10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-17973

C2 Global Technologies Inc.

(Exact name of registrant as specified in its charter)

FLORIDA (State or other jurisdiction of incorporation or organization) 59-2291344   (I.R.S. Employer Identification No.)

40 King St. West, Suite 3200, Toronto, ON M5H 3Y2

(Address of principal executive offices)

(416) 866-3000

(Registrant’s telephone number)

N/A

(Registrant’s former name)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter time period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Check whether the registrant is an accelerated filed (as defined in Rule 12b-2 of the Act).

Yes o No x

As of October 31, 2005, there were 19,237,135 shares of common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS

		Page
Part I.	Financial Information	3
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004	3
	Unaudited Condensed Consolidated Statements of Operations Three and nine months ended September 30, 2005 and 2004	4
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficit Period ended September 30, 2005	5
	Unaudited Condensed Consolidated Statements of Cash Flows Three and nine months ended September 30, 2005 and 2004	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7 - 20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
Part II.	Other Information	36
Item 1.	Legal Proceedings	36
Item 4.	Submission of Matters for a Vote of Security Holders	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

2

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements.

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	September 30,			December 31,
(In thousands of dollars, except share and per share amounts)	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	94		$	44
Restricted cash		1,800			—
Other current assets		28			1
Assets of discontinued operations		—			14,965
Total current assets		1,922			15,010
Other assets:
Furniture, fixtures, equipment and software		—			50
Intangible assets, net		65			80
Goodwill		173			173
Investments		1,100			1,100
Other assets		157			211
Assets of discontinued operations, less current portion		—			7,385
Total assets	$	3,417		$	24,009
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	2,718		$	2,010
Convertible note payable, net of unamortized discount		1,765			1,768
Liabilities of discontinued operations		4,320			32,584
Total current liabilities		8,803			36,362
Convertible note payable, net of unamortized discount		1,465			2,630
Warrants, convertible to common stock		91			322
Liabilities of discontinued operations, less current portion		—			645
Subordinated notes payable to a related party, net of unamortized discount		67,348			46,015
Total liabilities		77,707			85,974
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $10.00 par value, authorized 10,000,000 shares, issued and outstanding 618 at September 30, 2005 and December 31, 2004, liquidation preference of $618 at September 30, 2005 and December 31, 2004		6			6
Common stock, $0.01 par value, authorized 300,000,000 shares, issued and outstanding 19,237,135 at September 30, 2005 and December 31, 2004		192			192
Additional paid-in capital		188,771			186,650
Accumulated deficit		(263,259	)		(248,813	)
Total stockholders’ deficit		(74,290	)		(61,965	)
Total liabilities and stockholders’ deficit	$	3,417		$	24,009

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands of dollars, except per share amounts)	2005			2004			2005			2004
Revenue	$	—		$	—		$	—		$	540
Operating costs and expenses:
Selling, general and administrative		490			779			2,489			2,393
Research and development		88			119			389			225
Depreciation and amortization		9			5			27			15
Total operating costs and expenses		587			903			2,905			2,633
Operating loss		(587	)		(903	)		(2,905	)		(2,093	)
Other income (expense):
Interest expense - related party		(1,943	)		(1,855	)		(7,893	)		(6,382	)
Interest expense - third party		(112	)		—			(302	)		(13	)
Interest and other income		120			21			121			1,440
Total other expense		(1,935	)		(1,834	)		(8,074	)		(4,955	)
Loss from continuing operations		(2,522	)		(2,737	)		(10,979	)		(7,048	)
Gain (loss) from discontinued operations (net of $0 tax)		4,292			(4,130	)		(3,467	)		(9,243	)
Net income (loss)	$	1,770		$	(6,867	)	$	(14,446	)	$	(16,291	)
Basic and diluted weighted average shares outstanding (in thousands)		19,237			19,261			19,237			19,262
Net income (loss) per common share - basic and diluted:
Loss from continuing operations	$	(0.13	)	$	(0.14	)	$	(0.57	)	$	(0.36	)
Gain (loss) from discontinued operations		0.22			(0.22	)		(0.18	)		(0.48	)
Net gain (loss) per common share	$	0.09		$	(0.36	)	$	(0.75	)	$	(0.84	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the period ended September 30, 2005

(in thousands of dollars, except share amounts)

(unaudited)

	Preferred stock					Common stock
	Shares			Amount		Shares			Amount		Additional paid in capital			Accumulated deficit
Balance at December 31, 2003		619		$	6		19,262,095		$	192	$	182,879		$	(226,030	)
Conversion of Class N preferred stock to common stock		(1	)		—		40			—
Cancellation of common stock (1)		—			—		(25,000	)		—		(21	)		—
Beneficial conversion feature on certain convertible notes payable to related party		—			—		—			—		3,771			—
C2 costs paid by majority stockholder		—			—		—			—		16			—
Issuance of options to purchase common stock to non-employee		—			—		—			—		5			—
Net loss		—			—		—			—		—			(22,783	)
Balance at December 31, 2004		618			6		19,237,135			192		186,650			(248,813	)
Beneficial conversion feature on certain convertible notes payable to related party		—			—		—			—		1,120			—
Conferral of benefit by majority stockholder		—			—		—			—		1,000			—
Issuance of options to purchase common stock to non-employee		—			—		—			—		1			—
Net loss		—			—		—			—		—			(14,446	)
Balance at September 30, 2005		618		$	6		19,237,135		$	192	$	188,771		$	(263,259	)

(1) The Company received and cancelled 25,000 common shares of the Company pursuant to the partial settlement of a prior claim against a third party.

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands of dollars)	2005			2004			2005			2004
Cash flows from operating activities:
Net loss from continuing operations	$	(2,522	)	$	(2,737	)	$	(10,979	)	$	(7,048	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		9			5			27			15
Amortization of discount on subordinated notes payable to related party		340			697			3,446			3,296
Amortization of discount on notes payable to third party		71			—			211			—
Accrued interest added to loan principal of related party debt		1,603			1,158			4,447			3,086
Expense associated with stock options issued to non-employee for services		—			(2	)		1			7
Management benefit conferred by majority stockholder		—			83			—			198
Gain on sale of investment in common stock		—			—			—			(1,376	)
Loss on disposal of fixed assets		38			4			38			4
Decrease in allowance for impairment of net assets of discontinued operations		—			—			—			(148	)
Mark to market adjustment to warrants		(64	)		—			(230	)		—
		(525	)		(792	)		(3,039	)		(1,966	)
Increase (decrease) in operating assets and liabilities:
Accounts receivable		—			—			—			6
Other assets		(8	)		32			(28	)		31
Accounts payable, accrued liabilities and interest payable		(37	)		(4	)		708			(546	)
Net cash used in operating activities by continuing operations		(570	)		(764	)		(2,359	)		(2,475	)
Net cash used in operating activities by discontinued operations		(3,471	)		(601	)		(12,057	)		(4,060	)
Net cash used in operating activities		(4,041	)		(1,365	)		(14,416	)		(6,535	)
Cash flows from investing activities:
Cash received from sale of investments in common stock, net		—			—			—			3,581
Net cash used in investing activities of discontinued operations		(81	)		(277	)		(127	)		(670	)
Net cash provided by (used in) investing activities		(81	)		(277	)		(127	)		2,911
Cash flows from financing activities:
Proceeds from issuance of subordinated notes payable to related party		4,349			2,265			14,561			11,704
Payment of notes payable to third parties		(294	)		—			(1,326	)		—
Purchase and retirement of common stock					(21	)		—			(21	)
Costs paid by majority stockholder		—			—			—			15
Net cash provided by (used in) financing activities of discontinued operations		1,959			(602	)		3,158			(8,069	)
Net cash provided by financing activities		6,014			1,642			16,393			3,629
Increase in cash, cash equivalents and restricted cash		1,892			—			1,850			5
Cash, cash equivalents and restricted cash at beginning of period		2			—			44			(5	)
Cash, cash equivalents and restricted cash at end of period	$	1,894		$	—		$	1,894		$	—
Supplemental schedule of non-cash investing and financing activities:
Disposition of telecommunications business in exchange for assumption of liabilities	$	8,014		$	—		$	8,014		$	—
Discount in connection with convertible note payable to
related party		382			291			1,120			853
Supplemental cash flow information:
Taxes paid	$	16		$	—		$	16		$	11
Interest paid		70			—			322			13

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

C2 GLOBAL TECHNOLOGIES INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Note 1 - Description of Business and Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of C2 Global Technologies Inc. (formerly Acceris Communications Inc.), and its wholly-owned subsidiaries Acceris Communications Corp. (“ACC”); I-Link Communications Inc., (“ILC”), Transpoint Holdings Corporation, and membership interest in Local Telcom Holdings, LLC (collectively, “Transpoint”), and C2 Communications Technologies Inc. (formerly Acceris Communications Technologies, Inc.). These entities, on a combined basis, are referred to as “C2”, the “Company”, or “we” in these unaudited condensed consolidated financial statements.

The Company was incorporated in the State of Florida in 1983 under the name “MedCross, Inc.” which was changed to “I-Link Incorporated” in 1997 and to “Acceris Communications Inc.” in 2003. In August 2005, subsequent to the receipt of shareholder approval, the Company amended its Articles of Incorporation to effect the name change from “Acceris Communications Inc.” to “C2 Global Technologies Inc.” The new name reflects a change in the strategic direction of the Company in light of the disposition of its Telecommunications business, as discussed below.

C2 owns certain voice over Internet Protocol (“VoIP”) patents that it seeks to license, including U.S. Patent Nos. 6,243,373 and 6,438,124 (together the “VoIP Patent Portfolio”). Following the disposition of the Telecommunications assets, discussed in Note 7 to these unaudited condensed consolidated financial statements, licensing of intellectual property constitutes the primary business of the Company.

All significant intercompany accounts and transactions have been eliminated upon consolidation.

Management believes that the unaudited interim data includes all adjustments necessary for a fair presentation. The December 31, 2004 unaudited condensed consolidated balance sheet, as included herein, is derived from the audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The September 30, 2005 unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2004, filed with the Securities and Exchange Commission.

These unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty. The independent registered public accounting firm’s report on the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2004 contained an explanatory paragraph regarding the Company’s ability to continue as a going concern.

The results of operations for the three and nine month periods ended September 30, 2005 are not necessarily indicative of those to be expected for the entire year ending December 31, 2005.

Note 2 - Summary of Significant Accounting Policies

Net earnings (loss) per share

Basic earnings per share is computed based on the weighted average number of C2 common shares outstanding during the period. Options, warrants, convertible preferred stock and convertible debt are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. As the Company has a net loss for the three month period ended September 30, 2004 and the nine month periods ended September 30, 2005 and 2004, basic and diluted loss per share are the same.

7

Potential common shares that were not included in the computation of diluted earnings per share, because they would have been anti-dilutive, are as follows:

	September 30,
	2005		2004
Assumed conversion of Series N preferred stock		24,720		24,760
Assumed conversion of related party convertible debt		3,559,327		2,657,886
Assumed conversion of third party convertible debt		4,177,808		—
Assumed exercise of options and warrants to purchase shares of common stock		2,129,246		2,353,550
		9,891,101		5,036,196

Investments

Dividends and realized gains and losses on equity securities are included in other income in the consolidated statements of operations.

Investments are accounted for under the cost method, as the equity securities or the underlying common stock are not readily marketable and the Company’s ownership interests do not allow it to exercise significant influence over these entities. The Company monitors these investments for impairment by considering current factors including economic environment, market conditions, operational performance, and other specific factors relating to the business underlying the investment, and will record impairments in carrying values if appropriate. The fair values of the securities are estimated using the best available information as of the evaluation date, including the quoted market prices of comparable public companies, market price of the common stock underlying the preferred stock, recent financing rounds of the investee, and other investee specific information. See Note 5 for further discussion of the Company’s investment in convertible preferred stock.

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates include revenue recognition, the allowance for doubtful accounts, purchase accounting (including the ultimate recoverability of intangibles and other long-lived assets), valuation of deferred tax assets, and contingencies surrounding litigation. These policies have the potential to have a significant impact on our financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events which are continuous in nature.

The Company accounts for intangible assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations (“SFAS 141”) and SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). All business combinations are accounted for using the purchase method. Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually. Intangible assets are recorded based on estimates of fair value at the time of the acquisition.

The Company assesses the fair value of goodwill based upon a discounted cash flow methodology. If the carrying amount of the assets exceeds the estimated fair value determined through the discounted cash flow analysis, goodwill impairment may be present. The Company would measure the goodwill impairment loss based upon the fair value of the underlying assets and liabilities, including any unrecognized intangible assets, and estimate the implied fair value of goodwill. An impairment loss would be recognized to the extent that the business’s recorded goodwill exceeded the implied fair value of goodwill.

8

The Company performed its annual goodwill impairment test in the third quarter of 2005. No impairment was present upon the performance of these tests in 2005 and 2004. We cannot predict the occurrence of future events that might adversely affect the reported value of goodwill. Such events may include, but are not limited to, strategic decisions made in response to economic and competitive conditions, and judgments on the validity of the Company’s VoIP Patent Portfolio or due to other factors not known to management at this time.

Regularly, the Company evaluates whether events or circumstances have occurred that indicate the carrying value of its other amortizable intangible assets may not be recoverable. When factors indicate the asset may not be recoverable, the Company compares the related future net cash flows to the carrying value of the asset to determine if impairment exists. If the expected future net cash flows are less than carrying value, impairment is recognized to the extent that the carrying value exceeds the fair value of the asset.

The Company assesses the value of its deferred tax asset, which has been generated by a history of net operating losses, at least annually, and determines the necessity for a valuation allowance. The Company evaluates which portion, if any, will more likely than not be realized by offsetting future taxable income. The determination of that allowance includes a projection of its future taxable income, as well as consideration of any limitations that may exist on its use of its net operating loss carryforwards.

The Company is involved from time to time in various legal matters arising out of its operations in the normal course of business. On a case by case basis, the Company evaluates the likelihood of possible outcomes for this litigation. Based on this evaluation, the Company determines whether a liability is appropriate. If the likelihood of a negative outcome is probable, and the amount is estimable, the Company accounts for the liability in the current period. A change in the circumstances surrounding any current litigation could have a material impact on the financial statements.

Stock-based compensation

At September 30, 2005, the Company has several stock-based compensation plans, which are described more fully in Note 18 to the audited consolidated financial statements contained in our most recently filed Form 10-K. The Company accounts for these plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations (collectively, “APB 25”). Stock-based employee compensation cost is not reflected in net loss, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. In December 2004, the Financial Accounting Standards Board (“FASB”) issued a revision to SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123R”). SFAS No. 123R supersedes APB 25. SFAS No. 123R requires that all stock-based compensation, including options, be expensed at fair value as of the grant date over the vesting period. Companies will be required to use an option pricing model (i.e., Black-Scholes or Binomial) to determine compensation expense, consistent with the model used in the already required disclosures of SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure. In April 2005, the SEC issued a release to amend the effective date of compliance with SFAS No. 123R to the first quarter of the first fiscal year beginning after June 15, 2005. The Company expects to adopt SFAS No. 123R on January 1, 2006.

In accordance with SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as amended by SFAS No. 148, see below for a tabular presentation of the pro forma stock-based compensation cost, net loss and loss per share as if the fair value-based method of expense recognition and measurement prescribed by SFAS 123 had been applied to all employee options. Options granted to non-employees (excluding options granted to non-employee members of the Company’s Board of Directors for their services as Board members) are recognized and measured using the fair value-based method prescribed by SFAS 123.

9

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net income (loss) as reported	$	1,770		$	(6,867	)	$	(14,446	)	$	(16,291	)
Deduct:
Employee stock-based compensation cost determined under the fair value-based method for all awards, net of $0 tax		(180	)		116			—			454
Pro forma net income (loss)	$	1,950		$	(6,983	)	$	(14,446	)	$	(16,745	)
Net earnings (loss) per share, basic and diluted:
As reported	$	0.09		$	(0.36	)	$	(0.75	)	$	(0.84	)
Pro forma	$	0.10		$	(0.36	)	$	(0.75	)	$	(0.87	)

Most employees participating in the stock-based compensation plan left the Company in conjunction with the disposition of the Telecommunications segment (described in Note 7 to these unaudited condensed consolidated financial statements). In the third quarter of 2005, 411,725 options expired or were cancelled, leaving 1,129,246 options outstanding at September 30, 2005. Of these options, 133,975 will expire if not exercised by December 31, 2005.

New Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (“SFAS No. 154”). SFAS No. 154 replaces Accounting Principles Board Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the accounting for and reporting of a change in accounting principle. SFAS No. 154 applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement when specific transition provisions are not provided. SFAS No. 154 requires retrospective application to prior periods' financial statements for changes in accounting principle, unless it is impractical to determine the period specific or cumulative effect of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.

Note 3 - Liquidity and Capital Resources.

As a result of our substantial operating losses and negative cash flows from operations, at September 30, 2005 we had a stockholders’ deficit of $74,290 (December 31, 2004 - $61,965) and negative working capital of $6,881 (December 31, 2004 - $21,352). The reduction of the working capital deficit is due primarily to the disposition of the Telecommunications business, as discussed in Note 7 of these unaudited condensed consolidated financial statements.

During the third quarter of 2005, the Company financed its continuing operations primarily through advances from a related party of $4,349 (YTD - $14,561), while discontinued operations were primarily financed by the buyer of the Telecommunications assets through advances which, at closing, formed additional consideration for the assets disposed of by the Company in the third quarter of 2005. Related party debt, including accrued interest and net of unamortized discount, owed to the Company’s majority stockholder, Counsel Corporation (“Counsel”), is $67,348 at September 30, 2005, compared to $46,015 at December 31, 2004. This related party debt was extended in conjunction with the disposition of the Telecommunications business and now matures on December 31, 2006. The related party debt is supplemented by a Keep Well agreement from Counsel, which requires Counsel to fund, through long-term intercompany advances or equity contributions, all capital investment, working capital or other operational cash requirements through December 31, 2006.

10

The Company has not realized significant revenues from continuing operations during the last two years. The Company’s primary source of funding is pursuant to the Keep Well agreement with its majority stockholder, which expires on December 31, 2006, at which time related party debt, currently $71,109, matures. The Company has no certainty that it will obtain significant revenues from its operations or that its majority stockholder will continue, or will have the ability to continue, to support the business beyond its current commitments. The existence of these uncertainties gives rise to significant doubt about the Company’s ability to continue as a going concern.

Note 4 - Composition of Certain Financial Statements Captions

Furniture, fixtures, equipment and software consisted of the following:

December 31, 2004
	Cost		Accumulated depreciation			Net
Telecommunications equipment	$	37	$	(5	)	$	32
Computer equipment		16		(4	)		12
Software and information systems		8		(2	)		6
Total furniture, fixtures, equipment and software	$	61	$	(11	)	$	50

Intangible assets consisted of the following:

September 30, 2005

	Amortization			Accumulated
	Period	Cost		amortization			Net
Patent rights	60 months	$	100	$	(35	)	$	65

December 31, 2004

	Amortization			Accumulated
	Period	Cost		amortization			Net
Patent rights	60 months	$	100	$	(20	)	$	80

Amortization expense for each of the three month periods ended September 30, 2005 and 2004 was $5. Amortization expense for each of the nine month periods ended September 30, 2005 and 2004 was $15.

11

Accounts payable and accrued liabilities consisted of the following:

	September 30, 2005		December 31, 2004
Regulatory and legal fees	$	762	$	998
Accounting, audit and tax consulting		436		35
Accrued restructuring costs		320		—
Advisory fees		186		—
Obligations to equipment suppliers		524		524
Income and sales taxes		112		87
Payroll and benefits		46		87
Other		332		279
Total accounts payable and accrued liabilities	$	2,718	$	2,010

Note 5 - Investments

The Company’s investments as of September 30, 2005 consist of a convertible preferred stock holding in AccessLine Communications Corporation, a privately-held corporation. This stock was received as consideration for a licensing agreement (reflected in technology licensing and related services revenues) in the second quarter of 2003, the estimated fair value of which was determined to be $1,100. The fair value of the securities is estimated using the best available information as of the evaluation date, including the quoted market prices of comparable public companies, recent financing rounds of the investee, and other investee specific information.

Prior to June 21, 2004, the Company also held an investment in the common stock of Buyers United Inc. (“BUI”), which investment was acquired as consideration received related to the sale of the operations of ILC (see Note 7 to these unaudited condensed consolidated financial statements). At the time of the sale of the ILC business, the purchase price consideration paid by BUI was in the form of convertible preferred stock, with additional shares of preferred stock received subsequently based on contingent earn out provisions in the purchase agreement. In addition, common stock dividends were earned on the preferred stock holding. On March 16, 2004, the Company converted its preferred stock into 1,500,000 shares of BUI common stock, and sold 750,000 shares at $2.30 per share in a private placement transaction. This sale resulted in a gain of approximately $565, which was included in interest and other income in the three months ended March 31, 2004 and was based on specific identification of the securities sold and their related cost basis. Through several open market transactions during the three months ended June 30, 2004, the Company sold the remaining 808,546 of these shares, resulting in a gain of approximately $811, which was included in interest and other income in the three and six months ended June 30, 2004.

12

Note 6 - Debt

A summary of the Company’s outstanding debt is as follows:

	Maturity date		September 30, 2005							December 31, 2004
			Gross debt		Discounts			Reported debt		Gross debt		Discounts			Reported debt
Convertible note payable1		October 14, 2007	$	3,676	$	(446	)	$	3,230	$	5,003	$	(605	)	$	4,398
Subordinated notes payable to a related party2		December 31, 2006		71,109		(3,761	)		67,348		52,100		(6,085	)		46,015
Common stock warrants		October 14, 2009		91		—			91		322		—			322
Total outstanding debt			$	74,876	$	(4,207	)	$	70,669	$	57,425	$	(6,690	)	$	50,735

¹ On September 30, 2005, the Company, in conjunction with the completion of the sale of the Telecommunications business described in Note 7 of these unaudited condensed consolidated financial statements, agreed to modification to the security interest in the Company held by the convertible note holder as follows: (a) to release the security interest in the assets being disposed of in the sale of the Telecommunications assets, (b) to convert the security interest of the convertible note to the senior debt position, (c) to place $1,800 into a restricted cash account for the benefit of the convertible note holder, the proceeds of which the convertible note holder is authorized to apply toward scheduled monthly payments under the loan agreement.

² Includes accrued interest, which each quarter is added to the principal amounts outstanding. The related party debt is subordinated to the convertible note payable, which is guaranteed by Counsel. The current debt arrangement with the convertible note holder prohibits the repayment of the Counsel debt prior to the repayment or conversion of the convertible debt.

Note 7 - Discontinued Operations

Disposition of the Telecommunications Business

Commencing in 2001, the Company entered the Telecommunications segment, acquiring certain assets from the estate of WorldxChange Communications Inc. from bankruptcy. In 2002, the Company also acquired certain assets of the estate of RSL.COM USA Inc. from bankruptcy and in 2003 acquired the shares of Transpoint. The Company entered into an Asset Purchase Agreement, dated as of May 19, 2005, to sell substantially all of the assets and to transfer certain liabilities of the Telecommunications segment of the business to Acceris Management and Acquisition LLC (“AMA” or “Buyer”), an arm’s length Minnesota limited liability company and wholly-owned subsidiary of North Central Equity LLC (“NCE”). In addition, on May 19, 2005, the parties executed a Management Services Agreement (“MSA”), Security Agreement, Note, Proxy and Guaranty. This transaction was completed on September 30, 2005.

The sale resulted in a gain on disposition of $6,387, net of disposition and business exit costs. In accordance with GAAP, this gain, and the Telecommunications operations for the three and nine months ended September 30, 2005, as well as for all prior periods included in these unaudited condensed consolidated financial statements, have been reported in discontinued operations.

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At the closing of the asset sale transaction, C2’s controlling shareholder, Counsel, agreed to provide a $585 loan to NCE. This loan is repayable over six months on a straight-line basis, subject to a holdback in the amount of $320 relating to recorded liabilities of C2 that had not been settled at closing. In conjunction with the closing and the expiration of the MSA, referenced above, the Company and AMA entered into a second Management Services Agreement (“MSA2”) under which the Company has agreed to continue to provide services in certain states where the Buyer, at closing, had not obtained authorization to provide telecommunications services. The Company will be charged a management fee equal to the revenue earned from providing these services by the Buyer. The above is a summary description of the MSA2 and by its nature is incomplete.

The following tables provide additional information with respect to the assets that were disposed of, the liabilities that were assumed in the described transaction, and the operating results of the discontinued operations:

Assets and liabilities - Discontinued Operations	September 30, 2005		December 31, 2004
Cash and cash equivalents	$	1,184	$	414
Accounts receivable, net		10,288		13,079
Other current assets		1,021		1,472
Total current assets		12,493		14,965
Furniture, fixtures, equipment and software, net		1,766		4,102
Intangible assets, net		809		1,324
Goodwill		947		947
Other assets		617		1,012
Total assets		16,632		22,350
Senior secured revolving credit facility		5,431		4,725
Accounts payable and accrued liabilities		12,710		25,299
Unearned revenue		622		959
Subordinated note payable		4,000		-
Current portion of notes payable to third parties		199		160
Obligations under capital leases		-		1,441
Total current liabilities		22,962		32,584
Notes payable to third parties, less current portion		500		645
Total liabilities		23,462		33,229
Net liabilities	$	6,830	$	10,879

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	Three months ended September 30,						Nine months ended September 30,
Statements of Income - Discontinued Operations	2005			2004			2005			2004
Revenues	$	20,222		$	27,390		$	63,715		$	88,532
Operating costs and expenses:
Telecommunications network expense1		12,358			15,349			39,454			47,461
Selling, general and administrative		8,466			13,213			27,560			40,436
Provision for doubtful accounts		552			941			2,216			3,908
Depreciation and amortization		626			1,515			2,988			4,862
Total operating costs and expenses		22,002			31,018			72,218			96,667
Operating loss		(1,780	)		(3,628	)		(8,503	)		(8,135	)
Other income (expense):
Interest expense		(326	)		(707	)		(1,393	)		(2,187	)
Interest and other income		11			205			42			1,079
Total other income (expense)		(315	)		(502	)		(1,351	)		(1,108	)
Loss before gain on sale of business		(2,095	)		(4,130	)		(9,854	)		(9,243	)
Gain on sale of business (net of $0 tax)		6,387			-			6,387			-
Net income (loss) - discontinued operations (net of $0 tax)	$	4,292		$	(4,130	)	$	(3,467	)	$	(9,243	)

¹ Exclusive of depreciation expense on telecommunications network assets of $166 and $1,222 for the three months ended September 30, 2005 and 2004, respectively, and $1,545 and $3,861 for the nine months ended September 30, 2005 and 2004, respectively, included in depreciation and amortization.

The gain on the sale of the Telecommunications business was determined as follows:

Consideration received:
Assumption of liabilities by buyer	$	23,462
Less: Book value of assets disposed		(16,632	)
		6,830
Less:
Investment banker fees associated with disposition		(279	)
Other costs associated with disposition		(164	)
Net gain on sale of business	$	6,387

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Following the sale, the Company retained the following discontinued liabilities:

Liabilities of Discontinued Operations	September 30, 2005
Legal and regulatory	$	2,998
Telecom and related		384
Income and sales taxes		395
Other		543
Total liabilities	$	4,320

Sale of assets of ILC

On December 6, 2002, the Company entered into an agreement to sell substantially all of the assets and customer base of ILC to BUI. The sale included the physical assets required to operate C2’s nationwide network using its patented VoIP technology (constituting the core business of ILC) and a license in perpetuity to use C2’s proprietary software platform. The sale closed on May 1, 2003 and provided for a post-closing cash settlement between the parties. The sale price consisted of 300,000 shares of Series B convertible preferred stock (8% dividend) of BUI, subject to adjustment in certain circumstances, of which 75,000 shares were subject to an earn-out provision. The earn-out took place on a monthly basis over a fourteen-month period which began January 2003. The Company recognized the value of the earn-out shares as additional sales proceeds when earned. During the year ending December 31, 2003, 64,286 shares of the contingent consideration were earned and were included as a component of gain (loss) from discontinued operations. The fair value of the 225,000 shares (non-contingent consideration to be received) of BUI convertible preferred stock was determined to be $1,350 as of December 31, 2002. As of December 31, 2003, the combined fair value of the original shares (225,000) and the shares earned from the contingent consideration (64,286 shares) was determined to be $1,916. The value of the shares earned from the contingent consideration was included in the calculation of gain from discontinued operations for the year ended December 31, 2003. As additional contingent consideration was earned, it was recorded as a gain from discontinued operations. In the first quarter of 2004, the Company recorded a gain from discontinued operations of $104. This gain was due to the receipt in January 2004 of the remaining 10,714 shares of common stock as contingent consideration, which is recorded as additional gain from discontinued operations.

Upon closing of the sale, BUI assumed all operational losses from December 6, 2002. Accordingly, the gain of $529 for the year ended December 31, 2003 included the increase in the sales price for the losses incurred since December 6, 2002. In the year ended December 31, 2002, the Company recorded a loss from discontinued operations related to ILC of $12,508. No income tax provision or benefit was recorded on discontinued operations.

Note 8 - Other Income

During the third quarter of 2005, the Company entered into settlement agreements with certain carriers, which resulted in the recovery of receivables that were fully reserved against when acquired in 2001 as part of the acquisition of the assets of WorldxChange Communications Inc. from bankruptcy. As a result of these agreements, $160 was received, and has been recorded in interest and other income in the accompanying unaudited condensed consolidated financial statement of operations for the three and nine months ended September 30, 2005. Subsequent to the end of the third quarter, the Company entered into two additional settlement agreements of a similar nature, which will result in $910 being recorded as other income in the fourth quarter of 2005.

Note 9 - Exchange of Assets for Royalty Agreement

At the end of September 2005, the Company entered into a 12 year royalty agreement with a company controlled by an employee, and also provided for continued consulting services from the employee until April 30, 2006. The Company advanced a loan of $140, with repayment contingent upon future royalties. Additionally, the Company contributed furniture, fixtures, equipment and software with a book value of $38 and assigned an operating lease obligation to the employee’s company. At the end of the current reporting period, due to the absence of certainty pertaining to any future economic benefit from the loan, the Company has expensed the loan.

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Note 10 - Income Taxes

     The Company recognized no income tax benefit from the losses generated in the nine months ended September 30, 2005 and 2004 because of the uncertainty surrounding the realization of the related deferred tax asset. Pursuant to Section 382 of the Internal Revenue Code, annual usage of the Company’s net operating loss carryforwards, prior to the sale of the Company’s Telecommunications business, was limited to approximately $6,700 per annum until 2008 and $1,700 per annum thereafter as a result of previous cumulative changes of ownership resulting in a change of control of the Company. After the completion of this transaction, the annual usage of the Company’s net operating loss carryforwards is further limited to approximately $2,500 per annum until 2008 and $1,700 per annum thereafter. These rules in general provide that an ownership change occurs when the percentage shareholdings of 5% direct or indirect shareholders of a loss corporation have in aggregate increased by more than 50 percentage points during the immediately preceding three years. Restrictions in net operating loss carry forwards occurred in 2001 as a result of the acquisition of the Company by Counsel. Further restrictions may have occurred as a result of subsequent changes in the share ownership and capital structure of the Company and Counsel. There is no certainty that the application of these rules may not reoccur resulting in further restrictions on the Company’s income tax loss carry forwards existing at a particular time. In addition, further restrictions or reductions in net operating loss carryforwards may occur through future merger, acquisition and/or disposition transactions. Any such additional limitations could require the Company to pay income taxes in the future and record an income tax expense to the extent of such liability despite the existence of loss carryforwards.

Note 11 - Related Party Transactions

     During the nine months ended September 30, 2005, Counsel advanced $14,561 and converted $4,447 of interest payable to principal. All loans from Counsel mature on December 31, 2006 and accrue interest at rates ranging from 9% to 10%, with interest compounding quarterly. Some of the loans are subject to an accelerated maturity in certain circumstances. At September 30, 2005, the closing of the sale of the Telecommunications business, which is discussed in more detail in Note 7 to these unaudited condensed consolidated financial statements, invoked the accelerated provisions of these loans. Counsel, in conjunction with the sale, waived the acceleration rights invoked by virtue of the sale and continues to retain its acceleration rights related to future events. On May 16, 2005, Counsel agreed, subject to the completion of the disposition of the Telecommunications operations, to extend its Keep Well through December 31, 2006 and to extend its related party loans through the same period. The Keep Well requires Counsel to fund, through long-term intercompany advances or equity contributions, all capital investment, working capital or other operational cash requirements.

     Allan Silber, the Chief Executive Officer (“CEO”) of C2, is an employee of Counsel. As CEO of C2, until June 30, 2005 he was entitled to an annual salary of $275 and a discretionary bonus of up to 100% of the base salary. Effective July 1, 2005, to reflect the reduced complexity of C2’s business following the disposition of the Telecommunications operations, Mr. Silber agreed to reduce his annual base salary to $138 going-forward, plus a discretionary bonus of 100% of the base salary. Such compensation is expensed and paid by C2.

The Company entered into a Management Services Agreement (the “Agreement”) with Counsel, dated December 23, 2004. Under the terms of the Agreement, the Company agreed to make payment to Counsel for the past and future services to be provided by Counsel personnel (excluding Allan Silber, Counsel’s Chairman, President and CEO and the Company’s Chairman and CEO) to the Company for the calendar years of 2004 and 2005. The basis for such services charged is an allocation, on a cost basis, based on time incurred, of the base compensation paid by Counsel to those employees providing services to the Company. The cost of such services was $280 for the year ended December 31, 2004. Services for 2005 are being determined on the same basis. For each fiscal quarter, Counsel provides the details of the charge for services by individual, including respective compensation and their time allocated to the Company. For the first nine months of 2005, the cost was $338. In accordance with the terms of the convertible note payable, amounts owing to Counsel cannot be repaid while amounts remain owing under the convertible note payable. The foregoing fees for 2004 and 2005 are due and payable within 30 days following the respective year ends, subject to applicable restrictions. Any unpaid fee amounts will bear interest at 10% per annum commencing on the day after such year end. In the event of a change of control, merger or similar event of the Company, all amounts owing, including fees incurred up to the date of the event, will become due and payable immediately upon the occurrence of such event. The Agreement does not guarantee the personal services of any specific individual at the Company throughout the term of the agreement and the Company will have to enter into a separate personal services arrangement with such individual should their specific services be required. During the first nine months of 2005, the Company did not enter into any such agreements.

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Counsel entered into compensation arrangements with one of its executive officers relating to the retention of the personal services of the executive through the disposition of C2’s Telecommunications business. Counsel also entered into a contract with the executive related to the disposition of C2’s Telecommunications business. The fair value of these contracts is $1,000 and has been recorded by the Company as a conferral of a $1,000 benefit to the Company from its controlling shareholder, as required under GAAP. The amount has been reported as an expense of the discontinued operations, and has been credited to contributed surplus. There are no economic consequences to C2 as the result of this conferral of benefit.

Note 12 - Commitments and Contingencies

Legal Proceedings

On April 16, 2004, certain stockholders of the Company (the “Plaintiffs”) filed a putative derivative complaint in the Superior Court of the State of California in and for the County of San Diego, (the “Complaint”) against the Company, WorldxChange Corporation (sic), Counsel Communications LLC, and Counsel Corporation as well as certain present and former officers and directors of the Company, some of whom also are or were directors and/or officers of the other corporate defendants (collectively, the “Defendants”). The Complaint alleges, among other things, that the Defendants, in their respective roles as controlling stockholder and directors and officers of the Company committed breaches of the fiduciary duties of care, loyalty and good faith and were unjustly enriched, and that the individual Defendants committed waste of corporate assets, abuse of control and gross mismanagement. The Plaintiffs seek compensatory damages, restitution, disgorgement of allegedly unlawful profits, benefits and other compensation, attorneys’ fees and expenses in connection with the Complaint. The Company believes that these claims are without merit and intends to continue to vigorously defend this action. There is no assurance that this matter will be resolved in the Company’s favor and an unfavorable outcome of this matter could have a material adverse impact on its business, results of operations, financial position or liquidity.

C2 and several of C2’s current and former executives and board members were named in a securities action filed in the Superior Court of the State of California in and for the County of San Diego (the “Court”) on April 16, 2004, in which the plaintiffs made claims nearly identical to those set forth in the Complaint in the derivative suit described above. The Company believes that these claims are without merit and intends to vigorously defend this action. There is no assurance that this matter will be resolved in the Company’s favor and an unfavorable outcome of this matter could have a material adverse impact on its business, results of operations, financial position or liquidity. At a September 2, 2005 case management conference, the Court set June 16, 2006 as the trial date for this action and indicated that a trial regarding the derivative action described above would immediately follow.

In connection with the Company’s efforts to enforce its patent rights, C2 Communications Technologies Inc., our wholly owned subsidiary, filed a patent infringement lawsuit against ITXC Corp. (“ITXC”) in the United States District Court of the District of New Jersey on April 14, 2004. The complaint alleges that ITXC’s VoIP services and systems infringe the Company’s U.S. Patent No. 6,243,373, entitled “Method and Apparatus for Implementing a Computer Network/Internet Telephone System.” On May 7, 2004, ITXC filed a lawsuit against C2 Communications Technologies Inc., and the Company, in the United States District Court for the District of New Jersey for infringement of five ITXC patents relating to VoIP technology, directed generally to the transmission of telephone calls over the Internet and the completion of telephone calls by switching them off the Internet and onto a public switched telephone network. The Company believes that the allegations contained in ITXC’s complaint are without merit and the Company intends to continue to provide a vigorous defense to ITXC’s claims. There is no assurance that this matter will be resolved in the Company’s favor and an unfavorable outcome of this matter could have a material adverse impact on its business, results of operations, financial position or liquidity.

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At our Adjourned Meeting of Stockholders held on December 30, 2003, our stockholders, among other things, approved an amendment to our Articles of Incorporation, deleting Article VI thereof (regarding liquidations, reorganizations, mergers and the like). Stockholders who were entitled to vote at the meeting and advised us in writing, prior to the vote on the amendment, that they dissented and intended to demand payment for their shares if the amendment was effectuated, were entitled to exercise their appraisal rights and obtain payment in cash for their shares under Sections 607.1301 - 607.1333 of the Florida Business Corporation Act (the “Florida Act”), provided their shares were not voted in favor of the amendment. In January 2004, we sent appraisal notices in compliance with Florida corporate statutes to all stockholders who had advised us of their intention to exercise their appraisal rights. The appraisal notices included our estimate of fair value of our shares, at $4.00 per share on a post-split basis. These stockholders had until February 29, 2004 to return their completed appraisal notices along with certificates for the shares for which they were exercising their appraisal rights. Approximately 33 stockholders holding approximately 74,000 shares of our stock returned completed appraisal notices by February 29, 2004. A stockholder of 20 shares notified us of his acceptance of our offer of $4.00 per share, while the stockholders of the remaining shares did not accept our offer. Subject to the qualification that, in accordance with the Florida Act, we may not make any payment to a stockholder seeking appraisal rights if, at the time of payment, our total assets are less than our total liabilities, stockholders who accepted our offer to purchase their shares at the estimated fair value will be paid for their shares within 90 days of our receipt of a duly executed appraisal notice. If we should be required to make any payments to dissenting stockholders, Counsel will fund any such amounts through the purchase of shares of our common stock. Stockholders who did not accept our offer were required to indicate their own estimate of fair value, and if we do not agree with such estimates, the parties are required to go to court for an appraisal proceeding on a individual basis, in order to establish fair value. Because we did not agree with the estimates submitted by most of the dissenting stockholders, we have sought a judicial determination of the fair value of the common stock held by the dissenting stockholders. On June 24, 2004, we filed suit against the dissenting stockholders seeking a declaratory judgment, appraisal and other relief in the Circuit Court for the 17^th Judicial District in Broward County, Florida. On February 4, 2005, the declaratory judgment action was stayed pending the resolution of the direct and derivative lawsuits filed in California. This decision was made by the judge in the Florida declaratory judgment action due to the similar nature of certain allegations brought by the defendants in the declaratory judgment matter and the California lawsuits described above. On March 7, 2005, the dissenting shareholders appealed the decision of the District Court judge to the Fourth District Court of Appeals for the State of Florida, which denied the appeal on June 21, 2005. When the declaratory judgment matter resumes, there is no assurance that this matter will be resolved in our favor and an unfavorable outcome of this matter could have a material adverse impact on our business, results of operations, financial position or liquidity.

The Company is involved in various other legal matters arising out of its operations in the normal course of business, none of which are expected, individually or in the aggregate, to have a material adverse effect on the Company.

Note 13 - Agent Warrant Program

     During the first quarter of 2004, the Company launched the Acceris Communications Inc. Platinum Agent Program (the “Agent Warrant Program”). The Agent Warrant Program provided for the issuance, to participating independent agents, of warrants to purchase up to 1,000,000 shares of the Company’s common stock. The Agent Warrant Program was established to encourage and reward consistent, substantial and persistent production by selected commercial agents in the telecommunications business serving the Company’s domestic markets and to strengthen the Company’s relationships with these agents by granting long-term incentives in the form of the warrants to purchase the Company’s common stock at current price levels. The Agent Warrant Program was administered by the Compensation Committee of the Board of Directors of the Company.

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     The Company discontinued its Agent Warrant Program during the third quarter of 2005. The Company accounted for the warrants issued under the plan under the provisions of the FASB’s Emerging Issue Task Force’s (“EITF”) Issue No. 96-18, and, accordingly, no expense has been recognized in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2005.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the information contained in the unaudited condensed consolidated financial statements of the Company and the related notes thereto, appearing elsewhere herein, and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Form 10-K for the year ended December 31, 2004, filed with the Securities and Exchange Commission (“SEC”). All numbers are in thousands of dollars except for share and per share data.

Forward Looking Information

This report contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, which are based on management’s exercise of business judgment as well as assumptions made by and information currently available to, management. When used in this document, the words “may”, "will”, “anticipate”, “believe”, “estimate”, “expect”, “intend” and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, and as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.

Overview and Recent Developments

C2 Global Technologies Inc. (“C2” or the “Company”) was incorporated in the State of Florida in 1983 under the name “MedCross, Inc.” which was changed to “I-Link Incorporated” in 1997 and to “Acceris Communications Inc.” in 2003. Subsequent to the receipt of shareholder approval of the proposed name change at the 2005 Annual Shareholder Meeting held on August 5, 2005, the Company amended its Articles of Incorporation to effect the name change from “Acceris Communications Inc.” to “C2 Global Technologies Inc.” The new name reflects a change in the strategic direction of the Company in light of the disposition of its Telecommunications business, as discussed below.

C2 owns certain voice over Internet Protocol (“VoIP”) patents which it seeks to license, including U.S. Patent Nos. 6,243,373 and 6,438,124 (together the “VoIP Patent Portfolio”). Following the sale of the Telecommunications assets, described below, licensing of intellectual property constitutes the primary business of the Company.

The Company achieved two major milestones in the quarter ended September 30, 2005 that are expected to contribute to the long term success of C2:

·   Completed the disposition of the Telecommunications business, recording a net gain on sale of $6,387 and the accompanying extinguishment of $23,462 of third party obligations. The completion of this transaction resulted in the extension of related party debt through to December 31, 2006, and the securing of funding to pursue our business strategy through the same date, via a Keep Well agreement with our controlling shareholder, Counsel Corporation (“Counsel”).

·   Was awarded patents in VoIP technology from the People’s Republic of China and in Canada, corresponding to U.S. Patent No. 6,243,373.

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Company History

In 1994, we began operating as an Internet service provider and quickly identified that the emerging Internet Protocol (“IP”) environment was a promising basis for enhanced service delivery. We soon turned to designing and building an IP telecommunications platform consisting of proprietary software, hardware and leased telecommunications lines. The goal was to create a platform with the quality and reliability necessary for voice transmission.

In 1997, we started offering enhanced services over a mixed IP-and-circuit-switched network platform. These services offered a blend of traditional and enhanced communication services and combined the inherent cost advantages of an IP-based network with the reliability of the existing Public Switched Telephone Network (“PSTN”).

In August 1997, we acquired MiBridge, Inc. (“MiBridge”), a communications technology company engaged in the design, development, integration and marketing of a range of software telecommunications products that support multimedia communications over the PSTN, local area networks (“LANs”) and IP networks. The acquisition of MiBridge permitted us to accelerate the development and deployment of IP technology across our network platform.

In 1998, we first deployed our real-time IP communications network platform. With this new platform, all core operating functions such as switching, routing and media control became software-driven. This new platform represented the first nationwide, commercially viable VoIP platform of its kind. Following the launch of our software-defined VoIP platform in 1998, we continued to refine and enhance the platform to make it even more efficient and capable for our partners and customers.

In 2002, the U.S. Patent and Trademark Office issued a patent (No. 6,438,124, the “C2 Patent”) for the Company’s Voice Internet Transmission System. Filed in 1996, the C2 Patent reflects foundational thinking, application, and practice in the VoIP Services market. The C2 Patent encompasses the technology that allows two parties to converse phone-to-phone, regardless of the distance, by transmitting voice/sound via the Internet. No special telephone or computer is required at either end of the call. The apparatus that makes this technically possible is a system of Internet access nodes, or Voice Engines (VoIP Gateways). These local Internet Voice Engines provide digitized, compressed, and encrypted duplex or simplex Internet voice/sound. The end result is a high-quality calling experience whereby the Internet serves only as the transport medium and as such, can lead to reduced toll charges. In conjunction with the issuance of our core C2 Patent, we disposed of our domestic U.S. VoIP network in a transaction with Buyers United, Inc. (“BUI”), which closed on May 1, 2003. The sale included the physical assets required to operate our nationwide network using our patented VoIP technology (constituting the core business of the I-Link Communications Inc. (“ILC”) business) and included a fully paid non-exclusive perpetual license to our proprietary software-based network convergence solution for voice and data. The sale of the ILC business removed essentially all operations that did not pertain to our proprietary software-based convergence solution for voice and data. As part of the sale, we retained all of our intellectual and property rights and patents.

In 2003, we added to our VoIP Patent Portfolio when we acquired U.S. Patent No. 6,243,373 (the “VoIP Patent”), which included a corresponding foreign patent and related international patent applications. The VoIP Patent, together with the existing C2 Patent and its related international patent applications, form our international VoIP Patent Portfolio that covers the basic process and technology that enables VoIP communication as it is used in the market today. Telecommunications companies that enable their customers to originate a phone call on a traditional handset, transmit any part of that call via IP, and then terminate the call over the traditional telephone network, are utilizing C2’s patented technology.

The comprehensive nature of the VoIP Patent, which is titled “Method and Apparatus for Implementing a Computer Network/Internet Telephone System”, is summarized in the patent’s abstract, which describes the technology as follows: “A method and apparatus are provided for communicating audio information over a computer network. A standard telephone connected to the PSTN may be used to communicate with any other PSTN-connected telephone, where a computer network, such as the Internet, is the transmission facility instead of conventional telephone transmission facilities.” In conjunction with the acquisition of the VoIP Patent, we agreed to give the vendor 35% of the net earnings from our VoIP Patent Portfolio.

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Intellectual property

In addition to the C2 and VoIP Patents, which cover the foundation of any VoIP system, our VoIP architecture patent portfolio includes:

Private IP Communication Network Architecture (Pending) - A disclosed Internet Linked Network Architecture delivers telecommunication type services across a network utilizing digital technology. The unique breadth and flexibility of telecommunication services offered by the Internet Linked Network Architecture flow directly from the network over which they are delivered and the underlying design principles and architectural decisions employed during its creation.

C2 also owns intellectual property that solves VoIP conferencing problems:

Delay Synchronization in Compressed Audio Systems - This invention eliminates objectionable popping and clicking when switching between parties (conferees) in a communications conferencing system employing signal compression techniques to reduce bandwidth requirements.

Volume Control Arrangement for Compressed Information Signals - This invention allows for modifying amplitude, frequency or phase characteristics of an audio or video signal in a compressed signal system without altering the encoder or decoder employed by each conferee in communications information conferencing.

Below is a summary of the Company’s issued and pending patents:

Type	Title	Number	Status
VoIP Architecture	Computer Network/Internet Telephone System	U.S. No. 6,243,373 Australia No. 716096 People’s Republic of China Application No. 96199457.6 Canada No. 2,238,867	Issued
	Internet Transmission System	U.S. No. 6,438,124 People’s Republic of China No. ZL97192954.8	Issued
	Private IP Communication Network Architecture	Confidential	Pending
Conferencing	Delay Synchronization in Compressed Audio System	U.S. No. 5,754,534	Issued
	Volume Control Arrangement for Compressed Information Signal Delays	U.S. No. 5,898,675	Issued
Fax	Facsimile Transmission System	Confidential	Pending

Together, these patented technologies have been successfully deployed and commercially proven in a nationwide IP network and in C2’s unified messaging service, Application Program Interface and software licensing businesses. The Company is engaged in licensing discussions with third parties domestically and internationally. At present, no royalties are being paid to the Company. We plan to enforce our patents, including retaining outside counsel, to realize value from our intellectual property by offering licenses to service providers, equipment companies and end-users who are deploying VoIP networks for phone-to-phone communications. In this regard, the Company has entered into a contingency arrangement with a third party with expertise in the enforcement of intellectual property rights.

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Disposition of the Telecommunications Business

Commencing in 2001, the Company entered the Telecommunications segment, acquiring certain assets from the estate of WorldxChange Communications Inc. from bankruptcy. In 2002, the Company also acquired certain assets of the estate of RSL.COM USA Inc. from bankruptcy and in 2003 acquired the shares of Transpoint. The Company entered into an Asset Purchase Agreement (“APA”), dated as of May 19, 2005, to sell substantially all of the assets and to transfer certain liabilities of the Telecommunications segment of the business to Acceris Management and Acquisition LLC (“AMA” or “Buyer”), a Minnesota limited liability company and wholly-owned subsidiary of North Central Equity LLC (“NCE”). In addition, on May 19, 2005, the parties executed a Management Services Agreement (“MSA”), Security Agreement, Note, Proxy and Guaranty. This transaction was completed on September 30, 2005.

The sale resulted in a gain on disposition of $6,387, net of disposition and business exit costs. In accordance with GAAP, this gain, and the Telecommunications operations for the three and nine months ended September 30, 2005, as well as for all prior periods included in these unaudited condensed consolidated financial statements, have been reported in discontinued operations.

At the closing of the asset sale transaction, C2’s controlling shareholder, Counsel, agreed to provide a $585 loan to NCE. This loan is repayable over six months on a straight-line basis, subject to a holdback in the amount of $320 relating to recorded liabilities of C2 that had not been settled at closing. In conjunction with the closing and the expiry of the MSA, referenced above, the Company and AMA entered into a second Management Services Agreement (“MSA2”) under which the Company has agreed to continue to provide services in certain states where the Buyer, at closing, had not obtained authorization to provide telecommunications services. The Company will be charged a management fee equal to the revenue earned from providing these services by the Buyer. The above is a summary description of the MSA2 and by its nature is incomplete. It is qualified in its entirety by the text of the MSA2, a copy of which is attached to this quarterly report as Exhibit 10.5.

The following tables provide additional information with respect to the assets that were disposed of, the liabilities that were assumed in the described transaction, and the operating results of the discontinued operations:

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Assets and liabilities - Discontinued Operations	September 30, 2005		December 31, 2004
Cash and cash equivalents	$	1,184	$	414
Accounts receivable, net		10,288		13,079
Other current assets		1,021		1,472
Total current assets		12,493		14,965
Furniture, fixtures, equipment and software, net		1,766		4,102
Intangible assets, net		809		1,324
Goodwill		947		947
Other assets		617		1,012
Total assets		16,632		22,350
Senior secured revolving credit facility		5,431		4,725
Accounts payable and accrued liabilities		12,710		25,299
Unearned revenue		622		959
Subordinated note payable		4,000		-
Current portion of notes payable to third parties		199		160
Obligations under capital leases		-		1,441
Total current liabilities		22,962		32,584
Notes payable to third parties, less current portion		500		645
Total liabilities		23,462		33,229
Net liabilities	$	6,830	$	10,879

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	Three months ended September 30,						Nine months ended September 30,
Statements of Income - Discontinued Operations	2005			2004			2005			2004
Revenues	$	20,222		$	27,390		$	63,715		$	88,532
Operating costs and expenses:
Telecommunications network expense1		12,358			15,349			39,454			47,461
Selling, general and administrative		8,466			13,213			27,560			40,436
Provision for doubtful accounts		552			941			2,216			3,908
Depreciation and amortization		626			1,515			2,988			4,862
Total operating costs and expenses		22,002			31,018			72,218			96,667
Operating loss		(1,780	)		(3,628	)		(8,503	)		(8,135	)
Other income (expense):
Interest expense		(326	)		(707	)		(1,393	)		(2,187	)
Interest and other income		11			205			42			1,079
Total other income (expense)		(315	)		(502	)		(1,351	)		(1,108	)
Loss before gain on sale of business		(2,095	)		(4,130	)		(9,854	)		(9,243	)
Gain on sale of business (net of $0 tax)		6,387			-			6,387			-
Net income (loss) - discontinued operations (net of $0 tax)	$	4,292		$	(4,130	)	$	(3,467	)	$	(9,243	)

¹ Exclusive of depreciation expense on telecommunications network assets of $166 and $1,222 for the three months ended September 30, 2005 and 2004, respectively, and $1,545 and $3,861 for the nine months ended September 30, 2005 and 2004, respectively, included in depreciation and amortization.

The gain on the sale of the Telecommunications business was determined as follows:

Consideration received:
Assumption of liabilities by buyer	$	23,462
Less: Book value of assets disposed		(16,632	)
		6,830
Less:
Investment banker fees associated with disposition		(279	)
Other costs associated with disposition		(164	)
Net gain on sale of business	$	6,387

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Following the sale, the Company retained the following discontinued liabilities:

Liabilities of Discontinued Operations	September 30, 2005
Legal and regulatory	$	2,998
Telecom and related		384
Income and sales taxes		395
Other		543
Total liabilities	$	4,320

Industry

Historically, the communications services industry has transmitted voice and data over separate networks using different technologies. Traditional carriers have typically built telephone networks based on circuit switching technology, which establishes and maintains a dedicated path for each telephone call until the call is terminated.

The communications services industry continues to evolve, both domestically and internationally, providing significant opportunities and risks to the participants in these markets. Factors that have been driving this change include:

• entry of new competitors and investment of substantial capital in existing and new services, resulting in significant price competition

• technological advances resulting in a proliferation of new services and products and rapid increases in network capacity

• The Telecommunications Act of 1996, as amended (“1996 Act”); and

• growing deregulation of communications services markets in the United States and in selected countries around the world

VoIP is a technology that can replace the traditional telephone network. This type of data network is more efficient than a dedicated circuit network because the data network is not restricted by the one-call, one-line limitation of a traditional telephone network. This improved efficiency creates cost savings that can be either passed on to the consumer in the form of lower rates or retained by the VoIP provider. In addition, VoIP technology enables the provision of enhanced services such as unified messaging.

Competition

We are seeking to have telecommunications service providers (“TSPs”) and equipment suppliers (“ESs”) license our technology and patent rights based on our work to date in VoIP technology, which commenced in 1994. In this regard, our competition is existing technology, outside the scope of our patents, which allows TSPs and ESs to deliver communication services to their customers. Several carriers have also recently announced that they are seeking injunction or licensing arrangements for third parties relating to their VoIP patents.

VoIP is in the early stage of adoption by telecommunications companies. While we and many others believe that we will see the proliferation of this technology in the coming years, and while we believe that this proliferation will occur within the context of our patents, there is no certainty that this will occur and that it will occur in a manner that requires organizations to license our patents.

Risk Factors

Many factors could cause actual results to differ materially from our forward-looking statements. Several of these factors, which are more fully discussed in our Annual Report on Form 10-K for the year ended December 31, 2004, filed with the SEC, include, without limitation:

1)   Our ability to license our intellectual property in the area of VoIP;

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2)   Adoption of new, or changes in, accounting principles;

3)   The ability of our controlling shareholder to fund our operations, as contracted, through December 31, 2006; and

4)   Other risks referenced from time to time in our filings with the SEC and other regulatory bodies.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to intangible assets, contingencies, collectibility of receivables and litigation. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The critical accounting estimates used in the preparation of our consolidated financial statements are discussed in our Annual Report on Form 10-K for the year ended December 31, 2004. To aid in the understanding of our financial reporting, a summary of significant accounting policies are described in Note 2 of the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. These policies have the potential to have a significant impact on our financial statements, either because of the significance of the financial statement item to which they relate, or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events which are continuous in nature.

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Contractual Obligations

        The following table summarizes the amounts of payments due under specified contractual obligations as of September 30, 2005:

	Payments Due by Period
Contractual Obligations	Less than 1 Year		1 - 3 Years		4 - 5 Years		More than 5 Years
Long-term debt obligations, excluding interest	$	1,765	$	73,020	$	—	$	—
Common stock warrants		—		—		91
Operating lease obligations		4		—		—		—
Total	$	1,769	$	73,020	$	91	$	—

Management’s Discussion of Financial Condition

Liquidity and Capital Resources

As a result of our substantial operating losses and negative cash flows from operations, at September 30, 2005 we had a stockholders’ deficit of $74,290 (December 31, 2004 - $61,965) and negative working capital of $6,881 (December 31, 2004 - $21,352). The reduction of the working capital deficit is due primarily to the disposition of the Telecommunications net liabilities, as discussed above.

During the third quarter of 2005, the Company financed its continuing operations primarily through advances from a related party of $4,349 (YTD - $14,561), while discontinued operations were primarily financed by the buyer of the Telecommunications assets through advances which, at closing, formed additional consideration for the assets disposed of by the Company in the third quarter of 2005. Related party debt, including accrued interest and net of unamortized discount, owed to the Company’s majority stockholder, Counsel, is $67,348 at September 30, 2005, compared to $46,015 at December 31, 2004. This related party debt was extended in conjunction with the disposition of the Telecommunications business and now matures on December 31, 2006. The related party debt is supplemented by a Keep Well agreement from Counsel, which requires Counsel to fund, through long-term intercompany advances or equity contributions, all capital investment, working capital or other operational cash requirements through December 31, 2006.

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A summary of the Company’s outstanding debt is as follows:

	Maturity date		September 30, 2005							December 31, 2004
			Gross debt		Discounts			Reported debt		Gross debt		Discounts			Reported debt
Convertible note payable1		October 14, 2007	$	3,676	$	(446	)	$	3,230	$	5,003	$	(605	)	$	4,398
Subordinated notes payable to a related party2		December 31, 2006		71,109		(3,761	)		67,348		52,100		(6,085	)		46,015
Common stock warrants		October 13, 2009		91		—			91		322		—			322
Total outstanding debt			$	74,876	$	(4,207	)	$	70,669	$	57,425	$	(6,690	)	$	50,735

¹ On September 30, 2005, the Company, in conjunction with the completion of the sale of the Telecommunications business described in Note 7 of these unaudited condensed consolidated financial statements, agreed to modification to the security interest in the Company held by the convertible note holder as follows: (a) to release the security interest in the assets being disposed of in the sale of the Telecommunications assets, (b) to convert the security interest of the convertible note to the senior debt position, (c) to place $1,800 into a restricted cash account for the benefit of the convertible note holder, the proceeds of which the convertible note holder is authorized to apply toward scheduled monthly payments under the loan agreement.

² Includes accrued interest, which each quarter is added to the principal amounts outstanding. The related party debt is subordinated to the convertible note payable, which is guaranteed by Counsel. The current debt arrangement with the convertible note holder prohibits the repayment of the Counsel debt prior to the repayment or conversion of the convertible debt.

Working Capital

Cash, cash equivalents and restricted cash as of September 30, 2005 were $1,894 compared to $44 at December 31, 2004.

Our working capital deficit decreased $14,471 to $6,881 as of September 30, 2005, from $21,352 as of December 31, 2004. The reduction of the working capital deficit is due to the disposition of the Telecommunications business as discussed above. We believe our existing capital resources are adequate to finance our operations until December 31, 2006. However, our long-term viability is dependent upon successful operation of our business, our ability to pursue licensing arrangements in the marketplace and our ability to manage and raise additional funds to meet our business objectives.

Cash flows from operating activities

Cash used in operating activities (excluding non-cash working capital and discontinued operations) during the three months ended September 30, 2005 was $525, as compared to cash used of $792 during the same period in 2004. The reduction is primarily due to a reduction in net losses from continuing operations in the reporting period due to a reduction in the scale of the operations of the business.

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Cash used in operating activities (excluding non-cash working capital and discontinued operations) during the nine months ended September 30, 2005 was $3,039, as compared to cash used of $1,966 during the same period in 2004. Net cash used in operating activities (excluding discontinued operations) during the nine months ended September 30, 2005 was $2,359, as compared to $2,475 during the same period in 2004. The net loss from continuing operations increased by $3,931. This was offset by an increase in interest added to related party debt of $1,361 and increased amortization of debt discounts in the amount of $361. Accounts payable decreased by $546 in the first nine months of 2004, but increased by $708 during the first nine months of 2005, for a net increase of $1,254. As well, in the first nine months of 2004 the Company recorded a gain on the sale of investment in common stock of $1,376; there were no similar items in the first nine months of 2005.

Cash flows from investing activities

Net cash used by investing activities (excluding discontinued operations) during the three months ended September 30, 2005 and 2004 was $0.

Net cash used by investing activities (excluding discontinued operations) during the nine months ended September 30, 2005 was $0, as compared to net cash provided of $3,581 for the same period in 2004. In 2004, net cash provided related to $3,581 in proceeds received from the sale of common stock in BUI. There were no similar sales of investments in the first nine months of 2005.

Cash flows from financing activities

Financing activities (excluding discontinued operations) provided net cash of $4,055 during the three months ended September 30, 2005, as compared to $2,244 for the same period in 2004. The increase in the current quarter related primarily to the Company requiring additional cash to place into a restricted account in favor of the convertible note holder. The cash was required as replacement security for the security released in conjunction with the disposition of the Telecommunication operations which occurred in the current reporting period, as discussed above.

Financing activities (excluding discontinued operations) provided net cash of $13,235 during the nine months ended September 30, 2005, as compared to $11,698 for the same period in 2004. The difference of $1,537 is due to an increase of $2,857 in proceeds from the issuance of subordinated notes payable to a related party, offset by $1,326 in payments of notes to third parties. There were no third party notes outstanding for the first nine months of 2004, and therefore there were no similar transactions in 2004.

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Management’s Discussion of Results of Operations

The following table displays the Company’s unaudited consolidated quarterly results of operations for the seven quarters ended September 30, 2005, as well as for the nine months ended September 30, 2004 and 2005.

	2004 (unaudited)												2005 (unaudited)									Nine months ended September 30, 2004			Nine months ended September 30, 2005
	Q1			Q2			Q3			Q4			Q1			Q2			Q3			(unaudited)			(unaudited)
Revenues:
Technologies	$	450		$	90		$	—		$	—		$	—		$	—		$	—		$	540		$	—
Total revenues		450			90			—			—			—			—			—			540			—
Operating costs and expenses:
Selling, general, administrative and other		845			769			779			1,574			837			1,162			490			2,393			2,489
Research and development		—			106			119			217			150			151			88			225			389
Depreciation and amortization		5			5			5			5			9			9			9			15			27
Total operating costs and expenses		850			880			903			1,796			996			1,322			587			2,633			2,905
Operating income (loss)		(400	)		(790	)		(903	)		(1,796	)		(996	)		(1,322	)		(587	)		(2,093	)		(2,905	)
Other income (expense):
Interest expense		(2,832	)		(1,708	)		(1,855	)		(2,159	)		(2,631	)		(3,509	)		(2,055	)		(6,395	)		(8,195	)
Other income		609			810			21			48			—			1			120			1,440			121
Total other income (expense)		(2,223	)		(898	)		(1,834	)		(2,111	)		(2,631	)		(3,508	)		(1,935	)		(4,955	)		(8,074	)
Loss from continuing operations		(2,623	)		(1,688	)		(2,737	)		(3,907	)		(3,627	)		(4,830	)		(2,522	)		(7,048	)		(10,979	)
Gain (loss) from discontinued operations, net of $0 tax		1,415			(6,528	)		(4,130	)		(2,585	)		(4,481	)		(3,278	)		4,292			(9,243	)		(3,467	)
Net income (loss)	$	(1,208	)	$	(8,216	)	$	(6,867	)	$	(6,492	)	$	(8,108	)	$	(8,108	)	$	1,770		$	(16,291	)	$	(14,446	)

Three-Month Period Ended September 30, 2005 Compared to Three-Month Period Ended September 30, 2004

The business has narrowed its focus, commencing with the third quarter of 2005, to licensing its intellectual property. In the future, revenue is expected to be derived from licensing intellectual property to third parties.

Selling, general, administrative and other expense, was $490 during the third quarter of 2005 as compared to $779 for the third quarter of 2004. The significant changes included:

·   Compensation expense was $35 in the third quarter of 2005, as compared to $69 in the third quarter of 2004.

·   Legal expenses in the third quarter of 2005 were $42, as compared to $379 in the third quarter of 2004. The decrease was primarily related to less activity in the Company’s litigation with ITXC for patent infringement, as the parties made efforts toward a settlement, as well as less activity associated with the direct and derivative actions against the Company.

·   Accounting and tax consulting expenses were $69 in the third quarter of both 2005 and 2004.

·   Restructuring expenses totaled $152 in the third quarter of 2005, relating to severance costs paid to former employees. There were no similar expenses in the third quarter of 2004.

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Research and development (“R&D”) costs - The Company ceased its investment in R&D in the third quarter of 2005 in conjunction with its decision to focus all business efforts on the realization of licensing fees associated with its intellectual property.

Depreciation and amortization - This expense was $9 in the third quarter of 2005, as compared to $5 during the third quarter of 2004.

The changes in other income (expense) are primarily related to the following:

·   Interest expense - Related party interest expense totaled $1,943 in the third quarter of 2005, as compared to $1,855 in the third quarter of 2004. The increase of $88 is the net effect of two factors. Interest expense increased by $436 due to the quarterly capitalization of interest on the loans and additional advances. This increase was offset by a decrease of $348 in the quarterly amortization of the beneficial conversion feature related to the related party’s ability to convert its debt to equity. Included in related party interest expense in the third quarter of 2005 is $340 of amortization of the beneficial conversion feature (“BCF”), on $17,868 of debt convertible at $5.02 per share. In the third quarter of 2004, amortization of the BCF was $688 on $16,346 of debt convertible at $6.15 per share.

Third party interest expense totaled $112 in the third quarter of 2005, as compared to $nil in the third quarter of 2004. The increase is attributed to $175 of interest expense on the convertible note payable to Laurus Master Fund, Ltd., which was entered into in October 2004, partially offset by a mark to market adjustment on the related Laurus warrants of $64.

·   Other income - In the third quarter 2005, other income totaled $120, as compared to $21 during the third quarter of 2004. In the third quarter of 2005, the Company entered into settlement agreements with certain carriers, which resulted in the recovery of $160 of receivables that were fully reserved against when acquired in 2001 as part of the acquisition of the assets of WorldxChange Communications Inc. from bankruptcy. This was reduced by a loss of $38 on the transfer of furniture, fixtures, equipment and software to a former employee in conjunction with entry into a multi-year royalty agreement. Subsequent to the end of the third quarter, the Company entered into two additional settlement agreements of the same nature, which will result in $910 being recorded as other income in the fourth quarter.

Discontinued operations - In the third quarter of 2005, the Company reported a $4,292 gain from discontinued operations (net of tax of $0), as compared to a loss of $4,130 (net of tax of $0) reported in the third quarter of 2004. The 2005 gain consists of a $2,095 loss related to Telecommunications operations for the quarter, and the $6,387 gain recognized on the disposition of these operations, as discussed in Note 7 to the accompanying unaudited condensed consolidated financial statements. The 2004 loss consists solely of the operations of the Telecommunications segment during the third quarter of 2004.

Nine-Month Period Ended September 30, 2005 Compared to Nine-Month Period Ended September 30, 2004

The business has narrowed its focus, commencing with the third quarter of 2005, to licensing its intellectual property. In the future, revenue is expected to be derived from licensing intellectual property to third parties. Technologies revenues were $0 in the first nine months of 2005 compared to $540 in the first nine months of 2004. The revenues in 2004 relate to a contract that was entered into with a Japanese company in 2003.

Selling, general, administrative and other expense was $2,489 during the first nine months of 2005, as compared to $2,393 for the first nine months of 2004. The significant changes included:

·   Compensation expense was $173 in the first nine months of 2005, as compared to $287 in the first nine months of 2004.

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·   Legal expenses in the first nine months of 2005 were $971, as compared to $1,079 in the first nine months of 2004. The decrease was primarily related to less activity in the Company’s litigation with ITXC for patent infringement, as the parties made efforts toward a settlement of matters, as well as less activity associated with the direct and derivative actions against the Company.

·   Accounting and tax consulting expenses were $207 in the first nine months of both 2005 and 2004.

·   Restructuring expenses totaled $152 in the first nine months of 2005, relating to severance costs paid to former employees in the third quarter of 2005. There were no similar expenses in the first nine months of 2004.

Research and development (“R&D”) costs - The Company ceased its investment in R&D in the third quarter of 2005 in conjunction with its decision to focus all business efforts on the realization of licensing fees associated with its intellectual property.

Depreciation and amortization - This expense was $27 in the first nine months of 2005, as compared to $15 during the first nine months of 2004.

The changes in other income (expense) are primarily related to the following:

·   Interest expense - Related party interest expense totaled $7,893 for the nine months ended September 30, 2005, as compared to $6,382 for the nine months ended September 30, 2004. The increase of $1,511 is the combined effect of two factors. Interest expense increased by $1,305 due to the quarterly capitalization of interest on the loans and additional advances. Additionally, there was an increase of $206 in the amortization of the beneficial conversion feature related to the related party’s ability to convert its debt to equity. Included in related party interest expense in the first nine months of 2005 is $3,446 of amortization of the BCF, on $17,868 of debt convertible at $5.02 per share. In the first nine months of 2004, amortization of the BCF was $3,240 on $16,346 of debt convertible at $6.15 per share.

Third party interest expense totaled $302 in the first nine months of 2005, as compared to $13 in the first nine months of 2004. The increase is attributed to $532 of interest expense on the convertible note payable to Laurus Master Fund Ltd., which was entered into in October 2004, partially offset by a mark to market adjustment on the related Laurus warrants of $230.

·   Other income - This totaled $121 for the first nine months of 2005, as compared to $1,440 during the first half of 2004. In the third quarter of 2005, the Company entered into settlement agreements with certain carriers, which resulted in the recovery of $160 of receivables that were fully reserved against when acquired in 2001 as part of the acquisition of the assets of WorldxChange Communications Inc. from bankruptcy. This was offset by a loss of $38 when fixed assets were transferred to a former employee in return for future royalty revenues, and a loss of $2 relating to forfeiture of security deposits on vacated premises. During the first nine months of 2004, approximately $1,376 related to our sale of BUI common stock.

Discontinued operations - In the nine months ended September 30, 2005, the Company reported a $3,467 loss from discontinued operations, as compared to the $9,243 loss reported in the nine months ended September 30, 2004. The 2005 loss consists of a $9,854 loss related to Telecommunications operations for the nine months, and the $6,387 gain recognized on the disposition of these assets, as discussed in Note 7 to the accompanying unaudited condensed consolidated financial statements. The 2004 loss consists of a $104 gain related to the sale of the ILC business, and $9,347 loss from the Telecommunications operations for the nine months.

Inflation. Inflation did not have a significant impact on our results during the last fiscal quarter.

Off-Balance Sheet Transactions.The Company does not engage in material off-balance sheet transactions.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our exposure to market risk is limited to interest rate sensitivity, which is affected by changes in the general level of United States interest rates. Our cash equivalents are invested with high quality issuers and we limit the amount of credit exposure to any one issuer. Due to the short-term nature of the cash equivalents, we believe that we are not subject to any material interest rate risk as it relates to interest income. As to interest expense, we have one debt instrument that has a variable interest rate. Our variable interest rate convertible note provides that the principal amount outstanding bears interest at the prime rate as published in the Wall St. Journal (“WSJ interest rate”, 6.75% at September 30, 2005) plus 3% (but not less than 7.0% in total), decreasing by 2% (but not less than 0%) for every 25% increase in the Market Price (as defined therein) above the fixed conversion price of $0.88 following the effective date (January 18, 2005) of the registration statement covering the common stock issuable upon conversion. Assuming the debt amount on the variable interest rate convertible note at September 30, 2005 was constant during the next twelve-month period, the impact of a one percent increase in the interest rate would be an increase in interest expense of approximately$37for that twelve-month period. In respect of the variable interest rate convertible note, should the price of the Company’s common stock increase and maintain a price equal to 125% of $0.88 for a twelve month period, the Company would benefit from a reduced interest rate of 2%, resulting in lower interest costs of up to approximately $74 for that twelve-month period. We do not believe that we are subject to material market risk on our fixed rate debt with Counsel in the near term.

We did not have any foreign currency hedges or other derivative financial instruments as of September 30, 2005. We do not enter into financial instruments for trading or speculative purposes and do not currently utilize derivative financial instruments. Our operations are conducted primarily in the United States and as such are not subject to material foreign currency exchange rate risk.

Item 4. Controls and Procedures.

As of the end of the period covered by this Quarterly Report, the Chief Executive Officer and Chief Financial Officer of the Company (the “Certifying Officers”) conducted evaluations of the Company’s disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosure. Based on this evaluation, the Certifying Officers have concluded that the Company’s disclosure controls and procedures were effective to ensure that material information is recorded, processed, summarized and reported by management of the Company on a timely basis in order to comply with the Company’s disclosure obligations under the Exchange Act, and the rules and regulations promulgated thereunder.

Further, there were no changes in the Company’s internal control over financial reporting during the third fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On April 16, 2004, certain stockholders of the Company (the “Plaintiffs”) filed a putative derivative complaint in the Superior Court of the State of California in and for the County of San Diego, (the “Complaint”) against the Company, WorldxChange Corporation (sic), Counsel Communications LLC, and Counsel Corporation as well as certain present and former officers and directors of the Company, some of whom also are or were directors and/or officers of the other corporate defendants (collectively, the “Defendants”). The Complaint alleges, among other things, that the Defendants, in their respective roles as controlling stockholder and directors and officers of the Company committed breaches of the fiduciary duties of care, loyalty and good faith and were unjustly enriched, and that the individual Defendants committed waste of corporate assets, abuse of control and gross mismanagement. The Plaintiffs seek compensatory damages, restitution, disgorgement of allegedly unlawful profits, benefits and other compensation, attorneys’ fees and expenses in connection with the Complaint. The Company believes that these claims are without merit and intends to continue to vigorously defend this action. There is no assurance that this matter will be resolved in the Company’s favor and an unfavorable outcome of this matter could have a material adverse impact on its business, results of operations, financial position or liquidity.

The Company and several of its current and former executives and board members were named in a securities action filed in the Superior Court of the State of California in and for the County of San Diego (the “Court”) on April 16, 2004, in which the plaintiffs made claims nearly identical to those set forth in the Complaint in the derivative suit described above. The Company believes that these claims are without merit and intends to vigorously defend this action. There is no assurance that this matter will be resolved in the Company’s favor and an unfavorable outcome of this matter could have a material adverse impact on its business, results of operations, financial position or liquidity. At a September 2, 2005 case management conference, the Court set June 16, 2006 as the trial date for this action and indicated that a trial regarding the derivative action described above would immediately follow.

In connection with the Company’s efforts to enforce its patent rights, C2 Communications Technologies Inc., our wholly owned subsidiary, filed a patent infringement lawsuit against ITXC Corp. (“ITXC”) in the United States District Court of the District of New Jersey on April 14, 2004. The complaint alleges that ITXC’s VoIP services and systems infringe the Company’s U.S. Patent No. 6,243,373, entitled “Method and Apparatus for Implementing a Computer Network/Internet Telephone System.” On May 7, 2004, ITXC filed a lawsuit against C2 Communications Technologies Inc., and the Company, in the United States District Court for the District of New Jersey for infringement of five ITXC patents relating to VoIP technology, directed generally to the transmission of telephone calls over the Internet and the completion of telephone calls by switching them off the Internet and onto a public switched telephone network. The Company believes that the allegations contained in ITXC’s complaint are without merit and the Company intends to continue to provide a vigorous defense to ITXC’s claims. There is no assurance that this matter will be resolved in the Company’s favor and an unfavorable outcome of this matter could have a material adverse impact on its business, results of operations, financial position or liquidity.

At our Adjourned Meeting of Stockholders held on December 30, 2003, our stockholders, among other things, approved an amendment to our Articles of Incorporation, deleting Article VI thereof (regarding liquidations, reorganizations, mergers and the like). Stockholders who were entitled to vote at the meeting and advised us in writing, prior to the vote on the amendment, that they dissented and intended to demand payment for their shares if the amendment was effectuated, were entitled to exercise their appraisal rights and obtain payment in cash for their shares under Sections 607.1301 - 607.1333 of the Florida Business Corporation Act (the “Florida Act”), provided their shares were not voted in favor of the amendment. In January 2004, we sent appraisal notices in compliance with Florida corporate statutes to all stockholders who had advised us of their intention to exercise their appraisal rights. The appraisal notices included our estimate of fair value of our shares, at $4.00 per share on a post-split basis. These stockholders had until February 29, 2004 to return their completed appraisal notices along with certificates for the shares for which they were exercising their appraisal rights. Approximately 33 stockholders holding approximately 74,000 shares of our stock returned completed appraisal notices by February 29, 2004. A stockholder of 20 shares notified us of his acceptance of our offer of $4.00 per share, while the stockholders of the remaining shares did not accept our offer. Subject to the qualification that, in accordance with the Florida Act, we may not make any payment to a stockholder seeking appraisal rights if, at the time of payment, our total assets are less than our total liabilities, stockholders who accepted our offer to purchase their shares at the estimated fair value will be paid for their shares within 90 days of our receipt of a duly executed appraisal notice. If we should be required to make any payments to dissenting stockholders, Counsel will fund any such amounts through the purchase of shares of our common stock. Stockholders who did not accept our offer were required to indicate their own estimate of fair value, and if we do not agree with such estimates, the parties are required to go to court for an appraisal proceeding on an individual basis, in order to establish fair value. Because we did not agree with the estimates submitted by most of the dissenting stockholders, we have sought a judicial determination of the fair value of the common stock held by the dissenting stockholders. On June 24, 2004, we filed suit against the dissenting stockholders seeking a declaratory judgment, appraisal and other relief in the Circuit Court for the 17^th Judicial District in Broward County, Florida. On February 4, 2005, the declaratory judgment action was stayed pending the resolution of the direct and derivative lawsuits filed in California. This decision was made by the judge in the Florida declaratory judgment action due to the similar nature of certain allegations brought by the defendants in the declaratory judgment matter and the California lawsuits described above. On March 7, 2005, the dissenting shareholders appealed the decision of the District Court judge to the Fourth District Court of Appeals for the State of Florida, which denied the appeal on June 21, 2005. When the declaratory judgment matter resumes, there is no assurance that this matter will be resolved in our favor and an unfavorable outcome of this matter could have a material adverse impact on our business, results of operations, financial position or liquidity.

36

The Company is involved in various other legal matters arising out of its operations in the normal course of business, none of which are expected, individually or in the aggregate, to have a material adverse effect on the Company.

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

(a)  Our annual meeting of stockholders was held on August 5, 2005.

(b)  Henry Y. L. Toh, Allan Silber and Hal B. Heaton were elected as our Class II directors each to serve for three years or until their successors are duly elected and qualified.

(c)  In addition to the election of directors, there were three additional matters presented to the stockholder vote at the annual meeting: approval of the sale of substantially all of our assets; approval of the name change amendment to our Articles of Incorporation; and ratification of auditor appointment. The following table is a tabulation of the final votes for each of the matters presented at the annual meeting:

	Affirmative /		Withheld				Broker
	Votes		Negative Votes		Abstentions		Non-votes
Election of Henry Y. L. Toh		18,758,463		17,621		-		-
Election of Allan Silber		18,766,334		9,750		-		-
Election of Hal Heaton		18,760,718		15,366		-		-
Approval of the sale of substantially all assets		17,611,624		10,511		4,785		1,149,164
Approval of the name change amendment		18,757,295		15,530		3,258		-
Ratification of BDO Seidman LLP as the Company’s independent auditors		18,768,116		7,054		913		-

(d)   n/a.

Item 5. Other Information

At the November 8, 2005 Board of Directors meeting, Catherine A. Moran was appointed to serve as Vice President of Accounting and Corporate Controller of the Company.  Ms. Moran holds the same position at Counsel Corporation, the Company's majority stockholder.  Ms. Moran joined Counsel Corporation in February 2004.  There is no arrangement or understanding between the newly appointed officer and any other persons pursuant to which she was appointed as discussed above.  Nor are there any family relationships between such person and any executive officers and directors.  Further, there are no transactions involving the Company and the newly appointed officer which transaction would be reportable pursuant to Item 404 of Regulation S-K promulgated under the Securities Act of 1933, as amended.

37

Item 6. - Exhibits.

(a) Exhibits

Exhibit No.	Identification of Exhibit
10.1	Promissory Note for $4,198,865.30 dated September 30, 2005 between C2 Global Technologies Inc. and Counsel Corporation.
10.2	Promissory Note for $112,500.00 dated September 30, 2005 between C2 Global Technologies Inc. and Counsel Corporation.
10.3	Promissory Note for $37,999.28 dated September 30, 2005 between C2 Global Technologies Inc. and Counsel Corporation.
10.4	First Amendment to Asset Purchase Agreement dated September 30, 2005, by and among Acceris Communications Inc., Acceris Communications Corp., Counsel Corporation, Acceris Management and Acquisition LLC, and North Central Equity LLC
10.5	Management Services Agreement (With Respect to Specified State Customer Bases) dated September 30, 2005, by and among Acceris Communications Inc., Acceris Communications Corp., Counsel Corporation, Acceris Management and Acquisition LLC, and North Central Equity LLC
10.6	Amended and Restated Master Security Agreement dated September 30, 2005, by and among C2 Global Technologies Inc. and certain of its subsidiaries, and Laurus Master Fund, Ltd.
10.7	Cash Collateral Deposit Agreement dated September 30, 2005, by and between C2 Global Technologies Inc. and Laurus Master Fund, Ltd.
31.1	Certification pursuant to Rule 13a-14(a) and 15d-14(a) required under Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Rule 13a-14(a) and 15d-14(a) required under Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized.

	C2 Global Technologies Inc.
Date: November 10, 2005	By:	/s/ Allan C. Silber Allan C. Silber Chief Executive Officer and Chairman
	By:	/s/ Gary M. Clifford Gary M. Clifford Chief Financial Officer

39

EX-10.1

Exhibit 10.1

PROMISSORY NOTE

$4,198,865.30  September 30, 2005

FOR VALUE RECEIVED, C2 Global Technologies Inc., a Florida corporation formerly known as I-Link Incorporated and Acceris Communications Inc. (the “Maker”) promises to pay to Counsel Corporation, an Ontario corporation, or its assigns (the “Payee”), in the lawful money of the United States of America (“Dollars” or “$”) the principal sum of Four Million One Hundred and Ninety-Eight Thousand Eight Hundred and Sixty-Five and 30/l00ths Dollars ($4,198,865.30) funded from time to time by Payee to Maker, together with interest thereon as set forth herein, on or before the Maturity Date as provided below and in accordance with the provisions of that certain Loan Agreement dated as of January 26, 2004 between the Maker and Payee as the same may be amended, modified, extended or restated, the “Loan Agreement.” Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Loan Agreement.

1.   Interest. The outstanding principal amount of this Promissory Note (the “Note”), together with unpaid interest, shall bear interest at the rate of ten percent (10%) per annum commencing on the date funded as to principal hereunder, namely,

·   commencing July 6, 2005 in respect of Twenty Thousand Dollars ($20,000.00) funded on that date,

·   commencing July 7, 2005 in respect of Twenty Thousand Dollars ($20,000.00) funded on that date,

·   commencing July 11, 2005 in respect of Twenty-Five Thousand Dollars ($25,000.00) funded on that date,

·   commencing July 13, 2005 in respect of One-Hundred and Thirty Thousand Dollars ($130,000.00) funded on that date,

·   commencing July 15, 2005 in respect of Thirty-Two Thousand ($32,000.00) funded on that date,

·   commencing August 2, 2005 in respect of Two-Hundred and Eighty-Five Thousand Dollars ($285,000.00) funded on that date,

·   commencing August 17, 2005 in respect of Twenty-Five Thousand Dollars ($25,000.00) funded on that date,

·   commencing August 18, 2005 in respect of Forty Thousand Dollars ($40,000.00) funded on that date,

·   commencing August 25, 2005 in respect of One-Hundred Thousand Dollars ($100,000.00) funded on that date,

·   commencing August 29, 2005 in respect of Three-Hundred Thousand Dollars ($300,000.00) funded on that date,

·   commencing August 31, 2005 in respect of One-Hundred and Seventy Thousand Dollars ($170,000.00) funded on that date,

·   commencing September 1, 2005 in respect of Two-Hundred and Eighty-Six Thousand Dollars ($286,000.00) funded on that date,

·   commencing September 2, 2005 in respect of One-Hundred and Forty Thousand Dollars ($140,000.00) funded on that date,

·   commencing September 8, 2005 in respect of Twenty-Five Thousand Dollars ($25,000.00) funded on that date,

·   commencing September 20, 2005 in respect of Ten Thousand Dollars ($10,000.00) funded on that date,

·   commencing September 21, 2005 in respect of Fifty Thousand Dollars ($50,000.00) funded on that date,

·   commencing September 27, 2005 in respect of One-Hundred Thousand Dollars ($100,000.00) funded on that date,

·   commencing September 28, 2005 in respect of Sixty Thousand Dollars ($60,000.00) funded on that date,

·   commencing September 29, 2005 in respect of One Million Eight-Hundred Thousand Dollars ($1,800,000.00) funded on that date,

·  commencing September 29, 2005 in respect of One-Hundred and Eighty-Seven Thousand Five-Hundred Dollars ($187,500.00) funded on that date,

·   commencing September 30, 2005 in respect of Eighty Thousand One-Hundred and Fifty-Six and 73/100ths Dollars ($80,156.73) funded on that date,

·   commencing September 30, 2005 in respect of Three-Hundred and Thirteen Thousand Two-Hundred and Eight and 57/100ths Dollars funded on that date.

which interest shall accrue and be compounded quarterly and shall result in a corresponding increase in the principal amount of the Indebtedness.

2.Time and Place of Payment. The Indebtedness shall be due and payable in full on April 30, 2006 (the “Maturity Date”); provided that the Maturity Date shall be further extended to December 31, 2006 upon the legal Closing of the transaction with North Central Equity LLC (the “Transaction”) for the sale of substantially all of the telecommunication assets of Acceris Communications Corp; provided, further, however, that notwithstanding the above, the Maturity Date shall be accelerated to the date ten (10) calendar days following closing under or conclusion of each occurrence of (a) the sale or sales by Acceris to a third party unrelated to Counsel Corp of the Buyers United, Inc. Series B Convertible Preferred Stock and/or the common stock into which such stock is convertible owned by Acceris and held by Counsel Corp as security for the performance by Acceris hereunder pursuant to the Stock Pledge Agreement, or any portion thereof (a “BUI Sale”) or (b) an equity investment or investments in Acceris by a third party unrelated to Counsel Corp through the capital markets, whether pursuant to a registered offering or unregistered offering or other transaction (an “Equity Investment”); provided, further, however, that the Maturity Date shall be accelerated with respect only to the portion of the unpaid Indebtedness equal to the net amount received by Acceris from any such BUI Sale or any such Equity Investment.

3.The Indebtedness, including that portion of the Indebtedness represented by this Note, is secured pursuant to that Amended and Restated Stock Pledge Agreement between the Maker and Payee dated as of January 26, 2004, executed and delivered concurrent herewith as the same has been amended, modified, extended or restated, the “Stock Pledge Agreement.”

4.Events of Default. The occurrence of any of the following events or conditions shall constitute an event of default (each an “Event of Default”):

(a)Maker shall fail to pay any of the Indebtedness pursuant to terms of this Note;

(b)Maker shall fail to comply with any term, obligation, covenant, or condition contained in any agreement between Maker and Payee (each, an “Agreement”);

(c)Any warranty or representation made to Payee by Maker under any Agreement proves to have been false when made or furnished;

(d)If Maker voluntarily files a petition under the federal Bankruptcy Act, as such Act may from time to time be amended, or under any similar or successor federal statute relating to bankruptcy, insolvency, arrangements or reorganizations, or under any state bankruptcy or insolvency act, or files an answer in an involuntary proceeding admitting insolvency or inability to pay debts, or if Maker is adjudged a bankrupt, or if a trustee or receiver is appointed for Maker’s property, or if Maker makes an assignment for the benefit of its creditors, or if there is an attachment, receivership, execution or other judicial seizure, then Payee may, at Payee’s option, declare all of the Indebtedness to be immediately due and payable without prior notice to Maker, and Payee may invoke any remedies permitted by this Note. Any attorneys’ fees and other expenses incurred by Payee in connection with Maker’s bankruptcy or any of the other events described in this Section 3 shall be additional Indebtedness of Maker secured by this Note.

(e)There exists a material breach by Maker under (or a termination by any party of) a material contract of Maker (for purposes of this Section 4 a material contract shall mean any contract resulting in revenues of in excess of $10,000 per annum);

(f)Maker is in default under any funded indebtedness, including but not limited to indebtedness evidenced by notes or capital leases, of Maker other than the amounts loaned pursuant to this Note; or

(g)If Maker’s business undergoes a material adverse change in Payee’s reasonable opinion.

If an Event of Default specified in Section 4(d) hereof occurs and is continuing, the principal amount of the Indebtedness, together with all accrued and unpaid interest thereon, shall automatically become and be immediately due and payable, without any declaration or other act on the part of Payee.

5.Acceleration. Upon an Event of Default, the Payee may give written notice to the Maker of the occurrence of such Event of Default and Maker shall have the shorter of (i) thirty (30) days or (ii) such remedy period as set forth in the applicable provisions of Section 4 within which to cure such Event of Default. If the Event of Default is not cured within the applicable cure period, then, at the option of the Payee, Payee may declare the Maker in default (a “Default”) and all sums due hereunder shall become immediately due and payable.

Any written notification from Payee to Maker hereunder shall be deemed to be written notification of an Event of Default, or Default, or rescission of Acceleration (as provided below), respectively, only if such notification, communication or other election shall (a) be clearly and distinctly identified as such a Notice of Event of Default, Notice of Default, or Notice of Rescission of Acceleration, respectively, and (b) be given by certified mail, return receipt requested or overnight delivery requiring acknowledgement of receipt, and any communication between the parties not so designated and delivered shall not be construed or deemed to be effective notice under this Section 5.

6.Waivers. The Maker hereby waives presentment, demand for payment, notice of dishonor and any and all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this Note and hereby consents to any waivers or modifications that may be granted or consented to by the Payee of this Note. No waiver by the Payee or any breach of any covenant of the Maker herein contained or any term or condition hereof shall be construed as a waiver of any subsequent breach of the same or of any other covenant, term or condition whatsoever.

7.Enforcement. In the event that any Payee of this Note shall institute any action for the enforcement or the collection of this Note, there shall be immediately due and payable, in addition to the unpaid balance of this Note, all late charges, and all costs and expenses of such action including reasonable attorney’s fees. The Maker waives the right to interpose any setoff, counterclaim or defense of any nature or description whatsoever.

8.Replacement of Note. Upon receipt by the Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of an indemnity reasonably satisfactory to it, and upon reimbursement to the Make of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Note if mutilated, the Maker will make and delivery a new Note of like tenor in lieu of this Note.

9.Amendments. This Note may not be changed, modified, amended, or terminated except by a writing duly executed by the Maker and the Payee.

10.Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

11.Assignment. This Note may not be assigned, in whole or in part, by operation of law or otherwise, by the Maker without the prior written consent of the Payee in its sole and absolute discretion, and any purported assignment without the express prior written consent of the Payee shall be void ab initio. The Payee may assign any or all of its rights and interests hereunder to any party. Subject to the foregoing, this Note shall be binding upon, and inure to the benefit of, the successors and assigns of the Payee and the Maker.

[See attached Signature Page]

Signature Page

to Promissory Note

dated as of September 30, 2005

IN WITNESS WHEREOF, the Maker has executed this Promissory Note by its duly authorized officer as of the 30th day of September, 2005.

C2 GLOBAL TECHNOLOGIES INC.

By:  

Name:

Title:

EX-10.2

Exhibit 10.2

PROMISSORY NOTE

$112,500.00  September 30, 2005

FOR VALUE RECEIVED, C2 Global Technologies Inc., a Florida corporation formerly known as Acceris Communications Inc. and I-Link Incorporated (the “Maker”) promises to pay to Counsel Corporation, an Ontario corporation, or its assigns (the “Payee”), in the lawful money of the United States of America (“Dollars” or “$”) the principal sum of One-Hundred and Twelve Thousand Five-Hundred and 0/100ths Dollars, together with interest thereon as set forth herein, on or before the Maturity Date as provided below and in accordance with the provisions of the management services agreement between the Payee and Acceris Capital Corporation (“ACC”) dated December 31, 2004 as assigned by ACC to the Maker, and that certain Loan Agreement dated as of January 26, 2004 between the Maker and Payee as the same may be amended, modified, extended or restated, the “Loan Agreement.” Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Loan Agreement.

1.Interest. Commencing on January 31, 2006, the outstanding principal amount of this Promissory Note (the “Note”), together with unpaid interest, shall bear interest with effect from January 1, 2006 at the rate of ten percent (10%) per annum, which interest shall accrue and be compounded quarterly and shall result in a corresponding increase in the principal amount of the Indebtedness.

2.Time and Place of Payment. The Indebtedness shall be due and payable in full on April 30, 2006 (the “Maturity Date”); provided that the Maturity Date shall be further extended to December 31, 2006 upon the legal Closing of the transaction with North Central Equity LLC (the “Transaction”) for the sale of substantially all of the telecommunication assets of Acceris Communications Corp; provided, further, however, that notwithstanding the above, the Maturity Date shall be accelerated to the date ten (10) calendar days following closing under or conclusion of each occurrence of (a) the sale or sales by Acceris to a third party unrelated to Counsel Corp of the Buyers United, Inc. Series B Convertible Preferred Stock and/or the common stock into which such stock is convertible owned by Acceris and held by Counsel Corp as security for the performance by Acceris hereunder pursuant to the Stock Pledge Agreement, or any portion thereof (a “BUI Sale”) or (b) an equity investment or investments in Acceris by a third party unrelated to Counsel Corp through the capital markets, whether pursuant to a registered offering or unregistered offering or other transaction (an “Equity Investment”); provided, further, however, that the Maturity Date shall be accelerated with respect only to the portion of the unpaid Indebtedness equal to the net amount received by Acceris from any such BUI Sale or any such Equity Investment.

3.The Indebtedness, including that portion of the Indebtedness represented by this Note, is secured pursuant to that Amended and Restated Stock Pledge Agreement between the Maker and Payee dated as of January 26, 2004, executed and delivered concurrent herewith as the same has been amended, modified, extended or restated, the “Stock Pledge Agreement.”

4.Events of Default. The occurrence of any of the following events or conditions shall constitute an event of default (each an “Event of Default”):

(a)Maker shall fail to pay any of the Indebtedness pursuant to terms of this Note;

(b)Maker shall fail to comply with any term, obligation, covenant, or condition contained in any agreement between Maker and Payee (each, an “Agreement”);

(c)Any warranty or representation made to Payee by Maker under any Agreement proves to have been false when made or furnished;

(d)If Maker voluntarily files a petition under the federal Bankruptcy Act, as such Act may from time to time be amended, or under any similar or successor federal statute relating to bankruptcy, insolvency, arrangements or reorganizations, or under any state bankruptcy or insolvency act, or files an answer in an involuntary proceeding admitting insolvency or inability to pay debts, or if Maker is adjudged a bankrupt, or if a trustee or receiver is appointed for Maker’s property, or if Maker makes an assignment for the benefit of its creditors, or if there is an attachment, receivership, execution or other judicial seizure, then Payee may, at Payee’s option, declare all of the Indebtedness to be immediately due and payable without prior notice to Maker, and Payee may invoke any remedies permitted by this Note. Any attorneys’ fees and other expenses incurred by Payee in connection with Maker’s bankruptcy or any of the other events described in this Section 3 shall be additional Indebtedness of Maker secured by this Note.

(e)There exists a material breach by Maker under (or a termination by any party of) a material contract of Maker (for purposes of this Section 4 a material contract shall mean any contract resulting in revenues of in excess of $10,000 per annum);

(f)Maker is in default under any funded indebtedness, including but not limited to indebtedness evidenced by notes or capital leases, of Maker other than the amounts loaned pursuant to this Note; or

(g)If Maker’s business undergoes a material adverse change in Payee’s reasonable opinion.

If an Event of Default specified in Section 4(d) hereof occurs and is continuing, the principal amount of the Indebtedness, together with all accrued and unpaid interest thereon, shall automatically become and be immediately due and payable, without any declaration or other act on the part of Payee.

5.Acceleration. Upon an Event of Default, the Payee may give written notice to the Maker of the occurrence of such Event of Default and Maker shall have the shorter of (i) thirty (30) days or (ii) such remedy period as set forth in the applicable provisions of Section 4 within which to cure such Event of Default. If the Event of Default is not cured within the applicable cure period, then, at the option of the Payee, Payee may declare the Maker in default (a “Default”) and all sums due hereunder shall become immediately due and payable.

Any written notification from Payee to Maker hereunder shall be deemed to be written notification of an Event of Default, or Default, or rescission of Acceleration (as provided below), respectively, only if such notification, communication or other election shall (a) be clearly and distinctly identified as such a Notice of Event of Default, Notice of Default, or Notice of Rescission of Acceleration, respectively, and (b) be given by certified mail, return receipt requested or overnight delivery requiring acknowledgement of receipt, and any communication between the parties not so designated and delivered shall not be construed or deemed to be effective notice under this Section 5.

6.Waivers. The Maker hereby waives presentment, demand for payment, notice of dishonor and any and all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this Note and hereby consents to any waivers or modifications that may be granted or consented to by the Payee of this Note. No waiver by the Payee or any breach of any covenant of the Maker herein contained or any term or condition hereof shall be construed as a waiver of any subsequent breach of the same or of any other covenant, term or condition whatsoever.

7.Enforcement. In the event that any Payee of this Note shall institute any action for the enforcement or the collection of this Note, there shall be immediately due and payable, in addition to the unpaid balance of this Note, all late charges, and all costs and expenses of such action including reasonable attorney’s fees. The Maker waives the right to interpose any setoff, counterclaim or defense of any nature or description whatsoever.

8.Replacement of Note. Upon receipt by the Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of an indemnity reasonably satisfactory to it, and upon reimbursement to the Make of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Note if mutilated, the Maker will make and delivery a new Note of like tenor in lieu of this Note.

9.Amendments. This Note may not be changed, modified, amended, or terminated except by a writing duly executed by the Maker and the Payee.

10.Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

11.Assignment. This Note may not be assigned, in whole or in part, by operation of law or otherwise, by the Maker without the prior written consent of the Payee in its sole and absolute discretion, and any purported assignment without the express prior written consent of the Payee shall be void ab initio. The Payee may assign any or all of its rights and interests hereunder to any party. Subject to the foregoing, this Note shall be binding upon, and inure to the benefit of, the successors and assigns of the Payee and the Maker.

[See attached Signature Page]

Signature Page

to Promissory Note

dated as of September 30, 2005

IN WITNESS WHEREOF, the Maker has executed this Promissory Note by its duly authorized officer as of the 30th day of September, 2005.

C2 GLOBAL TECHNOLOGIES INC.

By:  

Name:

Title:

EX-10.3

Exhibit 10.3

PROMISSORY NOTE

$37,999.28  September 30, 2005

FOR VALUE RECEIVED, C2 Global Technologies Inc., a Florida corporation formerly known as Acceris Communications Inc. and I-Link Incorporated (the “Maker”) promises to pay to Counsel Corporation, an Ontario corporation, or its assigns (the “Payee”), in the lawful money of the United States of America (“Dollars” or “$”) the principal sum of Thirty-Seven Thousand Nine-Hundred and Ninety-Nine and 28/100ths Dollars funded from time to time by Payee to Maker, together with interest thereon as set forth herein, on or before the Maturity Date as provided below and in accordance with the provisions of that certain Loan Agreement dated as of January 26, 2004 between the Maker and Payee as the same may be amended, modified, extended or restated, the “Loan Agreement.” Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Loan Agreement.

1.Interest. The outstanding principal amount of this Promissory Note (the “Note”), together with unpaid interest, shall bear interest at the rate of ten percent (10%) per annum commencing on October 1, 2005, which interest shall accrue and be compounded quarterly and shall result in a corresponding increase in the principal amount of the Indebtedness.

2.Time and Place of Payment. The Indebtedness shall be due and payable in full on April 30, 2006 (the “Maturity Date”); provided that the Maturity Date shall be further extended to December 31, 2006 upon the legal Closing of the transaction with North Central Equity LLC (the “Transaction”) for the sale of substantially all of the telecommunication assets of Acceris Communications Corp; provided, further, however, that notwithstanding the above, the Maturity Date shall be accelerated to the date ten (10) calendar days following closing under or conclusion of each occurrence of (a) the sale or sales by Acceris to a third party unrelated to Counsel Corp of the Buyers United, Inc. Series B Convertible Preferred Stock and/or the common stock into which such stock is convertible owned by Acceris and held by Counsel Corp as security for the performance by Acceris hereunder pursuant to the Stock Pledge Agreement, or any portion thereof (a “BUI Sale”) or (b) an equity investment or investments in Acceris by a third party unrelated to Counsel Corp through the capital markets, whether pursuant to a registered offering or unregistered offering or other transaction (an “Equity Investment”); provided, further, however, that the Maturity Date shall be accelerated with respect only to the portion of the unpaid Indebtedness equal to the net amount received by Acceris from any such BUI Sale or any such Equity Investment.

3.The Indebtedness, including that portion of the Indebtedness represented by this Note, is secured pursuant to that Amended and Restated Stock Pledge Agreement between the Maker and Payee dated as of January 26, 2004, executed and delivered concurrent herewith as the same has been amended, modified, extended or restated, the “Stock Pledge Agreement.”

4.Events of Default. The occurrence of any of the following events or conditions shall constitute an event of default (each an “Event of Default”):

(a)Maker shall fail to pay any of the Indebtedness pursuant to terms of this Note;

(b)Maker shall fail to comply with any term, obligation, covenant, or condition contained in any agreement between Maker and Payee (each, an “Agreement”);

(c)Any warranty or representation made to Payee by Maker under any Agreement proves to have been false when made or furnished;

(d)If Maker voluntarily files a petition under the federal Bankruptcy Act, as such Act may from time to time be amended, or under any similar or successor federal statute relating to bankruptcy, insolvency, arrangements or reorganizations, or under any state bankruptcy or insolvency act, or files an answer in an involuntary proceeding admitting insolvency or inability to pay debts, or if Maker is adjudged a bankrupt, or if a trustee or receiver is appointed for Maker’s property, or if Maker makes an assignment for the benefit of its creditors, or if there is an attachment, receivership, execution or other judicial seizure, then Payee may, at Payee’s option, declare all of the Indebtedness to be immediately due and payable without prior notice to Maker, and Payee may invoke any remedies permitted by this Note. Any attorneys’ fees and other expenses incurred by Payee in connection with Maker’s bankruptcy or any of the other events described in this Section 3 shall be additional Indebtedness of Maker secured by this Note.

(e)There exists a material breach by Maker under (or a termination by any party of) a material contract of Maker (for purposes of this Section 4 a material contract shall mean any contract resulting in revenues of in excess of $10,000 per annum);

(f)Maker is in default under any funded indebtedness, including but not limited to indebtedness evidenced by notes or capital leases, of Maker other than the amounts loaned pursuant to this Note; or

(g)If Maker’s business undergoes a material adverse change in Payee’s reasonable opinion.

If an Event of Default specified in Section 4(d) hereof occurs and is continuing, the principal amount of the Indebtedness, together with all accrued and unpaid interest thereon, shall automatically become and be immediately due and payable, without any declaration or other act on the part of Payee.

5.Acceleration. Upon an Event of Default, the Payee may give written notice to the Maker of the occurrence of such Event of Default and Maker shall have the shorter of (i) thirty (30) days or (ii) such remedy period as set forth in the applicable provisions of Section 4 within which to cure such Event of Default. If the Event of Default is not cured within the applicable cure period, then, at the option of the Payee, Payee may declare the Maker in default (a “Default”) and all sums due hereunder shall become immediately due and payable.

Any written notification from Payee to Maker hereunder shall be deemed to be written notification of an Event of Default, or Default, or rescission of Acceleration (as provided below), respectively, only if such notification, communication or other election shall (a) be clearly and distinctly identified as such a Notice of Event of Default, Notice of Default, or Notice of Rescission of Acceleration, respectively, and (b) be given by certified mail, return receipt requested or overnight delivery requiring acknowledgement of receipt, and any communication between the parties not so designated and delivered shall not be construed or deemed to be effective notice under this Section 5.

6.Waivers. The Maker hereby waives presentment, demand for payment, notice of dishonor and any and all other notices or demands in connection with the delivery, acceptance, performance, default or enforcement of this Note and hereby consents to any waivers or modifications that may be granted or consented to by the Payee of this Note. No waiver by the Payee or any breach of any covenant of the Maker herein contained or any term or condition hereof shall be construed as a waiver of any subsequent breach of the same or of any other covenant, term or condition whatsoever.

7.Enforcement. In the event that any Payee of this Note shall institute any action for the enforcement or the collection of this Note, there shall be immediately due and payable, in addition to the unpaid balance of this Note, all late charges, and all costs and expenses of such action including reasonable attorney’s fees. The Maker waives the right to interpose any setoff, counterclaim or defense of any nature or description whatsoever.

8.Replacement of Note. Upon receipt by the Maker of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of an indemnity reasonably satisfactory to it, and upon reimbursement to the Make of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Note if mutilated, the Maker will make and delivery a new Note of like tenor in lieu of this Note.

9.Amendments. This Note may not be changed, modified, amended, or terminated except by a writing duly executed by the Maker and the Payee.

10.Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

11.Assignment. This Note may not be assigned, in whole or in part, by operation of law or otherwise, by the Maker without the prior written consent of the Payee in its sole and absolute discretion, and any purported assignment without the express prior written consent of the Payee shall be void ab initio. The Payee may assign any or all of its rights and interests hereunder to any party. Subject to the foregoing, this Note shall be binding upon, and inure to the benefit of, the successors and assigns of the Payee and the Maker.

[See attached Signature Page]

Signature Page

to Promissory Note

dated as of September 30, 2005

IN WITNESS WHEREOF, the Maker has executed this Promissory Note by its duly authorized officer as of the 30th day of September, 2005.

C2 GLOBAL TECHNOLOGIES INC.

By:  

Name:

Title:

EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT

This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this “First Amendment”) dated as of September 30, 2005 and effective at 11:59 Eastern Time on such date (the “Effective Date”), is by and among Acceris Management and Acquisition LLC, a Minnesota limited liability company (the “Buyer”), North Central Equity LLC, a Minnesota limited liability company (“Guarantor”), C2 Global Technologies Inc. f/k/a Acceris Communications Inc., a Florida corporation (“ACI”), Acceris Communications Corp., a Delaware corporation (the “Company”), and Counsel Corporation, a Canadian corporation organized under the laws of the province of Ontario (the “Parent”) (ACI and the Company are collectively the “Sellers” and ACI, Acceris and Parent are collectively the “Seller Parties”).

W I T N E S S E T H:

WHEREAS, the parties to this First Amendment are party to an Asset Purchase Agreement dated May 19, 2005 (the “Agreement”) pursuant to which the Company has agreed to sell, transfer and otherwise convey, and the Buyer has agreed to purchase and assume, the Acquired Assets and the Assumed Liabilities, on the terms and subject to the conditions of the Agreement; and

WHEREAS, the parties have negotiated certain changes to the terms of the Agreement necessary to close the transaction and desire to amend the Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the respective covenants and agreements herein contained, the parties hereby agree to amend the Agreement with this First Amendment as follows:

1.   Section 2.1 of the Agreement is hereby amended by adding the following two sentences at the end of such section:

Seller Parties have negotiated a wholesale account credit of $585,000 with Qwest Communications Corporation (“Qwest”). In exchange, at Closing Guarantor shall make a Promissory Note in the amount of $585,000 payable to Parent. Promptly following Closing, the Seller Parties shall produce a settlement agreement with Qwest (“Qwest Settlement Agreement”) pursuant to the letter agreement entered into at Closing among the parties to this First Amendment (“Letter Agreement”). Seller Parties shall deliver to Buyer an opinion of their counsel in form and substance reasonably satisfactory to Buyer promptly following Closing.

2.   Section 2.4 of the Agreement is hereby deleted and replaced with the word “omitted”.

3.   Section 2.6 of the Agreement is hereby amended by making 2.6 “Deliveries at Closing” into subsection (a) and by adding a new subsection (b) which reads as follows:

(b) At the Closing the parties shall execute a Closing Statement that identifies the repayment of (i) the Promissory Note made by the Guarantor to the Parent in the amount of $375,000 on May 19, 2005, (ii) the Promissory Note made by the Guarantor to the Parent in the amount of $625,000 issued on July 6, 2005, (iii) accrued interest on such Notes totaling $22,712.32 and (iv) the $585,000 Note issued by the Buyer to Parent on the Closing less an amount of (x) $114,000 owed by the Sellers for lost network disputes that are part of the Excluded Liabilities but were satisfied by the Buyer, (y) September payroll reimbursement for ACI employees paid through the Acceris Communications Corp. payroll system in the amount of $33,623.49, and (z) a balance sheet adjustment in place of compliance with Section 2.4 of the Agreement (which has been deleted by this First Amendment) in the amount of $67,833.50, and (iv) a Promissory Note issued by Guarantor to Parent in the amount of $585,000. At Closing, Guarantor shall pay Parent the sum of $807,255.78 according to the Letter Agreement in immediately available funds and make a Promissory Note to Parent in the amount of $585,000.

4.   The last two sentences of Section 5.1(a) of the Agreement is hereby deleted.

5.   [Intentionally deleted]

6.   Section 5.7(a) of the Agreement is hereby amended by deleting the first two sentences of Section 5.7(a) and adding the following language in its place:

The Buyer has waived the requirement that the Seller Parties use their commercially reasonable efforts to obtain the third party Consents listed on Schedule 3.3 prior to the Closing.

7.   [Intentionally deleted]

8.   [Intentionally deleted]

9.   [Intentionally deleted]

10.   The following is added to the Agreement as a new Section 5.18:

In connection with the approximately $884,566 total of network billing disputes with (i) MCI Network Services, Inc. (“MCI”) (approximately $530,000 of disputed billings), (ii) Global Crossings Bandwidth, (“Global”) (approximately $320,000 of disputed billings) and (iii) various other carrier disputes (approximately $34,566 of disputed billings) that are Excluded Liabilities, the Seller Parties agree to use their reasonable best efforts to resolve the disputes as quickly as possible. The Promissory Note dated September 30, 2005 for $585,000 made by Guarantor to Counsel Corporation contains provisions that suspend Guarantor’s obligation to make principle payments in order to reduce Buyer’s risk with respect to the foregoing network billing disputes. Buyer shall make Keith Harrison and Abby Knowlton reasonably available to Seller Parties to assist them in resolving such network billing disputes.

11.   Clause (iv) of Section 9.3 is hereby deleted. The Seller Parties shall provide the assistance, if any, necessary under the provisions of Section 5.7(a) of the Agreement as amended by this First Amendment.

12.   Section 9.6 of the Agreement is hereby deleted and replaced with the word “omitted”.

13.   [Intentionally deleted]

14.   Section 9.10 of the Agreement is hereby deleted and replaced with the word “omitted”. The following is hereby added to the Agreement as a new Section 5.19:

Buyer and the Universal Services Administrative Company (the “USAC”) have entered into a settlement for approval by the FCC with respect to amounts owed to the USAC by the Company and the parties agree, notwithstanding any provision of the Agreement to the contrary, that such amounts and obligations shall be Assumed Liabilities.

15.   The following conditions precedent to the Buyer’s obligation to consummate the transactions contemplated by the Agreement are hereby added to the Agreement as Sections 9.11, 9.12 and 9.13:

Section 9.11. Seller Parties shall deliver, marked as satisfied, the Promissory Note in the amount of $375,000 dated May 19, 2005 payable by Guarantor to Parent and the Promissory Note in the amount of $625,000 dated July 6, 2005 payable by Guarantor to Parent.

Section 9.12. Seller Parties shall deliver an executed copy of the settlement agreement between Acceris Communications Corp. and MCI Worldcom Network Services, Inc. regarding the $374,186 volume commitment penalty payment in the MCI Telecommunications Services Agreement dated November 1, 2001, as amended.

Section 9.13. Pursuant to the Letter Agreement, Seller Parties shall deliver an executed copy of the Qwest Settlement Agreement.

15.   The following agreements that were entered into by all or some of the parties to this First Amendment are hereby terminated: Secured Promissory Note dated May 19, 2005, Irrevocable Proxy dated May 19, 2005, Guaranty dated May 19, 2005, Security Agreement dated May 19, 2005 and the Management Services Agreement dated May 19, 2005. At Closing, Buyer shall mark as satisfied and deliver to Parent the Secured Promissory Note.

16.   Capitalized terms not defined in this First Amendment shall have the meanings assigned in the Agreement.

17.   Except as amended hereby, the Agreement shall continue in full force and effect. IN WITNESS WEREOF, the parties hereto have caused this First Amendment to be executed as of the Effective Date.

BUYER: 

ACCERIS MANAGAMENT AND ACQUISITION LLC

Name:Elam Baer
Title: Chief Executive Officer

SELLER PARTIES:

COUNSEL CORPORATION

Name: _______________________________________ Title:  _______________________________________

C2 GLOBAL TECHNOLOGIES INC. f/k/a ACCERIS COMMUNICATIONS INC.

Name: _______________________________________ Title:  _______________________________________

ACCERIS COMMUNICATIONS CORP.

Name: _______________________________________ Title:  _______________________________________

GUARANTOR:

NORTH CENTRAL EQUITY LLC

Name: _______________________________________ Title:  _______________________________________

EX-10.5

Exhibit 10.5

MANAGEMENT SERVICES AGREEMENT

(WITH RESPECT TO SPECIFIED STATE CUSTOMER BASES)

THIS MANAGEMENT SERVICES AGREEMENT (“Agreement”) is made and entered into as of September 30, 2005 at 11:59 p.m. Eastern Time (“Effective Date”) by and among Acceris Management and Acquisition LLC, a Minnesota limited liability company (“Manager”), Acceris Communications Corp., a Delaware corporation (“Company”), and C2 Global Technologies Inc. f/k/a Acceris Communications Inc., a Florida corporation (“ACI” and, together with Company, the “Seller Parties”), and Counsel Corporation, a Canadian company organized under the laws of the province of Ontario (“Counsel”) (collectively the Company, ACI and Counsel are the “Company Parties”) and, for the sole purpose of making the guaranty contained in Section 21, North Central Equity, a Minnesota limited liability company.

BACKGROUND

WHEREAS, the Seller Parties have agreed to retain the Manager to manage the customer accounts in certain states specified on Exhibit A hereto (“Specified States”) during the interim period from the Closing Date to the date of final regulatory approval for the transfer of control of such customer assets under applicable state PUC rules and regulations as provided for under the Asset Purchase Agreement (the “Purchase Agreement”) among the Company Parties and the Manager; and

WHEREAS, the Closing under the Purchase Agreement is occurring as of the Effective Date, however, the receipt of all governmental consents required by the Purchase Agreement has not yet been finalized in the Specified States; and

WHEREAS, the Seller Parties desire to utilize Manager’s services on an exclusive basis to manage, to fullest extent permissible under Law (as defined below), the operations of the customer accounts in the Specified States pending receipt of the foregoing consents and approvals and Manager desires to provide such services to the customers in the Specified States on the terms and subject to the conditions stated herein.

NOW, THEREFORE, in consideration of the above recitals and mutual promises and other good and adequate consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

1.Compliance with Applicable Laws and Regulations.

1.1The Company Parties and Manager desire that this Agreement and the obligations performed hereunder be in substantial and good faith compliance with (i) all applicable rules, regulations and policies of the Federal Communications Commission (“FCC”) and any state public utility commission(s) (the “State PUC(s)”); (ii) the Communications Act of 1934, as amended (the “Act”), 47 U.S.C 151, et seq., (iii) applicable state and provincial laws applicable to the Company Parties and (iv) any other applicable Canadian or US federal, state and local law, regulation or policy (collectively, “Law(s)”).

1.2It is expressly understood by the parties that nothing in this Agreement is intended to give Manager any right that would be deemed to constitute a transfer of control (as is defined in the Act and/or any applicable FCC or other relevant Law) of any of the applicable licenses from the Company to Manager to the extent prohibited by applicable Law in the Specified States. Each party shall perform its obligations under this Agreement in accordance with applicable Law.

1.3If any State PUC or other governmental body of competent jurisdiction with regard to the customers in the Specified States determines that a provision of this Agreement violates any applicable Law, or if any State PUC governing the customers in the Specified States has advised the parties, orally or in writing, that the review of any request by the parties for authority for the transactions contemplated hereby will be inordinately delayed or will likely be determined adversely to the parties, the parties will use their respective reasonable efforts to negotiate in good faith to modify this Agreement to the minimum extent necessary so as to comply with such order, decree, action or determination and/or remove any controversy identified by a State PUC without material economic detriment or effect to either party, and to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. This Agreement, as so modified, shall then continue in full force and effect. If change of control approval cannot be obtained in any particular state, Manager shall assist the Company Parties to obtain a buyer for such customers for up to a one year period after the Closing Date. Any proceeds of the sale of such customer base shall be paid to the Manager as additional compensation under this Management Agreement.

2.Appointment of Manager. The Seller Parties hereby appoint Manager, to the fullest extent permissible under Law, as the sole and exclusive provider of all services necessary or appropriate for the supervision and management of the customers in the Specified States, as described more fully in Section 3 (the “Services”) up until the date of the approval by the applicable state PUC of the change of control approval and the approval of the certifications of the Manager to provide telecommunications services in the applicable states. The Company Parties consent to and agree to the appointment of the Manager. Manager hereby accepts such appointment on the terms and subject to the conditions stated herein.

3.Scope of the Services.

3.1Management. During the Term (defined below), and under the supervision, control and direction from time to time of the Company and the Company’s Board of Directors and by its Designated Executive (as defined below), Manager shall establish and implement operational policies and provide general management and direction of the day-to-day operations of the customer bases in the Specified States and shall exercise general supervision and direction of all affairs related to the customer accounts in the Specified States to the fullest extent permissible under Law and shall make decisions with respect to the establishment, provisioning, contracting, billing, customer service and collection of the customer accounts in the Specified States, subject to the reporting duties to the Designated Executive (defined below) and the Company’s Board of Directors.

(a)Manager agrees to report regularly at mutually agreeable times to the Company’s chief executive officer or a designee of the chief executive officer (“Designated Executive”) concerning the status of the management of the customers in the Specified States, but no less frequently than monthly, unless such update is waived by the Company or the Company Parties.

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(b)Manager shall manage the customers in the Specified States and report to the Designated Executive from time to time as provided for in this Agreement and shall use its best efforts to manage the customers in the Specified States in substantial good faith compliance with its obligations under this Agreement. Manager shall use its good faith best efforts to manage the responsibilities of operating and managing the Company’s operations under this Agreement. Day to day operations shall include customer billing, management of accounts receivables and cash collections relating to the customer accounts in the Specified States and providing working capital to fund the customer accounts receivables with respect to the customer accounts in the Specified States.Manager will be responsible for all costs associated with management of the customer accounts in the Specified States until this Agreement has been terminated or has expired.

4.Responsibilities of the Company. During the Term the Company Parties shall assist and fully cooperate on a timely basis with Manager in its performance of the Services. Time is of the essence under this Agreement and all Company Parties will work diligently to make decisions and execute any agreements or action plans for the Company in as reasonably expeditious manner as reasonably possible to allow Manager to perform the Services. The Company Parties shall have the Designated Executive available either on site or by telephone during all regular business hours and such Designated Executive shall have full and complete authority to bind the Company to decisions regarding the customer accounts in the Specified States. Without limiting the foregoing, the Company Parties shall undertake the following responsibilities to assist the Manager and to allow the Manager to manage the day to day operations of the Company:

(a)shall provide Manager with all information and materials in their possession or subject to their control to enable Manager to provide the Services under this Agreement;

(b)shall perform any acts reasonably necessary to manage the customer accounts in the Specified States, excluding those acts that are to be performed by Manager in connection with the Services, pursuant to and in accordance with the request of Manager;

(c)shall continue to communicate with third parties, including state regulatory commissions, in cooperation with Manager, including responding to their inquiries, requests and correspondence;

(d)shall promptly inform Manager, and provide Manager with copies of, all correspondence and communications relating to the Company from third parties; and

(e)At the request of Manager, they shall cause the Company to timely exercise rights it has under any of the contracts or agreements of the Company with the customers in the Specified States, including, but not limited to, rights, whether in law or equity, with respect to breach, termination, set-off, indemnity, waiver, sub-contracting and assignment and shall execute commitments, agreements, contracts, instruments or agreements as are reasonable for the management of the customer base in the Specified States as requested by the Manager.

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5.Independent Contractor Status of Manager. Manager is an independent contractor in the performance of the Services under this Agreement and shall determine the method, details and means of performing the Services. Without limiting the generality of the foregoing, Manager shall be permitted, in its sole discretion, but in no way shall be required to (i) enter into and perform contracts and agreements in its own name for the furnishing of services, equipment, parts and supplies in connection with the Services, and (ii) recruit and hire and terminate its own employees and independent contractors to provide the Services. Manager shall solely establish the terms and conditions of employment for its employees and shall pay all salaries and other compensation due to such employees.

6.Compensation. As its compensation for the Services, the Company shall pay Manager a fee equal to the gross collections from customer accounts in the Specified States (determined according to GAAP) during the Term (the “Fee”). The Company Parties shall have no obligation to pay or refund to Manager any amount spent or paid by Manager in its performance of this Agreement, including to or on behalf of a Company Party.

7.Expenses. Except as may be otherwise specifically provided herein, the parties hereto shall pay their own legal fees, accounting and other expenses incurred in connection with the negotiation and consummation of the transactions contemplated by this Agreement.

8.Term. The term of this Agreement (the “Term”) shall commence on the Effective Date hereof and shall expire upon the earlier of: (i) one year from the Effective Date; or (ii) the date on which the last state PUC in the Specified States approves the change of control of the customer base to Manager and the telecommunication carrier certifications of the Manager. Upon the termination of this Agreement, neither party shall be further obligated under this Agreement except for the parties’ obligations under the last two sentences of Section 1.3 and their respective indemnification obligations set forth in Section 9. The customer base for each Specified State shall be deemed transferred and all of the Seller Parties right title and interest to such customer accounts shall transfer to the Manager, free and clear of any Encumbrances of the Seller Parties (as that term is defined in the Purchase Agreement) on the applicable date of the order of the applicable state approving the transfer of such customer base from the Company to the Manager and the Manager’s approval of certifications to offer telecommunications services in such Specified States.

9.Indemnification.

(a)Subject to the other terms and conditions contained in this Agreement, the Company Parties will indemnify, defend and hold harmless the Manager and any of its Affiliates from and against any and all damages, liabilities, losses, costs and expenses (including all reasonable attorneys’, fees and costs) (collectively, “Losses”) incurred by the Manager arising our of or related to (i) the Company Parties’ breach of this Agreement, or (ii) the defense or disposition of any action, claim, suit, demand, litigation, arbitration, mediation or other proceeding initiated by a third party by or before any governmental entity or arbitral forum (each, an “Action”), whether civil, administrative, investigative or criminal, out of or related to the Manager’s performance under this Agreement. In the event Manager requests indemnification from the Company Parties with respect to the defense of any Action, the Company Parties shall advance such defense costs as Manager may reasonably request. If the Company Parties do not advance such defense costs, Manager shall have no obligation to cooperate or provide information to the Company Parties with respect to their defense of such claims.

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(b)The Company Parties expressly agree that Manager will have no liability to them or any third party based on the failure of the customers in the Specified Sates to achieve profitability, minimize losses, or based upon Manager’s lawful decision-making with respect to management of the customers in the Specified States under this Agreement. Any claim of either party arising under or relating to this Agreement shall be made only against the other party as a corporation or limited liability company, as the case may be, and any liability relating thereto shall be enforceable only against the corporate or limited liability company assets of the party. No party shall seek to pierce the corporate veil or otherwise seek to impose any liability relating to, or arising from, this Agreement against any parent company, Affiliated company, subsidiary, shareholder, employee, officer or director of the other party.

(c)Notwithstanding anything to the contrary contained in this Section 9 (except for the exception provided for with respect to Manager in 9(a)), the parties shall cooperate with each other in connection with any Action, including keeping each other reasonably informed with respect to the status of any Action and to obtain the benefits of any insurance coverage for third party claims that may be in effect at the time a third party claim is asserted.

10.Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given; (ii) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and confirmation of receipt is obtained promptly after completion of transmission; (iii) on the day after delivery to Federal Express or similar overnight courier or the Express Mail service maintained by the United States Postal Service; or (iv) on the fifth calendar day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid and properly addressed, to the party as follows:

If to the Company Parties: Acceris Communications Corp. c/o Counsel Corporation Scotia Plaza, Suite 3200 40 King Street West Toronto, Ontario M5H 3Y2 Canada Attn: Chief Executive Officer Facsimile: 416-866-3061

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Copy to: Harwell Howard Hyne Gabbert & Manner, P.C. 315 Deaderick Street, Suite 1800 Nashville, TN 37238-1800 Attn: Curtis Capeling Facsimile: 615-251-1059

If to Manager: Acceris Management and Acquisition LLC 60 South Sixth Street, Suite 2535 Minneapolis, MN 55402 Attention: Drew S. Backstrand, Esq. and Elam Baer Facsimile: 612-455-1022

Any party may change its address for the purpose of this Section by giving the other party written notice of its new address in the manner set forth above.

11.Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto relating to the subject matter hereof (the management services agreement with respect to only the customer bases in the Specified States), and all prior agreements, correspondence, discussions and understandings of the parties (whether oral or written) relating to the subject matter hereof are merged herein and superseded hereby, it being the intention of the parties hereto that this Agreement and the instruments and agreements contemplated hereby shall serve as the complete and exclusive statement of the terms of their agreement. The Management Services Agreement dated May 19, 2005 is expressly terminated as of the Effective Date.

12.Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any party (by contract, operation of law, change of control or otherwise) without the prior written consent of the other parties. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

13.Section and Paragraph Headings. The section and paragraph headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

14.Severability. Each provision of this Agreement is intended to be severable. Should any provision of this Agreement or the application thereof be judicially, or by arbitral award, declared to be or become illegal, invalid, unenforceable or void, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties.

15.Governing Law; Venue and Jurisdiction. This Agreement shall be governed by and construed according to the laws of the State of Illinois, without regard to the conflict of law rules of Illinois or any other state. The parties hereto consent to the exclusive venue and jurisdiction of an appropriate federal or state court in Cook County, Illinois for any suit or action arising out of or related to this Agreement. The parties hereto waive any arguments of forum non conveniens in any matter relating to this Agreement.

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16.Parties in Interest—No Third Party Beneficiaries. Nothing in this Agreement is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than parties hereto and their respective successors and permitted assigns. Nothing in this Agreement is intended to relieve or discharge the obligations or liability of any third persons to the Company Parties or Manager. No provision of this Agreement shall give any third parties any right of subrogation or action over or against the Company Parties or Manager.

17.Amendments; Waivers. This Agreement may be amended or modified, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties hereto, or in the case of a waiver, by the party waiving compliance. Any waiver by any party of any condition, or of the breach of any provision, term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall not be deemed to be nor construed as a further or continuing waiver of any such condition, or of the breach of any other provision, term, covenant, representation or warranty of this Agreement.

18.Counterparts. This Agreement may be executed in one or more original or facsimile counterparts, all of which shall be considered but one and the same agreement, and shall become effective when one or more such counterparts have been executed by each of the parties and delivered to the other parties. This Agreement may be executed in facsimile copy with the same binding effect as an original.

19.Interpretation. Except as otherwise provided or if the context otherwise requires, whenever used in this Agreement, (a) any noun or pronoun shall be deemed to include the plural and the singular, (b) the terms “include” and “including” shall be deemed to be followed by the phrase “without limitation,” (c) unless the context otherwise requires, all references to Sections refer to Sections of this Agreement, (d) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision, (e) any definition of or reference to any Law, agreement, instrument or other document herein will be construed as referring to such Law, agreement, instrument or other document as from time to time amended, supplemented or otherwise modified, (f) any definition of or reference to any statute will be construed as referring also to any rules and regulations promulgated thereunder, and (g) any use of “Dollars” or “$” shall refer to United States dollars and any component thereof. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

20.WAIVER OF JURY TRIAL. COMPANY PARTIES AND THE MANAGER EACH ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT MAY ARISE BETWEEN THE PARTIES, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF WHICH THIS AGREEMENT ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY JURY. ACCORDINGLY, THE PARTIES BY THEIR ACCEPTANCE OF THIS AGREEMENT WAIVE ANY RIGHT TO TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS AGREEMENT OR TO ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN CONNECTION HEREWITH.

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21.  Guaranty. Guarantor hereby guarantees to the Company Parties the full and prompt performance and payment of the Manager’s obligations under Section 3.1 (b) of this Agreement (the “Guaranteed Obligations”). Any act of the Company Parties consisting of a waiver of any of the terms, covenants or conditions of the Guaranteed Obligations, or the giving of any consent to any matter or thing relating to the Guaranteed Obligations, or the granting of any indulgences or extensions of time to the Manager or Guarantor, may be done without notice to Guarantor and without releasing the obligations of Guarantor hereunder. The obligations of Guarantor hereunder shall not be released by any of the Company Parties’ receipt, application or release of any security given for the payment, performance and observance of any of the Guaranteed Obligations. Similarly, the obligations of Guarantor hereunder shall not be released by any modification of any of the terms of the Guaranteed Obligations made by the Company Parties and the Manager, but in the case of any such modification, the liability of Guarantor shall be deemed modified in accordance with the terms of any such modification. The liability of Guarantor hereunder shall in no way be affected by (a) the release or discharge of the Manager in any creditors’ receivership, bankruptcy or other proceedings, (b) the impairment, limitation or modification of the liability of the Manager or the estate of the Manager in bankruptcy, or of any remedy for the enforcement of any of the Guaranteed Obligations resulting from the operation of any present or future provision of the Federal bankruptcy law or any other statute or the decision of any court, (c) the rejection or disaffirmance of any instrument, document or agreement evidencing any of the Guaranteed Obligations in any such proceedings, (d) the assignment or transfer of any of the Guaranteed Obligations by the Company Parties, (e) the cessation from any cause whatsoever of the liability of the Manager with respect to the Guaranteed Obligations. This is a guaranty of payment and performance and not of collection. The liability of Guarantor hereunder shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against the Manager or any other person, nor against any collateral available to the Company Parties. Guarantor hereby waives any right to require that an action be brought against Manager or any other person or to require that resort be had to any collateral in favor of the Company Parties prior to discharging its obligations hereunder.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

MANAGER:

ACCERIS MANAGEMENT AND

ACQUISITION LLC

Name:Elam Baer

Title: Chief Executive Officer

COMPANY PARTIES:

COUNSEL CORPORATION

Name: _________________________________________________________________

Title: __________________________________________________________________

C2 GLOBAL TECHNOLOGIES INC. F/K/A

ACCERIS COMMUNICATIONS INC.

Name: _________________________________________________________________

Title: __________________________________________________________________

ACCERIS COMMUNICATIONS CORP.

Name: _________________________________________________________________

Title: __________________________________________________________________

GUARANTOR:

NORTH CENTRAL EQUITY LLC

Name:Elam Baer

Title: Chief Executive Officer

(SIGNATURE PAGE TO MANAGEMENT SERVICES AGREEMENT

WITH RESPECT TO SPECIFIED STATE CUSTOMER BASES)]

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EXHIBIT A

SPECIFIED STATE CUSTOMER BASES MANAGED UNDER MANAGEMENT SERVICES AGREEMENT

1. CONNETICUT

2. FLORIDA

3. HAWAII

4. LOUISIANA

5. NEVADA

6. NEW YORK

(with respect solely to the filing and effectiveness of the Manager’s Tariff at the NY PUC)

7. NEW JERSEY

8. PENNSYLVANIA

9. SOUTH CAROLINA

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EX-10.6

Exhibit 10.6

C2 GLOBAL TECHNOLOGIES, INC. AND CERTAIN OF ITS SUBSIDIARIES

AMENDED AND RESTATED MASTER SECURITY AGREEMENT

To: Laurus Master Fund, Ltd. c/o M&C Corporate Services Limited P.O. Box 309 GT Ugland House South Church Street George Town Grand Cayman, Cayman Islands

Dated as of October 14, 2004 and amended and restated as of September 30, 2005, as described in paragraph 1 below

To Whom It May Concern:

1.Reference is made to that certain Master Security Agreement, dated October 14, 2004, by and among C2 Global Technologies Inc. (formally known as Acceris Communications Inc.), a Florida corporation (the “Company”), certain subsidiaries of the Company and Laurus Master Fund, Ltd., a Cayman Islands company (as amended, modified or supplemented prior to the date hereof, the “Existing Master Security Agreement”). Each of the Company, the other Assignors (as defined below) and Laurus hereby agree that this Master Security Agreement shall amend, restate, supersede and replace in all respects the Existing Master Security Agreement. The Company, each other Assignor and Laurus hereby agree that (i) this Master Security Agreement shall be a “Related Agreement” under, and as defined in, and for all purposes of, the Securities Purchase Agreement referred to below and (ii) that this Master Security Agreement shall be considered the “Master Security Agreement” under, as defined in, and for all purposes of, the Securities Purchase Agreement and the Related Agreements.

2.To secure the payment of all Obligations (as hereafter defined), the Company, each of the other undersigned parties (other than Laurus) and each other entity that is required to enter into this Master Security Agreement (each an “Assignor” and, collectively, the “Assignors”) hereby assigns and grants to Laurus a continuing security interest in all of the following property now owned or at any time hereafter acquired by such Assignor, or in which such Assignor now has or at any time in the future may acquire any right, title or interest (the “Collateral”): all cash, cash equivalents, accounts, accounts receivable, deposit accounts (including, without limitation, the deposit account that holds the Collateral Deposit maintained at North Fork Bank (Account Name: Laurus Master Fund-COBT Cash Collateral, Account Number: 270-405-5827) referred to in that certain Cash Collateral Deposit Agreement, dated September 30, 2005, by and between the Company and Laurus), inventory, equipment, goods, fixtures, documents, instruments (including, without limitation, promissory notes), contract rights, general intangibles (including, without limitation, payment intangibles and an absolute right to license on terms no less favorable than those current in effect among such Assignor’s affiliates), chattel paper, supporting obligations, investment property (including, without limitation, all partnership interests, limited liability company membership interests and all other equity interests owned by any Assignor), letter-of-credit rights, trademarks, trademark applications, tradestyles, patents, patent applications, copyrights, copyright applications and other intellectual property in which such Assignor now has or hereafter may acquire any right, title or interest, all proceeds and products thereof (including, without limitation, proceeds of insurance) and all additions, accessions and substitutions thereto or therefor. In the event any Assignor wishes to finance the acquisition in the ordinary course of business of any hereafter acquired equipment and has obtained a written commitment from an unrelated third party financing source to finance such equipment, Laurus shall release its security interest on such hereafter acquired equipment so financed by such third party financing source. Except as otherwise defined herein, all capitalized terms used herein shall have the meanings provided such terms in the Securities Purchase Agreement referred to below.

3.The term “Obligations” as used herein shall mean and include all debts, liabilities and obligations owing by each Assignor to Laurus arising under, out of, or in connection with: (i) that certain Securities Purchase Agreement dated as of the date hereof by and between the Company and Laurus (the “Securities Purchase Agreement”) and (ii) the Related Agreements referred to in the Securities Purchase Agreement (as each of the documents referred to in the immediately preceding clauses (i) and (ii) may be amended, modified, restated or supplemented from time to time, collectively, the “Documents”), and in connection with any documents, instruments or agreements relating to or executed in connection with the Documents or any documents, instruments or agreements referred to therein or otherwise, and in connection with any other indebtedness, obligations or liabilities of each such Assignor to Laurus, whether now existing or hereafter arising, direct or indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under, pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise, including, without limitation, obligations and liabilities of each Assignor for post-petition interest, fees, costs and charges that accrue after the commencement of any case by or against such Assignor under any bankruptcy, insolvency, reorganization or like proceeding (collectively, the “Debtor Relief Laws”) in each case, irrespective of the genuineness, validity, regularity or enforceability of such Obligations, or of any instrument evidencing any of the Obligations or of any collateral therefor or of the existence or extent of such collateral, and irrespective of the allowability, allowance or disallowance of any or all of the Obligations in any case commenced by or against any Assignor under any Debtor Relief Law.

4.Each Assignor hereby jointly and severally represents, warrants and covenants to Laurus that:

(a)it is a corporation, partnership or limited liability company, as the case may be, validly existing, in good standing and formed under the respective laws of its jurisdiction of formation set forth on Schedule A, and each Assignor will provide Laurus thirty (30) days’ prior written notice of any change in any of its respective jurisdiction of formation;

2

(b)its legal name is as set forth in its Certificate of Incorporation or other organizational document (as applicable) as amended through the date hereof and as set forth on Schedule A, and it will provide Laurus thirty (30) days’ prior written notice of any change in its legal name;

(c)its organizational identification number (if applicable) is as set forth on Schedule A hereto, and it will provide Laurus thirty (30) days’ prior written notice of any change in its organizational identification number;

(d)it is the lawful owner of its Collateral and it has the sole right to grant a security interest therein and will defend the Collateral against all claims and demands of all persons and entities;

(e)it will keep its Collateral free and clear of all attachments, levies, taxes, liens, security interests and encumbrances of every kind and nature (“Encumbrances”), except (i) Encumbrances securing the Obligations, (ii) Encumbrances securing the indebtedness of such Assignor owing to any of Counsel Corporation, an Ontario corporation (“Counsel”), Counsel Corporation (US), a Delaware corporation (“Counsel US”), or Counsel Communications, LLC, a Delaware limited liability company (“Counsel Communications”), in each case solely to the extent that such indebtedness is included in the term “Junior Liabilities” under and as defined in that certain Subordination Agreement, dated as of September 30, 2005, by and among Counsel, Counsel US, Counsel Communications and Laurus, as such agreement is amended, modified or supplemented from time to tiem and (iii) Encumbrances securing indebtedness of each such Assignor not to exceed $50,000 in the aggregate for all such Assignors so long as all such Encumbrances are removed or otherwise released to Laurus’ satisfaction within ten (10) days of the creation thereof;

(f)it will, at its and the other Assignors’ joint and several cost and expense keep the Collateral in good state of repair (ordinary wear and tear excepted) and will not waste or destroy the same or any part thereof other than ordinary course discarding of items no longer used or useful in its or such other Assignors’ business;

(g)it will not, without Laurus’ prior written consent, sell, exchange, lease or otherwise dispose of any Collateral, whether by sale, lease or otherwise, except for the sale of inventory in the ordinary course of business and for the disposition or transfer in the ordinary course of business during any fiscal year of obsolete and worn-out equipment or equipment no longer necessary for its ongoing needs, having an aggregate fair market value of not more than $25,000 and only to the extent that:

(i)the proceeds of each such disposition are used to acquire replacement Collateral which is subject to Laurus’ first priority perfected security interest, or are used to repay the Obligations or to pay general corporate expenses; or

3

(ii)following the occurrence of an Event of Default which continues to exist the proceeds of which are remitted to Laurus to be held as cash collateral for the Obligations;

(h)it will insure or cause the Collateral to be insured in Laurus’ name (as an additional insured and loss payee) against loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as Laurus shall specify in amounts and under policies by insurers acceptable to Laurus and all premiums thereon shall be paid by such Assignor and the policies delivered to Laurus. If any such Assignor fails to do so, Laurus may procure such insurance and the cost thereof shall be promptly reimbursed by the Assignors, jointly and severally, and shall constitute Obligations;

(i)it will at all reasonable times allow Laurus or Laurus’ representatives free access to and the right of inspection of the Collateral;

(j)such Assignor (jointly and severally with each other Assignor) hereby indemnifies and saves Laurus harmless from all loss, costs, damage, liability and/or expense, including reasonable attorneys’ fees, that Laurus may sustain or incur to enforce payment, performance or fulfillment of any of the Obligations and/or in the enforcement of this Master Security Agreement or in the prosecution or defense of any action or proceeding either against Laurus or any Assignor concerning any matter growing out of or in connection with this Master Security Agreement, and/or any of the Obligations and/or any of the Collateral except to the extent caused by Laurus’ own gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and nonappealable decision); and

(k)all trademarks, trademark applications, patents, patent applications, copyrights and copyright applications in which such Assignor has an interest is set forth on Schedule B to this Master Security Agreement, together with the registration or application number therefore, the registration or application date thereof and the country in which such registration or application has been applied for.

5.The occurrence of any of the following events or conditions shall constitute an “Event of Default” under this Master Security Agreement:

(a)any covenant or any other term or condition of this Master Security Agreement is breached in any material respect and such breach, to the extent subject to cure, shall continue without remedy for a period of fifteen (15) days after the occurrence thereof;

4

(b)any representation or warranty, or statement made or furnished to Laurus under this Master Security Agreement by any Assignor or on any Assignor’s behalf should prove to any time be false or misleading in any material respect on the date as of which made or deemed made;

(c)the loss, theft, substantial damage, destruction, sale or encumbrance to or of any of the Collateral or the making of any levy, seizure or attachment thereof or thereon except to the extent:

(i)such loss is covered by insurance proceeds which are used to replace the item or repay Laurus; or

(ii)said levy, seizure or attachment does not secure indebtedness in excess of $100,000 in the aggregate for all Assignors and such levy, seizure or attachment has been removed or otherwise released within ten (10) days of the creation or the assertion thereof;

(d)an Event of Default shall have occurred under and as defined in any Document.

6.Upon the occurrence of any Event of Default and at any time thereafter, Laurus may declare all Obligations immediately due and payable and Laurus shall have the remedies of a secured party provided in the Uniform Commercial Code as in effect in the State of New York, this Agreement and other applicable law. Upon the occurrence of any Event of Default and at any time thereafter, Laurus will have the right to take possession of the Collateral and to maintain such possession on any Assignor’s premises or to remove the Collateral or any part thereof to such other premises as Laurus may desire. Upon Laurus’ request, each Assignor shall assemble or cause the Collateral to be assembled and make it available to Laurus at a place designated by Laurus. If any notification of intended disposition of any Collateral is required by law, such notification, if mailed, shall be deemed properly and reasonably given if mailed at least ten (10) days before such disposition, postage prepaid, addressed to the applicable Assignor either at such Assignor’s address shown herein or at any address appearing on Laurus’ records for such Assignor. Any proceeds of any disposition of any of the Collateral shall be applied by Laurus to the payment of all expenses in connection with the sale of the Collateral, including reasonable attorneys’ fees and other legal expenses and disbursements and the reasonable expenses of retaking, holding, preparing for sale, selling, and the like, and any balance of such proceeds may be applied by Laurus toward the payment of the Obligations in such order of application as Laurus may elect, and each Assignor shall be liable for any deficiency. For the avoidance of doubt, following the occurrence and during the continuance of an Event of Default, Laurus shall have the immediate right to withdraw any and all monies contained in any deposit account in the name of any Assignor and controlled by Laurus and apply same to the repayment of the Obligations (in such order of application as Laurus may elect).

7.If any Assignor defaults in the performance or fulfillment of any of the terms, conditions, promises, covenants, provisions or warranties on such Assignor’s part to be performed or fulfilled under or pursuant to this Master Security Agreement, Laurus may, at its option without waiving its right to enforce this Master Security Agreement according to its terms, immediately or at any time thereafter and without notice to any Assignor, perform or fulfill the same or cause the performance or fulfillment of the same for each Assignor’s joint and several account and at each Assignor’s joint and several cost and expense, and the cost and expense thereof (including reasonable attorneys’ fees) shall be added to the Obligations and shall be payable on demand with interest thereon at the highest rate permitted by law, or, at Laurus’ option, debited by Laurus from any other deposit accounts in the name of any Assignor and controlled by Laurus.

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8.Each Assignor appoints Laurus, any of Laurus’ officers, employees or any other person or entity whom Laurus may designate as such Assignor’s attorney, with power to execute such documents in each such Assignor’s behalf and to supply any omitted information and correct patent errors in any documents executed by any Assignor or on any Assignor’s behalf; to file financing statements against such Assignor covering the Collateral (and, in connection with the filing of any such financing statements, describe the Collateral as “all assets and all personal property, whether now owned and/or hereafter acquired” (or any substantially similar variation thereof)); to sign such Assignor’s name on public records; and to do all other things Laurus deem necessary to carry out this Master Security Agreement. Each Assignor hereby ratifies and approves all acts of the attorney and neither Laurus nor the attorney will be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact or law other than gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision). This power being coupled with an interest, is irrevocable so long as any Obligations remains unpaid.

9.No delay or failure on Laurus’ part in exercising any right, privilege or option hereunder shall operate as a waiver of such or of any other right, privilege, remedy or option, and no waiver whatever shall be valid unless in writing, signed by Laurus and then only to the extent therein set forth, and no waiver by Laurus of any default shall operate as a waiver of any other default or of the same default on a future occasion. Laurus’ books and records containing entries with respect to the Obligations shall be admissible in evidence in any action or proceeding, shall be binding upon each Assignor for the purpose of establishing the items therein set forth and shall constitute prima facie proof thereof. Laurus shall have the right to enforce any one or more of the remedies available to Laurus, successively, alternately or concurrently. Each Assignor agrees to join with Laurus in executing such documents or other instruments to the extent required by the Uniform Commercial Code in form satisfactory to Laurus and in executing such other documents or instruments as may be required or deemed necessary by Laurus for purposes of affecting or continuing Laurus’ security interest in the Collateral.

10.THIS MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. All of the rights, remedies, options, privileges and elections given to Laurus hereunder shall inure to the benefit of Laurus’ successors and assigns. The term “Laurus” as herein used shall include Laurus, any parent of Laurus’, any of Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now existing or hereafter created or acquired, and all of the terms, conditions, promises, covenants, provisions and warranties of this Agreement shall inure to the benefit of each of the foregoing, and shall bind the representatives, successors and assigns of each Assignor.

6

11.Each Assignor hereby consents and agrees that the state of federal courts located in the County of New York, State of New York shall have exclusive jurisdiction to hear and determine any claims or disputes between Assignor, on the one hand, and Laurus, on the other hand, pertaining to this Master Security Agreement or to any matter arising out of or related to this Master Security Agreement, provided, that Laurus and each Assignor acknowledges that any appeals from those courts may have to be heard by a court located outside of the County of New York, State of New York, and further provided, that nothing in this Master Security Agreement shall be deemed or operate to preclude Laurus from bringing suit or taking other legal action in any other jurisdiction to collect, the Obligations, to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Laurus. Each Assignor expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each Assignor hereby waives any objection which it may have based upon lack of personal jurisdiction, improper venue or forumnonconveniens. Each Assignor hereby waives personal service of the summons, complaint and other process issues in any such action or suit and agrees that service of such summons, complaint and other process may be made by registered or certified mail addressed to such assignor at the address set forth on the signature lines hereto and that service so made shall be deemed completed upon the earlier of such Assignor’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

The parties desire that their disputes be resolved by a judge applying such applicable laws. Therefore, to achieve the best combination of the benefits of the judicial system and of arbitration, the parties hereto waive all rights to trial by jury in any action, suite, or proceeding brought to resolve any dispute, whether arising in contract, tort, or otherwise between Laurus, and/or any Assignor arising out of, connected with, related or incidental to the relationship established between them in connection with this Master Security Agreement or the transactions related hereto.

12.It is understood and agreed that any person or entity that desires to become an Assignor hereunder, or is required to execute a counterpart of this Master Security Agreement after the date hereof pursuant to the requirements of any Document, shall become an Assignor hereunder by (x) executing a Joinder Agreement in form and substance satisfactory to Laurus, (y) delivering supplements to such exhibits and annexes to such Documents as Laurus shall reasonably request and (z) taking all actions as specified in this Master Security Agreement as would have been taken by such Assignor had it been an original party to this Master Security Agreement, in each case with all documents required above to be delivered to Laurus and with all documents and actions required above to be taken to the reasonable satisfaction of Laurus.

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13.All notices from Laurus to any Assignor shall be sufficiently given if mailed or delivered to such Assignor’s address set forth below.

Very truly yours,
C2 GLOBAL TECHNOLOGIES INC.
By:
	Name:
	Title:
	Address:

C2 COMMUNICATIONS TECHNOLOGIES, INC.
By:
	Name:
	Title:
	Address:

WEBTOTEL INC.
By:
	Name:
	Title:
	Address:

CPT-1 HOLDINGS, INC.
By:
	Name:
	Title:
	Address:

ACCERIS COMMUNICATIONS CORP.
By:
	Name:
	Title:
	Address:

MIBRIDGE, INC.
By:
	Name:
	Title:

ACKNOWLEDGED AND AGREED:
LAURUS MASTER FUND, LTD.
By:
	Name:
	Title

8

EX-10.7

Exhibit 10.7

C2 GLOBAL TECHNOLOGIES INC.

8813 Ridge Road

Bethesda, Maryland 20817

September 30, 2005

Laurus Master Fund, Ltd.

c/o Laurus Capital Management, LLC

825 Third Avenue

New York, New York 10022

Re: Cash Collateral Deposit Agreement

Gentlemen:

Reference is made to the Amended and Restated Master Security Agreement dated as of October 14, 2004 and amended and restated as of the date hereof, as the same may be further amended, modified, supplemented and restated from time to time (the “Security Agreement”) by and among C2 Global Technologies, Inc. (f/k/a Acceris Communications, Inc.), a Florida corporation (“C2 Global”), C2 Communications Technologies, Inc., a Delaware corporation (“C2 Communications”), WebtoTel Inc., a Delaware corporation (“WebtoTel”), CPT-1 Holdings, Inc., a Delaware corporation (“CPT-1”), Mibridge, Inc., a Utah corproration (“Mibridge”), Acceris Communications Corp., a Delaware corporation (“Acceris”) (each a “Company” and collectively the “Companies”) and Laurus Master Fund, Ltd. (“Laurus”). All capitalized terms used herein which are not defined shall have the meanings given to them in the Security Agreement.

In consideration of Laurus’ agreement to release its security interest in certain assets of one or more of the Companies, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, as collateral security for the Obligations, C2 Global (the parent company of each of C2 Communications, WebtoTel, CPT-1, Mibridge and Acceris), hereby deposits with Laurus and grants to Laurus a security interest in the sum of One Million Eight Hundred Thousand Dollars ($1,800,000), together with any and all interest accruing and accrued thereon, to be held by Laurus for the uses and purposes herein stated (this deposit to be hereinafter referred to as the “Collateral Deposit”).

Upon the occurrence and during the continuance of any Event of Default or if a notice of any lien, levy or assessment is filed of record with respect to any assets of any Company by the United States or any department, agency or instrumentality thereof, or if any taxes or debts owing at any time or times hereafter to any one of them becomes a lien or encumbrance upon any assets of any Company in Laurus’ possession or otherwise, Laurus and its successors and assigns may, without demand of performance or advertisement or notice of any kind to or upon any Company (each of which demands, advertisements and/or notices are hereby expressly waived), forthwith or at any time or times thereafter, appropriate and apply all or any part of the Collateral Deposit to the payment of the Obligations.

In addition to Laurus’ other rights hereunder, Laurus is hereby authorized to apply the proceeds of the Collateral Deposit to regularly scheduled amortization payments owing by the Companies to Laurus under the terms of the Secured Convertible Term Note dated October 14, 2004 made by C2 Global in favor of Laurus, as amended, modified, supplemented and restated from time to time.

When all Obligations have been indefeasibly paid in full, the Documents have been irrevocably terminated and the Companies have executed full releases in favor of Laurus in form and substance satisfactory to Laurus, any portion of the Collateral Deposit remaining on deposit hereunder shall be returned to C2 Global.

This letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed by and construed in accordance with the laws of the State of New York.

	Very truly yours,
	C2 GLOBAL TECHNOLOGIES INC.
	By:
		Name:
		Title:
ACCEPTED:
LAURUS MASTER FUND, LTD.
By: _______________________________________
Name:
Title:

2

EX-31.1

Exhibit 31.1

OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Allan C. Silber, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of C2 Global Technologies Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2005

By:	/s/ Allan C. Silber
	Allan C. Silber
	Chief Executive Officer and Chairman (Principal Executive Officer)

EX-31.2

Exhibit 31.2

OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary M. Clifford, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of C2 Global Technologies Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 10, 2005

By:	/s/ Gary M. Clifford
	Gary M. Clifford
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

C2 GLOBAL TECHNOLOGIES INC.

OFFICER’S CERTIFICATION

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. 1350)

The undersigned Allan C. Silber, duly appointed and incumbent officer of C2 Global Technologies Inc., a Florida corporation (the “Corporation”), in connection with the Corporation’s Quarterly Report on Form 10-Q for the three month period ended September 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), does hereby represent, warrant and certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that, to the best of his knowledge:

1.	The Report is in full compliance with reporting requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

November 10, 2005

/s/ Allan C. Silber

Allan C. Silber

Chief Executive Officer and Chairman

EX-32.2

Exhibit 32.2

C2 GLOBAL TECHNOLOGIES INC.

OFFICER’S CERTIFICATION

PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. 1350)

The undersigned Gary M. Clifford, duly appointed and incumbent officer of C2 Global Technologies Inc., a Florida corporation (the “Corporation”), in connection with the Corporation’s Quarterly Report on Form 10-Q for the three month period ended September 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), does hereby represent, warrant and certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended, that, to the best of his knowledge:

1.	The Report is in full compliance with reporting requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

November 10, 2005

/s/ Gary M. Clifford

Gary M. Clifford

Chief Financial Officer