any unauthorized use of or tampering with the Products; and (v) any other matter whatsoever not otherwise arising in connection with Supplier’s indemnity under the mutual indemnity set forth above.

C. Vendor shall notify Supplier promptly in the event of any Claim or threat thereof: (i) in which Supplier and/or any of its Indemnitees is/are named; (ii) involving the use of the Products as authorized in this Agreement; or (iii) which would otherwise trigger the mutual indemnification by Supplier hereunder. Supplier shall have the unrestricted right and option, at any time, to undertake, assume and conduct the defense, resolution, compromise or settlement of any such claim, proceeding, action or threat, in which event Vendor shall fully cooperate with and/or assist Supplier to the extent Supplier requests such cooperation and/or assistance.

10. NOTICES. Any and all notices, requests, demands and other communications which are required or may be given under, or in connection with, this Agreement shall be in writing and shall be deemed given when delivered in person or when received if by telegraphic or other electronic means (including, without limitation, telecopy or telex) or, if mailed, three business days after being deposited in the United States mail, certified or registered mail, postage prepaid, or if sent via Federal Express or similar courier service, two days after being deposited therewith, addressed to the party to whom it is to be given at the address hereinafter specified:

If to Company:

American Telecom Service, Inc.

1191 Huntington Drive, Suite 311

Duarte, CA 91010-24000

Attn: Mr. Corey Fischer

Telephone:                                    

Facsimile:                                     

With a copy to:

Mr. Bruce Hahn

1425 Market Blvd.

Roswell, GA 30076

Telephone:                                   

Facsimile: 770-518-1236

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If to Vendor:

Databyte Technology, Inc.

11836 Clark Street

Arcadia, CA 91006

Attn:                                              

Telephone:                                    

Facsimile:                                     

Any party hereto may, by notice given as provided herein, change the address to which, or the person to whose attention, notices shall be given.

11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original as against any party who has signed it and together shall be deemed a fully executed and original Agreement.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have each executed and entered into this Agreement as of the later of the two dates written below.

AMERICAN TELECOM SERVICES, INC.	DATABYTE TECHNOLOGY, INC.
By:	By:
Title:	Title:
Date:	Date:

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SERVICES AND DISTRIBUTION AGREEMENT

STANDARD TERMS AND CONDITIONS

The following Standard Terms and Conditions constitute a part of the Services and Distribution Agreement (the “Principal Terms”) dated as of October     , 2003 between American Telecom Services, Inc. (“Supplier”) and Databyte Technology, Inc. (“Vendor”). Capitalized terms used but not defined herein shall have the meanings set forth in the Principal Terms. Section references are to the Principal Terms and paragraph references are to these Standard Terms and Conditions. The Principal Terms and these Standard Terms and Conditions are referred to collectively in these Standard Terms and Condition as the “Agreement.”

1. TAXES. All amounts paid hereunder, including without limitation, service fees, shall be subject to tax reporting as required by municipal, state and federal tax authorities. Vendor and its officers and directors agree to pay all taxes and other payments required by municipal, state and federal laws, rules and regulations required of entities and its employees rendering services pursuant to agreements of this nature. PC shall not reimburse Vendor, Vendor’s employees, contractors, or any of Vendor’s officers, directors and employees (collectively, the “Vendor Parties”) for any payroll and/or employment taxes or other payments required of any of the Vendor Parties by municipal, state, federal laws, rules and regulations, including but not limited to unemployment and disability insurance payments. Vendor agrees to defend, indemnify and hold PC harmless from and against any penalties, fines and other payments and costs, including reasonable attorneys fees in the event a governmental authority determines that any Vendor Party is delinquent in paying any such taxes or other payments, including that for which PC may be held liable in the event of a finding that Vendor’s services, or that of Vendor’s employees or contractors are rendered as that of an employee of PC.

2. INSURANCE. Vendor represents and warrants that it maintains the following minimum insurance coverages: (a) Comprehensive General Liability Insurance with limits of liability of not less than $2,000,000 per occurrence and $2,000,000 in the aggregate; (b) Automobile Liability Insurance with limits of liability of not less than $1,000,000. A certificate evidencing such insurance shall be provided to PC. Additionally, Vendor shall obtain Workers’ Compensation and Employer’s Liability Insurance covering all employees and independent contractors engaged by Vendor and rendering services hereunder, which coverage shall meet the laws of various municipalities, states or countries in which Vendor may have employees.

3. PROTECTION OF RIGHTS.

A. Vendor recognizes and hereby acknowledges the great value of good will associated with the Products, and acknowledges that the Products and all rights therein and good will pertaining thereto belong exclusively to Supplier and have a secondary meaning in the mind of the public. In connection therewith, Vendor shall provide and maintain at its sole cost and expense, adequate facilities and qualified personnel (or use qualified vendors) so that Vendor maintains the Product in a first class manner in connection with the services it is engaged to render hereunder. Supplier shall have the right on reasonable notice to inspect Vendor’s facilities and its manner of processing the Products, and the manner and method of its handling of customer and billing services.

B. Vendor shall notify Supplier in writing of any infringement, imitation or unauthorized use by others of any of the Products that may come to Vendor’s attention, and Supplier shall have the sole right, but not the obligation, to take any action on account of any such infringement, imitation or unauthorized use. Vendor shall not institute any suit or take any action on account of any such infringement, imitation or unauthorized use without first obtaining the written consent of Supplier to do so.

C. Vendor shall take all reasonable precautions to protect the Products from unauthorized use and from access by unauthorized third parties. In connection herewith, Vendor shall obtain and maintain adequate insurance (in amounts and with deductibles mutually agreed to with Supplier) issued by a reputable insurance carrier, reasonably acceptable to Supplier, in order to protect Supplier’s interests while the Materials and any of its elements or components are in the possession of Vendor, which insurance shall be secondary to insurance obtained by Supplier in connection with the Property placed in Vendor’s custody and control. However,

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Vendor’s insurance shall be primary in connection with all sales, billing and customer service records maintained by Vendor. Vendor shall maintain an off-site a backup system for such records.

4. FORCE MAJEURE. In the event that either party is unable to perform any of its obligations under this Agreement because of any event beyond the reasonable control of that party, including, but not limited to, natural disaster, act of God, labor dispute, action or decree of a governmental body or failure of communication lines or necessary supplies (“Force Majeure Event”), the party who has been so affected shall promptly give notice to the other party and shall use its good faith efforts to resume performance as quickly as practicable. Upon receipt of such notice, all obligations under this Agreement shall be immediately suspended for the duration of such Force Majeure Event plus a reasonable period of time required to recommence the services. If any Force Majeure Event substantially prevents or hinders performance of the services for more than fifteen consecutive days, then Supplier may terminate this Agreement without penalty to Vendor or Supplier upon written notice of not less than thirty days. Such notice must be delivered to Vendor, if at all, prior to termination of the Force Majeure Event.

5. JURISDICTION. This Agreement shall be governed by the laws of the State of California applicable to agreements entered into and to be wholly performed therein. Except as specifically provided otherwise in this Agreement, all disputes hereunder shall be resolved in the applicable state or federal courts located in Los Angeles County, California. The parties hereby consent to the jurisdiction of such courts, agree to accept service of process by U.S. Mail, and waive any jurisdictional or venue defenses otherwise available.

6. DISPUTE RESOLUTION. In the event of any dispute between the parties relating to the performance, breach, termination or enforcement of any provision of this Agreement or otherwise arising out of this Agreement (the “Dispute”), the parties shall resolve the Dispute by the process set forth herein; provided, however, subject to any other applicable provisions contained in this Agreement, this Paragraph 6 shall not preclude any party from seeking equitable relief at any time in order to prevent irreparable harm (such as an infringement of intellectual property rights or a breach of confidentiality) or from commencing or pursuing legal action at any time to avoid the running of any statute of limitations. Any option periods or other time limitations set forth in this Agreement shall be suspended or otherwise tolled during the period that the parties are attempting to resolve the Dispute pursuant to this paragraph, unless agreed to otherwise in writing by the parties.

A. Notification of the Dispute: The party seeking to initiate the dispute resolution process shall give written notice to the other party generally describing the Dispute, the party’s claim or claims to be resolved, and identification of a representative of the initiating party who has knowledge and authority for resolving the Dispute. The party receiving the notice shall respond in writing within five business days after receipt of the notice, either describing such party’s efforts to resolve the claim(s) or identifying a representative of the responding party with knowledge and authority to negotiate to resolve the Dispute on such party’s behalf.

B. Negotiation: The designated representatives shall make investigations as they deem appropriate and shall meet promptly, but not later than thirty days after the responding party has responded, and shall negotiate in good faith to resolve the Dispute. If the Dispute has not been resolved within ten business days of their initial meeting, the parties shall submit the Dispute to non-binding mediation in accordance with the following procedure.

C. Mediation:

i. Selection of Mediator: If the parties do not immediately agree upon a mediator, each of the representatives of the parties shall, within five business days after expiration of the prior ten business day period, submit to the other a written list of the names and addresses of ten acceptable neutral mediators who are not related to the parties. The representatives shall rank the mediators that are common to both lists in order of preference and exchange the rankings, and the person with the highest combined ranking having no conflicts and being willing to serve shall be retained as mediator. If no mediator is selected by this procedure, the parties shall jointly request the American Arbitration Association to supply, within ten days, a list of at least five qualified mediators, whom each of the representatives shall rank in order of preference within five business days after receipt and exchange with the other representative. The person with the highest combined ranking having no conflicts and being willing to serve shall be retained as mediator. This procedure shall be continued until a mediator is retained.

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ii. Time and Place of Mediation: In consultation with the mediator, the parties shall designate a mutually convenient time and place for the mediation, such time to be not later than thirty days after selection of the mediator. If the parties do not agree promptly, the mediator shall determine the time and place and the parties shall comply.

iii. Summary of Views: At least seven days before the designated time for the mediation, each of the representatives shall submit to the mediator such statement of their views as may be determined by the mediator.

iv. Representation: Each party shall be represented at the mediation by a person having full authority to settle the Dispute, and may be represented by counsel and such additional but reasonable number of persons as may be needed to participate in negotiations.

v. Conduct of Mediation: The mediator shall determine the format for the meeting or meetings between the parties and shall conduct the mediation in a manner that enables each party to be heard and to discuss the Dispute with the other party with the assistance of the mediator. Each party shall participate in the proceedings in good faith toward the end of resolving the Dispute. The mediation shall be conducted in private, and shall be strictly confidential.

vi. Fees of Mediator and Disqualification: The fees and expenses of the mediator shall be paid by the parties in equal shares. The mediator shall be disqualified as a witness, consultant or counsel with respect to the Dispute and any directly related matters.

vii. Termination: The mediation may be terminated:

a. by the execution of a settlement agreement;

b. by a written declaration of the mediator; or

c. by a written good faith declaration of either party at anytime after one full day of mediation to the effect that the mediation process is terminated.

If the Dispute has not been resolved through mediation, within ten business days after termination of mediation, the parties shall submit the Dispute to mandatory binding arbitration in accordance with the following procedure.

D. Arbitration:

i. Rules and Place. Subject to the provisions of this subparagraph, the rules of the arbitration shall be agreed upon by the parties prior to the arbitration and based on the nature of the Dispute. To the extent that the parties cannot agree on the rules of the arbitration, then the Commercial Arbitration Rules of the American Arbitration Association (“AAA”) in effect on the Effective Date of this Agreement, except as the applicable rules are modified by this Agreement, shall apply. The proceedings shall be held in Los Angeles County, California. If the parties cannot agree on a time and place for the arbitration, then the arbitrator shall set the time and place. As a minimum set of rules in the arbitration, the parties agree as follows:

ii. Selection of Arbitrator. The arbitration shall be conducted by a single arbitrator mutually acceptable to both parties. If the parties cannot agree on a single arbitrator within thirty days from the date written demand is made for arbitration, each party shall identify one independent individual who shall meet to appoint a single arbitrator. If an arbitrator still cannot be agreed upon within an additional thirty days, one shall be appointed by the AAA. The arbitrator shall be knowledgeable regarding the warehousing and distribution business and the particular subject matter of this Agreement.

iii. Discovery. The parties shall agree upon what, if any, discovery shall be permitted. If the parties cannot

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agree on the form of discovery within fifteen days after the appointment of the arbitrator, then there shall be neither discovery nor the issuance of subpoenas. In no event, however, shall any such discovery take more than three months.

iv. Costs. Prior to a final award, the parties shall equally bear the costs and fees of the arbitration and each party shall bear its own legal expenses. The parties agree that a court reporter will record the arbitration proceedings and that the reporter’s record will be the agreed transcript of the proceedings. Prior to a final award, the parties will share the expenses of this court reporter.

v. Confidentiality. Any arbitration proceedings hereunder shall be conducted on a strictly confidential basis; provided, however, each party may discuss the proceedings with its confidential third party business advisors (e.g., attorneys, accountants, financial advisors) and disclosure shall be permitted as required by law, but only to the minimum extent so required.

vi. Decision of Arbitrator. The decision of the arbitrator shall either be rendered in writing or included in the transcript of the proceedings. The arbitrator shall specify the basis for his/her decision, the basis for the damages award and a breakdown of the damages awarded, and the basis of any other remedy authorized under this Agreement. The discretion of the arbitrator to fashion remedies shall be limited as stated in this Agreement and shall exclude any right to award a remedy based on implied rights under the Agreement. The decision of the arbitrator shall be considered as a final and binding resolution of the Dispute, shall not be subject to appeal and may be entered as a judgment in any court of competent jurisdiction located in Los Angeles County, California.

vii. Disqualification. The arbitrator shall be disqualified as a witness, consultant or counsel with respect to the Dispute and any directly related matters.

E. Time Limitations. The duty of the parties to resolve any Dispute in accordance with the terms of this Paragraph 6 shall survive the expiration or termination of this Agreement. The parties specifically agree that any action must be initiated, if at all, within one year from the accrual of the cause of action resulting in the Dispute or the date on which the party bringing the action first knew or with reasonable prudence should have known of the cause of action; provided, however, no action may be initiated more than one year after the expiration or termination of this Agreement.

7. ATTORNEYS FEES. If any Claim, mediation, arbitration or other proceeding is brought for the enforcement of this Agreement or for a judicial declaration of rights hereunder or as a result of a breach, default or misrepresentation in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable outside attorneys fees and other costs incurred in such Claim, mediation, arbitration or other proceeding, in addition to any other relief to which that party may be entitled, as fixed by the mediator, arbitrator or court.

8. WAIVER. This Agreement shall be binding on and shall inure to the benefit of the parties hereto and their heirs, administrators, successors and assigns. No waiver by either party of any default shall be deemed as a waiver of any prior or subsequent default of the same or other provisions of this Agreement.

9. SEVERABILITY. If any provision hereof is held invalid or unenforceable by a court of competent jurisdiction, such invalidity shall not affect the validity or operation of any other provision and such invalid provision shall be deemed to be severed from the Agreement without any other affect. Except as stated, this Agreement shall otherwise remain in full force and effect.

10. ASSIGNABILITY. The engagement of Vendor hereunder is personal to Vendor and may not be assigned by any act of Vendor, by operation of law or otherwise unless in connection with a transfer of substantially all the assets of Vendor or with the prior written consent of Supplier. Supplier may assign or delegate its rights and obligations under this Agreement to one or more of its parent, subsidiary or affiliated entities or in connection with a transfer of substantially all the stock or assets of Supplier. In the event an authorized assignee assumes in writing the assignor’s obligations hereunder, the assignor shall be relieved of such assumed obligations provided the assignee assumes to be bound by the terms of this Agreement.

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11. INTEGRATION. This Agreement, including the exhibits attached hereto, if any, constitutes the entire understanding of the parties, and revokes and supersedes all prior agreements between the parties, whether written or oral, and is intended as a final expression of their Agreement. It shall not be modified or amended except in a writing signed by the parties hereto and specifically referring to this Agreement. This Agreement shall take precedence over any other prior or contemporaneous documents that may be in conflict therewith.

12. NEITHER PARTY TO BE DEEMED DRAFTER. This agreement is to be deemed to have been drafted jointly by the parties hereto and any uncertainty or ambiguity existing herein shall not be construed for or against either party by reason of any rule of construction respecting the authorship or drafting hereof.

13. CORPORATE AUTHORITY. Each individual executing this Agreement on behalf of a corporation represents and warrants that he/she is duly authorized to execute and deliver this Agreement on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors thereof.

14. ATTORNEY-IN-FACT. Vendor shall cause to be executed, verified, acknowledged or delivered to Supplier, promptly upon Supplier’s request, such documents as Supplier may from time to time deem necessary or desirable in connection herewith. If Vendor fails to execute and deliver any such document within a reasonable time following Supplier’s request, Supplier shall have the right to execute, file and record said document in Vendor’s name, place and stead and Supplier is hereby irrevocably appointed Vendor’s attorney-in-fact for such purposes, which power is coupled with an interest, with rights of substitution and delegation.

15. RELATIONSHIP. The parties hereto have the relationship of independent contractors. Neither party shall become liable or responsible for any representation, promise, agreement, act or omission of the other party contrary to the provisions of this Agreement. This Agreement is not for the benefit of any third party and shall not be deemed to give any right or remedy to any person or entity other than Supplier and Vendor, whether or not such person or entity is referred to herein.

16. HEADINGS. The section and paragraph headings in this Agreement are for reference only and shall not effect the interpretation hereof.

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AMERICAN TELECOM SERVICES, INC.

2466 Peck Road

City of Industry, CA 90601

As of October 12, 2004

Mr. Lawrence Ho

Databyte Technology, Inc.

2466 Peck Road

City of Industry, CA 90601

Re: Amendment to Services and Distribution Agreement

Dear Mr. Ho:

The letter shall serve as an amendment (this “Amendment”) to the Services and Distribution Agreement dated as of October 24, 2003 by and between American Telecom Services, Inc. (“Supplier”) and Databyte Technology, Inc. (“Vendor”) (the “Agreement).

1. Defined Terms. All capitalized terms used herein and not otherwise defined herein shall have the meanings given to them as in the Agreement.

2. Amendment.

In order to correct a typographical error, in line three of Section 3.A, where the word “Vendor” appears it is replaced with the word “Supplier” and where the word “Supplier” appears it is replaced with the word “Vendor” and said change will be deemed retroactive to the date of the Agreement.

3. Ratification. The Original Agreement shall remain in full force and effect as amended hereby and each of Vendor and Supplier ratify and affirm the Original Agreement as so amended.

4. Counterparts. This Amendment may be executed in one or more counterparts and transmitted via facsimile, each of which shall be deemed an original as against any party who has signed it and together shall be deemed a fully executed and original Agreement.

AGREED TO AND ACCEPTED: AMERICAN TELECOM SERVICES, INC.	AGREED TO AND ACCEPTED: DATABYTE TECHNOLOGY, INC.
By:	By:
Its:	Its:

AMERICAN TELECOM SERVICES, INC.

2466 Peck Road

City of Industry, CA 90601

As of September 6, 2005

Mr. Lawrence Ho

Databyte Technology, Inc.

2466 Peck Road

City of Industry, CA 90601

Re: Amendment to Services and Distribution Agreement

Dear Mr. Ho:

The letter shall serve as a second amendment (this “Second Amendment”) to the Services and Distribution Agreement dated as of October 24, 2003 by and between American Telecom Services, Inc. (“Supplier”) and Databyte Technology, Inc. (“Vendor”) as amended October 12, 2004 (collectively, the “Agreement).

1. Defined Terms. All capitalized terms used herein and not otherwise defined herein shall have the meanings given to them as in the Agreement.

2. Amendment.

In lines three and four of Section 3.A of the agreement, “three percent (3%)” is deleted and “two percent (2%)” is inserted in lieu thereof..

5. Ratification. The Original Agreement shall remain in full force and effect as amended hereby and each of Vendor and Supplier ratify and affirm the Original Agreement as so amended.

6. Counterparts. This Amendment may be executed in one or more counterparts and transmitted via facsimile, each of which shall be deemed an original as against any party who has signed it and together shall be deemed a fully executed and original Agreement.

AGREED TO AND ACCEPTED: AMERICAN TELECOM SERVICES, INC.	AGREED TO AND ACCEPTED: DATABYTE TECHNOLOGY, INC.
By:	By:
Its:	Its:

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

American Telecom Services, Inc.

2466 Peck Road,

City of Industry, California 90601

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated August 31, 2005, relating to the financial statements of American Telecom Services, Inc., which is contained in that Prospectus. Our report contains an explanatory paragraph regarding uncertainties as to the ability of the Company to continue as a going concern.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

BDO Seidman, LLP

New York, New York

November 1, 2005

EX-23.3

Exhibit 23.3

CONSENT

The undersigned hereby consents to being named as a director nominee of American Telecom Services Inc. (“ATS”) in ATS’ registration statement on Form S-1 relating to its initial public offering of equity securities, to commence service as a director of ATS upon the closing of such offering.

October 21, 2005

/s/ Elliot J. Kerbis

Elliot J. Kerbis

EX-23.4

Exhibit 23.4

CONSENT

The undersigned hereby consents to being named as a director nominee of American Telecom Services Inc. (“ATS”) in ATS’ registration statement on Form S-1 relating to its initial public offering of equity securities, to commence service as a director of ATS upon the closing of such offering.

October 18, 2005

/s/ Donald G. Norris

Donald G. Norris

EX-23.5

Exhibit 23.5

CONSENT

The undersigned hereby consents to being named as a director nominee of American Telecom Services Inc. (“ATS”) in ATS’ registration statement on Form S-1 relating to its initial public offering of equity securities, to commence service as a director of ATS upon the closing of such offering.

October 18, 2005

/s/ Robert F. Doherty

Robert F. Doherty