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Use these links to rapidly review the document<BR>
<A HREF="#bg77601_table_of_contents">  Table of Contents</A> <BR>
<A HREF="#index">  INTELEPEER, INC. INDEX TO FINANCIAL STATEMENTS</A><BR></font>
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</FONT> <FONT SIZE=1><B>As filed with the Securities and Exchange Commission on May&nbsp;10, 2011  </B></FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1><B> Registration No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=1><B> <div style="width:100%;border-top:solid #000000 3.0pt;padding:0in 0in 0in 0in;font-size:3.0pt;"></div>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=1><B>WASHINGTON, DC 20549  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>FORM S-1<BR>  </B></FONT><FONT SIZE=1><B>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF&nbsp;1933  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>IntelePeer,&nbsp;Inc.<BR>  </B></FONT><FONT SIZE=1>(Exact Name of Registrant as Specified in Its Charter) </FONT></P>

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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Delaware</B></FONT><FONT SIZE=1><BR>
(State or Other Jurisdiction of Incorporation or Organization)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B> 7372</B></FONT><FONT SIZE=1><BR>
(Primary Standard Industrial<BR>
Classification Code Number)</FONT></TD>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B> 68-0556257</B></FONT><FONT SIZE=1><BR>
(I.R.S. Employer<BR>
Identification Number)</FONT></TD>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2855 Campus Drive, Suite&nbsp;200<BR>
San Mateo, CA 94403<BR>
(650)&nbsp;525-9200<BR>  </B></FONT><FONT SIZE=1>(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Frank Fawzi<BR>
Chairman, President and Chief Executive Officer<BR>
IntelePeer,&nbsp;Inc.<BR>
2855 Campus Drive, Suite&nbsp;200<BR>
San Mateo, CA 94403<BR>
(650)&nbsp;525-9200<BR>  </B></FONT><FONT SIZE=1>(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) </FONT></P>

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<TD COLSPAN=3 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Copies to:</B></FONT></TD>
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<TD ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=1><B> Peter M. Astiz, Esq.<BR>
Bradley J. Gersich, Esq.<BR>
DLA Piper&nbsp;LLP (US)<BR>
2000 University Avenue<BR>
East Palo Alto, CA 94303<BR>
(650)&nbsp;833-2000</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B><BR>
Christopher J. Austin, Esq.<BR>
Anthony J. McCusker, Esq.<BR>
Bradley C. Weber, Esq.<BR>
Goodwin Procter&nbsp;LLP<BR>
135 Commonwealth Drive<BR>
Menlo Park, CA 94025<BR>
(650)&nbsp;752-3100</B></FONT></TD>
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<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=1><B>Approximate date of commencement of proposed sale to the public:</B></FONT><FONT SIZE=1> As soon as practicable after this registration statement becomes
effective. </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the
following box.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this form is filed to register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this form is a post-effective amendment filed pursuant to Rule&nbsp;462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>


<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this form is a post-effective amendment filed pursuant to Rule&nbsp;462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule&nbsp;12b-2 of the Exchange Act. (Check one): </FONT></P>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Large accelerated filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Accelerated filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Non-accelerated filer&nbsp;[<FONT FACE="WINGDINGS">&#253;</FONT>]<BR></FONT> <FONT SIZE=1>(Do not check if a smaller reporting company)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>Smaller reporting company<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>CALCULATION OF REGISTRATION FEE  </B></FONT></P>

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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:4pt;text-indent:-4pt;"><FONT SIZE=1> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
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<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Title of Each Class of Security To be Registered</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Proposed Maximum<BR>
Aggregate Offering Price(1)</B></FONT><BR></TH>
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<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Amount of<BR>
Registration Fee(2)</B></FONT><BR></TH>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:4pt;text-indent:-4pt;"><FONT SIZE=1><B> </B></FONT><FONT SIZE=1>Common Stock, par value $0.0001 per share</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$100,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$11,610</FONT></TD>
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<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Estimated
solely for the purpose of calculating the registration fee pursuant to Rule&nbsp;457(o) under the Securities Act.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Calculated
pursuant to Rule&nbsp;457(o) based on an estimate of the proposed maximum aggregate offering price, including the offering price of shares that
the underwriters have the option to purchase to cover over-allotments, if any. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=1><B>The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall
file&nbsp;a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act or until the
registration statement shall become effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), shall determine.</B></FONT></P>

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<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

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</FONT> <FONT COLOR="#FF4040" SIZE=2>The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell
these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any jurisdiction where such offer or sale is not permitted. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>


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 </B></FONT><FONT COLOR="#FF4040" SIZE=2><B>SUBJECT TO COMPLETION, DATED MAY 10, 2011</B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Preliminary Prospectus  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares  </B></FONT></P>

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<IMG SRC="g551521.jpg" ALT="GRAPHIC" WIDTH="327" HEIGHT="64">
  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><I>

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<BR>  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=3><B><I>Common Stock  </I></B></FONT></P>

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<BR>  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This is the initial public offering of shares of common stock of IntelePeer,&nbsp;Inc. Prior to this offering, there has been no public market
for our common stock. We are
offering&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares and the selling
stockholders identified in this prospectus are offering&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock. We will not receive any
proceeds from the sale of shares to be offered by the selling stockholders. The initial public offering price of our common stock is expected to be between $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to apply for listing of our common stock on the New York Stock Exchange or Nasdaq Global Market under the symbol "PEER." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Investing in our common stock involves a high degree of risk. Please read "Risk Factors" beginning on page&nbsp;10.</I></B></FONT></P>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Per Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Initial public offering price</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Underwriting discounts and commissions</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds to IntelePeer, before expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds to selling stockholders, before expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters have an option to purchase a maximum
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of common
stock from us and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares
of common stock from the selling
stockholders identified in this prospectus at the public offering price, less underwriting discounts and commissions, to cover over-allotments of shares, if any. The underwriters can
exercise this option at any time within 30&nbsp;days from the date of this prospectus. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters expect to deliver the shares of common stock to purchasers on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011. </FONT></P>
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<TD style="font-family:times;"><FONT SIZE=5><B>J.P.&nbsp;Morgan</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>Deutsche&nbsp;Bank&nbsp;Securities</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=5><B>Barclays&nbsp;Capital</B></FONT></TD>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>RBC Capital Markets</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>William Blair&nbsp;&amp; Company<BR> </B></FONT></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2011 </FONT></P>

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<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

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NAME="BG77601A_main_toc"></A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
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<BR></FONT><FONT SIZE=2><B>  Table of Contents    <BR>    </B></FONT></P>

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<A NAME="BG77601_TOC"></A> </FONT></P>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Page </B></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ca77601_prospectus_summary"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prospectus Summary</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ca77601_prospectus_summary"><FONT SIZE=2>1</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#da77601_risk_factors"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk Factors</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#da77601_risk_factors"><FONT SIZE=2>10</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#de77601_forward-looking_statements"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forward-Looking Statements</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#de77601_forward-looking_statements"><FONT SIZE=2>30</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#de77601_use_of_proceeds"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Use of Proceeds</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#de77601_use_of_proceeds"><FONT SIZE=2>31</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#de77601_dividend_policy"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dividend Policy</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#de77601_dividend_policy"><FONT SIZE=2>31</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dg77601_capitalization"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capitalization</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dg77601_capitalization"><FONT SIZE=2>32</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dg77601_dilution"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dilution</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dg77601_dilution"><FONT SIZE=2>34</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#di77601_selected_financial_data"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selected Financial Data</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#di77601_selected_financial_data"><FONT SIZE=2>36</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dk77601_management_s_discussion_and_an__man03466"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of
Operations</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dk77601_management_s_discussion_and_an__man03466"><FONT SIZE=2>38</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dq77601_business"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Business</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dq77601_business"><FONT SIZE=2>64</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#du77601_regulation"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Regulation</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#du77601_regulation"><FONT SIZE=2>82</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dw77601_management"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Management</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dw77601_management"><FONT SIZE=2>90</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dy77601_executive_compensation"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Executive Compensation</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dy77601_executive_compensation"><FONT SIZE=2>95</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ee77601_certain_relationships_and_related_party_transactions"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Certain Relationships and Related Party Transactions</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ee77601_certain_relationships_and_related_party_transactions"><FONT SIZE=2>118</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ee77601_principal_and_selling_stockholders"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Principal and Selling Stockholders</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ee77601_principal_and_selling_stockholders"><FONT SIZE=2>121</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#eg77601_description_of_capital_stock"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Description of Capital Stock</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#eg77601_description_of_capital_stock"><FONT SIZE=2>124</FONT></A></TD>
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<TD VALIGN="TOP" style="font-family:times;"><A HREF="#eg77601_shares_eligible_for_future_sale"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares Eligible for Future Sale</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#eg77601_shares_eligible_for_future_sale"><FONT SIZE=2>130</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ei77601_material_u.s._federal_income_a__mat03487"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Material U.S. Federal Income and Estate Tax Consequences for Non-U.S. Holders of
Common Stock</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ei77601_material_u.s._federal_income_a__mat03487"><FONT SIZE=2>132</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ek77601_underwriting"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Underwriting</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ek77601_underwriting"><FONT SIZE=2>136</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ek77601_legal_matters"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Legal Matters</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ek77601_legal_matters"><FONT SIZE=2>141</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ek77601_experts"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Experts</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ek77601_experts"><FONT SIZE=2>141</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ek77601_where_you_can_find_more_information"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Where You Can Find More Information</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ek77601_where_you_can_find_more_information"><FONT SIZE=2>141</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#index"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Index to Financial Statements</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#index"><FONT SIZE=2>F-1</FONT></A></TD>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. Neither we, the
selling stockholders, nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing
prospectus filed with the Securities and Exchange Commission. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where
offers and sales are permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
Our business, financial condition, results of operations, and prospects may have changed since that date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2011, U.S. federal securities laws may require all dealers that effect transactions in our common stock, whether or not participating in this offering, to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>i</FONT></P>

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<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ca77601_prospectus_summary"> </A>
<A NAME="toc_ca77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  PROSPECTUS SUMMARY    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This prospectus summary highlights information contained elsewhere in this prospectus. It does not contain all
of the information that may be important to your investment decision. Before making an investment decision, you should carefully read and consider this entire prospectus, including our financial
statements and the related notes included elsewhere in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Unless otherwise indicated, the terms "IntelePeer," "we," "us" and "our" refer to IntelePeer,&nbsp;Inc. and its subsidiary.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Business Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading provider of on-demand, cloud-based communications services to service providers and enterprises. Our
customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal
communications services, including voice,
unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to existing alternatives. Our CloudWorx CaaS
Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal, IP-based solutions. Our service provider
customers include wireless and wireline carriers, as well as cable and voice over IP, or VoIP, providers. Our enterprise customers include businesses seeking integrated multimodal communications
solutions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
global telecommunications industry is undergoing a shift to next-generation IP-based communication technologies from legacy telephone networks. This transition is being driven by the
widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models, such as Software-as-a-Service, or SaaS. We believe
these trends, along with the inability of legacy infrastructures to support user demand for next-generation multimodal communications services, have created an opportunity and a need for a
flexible and high-quality cloud-based communications platform. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
on-demand CloudWorx CaaS Platform is fast to implement, easy to administer through our self-service web-based CloudCentral Portal and highly
scalable. It is based on a sophisticated and integrated multi-layer approach, which includes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our software-based Media Peering Grid service, providing any-to-any connection capabilities and
allowing service providers and enterprises to cost-effectively interconnect and transport communications traffic, at a rate of more than 20&nbsp;billion minutes annually based on our
traffic in the first quarter of 2011;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our SuperRegistry directory, currently containing more than 400&nbsp;million telephone numbers and end-point identifying
addresses for wireless, wireline and other communications devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our AppWorx open and secure communications application development environment, which allows our customers and partners to
build and offer a growing set of multimodal communications applications, which they can use to generate additional revenue or enhanced productivity. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>These
three layers are fully integrated, allowing simplified delivery of enhanced voice and rich-media services connecting through the industry-standard Session Initiation
Protocol, or SIP, to IP devices and enabling connectivity to traditional non-IP communication devices, such as legacy telephones. Our software-based platform scales easily without
requiring significant additional capital expenditures to create and implement new services for new and existing customers and provides significant benefits versus traditional neutral and direct
interconnection arrangements. Our CloudWorx CaaS Platform is used by service provider customers, such as Sprint Nextel Corp. and Qwest Communications, and </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>1</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>enterprise
customers, as well as our channel partners delivering communications services to enterprises using equipment and software supplied by technology partners such as Microsoft, Cisco, Avaya and
Siemens. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that our cloud-based architecture, the scale of our proprietary, multi-layer, fully-integrated CloudWorx CaaS Platform, and the network effects arising out of the breadth of
our relationships with service provider customers, enterprise customers and channel partners, provide us with a significant competitive advantage. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
2008, 2009 and 2010 our total revenue was $43.4&nbsp;million, $76.2&nbsp;million and $111.5&nbsp;million, representing year-over-year organic growth
rates of 57&nbsp;percent, 76&nbsp;percent and 46&nbsp;percent, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Industry Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite significant developments in communications technology, the basic public telephone system, which is known as the Public Switched
Telephone Network, or PSTN, continues to rely on legacy networks using many of the same techniques that have been used for decades to connect one voice caller to another. The legacy PSTN structure
requires coordination across service providers and creates significant costs, including transit charges and other payments to intermediate service providers. In addition, the transit of communications
across multiple service providers can degrade voice quality and reduce reliability. This structure also lacks flexibility to support multimodal communications and creates obstacles to the introduction
of new forms of communications services and applications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
growth of next-generation communications services, driven by the increasing availability of broadband Internet connections, has led to the development of the SIP standard
protocol to provide a uniform standard for controlling multimodal communications sessions among IP networks,
unified communications systems and end-user communications devices. Infrastructure investments in, and widespread availability of, broadband Internet connections have led to an increase in
the adoption of unified communications systems, offering more advanced features such as VoIP, email, instant messaging, collaboration and video conferencing as well as the ability to combine different
forms of multimodal communications such as voice and video. SIP-based communications enable substantial cost savings, operating flexibility and advanced features relative to traditional telephony. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However,
due to the lack of an end-to-end SIP-based communications platform, the legacy PSTN has had to serve as a bridge for traffic between and
among VoIP and other SIP networks as well as for connections to non-IP-based networks and end point devices, thus losing the advantages of SIP. This legacy PSTN infrastructure has become
increasingly difficult to support as service providers balance the need to upgrade networks and introduce new communications services, with the goal of reducing operating costs and capital
expenditures. Traditional approaches are severely limited by their inadequate support for software-based communications and rich media applications, higher capital and operating costs, reliance on
multiple regional and local physical facilities, inefficient routing, lack of dynamic network capacity allocation and the absence of a centralized directory for multimodal communications. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
service providers that exchange significant volumes of traffic have used SIP to directly interconnect with other service providers. These direct connect approaches require unique
solutions for each individual partner, which are complex to implement and costly to manage because of the large number of direct interconnects required and the inefficiency of managing multiple
partner relationships. In addition, existing neutral interconnect solution providers offering peering services use a series of hardware switches that rely on legacy protocols and a hierarchical
architecture that must be deployed in every local market where communication services are to be provided. These neutral interconnect solutions require high initial capital expenditures and significant
ongoing maintenance. Moreover, these solutions still rely upon the PSTN hierarchical architecture and are not capable of providing large scale multimodal communications solutions. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>2</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
migrating to IP networks, service providers can leverage the flexibility of a software and cloud-based platform to increase the variety of communications services delivered to
customers as hosted offerings. Further, customers recognize that, in addition to the many service improvements, adoption of SIP as a protocol for controlling multimedia communication sessions, such as
voice and video over IP, provides the potential to drive down telecommunications costs as IP-based networks are more efficient and cost-effective than those that rely on legacy
PSTN infrastructure. According to IDC, the total U.S. telecommunications services market is expected to reach $326.5&nbsp;billion by 2014.<SUP>(1)</SUP> Additionally, Infonetics Research has
forecasted that the worldwide market for VoIP services could reach $74.5&nbsp;billion by 2015.<SUP>(2)</SUP> Connecting IP-based networks to each other or the PSTN, which is referred
to as SIP trunking, represents one of the fastest growing segments within the VoIP services market, and is forecasted to increase at a compound annual growth rate of 52&nbsp;percent from
$599&nbsp;million in 2010 to $4.8&nbsp;billion in 2015.<SUP>(2)</SUP> In addition to the migration of communications traffic from the PSTN to IP networks, a number of other trends in the
industry are driving the growth in demand for a new cloud-based communications service platform including the proliferation of broadband connectivity, emergence of cloud-based service architectures,
the proliferation of SIP/IP-based devices, increased demand for multimodal and unified communications. </FONT></P>

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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>IDC, "U.S. Telecommunications Services 2010-2014 Forecast," IDC #223323, July 2010. </FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Infonetics
Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March&nbsp;28,
2011.</FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B> Our Competitive Strengths  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our solutions address the needs of service providers and enterprises while maintaining capital and operating efficiency. We believe the
following strengths differentiate us and position us for continued growth: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Cloud-based services architecture.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our solutions are
delivered on demand through a cloud-based architecture that can serve customers anytime and anywhere. This flexible and scalable architecture also enables us to customize our services to match each
new customer's needs, thereby eliminating the challenges often associated with the adoption and implementation of fixed, one-size-fits-all solutions. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Fully-managed, IP-based Media Peering Grid
service.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our proprietary software-based, fully-managed, distributed Media Peering Grid service provides carrier-grade,
high-quality voice and connectivity that can be relied on as a primary communications network. Our flexible Media Peering Grid software supports both legacy and VoIP network
interoperability and enables our customers to efficiently and cost-effectively transition their communications infrastructures from the legacy PSTN to an IP network incrementally and on
demand, thus reducing expenses associated with legacy architecture as well as call delivery tolls and circuit expenses.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Extensive, secure, multimodal SuperRegistry directory.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The
scale and multimodal nature of our directory give us the ability to complete a call to any connected end-point device, regardless of whether it is a PSTN-based handset or a
SIP-connected device. Using our proprietary intelligent routing software, and the telephone numbers and end-point identifying addresses in our SuperRegistry directory, we are able to
determine the interface type necessary to complete the connection and route traffic more efficiently from end-to-end, through our Media Peering Grid service. Furthermore, our SuperRegistry directory
enables our enterprise customers to achieve rich media, all-IP unified communications across disparate communications technologies with other enterprises and IP connected devices. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>AppWorx open application development environment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our
AppWorx open application development environment provides software developers and channel partners with access to powerful tools for rapid development and integration of new communications services.
These applications and new </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>3</FONT></P>

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<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>services
can be accessed from anywhere, deployed quickly over our platform and easily integrated into existing web services or software applications. Our AppWorx development environment enables our
customers to develop and use these applications to provide additional functionality and new and differentiated services to their end-users, which our customers can use to develop a
stronger relationship with their end-customers.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Powerful network effects.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We benefit from strong network
effects driven by the large volume of numbers in our SuperRegistry directory. As our service provider peering partnerships and enterprise customer base grow, the benefits each existing customer
realizes by using our platform increase, resulting in reduced costs for our customers and increased traffic through our platform. New features and partnerships broaden our value proposition,
attracting more customers, peering partners and channel partners. The scale of our business and depth of our relationships not only attract new customers but also serve as barriers to entry for
potential competitors.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Fully integrated communications platform.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our multi-layer
platform, which integrates transport, peering, registry services and application programming interfaces, or APIs, offers our customers a one-stop, flexible and full-featured
solution for developing and extending their communications services as compared to alternatives that focus on local market, hardware-based solutions. Our fully integrated platform also enables us to
be flexible and to easily add and deploy new IP-enabled communications and collaboration services as our customers' needs evolve. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Our Strategy  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our objective is to continue to leverage our CloudWorx CaaS Platform to enhance our position as a leading provider of communications
solutions for service providers and enterprises. We intend to accomplish this by pursuing the following strategies: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Extend the technology leadership of our CloudWorx CaaS
Platform.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to continue to invest in our platform through internal development or by acquiring complementary technology. These
activities are expected to broaden our support for new collaboration and communications features, enhance the capabilities of our SuperRegistry directory, and expand our AppWorx application
development environment to drive broader adoption among new customers and developer communities.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Extend the reach and breadth of our peering
partnerships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We plan to add additional telephone numbers and end-point identifying addresses to our SuperRegistry directory
from new and expanded relationships with service providers and enterprise customers. As we add additional direct peering partners, we expect to increase our communications traffic and revenue without
needing to utilize the legacy PSTN, which we expect will reduce our traffic delivery costs.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Grow our relationships with existing customers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our sales
team works closely with our customers to understand their challenges and industry trends, determine the services that we can provide to better serve their needs as well as to identify areas of focus
for our ongoing research and development activities. These relationships allow our support team to respond more quickly and effectively to customer needs and our development team to provide customized
solutions for our customers. We intend to continue to leverage the work of our sales team to identify and deliver additional services to expand our relationships.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expand our customer base and technology partnerships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We
intend to expand our base of enterprise customers by deepening our existing technology partnerships, developing new technology partnerships and expanding our network of channel partners. We also
intend to focus on expanding our service provider customer base by leveraging our CloudWorx CaaS Platform, investing in our direct sales force and educating service providers on the potential
opportunity to reduce or eliminate capital expenditures and reduce operating costs by leveraging our platform. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>4</FONT></P>

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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Broaden our international presence.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We plan to extend our
geographic reach and coverage by expanding our peering partner network and SuperRegistry directory globally through the addition of international service providers, peering partners and global
enterprise customers. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Risks  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing in our common stock involves significant risks. You should carefully consider the risks in "Risk Factors" before making a
decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case,
the trading price of our common stock would likely decline, and you may lose all or a part of your investment. Below is a summary of some of the principal risks we face.  </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our recent growth rates may not be indicative of our future growth;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We have a history of losses and may not achieve profitability in the future;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our revenue is concentrated in a limited number of customers, and our contracts do not include any fixed commitments to
use our services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We face significant competition from both established and new service providers and we may not compete successfully; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We operate in a dynamic legal and regulatory environment where changes in laws and regulations could adversely impact our
business; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We are subject to federal and state regulation, and we may be subject to enforcement and other adverse proceedings that
may have a material adverse effect on our reputation or our future results of operations. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Corporate Information  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in June 2003 under the laws of the State of Washington as Voex,&nbsp;Inc. We were reincorporated under the laws
of the State of Delaware in October 2006. We changed our name to IntelePeer,&nbsp;Inc. in September 2007. Our principal executive offices are located at 2855 Campus Drive, Suite&nbsp;200, San
Mateo, California 94403, and our telephone number is (650)&nbsp;525-9200. We maintain a corporate website at <U>www.intelepeer.com</U>. The information on, or
accessible through, our website does not constitute a part of, and is not incorporated into, this prospectus. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
trademarks include IntelePeer&reg;, our company name and logo, AppWorx&reg;, CloudWorx&#153;, CoreCloud&#153;, CloudCentral&#153;, IntelePeer
AppWorx&reg;, Media Peering Grid&#153; and SuperRegistry&reg;. All other trademarks or service marks appearing in this prospectus are trademarks or service marks of their
respective owners. </FONT></P>

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<BR></FONT><FONT SIZE=2><B>  THE OFFERING    <BR>    </B></FONT></P>
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<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Common stock offered:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><BR><FONT SIZE=2>By us</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares if the underwriters exercise their
over-allotment option in full)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><BR><FONT SIZE=2>By the selling stockholders</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares (&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares if the underwriters exercise their
over-allotment option in full)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Total</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>Common stock to be outstanding after this offering</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
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<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>Over-allotment option</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>The underwriters have an option to purchase a maximum of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of common stock from us
and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of common stock from the selling stockholders identified in this prospectus at the public offering price, less underwriting discounts and
commissions, to cover over-allotments of shares, if any. The underwriters can exercise this option at any time within 30&nbsp;days from the date of this prospectus.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>Use of proceeds</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>We estimate that the net proceeds to us from this offering will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;million, assuming an initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;per share, which
is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use the net proceeds
from this offering for working capital and general corporate purposes.</FONT></TD>
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<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>We will not receive any proceeds from the sale of common stock by the selling stockholders.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>See "Use of Proceeds" for additional information.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>Risk factors</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>See "Risk Factors" immediately following this prospectus summary to read about factors you should consider before investing in our common stock.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>Proposed market symbol</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>We intend to apply for listing of our common stock on the New York Stock Exchange or the Nasdaq Global Market under the symbol "PEER."</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares of our common stock expected to be outstanding after completion of this offering is based on 53,483,915 shares outstanding as of March&nbsp;31, 2011, and
excludes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>15,190,994 shares of common stock issuable upon the exercise of options outstanding as of March&nbsp;31, 2011 at a
weighted average exercise price of $0.55 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>2,106,669 shares of common stock reserved for issuance upon the exercise of warrants outstanding as of March&nbsp;31,
2011 at a weighted average exercise price of $0.80; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>287,142 shares of common stock reserved for issuance under our equity incentive plan as of March&nbsp;31, 2011. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>

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<A NAME="page_cc77601_1_7"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Unless
otherwise indicated, this prospectus reflects and assumes the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the conversion of all then-outstanding shares of our convertible preferred stock into an aggregate of
43,139,866 shares of common stock upon the closing of this offering;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the conversion of all then-outstanding warrants to purchase shares of convertible preferred stock, which
warrants by their express terms do not terminate if not exercised prior to this offering, into warrants to purchase an identical number of shares of common stock upon the closing of this offering; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the exercise in full of all then-outstanding warrants to purchase shares of convertible preferred stock and
common stock prior to the closing of this offering pursuant to conditional notices of exercise received for warrants which by their express terms terminate if not exercised prior to this offering; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>no exercise by the underwriters of their over-allotment option. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2><A
NAME="page_ce77601_1_8"> </A>


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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ce77601_summary_financial_data"> </A>
<A NAME="toc_ce77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  SUMMARY FINANCIAL DATA    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes our financial data for the periods presented. We have derived the summary statement of operations data
for the years ended December&nbsp;31, 2008, 2009 and 2010 and the balance sheet data as of December&nbsp;31, 2010 from our audited financial statements included elsewhere in this prospectus. Our
historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="15pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="15pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="68pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except share and per share data)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Statement of Operations Data:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$43,352</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$76,194</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$111,549</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peering partner compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,824</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,232</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>78,820</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Infrastructure costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,987</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,265</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,636</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,353</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,673</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,578</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,447</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,567</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,069</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,741</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,367</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,693</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,177</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,568</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,547</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,852</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,373</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47,381</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>77,045</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>112,062</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss from operations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,029</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(851</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(513</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,274</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,488</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,614</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,004</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,492</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(5,140</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(3,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share of common stock, basic and diluted(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(0.59</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(0.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(1.33</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing net loss per share of common stock, basic and diluted(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,759,925</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(0.07</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,447,513</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=11,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=44215,FOLIO='8',FILE='DISK105:[11ZBH1.11ZBH77601]CE77601A.;29',USER='BKYNARD',CD=';9-MAY-2011;13:14' -->
<A NAME="page_ce77601_1_9"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><BR></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="59pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>As of December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Actual </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro Forma(3) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro Forma as<BR>
Adjusted(4) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Balance Sheet Data:</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Working capital (deficit)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3,536</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3,536</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,187</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,187</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total indebtedness(5)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,675</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,675</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warrant liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,400</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Redeemable Convertible preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33,379</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' equity (deficit)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(32,891</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,881</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>The
following table presents stock-based compensation expense included in each expense category (in thousands): </FONT></DD></DL>
 </DIV>
<DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="16pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="16pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="16pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>31</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>144</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>81</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>185</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>111</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>153</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>106</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>186</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Total stock-based compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>319</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>297</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>564</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Please
see Notes&nbsp;1 and 12 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our
basic and diluted net loss per share of common stock and pro forma net loss per share of common stock.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>The
pro forma column in the balance sheet data table above reflects (i)&nbsp;the conversion of all outstanding shares of our convertible preferred stock
into 41,695,608 shares of common stock immediately upon the completion of this offering and (ii)&nbsp;the resulting reclassification of the convertible preferred stock warrant liability to
additional paid-in capital.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>The
pro forma as adjusted column in the balance sheet data table above reflects (i)&nbsp;the conversion of all outstanding shares of our convertible
preferred stock into 41,695,608 shares of common stock immediately upon the completion of this offering, (ii)&nbsp;the resulting reclassification of the convertible preferred stock warrant liability
to additional paid-in capital and (iii)&nbsp;the receipt of the net proceeds from the sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of
common stock offered by us in this offering at an assumed initial
public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), after deducting underwriting discounts and
commissions
and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share would increase (decrease) our cash and cash
equivalents, working capital, total assets and total stockholders' equity by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, assuming the number of shares offered by us remains the same as set forth on the cover page of
this
prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Total
indebtedness includes $18.2&nbsp;million in equipment financing obligations and $0.5&nbsp;million payable under our capital lease obligation. See
Notes&nbsp;4 and 10 to our audited financial statements included elsewhere in this prospectus. </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>9</FONT></P>

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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="da77601_risk_factors"> </A>
<A NAME="toc_da77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  RISK FACTORS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>Investing in our common stock involves a high degree of risk. You should carefully consider all the risks
described below before making a decision to invest in our common stock. Our business could be harmed by any of these risks at any time. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> <A NAME="da77601_risks_relating_to_our_business"> </A>
<A NAME="toc_da77601_2"> </A>
<BR>    </I></FONT><FONT SIZE=2><B>  Risks Relating to Our Business    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We have experienced rapid growth in recent periods and our recent growth rates may not be indicative of our future growth. If we fail to manage our growth effectively, we
may be unable to execute our business plan, maintain high levels of service and customer satisfaction or adequately address competitive challenges.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenue has increased substantially since our inception, but we may not be able to sustain revenue growth consistent with recent
history, or at all. We believe growth of our revenue depends on a number of factors, including our ability to: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Price our services effectively so that we are able to attract and retain customers without compromising our profitability; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Attract new customers, increase our existing customers' use of our services and provide our customers with excellent
customer support;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Continue to increase the number of telephone numbers and end-point identifying addresses in our SuperRegistry
directory;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Develop new communications applications to increase our customers' use of our services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Efficiently and accurately capture cost and revenue data for the more than 1.7&nbsp;billion minutes of traffic delivered
per month over our platform;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Introduce our services to new markets outside of the United States; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Increase awareness of our brand on a global basis. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>We
can not assure you that we will be able to successfully accomplish any of these tasks. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
we currently plan to expand our business significantly to satisfy the anticipated demand for our services. To manage this growth, we must improve operational and financial
systems, procedures and controls, and expand, train and manage our employee base. We must maintain and expand relationships with current customers, peering partners and other third parties, while
attracting new customers, peering partners and channel partners. If we cannot manage our growth effectively, we may be unable to take advantage of market opportunities, execute our business strategies
or respond to competitive pressures. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We have a history of losses and may not achieve or maintain profitability in the future.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had net losses of $3.3&nbsp;million and $11.6&nbsp;million in the years ended December&nbsp;31, 2009 and 2010, respectively.
We cannot predict if we will attain profitability in the near future or at all. We expect to continue to make significant expenditures to develop and expand our business. In addition, as a public
company, we will incur additional legal, accounting and other expenses that we did not incur as a private company. These increased expenditures will make it more difficult to achieve future
profitability. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and unforeseen expenses, difficulties, complications and
delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. We will need to generate significant revenue to achieve profitability, and we cannot assure any
prospective investor that we will be able to do so. Likewise, we cannot assure our ability to sustain or increase such profitability on a quarterly or annual basis in the future. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>10</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our revenue is concentrated in a relatively limited number of customers, and our contracts do not include any fixed commitment to use our services. The termination of these
contracts by our customers, or a decrease in traffic from those customers, could materially and adversely impact our results of operations and financial condition.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our top two customers, in the aggregate, represented 45&nbsp;percent of our total revenue during the year ended December&nbsp;31,
2010. Sprint, alone, accounted for 29&nbsp;percent of our
total revenue during that same time period. In general, our customer contracts are non-exclusive and have neither volume nor time period commitments. Any customer is able to discontinue
the use of all or a portion of our services at any time. If one or more customers were to reduce their demand for our services, our revenue could decline. If we lose one or more of our top customers,
or, if one or more of these major customers significantly decreases its use of our services, our business will be materially and adversely affected. From time to time, we have experienced material
reductions in revenue from key customers. For example, our revenue from one of our top customers decreased from $35.3&nbsp;million in 2009 to $18.2&nbsp;million in 2010. Revenue from another top
customer decreased from $2.9&nbsp;million in 2008 to $0.2&nbsp;million in 2009. There can be no assurance that we will not have similar substantial decreases in customer revenue in the future, or
that the growth in our other customers will make up for any such decreases. As a result, our future revenue is difficult to forecast. Because our expense levels are based on our expectations as to
future revenue and to a large extent are fixed in the short term, we might be unable to adjust spending in time to compensate for any shortfall in revenue. Accordingly, any significant shortfall of
revenue in relation to our expectations will harm our operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our pricing and billing systems are complex and errors could adversely affect our revenue and profits</I></B></FONT><FONT SIZE=2><B>.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently route more than 1.7&nbsp;billion minutes of voice traffic each month and operate in a dynamic market, which makes our
pricing and billing efforts complex to develop and challenging to implement. To be profitable, we must have accurate and complete information about the costs associated with connecting data and voice
transmissions over our platform, and properly incorporate such information into our pricing model. Our pricing model must also reflect accurate and current information about the market for our
services, including the pricing of competitive alternatives for our services, as well as reliable forecasts of traffic volume. We may determine pricing for our services based on data that is outdated
or otherwise flawed. Even if we have complete and accurate market information, we may not set prices to optimize both revenue and profitability. If we price our services too high, the amount of
traffic that may be routed through our platform may decrease and accordingly our revenue may decline. If we price our services too low, our margins may be adversely affected, which will reduce our
ability to achieve and maintain profitability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
we rely heavily on a single third party to provide us with key software and services for our billing. If that third party ceases to provide those services to us for any
reason, or fails to perform billing services accurately and completely, we may not be able to deliver accurate invoices promptly. Delays in invoicing can lead to delays in revenue recognition, and
inaccuracies in our billing could result in lost revenue. If we fail to adapt quickly and effectively to changes affecting our costs, pricing and billing, our profitability and cash flow will be
adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Commercial disputes and collection issues are common in our industry and any disputes with our peering partners or our customers could result in increased expenses or an
inability to collect revenue for services provided and any collection problems could result in delays or failures to collect revenue.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our direct and indirect peering arrangements are based on commercial agreements with a variety of parties. Disputes concerning payment
for services rendered can occur for numerous reasons given the complexities of the regulatory environment and the number of parties involved in handling communications traffic. From time to time, we
may dispute an invoice for the amount of traffic that we delivered to our peering partners or the rates that should have been applied to that traffic. Dispute </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>11</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>resolution
generally requires a review of call detail records and negotiations with our peering partners. If we subsequently determine that the disputed amounts will be settled for an amount in excess
of the amount which we originally accrued, we will recognize the difference as an increase in peering partner compensation which would adversely impact our results of operations. For example, for the
year ended December&nbsp;31, 2010, we determined that certain disputed amounts could result in an additional charge of $1.1&nbsp;million, which resulted in us recognizing this amount as additional
peering partner compensation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are also subject to potential billing disputes with customers. Additionally, some customers have failed to pay for services because their financial condition limits their ability to
satisfy their obligations. For example, in 2007, a customer that represented 1.6 percent of our revenue defaulted on its obligation of $163,000 and declared bankruptcy. Delays in receiving payments,
or our inability to collect payments pursuant to such agreements, can adversely impact our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our financial position, revenue, operating results and profitability may vary significantly from quarter to quarter, which could cause the price of our common stock to
decline significantly.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As our business continues to grow, we believe that our quarterly operating results may be subject to significant fluctuation due to
various factors, many of which are beyond our control. Factors that may affect our quarterly operating results in the future include the risk factors discussed in this Risk Factors section, and in
particular the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes in the amount of voice traffic which major customers route through our CloudWorx CaaS Platform; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our failure to properly anticipate changes in the price our customers are willing to pay, or the costs we must pay, to
deliver certain traffic;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the timing, capacity and breadth of direct peering established to support our customers;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>decisions by our service provider customers to establish direct connection arrangements with other major service providers
rather than route traffic through our CloudWorx CaaS Platform;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fluctuations based upon seasonality or the weighted average number of business days in a particular quarter; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>traffic outages or other failures of our platform; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>variability of operating expenses as a percentage of revenue. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly,
it is difficult for us to accurately forecast our results of operations on a quarterly basis. If we fail to meet expectations of investors or analysts, our stock price may
fall rapidly and without notice. Furthermore, the fluctuation of our quarterly operating results may render period-to-period comparisons of our operating results less
meaningful and you should not rely upon them as an indication of our future performance. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We have a limited operating history and a relatively new business in an emerging and rapidly evolving market, making it difficult to evaluate our business and future
prospects, thereby increasing the risk of your investment.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The revenue and income potential of our business and market is unproven, and our limited operating history with our current business
model makes an evaluation of our business and prospects difficult. We were incorporated in June 2003 and since inception have been generating revenue from service provider customers. We first began
offering our AppWorx-powered applications to enterprise customers in 2008. In 2010, 2.7&nbsp;percent of our revenue was generated from enterprise customers. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>12</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to grow our business will depend significantly on an increase in the adoption of new technologies, which may not occur or may not occur as quickly as we anticipate. Our
CloudWorx CaaS Platform has the ability to deliver multimodal communications services, including voice, video, unified communications and other rich-media applications. If the market for
these multimodal and unified communications capabilities does not develop, or develop as fast as we expect, our revenue may not grow. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also seek to expand our business through growth in markets outside of the United States. We have no experience in providing services to, or in navigating the regulatory landscape of,
those markets. If we fail to execute our business plan and attract new customers from outside of the United States, we may be unable to grow our revenue or offset declines in revenue in the United
States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
current or future competitors may develop and offer competing products or services that are, or are perceived to be, superior to our services in some respect. Our services
may not be sufficiently competitive with those new products or services and, as a result, our revenue may decrease. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Decreasing telecommunications rates may diminish or eliminate our competitive pricing advantage.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for communications services is highly competitive and is characterized by decreasing rates for services. Even as traffic
volumes have increased due to the increasing penetration of broadband Internet access services and consumer demand for content over
such services, the rates that service providers pay each other has decreased over time. International and domestic telecommunications rates have decreased significantly over the last few years in most
of the markets in which we operate, and we anticipate these rates will continue to decline in all of the markets in which we do business or expect to do business. If we are unable to reduce our
operating expenses and adjust the rates we charge for our services, the decreasing market rates for the exchange of traffic may diminish or eliminate our competitive pricing position. Continued rate
decreases may require us to lower our rates to remain competitive and could reduce or possibly eliminate any gross profit from our services. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> If we fail to accurately forecast our revenue or the commitments we must make to satisfy demand for our services, our results of operations and financial condition could be
adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must continue to invest in our business such that we have sufficient infrastructure and support to transport increasing numbers of
minutes through our Media Peering Grid service. Our investment in our infrastructure depends largely on our forecasts of demand for our services, which is based on historical growth in the use of our
services. If communications traffic declines or does not grow as fast as it has historically grown, our revenue may be less than we forecast, and we may have incurred infrastructure costs in excess of
what was required to facilitate the delivery of communications traffic through our platform. If demand for our services exceeds our forecasts, our infrastructure may not be prepared for such an
increase in demand and we may not be able to capitalize fully on the growth opportunity and increase our revenue in an optimal manner. In either case, the results of operations and our financial
condition could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We may lose customers if we experience system failures that significantly disrupt the availability and quality of the services that we provide.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are dependent upon our ability to prevent system interruption. We have experienced system failures from time to time,
including loss of power in a commercially hosted facility, software bugs that prevented calls from routing normally and fiber cuts that denied access to a site from our backbone. In the past, these
system failures caused periods of low quality service lasting from 10 to 180 minutes and total site unavailability of 10 to 60 minutes. Although we have endeavored to mitigate the potential impact of
failures through our distributed platform and redundant operations, there is no guarantee that we will not have system failures in the future, including those that are </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>materially
worse in scope or duration. Any interruption in the ability of our customers to use our services reduces our current revenue, could harm our future revenue, and could subject us to
additional regulatory scrutiny. Such interruptions could also undermine customer confidence in the reliability of our services and cause us to lose customers or make it more difficult to attract new
ones. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
business also requires us to protect our infrastructure against damage from human error, fire, earthquakes, floods, power loss, sabotage, intentional acts of vandalism, terrorism and
similar events. Despite any precautions we may take, the occurrence of a natural disaster, power outage or other unanticipated problems could result in lengthy interruptions in the availability of our
services. We do not carry business interruption insurance sufficient to compensate us for losses that may result from interruptions in the availability of our services as a result of system failures. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our offerings are dependent upon third-party facilities, equipment and services, and interruptions or delays in service from our third-party facility providers could impair
our ability to deliver our services to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We rely on third parties' facilities and equipment to operate our business as our customers' traffic traverses a variety of facilities
controlled by third parties. We principally buy equipment and software to build and update our system infrastructure from one supplier. If our third-party service providers fail to maintain facilities
properly, if our equipment fails to perform as expected or if the providers of facilities or equipment fail to respond quickly to problems, our customers may experience service interruptions. Such
service interruptions may affect the perceived reliability of our service which could damage our brand and reputation adversely affecting our growth. Additionally, we rely on a single supplier to
provide us with key billing and related services. If that supplier stops providing those services to us for any reason, we could experience disruption in our ability to quickly capture the information
we need to promptly generate invoices for our services. These delays in invoicing could materially delay our receipt of revenue from our customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our IP telephony offering relies, in some instances, on third parties to originate and deliver all calls placed and received by such customers.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In offering IP telephony services, we rely on the infrastructure of the third-party network service providers who are our peering
partners to provide telephone numbers, PSTN call termination and origination services and local number portability. In relying on such third parties, we are able to offer our services over a greater
geographic area and can compete with other providers of such services in a broader marketplace. But in relying on such third parties, we have less control over the quality and reliability of our
service. Moreover, if any of these third-party service providers cease operations or otherwise terminate services on which we depend, we could suffer customer loss or increased costs for our services,
which could have a material adverse impact on us and our reputation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We face significant competition from both established and new service providers, as well as from our customers, and if we do not compete successfully, we could lose market
share, experience reduced revenue or suffer losses.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The services we provide are also offered by others and in the future may be offered by an increasing number of parties. Currently, we
face competition from legacy telecommunications service providers as well as emerging providers of voice peering services. Our competitors include traditional telecommunications carriers and other
providers of specialized communications services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are few substantial barriers to pursuing business from our customers, and we expect to face additional competition from new market entrants in the future. Many of our current and
potential competitors have substantially greater financial, technical and marketing resources, larger customer bases, greater name recognition and more established relationships in the industry than
we have. As a </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>result,
certain of our competitors may be able to develop and expand their network infrastructures and service offerings more quickly, adapt to new or emerging technologies and changes in customer
requirements more quickly, take advantage of acquisitions and other opportunities more readily, devote greater resources to the marketing and sale of their services and adopt more aggressive pricing
and incentive policies than we can. Those service providers may attract communications traffic that is currently utilizing our CloudWorx CaaS Platform. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover,
some of the potentially biggest users of our peering services, like incumbent local exchange carriers, competitive local exchange carriers and wireless and cable companies, may
enter into direct peering arrangements between and among themselves and with other service providers. Such direct connections may result in lower traffic volumes for us and negatively impact our
business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to compete effectively will depend on a number of factors, including without limitation: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to offer cost-effective and high-quality services consistently and without delay; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to respond quickly and effectively to market demand for new services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to adopt or adapt to changing regulatory standards and industry practices;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the number and nature of our competitors and competitiveness of their services; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the entrance of new competitors into our markets. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
of these factors are outside of our control. For these reasons, we may not be able to compete successfully against our current or future competitors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Consolidation in the telecommunications industry could lead to an unexpected and significant reduction in revenue.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry has historically been marked by significant consolidation. If two service providers that are currently
connecting traffic through our platform become part of a single entity and network infrastructure, those parties may no longer need to route telecommunications traffic through our platform, which will
adversely affect the revenue we generate from such traffic. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs, our services may become less competitive
or obsolete, and we could lose customers or market share.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success will depend in part on our ability to modify or enhance our services to meet customer needs, to add functionality
and to address technological advancements. The telecommunications industry is characterized by rapid technological change and new service offerings, which could make our service offerings obsolete or
too costly or inefficient on a relative basis. We must adapt to this rapidly changing market by continually improving the features,
functionality, reliability and responsiveness of our services, and by developing new features, services and applications to meet changing customer needs or developing industry standards. We cannot
assure you that we will be able to adapt to these challenges or respond successfully or in a cost effective way. Failure to do so would adversely affect our ability to compete and retain customers or
market share. In addition, our innovations may not achieve the market penetration or price levels necessary for profitability. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> The market for next generation communications services may not develop as we anticipate.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for multimodal communications and unified communications services is at an early stage of development, and the market for
these services may not achieve high levels of demand. Our success depends on the willingness of enterprises to adopt these next generation communications services. If demand for these services does
not develop as we expect, it may adversely affect our revenue growth from enterprise customers. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> Our sales channels may not be effective in selling our communications services to enterprise customers.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, we rely on sales channels to acquire enterprise customers. If our sales channel partners are not effective in generating
demand from enterprise customers for our services, we may have to evaluate alternative customer acquisition models, including introducing a direct sales model for attracting and retaining enterprise
customers. As a result, our operating costs may be significantly increased, which may adversely affect our ability to achieve or maintain profitability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our CloudWorx CaaS Platform could subject us to litigation and other disputes from third parties.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our CloudWorx CaaS Platform relies on multiple service providers to deliver communications traffic. We enter into contractual or other
arrangements with the service provider from which we receive traffic and with the peering partner to which we deliver communications traffic. However, we do not have written contractual arrangements
with all of the parties that participate in the origination, transit or termination of traffic through our platform. Our
partners provide us assurances that they are in compliance with applicable laws and regulations. While our contracts address compensation issues, they also recognize that the market is subject to
regulatory uncertainty and changes in law. We may be subject to litigation or other disputes as a result of our indirect peering business. We may not have recourse through contractual indemnification.
Our inability to seek recourse either from those with which we enter into written contracts or third parties may adversely impact our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We may be vulnerable to security breaches, which could disrupt our operations and have a material adverse effect on our financial performance and operating results.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A party who is able to compromise the security of our facilities could misappropriate either our proprietary information or the
personal information of our customers, or cause interruptions or malfunctions in our operations. We may be required to expend significant capital and financial resources to protect against such
threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not
be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits,
loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial performance and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If our security measures are breached and unauthorized access is obtained to a customer's stored data or any consumer data that we may store from time to time or if data is
lost due to hardware failures or errors, our services may be perceived as not being secure, customers may curtail or stop using our services and we may incur significant legal and financial exposure
and liabilities.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our services involve the storage and transmission of customers' proprietary information, including certain consumer data.
Security breaches related to this information could expose us to a risk of loss of this information, litigation and possible liability, as well as damage our relationships with our customers. If our
security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, during transfer of data to additional data centers or at any time, and, as a result, someone
obtains unauthorized access to our data or our customers' data, our reputation could be damaged, our business may suffer and we could incur significant liability. Additionally, third parties may
attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data or our customers'
data, which could result in significant legal and financial exposure and a loss of confidence in the security of our service, which would harm our future business prospects. Furthermore, our ability
to collect and report data may be interrupted by a number of factors, including our inability to access the Internet, the failure of our platform, security breaches or variability in user traffic on
customer </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>websites.
In addition, computer viruses may harm our systems causing us to lose data, and the transmission of computer viruses could expose us to litigation. Because the techniques used to obtain
unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement
adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and
customers. Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover any claim against us for
loss of data or other indirect or consequential damages and defending a suit, regardless of its merit, could be costly and divert management's attention. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The loss of key members of our senior management team could prevent us from executing our business strategy and could have a material adverse effect on our business.
Additionally, the failure to attract and retain qualified personnel could prevent us from executing our business strategy.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future performance depends substantially on the continued services of our management and other key personnel, including members of
our technical, marketing and sales teams, and our ability to retain and motivate those persons. We do not have long-term employment agreements with any of our key personnel and we do not
maintain any "key person" life insurance policies. Competition for qualified personnel is intense and we may not be successful in attracting and retaining the key personnel that we need to compete
effectively. The value of our common stock may adversely affect our efforts to motivate the performance of our key personnel. It
may be difficult to retain those employees who have substantial in-the-money, vested options or other equity awards. Conversely, if options granted to our employees have
exercise prices that are substantially above our then-current share price, it may be difficult to motivate and retain those employees. Additionally, if the market price of our common stock
does not increase or declines, it may limit our ability to attract new employees with equity incentives. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our
operations and harm our operating results</I></B></FONT><FONT SIZE=2><B>.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our
application suite, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur
various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate successfully the acquired personnel,
operations and technologies, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of
factors, including:  </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>unanticipated costs or liabilities associated with the acquisition;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>incurrence of acquisition-related costs;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>diversion of management's attention from other business concerns;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>harm to our existing business relationships with business partners and customers as a result of the acquisition; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the potential loss of key employees;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>use of resources that are needed in other parts of our business; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>use of substantial portions of our available cash to consummate the acquisition. </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment
at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which
could harm our results of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisitions
could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired
business fails to meet our expectations, our operating results, business and financial condition may suffer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If we are unable to protect our proprietary technology and other intellectual property rights, our ability to compete for business or exclude others from competing with us
may be adversely affected. Our solutions and services may infringe on the intellectual property rights of others, which may subject us to legal liability, harm our reputation, prevent us from offering
certain solutions and services to our customers or distract management. Any claims or litigation involving intellectual property, whether we ultimately win or lose, could be extremely
time-consuming, costly and harmful to our reputation.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We regard the protection of our trademarks, service marks, copyrights, patents, domain names, trade dress and trade secrets as critical
to our success. To protect our intellectual property rights, we rely on national, state and common law rights, as well as a variety of
administrative procedures, and we seek protection through trade secrets, confidentiality agreements and other security measures, including patent law protection. To date, we have one issued patent.
The process of seeking patent protection takes a long time and is expensive. We are unable to guarantee that additional patents will issue from pending or future applications or that, if patents
issue, they will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. Some of our
technologies are not covered by any patent or patent application. The confidentiality agreements on which we rely to protect certain technologies may be breached and may not be adequate to protect our
proprietary technologies. There can be no assurance that other countries in which we market our services will have applicable laws to protect our intellectual property rights to the same extent as the
United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to compete successfully also depends on our ability to operate without infringing the proprietary rights of others. We have no means of knowing what patent applications have
been filed in the United States until they are published. In addition, the technology sector in which we operate is characterized by frequent claims and litigation regarding patents, trademarks and
other intellectual property rights. We may need to file lawsuits to enforce our intellectual property rights, and we may need to defend against claimed infringement of the rights of others. Any
litigation could result in substantial costs to us and divert our resources. Despite our efforts in bringing or defending lawsuits, we may not be able to prevent third parties from infringing upon or
misappropriating our intellectual property, or offering solutions or services that are directly competitive with ours. In the event of an adverse outcome in any such litigation, we may be required to
stop our use of infringing technologies, expend significant resources to develop or acquire non-infringing technologies or obtain licenses to the intellectual property we are found to have
infringed. There can be no assurance that we would be successful in such development or acquisition or that necessary licenses would be available on reasonable terms, or at all. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Risks Related to Our Industry, Including Regulation by Governmental Authorities  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We operate in a dynamic legal and regulatory environment where changes in law and regulations could adversely impact our business.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our service offerings are subject to regulation at the international, federal, state and local levels. Regulations affect
our business and can change the marketplace. The adoption and enactment of new regulations, or the modifications to existing ones, can have a material adverse effect on our business. Additionally,
future legislative, judicial and regulatory agency actions could have an adverse effect on our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our communications service offerings depend on complex compensation arrangements between service providers where federal and state regulatory reform and judicial decisions
can have unpredictable results and may make our communications service offerings less viable or potentially unsustainable.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;How service providers compensate each other varies based on a variety of factors, including </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether a call terminates on a wireline or wireless network;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether the call is local or long distance;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether the call is intrastate, interstate or international; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the classification of IP traffic as either traditional telecommunications or information services traffic. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depending
on the nature of the traffic and the arrangements between the service providers, compensation may be determined by federal or state rules, contracts entered into between
service providers, tariffs or other arrangements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we provide our communications services pursuant to contracts with those service providers who connect directly to us, much of the traffic routed using our service is ultimately
originated or terminated by other parties with whom we are connected only indirectly, and the rights and obligations of these indirectly connected parties, including the rates they pay for the
origination and termination of the traffic they carry, are often governed by regulated tariffs rather than by contracts. Those rates, in turn, have a material effect on the rates that we pay our
peering partners to transmit and terminate our traffic. The Federal Communications Commission, or FCC, is considering reform of the system under which service providers compensate each other for
interstate, intrastate and local traffic origination and termination services. Recently, the FCC announced its intention to comprehensively reform this system. A number of states are also actively
considering compensation reform that could impact our business.
Existing rules governing compensation may be changed as a result of these regulatory proceedings, or as a result of legislative or judicial actions, in ways that are impossible to predict. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reform
of the intercarrier compensation system could alter any of a myriad of factors that could adversely impact our business. For example, the FCC could establish an unfavorable rate
that may be assessed for the transmission and termination of certain traffic that we deliver over our platform or adopt other rules, which may negatively impact our business. It is also possible that
the FCC could classify certain traffic in a manner that negatively impacts our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is unclear at this time what measures the FCC may take to reform compensation arrangements between service providers. Certain models we use today may be prohibited in the future or
subject to rules that make the way we currently do business less profitable or unprofitable. If certain rules are adopted, we may have to change the way in which we route traffic, discontinue
relationships with existing partners, or modify our business practices materially. Depending on the rules adopted, some of our offerings, to the extent they are sustainable, may not be as profitable
in the future. We cannot predict how changes in FCC and/or state rules will impact us at this time. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>19</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> We may be subject to increased liability for Federal Universal Service Fund contributions.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to contribute to the Federal Universal Service Fund, or USF, a percentage (which varies quarterly) of certain of our
revenue derived from providing retail interstate and international telecommunications and communications services. We are required to report our revenue periodically to enable the Universal Service
Administrative Company, which administers the Fund on behalf of the FCC, to determine our contribution requirement. Based on these reports, we pass through our estimated contribution obligation to
customers in the form of an assessment. We are also required to obtain and maintain exemption certifications for our service provider customers. The rules governing allocation of our revenue between
telecommunications services (which are subject to assessment) and information services (which are not) are complex and in some situations ambiguous. If we are determined to have allocated our revenue
incorrectly or otherwise failed to report all required revenue from end-users, we could be subject to liability for underpayment of contributions to the Fund, which would be extremely
difficult to recover from customers. If the certifications that some of our customers provide to justify the exemption of their charges from USF assessments are found to be defective and we cannot
show we reasonably expected such customers to contribute to the Fund, we may be subject to additional USF contribution liabilities. While we may be legally entitled to collect any shortfall USF
contribution from our customers, we may not be able to do so and this could have a material adverse impact on our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The FCC is actively considering reform of the USF and, depending on the reforms adopted, the ultimate cost of our services to our customers may rise.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC is actively considering ways to reform the USF in a manner that does not require additional statutory authority. The FCC could
adopt a number of different reforms that change the methodology for contributing to the USF. Depending on the reform adopted, this could increase what we are required to contribute to the USF, which
could result in increasing the price of our offerings. We cannot predict the impact of this proceeding on our business. Additionally, the U.S. Congress, the FCC, state legislatures and/or state
agencies may target, among other things, state USF contribution methodologies, access or settlement charges that are exchanged between service providers, imposing taxes related to Internet
communications, imposing tariffs or other regulations based on encryption concerns, or the characteristics and quality of products and services that we may offer. New laws or regulations concerning
these or other areas of our business could restrict our growth or increase our cost of doing business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The outcome of pending regulatory proceedings, litigation or other disputes may subject us to retroactive liability for intercarrier compensation arrangements.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The regulations and other arrangements that govern compensation between service providers are complex and, depending on the traffic at
issue, subject to federal and state jurisdiction, including regulation by the FCC and state public utilities commissions. Application of current intercarrier compensation rules is constantly under
review. A number of state commissions are actively considering disputes between service providers that could adversely affect us. Additionally, there is ongoing litigation in the industry that could
affect certain components of our indirect peering business, such as the charges our indirect peering partners pay to transport and terminate our traffic. When and how the FCC, state commission or
other entities with jurisdiction and authority ultimately resolve the intercarrier compensation disputes, or interpret regulatory rulings, we may be subject to retroactive liability for intercarrier
compensation charges. Due to this legal uncertainty, we are unable to predict the impact on our business. Moreover, it is possible that we may be subject to retroactive liability for certain traffic.
It may be difficult to collect from our customers for such retroactive liability. Should we be subject to retroactive liability and be unable to collect on such liabilities from our customers or third
parties, our business may be adversely impacted. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>20</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> We are subject to federal and state regulation for certain of our communications service offerings and we may be subject to enforcement actions or other adverse proceedings
that may have a material adverse impact on our reputation or our future results of operations.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For certain of our communications services offerings, we are subject to regulation by the FCC and state public utilities commissions.
Among other requirements, we must obtain and maintain certificates of authority to offer communications services at the state and federal level and we are subject to reporting requirements. Interstate
and intrastate telecommunications services are subject to a wide range of frequently changing state and federal regulations, rules and laws and we cannot ensure that we are always in compliance with
all of these requirements at any single point in time. The agencies responsible for the enforcement of these laws, rules and regulations have initiated and may continue to initiate inquiries or
actions based on customer complaints or on their own initiative. While we believe our actions and positions are in compliance with the related rules and in accordance with accepted industry practices,
we cannot predict with certainty the timing or outcome of these various reviews. We may be subject to fines, penalties, forfeitures or other enforcement actions as well as complaints seeking damages
that could result in monetary or reputational harm. Any of these outcomes could have material adverse impact on our future results of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The FCC could classify some of our offerings as telecommunications services, which could result in additional federal and state regulatory obligations.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal and state authorities are currently considering the appropriate classification of certain of our offerings. For example, on
February&nbsp;12, 2004, the FCC initiated a notice of proposed rulemaking to consider the appropriate regulatory classification for VoIP and other IP-enabled services. On November&nbsp;9, 2004,
the FCC ruled that Vonage DigitalVoice and similar nomadic VoIP services are not subject to state certification, tariffing and other similar common-carrier service provider regulations. This ruling
was appealed by several states. On March&nbsp;21, 2007, the United States Court of Appeals for the Eighth Circuit affirmed the FCC's declaratory ruling. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
FCC has yet to classify IP-enabled services, particularly interconnected VoIP services, as either telecommunications services or information services. If the FCC
classifies certain or all of our IP-enabled service offerings as telecommunications, we may be subject to additional regulatory obligations at both the federal and state levels and less
favorable rates associated with such traffic. It is possible that certain states may classify IP-enabled services like those that we offer as telecommunications services. At least one
state, Maine, has already classified particular interconnected VoIP service offerings as telecommunications services. This may adversely impact our business by increasing the cost of offering such
services and the rates we pay to terminate such traffic. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The FCC and certain state regulatory agencies must grant approval before we engage in certain transactions or other activities which may result in delay or increase our
transaction costs.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain transactions and agreements, including among other things mergers, acquisitions of other regulated companies, and asset sales,
require regulatory approval either at the federal or state level, or sometimes from both federal and state regulatory agencies. Delays in receiving required regulatory approvals (including approvals
relating to stock issuance, acquisitions, financing activities, or transactions relating in transfers of control) and completing interconnection agreements with other carriers may have a material
adverse effect on our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Internet service providers might restrict our ability to provide services to our customers.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our offerings depend on the ability of our customers to access our services through broadband Internet connections and certain
of our products require significant bandwidth to work effectively. Broadband access to the Internet is provided by companies that have increasing market power in the broadband Internet access
marketplace, including incumbent telephone companies, cable </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>companies
and mobile communications companies. Some of these providers have stated that they may take measures that could degrade, disrupt or increase the cost of user access to certain of our
products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings, while others,
including some of the largest providers of broadband Internet access services, have committed to not engaging in such behavior. The ability of the FCC to regulate broadband Internet access services
has been called into question by a recent ruling of the United States Court of Appeals for the D.C. Circuit. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December&nbsp;23, 2010, the FCC adopted an order that would impose non-discrimination rules on providers of fixed and wireless broadband Internet access services, with
wireless providers subject to a more limited set of rules. While the substance of the rules and the process used by the FCC in adopting the rules differs from the FCC's previous Internet policy
principles that were called into question by the D.C. Circuit, questions remain concerning the FCC's legal authority to adopt rules governing the conduct of fixed and wireless broadband Internet
access providers. The FCC's rules are not effective yet and there is uncertainty as to whether the rules will become effective. We cannot predict whether the rules will become effective and
enforceable, nor can we predict what impact these rules may have on our business at this time. While we believe that substantial interference with access to our products and services is unlikely, such
broadband Internet access provider interference has occurred in very limited circumstances in the U.S., and could result in a loss of existing users and increased costs, and could impair our ability
to attract new users, thereby harming our revenue and growth. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our ability to offer services outside the U.S. is subject to the local regulatory environment, which is different than the U.S. and our growth may be impeded.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As we expand into new markets outside of the United States, the regulatory structure of foreign markets differ in significant ways than
the United States communications marketplace. We will have to adapt our business strategies to reflect the regulatory realities of these marketplaces which could impede our growth. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If our emergency and E-911 calling services do not function properly, we may be exposed to significant liability from our users.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our IP telephony offerings are subject to FCC rules governing the delivery of emergency calling services. Similar to other
providers of similar IP telephony services, our emergency calling and E-911 service are different than those associated with traditional telecommunications services. These differences may
lead to an inability to make and complete calls that would not occur for users of traditional telephony services. For example, to provide the emergency calling services required by the FCC's rules to
our IP telephony consumers, we must use components of both the wireline and wireless infrastructure in unique ways that can result in failed connections and calls. Access to emergency services call
centers provided over the Internet may be adversely affected by power outages and network congestion that may not occur for users of traditional telephony services. Emergency call centers may not be
equipped with appropriate hardware or software to accurately process and respond to emergency calls initiated by consumers of our IP telephony services. Users that use our IP telephony services
nomadically are required to manually update their location information, and failure to do so may result in dispatching of assistance to the wrong location. As a result, we could be subject to
enforcement action by the FCC or other entities&#151;possibly exposing us to significant monetary penalties, cease and desist orders, civil liability and other adverse consequences. The FCC's
rules also impose other obligations on us, such as properly recording our customers' registered locations. Failure to comply with these requirements may result in FCC enforcement action, potential
monetary penalties and other adverse consequences. </FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2><B><I> The FCC has an open proceeding considering the imposition of additional E-911 obligations on providers of Internet protocol telephony.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC is considering modifying the emergency calling rules applicable to providers of IP telephony services. In June 2007, the FCC
released a Notice of Proposed Rulemaking to consider whether it should impose additional obligations on interconnected VoIP providers. Among other things, the FCC is considering requiring that certain
providers of IP telephony&#151;including some of our offerings&#151;to implement a solution to automatically determine the location of their customers for purposes of E-911
rather than allowing customers to manually update their existing location. The FCC notice includes a tentative conclusion that certain IP telephony offerings that allow their service to be used in
more than one location&#151;including some of our offerings&#151;to be required to meet the same customer location accuracy standards applicable to providers of mobile telecommunications
services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2010, the FCC released a Notice of Inquiry again requesting comment on auto-location obligations and standards for certain IP telephony offerings which would
include some of our offerings. The Notice of Inquiry is seeking comment on whether the FCC's rules concerning the delivery of emergency services should be extended to non-interconnected
VoIP services as well as to mobile IP telephony applications used on smartphones, computers and other devices. We are currently unable to predict the outcome of these proceedings and the impact on our
business. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> States are attempting to regulate certain forms of IP telephony which could result in making such offerings less competitive with traditional offerings of telecommunications
services and states are imposing additional surcharges and fees on providers of IP telephony services.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer certain services through IP telephony. IP telephony is subject to less regulation than traditional telecommunications
services. IP telephony has grown substantially over the last few years leading to increased scrutiny by federal and state legislatures and regulatory agencies. Historically, the FCC has preempted
states from imposing entry, tariffing and other traditional common carrier requirements on nomadic IP telephony offerings and instead subjects such offerings to discrete regulatory obligations. But
the FCC has recently allowed states to impose certain state-related funding obligations on providers of IP telephony. Additionally, a number of states are aggressively trying to exert jurisdiction
over certain forms of IP telephony, including some of our offerings, making the legal status of our services uncertain and subject to change as a result of future regulatory action, judicial decisions
or legislation in any of the jurisdictions in which we operate. Increased regulation at the state level could increase the costs associated with our service offerings. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
retail offerings of both telecommunications and IP telephony require us to collect and remit various federal and state surcharges. We pass these regulatory fees along to our
customers consistent with federal and state law. With respect to our IP telephony offering, an increasing number of states are considering the imposition of additional state-based surcharges and fees.
We would likely pass such
surcharges and fees along to our customers resulting in increasing the overall bill for our customers. The resulting increase in cost associated with our service may make our services less competitive
with traditional providers of telecommunications services and may also put us at a competitive disadvantage to providers of IP telephony that choose not to comply with these obligations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> There may be risks associated with our ability to comply with the requirements of federal and other regulations related to Customer Proprietary Network Information.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC's existing rules provide that service providers may not use customer proprietary network information, or CPNI, without customer
approval except under specific circumstances, and must comply with detailed customer approval processes when using CPNI outside of such circumstances. The FCC's CPNI rules also impose, among other
obligations, data security requirements on service providers and interconnected VoIP providers like us. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the present time, we do not utilize our customer's CPNI in a manner which would require us to obtain consent from our customers but, in the event that we do in the future, we will be
required to adhere to specific CPNI rules targeted at marketing such services. Our failure to achieve compliance with any future CPNI orders, rules, filings or standards, or any enforcement action
initiated by the FCC, other federal agencies, state public utilities commissions, or other state entities, against us could have a material adverse effect on our business, financial condition or
operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> User concerns about our use and protection of personal data and the privacy of their communications and data protection breaches could harm our brand, reduce demand for our
products and expose us to government proceedings and actions. Failure or perceived failure by us to comply with our privacy policy or legal or regulatory requirements in one or multiple jurisdictions
could result in proceedings, actions or penalties against us.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effectiveness of our solutions relies on our customers' storage and use of data concerning their customers, including financial,
personally identifying and other sensitive data. Our customers' collection and use of data for consumer profiling may raise privacy and security concerns and negatively impact the demand for our
solutions. We have implemented various features intended to enable our customers to better comply with privacy and security requirements, such as opt-out messaging and checking, the use of
anonymous identifiers for sensitive data, and restricted data access, but these security measures may not be effective against all potential privacy
concerns and security threats. If a breach of customer data security were to occur, our solutions may be perceived as less desirable, which would negatively affect our business and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, governments in some jurisdictions have enacted or are considering enacting consumer data privacy legislation, including laws and regulations applying to the solicitation,
collection, processing and use of consumer data. This legislation could reduce the demand for our solutions if we fail to design or enhance our solutions to enable our customers to comply with the
privacy and security measures required by the legislation. Moreover, we may be exposed to liability under existing or new consumer data privacy legislation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our business is subject to certain risks associated with our ability to comply with the Communications Assistance for Law Enforcement Act.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When we provide certain services we are subject to the Communications Assistance for Law Enforcement Act, or CALEA. CALEA requires us
to have the capability to provide to law enforcement agencies certain information about traffic that our customers originate. This requires, among other things, that we have the capability to provide
information concerning the origination and destination of communications traffic as well as the ability to provide real-time surveillance. CALEA further requires that we have the
capability to deliver such information in a specific format and to a particular destination identified by law enforcement. The FCC's rules allow us to use third parties to comply with these
obligations but we are ultimately responsible for compliance. We may be unable to comply with CALEA in all instances, subjecting us to fines, penalties and other enforcement actions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Risks Related to Our Common Stock and this Offering  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Being a public company will increase the administrative costs of operating our business, including maintaining and improving our financial controls and complying with rules
and regulations, and may be a significant burden on our management team, thus requiring considerable expenditures of our resources.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a public company, we will incur additional legal, accounting and other expenses that we do not incur as a private company. The
Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules of the exchange on which our shares are listed, will apply to us as a
public company. Compliance with these rules and regulations will necessitate significant increases in our legal and financial budgets and may also strain our personnel, systems and </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>resources.
The Exchange Act requires, among other things, filing of annual, quarterly and current reports with respect to our business and financial results and condition. The Sarbanes-Oxley Act
requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Satisfying these requirements involves a commitment of
significant resources and management oversight. As a result of management's efforts to comply with such requirements, other important business concerns may receive insufficient attention, which could
have a material adverse effect on our business, financial condition and results of operations. Failure to meet certain of these regulatory requirements may also cause us to be delisted from the New
York Stock Exchange or Nasdaq Global Market. In addition, we currently have a relatively small finance staff and may have difficulty recruiting additional legal, accounting and financial staff with
appropriate public company experience and technical accounting knowledge. The hiring of such personnel will also increase our operating expenses in future periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept
reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate director and officer insurance, it may be more difficult for us to attract and retain
qualified persons to serve on our board of directors or as executive officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If we are unable to successfully remediate material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be
adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the audit of our financial statements for the year ended December&nbsp;31, 2010, our management and independent
registered public accounting firm identified two material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency, or a combination of control
deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our management and independent
registered public accounting firm did not
perform an evaluation of our internal control over financial reporting as of December&nbsp;31, 2010 in accordance with the provisions of the Sarbanes-Oxley Act. Had we and our independent registered
public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have
been identified by management or our independent registered public accounting firm, and those control deficiencies could have also represented one or more material weaknesses. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
management and independent registered public accounting firm identified material weaknesses related to (i)&nbsp;a lack of adequate control over the accounting for complex financial
instruments, including accounting for certain stock warrants and convertible instruments and (ii)&nbsp;a lack of adequate control to identify, evaluate, monitor and adjust our accrued liability for
peering partner disputes. Both of these control deficiencies resulted in a more than remote likelihood that a material misstatement of our annual and interim financial statements would not be
prevented or detected. As a result, audit adjustments to our financial statements were identified during the course of the audit. In an effort to remediate these material weaknesses, with respect to
complex financial instruments, we have retained consultants to assist us in properly accounting for complex financial instruments and have also developed in-house knowledge and expertise
related to the accounting literature surrounding complex financial instruments. With respect to peering partner disputes, we have developed, documented and initiated enhanced procedures over our
peering partner disputes to improve our ability to make reasonable estimates with respect to the amounts for which such disputes will ultimately be settled. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot assure you that these measures will significantly improve or remediate the material weakness described above. We also cannot assure you that we have identified all or that we
will not in the future have additional material weaknesses. Accordingly, material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting for
purposes of our </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>attestation
required by reporting requirements under the Exchange Act or Section&nbsp;404 of the Sarbanes-Oxley Act after this offering. The standards required for a Section&nbsp;404 assessment
under the Sarbanes-Oxley Act will require us to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. These stringent
standards require that our audit committee be advised and regularly updated on management's review of internal controls. Our management may not be able to effectively and timely implement controls and
procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to us as a public company. If we fail to staff our accounting and finance
function adequately or maintain internal controls adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable
to report our financial results accurately or in a timely manner and our business and stock price may suffer. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> We may need additional capital in the future and such capital may be limited or unavailable. Failure to raise capital when needed could prevent us from growing in accordance
with our plans.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may require more capital in the future from equity or debt financings to fund our operations, finance investments in equipment and
infrastructure, acquire complementary businesses and technologies, and respond to competitive pressures and potential strategic opportunities. We believe that our existing working capital, together
with the proceeds of this offering, will be sufficient to fund our working capital requirements, capital expenditures and operations for at least the next 12&nbsp;months. However, the assumptions on
which this assessment has been made may prove to be wrong, and it is possible that we could expend available financial resources sooner than we currently expect. If we are required to raise additional
funds through further issuances of equity or other securities convertible into equity, our existing stockholders could suffer significant dilution, and any new shares we issue could have rights,
preferences or privileges senior to those of the holders of our common stock, including the shares of common stock sold in this offering. The additional capital we may seek may not be available or, if
available, may not be available on favorable terms. In addition, our existing debt instruments limit our ability to incur additional indebtedness under certain circumstances. If we are unable to
obtain capital on favorable terms, or if we are unable to obtain capital at all, we may have to reduce our operations or forego opportunities, and this may have a material adverse effect on our
business, financial condition and results of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Failure to achieve and maintain effective internal controls in accordance with Section&nbsp;404 of the Sarbanes-Oxley Act could have a material adverse effect on our
business and stock price.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will be subject to rules adopted by the Securities and Exchange Commission, or SEC, pursuant to Section&nbsp;404 of the
Sarbanes-Oxley Act, which require us to include in our Annual Report on Form&nbsp;10-K our report on, and assessment of the effectiveness of, our internal controls over financial
reporting beginning with our year ending December&nbsp;31, 2012. Our independent auditors will also be required to attest to and report on the effectiveness of our internal controls over financial
reporting. If we fail to achieve and maintain the adequacy of our internal controls, there is a risk that we will not comply with all of the requirements imposed by Section&nbsp;404. Moreover,
effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. Any of these possible outcomes could result in an adverse
reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements and could result in investigations or sanctions by the SEC, our stock exchange
or other regulatory authorities or in stockholder litigation. Any of these factors ultimately could harm our business and could negatively impact the market price of our securities. Ineffective
control over financial reporting could also cause investors to lose confidence in our reported financial information, which could adversely affect the trading price of our common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, our management, including our chief financial officer and
chief executive </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>officer,
does not expect that our disclosure controls and procedures can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, have been detected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> There is no existing market for our common stock, and an active, liquid and orderly market for our common stock may not develop.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, there is no public market for our common stock. Investor interest in us may not lead to the development of an active trading
market. The initial public offering price for the shares of our common stock will be negotiated between us and representatives of the underwriters and may not be indicative of prices that will prevail
in the open market following this offering. You may not be able to resell our common stock at or above the initial public offering price. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The trading value of our common stock may be volatile, and you might not be able to sell your shares at or above the initial public offering price.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Though our common stock has no prior trading history, the trading prices of technology company securities in general have been highly
volatile. Accordingly, the trading price of our common stock is likely to be subject to wide fluctuations, and you may not be able to resell our common stock at or above the initial public offering
price. Factors, in addition to those outlined elsewhere in this prospectus, that may affect the trading price of our common stock include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>actual or anticipated variations in our operating results;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes in recommendations by any securities analysts that elect to follow our common stock;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the financial projections we may provide to the public, any changes in these projections or our failure to meet these
projections;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the loss of, or significant decrease in use of our services by, a key customer;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>market conditions in industry categories that we serve and the economy as a whole;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the loss of key personnel;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>regulatory changes affecting the delivery or overall value of our services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>lawsuits filed against us;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>price and volume fluctuations in the overall stock market; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>other events or factors, including those resulting from war, incidents of terrorism or responses to these events. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Future sales of shares by existing stockholders could cause our stock price to decline.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attempts by existing stockholders to sell substantial amounts of our common stock in the public market after the contractual
lock-up and other legal restrictions on resale discussed in this prospectus lapse could cause the trading price of our common stock to decline significantly. Based on shares outstanding as
of March&nbsp;31, 2011, upon completion of this offering, we will have outstanding&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock,
assuming no exercise of the underwriters' over-allotment
option. Of these shares, only shares of common stock sold in this offering to investors other than those subject to a 180-day contractual lock-up will be freely tradable,
without restriction, in the public market. J.P. Morgan Securities&nbsp;LLC and Deutsche Bank Securities Inc. may, in their sole discretion, </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>permit
our officers, directors, employees and current stockholders who are subject to a 180-day contractual lock-up to sell shares prior to the expiration of the
lock-up agreements. The lock-up is subject to extension under certain circumstances. For additional information, see "Underwriting." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
the lock-up agreements pertaining to this offering expire, substantially all of our shares will be eligible for sale in the public market, including shares held by
directors, executive officers and other affiliates, which will be subject to volume limitations under Rule&nbsp;144 under the Securities Act. In addition, shares subject to outstanding options and
reserved for future issuance under our stock option plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the
lock-up agreements and Rules&nbsp;144 and 701 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the
trading price of our common stock could decline. See "Shares Eligible for Future Sale" for more information regarding shares of our common stock that existing stockholders may sell after this
offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The research and reports that industry or financial analysts publish about us or our business will likely have an effect on the trading
price of our common stock. If an industry analyst decides not to cover our company, or if an industry analyst decides to cease covering our company at some point in the future, we could lose
visibility in the market, which in turn could cause our stock price to decline. If an industry analyst downgrades our stock, our stock price would likely decline rapidly in response. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The concentration of our capital stock ownership with insiders upon the completion of this offering will likely limit your ability to influence corporate matters including
the ability to influence the outcome of director elections and other matters requiring stockholder approval.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that our executive officers, directors, current five percent or greater stockholders and affiliated entities will
together beneficially own approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;percent of our common stock outstanding after this offering, assuming full exercise of the underwriters' over-allotment option. As a
result, these stockholders, acting together, will have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant
corporate transactions. Corporate action might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have
the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our management will have broad discretion over the use of the proceeds from this offering and might not apply the proceeds of this offering in ways that increase the value
of your investment.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management will have broad discretion to use the net proceeds from this offering. We expect to use the net proceeds from this
offering for general corporate purposes, including working capital. We may also use net proceeds for other purposes, including possible investments in, or acquisitions of, complementary products or
technologies, although we have no specific plans at this time to do so. We may fail to use these funds effectively to yield a significant return, or any return, on any investment of these net
proceeds. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> You will incur immediate and substantial dilution and may experience further dilution.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The initial public offering price of our common stock is substantially higher than $0.19, the net tangible book value per share of our
common stock as of December&nbsp;31, 2010, calculated on a pro forma basis for this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in net tangible book value per share from the price you paid, </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>28</FONT></P>

<HR NOSHADE>
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<BR>

<P style="font-family:times;"><FONT SIZE=2>based
on the initial offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. The exercise of options to purchase shares of our common stock outstanding as of December&nbsp;31, 2010 at a weighted average
exercise price of $0.46 per share will result in further dilution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management
and, as a result, depress the trading price of our common stock.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change of control of our
company or changes in our management that the stockholders of our company may deem advantageous. These provisions: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>establish a classified board of directors so that not all members of our board are elected at one time; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>authorize the issuance of "blank check" preferred stock that our board could issue to increase the number of outstanding
shares and to discourage a takeover attempt;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>limit the ability of our stockholders to call special meetings of stockholders;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our
stockholders;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>provide that the board of directors is expressly authorized to adopt, alter or repeal our bylaws; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted
upon by stockholders at stockholder meetings. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
anti-takeover defenses could discourage, delay or prevent a transaction involving a change of control of our company. These provisions could also discourage proxy
contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> We do not intend to pay dividends for the foreseeable future.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable
future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future
will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any
future gains on their investments. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>29</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="de77601_forward-looking_statements"> </A>
<A NAME="toc_de77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus includes forward-looking statements, including statements that involve expectations, plans or intentions (such as those
relating to future business or financial results, new features, products or services, or management strategies). You can identify these forward-looking statements by words such as "may," "will,"
"would," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. These forward-looking statements involve risks and uncertainties that could
cause our actual results to differ materially from those expressed or implied in these forward-looking statements. These risks and uncertainties include, among others, those described under "Risk
Factors" and elsewhere in this prospectus, including in our financial statements and related notes appearing in this prospectus, and the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to maintain or improve our growth rate, and fluctuations in our financial performance; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>intense competition from legacy and emerging communications service providers, including traditional telecommunications
carriers and other providers of specialized communications services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>availability and performance of third parties and third-party facilities, equipment and services; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to protect our intellectual property, technology and brand;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>regulation of our business and the risk that compliance with regulatory requirements may be costly and may require that we
change the services we offer, the price for our services or the way we do business in particular states or other regions;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the growth and availability of broadband Internet access;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to retain key personnel;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>risks associated with acquisitions and other strategic transactions;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to expand our service offerings; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the costs associated with being an independent public company and our ability to comply with the internal control and
reporting obligations of public companies. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>We
do not intend, and undertake no obligation, to update any of our forward-looking statements to reflect actual results, changes in circumstances, assumptions or beliefs, or future events or
circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>30</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="de77601_use_of_proceeds"> </A>
<A NAME="toc_de77601_2"> </A>
<BR></FONT><FONT SIZE=2><B>  USE OF PROCEEDS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the net proceeds from the sale of shares of our common stock that we are selling in this offering will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million if the underwriters' over-allotment option is exercised in full, based
on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the estimated price range shown on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated
offering
expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
$1.00 increase or decrease in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share would increase or decrease the net proceeds to us from the offering by
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions and estimated
offering
expenses payable by us. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would increase or decrease the net proceeds to us from this
offering by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions
and
estimated offering expenses payable by us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
principal purposes of this offering are to obtain additional capital, to create a public market for our common stock and to facilitate our future access to the public equity markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently intend to use the net proceeds received by us from this offering for working capital and general corporate purposes. We may also use a portion of our net proceeds to acquire
and invest in complementary products, technologies or businesses; however, we currently have no agreements or commitments to complete any such transaction and are not involved in negotiations to do
so. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot specify with certainty the particular uses for the net proceeds to be received by us from this offering. Accordingly, our management team will have broad discretion in using
the net proceeds to be received by us from this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pending
the use of proceeds from this offering as described above, we plan to invest the net proceeds in short- and intermediate-term, interest-bearing obligations,
investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="de77601_dividend_policy"> </A>
<A NAME="toc_de77601_3"> </A>
<BR></FONT><FONT SIZE=2><B>  DIVIDEND POLICY    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not
expect to pay any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on a number of
factors, including our earnings, capital requirements, financial condition, future prospects and other factors that our board of directors deems relevant. Additionally, under the terms of our Loan and
Security Agreement dated as of May&nbsp;5, 2010 by and between us and Hercules Technology II,&nbsp;L.P., and Comerica Bank, we must obtain written consent from the lenders prior to paying any cash
dividends. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>31</FONT></P>

<HR NOSHADE>
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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dg77601_capitalization"> </A>
<A NAME="toc_dg77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  CAPITALIZATION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our cash and cash equivalents and capitalization as of December&nbsp;31, 2010, as
follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on an actual basis;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on a pro forma basis after giving effect to the automatic conversion of all outstanding shares of our convertible
preferred stock into 41,695,608 shares of common stock, assuming the conversion immediately upon the completion of this offering, and the resulting reclassification of the convertible preferred stock
warrant liability to additional paid-in capital; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on a pro forma as adjusted basis after giving effect to the automatic conversion of all outstanding shares of our
convertible preferred stock into 41,695,608 shares of common stock assuming the conversion immediately upon the completion of this offering, the resulting reclassification of the convertible preferred
stock warrant liability to additional paid-in capital, and our receipt of the net proceeds from the sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock offered by us in this offering, at an
assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the estimated price range set forth on the cover page of the prospectus, after deducting estimated
underwriting
discounts and commissions and estimated offering expenses payable by us. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should read this table in conjunction with the sections titled "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and our financial statements and related notes included elsewhere in this prospectus. </FONT></P>
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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>As of December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Actual </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro Forma </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro Forma as<BR>
Adjusted </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except share<BR>
and per share data)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$9,159</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$9,159</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total indebtedness(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$18,675</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$18,675</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,400</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,007</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Convertible preferred stock, $0.0001 par value per share: 44,760,592 shares authorized, 41,695,608 shares issued and outstanding actual; no shares
authorized, issued and outstanding pro forma and pro forma as adjusted (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,379</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stockholders' equity (deficit):</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock, $0.0001 par value per share: 80,000,000 shares authorized, 8,802,409(2) shares issued and outstanding actual; 80,000,000 shares authorized,
50,498,017(2) shares issued and outstanding pro forma (unaudited);&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding pro forma as adjusted (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,487</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(36,611</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(36,611</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' equity (deficit)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(32,891</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,881</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total capitalization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$31,563</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$31,563</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Total
indebtedness includes $18.2&nbsp;million in equipment financing obligations and $0.5&nbsp;million payable under our capital lease obligation (see
Notes&nbsp;4 and 10 to our audited financial statements).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Does
not include 1,538,640 shares provided as security for obligations under non-recourse notes from certain stockholders, as such shares are treated as
options for purposes of accounting, though they are legally issued and outstanding. </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>32</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=35,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=580708,FOLIO='32',FILE='DISK105:[11ZBH1.11ZBH77601]DG77601A.;22',USER='ABEAULI',CD=';9-MAY-2011;20:10' -->
<A NAME="page_dg77601_1_33"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each $1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the midpoint of the
estimated price
range set forth on the cover page of the prospectus, would increase (decrease)
the amount of pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and net proceeds we receive from this offering
by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the
estimated
underwriting discounts and commissions and estimated offering expenses. Similarly, each increase (decrease) of one million shares in the number of shares of common stock offered by us would increase
(decrease) cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and net proceeds we receive from this offering by approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the underwriters' over-allotment option is exercised in full, pro forma as adjusted cash and cash equivalents, common stock and additional paid-in capital,
stockholders' equity (deficit) and shares issued and outstanding as of December&nbsp;31, 2010 would be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares of common stock issued and outstanding actual, pro forma, and pro forma as adjusted in the table above excludes the following shares: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>14,722,328 shares of common stock issuable upon the exercise of options outstanding, at a weighted average exercise price
of $0.46 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>807,850 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock, at a weighted
average exercise price of $0.71 per share; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>2,743,077 shares of common stock, on an as-converted basis, issuable upon the exercise of outstanding warrants
to purchase convertible preferred stock assuming the conversion immediately upon the completion of this offering, at a weighted average exercise price of $0.41 per share. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>33</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=36,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=684365,FOLIO='33',FILE='DISK105:[11ZBH1.11ZBH77601]DG77601A.;22',USER='ABEAULI',CD=';9-MAY-2011;20:10' -->
<A NAME="page_dg77601_1_34"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dg77601_dilution"> </A>
<A NAME="toc_dg77601_2"> </A>
<BR></FONT><FONT SIZE=2><B>  DILUTION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the
assumed initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible
book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net
tangible book value per share of common stock immediately after completion of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of common stock outstanding. Our historical net
tangible book value (deficit) as of December&nbsp;31, 2010, was $(1.6) million, or $(0.18) per share. Our pro forma net tangible book value as of December&nbsp;31, 2010 was $9.8&nbsp;million, or
$0.19 per share, based on the total number of shares of our common stock outstanding as of December&nbsp;31, 2010, after giving effect to the conversion of all outstanding shares of our convertible
preferred stock into common stock assuming the conversion immediately upon the completion of this offering and the resulting reclassification of the convertible preferred stock warrant liability to
additional paid-in capital. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
giving effect to our sale of shares of common stock in this offering at the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of December&nbsp;31, 2010 would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. This represents an immediate increase in net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to existing stockholders and an immediate
dilution in net tangible book value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to purchasers of common stock in this offering, as illustrated in the following table: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Assumed initial public offering price per share</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net tangible book value (deficit) per share as of December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Increase in pro forma net tangible book value (deficit) per share attributable to new investors</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma as adjusted net tangible book value per share after this offering</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dilution per share to investors in this offering</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
$1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the estimated price range listed on the cover page of
this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, assuming the number of shares offered by us remains the same as set
forth on
the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the underwriters' over-allotment option to purchase additional shares from us is exercised in full, the pro forma as adjusted net tangible book value per share after this
offering would be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share and the dilution to
new investors purchasing shares in this offering would be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents on a pro forma as adjusted basis as of December&nbsp;31, 2010, after giving effect to the conversion of all outstanding shares of convertible preferred
stock into common stock assuming the conversion immediately upon the closing of this offering, the differences between the existing stockholders and the purchasers of shares in this offering with
respect to the number of shares purchased from us, the total consideration paid, which includes net proceeds received from the issuance of common and convertible preferred stock, cash received from
the exercise of stock options </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>34</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>and
the value of any stock issued for services and the average price paid per share (in thousands, except per share amounts and percentages): </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Purchased </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total Consideration </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Average Price<BR>
Per Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percent </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percent </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Existing stockholders</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>New investors in this offering</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Totals</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
$1.00 increase (decrease) in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the midpoint of the range listed on the cover page of this prospectus,
would increase (decrease) total consideration paid by new investors by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, total consideration paid by all stockholders by
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and the average price per share paid by all
stockholders by $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, in each case assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, and without deducting the estimated
underwriting discounts and commissions and estimated offering payable by us. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would
increase or decrease cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and the net proceeds to us from this offering by approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the underwriters exercise their over-allotment option in full, our existing stockholders would own&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;percent and our new investors would own
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;percent of the total number of shares of our common stock outstanding after this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing calculations are based on our shares outstanding as of December&nbsp;31, 2010 assuming our outstanding convertible preferred stock converts into 41,695,608 shares of
common stock and excludes the following shares: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>14,722,328 shares of common stock issuable upon the exercise of options outstanding, at a weighted average exercise price
of $0.46 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>807,850 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock, at a weighted
average exercise price of $0.71 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>2,743,077 shares of common stock, on an as-converted basis, issuable upon the exercise of outstanding warrants
to purchase convertible preferred stock assuming the conversion immediately upon the completion of this offering, at a weighted average exercise price of $0.41 per share; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1,538,640 shares provided as security for obligations under non-recourse notes from certain stockholders, as such shares
are treated as options for purposes of accounting though they are legally issued and outstanding. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>35</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="di77601_selected_financial_data"> </A>
<A NAME="toc_di77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  SELECTED FINANCIAL DATA    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected statement of operations data for the years ended December&nbsp;31, 2008, 2009 and 2010 and the balance sheet data as of
December&nbsp;31, 2009 and 2010 are derived from our audited financial statements included elsewhere in this prospectus. The selected balance sheet data as of December&nbsp;31, 2008 are derived
from our audited financial statements that are not included in this prospectus. The selected statement of operations data for the years ended December&nbsp;31, 2006 and 2007 and the balance sheet
data as of December&nbsp;31, 2006 and 2007 are derived from our unaudited financial statements, which are not included in this prospectus. The unaudited results for the years ended
December&nbsp;31, 2006 and 2007 have been prepared on the same basis as the audited financial statements, and reflect all adjustments necessary to fairly reflect our financial position of
December&nbsp;31, 2006 and 2007 and the results of operations for the years then ended. Our historical results are not necessarily indicative of the results that may be expected in the future. You
should read the following selected historical financial data below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial
statements, related notes, and other financial information included elsewhere in this prospectus. The selected financial data in this section is not intended to replace the financial statements and is
qualified in its entirety by the financial statements and related notes included in this prospectus. </FONT></P>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2006 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2007 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except share and per share data)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Statement of Operations Data:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$18,970</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$27,586</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$43,352</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$76,194</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$111,549</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peering partner compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,051</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19,506</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,824</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,232</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>78,820</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Infrastructure costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>895</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,426</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,987</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,265</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,636</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,118</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,830</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,353</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,673</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,578</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,258</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,527</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,447</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,567</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,069</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,506</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,596</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,741</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,367</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,693</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,032</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,879</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,177</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,568</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,547</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>264</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,635</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,852</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,373</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23,124</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37,399</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47,381</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>77,045</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>112,062</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss from operations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,154</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,813</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,029</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(851</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(513</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(101</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(487</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,274</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,488</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,614</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>118</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>86</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,004</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,492</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(4,137</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(10,214</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(5,140</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(3,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share of common stock, basic and diluted(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(0.43</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(1.15</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(0.59</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(0.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(1.33</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing net loss per share of common stock, basic and diluted(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,525,979</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,874,075</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,759,925</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>$(0.07</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,447,513</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>36</FONT></P>

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<!-- ZEQ.=1,SEQ=39,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=112989,FOLIO='36',FILE='DISK105:[11ZBH1.11ZBH77601]DI77601A.;18',USER='DHOLBRO',CD=';7-MAY-2011;00:09' -->
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2006 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2007 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Balance Sheet Data:</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$5,990</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$1,943</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$11,764</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$10,134</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$9,159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Working capital (deficit)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,721</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(288</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,256</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,710</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3,536</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,714</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,661</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>28,099</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>36,462</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,187</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total indebtedness</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,528</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,117</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,608</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,035</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,675</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warrant liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>298</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,322</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,311</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,945</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,400</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Redeemable convertible preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,164</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,170</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33,345</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33,345</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33,379</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' deficit</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4,560</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(14,558</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(18,829</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21,875</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(32,891</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>The
following table presents stock-based compensation expense included in each expense category: </FONT></DD></DL>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2006 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2007 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$31</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$144</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>81</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>271</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>52</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>185</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>111</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>153</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>52</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>106</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>186</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Total stock-based compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$274</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$115</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$319</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$297</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$564</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Please
see Notes&nbsp;1 and 12 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our
basic and diluted net loss per share of common stock and pro forma net loss per share of common stock. </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>37</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dk77601_management_s_discussion_and_an__man03466"> </A>
<A NAME="toc_dk77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  MANAGEMENT'S DISCUSSION AND ANALYSIS<BR>  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified
below and elsewhere in this prospectus, particularly those discussed in the section entitled "Risk Factors." </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading provider of on-demand, cloud-based communications services to service providers and enterprises. Our
customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we
refer to as our CloudWorx CaaS Platform, to deliver multimodal communications services, including voice, unified communications, video and other rich-media applications, to communications
devices with reduced cost and improved quality compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to
our flexible, software-based, multimodal, IP-based solutions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
global telecommunications industry is undergoing a shift to next-generation IP-based communications technologies from legacy telephone networks. This transition is being
driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models such as Software as a
Service, or SaaS. We believe these trends, along with the inability of legacy infrastructures to support the convergence of business and next-generation communications services, such as
VoIP and rich-media communications, will continue to drive demand for a flexible and high-quality cloud-based communications platform such as ours. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revenue is derived principally from the delivery of communications services over our CloudWorx CaaS Platform. Substantially all of our revenue to date has been derived from the
transmission of voice traffic and related value-added services. Service provider and enterprise customers direct communications traffic to us, which we route through our peering partners so that the
traffic can be delivered to the ultimate recipient of the communication, which is the end-point device. We typically charge our customers based upon minutes of use for traffic delivered through our
platform. Our revenue has grown from $43.4&nbsp;million for the year ended December&nbsp;31, 2008 to $111.5&nbsp;million for the year ended December&nbsp;31, 2010. The minutes of use for
traffic delivered through our platform increased from 3.8&nbsp;billion in 2008 to almost 17&nbsp;billion in 2010, and our number of customers increased from 78 to 147. Similarly, the number of our
service provider peering partners increased from 34 in 2008 to more than 40 in 2010, and the number of telephone numbers and end point identifying addresses in our SuperRegistry directory increased to
over 400&nbsp;million in 2010. Our revenue growth has been driven by a combination of increases in revenue from existing customers and the addition of new customers. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically,
substantially all of our revenue was derived from service provider customers. In 2010, revenue from enterprise customers increased significantly but still represented a
small percentage of our revenue. We have made investments in research and development to create services more targeted to enterprise customers and in sales and marketing to build and manage our
enterprise focused sales channels. As a result, we expect that revenue from enterprise customers will represent an increasing percentage of our revenue in future periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
single largest cost is the amount we pay to our peering partners for delivering communications to the ultimate end-point device user. Peering partners are the parties with whom we
have contractual arrangements pursuant to which we direct the communications traffic routed through our CloudWorx CaaS Platform. When the end-point device user is also a customer of one of our peering
partners, we </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>38</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>refer
to this as direct peering, and when the end-point device user is not a customer of one of our peering partners, we refer to this as indirect peering. Our peering partner compensation expense has
historically increased largely in line with our increases in revenue. As we continue to grow the size of our SuperRegistry directory, we expect an increasing portion of our traffic will be delivered
as a result of direct peering and that our costs, as a percentage of revenue, will decrease. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
cloud-based software architecture has been designed to be scalable and enable us to continue to increase revenue without incurring a proportionate increase in our employee,
infrastructure, and other operating costs. Since our platform is software-based, our CloudWorx CaaS Platform can be scaled quickly and efficiently and we are able to increase our revenue without
making substantial investments in capital expenditures, regardless of geography. Because we have relied primarily on technology and software to respond to the increased demand for our services, our
revenue growth has not required a proportionate increase in headcount. In addition, since we are able to use third-party data centers and third-party fiber networks to deliver IP-based
traffic, we have a limited need for investments in our internal physical infrastructure. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
operate in a competitive and dynamic pricing environment. We monitor and, as appropriate, update the pricing that we offer our customers based upon multiple factors as we seek to
offer our customers competitive pricing while satisfying their needs for carrier level quality and reliability. Likewise, the amounts we must pay to our peering partners are subject to change. Our
proprietary software enables us to collect and quickly analyze information on communications traffic and provide our services at a competitive price without compromising the quality of our service. In
addition, as the volume of traffic through our CloudWorx CaaS Platform increases, we expect we will be able to enter into better pricing arrangements with our peering partners. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
contracts with customers and peering partners do not include volume or pricing commitments and a significant portion of our revenue has historically been concentrated in a relatively
limited number of customers. Although we have periodically experienced significant period-to-period variations in the revenue we derive from some of our largest customers, in
each quarter but one since the quarter ended March&nbsp;31, 2008, our aggregate revenue derived from existing customers increased over the revenue from the prior period. We have established and
maintain deep relationships with our customers, allowing us to have significant visibility into our customers' changing business plans and deployment decisions. Additionally, because we serve a
substantial number of the larger service providers in the U.S. market, we are able to monitor and benefit from the evolving trends among these service providers with respect to communications traffic
shifting between wireline and wireless providers, the continued migration of networks from the PSTN to SIP/IP-based networks and the changes in end-user customers among service
providers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to continue to grow our business by generating additional revenue from existing and new service provider and enterprise customers. We also intend to continue to expand our
relationships with channel and technology partners to increase our number of enterprise customers. To date, we have generated our revenue principally from customers in the United States. We expect to
expand our business internationally in future periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have incurred losses since inception as we have grown our business and invested in our CloudWorx CaaS Platform and selling and administrative functions. As of December&nbsp;31,
2010, we had an accumulated deficit of $36.6&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Key Metrics of Our Business  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We monitor revenue as a measure of our overall business performance. We continually analyze and adjust the prices we charge our
customers based on market conditions. Although our revenue is generally not impacted by seasonality, our revenue is principally driven by business communications usage and is impacted by the weighted
number of business days in each quarter. To derive the weighted </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>39</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>number
of business days in each quarter, we weight each day of the week and each holiday based upon historical traffic levels on those days. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also track operating margin to monitor operating costs, including peering partner compensation, infrastructure costs, capital expenditures and headcount, as a percentage of revenue.
We expect our operating costs as a percentage of revenue will decrease as our business continues to grow. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Key Components of Our Results of Operations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Revenue</I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
derive our revenue primarily from service provider and enterprise customer usage of our CloudWorx CaaS Platform services to connect our customers' traffic to the ultimate end-point
device and charge on a minute of use basis. Our revenue growth has resulted from a combination of delivering additional minutes from existing customers and adding new customers. The rates charged per
minute are determined by contractual terms between us and our customers and are subject to periodic changes. To date, our revenue has principally been derived from service provider customers and
substantially all of such revenue has been for voice traffic and related value added services. In addition to revenue based upon minutes of use from service providers, we also derive revenue from
communication services provided to enterprise customers either on a minutes of use or on a monthly recurring basis per subscriber as the services are provided. While this revenue has not been a
significant percentage of our revenue to date, we expect that revenue from enterprise customers will comprise an increasing portion of our revenue in future periods as we increase and expand
relationships with our customers, channel partners and technology partners, and those customers and channel partners develop additional applications that utilize our services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
is impacted by a variety of factors regarding the composition of the minutes of use, including whether they are wireless or VoIP minutes, on the one hand, or wireline minutes, on
the other hand. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Operating Expenses</I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating
expenses consist of peering partner compensation, infrastructure, operations, research and development, sales and marketing, general and administrative and depreciation and
amortization costs. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Peering Partner Compensation  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Peering partner compensation represents the costs we incur to connect our customers' traffic to the ultimate end-point device. These
costs consist primarily of charges for access to our peering partners' networks and are recorded at the time of usage. They are typically charged based upon minutes of use, and vary based upon
negotiated rates with each peering partner. Peering partner compensation costs are impacted by a variety of factors relating to the composition of the minutes, including whether they are wireless or
VoIP, on the one hand, or wireline, on the other hand. These costs are also impacted by whether the delivery is the result of direct or indirect peering. For indirect peering, our peering partner
generally must pay another service provider who ultimately delivers the traffic to the end-user. As such, our peering partner compensation costs for this traffic increase accordingly. As
we continue to grow the size of our SuperRegistry directory, we expect an increasing portion of our traffic will be delivered as a result of direct peering and that our costs as a percentage of
revenue will decrease. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recognize peering partner compensation costs as they are incurred in accordance with contractual requirements. Invoices received from our peering partners often cover billing for
millions of minutes. We perform monthly bill verification procedures to identify errors in peering partners' billing processes. These verification procedures include the examination of the bills,
review of call detail records, comparing billing rates used with contractual billing rates, evaluating the trends of invoiced </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>40</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>amounts
by peering partner and reviewing the types of charges being processed. If we discover a billing discrepancy as a result of our review, we then proactively seek to resolve the matter with our
peering partner. When applicable, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on our estimate of the amount that will eventually
be payable. If we subsequently determine that the disputed amounts will be settled for an amount different than the amount which we originally accrued, we will recognize the difference as an
adjustment to peering partner compensation. We believe that our procedures are designed to properly assess dispute accruals, however, changes to the estimates used in its calculation could result in a
material impact on our statement of operations. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Infrastructure Costs  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infrastructure costs include the costs of utilizing third party telecommunications networks, amounts we pay for use of
co-location facilities and interconnection services, and costs of equipment and software maintenance and support. The majority of these costs are fixed in nature. We make commitments for
infrastructure usage in anticipation of our future growth, balancing cost against the length of the commitment to cost effectively offer the quality and reliability that our customers require. We seek
to expand our capacity in advance of expected future growth needs. As such, our infrastructure costs may vary as a percentage of revenue in any particular period based upon the timing of these
investments in additional capacity. However, we expect that these costs will decline as a percentage of revenue over time. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Operations  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operations expenses consist of the costs of our administrative facilities and the costs related to our personnel who are directly
responsible for maintaining and expanding our CloudWorx CaaS Platform. Although there may be fluctuations from period to period as we hire additional personnel to expand our operations, we expect that
these costs will decline as a percentage of revenue in future periods. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Research and Development  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses consist of costs incurred for internal development projects and are comprised of personnel costs,
testing and compliance services, and facilities costs. We are currently devoting substantial resources to the development of additional functionality for our existing products and the development of
new application components and APIs. We generally expense research and development costs as incurred. Some direct development costs related to the internally developed software used to provide our
services are capitalized and depreciated over their useful life. The capitalized cost of this internally developed software for use in providing our services may increase as we continue to develop
additional functionality to facilitate the delivery of our services. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Sales and Marketing  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales and marketing expenses consist of personnel-related costs, sales commissions, travel costs and facilities costs and, to a lesser
extent, costs associated with marketing and publicizing our products and services. We primarily use a direct sales approach for our service provider customers and an indirect approach using sales
channels for our enterprise customers. We plan to continue to invest in sales and marketing to expand and grow our business. However, we expect that these costs as a percentage of revenue will decline
in future periods. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> General and Administrative  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses consist of personnel-related costs, professional services, and facilities costs related to our
executive, finance, human resources and information technology functions. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>41</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Professional
services consist of outside legal and accounting services and information technology consulting costs. These costs have generally increased as we have invested in our administrative
infrastructure to support our growth. Following the completion of this offering, we expect to incur additional expenses associated with being a public company, including increased legal and accounting
costs, investor relations costs and compliance costs in connection with the internal control requirements of the Sarbanes-Oxley Act. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Depreciation and Amortization  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization expenses relate to our property and equipment and finite-lived intangible assets. Depreciation expense
for property and equipment is primarily related to equipment that hosts our CloudWorx CaaS Platform housed at co-location facilities and is computed using the straight-line
method over the estimated useful lives of the assets. This equipment is depreciated over seven years and all other equipment is depreciated over three years. Amortization for leasehold improvements is
computed using the straight-line method over the shorter of the term of the lease or estimated useful lives of the assets. Amortization of finite-lived intangible assets is computed using
the straight-line method over the estimated economic life of the asset. For the capitalized development costs related to our CloudCentral customer portal, the amortization period is seven
years. For capitalized patent costs, the amortization period is the term of the patent, generally 14&nbsp;years, or the estimated economic life if deemed to be shorter. We expect depreciation and
amortization expenses to continue to increase on an absolute level as we increase our investments in equipment, but to decrease as a percentage of our revenue. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Other Income (Expense)</I></B></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Interest Expense, Net  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense, net consists primarily of interest accrued or paid on our equipment financing obligations and our loan and security
agreements, as well as the amortization of debt discount and deferred financing costs. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Change in Fair Value of Warrant Liabilities  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The change in fair value of warrant liabilities consists of the change in the fair value of our warrants to purchase convertible
preferred stock and those warrants to purchase common stock with price protection features. These outstanding warrants are classified as liabilities and, as such, are remeasured to fair value at each
balance sheet date with the corresponding gain or loss from the adjustment recorded in our statement of operations. The fair value of the warrants is estimated using the Black-Scholes option-pricing
model and incorporating considerations of the potential value associated with price protection features. We will continue to record adjustments to the fair value of the warrants until the earlier of
the exercise or expiration of the warrants. Following the
completion of this offering, we will no longer be subject to these charges relating to the warrants for the purchase of our convertible preferred stock as they will be converted into warrants for
common stock and will not have price protection features. However, we will continue to adjust our existing common stock warrants with price protection features for changes in fair value until the
earlier of the exercise or expiration of the warrants. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Internal Control Over Financial Reporting  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the audit of our financial statements for the year ended December&nbsp;31, 2010, our management and independent
registered public accounting firm identified two material weaknesses in our internal control over financial reporting, as defined in rules established by the Public Company Accounting Oversight Board,
or PCAOB. These material weaknesses related to (i)&nbsp;a lack of adequate </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>42</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>control
over the accounting for complex financial instruments, including accounting for certain stock warrants and convertible instruments and (ii)&nbsp;a lack of adequate controls to identify,
evaluate, monitor and adjust our accrued liability for peering partner disputes. As a result, audit adjustments to our financial statements were identified during the course of the audit. In an effort
to remediate these material weaknesses, with respect to complex financial instruments, we have retained consultants to assist us in properly accounting for complex financial instruments and have also
developed in-house knowledge and expertise related to the accounting literature surrounding complex financial instruments. With respect to peering partner disputes, we have developed,
documented and initiated enhanced procedures over our peering partner disputes to improve our ability to make reasonable estimates with respect to the amounts that such disputes will ultimately be
settled. We cannot assure you that these measures will significantly improve or remediate the material weaknesses described above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assessing
our procedures to improve our internal control over financial reporting is an ongoing process. We are currently not required to comply with Section&nbsp;404 of the
Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. As a result, our management did not perform an
evaluation of our internal control over financial reporting as of December&nbsp;31, 2010. Further, our independent registered public accounting firm has not been engaged to express, nor have they
expressed, an opinion on the effectiveness of our internal control over financial reporting. We currently do not have an internal audit function. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the year ending December&nbsp;31, 2012, pursuant to Section&nbsp;404 of the Sarbanes-Oxley Act, management will be required to deliver a report that assesses the effectiveness of
our internal control over financial reporting. Under current SEC rules, if we are an accelerated filer, our independent registered public accounting firm will be required to deliver an attestation
report on the effectiveness of our internal control over financial reporting beginning with the year ending December&nbsp;31, 2012. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>43</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Results of Operations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents our statement of operations for the periods indicated (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43,352</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>76,194</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>111,549</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peering partner compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29,824</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50,232</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>78,820</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Infrastructure costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,987</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,265</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,636</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,353</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,673</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,578</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,447</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,567</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,069</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,741</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,367</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,693</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,177</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,568</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,547</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,852</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,373</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,381</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>77,045</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112,062</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss from operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4,029</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(851</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(513</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,274</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,488</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,614</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>163</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,492</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5,140</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3,343</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(11,619</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" >


<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
stock-based compensation expense as follows (in thousands): </FONT></DD></DL>
 </DIV>
<DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$31</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>144</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>81</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>185</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>111</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>153</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>106</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>186</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Total stock-based compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$319</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$297</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>564</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>44</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=47,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=724316,FOLIO='44',FILE='DISK105:[11ZBH1.11ZBH77601]DK77601A.;49',USER='KSOLTER',CD=';9-MAY-2011;21:31' -->
<A NAME="page_dk77601_1_45"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the results of operations for the specified periods as a percentage of our revenue for those periods: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="20pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="20pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peering partner compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>69</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>66</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>71</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Infrastructure costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>109</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>101</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss from operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> (12</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> (4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> (10</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> Year ended December&nbsp;31, 2010 compared to the year ended December&nbsp;31, 2009  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Revenue  </I></B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="14pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="14pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="14pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>76,194</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>111,549</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>35,355</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revenue increased by $35.3&nbsp;million, or 46 percent, to $111.5&nbsp;million in 2010 from $76.2&nbsp;million in 2009. This increase primarily reflected an increase of
$28.8&nbsp;million resulting from the addition in late 2009 of a large service provider customer and an aggregate $10.9&nbsp;million in revenue due to increased usage from other existing service
provider customers offset in part by a decrease of $17.1&nbsp;million in revenue from one customer. The remaining increase was due to revenue from new customers in 2010. Revenue from our three
largest customers represented 50 percent of our revenue in 2010 as compared to 61 percent in 2009. Revenue from particular customers may vary from period to period as our contracts do not include
volume or pricing commitments. Revenue from particular customers has also varied as a result of industry consolidation and as our customers have added or lost end-users, and their
associated communications traffic, over time. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Operating Expenses  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Peering Partner Compensation  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="14pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="14pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="14pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peering partner compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50,232</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>78,820</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>28,588</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
peering partner compensation costs increased by $28.6&nbsp;million, or 57 percent, to $78.8&nbsp;million in 2010 from $50.2&nbsp;million in 2009. This increase was primarily
due to increased traffic through our CloudWorx CaaS Platform. Peering partner compensation increased as a percentage of revenue from </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>45</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=8,SEQ=48,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=181032,FOLIO='45',FILE='DISK105:[11ZBH1.11ZBH77601]DK77601A.;49',USER='KSOLTER',CD=';9-MAY-2011;21:31' -->
<A NAME="page_dk77601_1_46"> </A>


<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>66&nbsp;percent
in 2009 to 71 percent in 2010. In 2009, we benefited from a more favorable revenue mix than in 2010 due to the composition of minutes, causing peering partner compensation as a
percentage of revenue to be lower in 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Infrastructure Costs  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Infrastructure costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,265</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,636</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,371</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>26</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infrastructure
costs increased by $1.4&nbsp;million, or 26&nbsp;percent, to $6.6&nbsp;million in 2010 from $5.3&nbsp;million in 2009. This increase was necessary to support the
increase in minutes of use by our customers. In addition, our maintenance costs increased by $0.7&nbsp;million due to a year-over-year increase in costs related to the
equipment that hosts our CloudWorx CaaS Platform. Infrastructure costs decreased as a percentage of revenue from 7&nbsp;percent in 2009 to 6&nbsp;percent in 2010, as we were able to process the
increase in minutes of use without having to make a proportional investment in our infrastructure. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Operations  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,673</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,578</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>905</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operations
expenses increased by $0.9&nbsp;million, or 19&nbsp;percent, to $5.6&nbsp;million in 2010 from $4.7&nbsp;million in 2009. This increase was primarily the result of a
$0.8&nbsp;million increase in costs related to personnel due to an increase in the headcount in our operations group. Operations expenses decreased as a percentage of revenue from 6&nbsp;percent
in 2009 to 5&nbsp;percent in 2010, as we were able to increase our revenue without a proportional increase in our operations staff. Operations expenses included $31,000 in stock compensation expense
in 2009 and $0.1&nbsp;million in 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Research and Development  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,567</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,069</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>502</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and development expenses increased by $0.5&nbsp;million, or 14&nbsp;percent, to $4.1&nbsp;million in 2010 from $3.6&nbsp;million in 2009. This increase was primarily the
result of a $0.4&nbsp;million increase in costs related to personnel due to an increase in headcount as we expanded our product development efforts, in particular for our CloudCentral portal and
other new and enhanced services for our enterprise customers. Research and development expenses decreased as a percentage of revenue from 5&nbsp;percent in 2009 to 4&nbsp;percent in 2010,
notwithstanding an increase in research and development headcount, as a portion of research and development costs were capitalized. Capitalized software development costs increased from $0 in 2009 to
$0.7&nbsp;million in 2010. Research and development expenses included $49,000 in stock compensation expense in 2009 and $81,000 in 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Sales and Marketing  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,367</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,693</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,326</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>46</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=49,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=240568,FOLIO='46',FILE='DISK105:[11ZBH1.11ZBH77601]DK77601A.;49',USER='KSOLTER',CD=';9-MAY-2011;21:31' -->
<A NAME="page_dk77601_1_47"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
and marketing expenses increased by $1.3&nbsp;million, or 21&nbsp;percent, to $7.7&nbsp;million in 2010 from $6.4&nbsp;million in 2009. This increase was primarily the
result of a $1.3&nbsp;million increase in costs related to personnel due to an increase in headcount and a $0.5&nbsp;million increase in sales commissions and sales agent fees due to the increase
in revenue in 2010. These increases were offset by a $0.4&nbsp;million decrease in contractor and consulting fees, as we hired more employees. Sales and marketing expenses decreased as a percentage
of revenue from 8&nbsp;percent in 2009 to 7&nbsp;percent in 2010. Sales and marketing expenses included $0.1&nbsp;million in stock compensation expense in 2009 and $0.2&nbsp;million in 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>General and Administrative  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,568</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,547</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>979</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
and administrative expenses increased by $1.0&nbsp;million, or 21&nbsp;percent in 2010 to $5.5&nbsp;million from $4.6&nbsp;million in 2009. This increase was primarily
the result of an increase of $1.0&nbsp;million in costs related to personnel due to an increase in headcount as we continued to invest in our administrative infrastructure in anticipation of future
growth, $0.5&nbsp;million for regulatory filings and related professional services and $0.1&nbsp;million in recruiting costs. These increases were offset by decreases in bad debt expense of
$0.6&nbsp;million and legal costs of $0.3&nbsp;million. The decrease in bad debt expense was due to larger provisions taken in 2009 for customers whose receivables became uncollectible in that
year. General and administrative expenses decreased as a percentage of revenue from 6&nbsp;percent in 2009 to 5&nbsp;percent in 2010 due to a decrease in bad debt expense and an increase in
revenue without a need for a proportionate increase in administrative staff. General and administrative expenses included $0.1&nbsp;million in stock compensation expense in 2009 and
$0.2&nbsp;million in 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Depreciation and Amortization  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,373</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,346</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization expenses increased by $1.3&nbsp;million, or 57&nbsp;percent in 2010 to $3.7&nbsp;million from $2.4&nbsp;million in 2009 primarily due to an increase
in costs related to the equipment that hosts our CloudWorx CaaS Platform, as we added more capacity to address the increase in minutes of use and expansion of our customer base. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Interest Expense, Net  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,488</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,614</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,126</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>76</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense, net increased by $1.1&nbsp;million, or 76&nbsp;percent, in 2010 to $2.6&nbsp;million from $1.5&nbsp;million in 2009. This increase was primarily a result of
additional borrowings under our equipment financing agreements and the amortization of debt discount and deferred financing fees on all our debt obligations. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>47</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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</FONT> <FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>Change in Fair Value of Warrant Liabilities  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,492</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,488</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>746</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
change in fair value of warrant liabilities increased by $7.5&nbsp;million to an expense of $8.5&nbsp;million in 2010 from an expense of $1.0&nbsp;million in 2009. The change
was primarily due to the increase in the fair value of the stock underlying the warrants. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Year ended December&nbsp;31, 2009 compared to the year ended December&nbsp;31, 2008  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Revenue  </I></B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43,352</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>76,194</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32,842</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>76</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revenue increased by $32.8&nbsp;million, or 76&nbsp;percent, to $76.2&nbsp;million in 2009 from $43.4&nbsp;million in 2008. This increase primarily reflected a
$17.3&nbsp;million increase in revenue from our largest customer and $8.9&nbsp;million from new customers in 2009. Revenue from our three largest customers represented 61&nbsp;percent of our
revenue in 2009 as compared to 56&nbsp;percent in 2008. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Operating Expenses  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Peering Partner Compensation  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peering partner compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29,824</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50,232</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,408</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>68</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
peering partner compensation costs increased by $20.4&nbsp;million, or 68&nbsp;percent, to $50.2&nbsp;million in 2009 from $29.8&nbsp;million in 2008 due to increased traffic
over our CloudWorx CaaS Platform. Peering partner compensation decreased as a percentage of revenue from 69&nbsp;percent in 2008 to 66&nbsp;percent in 2009 primarily as a result of a more
favorable revenue mix due to the composition of minutes in 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Infrastructure Costs  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Infrastructure costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,987</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,265</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,278</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>76</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infrastructure
costs increased by $2.3&nbsp;million, or 76&nbsp;percent, to $5.3&nbsp;million in 2009 from $3.0&nbsp;million in 2008. This increase was primarily the result of
the increase in minutes of use by our customers. In addition, we maintained additional capacity during 2009 as we invested in additional infrastructure in anticipation of future growth. Infrastructure
costs as a percentage of revenue was unchanged at 7&nbsp;percent in 2008 and 2009, as the additional capacity was in line with the growth in minutes of use by our customers. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>48</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=51,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=748652,FOLIO='48',FILE='DISK105:[11ZBH1.11ZBH77601]DM77601A.;26',USER='DNICHOL',CD=';9-MAY-2011;13:52' -->
<A NAME="page_dm77601_1_49"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Operations  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,353</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,673</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,320</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operations
expenses increased by $1.3&nbsp;million, or 39&nbsp;percent, to $4.7&nbsp;million in 2009 from $3.4&nbsp;million in 2008. This increase was primarily the result of a
$1.1&nbsp;million increase in costs related to personnel due to an increase in the headcount of our operations group and $0.2&nbsp;million in fees paid to contractors due to the growth of our
business in 2009. Operations expenses decreased as a percentage of revenue from 8&nbsp;percent in 2008 to 6&nbsp;percent in 2009 as we were able to increase our revenue without needing a
proportionate increase in our operations staff. Operations expenses included $27,000 in stock compensation expense in 2008 and $31,000 in 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Research and Development  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,447</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,567</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,120</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and development expenses increased by $1.1&nbsp;million, or 46&nbsp;percent, to $3.6&nbsp;million in 2009 from $2.4&nbsp;million in 2008. This increase was primarily the
result of a $1.3&nbsp;million increase in costs related to personnel offset by a decrease of $0.3&nbsp;million in contract employee costs, as we hired more personnel for our product development
activities and reduced our reliance on outside services. We also expanded our research and development activities in 2009, as we began to develop new and enhanced services for our enterprise
customers. Research and development expenses decreased as a percentage of revenue from 6&nbsp;percent in 2008 to 5&nbsp;percent in 2009, as we decreased our reliance on outside contractors.
Research and development expenses included $16,000 in stock compensation expense in 2008 and $49,000 in 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Sales and Marketing  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,741</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,367</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,626</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>34</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
and marketing expenses increased by $1.6&nbsp;million, or 34&nbsp;percent, to $6.4&nbsp;million in 2009 from $4.7&nbsp;million in 2008. This increase was primarily the
result of an increase of $0.5&nbsp;million in costs related to personnel, $0.2&nbsp;million in recruiting fees, $0.1&nbsp;million in sales commissions and $0.1&nbsp;million in travel costs due
to an increase in the number of sales and marketing employees in 2009. We also increased our marketing expenses by $0.1&nbsp;million, and our consulting and contractor costs increased by
$0.5&nbsp;million due to the expansion of our operations in 2009. Sales and marketing expenses decreased as a percentage of revenue from 11&nbsp;percent in 2008 to 8&nbsp;percent in 2009 as we
increased our revenue without a proportionate increase in our sales and marketing staff. Sales and marketing expenses included $0.2&nbsp;million in stock compensation expense in 2008 and
$0.1&nbsp;million in 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>General and Administrative  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,177</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,568</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,391</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>110</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>49</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=52,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=260107,FOLIO='49',FILE='DISK105:[11ZBH1.11ZBH77601]DM77601A.;26',USER='DNICHOL',CD=';9-MAY-2011;13:52' -->
<A NAME="page_dm77601_1_50"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
and administrative expenses increased by $2.4&nbsp;million, or 110&nbsp;percent, to $4.6&nbsp;million in 2009 from $2.2&nbsp;million in 2008. This increase was primarily
the result of an increase of $0.7&nbsp;million in costs related to personnel due to higher headcount, $0.6&nbsp;million in professional services primarily due to higher legal costs,
$0.3&nbsp;million in contractor and consulting expenses and $0.5&nbsp;million in bad debt expense. Professional services and contractor and consulting costs increased, as we expanded our
operations and entered into more contracts with customers and peering partners, as well as a higher level of business development activity. General and administrative expenses increased as a
percentage of revenue from five percent in 2008 to six percent in 2009 due to an increase in bad debt expense and an increase in administrative staff. General and administrative expenses included
$91,000 in stock compensation expense in 2008 and $0.1&nbsp;million in 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Depreciation and Amortization  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,852</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,373</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>521</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>28</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization expenses increased by $0.5&nbsp;million, or 28&nbsp;percent, to $2.4&nbsp;million in 2009 from $1.9&nbsp;million in 2008. This increase was due to
additional costs related to the equipment that hosts our CloudWorx CaaS Platform, as we added more capacity to address the increased traffic and expansion of our customer base. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Interest Expense, Net  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,274</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,488</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>214</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense, net increased by $0.2&nbsp;million, or 17&nbsp;percent, to $1.5&nbsp;million in 2009 from $1.3&nbsp;million in 2008. This change was primarily a result of an
increase in interest expense from our equipment financings in 2009. This increase was offset by a non-recurring $0.5&nbsp;million beneficial conversion charge from the conversion of
$2.1&nbsp;million in convertible promissory notes and related accrued interest into our Series&nbsp;C convertible preferred stock in October 2008 at a discount. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Change in Fair Value of Warrant Liabilities  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Increase/<BR>
(Decrease) </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Increase/<BR>
(Decrease) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except for percentages)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>163</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,167</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(716</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair value of warrant liabilities changed by $1.2&nbsp;million to an expense of $1.0&nbsp;million in 2009 from a gain of $0.1&nbsp;million in 2008. This change was primarily
due to an increase in the fair value of the stock underlying the warrants. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>50</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=53,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=600688,FOLIO='50',FILE='DISK105:[11ZBH1.11ZBH77601]DM77601A.;26',USER='DNICHOL',CD=';9-MAY-2011;13:52' -->
<A NAME="page_dm77601_1_51"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Quarterly Results of Operations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our unaudited quarterly statement of operations data for each of the eight quarters in the period ended
December&nbsp;31, 2010. The data below has been prepared on the same basis as the audited financial statements included elsewhere in this prospectus, and, in management's opinion, reflects all
necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of this data. The results of historical periods are not necessarily indicative of the results of
operations for a full year or any future period. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:54%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"150%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="150%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="8pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=23 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Three Months Ended </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Mar&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Sept&nbsp;30,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Dec&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Mar&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Sept&nbsp;30,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Dec&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=23 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR>
(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>14,783</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>17,544</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>21,138</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>22,729</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>22,697</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>28,419</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>29,329</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>31,104</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Operating expenses:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Peering partner compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>9,446</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>11,353</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>14,132</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>15,301</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>15,949</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>19,949</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>20,952</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>21,970</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Infrastructure costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>992</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,340</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,552</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,381</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,471</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,434</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,681</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2,050</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Operations(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,197</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,138</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,246</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,092</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,311</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,419</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,451</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,397</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Research and development(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>834</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>932</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>968</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>833</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,005</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,026</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,027</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Sales and marketing(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,766</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,455</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,641</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,505</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,547</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,976</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2,113</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2,057</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>General and administrative(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,141</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,277</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,049</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,101</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,361</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,365</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,451</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,370</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>481</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>564</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>641</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>687</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>774</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>827</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,026</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,092</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Total operating expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>15,857</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>18,059</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>21,229</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>21,900</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>23,418</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>27,981</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>29,700</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>30,963</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Income (loss) from operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(1,074</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(515</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>829</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(721</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>438</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(371</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>141</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Interest expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(225</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(426</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(381</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(456</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(491</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(602</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(749</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(772</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Change in fair value of warrant liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(459</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(553</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(2,740</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(839</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(1,681</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>(3,232</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1> $(1,758</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$(940</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$(465</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$(180</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$(3,952</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$(1,003</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$(2,801</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$(3,863</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes stock-based compensation expense as follows: </FONT></DD></DL>
</UL>
 <DIV style="padding:0pt;position:relative;width:57%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"140%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="140%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="15pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="4pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=23 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Three Months Ended </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Mar&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Sept&nbsp;30,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Dec&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Mar&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Sept&nbsp;30,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Dec&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=23 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$32</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$35</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>10</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>11</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>17</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>20</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>31</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>42</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>15</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>34</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>53</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>26</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>26</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>42</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Total stock-based compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$76</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$63</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$67</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$103</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$143</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$147</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$171</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Quarterly Trends  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue continued to increase over each quarter in 2009 and 2010, except for the quarter ended March&nbsp;31, 2010, when revenue
decreased by $32,000 resulting from a more favorable mix of higher-priced minutes from one significant customer in the quarter ended December&nbsp;31, 2009 compared to the quarter ended
March&nbsp;31, 2010. Revenue in each quarter is impacted by the weighted number of business days in the quarter. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Peering
partner compensation increased over each quarter in 2009 and 2010 due to increased traffic over our CloudWorx CaaS Platform. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infrastructure
costs increased beginning in the second quarter of 2009 as we added capacity for the delivery of higher traffic levels, and then remained consistent until the latter part
of 2010 when we again expanded our capacity for the anticipated increase in minutes of use and maintenance costs due to our purchases of more equipment in 2010. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>51</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operations,
research and development, sales and marketing, and general and administrative expenses increased in 2009 and 2010 primarily due to the addition of personnel in connection
with the expansion of our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization expense increased quarter over quarter in 2009 and 2010 due to an increase in our purchases of equipment as we added more capacity to address the increased
traffic over our CloudWorx CaaS Platform. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense varied from quarter to quarter due to increased borrowings under our equipment financing arrangements and a loan modification in the quarter ended March&nbsp;31, 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change
in fair value of warrants was impacted by changes in the valuation of our stock which did not change significantly in the quarters ended June&nbsp;30, 2009 and
September&nbsp;30, 2009, and then continued to increase in subsequent quarters as the estimated fair value of our stock increased. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
loss decreased from the quarter ended March&nbsp;31, 2009 through the quarter ended December&nbsp;31, 2009 as we continued to benefit from higher income from operations. Our net
loss in the quarters ended March&nbsp;31 and June&nbsp;30, 2010 varied significantly primarily due to higher charges for the change in fair value of warrant liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Liquidity and Capital Resources  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since inception, we have funded our operations primarily with proceeds from issuances of common stock, convertible preferred stock,
convertible promissory notes and debt facilities. From inception to December&nbsp;31, 2010, we raised an aggregate of $36.1&nbsp;million from the sale of our convertible preferred stock, including
amounts received from the issuance of convertible promissory notes. We have also funded purchases of equipment with proceeds from our long-term debt. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
debt agreements contain certain affirmative and negative covenants, including restrictions with respect to payment of cash dividends, merger or consolidation, changes in the nature
of our business, disposal of assets and obtaining additional loans. Our debt agreements also contain certain financial covenants and cross-default provisions whereby a default, including a violation
of covenants, under the terms of one agreement would result in a default under another agreement. As of December&nbsp;31, 2010, we were in compliance with our debt covenants in all material
respects. Our debt agreements are collateralized by all of our assets. In the event we fail to comply with our debt covenants, the amounts outstanding under our debt agreements would become due and
payable absent a waiver by our lenders, which could materially and adversely affect our liquidity. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have incurred recurring operating losses since inception and have negative working capital of $3.5&nbsp;million, an accumulated deficit of $36.6&nbsp;million and a total
stockholders' deficit of $32.9&nbsp;million as of December&nbsp;31, 2010. We believe our existing cash and cash equivalents combined with the amounts available under our debt facilities, will be
sufficient to meet our working capital and capital expenditure needs for at least the next 12&nbsp;months. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently expect to continue to finance operations with a combination of cash provided by operations and debt arrangements. However, there can be no assurance that additional funding
will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund our operating needs or ultimately achieve
profitability. If we are unable to raise additional capital to fund our operations, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our
ability to execute on our business plans. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>52</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Cash Flows  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary of our cash flows is for the periods indicated, and has been derived from our financial statements which are
included elsewhere in this prospectus: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash provided by (used in) operating activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$(5,577</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$3,166</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$4,676</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash used in investing activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$(4,380</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$(10,343</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$(11,706</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash provided by financing activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$19,778</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$5,547</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$6,055</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Cash Flows from Operating Activities  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary uses of cash from operating activities have been for personnel related expenditures, product development and costs related
to our facilities. Our cash flows from operating activities will continue to be affected principally by our working capital requirements and the extent to which we increase spending on personnel as
our business grows. Our largest source of operating cash flows is cash collections from our customers. We generally bill our customers on a monthly or weekly basis with payment due within 30 or
15&nbsp;days. We have similar payment terms with our peering partners. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
used in operating activities of $5.6&nbsp;million in 2008 reflected a net loss of $5.1&nbsp;million, partially offset by non-cash interest of $0.6&nbsp;million
primarily related to the discount on the conversion of promissory notes into Series&nbsp;C convertible preferred stock. The increase in our net operating assets and liabilities was primarily a
result of an increase of $6.0&nbsp;million in accounts receivable
due to the increase in revenue in the latter part of 2010 partially offset by an increase of $2.4&nbsp;million in accounts payable as we expanded our business. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
provided by operating activities of $3.2&nbsp;million in 2009 reflected a net loss of $3.3&nbsp;million, partially offset by non-cash charges of $2.4&nbsp;million
for depreciation and amortization and $1.0&nbsp;million related to our warrants as a result of the issuance of additional warrants and an increase in the fair value of the stock underlying these
warrants. The increase in our net operating assets and liabilities was primarily a result of an increase of $4.3&nbsp;million in accounts payable and accrued liabilities as our business grew, offset
by an increase of $2.6&nbsp;million on our accounts receivable balances, primarily due to the increase in revenue year over year and the timing of when we collect on the receivables. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
provided by operating activities of $4.7&nbsp;million in 2010 reflected a net loss of $11.6&nbsp;million, offset by aggregate non-cash charges of
$12.2&nbsp;million due to depreciation expenses and the change in fair value of warrant liabilities and an increase of $2.6&nbsp;million in our net operating assets and liabilities. This increase
in our net operating assets and liabilities was primarily a result of an increase of $5.6&nbsp;million in accounts payable and accrued liabilities offset by an increase in our accounts receivable
balances of $2.4&nbsp;million which was primarily due to the increase in revenue year over year and the timing of when we collected on the receivables. As we have grown our business, we have been
able to obtain more favorable payment terms from our customers and peering partners. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Cash Flows from Investing Activities  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our investing activities have consisted primarily of capital expenditures to purchase equipment that hosts our CloudWorx CaaS Platform
and to a lesser degree purchase of intangible assets. We have historically made investments each year for the acquisition of additional equipment to support our current and anticipated revenue growth
and expect to continue to do so in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2008, cash used in investing activities was $4.4&nbsp;million as a result of our capital expenditures. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2009, cash used in investing activities was $10.3&nbsp;million as a result of $9.9&nbsp;million in capital expenditures and $0.5&nbsp;million for the purchase of intangible
assets. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>53</FONT></P>

<HR NOSHADE>
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 </FONT> <FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2010, cash used in investing activities was $11.7&nbsp;million as a result of $10.4&nbsp;million in capital expenditures and $1.5&nbsp;million for the
purchase of intangible assets, including the capitalization of our CloudCentral portal costs. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Cash Flows from Financing Activities  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, we have financed our operations primarily with proceeds from the sale of convertible preferred stock and debt facilities. As
of December&nbsp;31, 2010, we had outstanding debt of $18.7&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2008, cash provided by financing activities was $19.8&nbsp;million, primarily as a result of $16.2&nbsp;million of net proceeds from the issuance of our Series&nbsp;C
convertible preferred stock and net borrowings of $3.6&nbsp;million from an equipment loan facility that we entered into in 2007. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2009, cash provided by financing activities was $5.5&nbsp;million, primarily as a result of the receipt of $9.6&nbsp;million from equipment loan facilities that we entered into in
2007 and 2009, offset by repayments on our debt of $4.1&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2010, cash provided by financing activities was $6.1&nbsp;million, primarily as a result of the receipt of $10.2&nbsp;million from equipment loan facilities and a loan and
security agreement that we entered into in 2010, offset by repayments on our debt of $4.1&nbsp;million. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Contractual Obligations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summarizes our contractual obligations as of December&nbsp;31, 2010: </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Payments Due by Period </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:87pt;"><FONT SIZE=1><B>Contractual Obligations:

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Less than<BR>
1 Year </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>1 to 3 Years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>3 to 5 Years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>More than<BR>
5 Years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Long-term debt obligations, including current portion(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,990</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,555</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,545</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capital lease obligation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>131</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>393</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>77</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>601</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating lease obligations(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,704</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>517</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,221</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Purchase commitments</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,325</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,465</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>77</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,867</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Long-term
debt includes $18.2&nbsp;million in principal and $2.3&nbsp;million in accrued interest under the equipment financing agreements
entered into in 2007 and 2009 and a loan and security agreement entered into in 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Operating
lease agreements represent our obligation to make payments under our non-cancelable lease agreements for office facilities and
telecommunications equipment. </FONT></DD></DL>
</UL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Off-Balance Sheet Arrangements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2010, we did not have any off-balance sheet arrangement and we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Quantitative and Qualitative Disclosures about Market Risk  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to market risks in the ordinary course of our business. These risks primarily include risk related to interest rate
sensitivities. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
had cash and cash equivalents of $10.1&nbsp;million and $9.2&nbsp;million as of December&nbsp;31, 2009 and 2010. These amounts were held primarily in cash deposits and money
market funds and have been held </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>54</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>for
working capital purposes. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of the interest rates in the United States. Due to
the short-term nature of these instruments, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or our results of
operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
had long-term debt of $12.0&nbsp;million and $18.7&nbsp;million at December&nbsp;31, 2009 and 2010 consisting of our outstanding obligations under our equipment
financing arrangements, capital lease obligation, and the loan and security agreement that we entered into in May 2010. Our obligations under the equipment financing arrangements are fixed and are not
subject to fluctuations. During the year ended December&nbsp;31, 2010, a 10&nbsp;percent increase or decrease in the prime rate would not have had a material impact on our interest expense. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that in the future we enter into other long-term debt arrangements, we would be subject to fluctuations in interest rates which could have a material impact on
our future financial condition and results of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Critical Accounting Policies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation
of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, operating expenses and related disclosures. We base our
estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting
estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period-to-period. Accordingly, actual results could differ
significantly
from the estimates made by our management. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial
condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these
policies relate to the more significant areas involving management's judgments and estimates. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Revenue Recognition  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize revenue when all of the following have occurred: (1)&nbsp;we have entered into a legally binding arrangement;
(2)&nbsp;services have been rendered; (3)&nbsp;payment is deemed fixed or determinable; and (4)&nbsp;collection is probable. The sales prices for our services are typically considered to be
fixed or determinable at the inception of an arrangement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revenue is primarily derived from customer usage of our CloudWorx CaaS Platform on a minute of use basis. We recognize revenue based upon documented minutes of traffic over our
CloudWorx CaaS Platform at the time of customer usage. The rates we charge per minute are determined by contracts between us and our customers and are subject to periodic changes. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Allowance for Doubtful Accounts  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make required payments.
When we are aware of circumstances that may impair a specific customer's ability to meet its financial obligations, we provide a specific allowance against the amounts due and thereby reduce the net
receivable to the amount we believe will be collected. For all other customers, we base the amount of our allowance on our historical experience, current economic trends, and an analysis of our aged
outstanding accounts receivable balances. If the financial condition of a customer deteriorates, resulting in additional risk in their ability to make payments to us, then additional allowances may be
required which would result in an additional expense in the period that determination is made. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>55</FONT></P>

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<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Stock-Based Compensation  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the
date of grant, net of estimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date
fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair value of the option awards during the years ended December&nbsp;31, 2008, 2009 and 2010 was calculated using the Black-Scholes option valuation model with the following
assumptions: </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="84pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected term (in years)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.6%-4.1%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.6%-3.8%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.7%-2.6%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected volatility</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>42-52%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>52%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>52%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected dividend rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Black-Scholes model requires the use of highly subjective and complex assumptions which determine the fair value of share-based awards. These assumptions include: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I>Expected Term.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The expected term represents the period that our share-based awards are expected to be outstanding and was primarily
determined using the simplified method in accordance with guidance provided by the SEC. For option grants considered to be on standard terms, the simplified method calculates the expected term as the
average of the time-to-vesting and the contractual life of the awards. For awards not considered on standard terms, the expected term is based on the historical option exercise
behavior of our employees and posting-vesting cancellations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Risk-Free Interest Rate.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of
grant for zero coupon U.S. Treasury notes with maturities approximately equal to each award's expected term. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Expected Volatility.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The expected volatility is derived from historical volatilities of several unrelated public companies within the
telecommunications services and Software-as-a-Service, or SaaS, industries that are deemed to be comparable to our business because we have limited information on
the volatility of our common stock since we have no trading history. When making the selections of our industry peer companies to be used in the volatility calculation, we considered the size,
operational and economic similarities to our principal business operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Expected Dividend.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to assumptions used in the Black-Scholes option-pricing model, we must also estimate a forfeiture rate to calculate the stock-based compensation for our awards. Our
forfeiture rate is based on an analysis of our actual historical forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of
employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the
rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a
decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that
will result in an increase to the stock-based compensation expense recognized in the financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>56</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_do77601_1_57"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will continue to use judgment in evaluating the expected term, expected volatility and forfeiture rate related to our own stock-based compensation on a prospective basis. As we
continue to accumulate additional data related to our common stock, we may have refinements to the estimates of our expected volatility, expected terms and forfeiture rates, which could materially
impact our future stock-based compensation expense. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are also required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations with the Black-Scholes option-pricing
model. The fair values of the common stock underlying our stock-based awards were estimated on each grant date by our board of directors, with input from management. Our board of directors has
historically been
comprised of a majority of non-employee directors with significant experience in various industries including the telecommunications, software, and technology sectors. We believe that our
board of directors has the relevant experience and expertise to determine a fair value of our common stock on each respective grant date. Given the absence of a public trading market of our common
stock, and in accordance with the American Institute of Certified Public Accountants Practice Guide, </FONT><FONT SIZE=2><I>Valuation of Privately-Held-Company Equity
Securities Issued as Compensation</I></FONT><FONT SIZE=2>, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate
of the fair value of our common stock including: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>contemporaneous and retrospective valuations performed by unrelated third party specialists;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>prices for our convertible preferred stock sold to outside investors in arm's-length transactions; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>actual operating and financial performance;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>hiring of key personnel and the experience of our management;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>risks inherent in the development and deployment of our products and services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of our company
given prevailing market conditions and the nature and history of our business;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>market value of a comparable group of public companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>illiquidity of stock-based awards involving securities in a private company;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>industry information such as market size and growth; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>macroeconomic conditions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
March 2010, we have used the Probability-Weighted Expected Return Method, or PWERM, to estimate the fair value of our common and preferred stock. This valuation method was
considered to be most appropriate given the status of our business and the anticipated liquidity events. Under the PWERM method, management assigned probabilities and timing estimates to potential
liquidity events for our business based on a variety of factors, including primarily our recent operating history, the amount of cash held by us, and our business outlook. Three principal scenarios
were examined: a merger or acquisition, or M&amp;A, scenario; an initial public offering, or IPO, scenario; and a scenario in which the company continues to operate as a private entity. For each valuation
date, we prepared a financial forecast to be used in the computation of the enterprise value. The financial forecasts took into account our past experience and future expectations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
arrive at a value for common shares under the M&amp;A scenario and the IPO scenario, the Guideline Public Company Method was used to estimate our enterprise value at the time of the
respective anticipated liquidity event. The Guideline Public Company Method estimates the fair value </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>57</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_do77601_1_58"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>of
a company by applying to that company market revenue multiples of publicly traded companies in similar lines of business. When choosing the comparable companies to be used for the Guideline Public
Company Method, we focused on companies in the telecommunication services and SaaS industries. Some of the specific criteria we used to select and analyze comparable companies within our industry
included the business description, business size, projected growth, financial condition, and historical operating results. We analyzed the business and financial profiles of the selected companies for
relative similarity to us, and once such differences and similarities were determined and proper adjustments were made, we selected an appropriate enterprise value revenue multiple. This revenue
multiple was
applied to the trailing twelve months' revenue at the time of the anticipated future liquidity event to arrive at our anticipated enterprise value and total stockholder value at the time of the
respective liquidity event. The total stockholder value was then allocated among share classes based on the amount of liquidation preferences (or, in the case of the IPO scenario, the conversion
ratios of each of the preferred shares), and the resulting equity values were discounted to the present using a discount rate which accounted for the market cost of capital and risk. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also used a Guideline Public Company Method to estimate our enterprise value under the continuing to operate as a private entity scenario. As our business continued to grow, and
developing multi-year forecasts became possible, starting on December&nbsp;31, 2010, we supplemented the Guideline Public Company Method of estimating our enterprise value under the
continuing to operate as a private entity scenario with a Discounted Cash Flow approach. Under the Discounted Cash Flow approach, we analyzed the forecast of our expected future financial performance,
and discounted those to a present value using an appropriate discount rate which reflected our then-current cost of capital. We weighted the enterprise values and total stockholder values
determined by the Guideline Public Company Method and the Discounted Cash Flow approach to arrive at a single total stockholder value for the continuing to operate as a private entity scenario. Once
we arrived at an enterprise value under the continuing to operate as a private entity scenario, we apportioned this total stockholder value to the various share classes, based on their respective
liquidation preferences to arrive at a value for the common shares under the continuing to operate as a private entity scenario. Next, we applied a marketability discount to reflect the fact that our
common stockholders were unable to liquidate their holdings at will, or possibly at all, which resulted in a value for the common shares under the continuing to operate as a private entity scenario.
Lastly, we probability-weighted the common stockholder values under each of the scenarios to arrive at an indication of value for our common equity. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
regarding stock option grants to our employees since January&nbsp;1, 2010 is summarized as follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:67%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"120%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="120%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="91pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="97pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="77pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:40pt;"><FONT SIZE=1><B>Grant Date

<!-- COMMAND=ADD_SCROPPEDRULE,40pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Options<BR>
Granted </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exercise<BR>
Price </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fair Value Per Share<BR>
of Common Stock </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate Grant<BR>
Date Fair Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>May&nbsp;7, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>692,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>620,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>June&nbsp;24, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>82,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>73,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>September&nbsp;23, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>147,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.02</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.02</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>153,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>October&nbsp;27, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>67,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>89,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
intrinsic value of all outstanding options as of December&nbsp;31, 2010 was $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million based on the estimated fair value for our common stock of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the mid-point of the estimated price range set forth on the cover of this prospectus. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
factors described above were considered by our board of directors each time it determined the fair value of our common stock. No single event caused the valuation of our common stock
to increase or decrease through December&nbsp;31, 2010. Instead, a combination of the factors described below in each period led to the changes in the fair value of the underlying common stock. The
following additional </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>58</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>factors
had particular relevance in connection with the board of directors' determination during each of the following periods: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> March&nbsp;31, 2010 to June&nbsp;29, 2010: $1.70 per common share fair value  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>general, albeit slow, improvement in the economic environment, and a slight increase in the multiples of the peer
guideline public companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>continued growth in our revenue, and stable operating margins;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our updated liquidity scenarios, which reflected the possibility of a liquidity event in the year to year-and-a-half
horizon; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the most recent independent contemporaneous valuation report as of March&nbsp;31, 2010. </FONT></DD></DL>
</UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2><I> June&nbsp;30, 2010 to September&nbsp;29, 2010: $2.02 per common share fair value  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>decline in the overall economic environment, and a corresponding decline in the valuation of our peer guideline public
companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>continued growth in our revenue, and stable operating margins;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our updated liquidity scenarios which reflected a slight increase in the possibility of a liquidity event in the year to
year and a half horizon; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the most recent independent contemporaneous valuation report as of June&nbsp;30, 2010. </FONT></DD></DL>
</UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2><I> September&nbsp;30, 2010 to December&nbsp;30, 2010: $2.57 per common share fair value  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>slight improvement in the overall economic environment, and a corresponding slight improvement in the valuation of our
peer guideline public companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>continued growth in our revenue, and continued operating margin stability;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our updated liquidity scenarios which reflected a one quarter delay in the timing of a liquidity event; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the most recent independent contemporaneous valuation report as of September&nbsp;30, 2010. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><I> December&nbsp;31, 2010 to March&nbsp;30, 2011: $3.52 per common share fair value  </I></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>improvement in the overall economic environment, and a corresponding improvement in the valuation of our peer guideline
public companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>continued growth in our revenue, and continued operating margin stability;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our updated liquidity scenarios which reflected a delay in the timing of a liquidity event to the end of 2011; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the most recent independent contemporaneous valuation report as of December&nbsp;31, 2010. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>59</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
calculations are sensitive to highly subjective assumptions that we were required to make at each valuation date relating to an appropriate present value discount rate. The following
table summarizes these assumptions at the end of each quarter since March&nbsp;31, 2010: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:53pt;"><FONT SIZE=1><B>Valuation Date

<!-- COMMAND=ADD_SCROPPEDRULE,53pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Present Value<BR>
Discount Rate </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>March&nbsp;31, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>June&nbsp;30, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>28.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>September&nbsp;30, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>December&nbsp;31, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
present value discount rate was determined using a Capital Asset Pricing Model, or CAPM. The discount rate was based on an analysis of comparable companies in the telecommunications
services and SaaS industries. We also compared the results of the CAPM discount rate to discount rates published in various studies of venture capital required rates of return for investments in
companies of an equivalent stage of development. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Determining
the fair market value of our common stock involves complex and subjective judgments including estimates of revenue, assumed market growth rates and estimated costs, as well
as appropriate discount rates. At the time of each valuation, the significant estimates used in the discounted cash flow approach included estimates of our revenue and revenue growth rates for several
years into the future. Although each time we prepared such forecasts for use in the preparation of a valuation report, we did so based on assumptions that we believed to be reasonable and appropriate,
there can be no assurance that any such estimates for earlier periods or for future periods will prove to be accurate. There is also significant volatility in the telecommunications services and SaaS
industries. Our valuations incorporate the volatility in the markets based on the Guideline Public Company Method described above. We also experience fluctuations in our own financial forecasts on a
quarter-to-quarter basis which impacts the related valuations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
stock-based compensation expense for awards granted is as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>31</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>144</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>81</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>185</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>111</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>153</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>106</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>186</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stock-based compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>319</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>297</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>564</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010 we had $1.3&nbsp;million of unrecognized stock-based compensation expense, net of estimated forfeitures, that is expected to be recognized over a
weighted average period of 1.5&nbsp;years. In future periods, our stock-based compensation expense is expected to increase as a result of our existing unrecognized stock-based compensation to be
recognized as these awards vest and as we issue additional stock-based awards to attract and retain employees. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Liability Associated with Warrants to Purchase Convertible Preferred Stock and Common Stock  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Freestanding warrants to purchase shares of our convertible preferred stock are classified as liabilities on our balance sheets at fair
value because the warrants may conditionally obligate us to redeem the underlying convertible preferred stock at some point in the future. Certain freestanding </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>60</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>warrants
to purchase shares of our common stock are also classified as liabilities on our balance sheets at fair value because those warrants have price protection features. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
convertible preferred stock and common stock warrants are subject to remeasurement at each balance sheet date, and any change in fair value is recognized as change in fair value of
warrant liabilities in the statements of operations. We estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option-pricing model and incorporating
considerations of the potential value associated with price protection features. We use assumptions to estimate the fair value of these warrants including the remaining contractual terms of the
warrants, risk-free interest rates, expected dividend yields and the expected volatility of the underlying stock. These assumptions are subjective and the fair value of these warrants
could have differed significantly had we used different assumptions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will continue to record adjustments to the fair value of the convertible preferred stock warrants until they are exercised, expire or, upon the closing of an initial public offering,
when they become warrants to purchase shares of our common stock, at which time the warrants will no longer be accounted for as a liability. At that time, the then-current aggregate fair
value of these warrants will be reclassified from non-current liabilities to additional paid-in capital, a component of stockholders' equity, and we will cease to record any
related periodic changes in fair value. The common stock warrants with price protection features will continue to be classified as a liability and will be remeasured until they are exercised or
expire. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Recoverability of Intangible Assets  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets on our balance sheets consist primarily of capitalized costs to acquire and develop trademarks, patents, our
CloudCentral portal and regulatory licenses to operate as a telecommunications company. The trademarks and regulatory licenses have no expiration
date and thus are classified as indefinite lived intangible assets on our balance sheets. As of December&nbsp;31, 2010, we had $0.9&nbsp;million in indefinite-lived intangible assets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
capitalized portal development costs and capitalized patent have an economic useful life and/or expire after a specified period of time and thus are classified as finite-lived
intangible assets on our balance sheets. Amortization of finite-lived intangible assets is computed using the straight-line method over the estimated economic life of the assets. For the
CloudCentral portal, the amortization period is seven years. For capitalized patent assets, the amortization period is the term of the patent, generally 14&nbsp;years, or the estimated economic life
if deemed to be shorter. As of December&nbsp;31, 2010, we had $1.1&nbsp;million of finite-lived intangible assets on our balance sheets. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
our indefinite-lived intangible assets, we conduct a long-lived asset impairment analysis on an annual basis and whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. We perform our annual impairment test in the third quarter of each year. Factors we consider important which could cause us to assess potential
impairment include significant changes in the manner of our use of the asset or the strategy for our overall business and significant negative industry or economic trends. An impairment loss is
recorded when the carrying amount of the indefinite-lived asset is not recoverable and exceeds its fair value. The carrying amount of an asset is not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of the asset exceeds
its fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. Our ability to utilize the assets in growing our business, as well as the
market value of our company are variables considered in evaluating if impairment has occurred. These variables require management judgment and include inherent uncertainties such as customer
acceptance of our value proposition, our ability to manage operating costs and growing our business, as well as the impact of technology changes in our business. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>61</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>A
variation in the assumptions used could lead to a different conclusion regarding the realizability of an asset and, thus, could have a significant effect on our conclusions regarding whether an
asset is impaired and the amount of impairment loss recorded in our financial statements. We have used a replacement cost approach to determine the fair value of regulatory licenses for the purpose of
conducting an impairment test. This approach implies that the opportunity cost represents the foregone cash flows during the period it takes to obtain or create the asset, as compared to the cash
flows that would be earned if the intangible asset was on hand today. We have not recognized an impairment charge in our statements of operations on our indefinite-lived intangible assets in 2008,
2009 and 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
periodically review our finite-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset is impaired or the estimated
useful lives are no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with such assets are less than the carrying amount of the asset, an
impairment loss is recorded to write the asset down to their estimated fair values. Fair value is estimated based on
discounted future cash flows. We have not recognized an impairment charge in our statement of operations on our finite-lived intangible assets in 2008, 2009 and 2010. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Reserve for Peering Partner Disputes  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When applicable, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on
our estimate of the amount that will eventually be payable. If we subsequently determine that the disputed amounts will be settled for an amount different than the amount which we originally accrued,
we will recognize the difference as an adjustment to peering partner compensation. We believe that our procedures are designed to properly assess dispute accruals, however, changes to the estimates
used in its calculation could result in a material impact on our statement of operations. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Income Taxes  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and
any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our
future plans. As of December&nbsp;31, 2009 and 2010, we have recorded a full valuation allowance on our net deferred tax assets due to uncertainties related to our ability to utilize our deferred
tax assets in the foreseeable future. These deferred tax assets primarily consist of certain net operating loss carryforwards. Should the actual amounts differ from our estimates, the amount of our
valuation allowance could be materially impacted. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
inception, we have incurred operating losses, and, thus, we have not recorded a provision for income taxes for any of the periods presented for income tax. Accordingly, there have
not been significant changes to our provision for income taxes during 2008, 2009 or 2010, and we do not expect any significant changes until we are no longer incurring losses. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010, we had federal net operating loss carryforwards of $26.8&nbsp;million and state net operating loss carryforwards of $15.2&nbsp;million. Realization of
deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance.
If not utilized, the federal net operating loss and tax credit carryforwards will expire beginning in 2023 and the state net operating loss will begin expiring in 2024. Utilization of these net
operating losses and credit carryforwards may be subject to an annual limitation due to applicable provisions of the Internal Revenue Code of 1986, as amended, and state and local tax laws if we have
experienced an "ownership change" in the past, or if an ownership
change occurs in the future, including, for example, as a result of the shares issued in this offering aggregated with certain other sales of our stock before or after this offering. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>62</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Recent Accounting Pronouncements  </B></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Fair Value Measurements  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2010, we adopted new authoritative guidance on fair value measurements and disclosures. The new guidance
requires additional disclosures regarding fair value measurements, amends disclosures about postretirement benefit plan assets, and provides clarification regarding the level of disaggregation of fair
value disclosures by investment class. This guidance is effective for interim and annual reporting periods beginning after December&nbsp;15, 2009, except for certain Level&nbsp;3 activity
disclosure requirements that will be effective for reporting periods beginning after December&nbsp;15, 2010. Accordingly, we adopted this new guidance beginning January&nbsp;1, 2010, except for
the additional Level&nbsp;3 requirements, which will be adopted in 2011. Level&nbsp;3 assets and liabilities are those whose fair value inputs are unobservable and reflect management's best
estimate of what market participants would use in pricing the asset or liability at the measurement date. The adoption of this guidance did not have a material impact on our financial statements in
2010 and is not expected to have a material impact on our financial statements in 2011. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>63</FONT></P>

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<BR></FONT><FONT SIZE=2><B>  BUSINESS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading provider of on-demand, cloud-based communications services to service providers and enterprises. Our
customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal
communications services, including voice, unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to
existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal,
IP-based solutions. Our service provider customers include wireless and wireline carriers, as well as cable and voice over IP, or VoIP, providers. Our enterprise customers include
businesses seeking integrated multimodal communications solutions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
global telecommunications industry is undergoing a shift to next-generation IP-based communication technologies from legacy telephone networks. This transition is being
driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models such as Software as a
Service, or SaaS. We believe these trends, along with the inability of legacy infrastructures to support user demand for next-generation multimodal communications services, have created an
opportunity and a need for a flexible and high-quality cloud-based communications platform. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
on-demand CloudWorx CaaS Platform is fast to implement, easy to administer through our self-service web-based CloudCentral Portal and highly
scalable. It is based on a sophisticated and integrated multi-layer approach, which includes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our software-based Media Peering Grid service, providing any-to-any connection capabilities and
allowing service providers and enterprises to cost-effectively interconnect, transport and transact communications traffic, at a rate of more than 20&nbsp;billion minutes annually based on our
traffic in the first quarter of 2011;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our SuperRegistry directory, currently containing more than 400&nbsp;million telephone numbers and end-point
identifying addresses for wireless, wireline and other communication devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our AppWorx open and secure communications application development environment, which includes a complete set of
application programming interfaces, or APIs, developer tools, documentation and reference applications for building full-featured, rich-media applications that leverage our
Media Peering Grid service and our SuperRegistry directory. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
three layers are fully integrated to allow simplified delivery of enhanced voice and rich-media services connecting through the industry-standard Session Initiation
Protocol, or SIP, to IP devices and enabling connectivity to traditional non-IP communication devices, such as legacy telephones. Our software-based platform scales easily without
requiring significant additional capital expenditures to create and implement new services for new and existing customers and provides significant benefits versus traditional neutral and direct
interconnection arrangements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
CloudWorx CaaS Platform is used by service provider customers, such as Sprint and Qwest and enterprise customers, as well as our channel partners delivering communications services
to enterprises using equipment and software supplied by technology partners such as Microsoft, Cisco, Avaya and Siemens. Service providers rely on our solutions to respond to the rapidly changing
demands from their customers for high-quality multimodal communications through a variety of media and devices. Our platform allows service providers to eliminate or significantly reduce
their dependency on the higher cost legacy networks by avoiding those networks and directly delivering their communications traffic to other service providers' end-points through our
CloudWorx CaaS Platform services. Enterprise customers use our solutions to provide the connectivity necessary to support next-generation communication services, such as unified
communications, or UC, platforms that can be </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>64</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>used
by businesses to embed a full suite of IP-based applications into their daily communications, including VoIP, email, instant messaging, collaboration and video conferencing, as well
as advanced contact center communications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that our cloud-based architecture, the scale of our proprietary, multi-layer fully-integrated CloudWorx CaaS Platform, and the network effects arising out of the breadth of
our relationships with service provider customers, enterprise customers and channel partners, provide us with a significant competitive advantage. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
2008, 2009 and 2010 our total revenue was $43.4&nbsp;million, $76.2&nbsp;million and $111.5&nbsp;million, representing year-over-year organic growth
rates of 57&nbsp;percent, 76&nbsp;percent and 46&nbsp;percent, respectively. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Industry  </B></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Overview  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite significant developments in communications technology, the basic public telephone system, which is known as the Public Switched
Telephone Network, or PSTN, continues to rely on legacy networks using many of the same techniques that have been used for
decades to connect one voice caller to another. The PSTN is comprised of numerous local and long distance service providers that interconnect through hops and switches within their networks and often
across networks of other service providers to form&nbsp;a circuit and connect a call. This structure requires coordination across service providers and creates significant costs, including transit
charges and other payments to intermediate service providers. In addition, the transit of communications across multiple service providers can degrade voice quality and reduce reliability. This
structure also lacks flexibility to support multimodal communications and creates obstacles to the introduction of new forms of communications services and applications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
graphic below illustrates how a call from one end-user must pass through multiple connections and service providers to be routed to another end-user over the
traditional PSTN. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g603735.jpg" ALT="GRAPHIC" WIDTH="684" HEIGHT="400">
  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>Legacy service provider PSTN architecture  </I></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>65</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increasing availability of broadband Internet connections continues to drive the growth of next-generation communications services, devices and
content. This growth has led to the development of the SIP protocol to provide a uniform standard for controlling multimedia communications sessions among IP networks, unified communications systems
and end-user communications devices. Infrastructure investments in, and widespread availability of, broadband Internet connections have led to increased adoption of unified communications
systems, offering more advanced features such as VoIP, email, instant messaging, collaboration and video conferencing as well as the ability to combine different forms of multimodal communications
such as voice and video. SIP-based communications enable substantial cost savings, operating flexibility and features relative to traditional telephony. However, due to the lack of an
end-to-end SIP-based communications platform, the legacy PSTN has had to serve as a bridge for traffic between and among VoIP and other SIP networks as well as for
connections to non-IP-based networks and end-point devices thus losing the advantages of SIP. This legacy PSTN infrastructure has become increasingly difficult to support as
service providers balance the need to upgrade networks and introduce new communications services for their enterprise customers, wireless communication and application users and consumers
demanding multimodal connectivity, with the goal of reducing operating costs and capital expenditures. Without the ability to keep communications traffic on an end-to-end
connection over IP, it is challenging for service providers to achieve the operational and financial benefits associated with the adoption of all-IP protocols, such as SIP, and to support
enterprises and consumers that are increasingly demanding higher quality, multimodal communications solutions to ensure consistent features and interoperability across such applications. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g23279.jpg" ALT="GRAPHIC" WIDTH="684" HEIGHT="498">
  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>Reliance on legacy PSTN network  </I></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>66</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> Limitations of traditional approaches  </I></B></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Lack of support for software-based communications and rich media
applications.</I></FONT><FONT SIZE=2> The legacy PSTN infrastructure was not designed to support the high-bandwidth and feature-rich requirements of unified communications and
software-based rich media applications, such as video conferencing, SMS, instant messaging and collaboration using SIP and IP-based devices. In addition, legacy approaches lack an open and
secure application development environment with APIs, which further inhibits the development, distribution, access and integration of full-featured rich-media applications that can take
full advantage of IP-based communications.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Higher capital costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The legacy PSTN infrastructure is
characterized by limited functionality, fixed capacity cost and significant physical infrastructure requirements. Most service providers and enterprises maintain separate networks for
IP-related communications and traditional voice transport through dedicated circuits, resulting in additional infrastructure costs. The legacy PSTN's hierarchical architecture requires
switches to be housed in multiple regional and local physical facilities, resulting in high initial capital expenditures. In addition, service providers using the PSTN must install switches and other
infrastructure sufficient to handle the full volume of potential usage and do not have the capability to scale up or down on demand, thereby resulting in underutilized capacity and inefficient capital
investment.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Higher operating costs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The legacy PSTN infrastructure
architecture uses hardware-based, circuit-intensive networks that require ongoing maintenance and higher operating costs. In addition, due to the multiple regional and local physical facilities
required by legacy service providers' hierarchical architecture, the operating costs of the circuits connecting these facilities significantly add to the network operating costs. These maintenance and
operating costs, along with the lengthy activation periods associated with legacy PSTN infrastructures erode the potential operating cost benefits that could be obtained by using an all-IP
network.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Inefficient routing and lack of dynamic network capacity
allocation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;In the legacy PSTN, a call must follow a specific path, passing through multiple switches and hops, as it travels between
end-points. Transit costs increase and the call quality deteriorates as the number of switches and hops in a route increases. SIP-based communications often rely upon the
legacy PSTN as a bridge to connect disparate IP networks. This inefficient routing structure of the legacy PSTN imposes constraints on SIP-based communications, limiting the
full-potential of multimodal communications. Additionally, the legacy PSTN lacks the capability to support dynamic allocation of network capacity in order to enable on-demand
traffic volume changes and facilitate more efficient and cost-effective administration of networks.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Lack of a centralized directory for multimodal
communications.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The legacy PSTN was designed to deliver voice communications between devices connected to a fixed switching site. As a
result, directories included only limited identifying information such as user names and phone numbers. As devices have become increasingly feature-rich and offer multimodal
communications, there is a growing need for a directory that not only maps the unique device addresses but also has the ability to determine the location and detect the capabilities of each device. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Limitations of direct and existing neutral interconnect
arrangements.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Some service providers that exchange significant volumes of traffic have used SIP to directly interconnect with other
service providers. These direct connect approaches require unique solutions for each individual partner, which are complex to implement and costly to manage because of the large number of direct
interconnects required and the inefficiency of managing multiple partner relationships. In addition, existing neutral interconnect solution providers offering peering services use a series of hardware
switches that rely on legacy protocols and hierarchical architecture that must be deployed in every local market where communication services are to be provided. This approach requires switches to be
housed in a large number of physical facilities in each local area, </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>67</FONT></P>

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<UL>

<P style="font-family:times;"><FONT SIZE=2>resulting
in high initial capital expenditures, ongoing maintenance costs and limited scalability. Further, these neutral interconnect solution providers still rely upon the PSTN hierarchical
architecture and are not capable of providing large scale multimodal communications solutions.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Lack of SIP-based interconnect solutions of
scale.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;With the increased demand for unified communications platforms and multimodal communications, service providers and enterprises
are seeking SIP-based communication interconnect solutions of scale. Historically, these users were forced either to implement dedicated point-to-point IP
connections, or to rely on the legacy PSTN to serve as a bridge between networks. The former approach is limited in scale, costly and hard to manage, while the latter eliminates the ability to keep
communication traffic on IP connections end-to-end, limiting the ability to deliver the full benefits of multimodal communications. Having a large number of
SIP-based end-users provides the necessary scale to deliver the advantages of multimodal communications.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Lack of an integrated, on-demand
solution.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Traditionally, there has been a lack of integrated, on-demand solutions enabling service providers and enterprises
to deliver IP communications services. Service providers and enterprises seeking to deliver such services would have to combine various hardware, software and network solutions from different vendors,
requiring internal and external development and integration costs. Such approaches are expensive, have limited flexibility and features, pose interoperability challenges and require significant time
to implement. </FONT></DD></DL>
</UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Demand drivers for a new CaaS platform  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By migrating to IP networks, service providers can leverage the flexibility of a software and cloud-based platform to increase the
variety of communications services delivered to customers as hosted offerings. Further, customers recognize that, in addition to the many service improvements, adoption of SIP as a protocol for
controlling multimedia communication sessions, such as voice and video over IP, provides the potential to drive down telecommunications costs as IP-based networks are more efficient and
cost-effective than those that rely on legacy PSTN infrastructure. According to IDC, the total U.S. telecommunications services market is expected to reach $326.5&nbsp;billion by
2014.<SUP>(3)</SUP> Additionally, Infonetics Research has forecasted that the worldwide market for VoIP services could reach $74.5&nbsp;billion by 2015.<SUP>(4)</SUP> Connecting
IP-based networks to each other or the PSTN, which is refered to as SIP trunking, represents one of the fastest growing segments within the VoIP services market, and is forecasted to
increase at a compound annual growth rate of 52&nbsp;percent from $599&nbsp;million in 2010 to $4.8&nbsp;billion in 2015.<SUP>(4)</SUP> In addition to the migration of communications traffic
from the PSTN to IP networks, a number of other trends in the industry are driving the growth in demand for a new cloud-based communications service platform: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Proliferation of broadband connectivity.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Broadband
connectivity continues to expand worldwide at a rapid pace due to the increasing number of Internet users and the implementation of government-supported programs to bolster broadband infrastructure
deployment. This broadband proliferation increases the number of users that have access to and can benefit from all-IP communications services. </FONT></DD></DL>
</UL>

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<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>IDC, "U.S. Telecommunications Services 2010-2014 Forecast," IDC #223323, July 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Infonetics
Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March&nbsp;28,
2011.</FONT></DD></DL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>68</FONT></P>

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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Emergence of cloud-based services
architectures.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;On-demand delivery models are changing the way services are being delivered, providing significant benefits
such as minimizing up-front capital cost requirements, providing global reach, enabling customized pricing plans and centralized, highly redundant offerings with greater flexibility over
traditional on-premise models. As a result, cloud-based architectures are being rapidly adopted across organizations of all sizes. According to IDC, the
software-as-a-service market in the cloud, which also includes infrastructure-as-a-service and
platform-as-a-service, is expected to grow at a compound annual growth rate of 24&nbsp;percent from $17.1&nbsp;billion in 2010 to $40.5&nbsp;billion in
2014.<SUP>(5)</SUP> </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Proliferation of SIP/IP-based
devices.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Continuing improvements in technology are driving the convergence of computer functionality and Internet connectivity in
communications devices. At the same time, the industry continues to adopt SIP as the primary protocol for multimedia communications. The large-scale deployment of IP networks and broad adoption of
SIP-based devices, including SIP phones, SIP video devices and SIP-enabled private branch exchanges, or PBXs, are driving increasing growth in SIP usage. According to
Infonetics, worldwide business VoIP seats are expected to grow at a compound annual growth rate of 27&nbsp;percent from 19.9&nbsp;million in 2010 to 65.3&nbsp;million in
2015.<SUP>(6)</SUP> </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Demand for unified communications.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Organizations are
continuing to invest heavily in unified communications and mobility to increase collaboration, improve the productivity of their workforces and enhance relationships with customers and partners. In
addition, enterprises are looking for ways to augment their communications capabilities and leverage unified communications systems to enhance functionality and drive down costs. According to the
results of a survey conducted by IDC, one-fourth of medium-sized and large U.S. businesses surveyed indicated that they plan to implement a unified communications solution in the next
12&nbsp;months and nearly one-third of small businesses indicated that they plan to use unified communications in the same period.<SUP>(7)</SUP> </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Increased outsourcing by communications service
providers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Service providers are increasingly focused on providing on-demand multi-media services to their customers without
incurring significant additional operational and capital expenditures. They are increasingly choosing to outsource certain network operations and services which allows them to focus on strategic
investments to acquire customers and increase customer spending on new services. In a 2009 Booz&nbsp;&amp; Co. survey of global carriers, 25&nbsp;percent had already outsourced and 50&nbsp;percent
indicated that they could outsource their network operations and administration.<SUP>(8)</SUP> </FONT></DD></DL>
</UL>

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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>IDC, "Worldwide Software as a Service 2010-2014 Forecast: Software Will Never Be the Same," IDC #223628,
June 2010.  </FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Infonetics
Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March&nbsp;28, 2011. </FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>IDC,
"Worldwide Unified Communications 2011 Top 10 Predictions," IDC #226900, February 2011.  </FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Booz&nbsp;&amp;&nbsp;Co.,
"Outsourcing Network Operations: Maximizing the Potential," 2009.</FONT></DD></DL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>69</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Our CaaS Platform  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>IntelePeer CloudWorx CaaS platform  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have designed and developed a proprietary cloud-based communications service platform to address the challenges associated with the legacy PSTN. We believe
that our CloudWorx CaaS Platform cost-effectively leverages both a cloud-based architecture and the widespread availability of broadband connectivity to provide a carrier-grade, highly
flexible, software-based communications solution. Our on-demand CloudWorx CaaS Platform is fast to implement, easy to administer and highly scalable. It is based on a sophisticated,
integrated multi-layer approach, which includes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our Media Peering Grid service, providing any-to-any connection capabilities and supporting both
SIP/IP-based networks and the legacy PSTN, allowing service providers and enterprises to cost-effectively interconnect, transport and transact communications traffic, currently
at a rate of more than 20&nbsp;billion minutes annually;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our SuperRegistry directory, currently containing more than 400&nbsp;million telephone numbers and end-point
identifying addresses for wireless, wireline and other communication devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our AppWorx open and secure communications application development environment, which includes a complete set of APIs,
developer tools, documentation and reference applications. These applications allow our customers and partners to offer on-demand delivery of a growing set of multimodal communications
applications, which our customers can use to generate additional revenue. Our AppWorx development environment enhances customer engagement and retention with our CloudWorx CaaS Platform and increases
communications traffic over our platform. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
three layers are fully integrated via interconnecting software components, which enable our platform to be easily delivered and administered through our self-service
web portal. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Peering Layer: Media Peering Grid Service  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Media Peering Grid layer is a software-based set of components and services, delivered via a cloud architecture that allows us to
directly connect IP sessions between service providers and enterprises as well as to connect to legacy non-IP communication devices. Our Media Peering Grid service automatically
establishes individual peering relationships and direct connections that provide increased reliability, expanded multimodal functionality and fewer toll-generating hops as compared to
legacy call transport architectures used by the PSTN. For example, in a VoIP peering arrangement, </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>70</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>VoIP
operators can benefit from direct all-IP sessions using our Media Peering Grid service rather than traveling through multiple intermediate handoff points or hops over the legacy PSTN.
In addition to enabling direct connections between multiple service providers and enterprises, both across our IP-based platform and outside to the legacy PSTN, our cloud-based
architecture enables us to deploy new and expanded services to our customers without requiring them to make costly incremental investments in hardware. Additionally, our redundant,
geographically-dispersed, cloud-based architecture reduces the risk of regional disruptions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the efficiency and reliability of direct connections, our direct peering service can be used to link, or federate, self-contained, disparate networks to one
another, including enterprise, wireline, wireless and VoIP service providers, thus allowing these isolated networks to exchange traffic more efficiently than through the legacy PSTN. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Registry and Routing Layer: SuperRegistry Directory  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our SuperRegistry directory is a comprehensive database of telephone numbers and end-point identifying addresses for
wireless, wireline and other devices. We believe that our directory, which currently contains more than 400&nbsp;million numbers, is the largest independent multi-carrier, multimodal database of its
kind, and continues to grow through contributions from our service provider peering partners and enterprise customers. Our SuperRegistry directory includes routing paths, pricing and route costs,
route quality and other features and related information. This information enables us to cost-effectively route voice calls, messages and rich media over IP and legacy PSTN connections to
the correct end-points, across various service providers, regardless of end-point location, device type or communications platform. By taking advantage of our proprietary
routing software, directory and interconnections, enterprises and service providers are able to send traffic directly, without geographic constraints, to any of the numbers and addresses in our
directory, eliminating intermediate hops and the costs associated with them. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Using
our SuperRegistry directory and routing technologies, our enterprise customers can move beyond the limitations of the PSTN to achieve rich media, all-IP unified
communications with other enterprises across disparate communications technologies and to stand-alone SIP devices. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Application Services Layer: AppWorx Software Development Environment  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our AppWorx software development environment allows our customers to offer software developers and web designers an open development
platform to easily create innovative, communication-enabled applications. These applications include functions such as click-to-call, which enable an end-user to
initiate a phone call directly from a website, widespread message dissemination via voice and SMS, voice and text marketing campaign management, on-demand audio conferencing and
integration of communications into business processes and applications. The full integration of our AppWorx development environment with our other CloudWorx CaaS Platform layers enables
on-demand delivery of these applications to meet our customers' changing needs. The applications that we or our customers create using these tools and open interfaces can be used to drive
innovative business applications and models that take advantage of the convergence between telephony and the web. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
open architecture of our AppWorx development environment encourages third party developers and channel partners to leverage our technology to build new applications that can be
rapidly deployed. Developers can use these applications to generate incremental revenue streams or differentiate their products and services. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
three layers of our CloudWorx CaaS Platform are integrated to provide a simple and cost-effective approach to delivering enhanced voice and rich-media
services to any IP-connected device </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>71</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>worldwide.
Our proprietary platform enables service providers to offer incremental services expeditiously without needing to invest in new communications infrastructure. </FONT></P>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>IntelePeer peering platform solution</I></FONT></TD>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>IntelePeer enterprise federation</I></FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2><B> Our Competitive Strengths  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our solutions address the needs of service providers and enterprises while maintaining capital and operating efficiency. We believe the
following strengths differentiate us and position us for continued growth: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Cloud-based services architecture.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our solutions are
delivered on demand through a cloud-based architecture that can serve customers anytime and anywhere. This flexible and scalable architecture also enables us to customize our services to match each
new customer's needs, thereby eliminating the challenges often associated with the adoption and implementation of fixed, one-size-fits-all solutions. Our ability to
rapidly and easily deploy a customized solution on a service-by-service basis, helps us attract customers making a complete transition as well as those preferring to take a
gradual migration path from PSTN-based to SIP-based communications services. Our architecture also allows us to easily introduce and deploy new service offerings to our
existing customers and enables them to adjust their level of use based on demand, thereby allowing customers to address issues such as seasonal demand fluctuations. Using our architecture, our
customers can add new services or increase use of services quickly and with minimal incremental expense. Whereas other architectures require expensive, site-specific,
time-consuming hardware installations to extend their network systems into new territories, our cloud-based approach allows us to help our customers reach new geographic regions and
implement new services quickly and cost-effectively by leveraging the availability of the cloud. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>72</FONT></P>

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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Fully-managed, IP-based Media Peering Grid
service.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our proprietary software-based, fully-managed, distributed Media Peering Grid service provides carrier-grade,
high-quality voice and connectivity that can be relied on as a primary communications network. Our flexible Media Peering Grid software supports both legacy and VoIP network
interoperability and enables our customers to efficiently and cost-effectively transition their communications infrastructures from the legacy PSTN to an IP network incrementally and on demand, thus
reducing expenses associated with legacy architecture as well as call delivery services, tolls and circuit expenses.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Extensive, secure, multimodal SuperRegistry directory.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our
SuperRegistry directory currently includes a database of more than 400&nbsp;million telephone numbers and end-point identifying addresses corresponding to wireline, wireless and
IP-enabled devices. The scale and multimodal nature of this directory give us the ability to complete a call to any connected end-point device, regardless of whether it is a
PSTN-based handset or a SIP-connected device. This feature provides us with a significant competitive advantage in that it allows us to discover and direct sessions to both
traditional phones and IP-connected devices. Using our proprietary intelligent routing software and the numbers in our SuperRegistry directory, we are able to determine the interface type
necessary to complete the connection. We have been building this extensive SuperRegistry directory since 2006 through partnering efforts with service providers and enterprises. This expanding database
of telephone numbers and end-point addresses enables us to route traffic more efficiently from end-to-end, through our Media Peering Grid service, providing real-time optimal
routing for both service provider and enterprise originated calls, improving call reliability and decreasing call transport tolls. Furthermore, our SuperRegistry directory enables our enterprise
customers to achieve rich media, all-IP unified communications across disparate communications technologies, such as Microsoft, Cisco, Avaya and Siemens unified communications platforms,
with other enterprises and IP connected devices.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>AppWorx open application development environment.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our
AppWorx open application development environment provides software developers and channel partners with access to powerful tools for rapid development and integration of new communications services.
The tools in our AppWorx development environment include a set of APIs as well as fully customizable and scriptable command and control of calls that enable developers with little or no telecom
experience to easily build robust, rich media applications. These applications and new services can be accessed from anywhere, deployed quickly over our platform and easily integrated into existing
web services or software applications. Our AppWorx development environment enables our customers to develop and use these applications to provide additional functionality and new and differentiated
services to their end-users, which our customers can use to develop a stronger relationship with their end-customers.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Powerful network effects.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We benefit from strong network
effects driven by the large volume of numbers in our SuperRegistry directory. As our service provider peering partnerships and enterprise customer base grow, the benefits each existing customer
realizes by using our platform increase, resulting in reduced costs for our customers and increased traffic through our platform. New features and partnerships broaden our value proposition,
attracting more customers, peering partners and channel partners. For example, each new service provider or enterprise customer that allows us to add their end-point identifying numbers to our
SuperRegistry directory results in more calls that we can connect directly, providing increased quality and efficiency benefits and lower costs. In addition, every time we add an
IP-connected device, it increases our ability to provide multimodal communications capabilities to our customers. This helps us grow our revenue while at the same time increasing the
volume of traffic for which we compensate the service providers that make their numbers available through our SuperRegistry. The scale of our business and breadth of our relationships not only attract
new customers but also serve as barriers to entry for potential competitors. </FONT></DD></DL>
</UL>
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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Fully integrated communications platform.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our multi-layer
platform, which integrates transport, peering, registering services and APIs, offers our customers a one-stop, flexible and full-featured solution for developing and extending
their communications services as compared to alternatives that focus on local market, hardware-based solutions. Our fully integrated platform also enables us to be flexible and to easily add and
deploy new IP-enabled communications and collaboration services as our customers' needs evolve. Customers choosing our integrated platform solution benefit from a significant time, cost
and quality advantage as compared to the alternative of building a similarly functional solution that would require arrangements with multiple vendors and partners. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Our Strategy  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our objective is to continue to leverage our CloudWorx CaaS Platform to enhance our position as a leading provider of communications
solutions for service providers and enterprises. We intend to accomplish this by pursuing the following strategies: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Extend the technology leadership of our CloudWorx CaaS
Platform.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We have developed an innovative multi-layer platform and modular technology architecture that effectively transforms the
delivery of SIP-enabled communications, provides significant cost savings and enables faster and more flexible deployment. We intend to continue to invest in our platform through internal
development, or by acquiring complementary technology. These activities are expected to broaden our support for new collaboration and communications features, enhance the capabilities of our
SuperRegistry directory, and expand our AppWorx application development environment to drive broader adoption among new customers and developer communities.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Extend the reach and breadth of our peering
partnerships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We plan to add additional telephone numbers and end-point identifying addresses to our SuperRegistry directory
from new and expanded relationships with service providers and enterprise customers to increase our capacity for the benefit of our service provider and enterprise customers. As we add additional
direct peering partners, we expect to increase our communications traffic and revenue without needing to utilize the legacy PSTN, which we expect will reduce our traffic delivery costs. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Grow our relationships with existing customers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We have
built a diverse customer base of service providers and enterprises by cost-effectively connecting disparate networks over IP and providing highly flexible and high quality cloud-based
services. Our sales team works closely with our customers to understand their challenges and industry trends, determine the services that we can provide to better serve their needs as well as to
identify areas of focus for our ongoing research and development activities. These relationships allow our support team to respond more quickly and effectively to customer needs and our development
team to provide customized solutions for our customers. We intend to continue to leverage the work of our sales team to identify and deliver additional services to expand our relationships. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expand our customer base and technology partnerships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We
intend to expand our base of enterprise customers by deepening our existing technology partnerships with industry leaders such as Microsoft, Cisco, Avaya and Siemens, developing new technology
partnerships with additional industry leaders and expanding our network of channel partners. We also intend to focus on expanding our service provider customer base by leveraging our CloudWorx CaaS
Platform, investing in our direct sales force and educating service providers on the potential opportunity to reduce or eliminate capital expenditures and reduce operating costs by leveraging our
platform.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Broaden our international presence.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We currently have an
extensive peering partner network that serves U.S. customers through five U.S. regional data centers to connect with U.S. customers and connects with international service providers through data
centers in London, Los Angeles </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2>and
New York. We plan to extend our geographic reach and coverage by expanding our peering partner network and SuperRegistry directory globally through the addition of international service provider
peering partners, and global enterprise customers. </FONT></P>

</UL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Sales and Marketing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We market and sell our solutions through our direct sales force, agents and channel partners. As of March&nbsp;31, 2011, we employed
20 sales professionals and sales engineers and had relationships with 42 channel partners. We sell to service providers primarily through our direct sales force and we sell to enterprises primarily
through our indirect sales force that works with our channel partners. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
service provider direct sales force is composed of experienced sales professionals as well as sales engineers who promote the advantages of our CloudWorx CaaS Platform. This focus
provides a higher level of service and understanding of our customers' unique needs. Our enterprise sales team uses a channel sales strategy and seeks to partner with leading technology companies that
provide technology products and services to enterprises. Through this strategy, we benefit from the reach of dedicated sales agents, knowledgeable, certified resellers and technology providers who
resell or white label our services. Currently, our channel partners include resellers who sell and implement unified communications solutions, such as Microsoft, Cisco, Avaya and Siemens based
solutions, and who offer call center solutions. Our sales personnel work closely with these partners to assist them in selling customized solutions to their end-customers. We actively
support our channel partners on an ongoing basis. This support includes sales training, white papers, solution guides, hosted partner events and our on-demand self-service
CloudCentral portal. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
marketing team is principally engaged in the development of marketing collateral and support for our sales activities. We seek to play an active role in industry-related thought
leadership matters through speaking engagements, white papers and webinars. Our marketing also includes attendance at industry trade shows and conferences, as well as targeted corporate advertising. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Our Customers  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Today, we sell our solutions to service provider and enterprise customers primarily located in the United States. As of
March&nbsp;31, 2011, we had 92 service provider customers and 81 enterprise customers. For the year ended December&nbsp;31, 2010, Sprint and Qwest represented 29&nbsp;percent and
16&nbsp;percent of our revenue, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
service provider customers currently include major wireline and wireless carriers, competitive local exchange carriers, or CLECs, cable companies and VoIP providers, among others, as
well as other smaller service providers that provide services to limited regions or market segments. These service provider customers use our CloudWorx CaaS Platform to deliver traffic destined for
geographic areas
where the service providers do not own and operate their networks or where they are migrating from the PSTN to an IP-based solution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to enterprise customers, we have initially targeted mid-sized enterprises, including companies of 200 to 5,000 employees, which are seeking to migrate from a
legacy network architecture to a SIP/IP unified communications platform. We also target enterprises of all sizes that operate customer contact centers. Many of these enterprises are updating their
communications infrastructures to take advantage of their existing broadband Internet services to connect a growing number of geographically dispersed workers with highly productive and
cost-effective communications solutions. Furthermore, the increased use of video, SMS and other rich media applications in the enterprise business environment is driving a need for
sophisticated unified communications platforms, which can all be delivered by our CloudWorx CaaS Platform. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe the following case studies illustrate the value we offer to our customers: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I>Wireless service provider case study:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A major wireless provider in the midst of a technical and operational transition associated with its
migration to a SIP network was seeking a partner that could provide the SIP connectivity, carrier-grade quality, speed and flexibility that it was unable to achieve through alternative solutions. We
successfully partnered with this service provider and enabled it to introduce new SIP voice capabilities while simultaneously adapting a new outsourced network operation model. We believe our ability
to deliver consistent, high quality service, coupled with material cost savings and our strong industry reputation, positioned us as a preferred partner for the initial engagement. This initial sale
also created an opportunity for us to expand our relationship with this service provider customer by offering new services and features on an ongoing basis. This customer soon expanded the services
purchased from us by adding VoIP termination services. Since that time, we have further grown the business relationship by executing a direct peering agreement. More recently, this customer has
further increased the scope of services by contracting with us to provide them with direct inward dialing, or DID, services. We are also currently in discussions regarding providing additional
services to this customer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Enterprise customer through a channel partner case study:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A fast growing sports club company with over 350 locations in 22 U.S. states as
well as Canada, recently upgraded its entire corporate communications infrastructure with a new unified communications channel partner who recommended our services to them. During the engagement, we
expeditiously implemented our service in less than a month and further validated our reputation within the vendor partner community by replacing larger service providers who faced challenges in
delivering SIP trunking services. Through our SIP trunking services, the enterprise customer was able to integrate its communications experience with its business applications, standardize
capabilities across every location and simplify its network environment,
resulting in productivity gains and immediate annual cost savings of over $600,000, representing a significant reduction from the operating costs of its prior communications solutions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Enterprise customer contact center case study:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A global leader in on-demand, multi-channel contact center services was looking
for a solution that could help it manage its increasing call volume more efficiently and cost-effectively. Our on-demand capabilities, along with outbound local and long distance services
to support large volumes of event-based notification calls, enabled the customer to significantly increase its capacity and grow its revenue. The scalability of our CloudWorx CaaS Platform enabled
this customer to increase its usage by more than 60&nbsp;percent over a one-month period, allowing them to capitalize on a time-sensitive campaign opportunity to deliver millions of
calls. We further expanded the relationship by developing and reviewing key call metrics, critical to the contact center's business, to increase call success and optimize network utilization. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Technology  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed a proprietary, multi-layer stack, cloud communications platform, our CloudWorx Caas Platform, which hosts our core
technologies and services. Our proprietary, software-based platform currently includes three layers: a peering layer, called the Media Peering Grid, a directory layer, named the SuperRegistry, and an
applications layer, known as AppWorx. The three layers are integrated with our proprietary interconnection components. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
communications services are provided according to the functionality required by the selected application by following routing rules and preferences associated with individual devices
and users. These rules and preferences are maintained in and processed by the SuperRegistry directory layer. The AppWorx applications layer receives and processes communication session requests. The
Media Peering Grid peering layer receives device, user and routing rules and preferences from the directory layer, and establishes connections between devices accordingly. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Together,
the elements of our multi-layer platform run on a cloud-based architecture to deliver communication services between a wide variety of communication end-points. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> The Media Peering Grid or Peering Layer  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Media Peering Grid peering layer is a software-based solution that manages connections and capabilities between our CloudWorx CaaS
Platform and service provider and enterprise networks, providing the actual connections between devices or end-points. This peering layer processes incoming and outgoing communications,
enabling devices to connect by following specific routing policies based on user, device and routing information that is stored in our SuperRegistry directory. This peering layer connects calls and
interoperates the networks of various types of customers such as wireless and wireline service providers, CLECs, local exchange carriers, or LECs, enterprise customers, federation partners,
application service providers, VoIP service providers and peering partners. Our peering layer software supports various technologies and call types, including voice, video and SMS. If a call or
communication session is delivered between two devices running on different network architectures, it may be necessary to transcode, or convert, the call to a format that is compatible with the
specific destination device. Our peering layer determines the signaling protocol of each end-point and if necessary, automatically converts the call to a format compatible with the
destination device. Our peering layer supports SIP for VoIP calls as well as SS7 signaling for legacy PSTN calls. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Key
features of our peering layer include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Security architecture: We have designed and implemented a security system of multi-layered defense, which we believe to be
industry best practice. This protects our Media Peering Grid service and our communications with our customers. These layers include: access control lists on routers and stateful firewalls to block
unwanted traffic. Our security devices also block rogue media such as distributed denial of service attacks, or DDoS, and have embedded digital signal processors for media transcoding that deliver
optimal performance under load/attack. Our solution also includes a rich set of security features including encryption, transport layer security rogue real-time transport protocol protection, dynamic
blacklisting and toll fraud prevention.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Resiliency: We have designed a fully redundant, geographically diverse transport infrastructure dedicated to delivering
low latency and low jitter media services across the peering grid. We have taken a comprehensive approach to design from the wide area network, or WAN, level down to the individual cards and ports
providing high availability to our Media Peering Grid service. This design includes data center facilities, diverse fiber routes, and other redundancy measures. Additional elements of our service
designed to maintain our high availability of our platform include redundant power feeds with full UPS and generator backup, redundant cooling systems, humidification control, minimum 72&nbsp;hours
fuel storage on site, minimum two contracts for additional fuel per site, SAS 70 Type&nbsp;2 compliance and physical security including on-site security guards, cameras and biometrics. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Transcoding capabilities: We offer full support for wireless devices whether they use 3G, 4G or the emerging long term
evolution, or LTE, standard. We also support wireline codecs, such as G711, including fax and modem transmission capabilities. Our applications also include high-definition voice from VoIP
service providers. While the majority of our traffic comes from our IP active trunk groups including public SIP/IP and private GigE SIP, we also process time division multiplexing, or TDM,
DS-3 SS7 ISUP and dedicated clear channel DS-3. Furthermore, to enable our multimodal application development and distribution, we support a full range of both audio and video
coder and decoder technology or codecs. The peering layer receives the device, user, and routing rules and preferences and establishes connections between devices based on those elements. </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2><B><I> The SuperRegistry Directory or Directory Layer  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our directory layer is a policy-based engine that stores and maintains directory (or registry) entries, including user and routing
information, and then uses that information to determine a routing policy for each communications session. We use a combination of intelligent software and business rules to route communications
traffic based on quality level, cost constraints and registration for each device to be used for direct call connection. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
SuperRegistry directory is a secure database environment that combines cost information, quality of service metrics and optimal routing policy software with telephone numbers, IP
addresses, SIP trunk groups, telephone number portability data, SS7 point codes, used for PSTN end-point routing and connections to external federations, enabling heterogeneous peering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are developing enhancements to our policy-based routing, such as user contact preferences by device, based on criteria such as time of day, day of the week, user location and nature
of incoming calls. Our software will enable use of this directory data to deliver intelligent policy-based communications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Key
features of our SuperRegistry directory and related services include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Any-digit peering: Our software enables peering between service provider and enterprise networks using
10-digit (based upon the E.164 or industry standard international public telecommunication numbering plan) or 6-digit (area code and exchange for North America) phone numbers. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Regulatory: Our software includes support for U.S. regulatory designations such as interstate, intrastate and local
jurisdictions and the cost structure, tolls and tariffs associated with each of these jurisdictions.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Voice or video federation: We expect to release a new version of our service, that we believe will allow us to deliver
multimodal communications and federation capabilities whether inside a single enterprise or at different external enterprises. We expect to release this service in the second half of 2011. </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=2><B><I> The AppWorx Application Services Layer  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our application layer software enables creation and distribution of fully featured applications and offers a set of standards-based
APIs for managing use of these applications and activation services. This layer is also responsible for recognizing and initiating various application requests. When an application is accessed via a
user device, the application layer receives and identifies a communication session request which includes specific configuration information related to the request. The application layer software
includes numerous application scripts corresponding to specific features. An application script is a set of instructions which, when executed, causes specific actions to occur such as establishing a
communication session between two or more devices. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Examples
of application script uses include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>click-to-call, providing a voice connection between end-points initiated from a
website;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>SMS messaging, providing messaging capabilities between end-points;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>blast SMS, providing mass delivery of outbound messages;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>blast voice, delivering media to one or more end-points;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>auto conference, scheduling automatic dialing for conference call bridging;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reporting, for generating records of usage and performance of calls; </FONT></DD></DL>
</UL>
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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>real time call events, allowing applications to take action based on call progress;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>recording, enabling recording, storage and delivery of media sessions;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>text to speech engine processing that converts text into speech in a given language;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>scripted interactive voice response, or IVR, which allows users to define IVRs to be applied to voice calls; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>media management, which allows media to be converted and included in call sessions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within
our application layer is our CloudCentral Portal software, which enables our customers to activate and manage their services and is also used as our internal management portal to
manage aspects of our relationship with these customers. Our CloudCentral Portal is used for enterprise management, user management, SIP trunking, DID, toll-free number ordering,
management and reporting. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
software supports capabilities such as capacity planning, performance reporting, event monitoring and notification, call media and signaling analysis, as well as our billing and
invoicing report generation. These end applications connect to our business intelligence layer which tracks peering grid and vendor performance, service levels, traffic analysis, usage reporting and
billing service assurance. The business functions enabled by our software correspond to our peering grid tracking intelligence that handles automatic number identification, or ANI, including fax/modem
detection and routing, route loop detection and prevention, as well as tracking capacity data, processing network topology for fault analysis and traffic rerouting, and providing call detail record,
or CDR, correlation, summarization and warehousing. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> The Interconnection Components  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The various layers of our CloudWorx CaaS Platform are integrated by our proprietary software interconnection components that coordinate
activities between our peering, application and directory layers. The application layer delivers messages to the interconnection component for subsequent transmission to the peering layer, which
leverages the SuperRegistry directory layer for optimal routing policy. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Research and Development  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2011, we had 25 employees dedicated to research and development. Our total research and development expenses
were $2.4&nbsp;million, $3.6&nbsp;million and $4.1&nbsp;million for the years ended December&nbsp;31, 2008, 2009 and 2010, respectively. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Intellectual Property  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends upon our ability to protect our core technology and intellectual property. To accomplish this, we rely on a
combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, as well as customary confidentiality and other contractual protections. We have been issued a
patent in the United States. Additionally, we have eight patent applications pending in the United States, two provisional patent applications pending in the United States and four patent applications
pending in each of Europe, Japan and South Korea. Our registered trademarks in the United States include IntelePeer, IntelePeer AppWorx, AppWorx and SuperRegistry. We have four pending trademark
applications in the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the protections described above, we generally control access to and use of our proprietary software and other confidential information through the use of internal and
external controls, including contractual protections with employees, consultants, customers and vendors. U.S. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>79</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>and
international copyright laws protect our software. We also license software from third parties for integration into our service offerings. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
license our software to customers pursuant to agreements that impose restrictions on the customers' ability to use the software, including prohibitions on reverse engineering and
limitations on the use. We also seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute nondisclosure and
assignment of intellectual property agreements and by restricting access to our source code. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or obtain and use information that we regard as proprietary. We
cannot assure you that the steps taken by us will prevent misappropriation of our technology. We cannot assure you that other patents will issue from our pending or future applications or that, with
respect to our issued or any
future patents, they will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. In
addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as
diligently as government agencies and private parties in the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. In
particular, leading telecommunications companies have extensive patent portfolios. From time-to-time, third parties, including certain of these leading companies, may assert
patent, copyright, trademark or other intellectual property rights against us, our channel partners or our end-customers. Successful claims of infringement by a third party could prevent
us from performing certain services or require us to pay substantial damages, royalties or other fees. Even if third parties may offer a license to their technology, the terms of any offered license
may not be acceptable and the failure to obtain a license or the costs associated with any license could cause our business, operating results or financial condition to be materially and adversely
affected. We typically indemnify our end-customers and distributors against claims that our products infringe the intellectual property of third parties. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even
if our efforts to obtain patent protection are successful, third parties may not respect our rights and we may be required to initiate litigation to enforce any patents issued to
us, or to determine the scope or validity of a third party's patent or other proprietary rights. Patent litigation is expensive and time consuming, and may adversely affect our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Competition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The markets for our products are extremely competitive and are characterized by rapid technological change. Our competitors include
traditional telecommunications carriers and other providers of specialized communications services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
principal competitive factors in our markets include the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>brand recognition and financial strength;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>scope and scale of communication services offered;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>quality, reliability and availability of services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>cost of services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>speed of activation and implementation;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>wireless, wireline and other end-point coverage; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>customer service and support. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>80</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that we compete favorably with our competitors on the basis of these factors. In the competitive markets we seek to serve, we have tried to differentiate our service offerings
in several ways: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Innovative multimodal services&#151;we provide cloud-based, rich media communication services that exceed the
capabilities of PSTN voice services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Rapid activation&#151;we can quickly activate new customers;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>High reliability&#151;our fully managed, geographically distributed platform provides carrier-grade quality and
reliability for our communication services;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On-demand availability&#151;our customers can quickly increase or decrease amount and types of services
they purchase using our online portals; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Platform neutrality&#151;allowing service providers to use our peering and registry services despite competitive
pressures between each other in their service areas. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
operate in an industry with limited barriers to entry and expect to have new competitors in the future. Additionally, some of our larger, more well-known competitors have
greater brand recognition, longer operating histories, larger installed customer bases, larger sales and marketing budgets, as well as greater financial and other resources. Our biggest customers may
enter into direct peering relationships, which could substantially diminish our business opportunities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ability to compete effectively could be adversely affected by changes in regulation affecting our industry, consolidation among our competitors and our customers, entrance of new
competitors, rapid change in technology and market demands for new services, all of which are factors largely outside of our control. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Employees  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2011, we had 115 full-time employees, including 25 in sales and marketing, 43 in operations, 25 in
research and development and 22 in general and administrative and other functions. None of our employees are covered by collective bargaining agreements. We consider our relationships with our
employees to be good. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Facilities  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our headquarters are located in a 6,680 square-foot facility in San Mateo, California that we lease. The lease expires in
September 2013. We also operate our Engineering, Development and Operations center in Denver, Colorado in a 13,777 square-foot facility that we lease. The lease expires in August 2011. We
also have small offices in Seattle, Washington and Austin, Texas that we lease. We also have several co-location production facilities in New York, New York, Chicago, Illinois, Atlanta,
Georgia, Dallas, Texas, Los Angeles, California, and London, United Kingdom as well as a testing co-location facility in Englewood, Colorado, all of which are leased facilities. We believe
that our current facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable
additional or substitute space will be available as needed to accommodate any such expansion of our operations. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Legal Proceedings  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party
to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or
financial condition. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>81</FONT></P>

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<BR></FONT><FONT SIZE=2><B>  REGULATION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The United States has a dual regulatory structure applicable to the offering of telecommunications services. The Federal Communications
Commission, or FCC, in general regulates interstate and international telecommunications services; while state public utilities commissions, or PUCs, regulate telecommunications services that are
within a state's boundaries. Certain of our offerings are subject to regulation by both the FCC and state PUCs. Under the Communications Act of 1934, as amended by the Telecommunications Act of 1996,
or the Communications Act, we are subject to a variety of rules at the federal level that govern the rates we charge for certain services, customer privacy, public safety, contribution requirements to
a variety of federal telecommunications-related funds including the USF as well as reporting obligations. States impose similar obligations and may, in certain instances, regulate the rates we can
charge for certain offerings. A number of states impose USF contribution obligations that are in addition to federal USF
contribution requirements. The FCC and state PUCs will monitor our compliance with their rules and regulations, and may impose fines, fees and additional assessments if they determine our efforts do
not fully satisfy those requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
communications services are also subject to international regulation. Such regulations may affect our plans to expand our business internationally. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have obtained licenses to offer telecommunications services from the FCC and authorization to offer facilities-based and resold telecommunications services from PUCs in 43 states and
the District of Columbia. We are still pursuing licenses in the remaining states and expect to receive the necessary authorizations in the near future. Most states require us to file tariffs or price
lists setting forth the terms, conditions and prices for telecommunications services that are classified as intrastate. Rates, terms and conditions for certain services and access to network elements
provided by certain Incumbent Local Exchange Carriers, or ILECs, and Regional Bell Operating Companies, or RBOCs, are, in many cases, determined by arbitration before the applicable state PUC. The
precise jurisdictional reach of the various federal, state and local authorities depends on the offering and can be uncertain because it is subject to ongoing controversy and judicial review. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a regulated provider of telecommunications services, we are also entitled to certain rights. For example, other telecommunications service providers are required to interconnect their
networks with ours. We have the right to access certain elements of ILEC networks at rates that are just, reasonable and non-discriminatory. We also have the right to obtain telephone numbering
resources for our network use and for assignment to our customers. At the state level, we are generally entitled to tariff our service offerings, which allows us to set the terms, conditions and
prices of our offerings in accordance with state law for large numbers of customers without entering into individually negotiated agreements. These rights provide us benefits and protections that are
not available to unregulated entities. We leverage our status as a regulated provider to develop commercially beneficial relationships with our peering partners. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
technologies and the communications industry continue to change, the international, federal, state and local statutes and rules governing the communications industry may be modified
significantly. Such a change could substantially affect the demand and pricing for our services. Such changes could include, but are not limited to, an increase in regulatory oversight; regulation of
the prices that we can charge for some or all of our services; modification of statutes, rules or policies that could affect our current or future plans or that would require modification of the terms
and conditions of our tariffs, contracts, or other agreements that we rely on for our business; modifications to the operations or costs of the operations, including the pricing of our services to our
customers; a decrease in the amount of traffic our customers exchange with us; a change in the types of traffic our customers exchange with us (including our customers exchanging, on average, lower
priced minutes or services); changes in the rates governing the rates, terms and conditions under which voice service providers exchange traffic; </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>changes
in state or federal universal service programs; and changes or modifications in taxes or surcharges that could cause a decrease in the amount of traffic our customers deliver to us or affect
our sources of revenue. We cannot predict when, or upon what terms and conditions, further federal, state or local regulation or deregulation might occur or the effect future regulation or
deregulation may have on our business or the rights we enjoy as a regulated telecommunications service provider. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Federal and State Regulation of Voice Peering Services  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a competitive service provider, the pricing of our communications services is generally not heavily regulated by the FCC or state
utility agencies. However, these agencies have greater regulatory authority over the pricing of ILECs' tandem transit and access services. Regulation of these services and rates generally sets the
benchmark for the prices of competitive service providers including the communications services that we offer. To the extent that ILEC transit or access rates are reduced or capped, it could
negatively impact us as we may need to reduce our rates in order to comply with the law and compete with the ILEC or other service providers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
number of PUCs assert regulatory authority over the provision of local and intrastate transit services. Some PUCs have initiated proceedings to examine the regulatory status of
services such as ours. Some states have taken the position that voice peering service is an element of the "transport and termination of traffic" services that incumbent ILECs are required to provide
at rates based on a reasonable approximation of the additional costs of completing the calls under the Communications Act, while other PUCs have determined that the Communications Act does not apply
to these services. The PUC regulatory framework associated with local and intrastate transit services is constantly under review. If the FCC or a federal court determines that a particular state's
interpretation of the Communications Act was incorrect, the incumbent LECs' tandem transit rates may either increase or decrease substantially, which could affect our ability to offer competing
services profitably. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also offer access services, which include origination and termination of long-distance calls, through our platform in certain jurisdictions. The FCC and many state PUCs
currently limit the rates we may charge for originating and terminating access services. See "Regulation of Access Rates" below. The FCC is considering a proposal to reform the pricing of access
which, if adopted, would substantially reduce both intrastate and interstate access charges over an unknown transition period. While the exact length of the transition period is unknown at this time,
we expect that it will be over a number of years and could extend as long as 10&nbsp;years. Such services are also subject to the direct costs of exchanging traffic with other carriers in the form
of access rates. See "Other Proceedings That May Impact Our Business or Service Offerings&#151;Intercarrier Compensation Reform." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Regulation of Access Rates  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we do not directly access local exchanges pursuant to federal or state tariffs, the cost of such access can affect the amounts we
pay our indirect peering partners and ultimately impact our operations, margins and profitability. Like many other market participants, we are involved in billing disputes concerning the appropriate
data that should be used when determining intercarrier payments. The FCC and state PUCs are currently considering substantial modifications with respect to the way carriers compensate one another for
the exchange of traffic. See "Other Proceedings That May Impact Our Business or Service Offerings&#151;Intercarrier Compensation Reform." </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Interstate Access Charges  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Access charges that local exchange carriers, or LECs, impose upon us consist of both usage-sensitive switched access charges and
flat-rated transport and special access charges. The FCC regulates ILEC interstate access services. We also enter into commercial carrier-to-carrier contracts with
peering partners to transport and terminate our traffic, and such agreements are typically not subject to tariff </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>regulation.
The industry is subject to a significant amount of litigation related to how much access will cost and what services should pay for access. The regulatory structure governing the cost of
access is complex and tends to lag behind technological and service advancements, which creates a high level of uncertainty in the industry, as well as rate arbitrage. The cost of billing disputes
between carriers and service providers can be significant, and such disputes could result in litigation. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
FCC has adopted a mandatory detariffing regime for access services that wireless carriers wish to provide. Wireless carriers may not file tariffs for access services and must,
instead, enter into voluntary contracts. As the volume of wireless traffic increases, the potential for wireless access charges poses a risk to our cost structure. Our current business practice is to
pay commercially agreed upon rates to wireless carriers when handling traffic destined to wireless customer. If the FCC adopts an access charge regime for wireless traffic, we may have to pay more to
wireless carriers. The future of how much access will cost for wireless traffic is another question being addressed in the FCC's intercarrier compensation rulemaking. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Intrastate Access Charges  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intrastate access charges that incumbent and competitive LECs assess us, or that our competitive local exchange carriers, or CLECs, are
permitted to charge other carriers, are regulated by the PUCs. Intrastate access rates have historically been higher than interstate access rates, and continue to be so in many but not all states.
Intrastate access charges are also being examined in the FCC's intercarrier compensation proceeding. The disparity between interstate and intrastate access rates results in a significant number of
billing disputes and litigation throughout the industry. It is particularly difficult to determine the appropriate jurisdiction when a call originates or terminates on a mobile network, or on the
Internet, since the user's location can change at any time and may be different from that indicated by their telephone number. For these reasons, among others, a number of states have concluded that
intrastate access rates should be lowered to parity with interstate access, which is consistent with the FCC's tentative findings in its intercarrier compensation rulemaking. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many,
but not all, states have rules limiting the rates CLECs can tariff for intrastate access services, similar to the FCC rules discussed in the preceding sections. In these states,
CLEC rates generally cannot be higher than those of the competing ILEC. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Local Reciprocal Compensation  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Local telephone companies that deliver calls to the networks of other local carriers in the same geographic area for termination
typically compensate one another for terminating such traffic. The FCC has established a general framework and ratemaking methodology governing such compensation. The specific rates are regulated by
the PUCs. These rates vary from "bill-and-keep" to rates that approximate those for switched access services. Rates for local reciprocal compensation are often significantly
lower than rates for switched access, which may result in billing disputes and litigation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Regulation of Interconnected VoIP Services  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to telecommunications services, we offer a variety of VoIP services. VoIP services are a form of communications services
that use the IP standard instead of the legacy time division multiplexing, or TDM&nbsp;technology. Depending on the needs of the customer, we may offer services via the public Internet or over a
private or managed connection to the Internet. The FCC has asserted its regulatory authority over certain configurations of our VoIP services, known as interconnected VoIP. The FCC, however, to date
has not classified interconnected VoIP services as telecommunications services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interconnected
VoIP services are those services that enable real-time two-way voice communications, require a broadband Internet connection from the user's
location, require the use of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>84</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>IP-compatible
customer premises equipment and permit users generally both to receive calls from and to terminate calls to the PSTN. The FCC requires interconnected VoIP offerings to comply
with certain regulations including, but not limited to, the Communications Assistance for Law Enforcement Act, or CALEA, customer privacy regulations, discontinuance rules, E911 obligations, and
reporting obligations. These offerings must also contribute to a number of federal funds including the USF. Each of these regulations covers matters that, because we are a licensed telecommunications
carrier, our communications services would have been obligated to comply with even if we were not treated as an interconnected VoIP provider. Increased regulation of VoIP services by the FCC therefore
benefits us by ensuring parity in regulatory obligations between us and our competitors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
authority of the states to regulate certain types of interconnected VoIP services is uncertain at this time. In 2004, the FCC ruled that states could not impose certification,
tariffing or other similar common carrier requirements on a provider of nomadic interconnected VoIP service that relied on the public Internet for connections to its customers. However, the FCC did
not rule then, and generally has not subsequently addressed, to what extent the states could exercise jurisdiction over other interconnected VoIP services that use fixed connections to customers
rather than connecting over the public Internet. While the FCC has recently clarified that states may require nomadic interconnected VoIP service providers to contribute to state USF programs, it is
unclear what other regulatory authority states may have over interconnected VoIP services. Several states have recently sought to impose registration or other similar requirements on interconnected
VoIP providers that they believe are not covered by the FCC's ruling concerning VoIP services that rely on the public Internet for connections to their customers. Even if states are ultimately able to
require providers of certain types of interconnected VoIP services to seek approval to offer services, we believe the impact on us would be minimal as we are licensed in most states and the District
of Columbia, and intend to be licensed in all fifty states in the near future. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed below, there are a number of open proceedings at the FCC that could impose additional obligations on interconnected VoIP providers. For example, the FCC continues to examine
whether to expand E911 obligations that apply to interconnected VoIP services including the possible imposition of automatic location requirements. Further, as part of its intercarrier compensation
proceeding, the FCC is considering the appropriate regulatory classification of interconnected VoIP providers as either regulated telecommunications services or information services. The FCC is also
considering whether and how to impose access charges on VoIP traffic that involves an interstate or intrastate long distance communication. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Enhanced 911 Services  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2005, the FCC concluded that interconnected VoIP service providers must support enhanced 911 emergency services. The FCC rules,
among other things, also require interconnected VoIP providers to distribute stickers and labels informing customers of the limitations on their emergency services as compared with traditional
wireline E911 service to notify and obtain affirmative acknowledgement from customers that they are aware of those limitations to obtain from each customer, prior to the initiation of service, the
physical location at which the service will first be utilized, and to provide its customers one or more methods to update their "Registered Locations." Our VoIP E911 services, like those offered by
other interconnected VoIP service providers, are more limited than the 911 services offered by traditional wireline telephone companies. These limitations may cause significant delays, or even
failures, in callers' receipt of emergency assistance. Despite the fact that we have notified our customers and received affirmative acknowledgement from all of our customers that they understand
these differences, affected parties may attempt to hold us responsible for any loss, damage, injury or death suffered as a result of certain technical failures of the mandated E911 service for
interconnected VoIP providers. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>85</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2010, the FCC released a "Further Notice of Proposed Rulemaking" seeking additional comments on a number of issues including, but not limited to, whether nomadic
interconnected VoIP providers should be required to offer automatic location information of their users without customers providing location information. The FCC also sought comment on how far it can
extend E911 obligations to other types of companies including device manufacturers, software developers and others. At this time we cannot predict the outcome of this proceeding nor can we predict its
potential impact on our business. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Communications Assistance for Law Enforcement Act  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September 2005, the FCC concluded that interconnected VoIP service providers must comply with the CALEA and configure their network
and services to support law enforcement activity in the area of wiretaps and call records. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Universal Service Fund  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC and a number of states administer "universal service" funds to provide for affordable local telephone service in rural and
high-cost areas and to fund other social programs, such as Internet access to schools and libraries. There are numerous regulatory and legislative efforts to reform universal service
funding requirements and we cannot predict the outcome of these efforts. In June 2006, the FCC issued an order holding that interconnected VoIP providers must contribute to the federal USF. In
November 2010, the FCC clarified that states may impose USF contribution requirements on the intrastate revenues of nomadic interconnected VoIP providers to the extent that such contribution systems
do not conflict with federal law and the intrastate universal service assessments do not apply to revenues generated by services provided in other states. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April&nbsp;21, 2010, the FCC issued a notice that could lead to new proposals regarding contributions to the USF that, if adopted, could materially affect the magnitude of our
contributions to the fund. The Commission continues to analyze contribution requirements for USF. It is impossible to predict the impact of the FCC's proposals on our operations and financial results.
In addition, AT&amp;T&nbsp;Inc. filed a "Petition for Immediate Commission Action" on July&nbsp;10, 2009, requesting that the FCC adopt a new mechanism for calculating federal USF contribution that
would be applicable to all contributors. The specific proposal, which has been pending at the FCC for some time, is to determine contributions to the USF based on "assessable telephone numbers" rather
than interstate and international revenue. This AT&amp;T proposal remains pending. We cannot predict whether the FCC will adopt this or some other contribution methodology, nor can we predict the
potential impact on our business at this time. In addition, in February 2011, the FCC issued a notice of proposed rulemaking to adopt reforms to the USF program that would shift support from
narrowband services to broadband services. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Customer Proprietary Network Information  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC has determined that its Customer Proprietary Network Information, or CPNI, rules apply to interconnected VoIP providers.
Interconnected VoIP providers must adhere to particular customer approval processes when using CPNI outside of
pre-defined limits and when using CPNI, for marketing purposes. The rules also require such providers to take certain steps to verify a customer's identity before releasing any CPNI over
the telephone or the Internet, and to report unauthorized disclosures of CPNI. Interconnected VoIP providers must also file certain CPNI certification information annually with the FCC. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>86</FONT></P>

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<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Local Number Portability  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC has extended to interconnected VoIP providers the obligation to provide local number portability. Interconnected VoIP providers
are required to permit customers to retain their assigned telephone numbers when changing carriers, and are required to undertake porting requests on an expedited basis. Providers are also subject to
local number portability fees historically imposed on local exchange carriers. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Disability Access  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC has required interconnected VoIP providers to offer "711" dialing (for telecommunications relay), and to make their services
and equipment (including software used for interconnected VoIP) accessible to persons with disabilities, if doing so is readily achievable. Interconnected VoIP providers are also required to
contribute to the Telecommunications Relay Services Fund. In April 2010 the FCC announced plans to adopt a further order with respect to hearing aid compatibility requirements applicable to various
services. We cannot predict at this time what new requirements the FCC will establish, if any, or how any such new requirements may affect us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October, 2010, the Twenty-First Century Communications and Video Accessibility Act was signed into law. The statute imposes a number of accessibility and other obligations on
providers of Advanced Communications Services, which include interconnected VoIP services, and on manufacturers of equipment, including software, used for services covered by the law. The FCC has
initiated a rulemaking to implement the new accessibility requirements. We cannot predict whether we will be subject to additional accessibility requirements or whether any of our service offerings
that are not currently subject to disabilities access requirements will be subject to such obligations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Other Proceedings That May Impact Our Business or Service Offerings  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The FCC and state PUCs are considering a number of issues that could impact the structure of the market in which we operate. The FCC
and certain states continue to consider the pricing of services offered by incumbent providers that compete with our regulated offerings. New price regulation of incumbent offerings would likely
result in decreasing prevailing incumbent rates for services that compete with ours, making our services less attractive and potentially decreasing the prices we can charge for such services. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Intercarrier Compensation Reform  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As described above, the current regime governing intercarrier compensation consists of a patchwork of federal and state regulation
depending upon such factors as the provider, jurisdiction and nature of traffic. This has led to a significant amount of disputes and litigation throughout the industry. In February 2011, the FCC
released a Notice of Proposed Rulemaking that proposes significant changes in the industry with respect to carrier compensation reform. The FCC proposes that intercarrier compensation rates be reduced
or eliminated entirely over time, and distinctions between interstate, intrastate, local, wireless and VoIP traffic also be reduced or eliminated. Finally, the FCC also proposes to address on a faster
track three pressing intercarrier compensation issues: phantom traffic, access charges for VoIP traffic, and access stimulation. The intercarrier compensation proposals that could impact our business
include, for example: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the type and amount of rate reductions that should be imposed for originating and terminating access charges, both
intrastate and interstate;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether intercarrier compensation should remain at per minute rates in the long term or transition to
bill-and-keep or flat-rated charges; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>87</FONT></P>

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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>if and how rate changes should be incorporated in commercial contracts and interconnection agreements; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>what framework should govern intercarrier compensation obligations for interconnected VoIP traffic:
bill-and-keep, immediate obligation to pay VoIP-specific rates, obligation to pay specific compensation in the future, immediate obligation to pay existing rates
that apply to TDM traffic, or some other arrangement;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether the FCC should assert jurisdiction over all wireless termination charges (for traffic delivered by and to
commercial mobile radio service carriers) and establish different rates or rate transitions for such traffic;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether all providers, including interconnected VoIP providers and intermediate carriers, should pass the calling party
number, charge number, and signaling information concerning the financially responsible party with no alterations other than those permitted by published industry standards or FCC rules; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether a CLEC that shares access revenue with a customer resulting in net payments to the customer should be subject to
different interstate access tariff rules, or whether all revenue sharing arrangements should be declared unjust and unreasonable;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether the FCC should regulate transit and whether it has the authority to do so; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>whether IP interconnection fits within the existing legal and technical framework, what steps can the FCC take to
encourage IP-to-IP interconnection, and whether the FCC should address point of interconnection or network edge issues as part of intercarrier compensation reform. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot predict the outcome of this proceeding nor can we predict its potential impact on our business. For example, if the FCC makes all revenue sharing an unreasonable practice, we
likely would have to reform certain agreements. Depending on the final rules adopted by the FCC, we may be required to discontinue using certain carrier partners to deliver traffic to the PSTN, which
could increase our costs. If ILEC transit services are regulated and their rates reduced, it could reduce our profit margins on our indirect peering services. If per minute of use intercarrier
compensation goes away and/or IP-to-IP interconnection is required by law, it is not clear how that would impact our customers' incentives to continue using our Media Peering Grid service. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Network Neutrality Rules  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2010, the FCC adopted rules governing the provision of consumer wireline broadband Internet access services. Among other
things, the rules: (1)&nbsp;require providers of consumer broadband Internet access to publicly disclose their network management practices and the performance and commercial terms of their
broadband Internet access services; (2)&nbsp;prevent broadband Internet access providers from blocking lawful content, applications, services, or non-harmful devices, subject to
reasonable network management; and (3)&nbsp;prevent broadband Internet access providers from unreasonably discriminating in the transmission of lawful network traffic over a consumer's broadband
Internet access service. While these rules are focused on broadband Internet access services for consumers and small business, it is possible that they may likewise affect enterprise or carrier
Internet access services. It is likely that the FCC rules will be subject to court appeals, the outcome of which we cannot predict. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Outage Reporting  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July 2010, the FCC's Public Safety and Homeland Security Bureau sought comment on whether to extend the FCC's outage reporting rates
to broadband Internet service providers and interconnected </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>88</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>VoIP
service providers. The FCC is in the process of considering rules to extend the outage reporting requirements in Part&nbsp;4 of the rules to interconnected VoIP and broadband service providers. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Federal Trade Commission "Red Flag" Identity Theft Rules  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to Section&nbsp;114 of the Fair and Accurate Credit Transactions Act of 2003, or FACTA, and rules of the Federal Trade
Commission that require "creditors" to develop and effectuate written internal programs to detect, prevent, and mitigate identity theft in connection with their accounts. We likely would be deemed to
be a "creditor" as defined in the FACTA. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>89</FONT></P>

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<BR></FONT><FONT SIZE=2><B>  MANAGEMENT    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Executive Officers and Directors  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding our executive officers and directors: </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Title </B></FONT></TH>
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<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Frank Fawzi</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>48</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>President, Chief Executive Officer and Chairman of the Board</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Shaun Andrews</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>38</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>General Manager, Service Providers</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>John Belanger</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Senior Vice President of Service Provider Sales</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Phillip Bronsdon</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Senior Vice President of Engineering, Development and Operations</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Haydar Haba</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Founder, Chief Visionary Officer and Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Margaret Norton</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>General Manager, Enterprises</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>53</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Financial Officer, Secretary</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=2>William Harding(2)(3)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>63</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Lawrence Irving(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>54</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Javier Rojas(1)(2)(3)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>48</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=2>Raymond Smets(1)(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Member
of our audit committee.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Member
of our compensation committee.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Member
of our nominating and corporate governance committee. </FONT></DD></DL>


<P style="font-family:times;"><FONT SIZE=2><I> Executive Officers  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Frank Fawzi</I></B></FONT><FONT SIZE=2> has served as a director and Chairman of our board of directors since June
2006. In 2007, Mr.&nbsp;Fawzi assumed the role of chief executive officer and president. Before joining us, between 1991 and 2001, Mr.&nbsp;Fawzi founded and was the chief executive officer for
CommTech Corporation, a leader in the communications software industry until it was acquired by ADC, where he subsequently served as chief technology officer for ADC's Software&nbsp;&amp; Integration
Group, from 2001 to 2002. Mr.&nbsp;Fawzi also served as a partner with First Oakmount Corporation, an investment firm, from 2004 to 2006. Mr.&nbsp;Fawzi received a Bachelor of Science in
Engineering and Computer Science and a Masters of Science in Management Information Systems from Stevens Institute of Technology, and has participated in the Wharton Executive Management Program at
the University of Pennsylvania. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Shaun Andrews</I></B></FONT><FONT SIZE=2> has served as our general manager, Service Providers since May 2010. Before joining us, Mr.&nbsp;Andrews served in various
executive roles, ultimately as the vice president of commercial services for the wholesale marketing group with Level&nbsp;3 Communications, an international provider of fiber-based communications
services. Mr.&nbsp;Andrews worked at Level&nbsp;3 Communications from January 2006 to April 2010. Mr.&nbsp;Andrews holds a Bachelor of Science degree in marketing from Miami University of Ohio
and a Masters of Business Administration from the Kellogg Graduate School of Management at Northwestern University. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>John Belanger</I></B></FONT><FONT SIZE=2> has served as our senior vice president of service provider sales since January 2004. Before joining us, Mr.&nbsp;Belanger
served as senior director of the carrier services division, covering the western United States for France Telecom,&nbsp;Inc. Mr.&nbsp;Belanger worked at France Telecom,&nbsp;Inc. from May 2002
to January 2004. Mr.&nbsp;Belanger attended Capital University in Ohio. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Phillip Bronsdon</I></B></FONT><FONT SIZE=2> has served as our senior vice president of engineering, development and operations since September 2007. Before joining
us, Mr.&nbsp;Bronsdon served as a client principal in the Americas consulting and integration vertical for communications, media and entertainment at Hewlett Packard Corporation from August 2006 to
August 2007. Prior to joining Hewlett Packard, Mr.&nbsp;Bronsdon served as vice president of operations for Ooma, a VoIP service provider, from </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>90</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>November
2005 to August 2006. Mr.&nbsp;Bronsdon has served as a Brigade Commander, with the 37th&nbsp;Armored Brigade, Ohio Army National Guard. Mr.&nbsp;Bronsdon holds a Bachelors of Science
degree in computer science engineering from Ohio State University and a Masters of Business Administration from Ohio University. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Haydar Haba</I></B></FONT><FONT SIZE=2> has served as our chief visionary officer since October 2007 and as a member of our board of directors since
co-founding the company in 2003. Mr.&nbsp;Haba served as our president and chief executive officer from July 2003 to October 2007. Before founding the company, Mr.&nbsp;Haba was
founder and chief technology officer of Telco 214, an international voice communications provider from 1997 to 2000. Mr.&nbsp;Haba began his career at Symetrics Industries, a public company
specializing in the design and manufacture of communications systems and computer telephony platforms for the United States Department of Defense, NASA, and other large enterprises. Mr.&nbsp;Haba
completed PhD course work in electrical engineering and holds Bachelors of Science and Masters of Science degrees in electrical engineering and computer science from the Florida Institute of
Technology. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Margaret Norton</I></B></FONT><FONT SIZE=2> has served as our general manager, enterprises, since September 2009. Before joining us, Ms.&nbsp;Norton served in
various senior executive roles, ultimately as president and chief executive officer, with Mobilitec,&nbsp;Inc., a provider of integrated software products that enable mobile content delivery which
was acquired by Alcatel Lucent, from September 2003 to January 2008, after which she decided to take time off for personal development purposes. Prior to Mobilitec, Ms.&nbsp;Norton was a self
employed consultant and served on the board of directors of Roguewave Software, a developer of software tools for developers which was acquired by Quovadx,&nbsp;Inc., from January 2000 to September
2003. Ms.&nbsp;Norton holds a Bachelor of Arts degree in economics from the University of Arizona and a Masters of Business Administration from the University of Connecticut. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Andre Simone</I></B></FONT><FONT SIZE=2> has served as our chief financial officer since February 2007. Before joining us, Mr.&nbsp;Simone served as chief financial
officer of Dimatix,&nbsp;Inc., a provider of piezoelectric inkjet print heads, from February 2005 to October 2006. Prior to Dimatix, Mr.&nbsp;Simone served as chief financial officer of SAP
Markets,&nbsp;Inc., a provider of technology platforms and business solutions, from November 2002 to December 2004. Mr.&nbsp;Simone holds a Bachelor of Arts degree in economics from Stanford
University and a Masters of Business Administration from The Wharton School of Business at the University of Pennsylvania. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I> Directors  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>William J. Harding, Ph.D.,</I></B></FONT><FONT SIZE=2> has served as a member of our board of directors since
October 2008. Dr.&nbsp;Harding has served as a managing director of VantagePoint Capital Partners, a venture capital firm, since October 2007. Before joining VantagePoint, Dr.&nbsp;Harding held
several positions including as a managing director of Morgan Stanley&nbsp;&amp;&nbsp;Co., president of Morgan Stanley Venture Partners and a managing member of several venture capital funds affiliated
with Morgan Stanley, where he was employed from 1994 through 2007. Dr.&nbsp;Harding also served as an officer in the Military Intelligence Branch of the U.S. Army Reserve. In the last five years,
Dr.&nbsp;Harding has served as a director for InterNap Network Services Corporation and Aviza Technology,&nbsp;Inc. Dr.&nbsp;Harding holds a Bachelors of Science degree in engineering
mathematics and a Masters of Science degree in Systems Engineering from the University of Arizona and a Ph.D. in engineering from Arizona State University. Dr.&nbsp;Harding brings to our board his
extensive prior experience as an investor in technology companies, as well as his prior experience serving on the boards of directors of technology companies. Dr.&nbsp;Harding is a designee of
VantagePoint Venture Partners 2006 (Q),&nbsp;L.P. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Lawrence R. Irving</I></B></FONT><FONT SIZE=2> has served as a member of our board of directors since January 2011. Mr.&nbsp;Irving has served as the chief
financial officer and treasurer of Synchronoss Technologies,&nbsp;Inc., a provider of on-demand transaction, content and connectivity management solutions, since July 2001. Before
joining Synchronoss, Mr.&nbsp;Irving served as chief financial officer and treasurer at CommTech </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>91</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Corporation
from 1998 to 2001. Mr.&nbsp;Irving holds a Bachelors of Business Administration degree in accounting from Pace University and is a certified public accountant. Mr.&nbsp;Irving brings
to our board his extensive experience as a senior finance executive in leading public and private high-growth technology companies in the telecommunications and IT industries.
Mr.&nbsp;Irving is currently a designee of VantagePoint Capital Partners 2006 (Q),&nbsp;L.P. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Javier Rojas</I></B></FONT><FONT SIZE=2> has served as a member of our board of directors since June 2006. Mr.&nbsp;Rojas has served as a managing director of
Kennet Partners&nbsp;LLC, a venture capital firm, since December 2000, where he leads their United States investment activities. Before joining Kennet, Mr.&nbsp;Rojas was a managing director of
Broadview International and led their west coast software and services practice. Mr.&nbsp;Rojas holds a Bachelors of Science degree in finance from Georgetown University and a Masters of Business
Administration from Harvard University. Mr.&nbsp;Rojas brings to our board his extensive prior experience as an investor in technology companies, as well as his prior experience serving on the
boards of directors of technology companies. Mr.&nbsp;Rojas is a designee of Kennet II,&nbsp;L.P. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Raymond Smets</I></B></FONT><FONT SIZE=2> has served as a member of our board of directors since January 2011. Mr.&nbsp;Smets has served as the vice president and
general manager of the wireless networking business unit of Cisco Systems,&nbsp;Inc. since December 2008, where he is responsible for technology and product development for Cisco's 802.11n wireless
LAN access point products, controllers and software for management and
mobile services solutions. Before joining Cisco Systems, Mr.&nbsp;Smets served from September 2007 to August 2008, as the executive vice president of sales and marketing for Packeteer,&nbsp;Inc.,
an application classification and traffic prioritization systems provider. Mr.&nbsp;Smets also served as the senior vice president of Netopia,&nbsp;Inc., a provider of carrier-class broadband
customer premise equipment, from February 2006 to September 2008. Mr.&nbsp;Smets holds a Bachelors of Science degree in engineering from the University of Florida and a Masters of Business
Administration from Nova Southeastern University. Mr.&nbsp;Smets brings to our board his extensive experience as a senior executive leading public and private high-growth technology
business teams in the IT telecom, networking and security industries. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Board Composition and Independence  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our current directors were elected or appointed to our board of directors in accordance with an agreement that we entered into
with certain holders of our common stock and holders of our preferred stock, including entities with which certain of our directors are affiliated. The holders of a majority of our common stock,
voting as a separate class, have designated Frank Fawzi and Haydar Haba for election to our board of directors. The holders of a majority of our shares of Series&nbsp;C Preferred Stock, voting as a
separate class, have designated William Harding for election to our board of directors. The holders of a majority of our shares of Series&nbsp;B Preferred Stock, voting as a separate class, have
designated Javier Rojas for election to our board of directors. Lawrence Irving and Raymond Smets were appointed by members of our board of directors to fill vacancies in directorships for independent
directors. Upon the completion of this offering, the voting agreement and these board designation rights will terminate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the completion of this offering, our certificate of incorporation and bylaws will authorize a board of directors of six members. Our board of directors will be divided into three
classes with staggered three-year terms as follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Class&nbsp;I directors will
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and their terms will expire at the annual general
meeting of stockholders to be held in 2012;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Class&nbsp;II directors will
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and their terms will expire at the annual general
meeting of stockholders to be held in 2013; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Class&nbsp;III directors will
be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and their terms will expire at the annual general
meeting of stockholders to be held in 2014. </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
authorized number of directors may be changed only by resolution of our board of directors. This classification of our board of directors into three classes with staggered
three-year terms may have the effect of delaying or preventing changes in our control or management. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are no family relationships among any of our current directors or executive officers. Our board of directors has determined that other than Mr.&nbsp;Fawzi, our president and
chief executive officer, and Mr.&nbsp;Haba, our founder and chief visionary officer, each of the members of our board of directors is an "independent" director for purposes of the listing
requirements and rules and regulations of the New York Stock Exchange or Nasdaq Global Market. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Board Leadership Structure  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have a policy on whether the role of the chairperson and chief executive officer should be separated and our board of
directors believes that it is currently in the best interest of the company and its stockholders for Mr.&nbsp;Fawzi to serve in both roles, which he has done since October 2007, in light of his
knowledge of our company and our industry. Our board of directors believes combining these roles promotes effective leadership and provides the clear focus needed to execute our business strategies
and objectives. However, our board of directors does not believe these roles must be combined, and may in the future separate these roles. We do not have a lead independent director. Our board of
directors believes it will be able to effectively provide independent oversight of our business and affairs, including the risks facing our company, without an independent chairman or a lead
independent director through the composition of our board of directors and committees, the strong leadership of our independent directors and the other corporate governance policies and processes that
will be in place upon completion of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Board Committees  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors directs the management of our business and affairs, as provided by Delaware law, and conducts its business
through meetings of our board of directors. Our board of directors has established three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance
committee. In addition, from time to time, special committees may be established under the direction of our board of directors when
necessary to address specific issues. Our board of directors has adopted a written charter for each of the standing committees. These charters will be available on our corporate website at
www.intelepeer.com following the completion of the offering. We intend to rely on the transition periods provided by applicable stock exchange rules and Rule&nbsp;10A-3 of the Exchange
Act, which provide for phase-in compliance for companies that are listing on the exchange in connection with their initial public offering. As a result, we plan to have our audit,
compensation and nominating and governance committees comprised of a majority of independent directors within ninety days of our listing and comprised solely of independent directors within one year
of our listing. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our audit committee is comprised of Lawrence Irving, the committee chairman, Javier Rojas and Raymond Smets. Each of
Mr.&nbsp;Irving and Mr.&nbsp;Smets satisfies the independence requirements of the New York Stock Exchange or Nasdaq Global Market and Rule&nbsp;10A-3 of the Exchange Act. After the
completion of this offering, our audit committee will be directly responsible for, among other things, the appointment, compensation, retention, and management of our independent registered public
accounting firm. The committee will be responsible for reviewing the plans and results of the audit engagement with the firm, approving any additional professional services provided by the firm and
reviewing the firm's independence. Beginning with our first report on internal control over financial reporting, the committee will also be responsible for discussing the effectiveness of our internal
control over financial reporting with the public accounting firm and our relevant financial management. Our board of directors has determined that all of the members of the audit </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>93</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>committee
possess the level of financial literacy required by the applicable rules of the SEC, and that Lawrence Irving is an audit committee financial expert as currently defined by SEC rules. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our compensation committee is comprised of William Harding, the committee chairman, Javier Rojas and Raymond
Smets, each of
whom satisfies the independence requirements of the New York Stock Exchange or Nasdaq Global Market. In addition, Mr.&nbsp;Smets qualifies as a "non-employee director" under
Section&nbsp;16 of the Exchange Act and an "outside director" for purposes of Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended, or the Code. After the completion of this
offering, the compensation committee will be responsible for, among other things, supervising and reviewing our affairs as they relate to the compensation and benefits of our executive officers. In
carrying out these responsibilities, the compensation committee will review all components of executive compensation for consistency with our compensation philosophy and with the interests of our
stockholders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nominating and Corporate Governance Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our nominating and corporate governance committee is comprised of William Harding and
Javier Rojas,
each of whom satisfies the independence
requirements of the New York Stock Exchange or Nasdaq Global Market. After the completion of this offering, the nominating and corporate governance committee will be responsible for, among other
things, identifying individuals qualified to become board members; selecting, or recommending to our board of directors, director nominees for each election of directors; developing and recommending
to our board of directors criteria for selecting qualified director candidates; considering committee member qualifications, appointment and removal; recommending corporate governance principles,
codes of conduct and compliance mechanisms; and providing oversight in the evaluation of our board of directors and each committee. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Compensation Committee Interlocks and Insider Participation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2010, our compensation committee was comprised of Javier Rojas and William Harding. There are no interlocking relationships
between our board of directors or compensation committee and the board of directors or compensation committee of any other entity, nor has any interlocking relationship existed in the past. None of
our directors who served on our compensation committee during 2010 has served our company or any of our subsidiaries as an officer or employee. In addition, none of our executive officers serves as a
member of the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of our board of directors or our compensation committee. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Code of Business Conduct and Ethics  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted a written code of business conduct and ethics, which outlines the principles of legal and ethical business conduct
under which we do business. The code is applicable to all of our directors, officers and employees. This code will be available on our corporate website at www.intelepeer.com following the completion
of the offering. Any substantive amendment or waiver of the code relating to executive officers or directors will be made only after approval by a committee comprised of a majority of our independent
directors and will be disclosed on our website identified above within four business days. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Limitation of Liability and Indemnification  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For information concerning limitation of liability and indemnification applicable to our directors, executive officers and, in certain
cases, employees, see "Description of Capital Stock&#151;Limitations of Director Liability and Indemnification of Directors, Officers, and Employees" located elsewhere in this prospectus. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>94</FONT></P>

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<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dy77601_executive_compensation"> </A>
<A NAME="toc_dy77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  EXECUTIVE COMPENSATION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Compensation Discussion and Analysis  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following discussion and analysis of compensation arrangements of our named executive officers for 2010
should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations,
expectations, and determinations regarding our compensation programs. The actual amount and form of compensation and the compensation programs that we adopt in future periods may differ materially
from current or planned programs as summarized in this discussion.</I></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Objectives  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation committee of our board of directors has overall responsibility for our compensation program for our executive
officers. For 2010, our named executive officers were: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Frank Fawzi, president, chief executive officer, and chairman of the board of directors;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Andre Simone, chief financial officer;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Haydar Haba, chief visionary officer;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Phillip Bronsdon, senior vice president of engineering, development and operations; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>John Belanger, senior vice president of service provider sales. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
compensation committee's objective is to provide a total compensation package for executives that is reasonable, competitive and reflective of corporate and individual performance.
The compensation committee's decisions are driven by our desire to recruit and retain highly talented executives and to incentivize and reward aggressive corporate growth, achievement of
long-term corporate objectives and individual performance that meets or exceeds our expectations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
we operate in a highly competitive market, hiring and retaining officers and other key employees is critically important to our success. As a private company, our ability to
provide cash compensation has historically been limited by the needs of the business. Accordingly, the primary
component of our incentive compensation program has been the grant and vesting of equity awards. This allowed us conserve cash while still offering key employees the opportunity to share in future
gains as we worked towards a liquidity event for our investors, such as an initial public offering of our stock. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
we transition from being a privately-held company to a publicly-traded company, we will evaluate our philosophy and compensation programs as circumstances require. As part
of this review process, we will apply our corporate values and objectives to determine the types and levels of compensation required to meet our retention objectives. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Role of Executives in Executive Compensation Decisions  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our compensation committee seeks input and specific recommendations from our chief executive officer when discussing the performance
of, and compensation levels for, executives other than himself. The chief executive officer provides recommendations to the compensation committee regarding each executive officer's level of
individual achievement other than himself. However, he is not a member of the compensation committee and does not vote. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
compensation committee also works with our chief executive officer, our chief financial officer and the head of our human resources department to evaluate the financial, accounting,
tax and retention implications of our various compensation programs. Neither our chief executive officer nor any of our other executives participates in deliberations relating to his or her own
compensation. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>95</FONT></P>

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<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Role of Compensation Consultants in Executive Compensation Decisions  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation committee has the authority to retain the services of third-party executive compensation specialists in connection
with the establishment of cash and equity compensation and related policies. While the compensation committee did not use a compensation consultant in connection with setting 2010 executive
compensation, the compensation committee reviewed and considered various market data, including the professional and market experience of our committee members and the Radford Executive Survey and the
Survey Totals Report, to assist the
committee in establishing compensation levels for our executive officers, with an emphasis on technology companies with revenue in a range similar to ours. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2011, the compensation committee engaged Compensia,&nbsp;Inc., a national compensation consulting firm providing executive compensation advisory services, to assist it in
developing a set of executive compensation guiding principles, to evaluate the competitiveness of our executive officers' compensation and to assist the compensation committee in developing a public
company-oriented executive compensation program, including the establishment of reference points and guidelines with respect to base salary, incentive compensation and equity compensation. Compensia
is engaged by, and serves at the discretion of, the compensation committee. Compensia did not provide any services to us in 2010. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Timing of Compensation Decisions  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the end of each fiscal year, our chief executive officer reviews the performance of the executive officers other than himself and
presents his conclusions and recommendations to the compensation committee. At that time and throughout the year, the compensation committee will also evaluate the performance of our chief executive
officer, which is measured in substantial part against our financial performance. In the first quarter of the following fiscal year, the compensation committee then assesses the overall effectiveness
of our compensation plans against our goals, and determines whether any changes to the allocation of compensation elements, or the structure or level of any particular compensation element, are
warranted. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this process, our compensation committee generally establishes the elements of our performance-based cash bonus plan and determines whether to grant equity awards to
our executive officers. With respect to newly hired employees, our practice is typically to approve equity grants at the first meeting of the board of directors following such employee's hire date
provided that the board has received a third party valuation of the Company's common stock which incorporates all material information. We do not have any program, plan or practice to time equity
award grants in coordination with the release of material non-public information. From time to time, additional equity </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>96</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>awards
may be granted to executive officers during the fiscal year. In May 2011, we granted the following options to named executive officers: </FONT></P>
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<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Grant<BR>
Date </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number&nbsp;of<BR>
Securities<BR>
Underlying<BR>
Unexercised<BR>
Options<BR>
(#)<BR>
Exercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number&nbsp;of<BR>
Securities<BR>
Underlying<BR>
Unexercised<BR>
Options<BR>
(#)<BR>
Unexercisable(1) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option<BR>
Exercise Price<BR>
($) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option<BR>
Expiration&nbsp;Date </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Frank Fawzi</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>190,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2021</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>105,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2021</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Haydar Haba</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>85,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2021</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Phil Bronsdon</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>55,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2021</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John Belanger</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>55,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May 3, 2021</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>
of the total number of shares subject to the option will vest on May&nbsp;3, 2012, and the remainder will vest in equal monthly
installments over a 36-month period thereafter, subject to the grantee's continued service to us on each such vesting date. </FONT></DD></DL>
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Role of the Compensation Committee in Setting Executive Compensation  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation committee is responsible for overseeing our executive compensation philosophy and administering our executive
compensation program, as well as determining and approving the compensation for our executive officers, including the named executive officers. The compensation committee regularly reports to our full
board of directors on its deliberations. Historically, the compensation committee has advised the full board of directors on executive compensation matters, and the board of directors has set
compensation levels. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
anticipation of the initial public offering of our stock, the board of directors has delegated authority to make compensation decisions to our compensation committee, as described in
the compensation committee charter. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Members
of the compensation committee are appointed by the board of directors. Currently, the compensation committee consists of William Harding, Javier Rojas and Raymond Smets, none of
whom are executive officers of the Company, and each of whom qualifies as an "independent director" under the standards applicable to our stock exchange listing. In addition, Mr.&nbsp;Smets
qualifies as an "outside director" under Section&nbsp;162(m) of the Code. See "Management&#151;Board Committees&#151;Compensation Committee" above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
compensation committee will perform, at least annually, a strategic review of the compensation program for our executive officers to determine whether it provides adequate incentives
and motivation to our executive officers and whether it adequately compensates them relative to comparable officers in other companies with which we compete for executives. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>97</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Elements of Compensation Program  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation package for our named executive officers is composed of the following elements: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>annual base salary;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>short-term performance-based cash compensation, in the form of an annual bonus;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>long-term equity compensation, in the form of stock option grants; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a benefits package that is generally available to all of our employees. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
combine these elements to formulate compensation packages that provide competitive pay, reward achievement of financial, operational and strategic objectives and align the interests
of our named executive officers and other senior management personnel with those of our stockholders. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Determining the Amount of Each Element of Compensation  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On an annual basis, the compensation committee establishes our executive compensation program, considering such factors
as: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our short-term and long-term financial and strategic objectives;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>individual responsibilities and performance;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the amount earned by our executive officers in prior years;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>comparison to other executives within our company having similar levels of expertise and experience; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the external competitive market for senior management personnel; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>general economic factors and market outlook for the coming year. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
compensation committee believes that the most effective executive compensation program is one that delivers base salary and target incentive compensation at levels generally
consistent with market practice, but also provides for opportunities in the form of incremental bonus and long-term equity awards that may result in above market levels if company
objectives are exceeded and if executive officers remain for an extended period of time as our employees. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Base Salary  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Base salaries represent compensation for performing the basic obligations expected of each executive officer. The compensation
committee generally sets annual base salaries at a level which it believes is sufficient to attract and retain the level of executive talent that we believe is necessary to manage and foster our
growth and development. Historically, base salaries have approximated the 50th&nbsp;percentile of the competitive market, based primarily on the information set forth in the Radford Technology
Survey. However, dependent upon an individual employee's background and experience or performance review, base salaries have also been targeted at the 25th, 75th&nbsp;or 90th&nbsp;percentile of
the competitive market. Any changes in base salary are discretionary, and are made by the compensation committee based upon our performance and the responsibilities and continued success of each of
our </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>98</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<P style="font-family:times;"><FONT SIZE=2>executive
officers in contributing to that performance. The following table sets forth the guidelines we have historically used in targeting base salaries and setting merit increases: </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=17 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Current Salary as Compared to Competitive Market and<BR>
Suggested Annual Merit Increase for Each Level </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:70pt;"><FONT SIZE=1><B>Performance Rating

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Market Rate<BR>
Compensation </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Less than 85% </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>85-95% </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>95-105% </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>105-110% </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>110-115% </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>115-120% </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exceptional</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>90th&nbsp;Percentile</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exceeds Expectations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>75th&nbsp;Percentile</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Successfully Meets Expectations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>50th&nbsp;Percentile</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Occasionally Meets Expectations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>25th&nbsp;Percentile</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fails to Meet Requirements</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>25th&nbsp;Percentile</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
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<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2011, the annual base salaries for each of our named executive officers for 2011 were set, effective as of January&nbsp;1, 2011. Each
of our executive officers, other than Mr.&nbsp;Belanger, due to the nature of his commission plan as described in greater detail below, received an increase in their base salary based on their
individual performance reviews for 2010. Following the engagement of Compensia in March 2011, the compensation committee reviewed the base salaries that had been set in January 2011 and determined to
make a change to the base salary arrangement for 2011 for Mr.&nbsp;Fawzi and Mr.&nbsp;Haba. Under Mr.&nbsp;Fawzi's employment agreement with us, upon the completion of this offering,
Mr.&nbsp;Fawzi's salary will increase to $442,000 on an annualized basis. In connection with the execution of Mr.&nbsp;Haba's employment agreement with us, Mr.&nbsp;Haba's salary for 2011
increased from $242,459 to $250,459. </FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2010 and 2011 base salaries for our named executive officers are set forth below: </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="81pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="81pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:88pt;"><FONT SIZE=1><B>Named Executive Officer

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 Base Salary </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 Base Salary </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 Salary Percentage as Compared to the<BR>
Percentile of the Radford Executive Survey<BR>
Applicable to an Executive with the Named<BR>
Executive Officer's Peformance Rating </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Frank Fawzi</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>375,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>412,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>86</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>275,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>302,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Haydar Haba</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>237,705</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>250,459</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>105</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Phil Bronsdon</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>225,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>238,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>96</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John Belanger</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>125,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>125,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>n/a</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><I> Short-Term Performance-Based Cash Compensation  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use short-term performance-based cash compensation to incentivize performance consistent with our
shorter-term corporate financial and strategic objectives while making progress towards our longer-term growth and other
goals. The compensation committee determines cash bonus amounts for our executive officers, including the named executive officers, based on achievement of corporate financial targets established in
our annual operating plan and individual performance requirements, as described further below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of our executive officers, including our named executive officers, other than Mr.&nbsp;Belanger, who participates in a separate sales commission plan, is eligible to participate
in a performance-based cash bonus plan under which he may earn an annual target amount based on achievement of our corporate financial objectives and his individual performance. The corporate
performance element accounts for 75&nbsp;percent of the eligible bonus, and the individual's performance element accounts for the remaining 25&nbsp;percent. As explained in more detail below, the
bonus pool is accrued and funded quarterly based on performance against plan for each of the corporate financial objectives. Payment of any portion of the target bonus attributable to individual
performance is dependent upon the executive officer receiving a performance review of no less than "Successfully Meets Expectations." The </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>99</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=102,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=720922,FOLIO='99',FILE='DISK105:[11ZBH1.11ZBH77601]EA77601A.;38',USER='KSOLTER',CD=';9-MAY-2011;20:18' -->
<A NAME="page_ea77601_1_100"> </A>


<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>aggregate
annual target amounts are computed as a percentage target rate of annual base salary. The target amounts in 2010 for our named executive officers were as follows: </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="63pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:88pt;"><FONT SIZE=1><B>Named Executive Officer

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Annual Cash<BR>
Bonus Target </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Frank Fawzi</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Haydar Haba</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Phil Bronsdon</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
2010, the compensation committee established the following corporate financial objectives. The annual cash bonus pool was created and funded to support our annual operating plan, to
enhance long-term value creation, and to fund annual cash bonus awards. These corporate objectives comprised 75&nbsp;percent of the target bonus opportunity for 2010, and their relative
weightings were as follows: </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:71pt;"><FONT SIZE=1><B>Corporate Objective

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighting </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Revenue Targets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Gross Margin Targets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Adjusted EBITDA Targets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The quarterly targets for each of the above objectives for 2010 were as follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:71pt;"><FONT SIZE=1><B>Corporate Objective

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Q1 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Q2 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Q3 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Q4 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Revenue Targets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22,309,668</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>25,424,142</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,694,706</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,866,317</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Gross Margin Targets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2> 30.5%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2> 29.65%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2> 30.49%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2> 31.05%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Adjusted EBITDA Targets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>704,048</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>583,560</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,406,703</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,241,280</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation committee selected the above measures because it considered them to be appropriate indicators of our success in achieving the
objectives expressed and outlined in our annual plan as a private company. We historically calculated Gross Margin as total revenue less peering partner compensation divided by total revenue. We
historically calculated Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, change in fair value of warrant liability and stock-based compensation. In 2010, we
used Adjusted EBITDA as a key performance measure because we believed it facilitated operating performance comparisons from period to period by excluding potential differences caused by variations in
capital structures (affecting net interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or fluctuations in permanent differences or discrete
quarterly items) and the impact of depreciation and amortization expense on finite-lived intangible assets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
target levels were based upon expected growth from the prior year, but were set at an amount the compensation committee believed to be reasonably attainable in light of our
performance in prior years and our strategic and market outlook for 2010. In the event the minimum performance threshold was not met for any individual corporate quarterly objective, no bonus would be
accrued for that specific corporate target for the quarter. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Individual
achievement by our named executive officers comprised the remaining 25&nbsp;percent of the target bonus opportunity for 2010 and was based on each executive officer's 2010
annual performance review. Individual performance for each our named executive officers was assessed by our chief executive officer, other than for himself. The performance of our chief executive
officer was assessed by the compensation committee. Performance was evaluated following the end of the year and was based on three major areas of measurement: quality of work performed, quantity of
work performed and teamwork/initiative and management effectiveness. Individual performance for our named executive officers, and eligibility for a cash bonus, is ranked on the following scale: "Fails
to Meet Expectations," </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>100</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=103,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=867263,FOLIO='100',FILE='DISK105:[11ZBH1.11ZBH77601]EA77601A.;38',USER='KSOLTER',CD=';9-MAY-2011;20:18' -->
<A NAME="page_ea77601_1_101"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>"Occasionally
Meets Expectations," "Successfully Meets Expectations," "Exceeds Expectations" and "Exceptional." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
executive officer must achieve a ranking of at least "Successfully Meets Expectations" to be eligible for a payment of that portion of the bonus attributable to achievement of
individual objectives. Executive officers who rank at "Exceeds Expectations" or "Exceptional" are eligible for a discretionary bonus if reasonable, considering the achievement of our corporate
financial objectives. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
2010, the annualized target bonus pool available to fund the plan was set at $2,269,424, or approximately $567,356 per quarter, divided equally among the three corporate financial
objectives. Bonuses accrued quarterly based on actual achievement against plan for each of the financial measures, ranging from 25&nbsp;percent of the target bonus amount to 150&nbsp;percent of
the target bonus amount, as follows: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Revenue  </I></FONT></P>

</UL>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="70pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:44pt;"><FONT SIZE=1><B>Performance

<!-- COMMAND=ADD_SCROPPEDRULE,44pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Payout Percent </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Payout Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target minus 10%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,280</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target minus 5%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>62.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>118,199</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>189,119</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 5%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>212,759</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 10%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>236,399</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 15%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>150</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>283,679</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><I> Gross Margin  </I></FONT></P>

</UL>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="70pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:44pt;"><FONT SIZE=1><B>Performance

<!-- COMMAND=ADD_SCROPPEDRULE,44pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Payout Percent </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Payout Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target minus 5.6%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,280</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target minus 3.5%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>62.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>118,199</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>189,119</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 5%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>212,759</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 7.5%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>236,399</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 10%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>150</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>283,679</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><I> Adjusted EBITDA  </I></FONT></P>

</UL>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="70pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:44pt;"><FONT SIZE=1><B>Performance

<!-- COMMAND=ADD_SCROPPEDRULE,44pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Payout Percent </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Payout Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target minus 30%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47,280</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target minus 15%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>62.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>118,199</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>189,119</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 5%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>212,759</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 10%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>236,399</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 25%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>137.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>260,039</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Target plus 50%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>150</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>283,679</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
on the above tables, the maximum annual bonus pool available for 2010 was $3,404,136, or 150&nbsp;percent of the target amount. For 2010, our corporate financial performance was
118&nbsp;percent of plan, and the total available pool to be distributed among plan participants was $2,674,542. Based upon
our corporate performance and each individual's personal achievement of performance objectives, bonuses were paid in February 2011. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
corporate performance element was directly tied to our annual performance against the designated financial measures. For 2010, the corporate performance element was paid out at </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>101</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>118&nbsp;percent&#151;accounting
for 75&nbsp;percent of an individual's bonus. For example, if a named executive officer's target bonus was $100,000 for 2010, he or she earned
75&nbsp;percent of $118,000 (118&nbsp;percent of $100,000), or $88,500, for the corporate performance element. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
individual performance element was not directly tied to our annual corporate performance, but was instead based on an individual's annual performance review. The individual bonus
performance element for top performers is subject to adjustment at the discretion of our chief executive officer, and to board approval. For 2010, participants who achieved an annual performance
rating of "Successfully Meets Expectations" were eligible to receive 100&nbsp;percent of their individual performance element. At the discretion of our chief executive officer, participants who
achieved an annual performance rating of "Exceeds Expectations" were eligible to receive 121.5&nbsp;percent of their individual performance element and participants who achieved an annual
performance rating of "Exceptional" were eligible to receive 143&nbsp;percent of their individual performance element. The plan is budgeted based upon the assumption that all eligible executive
officers will achieve requisite performance ratings. Individuals receiving more than 100&nbsp;percent of their performance element were paid out of bonus amounts not earned by employee participants
who performed at a level below "Successfully Meets Expectations." Based on the above, if a named executive officer's target bonus amount was $100,000 for 2010, they would have earned $25,000 for a
performance level of "Successfully Meets Expectations," $30,375 for "Exceeds Expectations" or $35,750 for being rated "Exceptional." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
actual bonuses paid to our named executive officers during 2010 are set forth in the Summary Compensation Table below. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
2011, the compensation committee, in consultation with Compensia, decided to keep the same overall structure for our short-term performance-based cash compensation plan,
but decided to replace Gross Margin and Adjusted EBITDA with quarterly Operating Margin, calculated as revenue less total expenses plus stock-based compensation, and annual Unlevered Free Cash Flow,
calculated as Adjusted EBITDA less capital expenditures, as target objectives. Quarterly Total Revenue will remain as a target objective for 2011. The 2011 objectives and relative weighting are as
follows: </FONT></P>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:71pt;"><FONT SIZE=1><B>Corporate Objective

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighting </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Revenue Targets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Quarterly Operating Margin Targets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Annual Unlevered Free Cash Flow Target</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
compensation committee decided to change the objectives for our short-term performance-based cash compensation plan because it believes Operating Margin and Unlevered
Free Cash Flow are more representative of our business success and our overall performance, particularly as a public company, and our strategic plans to scale our business while remaining focused on
capital efficiency. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, while the target bonus pool dollar amounts have yet to be determined, the compensation committee, upon the recommendation of Compensia, decided (i)&nbsp;to increase the
target bonus amount for Mr.&nbsp;Fawzi to 100&nbsp;percent of his annual base salary and that of Mr.&nbsp;Simone to 65&nbsp;percent of his annual base salary and (ii)&nbsp;to modify the
range such that the maximum target bonus amount that may be achieved for each objective will be 200&nbsp;percent of the target bonus amounts. These changes were made to better align our compensation
with other publicly-traded companies identified by Compensia as comparable companies. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Discretionary Bonus  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to payments made under our 2010 short-term performance-based cash compensation plan, our board of directors
also awarded a discretionary bonus in the amount of approximately $17,000 to Mr.&nbsp;Fawzi for exceptional performance for 2010. As a result of Mr.&nbsp;Fawzi's leadership, we significantly
improved financial and operating performance, positioning us to pursue an initial public </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>102</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>offering.
The amount of the discretionary bonus was determined by the board of directors based on the total amount remaining available for distribution under the 2010 bonus pool after distribution to
the plan participants. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Sales Commission Plan  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Belanger did not participate in our short-term performance-based cash compensation plan in 2010, but instead
participated in a separate sales commission plan. For 2010, Mr.&nbsp;Belanger was paid a fixed percentage on all net profits (revenue multiplied by net margin %) generated by his assigned accounts
under the standard sales commission plan applicable to all of our sales professionals. As a result of his position as the leader of our sales team he was also entitled to a separate "override
commission," which was a fixed percentage on all net profits generated by accounts not assigned to Mr.&nbsp;Belanger, but instead assigned to sales professionals who report to Mr.&nbsp;Belanger.
For both the assigned accounts and the override accounts, the fixed percentage earned by Mr.&nbsp;Belanger increased once total net profits exceeded the net profits achieved during the month of
December 2009. The commission percentages for Mr.&nbsp;Belanger for 2010 were as follows: </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="31%" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="31%" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Assigned Accounts </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Override Accounts </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Up to December 2009 Total Monthly Net Profit Achievement</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>3% of total monthly net profit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>0.775% of total monthly net profit</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>In excess of December 2009 Total Monthly Net Profit Achievement</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>7% of net profit in excess of December 2009 total monthly net profit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>1% of net profit in excess of December 2009&nbsp;monthly net profit</FONT></TD>
</TR>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
fixed percentage was used to make the plan easy to understand and to directly tie Mr.&nbsp;Belanger's compensation to our success. Because our management wanted to incentivize
Mr.&nbsp;Belanger to maximize sales of our services and thereby maximize his own compensation, there were no target or maximum amounts established for Mr.&nbsp;Belanger's sales commission plan.
Mr.&nbsp;Belanger's actual commission payout for 2010 is set forth in the Summary Compensation Table presented later in this prospectus. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Long-Term Equity Compensation  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use equity awards to motivate and reward our executive officers, including our named executive officers, to encourage
long-term corporate performance based on the value of our common stock and to align the interests of our executive officers with those of our stockholders. We believe that stock options,
when granted with exercise prices equal to the fair market value of our common stock on the date of grant, provide an appropriate long-term incentive for our executive officers. Stock
options reward our executive officers only to the extent that, following their grant date, our stock price increases. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically,
we have not applied a rigid formula to determine the size of the stock option awards that are granted to our executive officers. Instead, these awards are determined in the
judgment of the compensation committee, taking into consideration, among other things, our performance and that of the executive officer during the past year, the prospective role and responsibility
of the executive officer, competitive factors, the amount of equity-based compensation held by the executive officer and the cash compensation received by the executive officer. Based on these
factors, the compensation committee sets the size of each stock option award at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of
long-term stockholder value. There were no equity awards granted to our named executive officers during 2009 or 2010 due to the fact that the equity ownership of our named executive
officers had not changed appreciably since our last round of equity financing in 2008. However, our compensation committee did recently review supplemental market studies regarding executive
compensation as well as the number of vested options held by key </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>103</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>employees.
As a result, in May 2011, the compensation committee granted equity awards to certain of our named executive officers in May 2011, as set forth above in "Timing of Compensation Decisions." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have not granted any equity awards to our named executive officers other than stock options. Typically, our named executive officers have received an initial stock option grant at the
time of hire, with only discretionary additional awards thereafter. We have adopted a long-term equity incentive plan to become effective following the completion of this offering. While
this plan provides for a variety of different types of equity awards, we expect that, reflecting our focus on long-term growth, the compensation committee will continue to use stock
options as our primary form of long-term incentive compensation. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Exercise Price of Equity Awards  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exercise price of stock options granted to our executives under our equity incentive plans is equal to or greater than the fair
market value of our common stock on the grant date. As a privately held company, our board of directors has historically determined the fair market value of our common stock based on various factors,
including (1)&nbsp;our recent and historical company performance; (2)&nbsp;our liquidity and cash resources; (3)&nbsp;our projections regarding our future financial results; (4)&nbsp;company
developments since the last time option grants were approved by our board of directors; (5)&nbsp;independent third party valuations; (6)&nbsp;the value of comparable companies; and (7)&nbsp;the
rights, preferences and privileges of our preferred stock relative to those of our common stock. See "Management's Discussion and Analysis of Financial Condition and Results of
Operations&#151;Critical Accounting Policies&#151;Stock Based Compensation" for further information. Upon the completion of this offering, we will use the market price of our common
stock on the date of grant for purposes of establishing the exercise price of stock options. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Other Compensation Policies  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I> Retirement and Other Benefits; Perquisites  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers, including the named executive officers, are eligible to participate in our tax-qualified
Section&nbsp;401(k) retirement savings plan on the same basis as our other employees who satisfy the plan's eligibility requirements, including requirements relating to age and length of service.
Under this plan, participants may elect to make pre-tax contributions of up to 90&nbsp;percent of their current compensation, not to exceed the applicable statutory income tax
limitation, which was $16,500 in 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
benefits received by our executive officers, including the named executive officers, include medical, dental and vision benefits, medical and dependent care flexible spending
accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance. These benefits are provided on the same basis
as to all of our full-time employees. We also maintain a corporate apartment for use by employees visiting our Denver operations, including our named executive officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
do not have a formal perquisite policy, and we do not emphasize special perquisites for our executive officers. The compensation committee may periodically review perquisites for our
executive officers, particularly in the context of new employment agreements. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Executive Equity Ownership  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We encourage our executive officers to hold a significant equity interest in our company. However, we do not have specific share
retention and ownership guidelines for our executive officers. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>104</FONT></P>

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<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Executive Hedging and Trading  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted a policy that, once we become a publicly traded company following this offering, we will not permit our executive
officers to sell short our stock, will prohibit our executive officers from holding our stock in a margin account, and will discourage the purchase and sale of exchange-traded options on our stock by
our executive officers. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Compensation Committee Philosophy on Acceleration of Vesting of Equity, Change of Control and Severance Benefits  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to our agreements with them, certain of our named executive officers may receive certain cash payments, continuation of
medical and welfare insurance benefits, and acceleration of vesting under outstanding equity awards in connection with a termination of employment or a change of control or the initial public offering
of the company. See "Executive Employment Agreements" and "Potential Payments Upon Termination, Change of Control or Initial Public Offering" below for more information. When establishing these
arrangements, the compensation committee believed that they were necessary to attract or retain qualified executives who may have pursued attractive alternatives absent these benefits. With respect to
benefits related to a change of control, the board of directors elected to provide for these benefits to partially mitigate the risks that exist for executives working in an environment where there is
a potential for a change of control. With respect to benefits related to an initial public offering, the board of directors elected to provide for these benefits to incentivize our executives for the
achievement of an initial public offering of the company. The compensation committee sought to provide change of control-related arrangements which would allow executives to focus on the value of
strategic alternatives to stockholders without concern for the impact of a change of control on their continued employment. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Effect of Tax and Accounting Treatment on Compensation Decisions  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consider the anticipated accounting and tax implications to us and our executives in determining our compensation programs. However,
these factors alone are not dispositive,
and we also consider the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives. Section&nbsp;162(m) of the
Code imposes a limit on the amount of compensation that we may deduct in any one year with respect to our chief executive officer and each of our next three most highly compensated executive officers
(other than our chief financial officer), unless specific and detailed criteria are satisfied. "Performance-based compensation," as defined in the Code, is fully deductible if the programs are
approved by stockholders and meet other requirements. We believe that grants of equity awards under our existing stock plan qualify as performance-based for purposes of satisfying the conditions of
Section&nbsp;162(m), thereby permitting us to receive a federal income tax deduction in connection with such awards. In general, we have determined that we will not seek to limit executive
compensation so that it is deductible under Section&nbsp;162(m). However, from time to time, we monitor whether it might be in our interests to structure our compensation programs to satisfy the
requirements of Section&nbsp;162(m). We seek to maintain flexibility in compensating our executives in a manner designed to promote our corporate goals and therefore our compensation committee has
not adopted a policy requiring all compensation to be deductible. Our compensation committee will continue to assess the impact of Section&nbsp;162(m) on our compensation practices and determine
what further action, if any, is appropriate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
follow the Financial Accounting Standards Board's Accounting Standards Codification Topic&nbsp;718 for our stock-based compensation awards. ASC&nbsp;718 requires companies to
calculate the grant date "fair value" of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables that
accompany this Compensation Discussion and Analysis, even though recipients may never realize any value from their awards. ASC&nbsp;718 also requires companies to recognize the compensation cost of
their stock-based </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>105</FONT></P>

<HR NOSHADE>
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<BR>

<P style="font-family:times;"><FONT SIZE=2>awards
in their income statements over the period that an employee is required to render service in exchange for the award. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Analysis of Risk Relating to Our Compensation Programs  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After reviewing the various design elements of our compensation programs to determine whether any of their aspects encourage excessive
or inappropriate risk-taking, the compensation committee has determined that our compensation programs do not encourage excessive risk or inappropriate risk taking, as our compensation
programs have been balanced to focus on our short-and long-term financial and operational performance. The determination was based on the following
factors: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the base salaries we pay to our employees are set at levels sufficient to match compensation paid by similarly situated
companies and are designed to provide a steady income regardless of our stock price performance, which we believe discourages risk taking;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our various non-equity incentive compensation programs contain company-wide and individual
elements that we believe are attainable without the need to take inappropriate risks or make material changes to our business or strategy;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>other than payments that may be made under our sales commission plans, which are not capped, the cash payments that may be
made to our employees under our non-equity incentive compensation programs are subject to maximum limits, which we believe mitigates the risks our employees may take; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>equity grants to participants under our equity incentive plans generally vest over a period of four years, which we
believe discourages excessive or inappropriate short-term risk taking. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Summary Compensation Table  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the total compensation earned for services rendered by our principal executive officer, our principal
financial officer, and our three other most highly compensated executive officers whose total compensation for the year ended December&nbsp;31, 2010 was in excess of $100,000 and who were serving as
executive officers at the end of that fiscal year. The listed individuals are referred to herein as our "named executive officers." </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>106</FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=109,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=937675,FOLIO='106',FILE='DISK105:[11ZBH1.11ZBH77601]EA77601A.;38',USER='KSOLTER',CD=';9-MAY-2011;20:18' -->
<A NAME="page_ea77601_1_107"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ea77601_summary_compensation_table_for_fiscal_year_2010"> </A>
<A NAME="toc_ea77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2010    <BR>    </B></FONT></P>
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<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:102pt;"><FONT SIZE=1><B>Name and Principal Position

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Salary </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Bonus </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Non-Equity<BR>
Incentive Plan<BR>
Compensation </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Frank Fawzi</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>2010</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>375,000</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>17,031</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>(1)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>232,969</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>(2)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>625,000</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:0pt;text-indent:-0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>



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 President, Chief Executive Officer and Chairman</I></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
275,000</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
170,586</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>(2)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
445,586</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:0pt;text-indent:-0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Chief Financial Officer, Secretary</I></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Haydar Haba</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
237,705</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
136,675</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>(2)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
374,380</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:0pt;text-indent:-0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Chief Visionary Officer</I></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Phil Bronsdon</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
225,000</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
133,523</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>(2)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
358,523</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:0pt;text-indent:-0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Senior Vice President, Engineering, Development and Operations</I></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 John Belanger</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
125,000</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
324,555</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>(3)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
449,555</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:0pt;text-indent:-0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Senior Vice President, Service Provider Sales</I></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
an amount awarded to Mr.&nbsp;Fawzi as a discretionary bonus by our board of directors for exceptional performance in 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
cash compensation paid to our named executive officers under our short-term performance-based cash compensation plan for the year
ended December&nbsp;31, 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
the total performance-based commissions earned by Mr.&nbsp;Belanger pursuant to his sales commission plan for the year ended
December&nbsp;31, 2010. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See discussion of the material terms of the employment agreements for each of the named executive officers under the heading "Executive Employment
Agreements," below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Grants of Plan-Based Awards  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with grants of non-equity incentive plan-based awards
granted during the year ended December&nbsp;31, 2010 to our named executive officers: </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ea77601_grants_of_plan-based_awards_for_fiscal_year_2010"> </A>
<A NAME="toc_ea77601_2"> </A>
<BR></FONT><FONT SIZE=2><B>  GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2010    <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="92pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Estimated Possible Payouts Under<BR>
Non-Equity Incentive Plan Awards(1) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

<!-- COMMAND=ADD_SCROPPEDRULE,21pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Plan Adoption Date </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Threshold </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Target </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Maximum </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Frank Fawzi</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May&nbsp;7, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46,875</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>187,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>281,250</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
May&nbsp;7, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
34,375</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
137,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
206,250</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Haydar Haba</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
May&nbsp;7, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
29,713</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
118,852</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
178,279</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Phil Bronsdon</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
May&nbsp;7, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
28,125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
112,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
168,750</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 John Belanger(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" >


<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>We
award non-equity incentive plan compensation under our short-term performance-based cash compensation plan, as described above
under the section entitled "Compensation Discussion and Analysis." The figures listed represent amounts that could have been earned for the year ended December&nbsp;31, 2010. The actual amount
earned by each named executive officer for 2010 is set forth above in the Summary Compensation Table.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Mr.&nbsp;Belanger
does not participate in our short-term performance-based cash compensation plan and has a separate commission plan as
described above under the section entitled "Compensation Discussion and Analysis." </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>107</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=10,SEQ=110,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=202209,FOLIO='107',FILE='DISK105:[11ZBH1.11ZBH77601]EA77601A.;38',USER='KSOLTER',CD=';9-MAY-2011;20:18' -->
<A NAME="page_ea77601_1_108"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
 <DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
<p style="font-family:times;"></FONT></P>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><A
NAME="ea77601_outstanding_equity_awards_at_fiscal_year_end_2010"> </A>
<A NAME="toc_ea77601_3"> </A>
<BR></FONT><FONT SIZE=2><B>  OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2010    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with respect to the unexercised options held by our named executive officers as of
December&nbsp;31, 2010: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:62%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"130%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="78pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="67pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name


<!-- COMMAND=ADD_SCROPPEDRULE,21pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Grant<BR>
Date </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Unexercised<BR>
Options<BR>
(#)<BR>
Exercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Unexercised<BR>
Options<BR>
(#)<BR>
Unexercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option<BR>
Exercise Price<BR>
($) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option<BR>
Expiration<BR>
Date </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Frank Fawzi</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5/10/2007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>218,809</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5/10/2017</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,978,802</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>520,739</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>428,571</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>104,159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>104,160</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
5/10/2007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>(5)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
798,463</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
34,717</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
0.39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
5/10/2017</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(6)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>840,139</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>249,772</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>104,159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>104,160</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Haydar Haba</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
5/28/2004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>(8)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
85,890</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
0.815</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
5/28/2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8/18/2004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>42,945</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.815</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8/18/2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5/10/2007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(10)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>459,299</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5/10/2017</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(11)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>367,476</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>109,251</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>104,159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>104,160</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John Belanger</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
5/28/2004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>(13)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
27,112</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
0.815</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
5/28/2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8/4/2004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(14)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>300,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.815</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8/4/2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8/18/2004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(15)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,338</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.815</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8/18/2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1/15/2005</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(16)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>243,684</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.95</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1/15/2012</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5/10/2007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5/10/2017</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(18)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>78,881</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23,452</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Phillip Bronsdon</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
10/15/2007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>(19)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
81,249</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
18,751</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
0.39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
10/15/2017</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(20)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>478,809</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>142,350</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2/14/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>34,719</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>34,720</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/11/2018</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/2
of the total number of shares issued pursuant to the option vested on May&nbsp;10, 2007, and the remainder vested in equal monthly installments over
an 18-month period thereafter.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/48<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vest monthly commencing November&nbsp;1, 2007, subject to
Mr.&nbsp;Fawzi's continued service to us on each such vesting date, with all shares subject to the option being vested by September&nbsp;30, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/12<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested monthly commencing November&nbsp;1, 2007 with all shares subject to
the option having vested by September&nbsp;30, 2008.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on December&nbsp;11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Fawzi's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on February&nbsp;5, 2008, and the remainder vested in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Simone's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/48<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vest monthly commencing November&nbsp;14, 2007, subject to
Mr.&nbsp;Simone's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on December&nbsp;11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Simone's continued service to us on each such vesting date. </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>108</FONT></P>

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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>100&nbsp;percent
of the total number of shares subject to the option vested on May&nbsp;28, 2004.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(9)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>100&nbsp;percent
of the total number of shares subject to the option vested on August&nbsp;18, 2004.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(10)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>100&nbsp;percent
of the total number of shares subject to the option vest upon the earlier to occur of (i)&nbsp;a change of control of us in which the
holders of our Series&nbsp;B preferred stock receive consideration with a fair market value of at least $7.374 per share of Series&nbsp;B preferred stock (as adjusted for stock splits,
combinations and the like) or (ii)&nbsp;the initial public offering of our common stock, pursuant to which a share of our Series&nbsp;B preferred stock (or our common stock upon conversion
thereof) has a fair market value of at least $7.374 per share (as adjusted for stock splits, combinations and the like), in each case subject to Mr.&nbsp;Haba's continued service to us on either
such occurrence.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(11)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on November&nbsp;14, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Haba's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(12)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on December&nbsp;11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Haba's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(13)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>100&nbsp;percent
of the total number of shares subject to the option vested on May&nbsp;28, 2004.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(14)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/3<SUP>rd</SUP>
of the total number of shares subject to the option vested on August&nbsp;4, 2004, 1/3<SUP>rd</SUP> of the total number of shares
subject to the option vested upon our attaining of $833,333 in collected monthly GAAP revenue for two consecutive fiscal months following the date of grant and the remaining 1/3<SUP>rd</SUP> of the
total number of shares subject to the option vested upon our attaining of $2,083,333 in collected monthly GAAP revenue for two consecutive fiscal months following the date of grant.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(15)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>100&nbsp;percent
of the total number of shares subject to the option vested on August&nbsp;18, 2004.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(16)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/24<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested monthly commencing in the month of our attaining of $833,333 in
collected monthly GAAP revenue for two consecutive fiscal months following the date of grant.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(17)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>100&nbsp;percent
of the total number of shares subject to the option vested on May&nbsp;16, 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(18)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on November&nbsp;14, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Belanger's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(19)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on September&nbsp;6, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Bronsdon's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(20)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on November&nbsp;14, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Bronsdon's continued service to us on each such vesting date.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(21)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>1/4<SUP>th</SUP>&nbsp;of
the total number of shares subject to the option vested on December&nbsp;11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr.&nbsp;Bronsdon's continued service to us on each such vesting date.</FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>109</FONT></P>

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</FONT> <FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Option Exercises and Stock Vested  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of our named executive officers exercised options, or became vested in shares of stock subject to stock awards, during the year
ended December&nbsp;31, 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Pension Benefits  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not maintain any defined benefit pension plans. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Nonqualified Deferred Compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not maintain any nonqualified deferred compensation plans. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Potential Payments upon Termination, Change of Control or Initial Public Offering  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our named executive officers are eligible to receive certain payments and benefits in connection with the following events pursuant to
the terms of their employment agreements, offer letter agreements and/or option agreements. The terms "cause," "termination without cause," "resignation for good reason" and "change of control" as
used below have the meanings given to them in the applicable agreements with us which we have filed as exhibits to the registration statement on Form&nbsp;S-1 of which this prospectus is
a part. The term "cause" generally includes the executive's refusal to perform assigned duties, acts of willful misconduct, personal dishonesty intended to result in substantial personal enrichment
and felony convictions or other willful acts which have a material adverse effect on us. The terms "involuntary termination without cause" and "resignation for good reason" generally mean the
executive's resignation in connection with the occurrence of certain events, which generally include a disproportionate salary reduction, materially adverse changes in responsibilities, an involuntary
relocation of greater than a certain number of miles or our material breach of the executive's employment agreement. The term "change of control" generally means the acquisition of our company
pursuant to which our stockholders prior to the event do not retain at least a majority of our outstanding voting securities after such event, or the sale of all or substantially all of our assets. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Termination without Cause, Resignation for Good Reason and Death or Permanent Disability  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon his involuntary termination without cause, his resignation for good reason or his death or permanent disability (as defined in his
agreement), Mr.&nbsp;Fawzi will be entitled to receive continuation of his then annual base salary over a 12-month period paid in accordance with our then existing payroll schedule, plus a lump sum
cash payment equal to the pro rata amount of his corresponding annual target bonus amount. In addition, Mr.&nbsp;Fawzi will be entitled to continuation of health and other benefits, including
coverage under our directors and officers liability insurance policy, for a six-month period. If such involuntary termination without cause or resignation for good reason occurs within 24
months following a change of control, Mr.&nbsp;Fawzi will be entitled to receive a lump sum cash payment equal to 100&nbsp;percent of his then annual base salary plus a pro rata amount of his
corresponding annual target bonus amount. In addition, 100&nbsp;percent of any then unvested equity awards will vest at the time of such termination without cause or resignation for good reason, and
Mr.&nbsp;Fawzi will be entitled to continuation of health and other benefits, including coverage under our director's and officer's liability insurance policy, for a period of 12 months.
Mr.&nbsp;Fawzi's right to receive the foregoing benefits is subject to his execution of a release of claims against us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
his involuntary termination without cause, his resignation for good reason or his death or permanent disability (as defined in his agreement), Mr.&nbsp;Simone will be entitled to
receive continuation of his then annual base salary over a six-month period paid in accordance with our then existing payroll schedule, plus a lump sum cash payment equal to the pro rata
amount of his corresponding annual target bonus amount. In addition, Mr.&nbsp;Simone will be entitled to continuation of health and other benefits, including coverage under our directors and
officers liability insurance policy, for a six-month </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>110</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>period.
If such involuntary termination without cause or resignation for good reason occurs within 24 months following a change of control, Mr.&nbsp;Simone will be entitled to receive a lump sum
cash payment equal to 100&nbsp;percent of his then annual base salary plus a pro rata amount of his corresponding annual target bonus amount. In addition, 100&nbsp;percent of any then unvested
equity awards will vest at the time of such termination without cause or resignation for good reason, and Mr.&nbsp;Simone will be entitled to continuation of health and other benefits, including
coverage under our directors and officers liability insurance policy, for a period of 12 months. Mr.&nbsp;Simone's right to receive the foregoing benefits is subject to his execution of a release of
claims against us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
his involuntary termination without cause or his resignation for good reason (as defined in his agreement), Mr.&nbsp;Haba will be entitled to receive continuation of his then
annual base salary over a 12-month period paid in accordance with our then existing payroll schedule, plus a lump sum cash payment equal to the pro rata amount of his corresponding annual
target bonus amount. In addition, Mr.&nbsp;Haba will be entitled to continuation of health and other benefits, including coverage under our directors and officers liability insurance policy, for a
six-month period. If such involuntary termination without cause or resignation for good reason occurs within 24 months following a change of control, Mr.&nbsp;Haba will be entitled to
receive a lump sum cash payment equal to 100&nbsp;percent of his then annual base salary plus a pro rata amount of his corresponding annual target bonus amount. In addition, 100&nbsp;percent of
any then unvested equity awards will vest at the time of such termination without cause or resignation for good reason, and Mr.&nbsp;Haba will be entitled to continuation of health and other
benefits, including coverage under our directors and officers liability insurance policy, for a period of 12 months. Mr.&nbsp;Haba's right to receive the foregoing benefits is subject to his
execution of a release of claims against us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
Mr.&nbsp;Belanger nor Mr.&nbsp;Bronsdon will be entitled to any payments upon termination without cause or for resignation for good reason. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents our estimate of the dollar value of the payments and benefits payable to our named executive officers upon the occurrence of a termination without cause or
resignation for
good reason in the circumstances noted below, assuming that such event occurred on December&nbsp;31, 2010: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:73%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"110%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="110%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="110pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="74pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

<!-- COMMAND=ADD_SCROPPEDRULE,21pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Event </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Cash<BR>
Severance<BR>
Payment </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Continuation<BR>
of Benefits<BR>
(1) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Value of Option<BR>
Acceleration<BR>
(2) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Frank Fawzi(3)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause in Absence of Change of Control(4)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>375,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>8,100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause within 24&nbsp;months after Change of Control(5)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>562,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16,200</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2,080,911</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason in Absence of Change of Control(4)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>375,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>8,100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason within 24&nbsp;months after Change of Control(5)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>562,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16,200</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2,080,911</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:10pt;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Andre Simone(3)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:10pt;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause in Absence of Change of Control(6)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
137,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause within 12&nbsp;months after Change of Control(6)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>137,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,273,706</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason in Absence of Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason within 12&nbsp;months after Change of Control(6)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>137,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>1,273,706</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>111</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=114,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=83298,FOLIO='111',FILE='DISK105:[11ZBH1.11ZBH77601]EC77601A.;38',USER='KSOLTER',CD=';9-MAY-2011;21:17' -->
<A NAME="page_ec77601_1_112"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
 <DIV style="padding:0pt;position:relative;width:73%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"110%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="110%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="110pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="74pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

<!-- COMMAND=ADD_SCROPPEDRULE,21pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Event </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Cash<BR>
Severance<BR>
Payment </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Continuation<BR>
of Benefits<BR>
(1) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Value of Option<BR>
Acceleration<BR>
(2) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Haydar Haba(3)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause in Absence of Change of Control(7)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>356,558</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16,200</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause within 24&nbsp;months after Change of Control(8)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>713,315</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16,200</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2,127,687</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason in Absence of Change of Control(7)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>356,558</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16,200</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason within 24&nbsp;months after Change of Control(8)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>713,315</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>16,200</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>2,127,687</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:10pt;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>John Belanger</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:10pt;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause in Absence of Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause in connection with Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason in Absence of Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason following Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:10pt;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Phillip Bronsdon</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:10pt;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause in Absence of Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1><BR>
&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Termination without Cause in connection with Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


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</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason in Absence of Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Resignation for Good Reason following Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" >


<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
the aggregate value of continuation of health insurance benefits after the date of termination. For the purposes of this calculation, expected
costs have not been adjusted for any likelihood that the executives will find other employment.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
the aggregate value of the accelerated vesting of the named executive officer's unvested stock options. With respect to each option award,
amounts were calculated by multiplying (i)&nbsp;the difference between the fair market value of our common stock on December&nbsp;31, 2010, $3.52, and the applicable exercise price of such option
award by (ii)&nbsp;the assumed number of option shares subject to such award vesting on an accelerated basis on December&nbsp;31, 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>The
respective rights of Messrs.&nbsp;Fawzi, Simone and Haba to receive the listed benefits are subject to such person's execution of a release of claims
against us.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Cash
severance for Mr.&nbsp;Fawzi, as of December&nbsp;31, 2010, was equal to 50&nbsp;percent of his annual base salary at December&nbsp;31, 2010,
plus his annual bonus target amount of $187,500 for fiscal year 2010. Cash severance payable to Mr.&nbsp;Fawzi related to salary was payable over six months pursuant to regular payroll procedures.
Cash severance payable to Mr.&nbsp;Fawzi related to bonus amounts was payable in a lump sum.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Cash
severance for Mr.&nbsp;Fawzi, as of December&nbsp;31, 2010, was equal to his annual base salary at December&nbsp;31, 2010, plus his annual bonus
target amount of $187,500 for fiscal year 2010, and was payable in a lump sum.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Cash
severance for Mr.&nbsp;Simone, as of December&nbsp;31, 2010, was equal to 50&nbsp;percent of his annual base salary at December&nbsp;31, 2010
and was payable over six months pursuant to regular payroll procedures.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Cash
severance for Mr.&nbsp;Haba, as of December&nbsp;31, 2010, was equal to his annual base salary at December&nbsp;31, 2010, plus his annual bonus
target amount of $118,853 for fiscal year 2010, and was payable in a lump sum.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Cash
severance for Mr.&nbsp;Haba, as of December&nbsp;31, 2010, was equal to 300&nbsp;percent of his annual base salary at December&nbsp;31, 2010
and was payable in a lump sum. Mr.&nbsp;Haba's salary and the terms of Mr.&nbsp;Haba's severance were changed in May&nbsp;2011. For additional information, see "Executive Employment
Agreements&#151;Haydar Haba" located elsewhere in this prospectus. </FONT></DD></DL>
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Change of Control or Initial Public Offering  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our stock option award agreements with our named executive officers provide that 100&nbsp;percent of the shares of common
stock subject to such option agreements will vest immediately prior to a change of control or the initial public offering of our securities. In addition, in the event of a change of control,
Mr.&nbsp;Simone's offer letter agreement, as amended, calls for the acceleration of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>112</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=115,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=368438,FOLIO='112',FILE='DISK105:[11ZBH1.11ZBH77601]EC77601A.;38',USER='KSOLTER',CD=';9-MAY-2011;21:17' -->
<A NAME="page_ec77601_1_113"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>100&nbsp;percent
of the unvested options subject to the option grant Mr.&nbsp;Simone received in connection with the entering into of his offer letter agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents our estimate of the dollar value of the payments and benefits payable to our named executive officers in connection with a change of control or initial
public offering of securities, assuming that such event occurred on December&nbsp;31, 2010: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="125pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="74pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

<!-- COMMAND=ADD_SCROPPEDRULE,21pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Event </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Value of Option<BR>
Acceleration<BR>
(1) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Frank Fawzi</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$2,080,911</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Initial Public Offering</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,760,098</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
1,273,706</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Initial Public Offering</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Haydar Haba<SUP>(2)</SUP></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
320,813</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Initial Public Offering</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John Belanger</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Initial Public Offering</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


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 Phillip Bronsdon</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change of Control</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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106,936</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Initial Public Offering</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
the aggregate value of the accelerated vesting of the named executive officer's unvested stock options. With respect to each option award,
amounts were calculated by multiplying (i)&nbsp;the difference between the fair market value of our common stock on December&nbsp;31, 2010, $3.52, and the applicable exercise price of such option
award by (ii)&nbsp;the assumed number of option shares subject to such award vesting on an accelerated basis on December&nbsp;31, 2010. For any award with a purchase price greater than $3.52, no
additional value is represented by the acceleration of outstanding unvested options subject to such award.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Mr.&nbsp;Haba
is entitled to acceleration of certain options held by him in the event the price of our common stock exceeds $7.374 per share following the
completion of our initial public offering or in the event of a change of control of us in which the holders of our Series&nbsp;B preferred stock receive consideration with a fair market value of at
least $7.374 per share. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither of the above tables includes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>any accrued benefits that were earned and payable as of December&nbsp;31, 2010, including bonuses deemed earned by the
executive pursuant to the terms of our 2010 short-term performance-based cash compensation plan;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>payments and benefits to the extent they are provided generally to all salaried employees and do not discriminate in
scope, terms or operation in favor of our named executive officers; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the value to the executive of the continuing right to indemnification and continuing coverage under our directors' and
officers' liability insurance, if applicable. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Executive Employment Agreements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into employment agreements or offer letter agreements with each of our named executive officers, which are summarized
below. For additional information regarding executive bonuses and severance and/or other benefits to be payable in connection with a named executive officer's termination, resignation for good reason
or in connection with a change of control and/or the initial public offering of our securities, see the sections under the heading "Executive Compensation" entitled "Compensation Discussion and
Analysis," and "Potential Payments upon Termination, Change of Control or Initial Public Offering," respectively. For additional information regarding equity awards, see the tables under the heading
"Executive Compensation" entitled "Summary Compensation Table," "Grants of Plan-Based Awards" and "Outstanding Awards at Fiscal Year-End." </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>113</FONT></P>

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<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Frank Fawzi  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an amended and restated employment agreement with Mr.&nbsp;Fawzi in May 2011 to serve as our president, chief
executive officer and chairman of the board. The agreement provides Mr.&nbsp;Fawzi's annual base salary is $412,500, subject to increase to $442,000 in the event of the initial public offering of
our securities on a national securities exchange. Mr.&nbsp;Fawzi's annual base salary is to be reviewed on at least an annual basis and may be increased, but not decreased, as determined by the
board. In addition, Mr.&nbsp;Fawzi is eligible to participate in our annual short-term performance based cash compensation plan with an annual target of 100&nbsp;percent of his then
annual base salary. The agreement has no specific term and constitutes
at-will employment. Pursuant to the agreement, each of Mr.&nbsp;Fawzi's previously granted equity awards shall continue to vest subject to their original terms; provided, however, that
the post-termination exercise period for each of his grants, notwithstanding the terms of each such grant, shall be extended to a term that is the shorter of three years following
Mr.&nbsp;Fawzi's termination for any reason other than for cause (as defined in the agreement) or the expiration date of the respective option grant. Pursuant to the agreement, Mr.&nbsp;Fawzi has
agreed that for one year following the termination of his employment with us for any reason, he will not, without our prior written consent, directly or indirectly, induce or attempt to induce any
person who is an employee or contractor of us or any of our affiliates to terminate his or her relationship with us or any of our affiliates. In addition to participating in the Company's standard
benefit plans, Mr.&nbsp;Fawzi's agreement also provides for certain severance and/or other benefits to be payable in connection with his termination, resignation for good reason, or in connection
with a change of control and/or the initial public offering of our securities. See "Potential Payments upon Termination, Change of Control or Initial Public Offering" above. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Andre Simone  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an amended and restated employment agreement with Mr.&nbsp;Simone in May 2011 to serve as our chief financial
officer. The agreement provides Mr.&nbsp;Simone's annual base salary is $302,500, subject to review on at least an annual basis, and may be increased, but not decreased, as determined by the board.
In addition, Mr.&nbsp;Simone is eligible to participate in our annual short-term performance based cash compensation plan with an annual target of 65&nbsp;percent of his then annual
base salary. The agreement has no specific term and constitutes at-will employment. Pursuant to the agreement, each of Mr.&nbsp;Simone's previously granted equity awards shall continue
to vest subject to their original terms; provided, however, that the post-termination exercise period for each of his grants, notwithstanding the terms of each such grant, shall be
extended to a term that is the shorter of twelve months following Mr.&nbsp;Simone's termination for any reason other than for cause (as defined in the agreement) or the expiration date of the
respective option grant. Pursuant to the agreement, Mr.&nbsp;Simone has agreed that for one year following the termination of his employment with us for any reason, he will not, without our prior
written consent, directly or indirectly, induce or attempt to induce any person who is an employee or contractor of us or any of our affiliates to terminate his or her relationship with us or any of
our affiliates. In addition to participating in the Company's standard benefit plans, Mr.&nbsp;Simone's agreement also provides for certain severance and/or other benefits to be payable in
connection with his termination, resignation for good reason, or in connection with a change of control and/or the initial public offering of our securities. See "Potential Payments upon Termination,
Change of Control or Initial Public Offering" above. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Haydar Haba  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an amended and restated employment agreement with Mr.&nbsp;Haba in May 2011 to serve as our chief visionary officer.
The agreement provides Mr.&nbsp;Haba's annual base salary is $250,459, subject to review on at least an annual basis, and may be increased, but not decreased, as determined by the board. In
addition, Mr.&nbsp;Haba is eligible to participate in our annual short-term performance </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>114</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>based
cash compensation plan with an annual target of 50&nbsp;percent of his then annual base salary. The agreement has no specific term and constitutes at-will employment. Pursuant to
the agreement, each of Mr.&nbsp;Haba's previously granted equity awards shall continue to vest subject to their original terms; provided, however, that the post-termination exercise
period for each of his grants, notwithstanding the terms of each such grant, shall be extended to a term that is the shorter of twelve months following Mr.&nbsp;Haba's termination for any reason
other than for cause (as defined in the agreement) or the expiration date of the respective option grant. Pursuant to the agreement, Mr.&nbsp;Haba has agreed that for one year following the
termination of his employment with us for any reason, he will not, without our prior written consent, directly or indirectly, induce or attempt to induce any person who is an employee or contractor of
us or any of our affiliates to terminate his or her relationship with us or any of our affiliates. In addition to participating in the Company's standard benefit plans, Mr.&nbsp;Haba's agreement
also provides for certain severance and/or other benefits to be payable in connection with his termination, resignation for good reason, or in connection with a change of control and/or the initial
public offering of our securities. See "Potential Payments upon Termination, Change of Control or Initial Public Offering" above. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> John Belanger  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an offer letter agreement with Mr.&nbsp;Belanger to serve as our vice president of sales and marketing, dated
December&nbsp;10, 2003. Mr.&nbsp;Belanger was subsequently appointed as our senior vice president of service provider sales. Mr.&nbsp;Belanger's annual base salary was initially $120,000 which
has subsequently been raised to $125,000. Under the terms of the agreement, Mr.&nbsp;Belanger is eligible to participate in a commission plan on such terms as our board of directors may determine.
See "Compensation Discussion and Analysis&#151;Elements of Executive Compensation&#151;Sales Commission Plan" above. The agreement also contemplates that Mr.&nbsp;Belanger will receive
an initial option grant as provided therein. The agreement does not provide for any severance and/or other benefits to be payable in connection with his termination, resignation for good reason or in
connection with a change of control and/or the initial public offering of our securities. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Phillip Bronsdon  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an offer letter agreement with Mr.&nbsp;Bronsdon to serve as our vice president of operations, dated
August&nbsp;21, 2007. Mr.&nbsp;Bronsdon was subsequently appointed as our senior vice president of engineering, development and operations. Mr.&nbsp;Bronsdon's annual base salary was initially
$175,000 which has subsequently been raised to $238,500. Under the terms of the agreement, Mr.&nbsp;Bronsdon is eligible to receive an annual performance bonus of up to 50&nbsp;percent of his
annual base salary based upon achievement of individual performance goals to be agreed upon by us and Mr.&nbsp;Bronsdon as well as company performance goals to be determined by our board of
directors. The agreement contemplates that Mr.&nbsp;Bronsdon will receive an initial option grant as provided therein. The agreement does not provide for any severance and/or other benefits to be
payable in connection with his termination, resignation for good reason or in connection with a change of control and/or the initial public offering of our securities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Director Compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, and other than as set forth in the following disclosure, we have not compensated our non-employee directors for
their services as directors. We do reimburse both employee and non-employee directors for reasonable travel and lodging expenses incurred by them to attend our board and committee
meetings. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February&nbsp;7, 2011, Raymond Smets received an option grant to purchase 100,000 shares of our common stock at an exercise price equal to $3.52 per share, the fair market value of
our common stock on the grant date, as determined by our board of directors. Pursuant to our letter agreement with </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>115</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Smets
dated January&nbsp;11, 2011, Mr.&nbsp;Smets receives a $25,000 annual retainer for his services as a director. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February&nbsp;7, 2011, Lawrence Irving received an option grant to purchase 100,000 shares of our common stock at an exercise price equal to $3.52 per share, the fair market value
of our common stock on the grant date, as determined by our board of directors. Pursuant to our letter agreement with Mr.&nbsp;Irving dated January&nbsp;26, 2011, Mr.&nbsp;Irving receives a
$35,000 annual retainer for his services as a director. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
the day after completion of this offering, Javier Rojas and William Harding will each receive an option grant under our 2011 Equity Incentive Plan, or 2011 Equity Plan, to purchase
100,000 shares of our common stock with an exercise price per share equal to the fair market value of our common stock on the date of grant. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning
upon the completion of this offering, all of our non-employee directors will be eligible to receive cash compensation of $25,000 per year for service as a director.
The chair of our audit committee will be entitled to receive an additional $15,000 per year, the chair of our compensation committee entitled to receive an additional $10,000 per year and the chair of
our nominating and corporate governance committee entitled to an additional $7,500 per year. Other members of the audit committee will be entitled to receive an additional $10,000 per year, other
members of the compensation committee entitled to an additional $5,000 per year and other members of the nominating and corporate governance committee entitled to an additional $3,000 per year.
Additionally, all non-employee directors will also be eligible to receive an option grant under our 2011 Equity Plan to purchase 25,000 shares of our common stock with an exercise price
per share equal to the fair market value of our common stock on the date of grant, which will be the first day after the Company holds its annual meeting. We will continue to reimburse all directors
for reasonable travel and lodging expenses incurred by them to attend our board and board committee meetings. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Employee Benefit Plans  </B></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Amended and Restated 2003 Stock Option and Restricted Stock Plan  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;10, 2003, our board of directors adopted, and the Company's stockholders later approved, our 2003 Stock Option and
Restricted Stock Plan and on May&nbsp;10, 2007, such plan was amended and restated. The Amended and Restated 2003 Stock Option and Restricted Stock Plan, or 2003 Stock Plan, provides for the grant
of incentive and nonstatutory stock options and stock purchase right awards to employees, consultants and members of our board of directors or of any of parent or subsidiary corporation of ours.
However, only options have been granted under the 2003 Stock Plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to adjustment in the event of certain changes in capital structure, the maximum aggregate number of shares of common stock authorized for issuance under the 2003 Stock Plan is
18,529,587. As of December&nbsp;31, 2010, options were outstanding under the 2003 Stock Plan and outside the plan to purchase 14,722,328 shares of common stock, at a weighted average exercise price
of $0.455 per share,
and 758,808 shares remained available for future grant. Shares subject to awards that expire, are forfeited or otherwise terminate will again be available for grant under the 2003 Stock Plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors will terminate the 2003 Stock Plan effective upon the closing of this offering, and no additional options or other equity awards may be granted under the 2003
Stock Plan following its termination. However, options granted under the 2003 Stock Plan prior to its termination will remain outstanding until they are either exercised or expire. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>2011 Equity Incentive Plan</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
2011 Equity Plan was approved by our board of directors and our stockholders in May 2011. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>116</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares of our common stock that has been initially authorized and reserved for issuance under the 2011 Equity Plan is equal to the total number of shares still available
for issuance under the 2003 Stock Plan as of the closing of this offering. This reserve will automatically increase on January&nbsp;1, 2012 and each subsequent anniversary through 2020, by an amount
equal to the smaller of (a)&nbsp;4.0&nbsp;percent of the number of shares of common stock issued and outstanding on the immediately preceding December&nbsp;31, or (b)&nbsp;an amount determined
by the board. The reserve will also increase automatically by the number of any shares subject to awards outstanding under the 2003 Stock Plan which expire or are cancelled or forfeited after the
closing of this offering. Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the 2011 Equity Plan and in outstanding awards to prevent dilution or
enlargement of participants' rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are cancelled or forfeited will again become
available for issuance under the 2011 Equity Plan. The shares available will not be reduced by awards settled in cash or by shares withheld to satisfy tax withholding obligations. Only the net number
of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under
the 2011 Equity Plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2011 Equity Plan will be administered by the compensation committee of our board of directors. Awards may be granted under the 2011 Equity Plan to our employees, including officers,
directors, or consultants or those of any present or future parent or subsidiary or other affiliated entity. While we may grant incentive stock options only to employees, we may grant nonstatutory
stock options, stock appreciation rights, restricted stock purchase rights or bonuses, restricted stock units, performance shares, performance units and cash-based awards or other
stock-based awards to any eligible participant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a change of control as described in the 2011 Equity Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2011 Equity
Plan or substitute substantially equivalent awards. Any awards which are not assumed or continued in connection with a change of control or are not exercised or settled prior to the change of control
will terminate effective as of the time of the change of control. The compensation committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such
extent as it determines, except that the vesting of all awards held by members of the board of directors who are not employees will automatically be accelerated in full. The 2011 Equity Plan also
authorizes the compensation committee, in its discretion and without the consent of any participant, to cancel each or any outstanding award denominated in shares upon a change of control in exchange
for a payment to the participant with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change of
control transaction over the exercise price per share, if any, under the award. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> 401(k) Plan  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through our relationship with Trinet, we offer our employees a defined contribution employee retirement plan, or 401(k) plan. Our
executive officers are also eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under
Section&nbsp;401(k) of the Code. The plan provides that each participant may contribute up to the statutory limit, which is $16,500 for calendar year 2011. Participants that are 50&nbsp;years or
older can also make "catch-up" contributions, which in calendar year 2011 may be up to an additional $5,500 above the statutory limit. The plan permits us to make discretionary
contributions and matching contributions, subject to established limits and a vesting schedule. In fiscal year 2010, we did not make any discretionary or matching contributions on behalf of our named
executive officers. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>117</FONT></P>

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<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_ee77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Policies and Procedures for Related Person Transactions  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All future transactions, if any, between us and our officers, directors and principal stockholders and their affiliates, as well as any
transactions between us and any entity with which our officers, directors or principal stockholders are affiliated will be reviewed and approved or ratified in accordance with policies and procedures
that our board of directors intends to adopt effective upon the completion of this offering. Such policies and procedures will require that related person transactions be approved by the audit
committee or our board of directors or otherwise in accordance with the then applicable SEC, NYSE or Nasdaq rules and regulations governing the approval of such transactions. These policies and
procedures have not been and will not be applied to the transactions described below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Related Person Transactions  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;1, 2008, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar
transactions in which the amount involved exceeded or will exceed $120,000 and in which any current or former director, executive officer, holder of more than five percent of our capital stock, any
member of the immediate family of or any entities affiliated with any of the foregoing persons or entities affiliated with them, had or will have a direct or indirect material interest, other than as
described above under the heading "Executive Compensation" and in the transactions described below. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Securities Issued to Insiders  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;5, 2008, June&nbsp;17, 2008, and August&nbsp;1, 2008 we collectively issued and sold an aggregate principal amount
of $2,050,000 of subordinated convertible promissory notes that accrued interest at a rate of eight percent per annum. As described below, on October&nbsp;31, 2008, all outstanding principal and
interest, equal to an aggregate amount of $2,117,003, converted into shares of our Series&nbsp;C preferred stock. The table below summarizes purchases of these convertible promissory notes by our
directors, executive officers, holders of more than five percent of any class of our voting securities, and any member of the immediate family of or any entities affiliated with any of the foregoing
persons. </FONT></P>
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<TD WIDTH="94pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:40pt;"><FONT SIZE=1><B>Purchasers

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Principal Amount of<BR>
Notes </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with Kennet&nbsp;II&nbsp;L.P.(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$1,193,798</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with IVS Fund&nbsp;II K/S(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>457,364</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with EDF Ventures&nbsp;III, Limited Partnership(3)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>348,837</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Consists
of $1,188,472 principal amount purchased by Kennet&nbsp;II&nbsp;L.P. and $5,326 principal amount purchased by King Street Partners&nbsp;L.P.
&nbsp;&nbsp;Javier Rojas is a managing director of Kennet Partners&nbsp;LLC, and is a member of our board of directors. Kennet Capital Management (Jersey)&nbsp;LTD. is the manager of each of
Kennet&nbsp;II&nbsp;L.P. and King Street Partners&nbsp;L.P.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Consists
of $304,909 principal amount purchased by IVS Fund&nbsp;II K/S and $152,455 principal amount purchased by IVS A/S.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Consists
of $313,954 principal amount purchased by EDF Ventures&nbsp;III, Limited Partnership and $34,883 principal amount purchased by EDF
Ventures&nbsp;III Sidecar, Limited Partnership. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;31, 2008, we issued and sold an aggregate of 17,541,050 shares of our Series&nbsp;C preferred stock at a per share price of
approximately $1.0597 with respect to shares purchased for cash and a per share price of approximately $0.8478 with respect to shares issued upon conversion of outstanding debt, for aggregate
consideration of approximately $18.1&nbsp;million (approximately $2.1&nbsp;million via conversion of debt and $16.0&nbsp;million in cash). The table below summarizes purchases of shares of our
Series&nbsp;C preferred stock by our directors, executive officers, holders of more than five percent of any class of our voting securities, and any member of the immediate family of or any entities </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>118</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>affiliated
with any of the foregoing persons. In connection with these sales, we granted the purchasers certain registration rights with respect to their securities. See "Description of Capital
Stock&#151;Registration Rights." Each outstanding share of our Series&nbsp;C preferred stock will be converted automatically into one share of our common stock immediately prior to the
completion of this offering. </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares of Series&nbsp;C<BR>
Preferred Stock </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate<BR>
Purchase<BR>
Price<SUP>(1)</SUP> </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>VantagePoint Venture Partners 2006(Q),&nbsp;L.P.(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,049,776</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$15,948,248</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with IVS Fund&nbsp;II K/S(3)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>555,815</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>471,198</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with Kennet&nbsp;II&nbsp;L.P.(4)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,450,771</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,229,906</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with EDF Ventures&nbsp;III, Limited Partnership(5)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>423,926</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>359,388</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Payment
via cash and conversion of outstanding debt at a 20&nbsp;percent discount to the cash purchase price.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>William
J. Harding is a member of VantagePoint Venture Associates 2006,&nbsp;LLC, the general partner of VantagePoint Venture Partners
2006(Q),&nbsp;L.P., and is a member of our board of directors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Consists
of 185,272 shares purchased by IVS A/S and 370,543 shares purchased by IVS Fund&nbsp;II&nbsp;K/S.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Consists
of 1,444,299 shares purchased by Kennet&nbsp;II&nbsp;L.P. and 6,472 shares purchased King Street Partners&nbsp;L.P. Javier Rojas is a
managing director of Kennet Partners&nbsp;LLC, and is a member of our board of directors. Kennet Capital Management (Jersey)&nbsp;LTD. is the manager of each of Kennet&nbsp;II&nbsp;L.P. and
King Street Partners&nbsp;L.P.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Consists
of 381,534 shares purchased by EDF Ventures&nbsp;III, Limited Partnership and 42,392 shares purchased EDF Ventures&nbsp;III Sidecar, Limited
Partnership. </FONT></DD></DL>
 </DIV>
 <UL>

<P style="font-family:times;"><FONT SIZE=2><I> Amended and Restated Registration Rights Agreement  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into a registration rights agreement with the purchasers of our outstanding convertible preferred stock, including
entities with which certain of our directors are affiliated, and certain holders of our outstanding common stock, including certain of our executive officers. As of December&nbsp;31, 2010, the
holders of up to 59,431,206 shares of our common stock, including the common stock issuable upon the conversion of our preferred stock and upon the exercise of warrants, are entitled to rights with
respect to the registration of their shares following this offering under the Securities Act. For a description of these registration rights and other registration rights held by certain holders of
our common stock, see "Description of Capital Stock&#151;Registration Rights." </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Indemnification Agreements  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into, or will enter into, an indemnification agreement with each of our directors and executive officers. The
indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. See
"Description of Capital Stock&#151;Limitations of Director Liability and Indemnification of Directors, Officers, and Employees." </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Offer Letters  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into employment agreements and proprietary information and inventions agreements with our executive officers. For more
information regarding these agreements, see "Executive Compensation&#151;Executive Employment Agreements." </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Indebtedness of Management  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2006, we issued an aggregate of 769,320&nbsp;shares of our common stock to Fawzi Common Stock, Inc., an entity
affiliated with Frank Fawzi, our chief executive officer and chairman, in exchange for a promissory note in the original principal amount of $932,493. Interest on the note originally accrued at a rate
of 5.06% per annum, and the note had an initial maturity date of the earlier of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>119</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>(i)&nbsp;June&nbsp;30,
2011 or (ii)&nbsp;the day immediately prior to a public offering. The note was a non-recourse note and was secured by a pledge of the 769,320&nbsp;shares of common
stock. In May 2007, in accordance with its terms, the note was amended to reduce the principal to $788,058 to reflect a reduction in the value of the shares of common stock following a reduction in
the conversion price of our Series&nbsp;B preferred stock. In December&nbsp;2010, the note was amended in order to change the interest rate to 0.32% per annum and to change the maturity date to
the earlier of (i)&nbsp;June&nbsp;30, 2012 or (ii)&nbsp;the day immediately prior to a public offering. The largest aggregate amount of indebtedness outstanding pursuant to the note was
$983,771, which represented the full amount of principal and accrued interest outstanding at May&nbsp;4, 2011, the date the note was repaid in full. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Recent Stock Sales  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;4, 2011, certain of our executive officers or their affiliates sold an aggregate of 727,274&nbsp;shares of our common
stock to an institutional investor. The institutional investor was not previously a company stockholder or an affiliate of a company stockholder. All transactions were completed at a price per share
of $5.50. The transaction for Fawzi Common Stock,&nbsp;Inc., an entity affiliated with Frank Fawzi, our chief executive officer and chairman, allowed Fawzi Common Stock,&nbsp;Inc. to satisfy the
indebtedness owed by Fawzi Common Stock,&nbsp;Inc. to us in an amount equal to $983,737, and tax liability associated with gains on the sale of such shares. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fawzi
Common Stock,&nbsp;Inc. sold an aggregate of 280,238 shares, representing approximately 6.2&nbsp;percent of the 4,517,574 shares then beneficially owned by Mr.&nbsp;Fawzi,
including shares subject to options held by Mr.&nbsp;Fawzi that were then exercisable or exercisable within 60&nbsp;days of the date of such transaction. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Simone
sold an aggregate of 47,146 shares, representing approximately 2.4&nbsp;percent of the 2,000,857 shares then beneficially owned by Mr.&nbsp;Simone, including shares
subject to options held by Mr.&nbsp;Simone that were then exercisable or exercisable within 60&nbsp;days of the date of such transaction. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Haba
sold an aggregate of 81,685 shares, representing approximately 2.0&nbsp;percent of the 4,079,808 shares then beneficially owned by Mr.&nbsp;Haba, including shares
subject to options held by Mr.&nbsp;Haba that were then exercisable or exercisable within 60&nbsp;days of the date of such transaction. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
institutional investor that purchased the shares of common stock sold by Messrs.&nbsp;Fawzi, Simone and Haba has entered into a lock-up agreement with the underwriters,
and the shares of common stock that were purchased are subject to the restrictions contained in such lock-up agreement, which are described elsewhere in this prospectus. See
"Underwriting." </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>120</FONT></P>

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<BR></FONT><FONT SIZE=2><B>  PRINCIPAL AND SELLING STOCKHOLDERS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information known to us regarding the beneficial ownership of our common stock as of March&nbsp;31,
2011 for: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each person, or group of affiliated persons, known to us to beneficially own more than five&nbsp;percent of our common
stock;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each of our directors;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each of our named executive officers;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>all of our directors and executive officers as a group; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each of the selling stockholders. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information in the following table has been presented in accordance with the rules of the SEC. Under the SEC's rules, beneficial ownership of a class of capital stock includes any
shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or
investment power within 60&nbsp;days following March&nbsp;31, 2011 through the exercise of any stock option, warrant or other right. Except as otherwise noted, unvested options granted under our
2003 Stock Plan are not immediately exercisable and therefore are not considered beneficially owned by their holder. If two or more persons share voting power or investment power with respect to
specific securities, each such person is deemed to be the beneficial owner of such securities. Except as we otherwise indicate below and subject to applicable community property laws, we believe that
the beneficial owners of the common stock listed below, based on information they have furnished to us, have sole voting and investment power with respect to the shares shown. Unless otherwise noted
below, the address for each holder listed below is c/o IntelePeer,&nbsp;Inc., 2855 Campus Drive, Suite&nbsp;200, San Mateo, CA 94403. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of calculating beneficial ownership, we have assumed that: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>as of March&nbsp;31, 2011, 53,483,915 shares of common stock were outstanding, assuming the conversion of all of our
outstanding convertible preferred stock, which will occur immediately prior to the completion of this offering; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we will issue&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common
stock in the offering (assuming the underwriters do not exercise their
over-allotment option). </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
the selling stockholders may offer all or a portion of the shares at any time and from time to time after the date hereof, no estimate can be made of the number of shares that
each selling stockholder may retain upon completing the offering. Assuming all of the shares offered hereunder are sold by the selling stockholders, after completing the offering, none of the selling
stockholders will own </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>121</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_ee77601_1_122"> </A>


<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>more
than one&nbsp;percent of the shares of common stock outstanding except as noted below. Beneficial ownership after the offering will depend on the number of shares sold by each selling
stockholder. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:62%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="130%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="46pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="75pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Shares<BR>
Beneficially Owned </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percent<BR>
Beneficially Owned </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total Shares<BR>
Offered if Over-<BR>
Allotment is<BR>
Exercised </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:139pt;"><FONT SIZE=1><B>Name and Address of Beneficial Owner

<!-- COMMAND=ADD_SCROPPEDRULE,139pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Before<BR>
Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>After<BR>
Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number<BR>
of Shares<BR>
Offered </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Before<BR>
Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>After<BR>
Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>5% Stockholders:</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>VantagePoint Venture Partners 2006(Q),&nbsp;L.P.(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,049,776</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with Kennet II&nbsp;L.P.(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,049,776</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with IVS Fund II K/S(3)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,765,821</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10.8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Entities affiliated with EDF Ventures III, Limited Partnership(4)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,397,660</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Frank M. Fawzi(5)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,517,574</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Haydar Haba(6)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,478,458</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Directors and Executive Officers:</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Frank M. Fawzi(5)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,517,574</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shaun Andrews(7)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>125,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John Belanger(8)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>775,675</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Phillip Bronsdon(9)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>677,133</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Haydar Haba(6)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,478,458</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Margaret Norton(10)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>437,249</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Andre Simone(11)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,000,857</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>William J. Harding</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Lawrence Irving</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Javier Rojas</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Raymond Smets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>All Directors and Executive Officers as a Group (11 persons)</I></FONT><FONT SIZE=2>(12)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
12,011,946</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
19.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Additional Selling Stockholders:</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
beneficial ownership of less than one&nbsp;percent.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>The
General Partner of VantagePoint Venture Partners 2006(Q),&nbsp;L.P. is VantagePoint Venture Associates 2006,&nbsp;LLC. Due to his authority as a
Managing Member of VantagePoint Venture Associates 2006,&nbsp;LLC, Alan E. Salzman may be deemed to have beneficial ownership over shares held by VantagePoint Venture Partners 2006(Q),&nbsp;L.P.
Mr.&nbsp;Salzman disclaims beneficial ownership except to the extent of his pecuniary interest in those shares. The address for each VantagePoint entity and for Mr.&nbsp;Salzman is 1001 Bayhill
Drive, Suite&nbsp;300, San Bruno, CA 94066.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
14,982,634 shares held by Kennet II&nbsp;L.P., or KII; and 67,142 shares held by King Street Partners&nbsp;L.P., or KSP. Pursuant to a
management agreement, Kennet Capital Management (Jersey) Limited, or KCMJL, has sole voting and investment power over the shares held by KII and KSP. KCMJL is a wholly owned subsidiary of Kennet
Partners&nbsp;LLP. The board of directors of KCMJL consists of Michael Harrop and Jane Stammers, who share such voting and investment power. KCMJL has appointed Javier Rojas, an affiliate of Kennet
Partners&nbsp;LLP and a limited partner of KSP, as its representative to the Company's board of directors. Each of Michael Harrop, Jane Stammers and Javier Rojas disclaim beneficial ownership except
to the extent of his or her pecuniary interest in these shares. The address of KCMJL is 47 Esplanade, St.&nbsp;Helier, Jersey JE1&nbsp;0BD Channel Islands.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
(i)&nbsp;3,843,880 shares held by IVS Fund II K/S and (ii)&nbsp;1,921,941 shares held by IVS A/S. The Board of Directors of IVS A/S has sole
voting power over the shares held by IVS Fund&nbsp;II K/S and IVS A/S. The board of directors of IVS A/S consists of Lars Bruhn, Peter Aagaard, Soren Fogtdal, Preben Mejer, and Frank Ewald, who
share such voting and investment power. Each of Lars Bruhn, Peter Aagaard, Soren Fogtdal, Preben Mejer, and Frank Ewald disclaim beneficial ownership except to the extent of his or her pecuniary
interest in these shares. </FONT></DD></DL>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
 <DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
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<DL compact>
<DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
(i)&nbsp;3,957,898 shares held by EDF Ventures&nbsp;III, Limited Partnership and (ii)&nbsp;439,762 shares held by EDF Ventures&nbsp;III
Sidecar, Limited Partnership. The general partner of EDF Ventures&nbsp;III, Limited Partnership is Enterprise Ventures&nbsp;III, Limited Partnership of which the general partner is EDM&nbsp;III,
Inc. The general partner of EDF Ventures&nbsp;III Sidecar, Limited Partnership is Enterprise Ventures&nbsp;III Sidecar, Limited Partnership of which the general partner is EDM&nbsp;III Sidecar,
Inc. Mary Campbell and Mike Devries collectively own all of the outstanding equity interests of each of EDM III, Inc. and EDM&nbsp;III Sidecar, Inc. and collectively have ultimate voting power over
the Company's shares held by EDF Ventures&nbsp;III, Limited Partnership and EDF Ventures III Sidecar, Limited Partnership. Each of Mary Campbell and Mike Devries disclaim beneficial ownership except
to the extent of his or her pecuniary interest in these shares.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
(i)&nbsp;769,320 shares held by Fawzi Common Stock, Inc., and (ii)&nbsp;3,272,280 shares issuable upon exercise of options exercisable within
60&nbsp;days following March&nbsp;31, 2011. Frank Fawzi has sole control over the shares held by Fawzi Common Stock, Inc.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
(i)&nbsp;671,830 shares issuable upon exercise of options and 2,454 shares issuable upon exercise of a warrant, all of which are exercisable
within 60&nbsp;days following March&nbsp;31, 2011 and (ii)&nbsp;2,156,210 shares held by UIS&nbsp;LLC of which Mr.&nbsp;Haba is the managing member. An additional 459,299 of
Mr.&nbsp;Haba's options shall become exercisable in the event the fair market value of our common stock exceeds $7.374 per share following the completion of our initial public offering, subject to
his continuous service to the Company.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
125,000 shares issuable upon options exercisable within 60&nbsp;days following March&nbsp;31, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
775,675 shares issuable upon options exercisable within 60&nbsp;days following March&nbsp;31, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(9)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
677,133 shares issuable upon options exercisable within 60&nbsp;days following March&nbsp;31, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(10)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Represents
437,249 shares issuable upon options exercisable within 60&nbsp;days following March&nbsp;31, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(11)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>Includes
1,912,711 shares issuable upon options exercisable within 60&nbsp;days following March&nbsp;31, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-9pt;'><FONT SIZE=1>(12)</FONT></DT><DD style="font-family:times;"><FONT SIZE=1>See
note&nbsp;(5) through (11). Includes 7,874,832 shares issuable pursuant to options or warrants exercisable within 60&nbsp;days following
March&nbsp;31, 2011. </FONT></DD></DL>
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<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

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<BR></FONT><FONT SIZE=2><B>  DESCRIPTION OF CAPITAL STOCK    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> General  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, $0.0001 par value
per share, and 5,000,000 shares of undesignated preferred stock, $0.0001 par value per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following description of the material provisions of our capital stock and our charter and bylaws is only a summary, does not purport to be complete and is qualified by applicable law
and the full provisions of our charter and bylaws. You should refer to our charter and bylaws as in effect upon the closing of this offering, which are included as exhibits to the registration
statement of which this prospectus is a part. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Common Stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2011, there were 53,483,915 shares of our common stock outstanding and held of record by 57 stockholders. The
foregoing assumes the automatic conversion of all of our outstanding convertible preferred stock into shares of our common stock, which will occur immediately prior to the completion of this offering.
All of the outstanding shares of our common stock are fully paid and nonassessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders
of shares of any series of preferred stock which we may issue in the future. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Holders of common stock are entitled to one vote per share on any matter to be voted upon by stockholders. All shares of
common stock
rank equally as to voting and all other matters. The shares of common stock have no preemptive or conversion rights, no redemption or sinking fund provisions, are not liable for further call or
assessment and are not entitled to cumulative voting rights. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividend Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For as long as such stock is outstanding, the holders of common stock are entitled to receive ratably any dividends
when and as
declared from time to time by our board of directors out of funds legally available for dividends. We currently intend to retain all future earnings for the operation and expansion of our business and
do not anticipate paying cash dividends on the common stock in the foreseeable future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liquidation Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon a liquidation or dissolution of our company, whether voluntary or involuntary, creditors will be paid before
any
distribution to holders of our common stock. After such distribution, and subject to the liquidation preferences of any outstanding preferred stock, holders of common stock are entitled to receive a
pro rata distribution per share of any excess amount. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Preferred Stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately prior to the completion of this offering, and assuming there are no exercises of outstanding warrants after
March&nbsp;31, 2011, all outstanding shares of our preferred
stock will be automatically converted into an aggregate of 43,139,866 shares of common stock provided that the aggregate offering price of the shares offered in this offering equals or exceeds
$50,000,000 and the per share offering price is at least $3.1791. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undesignated Preferred Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under our charter, as it will be amended and restated effective upon the completion of this offering, our
board of
directors has authority to issue undesignated preferred stock without stockholder approval. Our board of directors may also determine or alter for each class of preferred stock the voting powers,
designations, preferences, and special rights, qualifications, limitations, or restrictions as permitted by law. Our board of directors may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. Issuing preferred stock provides flexibility in </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>connection
with possible acquisitions and other corporate purposes, but could also, among other things, have the effect of delaying, deferring or preventing a change of control of our company and may
adversely affect the market price of our common stock and the voting and other rights of the holders of common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Warrants  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately following the completion of this offering, there will be outstanding and held of record by eleven holders warrants to
purchase 1,867,134 shares of our common stock, assuming no voluntary exercise of any of these warrants prior to the completion of this offering. This total includes warrants to purchase 1,082,404
shares of our preferred stock that will convert into warrants to purchase the same number of shares of our common stock upon the conversion of our preferred stock into common stock as a result of the
offering. The warrants that will remain outstanding following the completion of this offering have a weighted average exercise price of $0.83 per share and have termination dates that range from
October&nbsp;4, 2011 to May&nbsp;5, 2020. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Registration Rights  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Immediately prior to this offering all outstanding shares of our preferred stock will be converted into shares of our common stock and
all outstanding warrants to purchase shares of our preferred stock will become exercisable for shares of our common stock. After the completion of this offering, certain holders of our common stock
and warrants exercisable for our
common stock, assuming exercise of such warrants, will be entitled to rights with respect to the registration of their shares under the Securities Act. These registration rights are contained in our
Registration Rights Agreement, dated as of October&nbsp;31, 2008, as amended by Amendment No.&nbsp;1 thereto, dated April&nbsp;15, 2009, and Amendment No.&nbsp;2 thereto, dated May&nbsp;5,
2010, or the Registration Rights Agreement, and are described in additional detail below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this offering, each securityholder that has registration rights has entered into lock-up agreements or is otherwise subject to contractual restrictions
pursuant to which they have agreed not to transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of
common stock, for a period of at least 180&nbsp;days after the date of this prospectus, which is subject to extension in some circumstances, as described under the heading "Underwriting." </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><B><I> Registration Rights Agreement  </I></B></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registration rights provided for in the Registration Rights Agreement, will expire seven years following the completion of this
offering, or, with respect to any particular securityholder, when such securityholder is able to sell all of its shares pursuant to Rule&nbsp;144 of the Securities Act or a similar exemption during
any 90-day period. Subject to certain conditions, we will pay the registration expenses of the holders of the shares registered pursuant to the registrations described below. In an
underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares such holders may include in the offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demand Registration Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;After the completion of this offering, the holders of an aggregate of 47,228,017 shares of our common stock
will be
entitled to certain demand registration rights. Any time after October&nbsp;1, 2011, the holders of at least a majority of these shares can, on not more than two occasions, request that we register
all or a portion of their shares. The request for registration must cover at least that number of shares with an anticipated aggregate offering price, of at least $50,000,000. If in the good faith
judgment of our board of directors, we determine that it would be seriously detrimental to us and to our stockholders to effect such a demand registration, we have the right to defer such
registration, not more than once in any one-year period, for a period of up to 120&nbsp;days. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>125</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Piggyback Registration Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In connection with this offering, the holders of an aggregate of 59,431,206 shares of our common stock
were entitled
to, and the necessary percentage of holders waived, their rights to notice of this offering and to include their shares of registrable securities in this offering. Following the date of this offering,
in the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other securityholders, the holders of these shares will be
entitled to certain "piggyback" registration rights allowing the holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we
propose to file&nbsp;a registration statement under the Securities Act, other than with respect to a registration related to a company stock plan, the exchange of securities in certain corporate
reorganizations or certain other transactions, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the
number of shares included in the registration, to include their shares in the registration. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S-3 Registration Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;After the completion of this offering, the holders of an aggregate of 47,228,017 shares of our common stock
may
make a written request that we register their shares on Form&nbsp;S-3. We are obligated to effect such registration on Form&nbsp;S-3 if we are eligible to file&nbsp;a
registration statement on Form&nbsp;S-3, the request is made by the holders of not less than 30&nbsp;percent of the registrable securities then outstanding, and the request covers at
least that number of shares with an anticipated aggregate offering price of at least $1,000,000. These holders may make an unlimited number of requests for registration on Form&nbsp;S-3.
However, we will not be required to effect a registration on Form&nbsp;S-3 if in the good faith judgment of our board of directors, we determine that it would be seriously detrimental to
us and to our stockholders to effect such a Form&nbsp;S-3 registration, in which case we have the right to defer such registration for not more than 120&nbsp;days from the date of
request, provided that we have not utilized this right more than twice in any 12-month period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Anti-Takeover Matters  </B></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2><I> Certificate of Incorporation and Bylaw Provisions  </I></FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation and bylaws to be in effect upon the closing of this offering will include a
number of provisions that may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than
pursue non-negotiated takeover
attempts. They are intended to enhance our long-term value to our stockholders by increasing the likelihood of continued stability in the composition of our board of directors and its
policies and discouraging certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are also designed to reduce our vulnerability to an unsolicited
acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares
and, as a consequence, they also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts. These provisions include the items described
below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Board Composition and Filling Vacancies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors shall be divided into three classes with staggered three-year terms.
Only
one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. In addition,
because our stockholders will not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. Our amended
and restated bylaws will provide that directors may be removed only for cause by the affirmative vote of the holders of a majority of the voting power of all the outstanding shares of capital stock
entitled to vote generally in the election of directors voting together as a single class. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an
increase in the size of our board of directors, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No Written Consent of Stockholders.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation will provide that all stockholder actions are
required to
be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meetings of Stockholders.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated bylaws will provide that only our board of directors, the chairman of the board, the
chief
executive officer or the president may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting
of stockholders. Our amended and restated bylaws will limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Advance Notice Requirements.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated bylaws will establish advance notice procedures with regard to stockholder
proposals relating
to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be
timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less
than 90&nbsp;days nor more than 120&nbsp;days prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information specified in the amended
and restated bylaws. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment to Bylaws and Certificate of Incorporation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As required by the Delaware General Corporation Law, or DGCL, any amendment of
our certificate
of incorporation must first be approved by a majority of our board of directors and, if required by law or our certificate of incorporation, thereafter be approved by a majority of the outstanding
shares entitled to vote on the amendment, and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to management
of our business, stockholder action, directors, limitation of liability and the amendment of our bylaws and certificate of incorporation must be approved by no less than
66<SUP>2</SUP>/<SMALL>3</SMALL>&nbsp;percent of the voting power of all of the shares of capital stock issued and outstanding and entitled to vote generally in any election of directors, voting together as a
single class. Our bylaws may be amended by the affirmative vote of a majority vote of the directors then in office, subject to any limitations set forth in the bylaws; and may also be amended by the
affirmative vote of at least 66<SUP>2</SUP>/<SMALL>3</SMALL>&nbsp;percent of the voting power of all of the shares of capital stock issued and outstanding and entitled to vote generally in any election of
directors, voting together as a single class. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Blank Check Preferred Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our amended and restated certificate of incorporation will provide for 5,000,000 authorized shares of
preferred stock.
The existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest, or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best
interests of our company or our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our amended and restated certificate of incorporation
grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the
amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders
and may have the effect of delaying, deterring, or preventing a change of control of us. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Limitations of Director Liability and Indemnification of Directors, Officers and Employees  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by the DGCL, provisions in our amended and restated certificate of incorporation and amended and restated bylaws that will
be in effect upon the closing of this offering will limit or substantially eliminate the personal liability of our directors. Consequently, directors will not be personally liable to us or our
stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>any breach of the director's duty of loyalty to us or our stockholders;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>any transaction from which the director derived an improper personal benefit. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies, such as an injunction or
rescission. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, our amended and restated bylaws will provide that: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees, to the
fullest extent permitted by the DGCL, subject to limited exceptions, including an exception for indemnification in connection with a proceeding (or counterclaim) initiated by such persons; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we will advance expenses, including attorneys' fees, to our directors and, in the discretion of our board of directors,
certain officers and employees, in connection with legal proceedings, subject to limited exceptions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have entered into indemnification agreements with each of our executive officers and directors. These agreements provide that, subject to limited exceptions and among other things, we
will indemnify each of our executive officers and directors to the fullest extent permitted by law and advance expenses to each indemnitee in connection with any proceeding in which a right to
indemnification is available. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also intend to maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their
capacities as directors or officers, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors,
officers, or persons who control us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the
likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment
may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions,
the indemnification agreements and the insurance policy are necessary to attract and retain talented and experienced directors and officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
present, there is no pending litigation or proceeding involving any of our directors or officers where indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such indemnification. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>128</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Exchange Listing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before the date of this prospectus, there has been no public market for our common stock. We intend to apply to have our common stock
approved for listing on the New York Stock Exchange or Nasdaq Global Market, subject to notice of issuance, under the symbol "PEER." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Transfer Agent and Registrar  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common stock is Computershare,&nbsp;Inc. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>129</FONT></P>

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<A NAME="toc_eg77601_2"> </A>
<BR></FONT><FONT SIZE=2><B>  SHARES ELIGIBLE FOR FUTURE SALE    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to our initial public offering, there has not been a public market for shares of our common stock. Future sales of substantial
amounts of shares of our common stock, including shares issued upon the exercise of outstanding options and warrants, in the public market after this offering, or the possibility of these sales
occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the closing of this offering, and assuming that there are no exercises of outstanding options or warrants after March&nbsp;31, 2011 and assuming the underwriters do not exercise
their over-allotment option, we will have outstanding an aggregate of approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock.
Of these shares,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock to be
sold in this offering, plus an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares if the underwriters exercise their over-allotment option
in full, will be freely tradable in the public market without
restriction or further registration under the Securities Act, unless the shares are held by any of our affiliates, as that term is defined in Rule&nbsp;144 of the Securities Act. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
remaining&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock outstanding after this offering are restricted securities, as such
term is defined in Rule&nbsp;144 under the Securities Act.
These shares were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or sold in accordance with Rule&nbsp;144 or
Rule&nbsp;701 under the Securities Act, each of which is discussed below. In addition, the holders of substantially all of our currently outstanding shares of our common stock are subject to
lock-up agreements or other contractual restrictions under which they have agreed not to transfer or dispose of, directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of our common stock, for a period of at least 180&nbsp;days after the date of this prospectus, which is subject to extension in some
circumstances, as discussed under the heading "Underwriting." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the lock-up agreements described below and the provisions of Rule&nbsp;144 and Rule&nbsp;701, the shares of our common stock (excluding the shares to be
sold in this offering) will be available for sale in the public market as follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>substantially all of such shares will be subject to lock-up agreements and will not be eligible for immediate
sale upon the completion of this offering; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>all of such shares will be eligible for sale under Rule&nbsp;144 or Rule&nbsp;701 upon expiration of
lock-up agreements 180&nbsp;days after the date of this offering, subject to any extension of the lock-up period under circumstances described under the heading
"Underwriting," and provided that certain shares held by affiliates will be subject to volume limitations and other requirements of Rule&nbsp;144 described below. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Rule&nbsp;144  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;144, beginning 90&nbsp;days after the date of this prospectus, a person who is not our affiliate, has
not been our affiliate for the previous three months,
and who has beneficially owned shares of our common stock for at least six months, may sell all such shares. An affiliate or a person who has been our affiliate within the previous 90&nbsp;days, and
who has beneficially owned shares of our common stock for at least six months, may sell within any three-month period a number of shares that does not exceed the greater of: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>one percent of the number of shares of our common stock then outstanding, which will equal
approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares immediately after this offering, assuming no exercise of the underwriters' over-allotment option and based upon the number of shares of our common stock outstanding as of
March&nbsp;31, 2011; or </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>130</FONT></P>

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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the average weekly trading volume of our common stock on the New York Stock Exchange or Nasdaq Global Market during the
four calendar weeks preceding the filing of a notice on Form&nbsp;144 with respect to the sale; </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>provided,
in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90&nbsp;days before the sale, and subject to the lock-up agreements described
below. Sales under Rule&nbsp;144 by affiliates or persons who have been affiliates within the previous 90&nbsp;days are also subject to manner of sale provisions and notice requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Rule&nbsp;701  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;701 as currently in effect, any of our employees, directors, consultants or advisors who purchased shares
from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of this offering that was completed in reliance on Rule&nbsp;701
and complied with the requirements of Rule&nbsp;701 will, subject to the lock-up agreements described below, be eligible to resell such shares 90&nbsp;days after the effective date of
this offering in reliance on Rule&nbsp;144, but without compliance with certain restrictions, including the holding period, contained in Rule&nbsp;144. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Registration Rights  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of this offering, the holders
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock
outstanding and/or issued upon the
automatic conversion of our preferred stock upon the closing of our initial public offering, and the holders
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock
issuable upon exercise of outstanding
warrants will be entitled to various rights with respect to the registration of these shares under the Securities Act. Subject to the lock-up agreements described below, registration of
these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration statement
for such shares, subject to restrictions imposed on shares held by affiliates. See "Description of Capital Stock&#151;Registration Rights" for additional information. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Registration Statement on Form&nbsp;S-8  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to file one or more registration statements on Form&nbsp;S-8 under the Securities Act covering up to
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock reserved
for issuance under our Amended and Restated 2003 Stock Option and Restricted Stock Plan and our 2011 Equity Plan. These registration statements are
expected to be filed soon after the date of this prospectus and will automatically become effective upon filing. Accordingly, after expiration of lock-up agreements 180&nbsp;days after
the date of this offering, subject to any extension of the lock-up period under circumstances described under the heading "Underwriting," shares registered under such registration
statements will be available for sale in the public market, unless such shares are subject to vesting restrictions with us and requirements that apply to affiliates under Rule&nbsp;144 described
above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Lock-up Agreements  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a description of the lock-up agreements with the underwriters that restrict sales of shares by us, our officers and
directors, all of the selling stockholders and substantially all of our other securityholders, see the information under the heading "Underwriting." </FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_ei77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX<BR>  CONSEQUENCES FOR NON-U.S. HOLDERS OF COMMON STOCK    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a discussion of the material U.S. federal income and estate tax consequences to non-U.S. holders with
respect to their ownership and disposition of our common stock issued pursuant to this offering. In general, a "non-U.S. holder" is any beneficial owner of our common stock who is not, for
U.S. federal income tax purposes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>an individual who is a citizen or resident of the United States;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a corporation or any other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in
the United States or under the laws of the United States, any state thereof, or the District of Columbia;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>an estate, the income of which is subject to U.S. federal income tax regardless of its source; or </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a trust, if (i)&nbsp;a U.S. court can exercise primary supervision over the administration of the trust and one or more
U.S. persons can control all substantial decisions of the trust or (ii)&nbsp;the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person in
effect. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
an individual may be treated as a resident of the United States in any calendar year for U.S. federal income tax purposes by, among other ways, being present in the United
States for at least 31&nbsp;days in that calendar year and for an aggregate of at least 183&nbsp;days during a three-year period ending in the current calendar year. For purposes of
this calculation, such individual would count all of the days in which the individual was present in the current year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year. Residents are taxed for U.S. federal income tax purposes as if they were citizens of the United States. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
discussion is based on current provisions of the Internal Revenue Code, U.S. Treasury Regulations promulgated under the Internal Revenue Code, judicial opinions, published positions
of the Internal Revenue Service, or IRS, and all other applicable authorities, all of which are subject to change, possibly with retroactive effect. No ruling has been or will be sought from the IRS
with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position or that any such contrary position would not be sustained by a court. This
discussion assumes that the non-U.S. holder will hold our common stock as a capital asset (generally property held for investment). </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
discussion does not address all aspects of U.S. federal income and estate taxation or any aspects of state, local, or non-U.S. taxation, nor does it consider any
specific facts or circumstances that may apply to particular non-U.S. holders that may be subject to special treatment under the U.S. federal income tax laws, such
as: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>insurance companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>tax-exempt organizations;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>financial institutions;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>regulated investment companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>tax-qualified retirement plans;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>brokers or dealers in securities;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>investors that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other
integrated investment;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>controlled foreign corporations; </FONT></DD></DL>
</UL>
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<UL>
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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>passive foreign investment companies; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>U.S. expatriates. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a partnership or any other entity taxed as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the treatment of a partner in the partnership
or other entity taxed as a partnership will generally depend upon the status of the equity owner of such partnership or entity taxed as a partnership and the activities of the partnership or other
entity taxed as a partnership. Accordingly, partnerships and entities taxed as a partnership that hold our common stock and owners in such partnerships or other entities taxed as a partnership are
urged to consult their tax advisors regarding the specific U.S. federal income tax consequences to them of acquiring, owning or disposing of our common stock. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND
DISPOSING OF SHARES OF OUR COMMON STOCK, AS WELL AS THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS OF ACQUIRING, OWNING AND DISPOSING OF SHARES OF COMMON
STOCK.</B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Dividends  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As described above under the heading "Dividend Policy," we do not anticipate declaring or paying any cash dividends on our common stock
in the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, they will constitute a return
of capital and will first reduce the recipient's adjusted tax basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under the
heading "Gain on Sale or Other Disposition of Common Stock." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
paid to a non-U.S. holder will be subject to U.S. federal withholding tax at a rate equal to 30&nbsp;percent of the gross amount of the dividend, or a lower rate
prescribed by an applicable income tax treaty, unless the dividends are effectively connected with a trade or business carried on by the non-U.S. holder within the United States (and, if
required by an applicable income tax treaty, are attributable to a U.S. permanent establishment maintained by the non-U.S. holder). Under applicable Treasury Regulations, a
non-U.S. holder will be required to satisfy certain certification requirements, generally on IRS Form&nbsp;W-8BEN (or applicable successor form), directly or through an
intermediary, in order to claim a reduced rate of withholding under an applicable income tax treaty. If tax is withheld in an amount in excess of the amount prescribed by an applicable income tax
treaty, a refund of the excess amount may be obtained by timely filing an appropriate claim for refund with the IRS. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
that are effectively connected with such a U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment
maintained by the recipient) will not be subject to U.S. withholding tax if the non-U.S. holder files the required forms, usually an IRS Form&nbsp;W-8ECI (or applicable
successor form), with the payor of the dividend, but instead will be subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a resident
of the United States. A corporate non-U.S. holder that receives effectively connected dividends may be subject to an additional branch profits tax at a rate of 30&nbsp;percent, or a
lower rate prescribed by an applicable income tax treaty, with respect to effectively connected dividends. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Gain on Sale or Other Disposition of Common Stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable
disposition of the non-U.S. holder's shares of common stock unless: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the gain is effectively connected with a trade or business carried on by the non-U.S. holder within the United
States (and, if required by an applicable tax treaty, is attributable to a U.S. permanent establishment or a fixed base maintained by the non-U.S. holder), in which case the
non-U.S. holder generally will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates and, if the non-U.S. holder is
a corporation, the branch profits tax may apply, at a 30&nbsp;percent rate or such lower rate as may be specified by an applicable income tax treaty;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the non-U.S. holder is a nonresident alien individual who is present in the United States for 183&nbsp;days
or more in the taxable year of disposition and certain other conditions are met, in which case the non-U.S. holder will be required to pay a flat 30&nbsp;percent tax (or such lower rate
as may be specified by an applicable income tax treaty between the United States and such non-U.S. holder's country of residence) on the net gain derived from the disposition, which tax
may be offset by U.S. source capital losses, if any, provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our common stock constitutes a U.S. real property interest by reason of our status as a "United States real property
holding corporation," or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder's
holding period for our common stock. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real
property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our
common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if the non-U.S. holder actually or
constructively held more than five percent of our common stock at any time during the shorter of the five-year period preceding the disposition or the non-U.S. holder's holding
period for our common stock. We expect our common stock to be regularly traded on an established securities market, although we cannot guarantee that it will be so traded. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Information Reporting and Backup Withholding  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must report annually to the IRS and to each non-U.S. holder the amount of dividends on our common stock, the name and
address of the recipient and the amount, if any, of tax withheld. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected
dividends or withholding was reduced by an applicable income tax treaty. Under tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient's country of
residence. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividend
payments made to a non-U.S. holder that is not an exempt recipient generally will be subject to backup withholding, currently at a rate of 28&nbsp;percent, unless
a non-U.S. holder certifies as to its foreign status, which certification may be made on IRS Form&nbsp;W-8BEN. Notwithstanding the foregoing, backup withholding may apply if
either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds
from the disposition of common stock by a non-U.S. holder effected by or through a U.S. office of a broker will be subject to information reporting and backup
withholding, currently at a rate of 28&nbsp;percent of the gross proceeds, unless the non-U.S. holder certifies to the payor under penalties of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>134</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>perjury
as to, among other things, its address and status as a non-U.S. holder or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not
apply to a payment of disposition proceeds if the transaction is effected outside the United States by or through a non-U.S. office of a broker. However, if the broker is, for U.S. federal
income tax purposes, a U.S. person, a controlled foreign corporation, a foreign person who derives 50&nbsp;percent or more of its gross income for specified periods from the conduct of a U.S. trade
or business, a specified U.S. branch of a foreign bank or insurance company or a foreign partnership with certain connections to the United States, information reporting but not backup withholding
will apply unless the broker has documentary evidence in its files that the holder is a non-U.S. holder and other conditions are met; or the holder otherwise establishes an exemption. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Backup
withholding is not an additional tax. Rather, the amount of tax withheld is applied to the U.S. federal income tax liability of persons subject to backup withholding. If backup
withholding results in an overpayment of U.S. federal income taxes, a refund may be obtained, provided the required documents are timely filed with the IRS. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Recent Legislation Relating to Foreign Accounts  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recently enacted legislation generally will impose a U.S. federal withholding tax of 30&nbsp;percent on dividends and the gross
proceeds of a disposition of our common stock paid after December&nbsp;31, 2012 to a "foreign financial institution" (as specifically defined for this purpose) unless such institution enters into an
agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution
(which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners). The legislation also will generally impose a U.S.
federal withholding tax of 30&nbsp;percent on dividends and the gross proceeds of a disposition of our common stock paid after December&nbsp;31, 2012 to a non-financial foreign entity
unless such entity provides the withholding agent with either a certification that it does not have any substantial direct or indirect U.S. owners or provides information regarding direct and indirect
U.S. owners of the entity. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. Holders are encouraged to consult with their own tax
advisors regarding the possible implications of the legislation on their investment in our common stock. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Estate Tax  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock owned or treated as owned by an individual who is not a citizen or resident of the United States (as specifically
defined for U.S. federal estate tax purposes) at the time of death will be includible in the individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>135</FONT></P>

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<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ek77601_underwriting"> </A>
<A NAME="toc_ek77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  UNDERWRITING    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and the selling stockholders are offering the shares of common stock described in this prospectus through a number of underwriters.
J.P. Morgan Securities&nbsp;LLC, Deutsche Bank Securities&nbsp;Inc. and Barclays Capital&nbsp;Inc. are acting as joint book-running managers of the offering and as representatives of
the underwriters. We and the selling stockholders have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and the
selling stockholders have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set
forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table: </FONT></P>
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<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Shares </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>J.P. Morgan Securities&nbsp;LLC</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deutsche Bank Securities&nbsp;Inc.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Barclays Capital&nbsp;Inc.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>RBC Capital Markets,&nbsp;LLC</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>William Blair&nbsp;&amp; Company, L.L.C.&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters are committed to purchase all the shares of common stock offered by us and the selling stockholders if they purchase any shares. The underwriting agreement also provides
that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain
dealers at that price less a concession not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made
outside of the United States may be made by affiliates of the underwriters. The representatives have advised us that the underwriters do not intend to confirm discretionary sales in excess of five
percent of the shares of common stock offered in this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters have an option to buy up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of common stock from us and the selling
stockholders to cover sales of shares by the underwriters which
exceed the number of shares specified in the table above. The underwriters have 30&nbsp;days from the date of this prospectus to exercise this over-allotment option. If any shares are
purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock
are purchased, the
underwriters will offer the additional shares on the same terms as those on which the shares are being offered. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us and the selling stockholders per share of common
stock. The underwriting fee is $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us and the selling stockholders. These
amounts are </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>136</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>shown
assuming both no exercise and full exercise of the underwriters' option to purchase additional shares. </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Per share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Without<BR>
over-allotment<BR>
exercise </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>With full<BR>
over-allotment<BR>
exercise </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Public offering price</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Underwriting discounts and commissions to be paid by:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Us</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>The selling stockholders</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds, before expenses, to us</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds, before expenses, to selling stockholders</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting
discounts and commissions, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The
underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the
representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have agreed that we will not (i)&nbsp;offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the
Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make
any offer, sale, pledge, disposition or filing or (ii)&nbsp;enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any
shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or
otherwise), in each case without the prior written consent of J.P. Morgan Securities&nbsp;LLC and Deutsche Bank Securities&nbsp;Inc. for a period of 180&nbsp;days after the date of this
prospectus, other than the shares of our common stock to be sold hereunder and any shares of our common stock issued upon the exercise of options granted under our existing equity incentive plans.
Notwithstanding the foregoing, if (1)&nbsp;during the last 17&nbsp;days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to
our company occurs; or (2)&nbsp;prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning
on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
directors and executive officers, and certain of our significant stockholders have entered into lock-up agreements with the underwriters prior to the commencement of this
offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180&nbsp;days after the date of this prospectus, may not, without the prior written consent of
J.P. Morgan Securities&nbsp;LLC and Deutsche Bank Securities&nbsp;Inc., (1)&nbsp;offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>137</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<BR>

<P style="font-family:times;"><FONT SIZE=2>(including,
without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the
rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), (2)&nbsp;enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause&nbsp;(1) or (2)&nbsp;above is to be settled by delivery
of common stock or such other securities, in cash or otherwise or (3)&nbsp;make any demand for or exercise any right with respect to the registration of any shares of our common stock or any
security convertible into or exercisable or
exchangeable for our common stock. Notwithstanding the foregoing, if (1)&nbsp;during the last 17&nbsp;days of the 180-day restricted period, we issue an earnings release or material
news or a material event relating to our company occurs; or (2)&nbsp;prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during
the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the occurrence of the material news or material event. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to apply to have our common stock approved for listing/quotation on the New York Stock Exchange or the Nasdaq Global Market under the symbol "PEER." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this offering, the underwriters may engage in stabilizing transactions, which involve making bids for, purchasing and selling shares of common stock in the open market
for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the
common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on
the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' over-allotment
option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their
over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of
shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more
likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in
this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters have advised us that, pursuant to Regulation&nbsp;M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the
price of our common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or
to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock, and, as
a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any
time. The underwriters
may carry out these transactions on the New York Stock Exchange or the Nasdaq Global Market, in the over-the-counter market or otherwise. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>138</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of
the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the information set forth in this prospectus and otherwise available to the representatives;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our prospects and the history and prospects for the industry in which we compete;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>an assessment of our management;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our prospects for future earnings;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the general condition of the securities markets at the time of this offering;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>other factors deemed relevant by the underwriters and us. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
we nor the underwriters can assure investors that an active trading market will develop for our shares of common stock, or that the shares will trade in the public market at or
above the initial public offering price. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction
where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the
offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any
jurisdiction in which such an offer or a solicitation is unlawful. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
document is only being distributed to and is only directed at (i)&nbsp;persons who are outside the United Kingdom or (ii)&nbsp;to investment professionals falling within
Article&nbsp;19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order, or (iii)&nbsp;high net worth entities, and other persons to whom it may lawfully
be communicated, falling with Article&nbsp;49(2)(a) to (d)&nbsp;of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any
invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or
rely on this document or any of its contents. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or a Relevant Member State, from and including the date on which the
European Union Prospectus Directive, or the EU Prospectus Directive is implemented in that Relevant Member State, or Relevant Implementation Date, an offer of securities described in this prospectus
may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant
Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive,
except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in securities; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>139</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to any legal entity which has two or more of (1)&nbsp;an average of at least 250 employees during the last financial
year; (2)&nbsp;a total balance sheet of more than &euro;43,000,000; and (3)&nbsp;an annual net turnover of more than &euro;50,000,000, as shown in its last annual or
consolidated accounts;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to fewer than 100 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive)
subject to obtaining the prior consent of the book-running managers for any such offer; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article&nbsp;3
of the Prospectus Directive. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purposes of this provision, the expression an "offer of securities to the public" in relation to any securities in any Relevant Member State means the communication in any form
and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may
be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State and the expression EU Prospectus Directive means Directive 2003/71/EC and includes any
relevant implementing measure in each Relevant Member State. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial
advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and
commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of
themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>140</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ek77601_legal_matters"> </A>
<A NAME="toc_ek77601_2"> </A>
<BR></FONT><FONT SIZE=2><B>  LEGAL MATTERS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the shares of common stock offered by this prospectus and other legal matters will be passed upon for us by DLA
Piper&nbsp;LLP (US), East Palo Alto, California. Goodwin Procter&nbsp;LLP, Menlo Park, California, has acted as counsel for the underwriters in connection with certain legal matters related to
this offering. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ek77601_experts"> </A>
<A NAME="toc_ek77601_3"> </A>
<BR></FONT><FONT SIZE=2><B>  EXPERTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements as of December&nbsp;31, 2009 and 2010 and for each of the three years in the period ended
December&nbsp;31, 2010 included in this prospectus and in the registration statement have been so included in reliance on the report of BDO USA,&nbsp;LLP, an independent registered public
accounting firm, appearing elsewhere herein and in the registration statement, given on the authority of said firm as experts in auditing and accounting. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ek77601_where_you_can_find_more_information"> </A>
<A NAME="toc_ek77601_4"> </A>
<BR></FONT><FONT SIZE=2><B>  WHERE YOU CAN FIND MORE INFORMATION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC a registration statement on Form&nbsp;S-1, which includes amendments and exhibits, under the
Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information that is in the registration statement and its exhibits and schedules. Certain portions of the registration statement have been omitted
as allowed by the rules and regulations of the SEC. Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document
filed as an exhibit to the registration statement. You may read and copy the registration statement, including exhibits and schedules filed with it, and reports or other information we may file with
the SEC at the public reference facilities of the SEC at 100&nbsp;F Street, N.E., Room&nbsp;1580, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330
for further information on the operation
of the public reference rooms. In addition, the registration statement and other public filings can be obtained from the SEC's Internet site at www.sec.gov. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act and we will file annual, quarterly and current reports,
proxy statements, and other information with the SEC. We also maintain a website at www.intelepeer.com, at which you may access these materials free of charge as soon as reasonably practicable after
they are electronically filed with, or furnished to, the SEC. The inclusion of our website address in this prospectus does not include or incorporate by reference the information contained in, or that
can be accessed through, our website into this prospectus. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>141</FONT></P>

<HR NOSHADE>
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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fa77601_intelepeer,_inc._index_to_financial_statements"> </A>
<BR></FONT><FONT SIZE=2><B>  <A NAME="index"></A>INTELEPEER,&nbsp;INC.<BR>  <BR>    INDEX TO FINANCIAL STATEMENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="FA77601_TOC"></A> </FONT></P>
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<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fb77601_report_of_independent___fb702284"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Report of Independent Registered Public Accounting Firm</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fb77601_report_of_independent___fb702284"><FONT SIZE=2>F-2</FONT></A></TD>
</TR>
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<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fc77601_intelepeer,_inc._balance_sheet__int03157"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Balance Sheets</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fc77601_intelepeer,_inc._balance_sheet__int03157"><FONT SIZE=2>F-3</FONT></A></TD>
</TR>
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<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fe77601_intelepeer,_inc._statements_of__int03641"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Statements of Operations</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fe77601_intelepeer,_inc._statements_of__int03641"><FONT SIZE=2>F-4</FONT></A></TD>
</TR>
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<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fg77601_intelepeer,_inc._statements_of__int05218"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Statements of Redeemable Convertible Preferred Stock and Stockholders'
Deficit</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fg77601_intelepeer,_inc._statements_of__int05218"><FONT SIZE=2>F-5</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fi77601_intelepeer,_inc._state__fi702101"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Statements of Cash Flows</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fi77601_intelepeer,_inc._state__fi702101"><FONT SIZE=2>F-6</FONT></A></TD>
</TR>
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<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fk77601_intelepeer,_inc._notes_to_financial_statements"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Notes to Financial Statements</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fk77601_intelepeer,_inc._notes_to_financial_statements"><FONT SIZE=2>F-7</FONT></A></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-1</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fb77601_report_of_independent___fb702284"> </A>
<A NAME="toc_fb77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Board
of Directors and Stockholders<BR>
IntelePeer,&nbsp;Inc.<BR>
San Mateo, California </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying balance sheets of IntelePeer,&nbsp;Inc. as of December&nbsp;31, 2009 and 2010 and the related statements of operations, redeemable convertible
preferred stock and stockholders' deficit, and cash flows for each of the three years in the period ended December&nbsp;31, 2010. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IntelePeer,&nbsp;Inc. at December&nbsp;31, 2009 and
2010, and the results of its operations and its cash flows for each of the three years in the period ended December&nbsp;31, 2010, in conformity with accounting principles generally accepted in the
United States of America. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>/s/
BDO USA,&nbsp;LLP </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>San
Francisco, California<BR>
May&nbsp;9, 2011 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-2</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fc77601_intelepeer,_inc._balance_sheet__int03157"> </A>
<A NAME="toc_fc77601_1"> </A></FONT> <FONT SIZE=2><B><BR>  INTELEPEER,&nbsp;INC.    <BR>    <BR>    BALANCE SHEETS    <BR>    <BR>    (in thousands, except for share and per share amounts)    <BR>    </B></FONT></P>
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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro Forma<BR>
Stockholders'<BR>
Equity<BR>
as of<BR>
December&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CURRENT ASSETS:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,134</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,159</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts receivable, net of allowance for doubtful accounts of $89 and $67 as of December&nbsp;31, 2009 and 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,859</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,164</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prepaid expenses and other current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>96</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>287</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,089</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>21,610</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property and equipment, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,134</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22,224</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Intangible assets, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>558</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,049</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>681</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,304</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>TOTAL ASSETS</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>36,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47,187</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CURRENT LIABILITIES:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,987</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,630</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,025</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,994</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Equipment loans</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,367</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,422</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capital lease obligation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,379</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>25,146</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Equipment loans, non-current</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,668</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,735</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capital lease obligation, non-current</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>418</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,945</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,400</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,007</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,992</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>46,699</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Commitments and contingencies (Note&nbsp;10)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Redeemable convertible preferred stock, $0.0001 par value&#151;44,760,592 shares authorized; 41,685,408, 41,695,608 and no shares issued and outstanding as
of December&nbsp;31, 2009 and 2010 and pro forma (unaudited); liquidation preference of $36,088 as of December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,345</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,379</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>STOCKHOLDERS' DEFICIT:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock, $0.0001 par value&#151;80,000,000 shares authorized; 8,757,955, 8,802,409 and 50,498,017 shares issued and outstanding as of December&nbsp;31,
2009 and 2010, and pro forma (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,116</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,487</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(24,992</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(36,611</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(36,611</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' deficit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(21,875</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(32,891</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,881</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>36,462</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47,187</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>
See notes to financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-3</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fe77601_intelepeer,_inc._statements_of__int03641"> </A>
<A NAME="toc_fe77601_1"> </A></FONT> <FONT SIZE=2><B><BR>  INTELEPEER,&nbsp;INC.    <BR>    <BR>    STATEMENTS OF OPERATIONS    <BR>    <BR>    (in thousands, except for share and per share amounts)    <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="68pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>43,352</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>76,194</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>111,549</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Peering partner compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,824</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,232</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>78,820</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Infrastructure costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,987</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,265</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,636</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,353</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,673</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,578</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,447</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,567</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,069</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,741</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,367</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,693</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,177</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,568</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,547</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,852</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,373</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47,381</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>77,045</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>112,062</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss from operations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,029</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(851</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(513</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,274</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,488</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,614</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,004</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,492</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,140</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.59</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.33</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,759,925</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share of common stock, basic and diluted (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.07</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,447,513</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>See
notes to financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-4</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fg77601_intelepeer,_inc._statements_of__int05218"> </A>
<A NAME="toc_fg77601_1"> </A></FONT> <FONT SIZE=2><B><BR>  INTELEPEER,&nbsp;INC.    <BR>    <BR>    STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK<BR>  AND STOCKHOLDERS' DEFICIT    <BR>    <BR>    (in thousands, except for share amounts)
<BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:54%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="150%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="60pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="63pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=3 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=3 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Redeemable<BR>
Convertible<BR>
Preferred Stock </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Common Stock </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Additional<BR>
Paid-in<BR>
Capital </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Accumulated<BR>
Deficit </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total<BR>
Stockholders'<BR>
Deficit </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>BALANCE&#151;January&nbsp;1, 2008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23,228,885</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,170</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,950</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(16,509</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(14,558</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of Series&nbsp;B convertible preferred stock and warrants (net of issuance costs of $151 and value of warrants of $152)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>915,473</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>372</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of Series&nbsp;C convertible preferred stock (net of issuance costs of $210)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,049,776</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,691</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of Series&nbsp;C convertible preferred stock due to conversion of promissory notes</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,491,274</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,112</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Beneficial conversion feature for convertible promissory notes</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>528</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>528</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>319</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>319</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warrants issued for debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,140</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,140</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>BALANCE&#151;December&nbsp;31, 2008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,685,408</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,345</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,819</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(21,649</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18,829</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>297</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>297</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>BALANCE&#151;December&nbsp;31, 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,685,408</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,345</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,116</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(24,992</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(21,875</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of Series&nbsp;B convertible preferred stock upon exercise of warrant</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,200</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>564</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>564</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warrants issued for debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of common stock upon exercise of options</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of common stock upon exercise of warrants</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,454</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>BALANCE&#151;December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,695,608</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,379</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,802,409</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(36,611</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(32,891</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>See
notes to financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-5</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fi77601_intelepeer,_inc._state__fi702101"> </A>
<A NAME="toc_fi77601_1"> </A></FONT> <FONT SIZE=2><B><BR>  INTELEPEER,&nbsp;INC.    <BR>    <BR>    STATEMENTS OF CASH FLOWS    <BR>    <BR>    (in thousands)    <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,140</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Adjustments to reconcile net loss to net cash provided by (used in) operating activities:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,852</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,373</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,719</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,004</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,492</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Provision for doubtful accounts</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>129</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>667</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>74</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock-based compensation expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>319</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>297</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>564</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Non-cash interest expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>631</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>228</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>899</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gain on disposal of fixed assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(62</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(19</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(34</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,995</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,584</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,379</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prepaid expenses and other current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(161</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>257</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(191</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(41</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(62</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(461</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,433</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,040</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,643</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>621</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,308</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,969</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash provided by (used in) operating activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,577</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,166</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,676</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Purchase of property and equipment</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,443</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,920</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(10,362</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Purchase of intangible assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(37</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(521</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,491</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds from disposal of property and equipment</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>98</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>147</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,380</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(10,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,706</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds from borrowings</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,726</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,623</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,171</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Payments on borrowings</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,076</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,128</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds from exercise of common stock options</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds from exercise of common stock and preferred stock warrants</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of Series&nbsp;B and C convertible preferred stock and warrants, net of issuance costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,215</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19,778</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,547</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,055</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,821</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,630</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(975</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CASH AND CASH EQUIVALENTS&#151;Beginning of period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,943</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,764</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,134</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CASH AND CASH EQUIVALENTS&#151;End of period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,764</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,134</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,159</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash paid for interest</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>734</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,122</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,732</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>NONCASH INVESTING AND FINANCING ACTIVITIES:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of common stock warrants for credit facilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance of Series&nbsp;C convertible preferred stock warrants in connection with loans</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>630</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>637</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Conversion of bridge loans to Series&nbsp;C convertible preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,112</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Purchase of equipment with capital lease obligation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>560</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>
See notes to financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-6</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fk77601_intelepeer,_inc._notes_to_financial_statements"> </A>
<A NAME="toc_fk77601_1"> </A></FONT> <FONT SIZE=2><B><BR>  INTELEPEER,&nbsp;INC.    <BR>    <BR>    NOTES TO FINANCIAL STATEMENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Business  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IntelePeer,&nbsp;Inc. (the "Company" or "we" or "our" or "us") is a leading provider of on-demand, cloud-based communications
services to service providers and enterprises. Our customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our
CloudWorx CaaS Platform, to deliver multimodal communication services, including voice, unified communications, video and other rich-media applications to communications devices with reduced cost and
improved quality as compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible,
software-based, multimodal, IP-based solutions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
were incorporated in June 2003 under the laws of the State of Washington. We are the successor entity to a July&nbsp;1, 2003 acquisition transaction with a limited liability company
and asset purchase of the VoIP business line of another limited liability company, both of which were previously affiliated with us through common ownership. We were reincorporated under the laws of
the State of Delaware in October 2006. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Basis of Presentation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accompanying financial statements have been prepared assuming we will continue as a going concern. We have incurred recurring operating losses since inception and have an accumulated
deficit of $36.6&nbsp;million, negative working capital of $3.5&nbsp;million, and a total stockholders' deficit of $32.9&nbsp;million as of December&nbsp;31, 2010. Notwithstanding the
foregoing, we have $33.4&nbsp;million in redeemable convertible preferred stock not included in the calculation of stockholders' deficit. Additionally, our operating results in the years ended
December&nbsp;31, 2009 and 2010 showed improvement as compared to prior years, as reflected in higher revenue, lower operating losses and in the generation of positive cash flows from operations.
Since inception, we have relied primarily on the proceeds from equity offerings and debt proceeds to finance our operations. We plan to continue to finance operations with a combination of equity
issuances, debt arrangements, lines of credit and cash provided by operations. However, there can be no assurance that additional funding will be available to us on acceptable terms on a timely basis,
if at all, or that we will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability. If we are unable to raise additional capital or generate
sufficient cash from operating activities to adequately fund our operations, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability
to execute on our business plan. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Segment Reporting  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating segments are defined as components of a company about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive
officer and our board of directors. We have one business activity and there are no segment managers who are held accountable for operations. Accordingly, we have a </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-7</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fk77601_1_8"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>single
reporting segment. All of our principal operations, revenue and decision-making functions are located in the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Unaudited Pro Forma Stockholders' Equity  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pro forma stockholders' equity as of December&nbsp;31, 2010 presents our stockholders' equity as though all of our convertible
preferred stock outstanding had converted into 41,695,608 shares of common stock upon the completion of a qualifying initial public offering (IPO) of our common stock. In addition, the pro forma
stockholders' equity assumes the reclassification of the preferred stock warrant liability to additional paid-in capital upon completion of a qualifying IPO of our common stock, as the
warrants either expire upon an IPO or become common stock warrants that are not subject to remeasurement. The pro forma stockholders' equity does not give effect to any proceeds from the IPO itself. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Use of Estimates  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Such management estimates include allowance for doubtful accounts, reserves for disputes, fair value of common
stock, stock-based compensation expense, fair value of warrants, useful lives of intangible assets and valuation of deferred tax assets. We base our estimates on historical experience and also on
assumptions that we believe are reasonable, however, actual results could differ materially from those estimates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Concentrations of Credit Risk  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain the majority of our cash and cash equivalents at a highly qualified financial institution. All amounts of cash exceed
federally insured limits. To date we have not experienced a material loss or lack of access to our invested cash and cash equivalents. However, no assurance can be provided that access to our invested
cash and cash equivalents will not be impacted by adverse economic conditions in the financial markets. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
perform periodic credit evaluations of our customers and generally do not require collateral, and evaluate the need for maintaining an allowance for doubtful accounts. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2009, one customer individually accounted for 52% of total accounts receivable. As of December&nbsp;31, 2010, three customers individually accounted for 19%,
17% and 11% of total accounts receivable. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-8</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fk77601_1_9"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customers
representing 10% or greater of revenues for the periods presented were as follows (in percentages): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:38pt;"><FONT SIZE=1><B>Customers

<!-- COMMAND=ADD_SCROPPEDRULE,38pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Customer A</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Customer B</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Customer C</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:20%;">
 <!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" >


<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Less
than 10% </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Cash and Cash Equivalents  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and
cash equivalents consist of demand and money market fund deposits with a federally insured financial institution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Accounts Receivable  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable are carried at original invoice amount less an allowance made for doubtful accounts. We record an allowance for
doubtful accounts based on the probability of future collection. When we are aware of circumstances that may decrease the likelihood of collection, we record a specific allowance against amounts due
and thereby reduces the net receivable to the amount we reasonably believe will be collected. For all other customers, management determines the adequacy of the allowance based upon reviews of
individual creditworthiness, payment history, age of the accounts receivable balances, current economic conditions and other pertinent factors. Accounts are written off when deemed uncollectible.
Increases in the allowance are charged to expense in the period incurred. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table presents the changes in the allowance for doubtful accounts (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="34pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="27pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Allowance for doubtful accounts:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Balance, beginning of period</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>117</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>89</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Add: provision for doubtful accounts</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>129</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>667</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>74</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less: write-offs, net of recoveries and other adjustments</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(61</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(695</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(96</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Balance, end of period</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>117</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>89</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>67</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
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 <P style="font-family:times;"><FONT SIZE=2><B> Property and Equipment  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally seven years for CloudWorx CaaS Platform equipment and three years for furniture, fixtures and other equipment.
Amortization for leasehold improvements is computed using the straight-line </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-9</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>method
over the shorter of the term of the lease or estimated useful lives of the assets. Expenditures for repairs and maintenance are expensed as incurred. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
expense of assets acquired through capital leases is included in depreciation and amortization expense in the statements of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Accounting for Internal-Use Computer Software  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We capitalize certain external and internal costs, including internal payroll costs incurred in connection with the development or
acquisition of software for internal use. These costs are capitalized when we have entered the application development stage. Capitalization ceases when the software is substantially complete and is
ready for its intended use. We purchased and capitalized costs related to our CloudCentral portal of $749,000 during the year ended December&nbsp;31, 2010. We did not incur similar costs during the
years ended December&nbsp;31, 2008 and 2009. The capitalized development costs related to our CloudCentral portal are included in intangible assets and are amortized using the
straight-line method over the estimated useful life of seven years. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Deferred Offering Costs  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred offering costs, consisting of legal, accounting and filing fees relating to the IPO, are capitalized. The deferred offering
costs will be offset against IPO proceeds upon the effectiveness of the offering. In the event the offering is terminated, deferred offering costs
will be expensed. As of December&nbsp;31, 2010, we had capitalized $241,000 of deferred offering costs in other assets on the balance sheet. No amounts were deferred as of December&nbsp;31, 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Intangible Assets  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We capitalized certain costs to acquire trademarks, patents and regulatory licenses deemed essential to operate as a telecommunications
company. The trademarks and regulatory licenses have no expiration date and thus are classified as indefinite-lived assets. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
amortize our capitalized patent costs using the straight-line method over the shorter of the contractual term of the patent up to 14&nbsp;years or the estimated economic
life of the patent. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
trademarks and regulatory licenses are considered to be indefinite-lived assets and accordingly are not amortized. We conduct a long-lived asset impairment analysis for
these assets on an annual basis and whenever events or changes in circumstances indicate the carrying value of an asset may be impaired. We believe that no material events or changes in circumstances
have occurred that would require an impairment test for these assets. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Impairment of Long-Lived Assets  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We evaluate our long-lived assets for impairment and continue to evaluate them as events or changes in circumstances
indicate that the carrying amount of such assets may not be fully recoverable. We evaluate the recoverability of the long-lived assets by measuring the carrying amount of the assets
against the estimated undiscounted future cash flows associated with them. At the times such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are
not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. We have used a replacement cost approach to determine the fair value of regulatory licenses
for the </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-10</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>purpose
of conducting an impairment test. This approach implies that opportunity cost represents the foregone cash flows during the period it takes to obtain or create the asset, as compared to the
cash flows that would be earned if the intangible asset was on hand today. As of December&nbsp;31, 2010, we have not written down any of our long-lived assets as a result of impairment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Warrant Liabilities  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for freestanding warrants for shares of our convertible preferred stock that are contingently redeemable as liabilities at
fair value on the balance sheets because these warrants may obligate us to redeem the underlying preferred stock at some point in the future. The warrants are subject to remeasurement at each balance
sheet date, and any change in fair value is recognized in the change in fair value of warrant liabilities line on the statements of operations. We will continue to adjust the liability for changes in
fair value until the earlier of the exercise or expiration of the convertible preferred stock warrants, the completion of a deemed liquidation event, conversion of convertible preferred stock into
common stock, or until holders of the convertible preferred stock can no longer trigger a deemed liquidation event. At that time, the portion of the warrant liabilities related to the convertible
preferred stock warrants will be reclassified to additional paid-in capital. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants
to purchase shares of our common stock are also outstanding as of December&nbsp;31, 2010. Some of the common stock warrants include down round protection features which are
outside our control and, accordingly, these warrants are recorded as liabilities at fair value. The common stock warrants with down round protection features are subject to remeasurement at each
balance sheet date with any changes in fair value being recognized in the change in fair value of warrant liabilities line on the statements of operations. We will continue to adjust the liability for
changes in fair value until the earlier of the exercise or expiration of the warrants. At that time, the liability related to the common stock warrants with down round protection features will be
reclassified to additional paid-in capital. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Revenue Recognition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize revenue when there is persuasive evidence of an arrangement, services have been rendered, the fees are fixed or
determinable and collection is reasonably assured. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
revenues are derived from customer usage of our CloudWorx Caas Platform on a minute of use basis. We recognize revenue based upon documented minutes of traffic delivered over our
CloudWorx CaaS Platform at the time of customer usage. The rates charged per minute are determined by contracts between us and our customers. We also recognize revenue from communication services
provided to certain enterprise customers on a monthly recurring basis as the services are provided based on contractual amounts expected to be collected. These revenues have not been significant to
date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Peering Partner Compensation and Infrastructure Costs  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Peering partner compensation represents the costs we incur to connect our customers' traffic to the ultimate end-point
device. These costs consist primarily of charges for access to our peering partners' networks, and are recorded at the time of usage. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recognize peering partner compensation costs as they are incurred in accordance with contractual requirements. We perform monthly bill verification procedures to identify errors in
the </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-11</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>peering
partners' billing processes. These verification procedures include the examination of the bills, comparing billing rates used with contractual billing rates, evaluating the trends of invoiced
amounts by peering partner and reviewing the types of charges being processed. If we discover a billing discrepancy as a result of our review, we then proactively seek to resolve the matter with our
peering partner. When applicable, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on our estimate of the amount that will eventually
be payable. As we receive additional information that indicates the disputed amounts will be settled for an amount which is different than the amount which we originally accrued, we will recognize the
difference as an adjustment to peering partner compensation costs. We believe that our procedures are designed to properly assess dispute accruals; however, changes to the estimates used in the
calculation could result in a material impact on our statements of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Infrastructure
costs include the costs of utilizing third party telecommunications networks, amounts we pay for use of co-location facilities and interconnection services,
and costs of equipment and software maintenance and support. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Research and Development  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses consist of personnel costs, testing and compliance services, and facility costs, and are expensed as
incurred. However, some direct development costs related to the internally developed software used to provide our services may be capitalized and depreciated over the estimated useful life. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Income Taxes  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize deferred tax assets and liabilities for the expected future income tax consequences of events that have been recognized in
our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts and
their tax basis using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. Valuation allowances are provided when we are unable to conclude that the
realization of deferred tax assets is more likely than not. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
follow the accounting guidance for accounting for uncertainty in income taxes. The accounting guidance requires a more likely than not threshold for financial statement recognition
and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and the tax position taken or
expected to be taken on our tax return. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We
establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that
certain positions might be challenged despite our belief that the tax return positions are fully supportable. The reserves are adjusted in light of changing facts and circumstances, such as the
outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. As of December&nbsp;31, 2009 and 2010, we
had no unrecognized tax benefits. Our policy is to recognize interest and penalties related to income tax matters as an income tax expense. Through December&nbsp;31, 2010, we did not have any
interest or penalties associated with unrecognized tax benefits. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-12</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Fair Value of Financial Instruments  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair value based on the
liquidity of these financial instruments and based on their short-term nature. Based on borrowing rates currently available to us for loans with similar terms, the carrying value of the
long-term debt approximates fair value. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair
value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the
use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows: </FONT></P>

<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;1&#151;Unadjusted
quoted prices in active markets for identical assets or liabilities; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;2&#151;Inputs
other than quoted prices included within Level&nbsp;1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;3&#151;Unobservable
inputs that are supported by little or no market activity for the related assets or liabilities. </FONT></P>

</UL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as
considering counter-party credit risk in our assessment of fair value. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
valuation of certain items, including the valuation of outstanding warrants, involves significant estimates with underlying assumptions judgmentally determined. The valuation of
warrants for convertible preferred stock and common stock is based upon the Black-Scholes option-pricing model, which requires estimates of stock volatility and other assumptions. Certain
of the warrants are exercisable for preferred stock that is contingently redeemable. Certain of the common stock warrants and the conversion feature of the Series&nbsp;B and C convertible preferred
stock contain down round protection features. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
financial instruments consist of Level&nbsp;3 liabilities only, which include the convertible preferred stock warrant liabilities and the common stock warrant liabilities. The
determination of the fair value of the warrant liabilities is discussed in Note&nbsp;8. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-13</FONT></P>

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</FONT> <FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Stock-Based Compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. We
determine the grant date fair value of the awards using the Black-Scholes option-pricing model and generally recognize the fair value as stock-based compensation expense on a straight-line
basis over the vesting period of the respective awards. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As
such, our stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In
the event of a modification, the fair value of the grant immediately before and after the modification is determined and the difference in values, if any, is also recognized over the remaining vesting
period or immediately if the option is fully vested. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
account for stock options granted to non-employees also based on the fair value of the awards determined using the Black-Scholes option-pricing model. The fair value of
the awards granted to non-employees is remeasured as the awards vest, and the resulting change in value, if any, is recognized in the statement of operations during the period the related
services are rendered, which is generally the vesting period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Net Loss per Share of Common Stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common
stock outstanding for the period. The weighted-average number of shares of common stock used to calculate our basic net loss per share of common stock excludes those shares purchased with the notes
receivable from stockholders (see Note&nbsp;11) as these shares are not deemed to be issued for accounting purposes until the notes are paid off. The diluted net loss per share of common stock is
computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, convertible preferred
stock, stock options to purchase common stock, warrants to purchase convertible preferred stock and warrants to purchase common stock are considered to be common stock equivalents but have been
excluded from the calculation of diluted net loss per share of common stock as their effect is antidilutive for all periods presented. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Unaudited Pro Forma Net Loss per Share of Common Stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pro forma basic and diluted net loss per share of common stock has been computed to give effect to the conversion of the convertible
preferred stock into common stock. Also, the numerator in the pro forma basic and diluted net loss per share calculation has been adjusted to remove gains and losses resulting from remeasurements of
the portion of the warrant liability related to warrants to purchase shares of convertible preferred stock as these amounts will be reclassified to additional paid-in capital upon a
qualifying initial public offering of our common stock. The gains and losses resulting from remeasurements of the portion of the warrant liability related to warrants to purchase shares of common
stock with down round protection features have not been removed from the pro forma basic and diluted net loss per share of common stock calculation because the liability classification of these
warrants will not be impacted by a qualifying initial public offering of our common stock. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-14</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 1. Business and Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Recently Issued Accounting Pronouncements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2010, we adopted new authoritative guidance on fair value measurements and disclosures. The new guidance
requires additional disclosures regarding fair value measurements, amends disclosures about postretirement benefit plan assets, and provides clarification regarding the level of disaggregation of fair
value disclosures by investment class. This guidance is effective for interim and annual reporting periods beginning after December&nbsp;15, 2009, except for certain Level&nbsp;3 activity
disclosure requirements that will be effective for reporting periods beginning after December&nbsp;15, 2010. Accordingly, we adopted this new guidance beginning January&nbsp;1, 2010, except for
the additional Level&nbsp;3 requirements, which will be adopted in 2011. Level&nbsp;3 assets and liabilities are those whose fair value inputs are unobservable and reflect management's best
estimate of what market participants would use in pricing the asset or liability at the measurement date. The adoption of this guidance did not have a material impact on our financial statements in
2010 and is not expected to have a material impact on our financial statements in 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 2. Balance Sheet Items  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net consist of the following (in thousands): </FONT></P>
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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CloudWorx CaaS Platform equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19,393</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29,345</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Office furniture, fixtures and other equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,137</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,686</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>451</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>709</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total property and equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,981</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>31,740</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less accumulated depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5,847</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,516</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property and equipment, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,134</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,224</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
and amortization expense was $1.9&nbsp;million, $2.4&nbsp;million and $3.7&nbsp;million during the years ended December&nbsp;31, 2008, 2009 and 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
liabilities consist of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued compensation and benefits</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,093</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,796</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Reserve for peering partner disputes</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>95</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,249</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued commissions</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>187</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>226</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued interest</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>110</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>146</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>540</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>577</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,025</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,994</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-15</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=159,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=190376,FOLIO='F-15',FILE='DISK105:[11ZBH1.11ZBH77601]FM77601A.;25',USER='DNICHOL',CD=';9-MAY-2011;16:46' -->
<A NAME="page_fm77601_1_16"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> 3. Intangible Assets  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the components of our intangible assets (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="106pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="106pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Carrying Amount as of<BR>
December&nbsp;31, 2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Carrying Amount as of<BR>
December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Indefinite-lived assets:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Trade name and trademarks</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>127</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Regulatory licenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>499</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>817</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sub-total indefinite-lived assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>520</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>944</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Finite-lived assets:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Patents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>38</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>356</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>CloudCentral portal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>749</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sub-total finite-lived assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>38</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,105</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total intangible assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>558</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,049</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
patents have zero amortization expense reflected in the statements of operations during the years ended December&nbsp;31, 2008, 2009 and 2010 as the assets are not yet in service.
The CloudCentral portal was placed into service on December&nbsp;15, 2010 and therefore had no accumulated amortization as of December&nbsp;31, 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
expense for the estimated useful life of the patents and the CloudCentral portal, the finite-lived assets, is as follows during the years ended December&nbsp;31 (in
thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="81pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:91pt;"><FONT SIZE=1><B>Year Ending December&nbsp;31:

<!-- COMMAND=ADD_SCROPPEDRULE,91pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amortization of<BR>
Intangible Assets </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>114</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2012</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>158</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2013</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>158</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2014</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>158</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2015</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>158</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Thereafter</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>359</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,105</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> 4. Long-Term Debt  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Equipment Financing Obligations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2007, we entered into an equipment loan of up to $6.0&nbsp;million (borrowing limit) pursuant to a Master Lease Agreement
(amended on December&nbsp;3, 2008 to increase borrowings to $6.5&nbsp;million), under which advances are repayable over a 36-month period from each borrowing commencement date. Each
advance bears interest that ranges from 10.0% to 10.75%. The commitment to make advances terminated on October&nbsp;30, 2010. In March 2010, $1.3&nbsp;million of the principal repayments due in
2010 were deferred until January&nbsp;1, 2011 and later periods. There were outstanding borrowings of $5.2&nbsp;million and $4.1&nbsp;million under this agreement as of December&nbsp;31, 2009
and 2010. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-16</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fm77601_1_17"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 4. Long-Term Debt (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this agreement, in June 2007 we issued immediately exercisable and fully vested warrants to purchase 247,935 shares of our common stock at an exercise price of $0.39
per share. The fair value of the common stock warrant on the date of issuance was $58,000, as determined using the Black-Scholes option-pricing model, and was recorded as additional
paid-in capital and as a deferred financing cost. Also, in connection with the increase in credit line pursuant to the October 2009 amendment, we issued immediately exercisable and fully
vested warrants to purchase 94,366 shares of our Series&nbsp;C convertible preferred stock at an exercise price of $1.0597 per share. The fair value of the Series&nbsp;C warrant was $112,000, as
determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the debt. The deferred financing cost and the discount are being amortized to
interest expense over the term of the debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
April 2009, we entered into an equipment loan of up to $4.0&nbsp;million. Under this agreement, advances are repayable over a 36-month period from each loan commencement
date. Each advance bears a monthly interest rate factor. The monthly interest rate factor is indexed to the yield for U.S. Treasury Notes maturing closest to the date 36&nbsp;months from each loan's
commencement date (the "Index Instrument"). The monthly interest rate factor is adjusted to provide for any increase or decrease in the yield of the Index Instrument. The monthly interest rate factor
is fixed as of the date of the final acceptance of each item of equipment. The current loans under this facility bear interest at approximately 15%. The equipment purchased under the agreement serves
as the collateral for the loan. There were outstanding borrowings of $3.5&nbsp;million and $2.3&nbsp;million under this agreement as of December&nbsp;31, 2009 and 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this agreement, in May 2009 we issued immediately exercisable and fully vested warrants to purchase 226,479 shares of our Series&nbsp;C convertible preferred stock
at an exercise price of $1.0597 per share. The fair value of the Series&nbsp;C warrant on the date of issuance was $225,000, as determined using the Black-Scholes option-pricing model, and was
recorded as a warrant liability and as a deferred financing cost that is being amortized to interest expense over the term of the debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
May 2009, we entered into an equipment and security agreement with a total commitment of $4.0&nbsp;million. The commitment to make advances terminated on December&nbsp;31, 2009.
Advances are repayable over a 36-month period from each loan commencement date. Each advance bears interest equal to the greater of (a)&nbsp;12.33% or (b)&nbsp;12.33% plus the positive
or negative difference between (i)&nbsp;the one month LIBOR Rate as reported in the Wall Street Journal, on the date which is three business days before the funding date for such loan, and
(ii)&nbsp;0.33%. The interest rate is 13.0875% on balances outstanding as of December&nbsp;31, 2010. The equipment purchased under the agreement serves as collateral for the loan. There were
outstanding borrowings of $3.5&nbsp;million and $2.3&nbsp;million under this agreement as of December&nbsp;31, 2009 and 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this agreement, in May 2009 we issued immediately exercisable and fully vested warrants to purchase shares of our Series&nbsp;C convertible preferred stock at an
exercise price of $1.0597 per share. A warrant to purchase 150,000 shares of Series&nbsp;C convertible preferred stock was issued upon signing of the agreement and another warrant to purchase 36,322
shares of Series&nbsp;C convertible preferred stock was issued upon first draw under this agreement. The fair value of the warrant to purchase 150,000 shares of Series&nbsp;C convertible preferred
stock issued upon signing of the agreement was $149,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a deferred financing cost. The fair
value of the warrant to purchase 36,322 shares of Series&nbsp;C convertible preferred stock issued upon the first draw of funds was $36,000, as </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-17</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fm77601_1_18"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 4. Long-Term Debt (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>determined
using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the debt. We issued additional warrants for the purchase of 96,777 shares of our
Series&nbsp;C convertible preferred stock with an exercise price of $1.0597 per share upon draws under the agreement in 2009. The fair value of these additional warrants was $108,000, as determined
using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the
debt. The deferred financing cost and the discounts are being amortized to interest expense over the term of the debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Loan and Security Agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2010, we entered into a loan and security agreement that provided us with up to $10.0&nbsp;million in equipment financing and
a revolving accounts receivable loan facility of $10.0&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the agreement, the advances for equipment were available until December&nbsp;31, 2010, and bear interest at the prime rate plus 7% per year. The advances are payable over a
36-month period, and the payments due through December&nbsp;31, 2010 were interest only. As of December&nbsp;31, 2010, the total amount outstanding under the $10.0&nbsp;million
equipment loan was $9.5&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this agreement, in May 2010 we issued immediately exercisable and fully vested warrants to purchase 283,099 shares of our Series&nbsp;C convertible preferred stock
at an exercise price of $1.0597 per share. The fair value of the Series&nbsp;C warrant on the date of issuance was $637,000, as determined using the Black-Scholes option-pricing model, and was
recorded as a warrant liability and as a deferred financing cost that is being amortized to interest expense over the term of the debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
our option, we may prepay all, but not less than all, of the outstanding equipment loan advances by paying the entire principal balance, all accrued and unpaid interest, together with
a payment charge equal to the following percentage of the equipment loan balance being prepaid: 3% if prepaid in the first 12&nbsp;months following the closing date (May&nbsp;5, 2010); 2% if
prepaid after 12&nbsp;months but prior to 24&nbsp;months following the closing date, and thereafter 1%. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
$10.0&nbsp;million revolving accounts receivable loan facility bears interest at the prime rate plus 2.05% per year. The advances are based on 80% of our eligible accounts
receivable. The loan is repayable in interest only payments until the maturity date, at which time the entire principal and accrued interest is to be paid in full. The original maturity date for the
$10.0&nbsp;million revolving loan was May&nbsp;5, 2011, but was automatically extended to May&nbsp;5, 2012. There are no borrowings outstanding under the $10.0&nbsp;million revolving loan as
of December&nbsp;31, 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
loan and security agreement borrowings are secured by all assets of the Company, including intellectual property. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Other Matters  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the equipment financings and debt agreements contain certain covenants and information reporting requirements. The loan and
security agreement allows the lender to call the debt in the event there is a material adverse change in our business or financial condition. Additionally, under the terms of the loan agreement, we
cannot pay any cash dividends without the approval of the lenders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010, we were in compliance with the covenants set forth in our various debt agreements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-18</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 4. Long-Term Debt (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Schedule of Payments Due  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a schedule of payments due on our long-term debt as of December&nbsp;31, 2010 (in thousands): </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:91pt;"><FONT SIZE=1><B>Year Ending December&nbsp;31:

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,422</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2012</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,830</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2013</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,260</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Discount</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(103</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Current portion</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,422</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Non-current portion of equipment loans</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,735</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> 5. Convertible Promissory Notes Payable to Related Parties  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2008, we entered into a set of convertible promissory note payable agreements totaling $2.0&nbsp;million with several of our major investors. The notes accrued simple interest
at a fixed rate of 8%
per annum. The notes and accrued interest were repayable on January&nbsp;31, 2009. The notes were convertible into the Company's next equity financing upon written request from the major investors. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October 2008, the note holders authorized the conversion of the outstanding principal balance plus accrued unpaid interest totaling $2.1&nbsp;million into 2,491,274 shares of
Series&nbsp;C convertible preferred stock. The conversion was in connection with the issuance of Series&nbsp;C convertible preferred stock in October 2008. As the notes were converted into the
Series&nbsp;C convertible preferred stock at a 20% discount from the purchase price of the stock, we recognized a beneficial conversion charge in the amount of $528,000 as interest expense during
the year ended December&nbsp;31, 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 6. Common Stock Reserved for Issuance  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2010, we had reserved shares of common stock, on an as-if converted basis, for issuance as follows: </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="88pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance under stock option plan</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,722,328</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Available for issuance under stock option plan</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>758,808</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Conversion of convertible preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,695,608</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance upon exercise of convertible preferred stock warrants</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,743,077</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issuance upon exercise of common stock warrants</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>807,850</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>60,727,671</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-19</FONT></P>

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</FONT> <FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 7. Convertible Preferred Stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2008, we sold 915,473 shares of Series&nbsp;B convertible preferred stock ("Series&nbsp;B") at a price of $0.7374 per share for gross proceeds of $675,000. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the January 2008 Series&nbsp;B stock purchase, we issued warrants to the investors for the purchase of 274,639 shares of Series&nbsp;B with an exercise price of
$0.01 per share and an expiration date of December&nbsp;18, 2017. The fair value of the Series&nbsp;B warrants on the date of issuance of $152,000, as determined using the Black-Scholes
option-pricing model, was recorded as a warrant liability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October 2008, we sold 15,049,776 shares of Series&nbsp;C convertible preferred stock ("Series&nbsp;C") at a price of $1.0597 per share for gross proceeds of $15.9&nbsp;million.
In connection with the equity financing, convertible promissory notes from related parties were converted into 2,491,274 shares of Series&nbsp;C at $0.8478 per share, a 20% discount from the
purchase price of the preferred stock. The discount has been accounted for as a beneficial conversion feature charge of $528,000 (see Note&nbsp;5). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized
and outstanding convertible preferred stock as of December&nbsp;31, 2009 and 2010 was as follows (in thousands, except share data): </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>As of December&nbsp;31, 2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Authorized </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Issued and<BR>
Outstanding </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate<BR>
Liquidation<BR>
Preference </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,280,210</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,124,198</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>517</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>24,730,382</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23,020,160</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,975</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;C</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,750,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17,541,050</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,588</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>44,760,592</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,685,408</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>36,080</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>

 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="55pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>As of December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Authorized </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Issued and<BR>
Outstanding </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate<BR>
Liquidation<BR>
Preference </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,280,210</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,124,198</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>517</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>24,730,382</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23,030,360</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,983</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;C</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,750,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17,541,050</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,588</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>44,760,592</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,695,608</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>36,088</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rights, preferences and privileges of the convertible preferred stock are as follows: </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Liquidation Preferences  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Series&nbsp;A preferred stock has a liquidation preference of $0.46 per share plus unpaid dividends if declared by the board of
directors. Series&nbsp;B preferred stock has a liquidation preference of $0.7374 per share plus unpaid dividends if declared by the board of directors. Series&nbsp;C preferred stock has a
liquidation preference of $1.0597 per share plus unpaid dividends if declared by the board of directors. The liquidation preference amounts are to be paid in the following order of
priority: first to the holders of Series&nbsp;C preferred stock, then to the holders of the Series&nbsp;B preferred stock, then to the holders of the Series&nbsp;A preferred stock and then to
the holders of common stock. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-20</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=164,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=140313,FOLIO='F-20',FILE='DISK105:[11ZBH1.11ZBH77601]FO77601A.;28',USER='KSOLTER',CD=';9-MAY-2011;21:19' -->
<A NAME="page_fo77601_1_21"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 7. Convertible Preferred Stock (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Voting Rights  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each share of convertible preferred stock has a number of votes equal to the number of shares of common stock into which it is
convertible. The outstanding shares of preferred and common stock vote together as a single class on all matters, except with respect to the election of directors. The holders of Series&nbsp;B and C
preferred stock, voting as two separate classes, are currently each entitled to elect one director of the Company. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
holders of common stock, voting as a separate class, are currently entitled to elect two directors of the Company. The holders of preferred and common stock, voting together as a
single class and not a separate series, are currently entitled to elect three directors of the Company. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Conversion Rights  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each share of preferred stock is convertible, at the option of the holder, at any time into such number of shares of common stock as is
determined by dividing the applicable original issue price for such series by the applicable conversion price for such series (the "Conversion Rate"). The initial conversion price per share for each
series of preferred stock is the original issue price applicable to such series. As of December&nbsp;31, 2010 the conversion rate for all series of the outstanding shares of preferred stock is 1 to
1. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
share of preferred stock will be automatically converted into shares of common stock at the Conversion Rate at the time in effect for such series of preferred stock immediately upon
the sale of our common stock in a firm commitment underwritten public offering pursuant to a registration statement on Form&nbsp;S-1 or Form&nbsp;SB-2 under the Securities
Act of 1933 that results in gross proceeds to us, net of underwriting expenses, in excess of $50&nbsp;million at an offer price per share equal to three times (3x) the original issue price for the
Series&nbsp;C preferred (calculated to be $3.1791 as of December&nbsp;31, 2010). In addition, each share of preferred stock shall automatically be
converted into shares of common stock at the respective Conversion Rates at the time in effect for each such series of preferred stock upon consent or agreement of the holders of at least 66% of the
then outstanding shares of Series&nbsp;B preferred stock and Series&nbsp;C preferred stock (voting together as a single class and not as a separate series, and on an as-converted
basis). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Redemption Rights  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon receiving a written request at any time after September&nbsp;30, 2013, from the holders of 66% of the outstanding shares of
Series&nbsp;B and C preferred stock, we shall redeem, on the date three (3)&nbsp;months following our receipt of such written redemption request and on the last day of each calendar quarter
thereafter, the amount equal to all of the shares of Series&nbsp;B and C preferred stock that are outstanding on the date we receive such written redemption request. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recorded the convertible preferred stock at fair value on the dates of issuance, net of issuance costs. We classify the convertible preferred stock outside of stockholders' equity
(deficit) because the shares contain redemption features that are not solely within our control. During the years ended December&nbsp;31, 2008, 2009 and 2010, we did not adjust the carrying values
of the redeemable convertible preferred stock to the deemed redemption values of such shares since a liquidation event was not probable. Subsequent adjustments to increase the carrying values to the
ultimate redemption values will be made only when it becomes probable that such a liquidation event will occur. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-21</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=165,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=503195,FOLIO='F-21',FILE='DISK105:[11ZBH1.11ZBH77601]FO77601A.;28',USER='KSOLTER',CD=';9-MAY-2011;21:19' -->
<A NAME="page_fo77601_1_22"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 8. Warrants  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with issuing preferred stock and obtaining lease credit facilities, lines of credit, equipment financing and loans, we issued common stock warrants, and Series&nbsp;A, B
and C convertible preferred stock warrants. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have issued warrants to purchase shares of our common stock at various times since 2004. Some of the common stock warrants include a down round protection feature and used to provide
the holder an option to put these warrants to us for cash. In February 2010, these common stock warrants were extended for another five years, or to February 2015, and the put feature was removed.
These common stock warrants are recorded as liabilities at fair value and are subject to remeasurement at each balance sheet date due to the down round protection feature. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have issued warrants to purchase shares of our convertible preferred stock at various times since 2004. Our convertible preferred stock warrants are generally exercisable immediately
and can only be exercised for cash or net share settled. Freestanding warrants to purchase our convertible preferred stock are valued at fair value and classified as liabilities in the balance sheets
because the warrants may conditionally obligate us to transfer assets at some point in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010, the following common stock warrants, which are not subject to remeasurement, were outstanding: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:57%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"140%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="140%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="107pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="67pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="112pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:38pt;"><FONT SIZE=1><B>Issue Date

<!-- COMMAND=ADD_SCROPPEDRULE,38pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Reason for Grant </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Shares Into<BR>
Which the Warrant Is<BR>
Exercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exercise Price<BR>
per Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Expiration </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>November 2004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Debt financing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19,632</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.815</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>November&nbsp;12, 2011</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>October 2004</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Debt financing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,826</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.01</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>October&nbsp;4, 2011</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>June 2007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Debt financing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>247,935</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>June&nbsp;14, 2017</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>September 2006</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Debt financing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>61,922</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.211</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>September&nbsp;20, 2016</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>December 2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Debt financing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>70,775</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>December&nbsp;3, 2018</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>May 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Debt financing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23,120</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May&nbsp;4, 2020</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>446,210</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-22</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=166,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=973124,FOLIO='F-22',FILE='DISK105:[11ZBH1.11ZBH77601]FO77601A.;28',USER='KSOLTER',CD=';9-MAY-2011;21:19' -->
<A NAME="page_fo77601_1_23"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 8. Warrants (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010, the following common stock and preferred stock warrants, which are subject to remeasurement, were outstanding: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:57%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"140%" -->


</FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="140%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="89pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="75pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:38pt;"><FONT SIZE=1><B>Issue Date

<!-- COMMAND=ADD_SCROPPEDRULE,38pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Reason for Grant </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Type of Stock<BR>
Into Which the<BR>
Warrant Is<BR>
Exercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Shares<BR>
Into Which the<BR>
Warrant Is<BR>
Exercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exercise<BR>
Price per<BR>
Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Expiration </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>October 2004</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;A</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>50,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.46</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>October&nbsp;20, 2014</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>January 2005</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;A</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>106,012</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.815</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>January&nbsp;28, 2012</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>February 2005</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Common</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>230,061</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.815</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>February&nbsp;24, 2015</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>August 2005</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Common</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>131,579</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.95</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>February&nbsp;24, 2015</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>June 2006</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;B</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>105,296</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.496</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>December&nbsp;3, 2014</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>December 2007</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;B</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>28,419</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.737</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>June&nbsp;12, 2016</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>December 2007</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Equity financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;B</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,301,868</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.01</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Earlier of (i)&nbsp;the closing of an IPO or (ii)&nbsp;December&nbsp;18, 2017</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>January 2008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Equity financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;B</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>264,439</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>0.01</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Earlier of (i)&nbsp;the closing of an IPO or (ii)&nbsp;December&nbsp;18, 2017</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>May 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;C</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>186,322</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1.0597</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>May&nbsp;1, 2019</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>May 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;C</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>226,479</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1.0597</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>May&nbsp;14, 2019</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>June 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;C</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>36,652</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1.0597</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>June&nbsp;25, 2019</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>October 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;C</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>94,366</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1.0597</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>October&nbsp;28, 2019</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>October 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;C</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>60,125</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1.0597</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>October&nbsp;30, 2019</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>May 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Debt financing</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>Series&nbsp;C</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>283,099</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1.0597</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>May&nbsp;5, 2020</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3,104,717</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Fair Value of Warrant Liabilities  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the warrants to purchase common stock that are subject to remeasurement and the warrants to purchase
convertible preferred stock outstanding and their fair values as of December&nbsp;31, 2009 and 2010 (dollar amounts in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares as of </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fair Value as of </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>361,640</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>361,640</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>48</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,007</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,470,178</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,743,077</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,897</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,393</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,831,818</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,104,717</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,945</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,400</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-23</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=167,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=602372,FOLIO='F-23',FILE='DISK105:[11ZBH1.11ZBH77601]FO77601A.;28',USER='KSOLTER',CD=';9-MAY-2011;21:19' -->
<A NAME="page_fo77601_1_24"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 8. Warrants (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
changes in Level&nbsp;3 liabilities measured at fair value on a recurring basis are summarized as follows during the years ended December&nbsp;31, 2008, 2009 and 2010 (in
thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


</FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair value of warrant liabilities&#151;beginning of period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,322</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,311</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,945</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair value of preferred stock warrants issued during the period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>152</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>630</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>637</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair value of common stock warrants extended during the period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>359</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less: fair value of warrants exercised</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(33</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of the warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,004</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,492</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair value of warrant liabilities&#151;end of period</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,311</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,945</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,400</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair values of outstanding common stock warrants that are subject to remeasurement were estimated using the Black-Scholes option-pricing model, including consideration of any
potential additional value associated with pricing protection features, with the following weighted-average assumptions: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="18pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="18pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended<BR>
December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected term (in years)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected volatility</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>68</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>66</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>55</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected dividend rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair values of outstanding convertible preferred stock warrants were estimated using the Black-Scholes option-pricing model, including consideration of any potential additional value
associated with pricing protection features, with the following weighted-average assumptions: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


</FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected term (in years)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3.1&nbsp;-&nbsp;9.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.1&nbsp;-&nbsp;9.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.1&nbsp;-&nbsp;9.4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.3%&nbsp;-&nbsp;2.2%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.4%&nbsp;-&nbsp;3.6%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.6%&nbsp;-&nbsp;3.3%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected volatility</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50%&nbsp;-&nbsp;61%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>58%&nbsp;-&nbsp;66%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43%&nbsp;-&nbsp;61%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected dividend rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> 9. Stock-Based Compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2003 Stock Option and Restricted Stock Plan (the "Plan"), as amended, provides for the grant of options to purchase up to 15,629,587 shares of our common stock. Stock options are
exercisable at prices generally equal to the fair value of our common stock at the date of grant, as determined by the board of directors. Options generally vest over a four year period and may be
exercised for a period of up to ten years. Vested options generally expire 90&nbsp;days after termination of employment with certain exceptions described in the Plan. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-24</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 9. Stock-Based Compensation (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes stock option activity related to shares of common stock for the years ended December&nbsp;31, 2008, 2009 and 2010: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:62%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"130%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="130%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="59pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="79pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares<BR>
Available<BR>
for Grant </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number<BR>
of Stock Options<BR>
Outstanding </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Exercise<BR>
Price </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life (Years) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate<BR>
Intrinsic<BR>
Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding&#151;January&nbsp;1, 2008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,002,330</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,692,563</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.575</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional options authorized</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2,828,243</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Granted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,374,366</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,374,366</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.177</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forfeited</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>287,934</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(287,934</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.288</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expired</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>116,031</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(116,031</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.390</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding&#151;December&nbsp;31, 2008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>860,172</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,662,964</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.320</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional options authorized</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,000,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Granted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,304,032</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,304,032</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.637</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forfeited</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>924,708</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(924,708</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.586</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expired</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>210,460</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(210,460</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.128</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding&#151;December&nbsp;31, 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>691,308</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,831,828</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.358</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional options authorized</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,000,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Granted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(990,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>990,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.807</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forfeited</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>53,333</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(53,333</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.461</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expired</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,167</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,167</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.041</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exercised</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(42,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.200</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding&#151;December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>758,808</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,722,328</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.455</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>45,122</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested and expected to vest&#151;December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
14,042,334</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
0.459</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
6.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
42,977</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested&#151;December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,450,828</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.356</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.0</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,062</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair value of the option awards during the years ended December&nbsp;31, 2008, 2009 and 2010 was calculated using the Black-Scholes option valuation model with the following
assumptions: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected term (in years)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.6%&nbsp;-&nbsp;4.1%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.6%&nbsp;-&nbsp;3.8%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.7%&nbsp;-&nbsp;2.6%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected volatility</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>42%&nbsp;-&nbsp;52%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>52%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>52%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected dividend rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-25</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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</FONT> <FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 9. Stock-Based Compensation (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The expected term of the options represents the estimated time from the date of the grant until the date of exercise and is primarily based on the simplified method which calculates the
expected term as the average of the time-to-vesting and the contractual life of the awards. Expected volatility is determined based on the historical volatility of a peer group
of publicly-traded companies over the expected term of the options. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with
a similar term. The expected dividend yield was assumed to be zero as we have never paid dividends and have no current plans to do so. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate intrinsic value of options exercised during the year ended December&nbsp;31, 2010 was $100,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
weighted-average grant date fair value of our stock options during the years ended December&nbsp;31, 2008, 2009 and 2010 was $0.08, $0.22 and $0.94 per share. The aggregate grant
date fair value of our stock options granted to employees during the years ended December&nbsp;31, 2008, 2009 and 2010 was $676,000, $518,000 and $935,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Stock-Based Compensation Expense  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total stock-based compensation expense during the years ended December&nbsp;31, 2008, 2009 and 2010 are recognized in the
statements of operations as follows (in thousands): </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operations</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>31</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>144</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>81</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>185</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>111</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>153</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>91</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>106</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>186</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>319</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>297</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>564</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010, total compensation expense related to unvested stock-based awards granted under the Plan, but not yet recognized, was $1.3&nbsp;million, net of
estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted-average remaining period of 1.5&nbsp;years. There was no capitalized stock-based compensation
expense during the years ended December&nbsp;31, 2008, 2009 and 2010. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-26</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 9. Stock-Based Compensation (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
information regarding our stock options outstanding and vested and exercisable as of December&nbsp;31, 2010 is summarized below: </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="67pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="79pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Options Outstanding </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Options Vested and Exercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:54pt;"><FONT SIZE=1><B>Exercise Prices

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Stock Options<BR>
Outstanding </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life (Years) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Exercise<BR>
Price<BR>
per Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Subject<BR>
to Stock Options </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Exercise<BR>
Price<BR>
per Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$0.03</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>150,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.03</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>150,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.03</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,107,970</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,768,311</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.14</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$0.39-$0.44</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,225,375</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.41</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,182,079</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.40</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$0.66-$0.95</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,926,184</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.76</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,002,639</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.80</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$1.02-$1.23</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>322,799</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>322,799</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$1.70-$2.02</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>922,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.75</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.70</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$2.57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>67,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>$0.03-$2.57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,722,328</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,450,828</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Non-Employee Stock-Based Compensation Expense  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the years ended December&nbsp;31, 2008, 2009 and 2010, we granted 25,000, 20,000 and 25,000 stock options to
non-employees of the Company. As of December&nbsp;31, 2010, we had non-employee options to purchase 379,489 shares of
common stock outstanding with exercise prices ranging from $0.08 to $1.70 and contractual terms up to 10&nbsp;years. We have recorded stock-based compensation expense for these
non-employee options of $9,000, $7,000 and $81,000 for the years ended December&nbsp;31, 2008, 2009 and 2010, which is included in total stock-based compensation expense. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 10. Commitments and Contingencies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Capital Lease Obligation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into a capital lease obligation of $560,000 during the year ended December&nbsp;31, 2010 for CloudWorx CaaS Platform
equipment. Related accumulated amortization totaled $33,000 at December&nbsp;31, 2010. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-27</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=171,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=855486,FOLIO='F-27',FILE='DISK105:[11ZBH1.11ZBH77601]FQ77601A.;25',USER='DNICHOL',CD=';9-MAY-2011;16:47' -->
<A NAME="page_fq77601_1_28"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 10. Commitments and Contingencies (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a schedule of future minimum lease payments due under the capital lease obligation as of December&nbsp;31, 2010 (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="34pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:91pt;"><FONT SIZE=1><B>Year Ending December&nbsp;31:

<!-- COMMAND=ADD_SCROPPEDRULE,91pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>131</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2012</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>131</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2013</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>131</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2014</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>131</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2015</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>77</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total minimum lease payments</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>601</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less: amount representing interest</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(83</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Present value of minimum lease payments</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>518</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less: current portion</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capital lease obligation, non-current</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>418</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Operating Leases  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have non-cancelable operating leases for office space and infrastructure facilities expiring at various dates through
August 2013. Rent expense for non-cancellable operating leases with scheduled rent increases is recognized on a straight line basis over the lease term. Certain leases allow us, at our
option, to renew the leases for various periods. Rent expense for the years ended December&nbsp;31, 2008, 2009 and 2010 was $437,000, $547,000 and $592,000. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a schedule of future minimum lease payments under non-cancelable operating leases as of December&nbsp;31, 2010 (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:91pt;"><FONT SIZE=1><B>Year Ending December&nbsp;31:

<!-- COMMAND=ADD_SCROPPEDRULE,91pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,704</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2012</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>313</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2013</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>204</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,221</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Purchase Commitment  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a purchase commitment for CloudWorx CaaS Platform equipment to be ordered and delivered in 2011. As of December&nbsp;31,
2010, the outstanding purchase commitment under the agreement amounted to $4.5&nbsp;million. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Litigation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not a party to any litigation and do not have contingent reserves established for any litigation liabilities. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-28</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=172,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=920506,FOLIO='F-28',FILE='DISK105:[11ZBH1.11ZBH77601]FQ77601A.;25',USER='DNICHOL',CD=';9-MAY-2011;16:47' -->
<A NAME="page_fq77601_1_29"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 11. Notes Receivable from Stockholders  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June 2006, we issued 1,538,640 common shares to two of our executives in exchange for two promissory notes amounting to $1.6&nbsp;million. The notes receivable carry an annual
interest rate of 5.06% and will mature on the earlier of June&nbsp;30, 2011 or the day immediately prior to a public offering. These notes are non-recourse notes and are secured by a
pledge of the common stock, however, the notes were considered to be nonsubstantive and, as a result, the notes and related legally outstanding shares were not recorded on the balance sheet. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
December 2010, the notes receivable were amended to change the maturity date to the earlier of June&nbsp;30, 2012 or the day immediately prior to a public offering. In addition, the
annual interest rate was reduced to 0.32%. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 12. Net Loss per Share of Common Stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets for the computation of our basic and diluted net loss per share of common stock during the years ended December&nbsp;31, 2008, 2009 and 2010 (in thousands,
except for share and per
share amounts). The shares purchased with the notes receivable from stockholders have been excluded as these shares are not deemed to be issued for accounting purposes until the notes are paid off. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,140</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,343</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,757,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,759,925</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.59</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.33</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including
them would have been antidilutive: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Convertible preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,685,408</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,685,408</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41,695,608</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stock options to purchase common stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,662,964</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,831,828</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,722,328</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Convertible preferred stock warrants</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,866,234</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,470,178</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,743,077</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock warrants</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,289,125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,289,125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>807,850</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares purchased with stockholder notes</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,538,640</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,538,640</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,538,640</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-29</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=173,EFW="2203792",CP="INTELEPEER, INC.",DN="1",CHK=156306,FOLIO='F-29',FILE='DISK105:[11ZBH1.11ZBH77601]FQ77601A.;25',USER='DNICHOL',CD=';9-MAY-2011;16:47' -->
<A NAME="page_fq77601_1_30"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 12. Net Loss per Share of Common Stock (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the computation of our pro forma basic and diluted net loss per share of common stock during the year ended December&nbsp;31, 2010 (in thousands, except
for share and per share amounts): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="88pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended<BR>
December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,619</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in fair value of convertible preferred stock warrant liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,892</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss used in computing pro forma net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,727</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,759,925</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma adjustments to reflect assumed conversion of convertible preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,687,588</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing pro forma net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,447,513</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share of common stock, basic and diluted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.07</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> 13. Income Taxes  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We did not record a provision or benefit for income taxes during the years ended December&nbsp;31, 2008, 2009 and 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
deferred tax assets as of December&nbsp;31, 2009 and 2010 consist of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:70%;margin-left:15%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred tax assets:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net operating loss carryforward</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,512</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,077</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Allowance for doubtful accounts</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>153</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>805</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,088</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accruals, reserves and other</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>397</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,052</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross deferred tax assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,867</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,218</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,349</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,559</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net deferred tax assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,518</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,659</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred tax liabilities:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,518</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,659</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net deferred tax assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-30</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 13. Income Taxes (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reconciliations
of the statutory federal income tax to our effective tax during the years ended December&nbsp;31, 2008, 2009 and 2010 are as follows (in thousands): </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Tax at statutory federal rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,799</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,170</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4,067</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>State tax&#151;net of federal benefit</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(120</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(78</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(106</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in valuation allowance</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,873</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>830</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,210</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair market value adjustment to warrants</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(57</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>352</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,972</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>103</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>66</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Provision (benefit) for income taxes</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
valuation allowance for deferred tax assets as of December&nbsp;31, 2009 and 2010 was $8.4&nbsp;million and $9.6&nbsp;million, respectively. The net change in the total
valuation allowance for each of the years ended December&nbsp;31, 2008, 2009 and 2010 was an increase of $1.9&nbsp;million, $0.6&nbsp;million and $1.2&nbsp;million,
respectively. The valuation allowance was substantially related to net operating loss carryforwards that, in the judgment of management, are not more likely than not to be realized. In assessing the
realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax
liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010, we had federal net operating loss carryforwards of $26.8&nbsp;million expiring beginning in 2023. As of December&nbsp;31, 2010, we had state net
operating loss carryforwards of $15.2&nbsp;million, expiring beginning in 2024. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Internal
Revenue Code section&nbsp;382 places a limitation (the Section&nbsp;382 Limitation) on the amount of taxable income that can be offset by federal net operating carryforwards
after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. Generally, after a control change, a loss corporation cannot deduct
operating loss carryforwards in excess of the Section&nbsp;382 Limitation. Management has considered the impact such limitation may have on the utilization of our operating loss carryforwards
against taxable income in future periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2009 and 2010, we had no unrecognized tax benefits. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
file income tax returns in the United States and various states. The tax years 2006 through 2010 remain open in most jurisdictions. We are not currently under examination by income
tax authorities in federal or any state jurisdiction. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 14. Subsequent Events  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February 2011, warrant holders exercised warrants for the purchase of 1,444,258 shares of Series&nbsp;B convertible preferred stock with an exercise price of $0.01 per share,
resulting in gross proceeds to us of approximately $14,000. The portion of the warrant liability related to the exercised preferred stock warrants will be reclassified from warrant liabilities to
convertible preferred stock. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-31</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
INTELEPEER,&nbsp;INC. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 14. Subsequent Events (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;3, 2011, we increased the number of shares available for grant under our 2003 Stock Option and Restricted Stock Plan by 2.9&nbsp;million shares. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;4, 2011, the two executives with outstanding notes receivable related to the purchase of common stock (see Note&nbsp;11) repaid all of the outstanding principal and
accrued interest due under the notes receivable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have evaluated subsequent events through May&nbsp;9, 2011, the date the financial statements were available to be issued. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-32</FONT></P>

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<div style="width:100%;border-top:solid #000000 1.0pt;padding:0in 0in 0in 0in;font-size:4.0pt;"></div> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>Shares  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>
<IMG SRC="g551521.jpg" ALT="GRAPHIC" WIDTH="327" HEIGHT="64">
  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B> Common Stock  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=6><B>Prospectus  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>Joint Book-Running Managers  </I></FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="31%" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="31%" style="font-family:times;"></TD>
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<TD style="font-family:times;"><FONT SIZE=5><B>J.P.&nbsp;Morgan</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>Deutsche&nbsp;Bank&nbsp;Securities</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=5><B>Barclays&nbsp;Capital</B></FONT></TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>Co-Managers  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:100%;margin-left:0%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="48%" style="font-family:times;"></TD>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>RBC Capital Markets</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>William Blair&nbsp;&amp; Company</B></FONT></TD>
</TR>
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2011 </FONT></P>

<P style="font-family:times;"><FONT
SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
all dealers that effect transactions in these securities, whether or not participating in the offering, may be required to deliver a prospectus. This is in
addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><div
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ja77601_part_ii_information_not_required_in_prospectus"> </A>
<A NAME="toc_ja77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  PART II<BR>  INFORMATION NOT REQUIRED IN PROSPECTUS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja77601_item_13._other_expense__ja701994"> </A>
<A NAME="toc_ja77601_2"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;Other Expenses of Issuance and Distribution.    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following are the estimated expenses to be incurred in connection with the issuance and distribution of the securities registered
under this registration statement, other than underwriting discounts and commissions. All amounts shown are estimates except the SEC registration fee and the Financial Industry Regulatory
Authority,&nbsp;Inc. filing fee. The following expenses will be borne solely by the registrant. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>SEC registration fee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,610</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>FINRA filing fee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exchange listing fee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Legal fees and expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounting fees and expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Printing expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Transfer agent fees and expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Miscellaneous expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Estimate
</FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><A
NAME="ja77601_item_14._indemnification_of_directors_and_officers."> </A>
<A NAME="toc_ja77601_3"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;Indemnification of Directors and Officers.    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145(a) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right
of the corporation), because he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit, or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145(b)
of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending,
or completed action or suit by or in the right of the corporation to procure a judgment in its favor because the person is or was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made with respect to any claim, issue, or matter as to which he or she
shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but
in view of all of the circumstances of the case, he or she is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other adjudicating court shall deem proper. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-1</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145(e)
of the DGCL provides that expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized by Section&nbsp;145 of the DGCL. Section&nbsp;145(e) of the DGCL further provides that
such expenses (including attorneys' fees) incurred by former directors and officers or other employees or agents of the corporation may be so paid upon such terms and conditions as the corporation
deems appropriate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145(g)
of the DGCL provides, in general, that a corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have
the power to indemnify the person against such liability under Section&nbsp;145 of the DGCL. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
amended and restated bylaws that will be in effect upon completion of this offering will provide that we will indemnify, to the fullest extent permitted by the DGCL, any person who
was or is made or is threatened to be made a party or is otherwise involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he
or she, or a person for whom he or she is the legal representative, is or was one of our directors or officers or, while serving as one of our directors or officers, is or was serving at our request
as a director, officer, employee, or agent of another corporation or of another entity, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such
person, subject to limited exceptions relating to indemnity in connection with a proceeding (or part thereof) initiated by such person. Our amended and restated bylaws that will be in effect upon
completion of this offering will further provide for the advancement of expenses to each of our officers and directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
amended and restated certificate of incorporation that will be in effect upon completion of this offering will provide that, to the fullest extent permitted by the DGCL, as the same
exists or may be amended from time to time, our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Under
Section&nbsp;102(b)(7) of the DGCL, the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty can be limited or eliminated except
(i)&nbsp;for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii)&nbsp;for acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii)&nbsp;under Section&nbsp;174 of the DGCL (relating to unlawful payment of dividend or unlawful stock purchase or redemption); or (iv)&nbsp;for any transaction from
which the director derived an improper personal benefit. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also currently have and intend to maintain a general liability insurance policy which covers certain liabilities of directors and officers of our company arising out of claims based
on acts or omissions in their capacities as directors or officers, whether or not we would have the power to indemnify such person against such liability under the DGCL or the provisions of our
amended and restated certificate of incorporation or amended and restated bylaws. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have entered into indemnification agreements with each of our directors and our executive officers that provide that we will indemnify each of our directors and such officers to the
fullest extent permitted by law and by our amended and restated certificate of incorporation or amended and restated bylaws. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-2</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja77601_item_15._recent_sales_of_unregistered_securities."> </A>
<A NAME="toc_ja77601_4"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;Recent Sales of Unregistered Securities.    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;1, 2008, we have issued the following securities that were not registered under the Securities
Act: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between
January&nbsp;1, 2008 and April&nbsp;30, 2011, we granted options to employees, directors and consultants to purchase an aggregate of 12,288,398
shares of our common stock under our 2003 Stock Plan at exercise prices ranging from $0.14 to $5.50. During this period, options to purchase (i)&nbsp;10,000 shares of our common stock have been
exercised for an exercise price of $0.39, (ii)&nbsp;32,000 shares of our common stock have been exercised for an exercise price of $0.14, and (iii)&nbsp;3,000 shares of our common stock have been
exercised for an exercise price of $0.44, for cash consideration to us in the aggregate amount of $9,700. Of these options, 4,494,750 were deemed exempt from registration under the Securities Act in
reliance on Section&nbsp;4(2) of the Securities Act, and/or Regulation&nbsp;D promulgated thereunder, as transactions by an issuer not involving a public offering.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
January 2008, we issued 915,473 shares of our Series&nbsp;B preferred Stock to accredited investors at a purchase price of $0.7374 per share for an
aggregate purchase price of approximately $675,000.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>3.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
January 2008, we issued warrants to purchase 274,639 shares of Series&nbsp;B preferred stock with an exercise price of $0.01 per share to accredited
investors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>4.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On
June&nbsp;5, 2008, June&nbsp;17, 2008, and August&nbsp;1, 2008 we collectively issued and sold an aggregate principal amount of $2,050,000 of
subordinated convertible promissory notes to accredited investors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>5.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
October 2008, we issued 17,541,050 shares of our Series&nbsp;C preferred stock to accredited investors at a purchase price per share of $1.0597 for cash
payments and $0.8478 for issuances upon conversion of the above-mentioned promissory notes.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>6.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
December 2008, we issued a warrant to purchase 70,775 shares of common stock with an exercise price of $0.44 per share to an accredited investor.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>7.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
May 2009, we issued warrants to purchase 412,801 shares of Series&nbsp;C preferred stock with an exercise price of $1.0597 per share to accredited
investors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>8.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
June 2009, we issued a warrant to purchase 36,652 shares of Series&nbsp;C preferred stock with an exercise price of $1.0597 per share to an accredited
investor.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>9.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
October 2009, we issued warrants to purchase 154,491 shares of Series&nbsp;C preferred stock with an exercise price of $1.0597 per share to accredited
investors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>10.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
February 2010, the expiration dates with respect to certain warrants to purchase 361,640 shares of common stock were extended to February&nbsp;24,
2015.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>11.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
May 2010, we issued warrants to purchase 283,099 shares of Series&nbsp;C preferred stock with an exercise price of $1.0597 per share to accredited
investors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>12.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
May 2010, we issued warrants to purchase 23,120 shares of common stock with an exercise price of $1.70 per share to accredited investors.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>13.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
June 2010, we issued an option to purchase 150,000 shares of common stock at an exercise price of $0.03 per share outside of our stock option plan to
Daniel Quandt in connection with services rendered.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>14.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
October 2010, warrants to purchase 2,454 shares of common stock were exercised for an exercise price of $0.815 for total proceeds to us of $2,000. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-3</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>15.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
October 2010, warrants to purchase 10,200 shares of Series&nbsp;B preferred stock were exercised for an exercise price of $0.01 for total proceeds to
us of $102.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>16.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
February 2011, warrants to purchase 1,444,258 shares of Series&nbsp;B preferred stock were exercised for an exercise price of $0.01 for total proceeds
to us of $14,442. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as noted above, the issuance of options, shares issued upon exercise of options and restricted stock described in the first item above was deemed exempt from registration under
the Securities Act in reliance on Rule&nbsp;701 promulgated thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation. The other issuances of
securities described above were deemed exempt from registration under the Securities Act in reliance on Section&nbsp;4(2) of the Securities Act, and/or Regulation&nbsp;D promulgated thereunder, as
transactions by an issuer not involving a public offering. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.  </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja77601_item_16._exhibits."> </A>
<A NAME="toc_ja77601_5"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;Exhibits.    <BR>    </B></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2><I>(a)</I></FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Exhibits.</I></FONT></DD></DL>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Underwriting Agreement.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.2*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Amended and Restated Certificate of Incorporation to be effective upon completion of the offering.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Bylaws, as currently in effect.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.4*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Amended and Restated Bylaws to be effective upon completion of the offering.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Specimen of Stock Certificate.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Registration Rights Agreement by and among IntelePeer,&nbsp;Inc. and the investors listed on Exhibit&nbsp;A thereto, as amended.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Common Stock Purchase Warrant issued May&nbsp;4, 2010 to Vogen Funding,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued June&nbsp;14, 2007 to Vogen Funding,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued December&nbsp;3, 2008 to Vogen Funding,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued October&nbsp;4, 2004 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.7</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued September&nbsp;20, 2006 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Series&nbsp;A Preferred Stock issued January&nbsp;28, 2005 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Series&nbsp;B Preferred Stock issued June&nbsp;12, 2006 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Stock Purchase Warrant to Purchase Common Stock issued in connection with November&nbsp;12, 2004 Bridge Financing.</FONT></TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-4</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued February&nbsp;24, 2005 to DNJ Leasing II,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued August&nbsp;1, 2005 to DNJ Leasing II,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.13</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amendment to Stock Purchase Warrants to Purchase Common Stock by and between IntelePeer, Inc. &amp; DNJ Capital Partners II, LLC, dated October&nbsp;23, 2010.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Stock issued October&nbsp;20, 2004 to Silicon Valley Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.15</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Stock issued December&nbsp;3, 2004 to Silicon Valley Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.16</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Stock issued January&nbsp;28, 2005 to Silicon Valley Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.17</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Shares of Series&nbsp;C Preferred Stock issued May&nbsp;1, 2009 to Compass Horizon Funding Company&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Series&nbsp;C Preferred Stock issued May&nbsp;14, 2009 to Atel Ventures,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.19</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant Agreement by and between IntelePeer, Inc. and Hercules Technology II,&nbsp;L.P., dated May&nbsp;5, 2010.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant Agreement by and between IntelePeer, Inc. and Comerica Bank, dated May&nbsp;5, 2010.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>5.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Opinion of DLA Piper&nbsp;LLP (US).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.1&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the 2003 Stock Option and Restricted Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.2&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated 2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the Amended and Restated 2003 Stock Option and Restricted Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.3&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2011 Equity Incentive Plan and Form of Stock Option Agreement, Form of Restricted Stock Units Agreement and Form of Restricted Stock Agreement under the 2011 Equity Incentive Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Indemnification Agreement to be entered into by and between IntelePeer,&nbsp;Inc. and each of its directors and executive officers.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.5&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Executive Employment Agreement with Frank Fawzi, dated May&nbsp;6, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.6&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Executive Employment Agreement with Andre Simone, dated May&nbsp;6, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.7&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Executive Employment Agreement with Haydar Haba, dated May&nbsp;6, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.8&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with John Belanger, dated December&nbsp;10, 2003.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.9&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with Phillip Bronsdon, dated August&nbsp;21, 2007.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.10&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with Raymond Smets, dated January&nbsp;11, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.11&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with Lawrence Irving, dated January&nbsp;26, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Sublease Agreement between IntelePeer,&nbsp;Inc. and Con-way,&nbsp;Inc., dated August&nbsp;1, 2008.</FONT></TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-5</FONT></P>

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<A NAME="page_ja77601_1_6"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10.13</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>First Amendment to Sublease Agreement between IntelePeer,&nbsp;Inc. and Con-way,&nbsp;Inc., dated April&nbsp;12, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Commercial Lease Agreement between IntelePeer,&nbsp;Inc. and Garvin Partners, dated August&nbsp;21, 2008.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.15</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Loan and Security Agreement among IntelePeer,&nbsp;Inc., Hercules Technology II,&nbsp;L.P. and Comerica Bank, dated May&nbsp;5, 2010.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>21.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>List of Subsidiaries.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of DLA Piper&nbsp;LLP (US) (included in Exhibit&nbsp;5.1).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of BDO USA,&nbsp;LLP, Independent Registered Public Accounting Firm.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>24.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Power of Attorney (see signature page to this registration statement).</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>To
be filed by amendment.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Indicates
a management contract or any compensatory plan, contract, or arrangement. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><A
NAME="ja77601_item_17._undertakings."> </A>
<A NAME="toc_ja77601_6"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;Undertakings.    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer, or controlling person of us in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by the registrant is against public policy as
expressed in the Securities Act and will be governed by the final adjudication of such issue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned hereby undertakes that: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared effective.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>For
purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-6</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="jc77601_signatures"> </A>
<A NAME="toc_jc77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  SIGNATURES    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Mateo, State of California on May&nbsp;9, 2011. </FONT></P>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><B> INTELEPEER,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2> By:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;FRANK FAWZI<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Frank Fawzi<BR></FONT> <FONT SIZE=2><I>President and Chief Executive Officer, Chairman of the Board of Directors</I></FONT></TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="jc77601_power_of_attorney"> </A>
<A NAME="toc_jc77601_2"> </A>
<BR></FONT><FONT SIZE=2><B>  POWER OF ATTORNEY    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Know all men by these presents, that the undersigned directors and officers of the registrant, a Delaware corporation, which is filing
a registration statement on Form&nbsp;S-1 with the SEC, Washington, D.C. 20549 under the provisions of the Securities Act, hereby constitute and appoint Frank Fawzi and Andre Simone, and
each of them, the individual's true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution, for the person and in his or her name, place and
stead, in any and all capacities, to sign such registration statement and any or all amendments, including post-effective amendments to the registration statement, including a prospectus
or an amended prospectus therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule&nbsp;462(b) under the Securities Act, and all other
documents in connection therewith to be filed with the SEC, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Act, this registration statement and the Power of Attorney has been signed by the following persons in the capacities and on the dates
indicated. </FONT></P>
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<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:34pt;"><FONT SIZE=1><B>Signature

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:17pt;"><FONT SIZE=1><B>Title

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:17pt;"><FONT SIZE=1><B>Date

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 </B></FONT></DIV></TH>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;FRANK FAWZI<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Frank Fawzi</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>President and Chief Executive Officer, Chairman of the Board of Directors (Principal Executive Officer)</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;ANDRE SIMONE<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Andre Simone</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Chief Financial Officer and Secretary (Principal Financial Officer)</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;TODD SMITH<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Todd Smith</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Vice President and Corporate Controller (Principal Accounting Officer)</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;HAYDAR HABA<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Haydar Haba</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Founder, Chief Visionary Officer, Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-7</FONT></P>

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<A NAME="page_jc77601_1_8"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg77601a_main_toc">Table of Contents</A></FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:17pt;"><FONT SIZE=1><B>Title

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:17pt;"><FONT SIZE=1><B>Date

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 </B></FONT></DIV></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;WILLIAM HARDING<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> William Harding</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;JAVIER ROJAS<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Javier Rojas</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;RAYMOND SMETS<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Raymond Smets</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;LAWRENCE IRVING<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Lawrence Irving</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>May&nbsp;9, 2011</FONT></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-8</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg77601a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ka77601_exhibit_index"> </A>
<A NAME="toc_ka77601_1"> </A>
<BR></FONT><FONT SIZE=2><B>  EXHIBIT INDEX    <BR>    </B></FONT></P>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Underwriting Agreement.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.2*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Amended and Restated Certificate of Incorporation to be effective upon completion of the offering.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Bylaws, as currently in effect.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.4*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Amended and Restated Bylaws to be effective upon completion of the offering.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Specimen of Stock Certificate.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Registration Rights Agreement by and among IntelePeer,&nbsp;Inc. and the investors listed on Exhibit&nbsp;A thereto, as amended.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Common Stock Purchase Warrant issued May&nbsp;4, 2010 to Vogen Funding,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued June&nbsp;14, 2007 to Vogen Funding,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued December&nbsp;3, 2008 to Vogen Funding,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued October&nbsp;4, 2004 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.7</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued September&nbsp;20, 2006 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Series&nbsp;A Preferred Stock issued January&nbsp;28, 2005 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Series&nbsp;B Preferred Stock issued June&nbsp;12, 2006 to Vencore Solutions&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Stock Purchase Warrant to Purchase Common Stock issued in connection with November&nbsp;12, 2004 Bridge Financing.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued February&nbsp;24, 2005 to DNJ Leasing II,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Stock Purchase Warrant to Purchase Common Stock issued August&nbsp;1, 2005 to DNJ Leasing II,&nbsp;L.P.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.13</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amendment to Stock Purchase Warrants to Purchase Common Stock by and between IntelePeer, Inc. &amp; DNJ Capital Partners II, LLC, dated October&nbsp;23, 2010.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Stock issued October&nbsp;20, 2004 to Silicon Valley Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.15</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Stock issued December&nbsp;3, 2004 to Silicon Valley Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.16</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Stock issued January&nbsp;28, 2005 to Silicon Valley Bank.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.17</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Shares of Series&nbsp;C Preferred Stock issued May&nbsp;1, 2009 to Compass Horizon Funding Company&nbsp;LLC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant to Purchase Series&nbsp;C Preferred Stock issued May&nbsp;14, 2009 to Atel Ventures,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.19</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Warrant Agreement by and between IntelePeer, Inc. and Hercules Technology II,&nbsp;L.P., dated May&nbsp;5, 2010.</FONT></TD>
</TR>
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<P style="font-family:times;"><FONT SIZE=2><A
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Warrant Agreement by and between IntelePeer, Inc. and Comerica Bank, dated May&nbsp;5, 2010.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>5.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Opinion of DLA Piper&nbsp;LLP (US).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.1&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the 2003 Stock Option and Restricted Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.2&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated 2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the Amended and Restated 2003 Stock Option and Restricted Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.3&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2011 Equity Incentive Plan and Form of Stock Option Agreement, Form of Restricted Stock Units Agreement and Form of Restricted Stock Agreement under the 2011 Equity Incentive Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Indemnification Agreement to be entered into by and between IntelePeer,&nbsp;Inc. and each of its directors and executive officers.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.5&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Executive Employment Agreement with Frank Fawzi, dated May&nbsp;6, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.6&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Executive Employment Agreement with Andre Simone, dated May&nbsp;6, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.7&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Executive Employment Agreement with Haydar Haba, dated May&nbsp;6, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.8&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with John Belanger, dated December&nbsp;10, 2003.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.9&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with Phillip Bronsdon, dated August&nbsp;21, 2007.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.10&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with Raymond Smets, dated January&nbsp;11, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.11&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Offer Letter Agreement with Lawrence Irving, dated January&nbsp;26, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Sublease Agreement between IntelePeer,&nbsp;Inc. and Con-way,&nbsp;Inc., dated August&nbsp;1, 2008.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.13</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>First Amendment to Sublease Agreement between IntelePeer,&nbsp;Inc. and Con-way,&nbsp;Inc., dated April&nbsp;12, 2011.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Commercial Lease Agreement between IntelePeer,&nbsp;Inc. and Garvin Partners, dated August&nbsp;21, 2008.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.15</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Loan and Security Agreement among IntelePeer,&nbsp;Inc., Hercules Technology II,&nbsp;L.P. and Comerica Bank, dated May&nbsp;5, 2010.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>21.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>List of Subsidiaries.</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.1*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of DLA Piper&nbsp;LLP (US) (included in Exhibit&nbsp;5.1).</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of BDO USA,&nbsp;LLP, Independent Registered Public Accounting Firm.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>24.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Power of Attorney (see signature page to this registration statement).</FONT></TD>
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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>To
be filed by amendment.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Indicates
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Table of Contents
INTELEPEER, INC. INDEX TO FINANCIAL STATEMENTS
As filed with the Securities and Exchange Commission on May 10, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IntelePeer, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
7372
(Primary Standard Industrial
Classification Code Number)
68-0556257
(I.R.S. Employer
Identification Number)
2855 Campus Drive, Suite 200
San Mateo, CA 94403
(650) 525-9200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
Frank Fawzi
Chairman, President and Chief Executive Officer
IntelePeer, Inc.
2855 Campus Drive, Suite 200
San Mateo, CA 94403
(650) 525-9200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
Peter M. Astiz, Esq.
Bradley J. Gersich, Esq.
DLA Piper LLP (US)
2000 University Avenue
East Palo Alto, CA 94303
(650) 833-2000
Christopher J. Austin, Esq.
Anthony J. McCusker, Esq.
Bradley C. Weber, Esq.
Goodwin Procter LLP
135 Commonwealth Drive
Menlo Park, CA 94025
(650) 752-3100
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes
effective.
If
any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box.
o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer [
ý
]
(Do not check if a smaller reporting company)
Smaller reporting company
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of Security To be Registered
Proposed Maximum
Aggregate Offering Price(1)
Amount of
Registration Fee(2)
Common Stock, par value $0.0001 per share
$100,000,000
$11,610
(1)
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.
(2)
Calculated
pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price, including the offering price of shares that
the underwriters have the option to purchase to cover over-allotments, if any.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the
registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), shall determine.
Table of Contents
The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell
these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any jurisdiction where such offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 10, 2011
Preliminary Prospectus
Shares
Common Stock
This is the initial public offering of shares of common stock of IntelePeer, Inc. Prior to this offering, there has been no public market
for our common stock. We are
offering                                    shares and the selling
stockholders identified in this prospectus are offering                        shares of our common stock. We will not receive any
proceeds from the sale of shares to be offered by the selling stockholders. The initial public offering price of our common stock is expected to be between $            and
$            per
share.
We
intend to apply for listing of our common stock on the New York Stock Exchange or Nasdaq Global Market under the symbol "PEER."
Investing in our common stock involves a high degree of risk. Please read "Risk Factors" beginning on page 10.
Per Share
Total
Initial public offering price
$
$
Underwriting discounts and commissions
$
$
Proceeds to IntelePeer, before expenses
$
$
Proceeds to selling stockholders, before expenses
$
$
The
underwriters have an option to purchase a maximum
of                                    additional shares of common
stock from us and                                    additional shares
of common stock from the selling
stockholders identified in this prospectus at the public offering price, less underwriting discounts and commissions, to cover over-allotments of shares, if any. The underwriters can
exercise this option at any time within 30 days from the date of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The
underwriters expect to deliver the shares of common stock to purchasers on                        , 2011.
J.P. Morgan
Deutsche Bank Securities
Barclays Capital
RBC Capital Markets
William Blair & Company
,
2011
Table of Contents
Table of Contents
Page
Prospectus Summary
1
Risk Factors
10
Forward-Looking Statements
30
Use of Proceeds
31
Dividend Policy
31
Capitalization
32
Dilution
34
Selected Financial Data
36
Management's Discussion and Analysis of Financial Condition and Results of
Operations
38
Business
64
Regulation
82
Management
90
Executive Compensation
95
Certain Relationships and Related Party Transactions
118
Principal and Selling Stockholders
121
Description of Capital Stock
124
Shares Eligible for Future Sale
130
Material U.S. Federal Income and Estate Tax Consequences for Non-U.S. Holders of
Common Stock
132
Underwriting
136
Legal Matters
141
Experts
141
Where You Can Find More Information
141
Index to Financial Statements
F-1
You
should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. Neither we, the
selling stockholders, nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus or in any free writing
prospectus filed with the Securities and Exchange Commission. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where
offers and sales are permitted. You should assume that the information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
Our business, financial condition, results of operations, and prospects may have changed since that date.
Until                        ,
2011, U.S. federal securities laws may require all dealers that effect transactions in our common stock, whether or not participating in this offering, to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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PROSPECTUS SUMMARY
This prospectus summary highlights information contained elsewhere in this prospectus. It does not contain all
of the information that may be important to your investment decision. Before making an investment decision, you should carefully read and consider this entire prospectus, including our financial
statements and the related notes included elsewhere in this prospectus and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Unless otherwise indicated, the terms "IntelePeer," "we," "us" and "our" refer to IntelePeer, Inc. and its subsidiary.
Business Overview
We are a leading provider of on-demand, cloud-based communications services to service providers and enterprises. Our
customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal
communications services, including voice,
unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to existing alternatives. Our CloudWorx CaaS
Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal, IP-based solutions. Our service provider
customers include wireless and wireline carriers, as well as cable and voice over IP, or VoIP, providers. Our enterprise customers include businesses seeking integrated multimodal communications
solutions.
The
global telecommunications industry is undergoing a shift to next-generation IP-based communication technologies from legacy telephone networks. This transition is being driven by the
widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models, such as Software-as-a-Service, or SaaS. We believe
these trends, along with the inability of legacy infrastructures to support user demand for next-generation multimodal communications services, have created an opportunity and a need for a
flexible and high-quality cloud-based communications platform.
Our
on-demand CloudWorx CaaS Platform is fast to implement, easy to administer through our self-service web-based CloudCentral Portal and highly
scalable. It is based on a sophisticated and integrated multi-layer approach, which includes:
•
our software-based Media Peering Grid service, providing any-to-any connection capabilities and
allowing service providers and enterprises to cost-effectively interconnect and transport communications traffic, at a rate of more than 20 billion minutes annually based on our
traffic in the first quarter of 2011;
•
our SuperRegistry directory, currently containing more than 400 million telephone numbers and end-point identifying
addresses for wireless, wireline and other communications devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and
•
our AppWorx open and secure communications application development environment, which allows our customers and partners to
build and offer a growing set of multimodal communications applications, which they can use to generate additional revenue or enhanced productivity.
These
three layers are fully integrated, allowing simplified delivery of enhanced voice and rich-media services connecting through the industry-standard Session Initiation
Protocol, or SIP, to IP devices and enabling connectivity to traditional non-IP communication devices, such as legacy telephones. Our software-based platform scales easily without
requiring significant additional capital expenditures to create and implement new services for new and existing customers and provides significant benefits versus traditional neutral and direct
interconnection arrangements. Our CloudWorx CaaS Platform is used by service provider customers, such as Sprint Nextel Corp. and Qwest Communications, and
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enterprise
customers, as well as our channel partners delivering communications services to enterprises using equipment and software supplied by technology partners such as Microsoft, Cisco, Avaya and
Siemens.
We
believe that our cloud-based architecture, the scale of our proprietary, multi-layer, fully-integrated CloudWorx CaaS Platform, and the network effects arising out of the breadth of
our relationships with service provider customers, enterprise customers and channel partners, provide us with a significant competitive advantage.
For
2008, 2009 and 2010 our total revenue was $43.4 million, $76.2 million and $111.5 million, representing year-over-year organic growth
rates of 57 percent, 76 percent and 46 percent, respectively.
Industry Overview
Despite significant developments in communications technology, the basic public telephone system, which is known as the Public Switched
Telephone Network, or PSTN, continues to rely on legacy networks using many of the same techniques that have been used for decades to connect one voice caller to another. The legacy PSTN structure
requires coordination across service providers and creates significant costs, including transit charges and other payments to intermediate service providers. In addition, the transit of communications
across multiple service providers can degrade voice quality and reduce reliability. This structure also lacks flexibility to support multimodal communications and creates obstacles to the introduction
of new forms of communications services and applications.
The
growth of next-generation communications services, driven by the increasing availability of broadband Internet connections, has led to the development of the SIP standard
protocol to provide a uniform standard for controlling multimodal communications sessions among IP networks,
unified communications systems and end-user communications devices. Infrastructure investments in, and widespread availability of, broadband Internet connections have led to an increase in
the adoption of unified communications systems, offering more advanced features such as VoIP, email, instant messaging, collaboration and video conferencing as well as the ability to combine different
forms of multimodal communications such as voice and video. SIP-based communications enable substantial cost savings, operating flexibility and advanced features relative to traditional telephony.
However,
due to the lack of an end-to-end SIP-based communications platform, the legacy PSTN has had to serve as a bridge for traffic between and
among VoIP and other SIP networks as well as for connections to non-IP-based networks and end point devices, thus losing the advantages of SIP. This legacy PSTN infrastructure has become
increasingly difficult to support as service providers balance the need to upgrade networks and introduce new communications services, with the goal of reducing operating costs and capital
expenditures. Traditional approaches are severely limited by their inadequate support for software-based communications and rich media applications, higher capital and operating costs, reliance on
multiple regional and local physical facilities, inefficient routing, lack of dynamic network capacity allocation and the absence of a centralized directory for multimodal communications.
Some
service providers that exchange significant volumes of traffic have used SIP to directly interconnect with other service providers. These direct connect approaches require unique
solutions for each individual partner, which are complex to implement and costly to manage because of the large number of direct interconnects required and the inefficiency of managing multiple
partner relationships. In addition, existing neutral interconnect solution providers offering peering services use a series of hardware switches that rely on legacy protocols and a hierarchical
architecture that must be deployed in every local market where communication services are to be provided. These neutral interconnect solutions require high initial capital expenditures and significant
ongoing maintenance. Moreover, these solutions still rely upon the PSTN hierarchical architecture and are not capable of providing large scale multimodal communications solutions.
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By
migrating to IP networks, service providers can leverage the flexibility of a software and cloud-based platform to increase the variety of communications services delivered to
customers as hosted offerings. Further, customers recognize that, in addition to the many service improvements, adoption of SIP as a protocol for controlling multimedia communication sessions, such as
voice and video over IP, provides the potential to drive down telecommunications costs as IP-based networks are more efficient and cost-effective than those that rely on legacy
PSTN infrastructure. According to IDC, the total U.S. telecommunications services market is expected to reach $326.5 billion by 2014.
(1)
Additionally, Infonetics Research has
forecasted that the worldwide market for VoIP services could reach $74.5 billion by 2015.
(2)
Connecting IP-based networks to each other or the PSTN, which is referred
to as SIP trunking, represents one of the fastest growing segments within the VoIP services market, and is forecasted to increase at a compound annual growth rate of 52 percent from
$599 million in 2010 to $4.8 billion in 2015.
(2)
In addition to the migration of communications traffic from the PSTN to IP networks, a number of other trends in the
industry are driving the growth in demand for a new cloud-based communications service platform including the proliferation of broadband connectivity, emergence of cloud-based service architectures,
the proliferation of SIP/IP-based devices, increased demand for multimodal and unified communications.
(1)
IDC, "U.S. Telecommunications Services 2010-2014 Forecast," IDC #223323, July 2010.
(2)
Infonetics
Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March 28,
2011.
Our Competitive Strengths
Our solutions address the needs of service providers and enterprises while maintaining capital and operating efficiency. We believe the
following strengths differentiate us and position us for continued growth:
•
Cloud-based services architecture.
Our solutions are
delivered on demand through a cloud-based architecture that can serve customers anytime and anywhere. This flexible and scalable architecture also enables us to customize our services to match each
new customer's needs, thereby eliminating the challenges often associated with the adoption and implementation of fixed, one-size-fits-all solutions.
•
Fully-managed, IP-based Media Peering Grid
service.
Our proprietary software-based, fully-managed, distributed Media Peering Grid service provides carrier-grade,
high-quality voice and connectivity that can be relied on as a primary communications network. Our flexible Media Peering Grid software supports both legacy and VoIP network
interoperability and enables our customers to efficiently and cost-effectively transition their communications infrastructures from the legacy PSTN to an IP network incrementally and on
demand, thus reducing expenses associated with legacy architecture as well as call delivery tolls and circuit expenses.
•
Extensive, secure, multimodal SuperRegistry directory.
The
scale and multimodal nature of our directory give us the ability to complete a call to any connected end-point device, regardless of whether it is a PSTN-based handset or a
SIP-connected device. Using our proprietary intelligent routing software, and the telephone numbers and end-point identifying addresses in our SuperRegistry directory, we are able to
determine the interface type necessary to complete the connection and route traffic more efficiently from end-to-end, through our Media Peering Grid service. Furthermore, our SuperRegistry directory
enables our enterprise customers to achieve rich media, all-IP unified communications across disparate communications technologies with other enterprises and IP connected devices.
•
AppWorx open application development environment.
Our
AppWorx open application development environment provides software developers and channel partners with access to powerful tools for rapid development and integration of new communications services.
These applications and new
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services
can be accessed from anywhere, deployed quickly over our platform and easily integrated into existing web services or software applications. Our AppWorx development environment enables our
customers to develop and use these applications to provide additional functionality and new and differentiated services to their end-users, which our customers can use to develop a
stronger relationship with their end-customers.
•
Powerful network effects.
We benefit from strong network
effects driven by the large volume of numbers in our SuperRegistry directory. As our service provider peering partnerships and enterprise customer base grow, the benefits each existing customer
realizes by using our platform increase, resulting in reduced costs for our customers and increased traffic through our platform. New features and partnerships broaden our value proposition,
attracting more customers, peering partners and channel partners. The scale of our business and depth of our relationships not only attract new customers but also serve as barriers to entry for
potential competitors.
•
Fully integrated communications platform.
Our multi-layer
platform, which integrates transport, peering, registry services and application programming interfaces, or APIs, offers our customers a one-stop, flexible and full-featured
solution for developing and extending their communications services as compared to alternatives that focus on local market, hardware-based solutions. Our fully integrated platform also enables us to
be flexible and to easily add and deploy new IP-enabled communications and collaboration services as our customers' needs evolve.
Our Strategy
Our objective is to continue to leverage our CloudWorx CaaS Platform to enhance our position as a leading provider of communications
solutions for service providers and enterprises. We intend to accomplish this by pursuing the following strategies:
•
Extend the technology leadership of our CloudWorx CaaS
Platform.
We intend to continue to invest in our platform through internal development or by acquiring complementary technology. These
activities are expected to broaden our support for new collaboration and communications features, enhance the capabilities of our SuperRegistry directory, and expand our AppWorx application
development environment to drive broader adoption among new customers and developer communities.
•
Extend the reach and breadth of our peering
partnerships.
We plan to add additional telephone numbers and end-point identifying addresses to our SuperRegistry directory
from new and expanded relationships with service providers and enterprise customers. As we add additional direct peering partners, we expect to increase our communications traffic and revenue without
needing to utilize the legacy PSTN, which we expect will reduce our traffic delivery costs.
•
Grow our relationships with existing customers.
Our sales
team works closely with our customers to understand their challenges and industry trends, determine the services that we can provide to better serve their needs as well as to identify areas of focus
for our ongoing research and development activities. These relationships allow our support team to respond more quickly and effectively to customer needs and our development team to provide customized
solutions for our customers. We intend to continue to leverage the work of our sales team to identify and deliver additional services to expand our relationships.
•
Expand our customer base and technology partnerships.
We
intend to expand our base of enterprise customers by deepening our existing technology partnerships, developing new technology partnerships and expanding our network of channel partners. We also
intend to focus on expanding our service provider customer base by leveraging our CloudWorx CaaS Platform, investing in our direct sales force and educating service providers on the potential
opportunity to reduce or eliminate capital expenditures and reduce operating costs by leveraging our platform.
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•
Broaden our international presence.
We plan to extend our
geographic reach and coverage by expanding our peering partner network and SuperRegistry directory globally through the addition of international service providers, peering partners and global
enterprise customers.
Risks
Investing in our common stock involves significant risks. You should carefully consider the risks in "Risk Factors" before making a
decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case,
the trading price of our common stock would likely decline, and you may lose all or a part of your investment. Below is a summary of some of the principal risks we face.
•
Our recent growth rates may not be indicative of our future growth;
•
We have a history of losses and may not achieve profitability in the future;
•
Our revenue is concentrated in a limited number of customers, and our contracts do not include any fixed commitments to
use our services;
•
We face significant competition from both established and new service providers and we may not compete successfully;
•
We operate in a dynamic legal and regulatory environment where changes in laws and regulations could adversely impact our
business; and
•
We are subject to federal and state regulation, and we may be subject to enforcement and other adverse proceedings that
may have a material adverse effect on our reputation or our future results of operations.
Corporate Information
We were incorporated in June 2003 under the laws of the State of Washington as Voex, Inc. We were reincorporated under the laws
of the State of Delaware in October 2006. We changed our name to IntelePeer, Inc. in September 2007. Our principal executive offices are located at 2855 Campus Drive, Suite 200, San
Mateo, California 94403, and our telephone number is (650) 525-9200. We maintain a corporate website at
www.intelepeer.com
. The information on, or
accessible through, our website does not constitute a part of, and is not incorporated into, this prospectus.
Our
trademarks include IntelePeer®, our company name and logo, AppWorx®, CloudWorx™, CoreCloud™, CloudCentral™, IntelePeer
AppWorx®, Media Peering Grid™ and SuperRegistry®. All other trademarks or service marks appearing in this prospectus are trademarks or service marks of their
respective owners.
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Table of Contents
THE OFFERING
Common stock offered:
By us
shares (            shares if the underwriters exercise their
over-allotment option in full)
By the selling stockholders
shares (            shares if the underwriters exercise their
over-allotment option in full)
Total
shares
Common stock to be outstanding after this offering
shares
Over-allotment option
The underwriters have an option to purchase a maximum of              additional shares of common stock from us
and              additional shares of common stock from the selling stockholders identified in this prospectus at the public offering price, less underwriting discounts and
commissions, to cover over-allotments of shares, if any. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
Use of proceeds
We estimate that the net proceeds to us from this offering will be approximately $    million, assuming an initial public offering price of $    per share, which
is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use the net proceeds
from this offering for working capital and general corporate purposes.
We will not receive any proceeds from the sale of common stock by the selling stockholders.
See "Use of Proceeds" for additional information.
Risk factors
See "Risk Factors" immediately following this prospectus summary to read about factors you should consider before investing in our common stock.
Proposed market symbol
We intend to apply for listing of our common stock on the New York Stock Exchange or the Nasdaq Global Market under the symbol "PEER."
The
number of shares of our common stock expected to be outstanding after completion of this offering is based on 53,483,915 shares outstanding as of March 31, 2011, and
excludes:
•
15,190,994 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2011 at a
weighted average exercise price of $0.55 per share;
•
2,106,669 shares of common stock reserved for issuance upon the exercise of warrants outstanding as of March 31,
2011 at a weighted average exercise price of $0.80; and
•
287,142 shares of common stock reserved for issuance under our equity incentive plan as of March 31, 2011.
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Unless
otherwise indicated, this prospectus reflects and assumes the following:
•
the conversion of all then-outstanding shares of our convertible preferred stock into an aggregate of
43,139,866 shares of common stock upon the closing of this offering;
•
the conversion of all then-outstanding warrants to purchase shares of convertible preferred stock, which
warrants by their express terms do not terminate if not exercised prior to this offering, into warrants to purchase an identical number of shares of common stock upon the closing of this offering;
•
the exercise in full of all then-outstanding warrants to purchase shares of convertible preferred stock and
common stock prior to the closing of this offering pursuant to conditional notices of exercise received for warrants which by their express terms terminate if not exercised prior to this offering; and
•
no exercise by the underwriters of their over-allotment option.
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Table of Contents
SUMMARY FINANCIAL DATA
The following table summarizes our financial data for the periods presented. We have derived the summary statement of operations data
for the years ended December 31, 2008, 2009 and 2010 and the balance sheet data as of December 31, 2010 from our audited financial statements included elsewhere in this prospectus. Our
historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes included elsewhere in this prospectus.
Year Ended December 31,
2008
2009
2010
(in thousands, except share and per share data)
Statement of Operations Data:
Revenue
$43,352
$76,194
$111,549
Operating expenses:
Peering partner compensation
29,824
50,232
78,820
Infrastructure costs
2,987
5,265
6,636
Operations(1)
3,353
4,673
5,578
Research and development(1)
2,447
3,567
4,069
Sales and marketing(1)
4,741
6,367
7,693
General and administrative(1)
2,177
4,568
5,547
Depreciation and amortization
1,852
2,373
3,719
Total operating expenses
47,381
77,045
112,062
Loss from operations
(4,029
)
(851
)
(513
)
Interest expense, net
(1,274
)
(1,488
)
(2,614
)
Change in fair value of warrant liabilities
163
(1,004
)
(8,492
)
Net loss
$(5,140
)
$(3,343
)
$(11,619
)
Net loss per share of common stock, basic and diluted(2)
$(0.59
)
$(0.38
)
$(1.33
)
Shares used in computing net loss per share of common stock, basic and diluted(2)
8,757,955
8,757,955
8,759,925
Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)
$(0.07
)
Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(2)
50,447,513
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As of December 31, 2010
Actual
Pro Forma(3)
Pro Forma as
Adjusted(4)
(in thousands)
(unaudited)
(unaudited)
Balance Sheet Data:
Cash and cash equivalents
$
9,159
$
9,159
$
Working capital (deficit)
(3,536
)
(3,536
)
Total assets
47,187
47,187
Total indebtedness(5)
18,675
18,675
Warrant liabilities
12,400
1,007
Redeemable Convertible preferred stock
33,379
—
Total stockholders' equity (deficit)
(32,891
)
11,881
(1)
The
following table presents stock-based compensation expense included in each expense category (in thousands):
Year Ended December 31,
2008
2009
2010
Operations
$
27
$
31
$
144
Research and development
16
49
81
Sales and marketing
185
111
153
General and administrative
91
106
186
Total stock-based compensation
$
319
$
297
$
564
(2)
Please
see Notes 1 and 12 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our
basic and diluted net loss per share of common stock and pro forma net loss per share of common stock.
(3)
The
pro forma column in the balance sheet data table above reflects (i) the conversion of all outstanding shares of our convertible preferred stock
into 41,695,608 shares of common stock immediately upon the completion of this offering and (ii) the resulting reclassification of the convertible preferred stock warrant liability to
additional paid-in capital.
(4)
The
pro forma as adjusted column in the balance sheet data table above reflects (i) the conversion of all outstanding shares of our convertible
preferred stock into 41,695,608 shares of common stock immediately upon the completion of this offering, (ii) the resulting reclassification of the convertible preferred stock warrant liability
to additional paid-in capital and (iii) the receipt of the net proceeds from the sale of                        shares of
common stock offered by us in this offering at an assumed initial
public offering price of $            per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), after deducting underwriting discounts and
commissions
and estimated offering expenses payable by us. A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) our cash and cash
equivalents, working capital, total assets and total stockholders' equity by $            , assuming the number of shares offered by us remains the same as set forth on the cover page of
this
prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(5)
Total
indebtedness includes $18.2 million in equipment financing obligations and $0.5 million payable under our capital lease obligation. See
Notes 4 and 10 to our audited financial statements included elsewhere in this prospectus.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider all the risks
described below before making a decision to invest in our common stock. Our business could be harmed by any of these risks at any time. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.
Risks Relating to Our Business
We have experienced rapid growth in recent periods and our recent growth rates may not be indicative of our future growth. If we fail to manage our growth effectively, we
may be unable to execute our business plan, maintain high levels of service and customer satisfaction or adequately address competitive challenges.
Our revenue has increased substantially since our inception, but we may not be able to sustain revenue growth consistent with recent
history, or at all. We believe growth of our revenue depends on a number of factors, including our ability to:
•
Price our services effectively so that we are able to attract and retain customers without compromising our profitability;
•
Attract new customers, increase our existing customers' use of our services and provide our customers with excellent
customer support;
•
Continue to increase the number of telephone numbers and end-point identifying addresses in our SuperRegistry
directory;
•
Develop new communications applications to increase our customers' use of our services;
•
Efficiently and accurately capture cost and revenue data for the more than 1.7 billion minutes of traffic delivered
per month over our platform;
•
Introduce our services to new markets outside of the United States; and
•
Increase awareness of our brand on a global basis.
We
can not assure you that we will be able to successfully accomplish any of these tasks.
Additionally,
we currently plan to expand our business significantly to satisfy the anticipated demand for our services. To manage this growth, we must improve operational and financial
systems, procedures and controls, and expand, train and manage our employee base. We must maintain and expand relationships with current customers, peering partners and other third parties, while
attracting new customers, peering partners and channel partners. If we cannot manage our growth effectively, we may be unable to take advantage of market opportunities, execute our business strategies
or respond to competitive pressures.
We have a history of losses and may not achieve or maintain profitability in the future.
We had net losses of $3.3 million and $11.6 million in the years ended December 31, 2009 and 2010, respectively.
We cannot predict if we will attain profitability in the near future or at all. We expect to continue to make significant expenditures to develop and expand our business. In addition, as a public
company, we will incur additional legal, accounting and other expenses that we did not incur as a private company. These increased expenditures will make it more difficult to achieve future
profitability. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and unforeseen expenses, difficulties, complications and
delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. We will need to generate significant revenue to achieve profitability, and we cannot assure any
prospective investor that we will be able to do so. Likewise, we cannot assure our ability to sustain or increase such profitability on a quarterly or annual basis in the future.
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Our revenue is concentrated in a relatively limited number of customers, and our contracts do not include any fixed commitment to use our services. The termination of these
contracts by our customers, or a decrease in traffic from those customers, could materially and adversely impact our results of operations and financial condition.
Our top two customers, in the aggregate, represented 45 percent of our total revenue during the year ended December 31,
2010. Sprint, alone, accounted for 29 percent of our
total revenue during that same time period. In general, our customer contracts are non-exclusive and have neither volume nor time period commitments. Any customer is able to discontinue
the use of all or a portion of our services at any time. If one or more customers were to reduce their demand for our services, our revenue could decline. If we lose one or more of our top customers,
or, if one or more of these major customers significantly decreases its use of our services, our business will be materially and adversely affected. From time to time, we have experienced material
reductions in revenue from key customers. For example, our revenue from one of our top customers decreased from $35.3 million in 2009 to $18.2 million in 2010. Revenue from another top
customer decreased from $2.9 million in 2008 to $0.2 million in 2009. There can be no assurance that we will not have similar substantial decreases in customer revenue in the future, or
that the growth in our other customers will make up for any such decreases. As a result, our future revenue is difficult to forecast. Because our expense levels are based on our expectations as to
future revenue and to a large extent are fixed in the short term, we might be unable to adjust spending in time to compensate for any shortfall in revenue. Accordingly, any significant shortfall of
revenue in relation to our expectations will harm our operating results.
Our pricing and billing systems are complex and errors could adversely affect our revenue and profits
.
We currently route more than 1.7 billion minutes of voice traffic each month and operate in a dynamic market, which makes our
pricing and billing efforts complex to develop and challenging to implement. To be profitable, we must have accurate and complete information about the costs associated with connecting data and voice
transmissions over our platform, and properly incorporate such information into our pricing model. Our pricing model must also reflect accurate and current information about the market for our
services, including the pricing of competitive alternatives for our services, as well as reliable forecasts of traffic volume. We may determine pricing for our services based on data that is outdated
or otherwise flawed. Even if we have complete and accurate market information, we may not set prices to optimize both revenue and profitability. If we price our services too high, the amount of
traffic that may be routed through our platform may decrease and accordingly our revenue may decline. If we price our services too low, our margins may be adversely affected, which will reduce our
ability to achieve and maintain profitability.
Additionally,
we rely heavily on a single third party to provide us with key software and services for our billing. If that third party ceases to provide those services to us for any
reason, or fails to perform billing services accurately and completely, we may not be able to deliver accurate invoices promptly. Delays in invoicing can lead to delays in revenue recognition, and
inaccuracies in our billing could result in lost revenue. If we fail to adapt quickly and effectively to changes affecting our costs, pricing and billing, our profitability and cash flow will be
adversely affected.
Commercial disputes and collection issues are common in our industry and any disputes with our peering partners or our customers could result in increased expenses or an
inability to collect revenue for services provided and any collection problems could result in delays or failures to collect revenue.
Our direct and indirect peering arrangements are based on commercial agreements with a variety of parties. Disputes concerning payment
for services rendered can occur for numerous reasons given the complexities of the regulatory environment and the number of parties involved in handling communications traffic. From time to time, we
may dispute an invoice for the amount of traffic that we delivered to our peering partners or the rates that should have been applied to that traffic. Dispute
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resolution
generally requires a review of call detail records and negotiations with our peering partners. If we subsequently determine that the disputed amounts will be settled for an amount in excess
of the amount which we originally accrued, we will recognize the difference as an increase in peering partner compensation which would adversely impact our results of operations. For example, for the
year ended December 31, 2010, we determined that certain disputed amounts could result in an additional charge of $1.1 million, which resulted in us recognizing this amount as additional
peering partner compensation.
We
are also subject to potential billing disputes with customers. Additionally, some customers have failed to pay for services because their financial condition limits their ability to
satisfy their obligations. For example, in 2007, a customer that represented 1.6 percent of our revenue defaulted on its obligation of $163,000 and declared bankruptcy. Delays in receiving payments,
or our inability to collect payments pursuant to such agreements, can adversely impact our business.
Our financial position, revenue, operating results and profitability may vary significantly from quarter to quarter, which could cause the price of our common stock to
decline significantly.
As our business continues to grow, we believe that our quarterly operating results may be subject to significant fluctuation due to
various factors, many of which are beyond our control. Factors that may affect our quarterly operating results in the future include the risk factors discussed in this Risk Factors section, and in
particular the following:
•
changes in the amount of voice traffic which major customers route through our CloudWorx CaaS Platform;
•
our failure to properly anticipate changes in the price our customers are willing to pay, or the costs we must pay, to
deliver certain traffic;
•
the timing, capacity and breadth of direct peering established to support our customers;
•
decisions by our service provider customers to establish direct connection arrangements with other major service providers
rather than route traffic through our CloudWorx CaaS Platform;
•
fluctuations based upon seasonality or the weighted average number of business days in a particular quarter;
•
traffic outages or other failures of our platform; and
•
variability of operating expenses as a percentage of revenue.
Accordingly,
it is difficult for us to accurately forecast our results of operations on a quarterly basis. If we fail to meet expectations of investors or analysts, our stock price may
fall rapidly and without notice. Furthermore, the fluctuation of our quarterly operating results may render period-to-period comparisons of our operating results less
meaningful and you should not rely upon them as an indication of our future performance.
We have a limited operating history and a relatively new business in an emerging and rapidly evolving market, making it difficult to evaluate our business and future
prospects, thereby increasing the risk of your investment.
The revenue and income potential of our business and market is unproven, and our limited operating history with our current business
model makes an evaluation of our business and prospects difficult. We were incorporated in June 2003 and since inception have been generating revenue from service provider customers. We first began
offering our AppWorx-powered applications to enterprise customers in 2008. In 2010, 2.7 percent of our revenue was generated from enterprise customers.
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Our
ability to grow our business will depend significantly on an increase in the adoption of new technologies, which may not occur or may not occur as quickly as we anticipate. Our
CloudWorx CaaS Platform has the ability to deliver multimodal communications services, including voice, video, unified communications and other rich-media applications. If the market for
these multimodal and unified communications capabilities does not develop, or develop as fast as we expect, our revenue may not grow.
We
also seek to expand our business through growth in markets outside of the United States. We have no experience in providing services to, or in navigating the regulatory landscape of,
those markets. If we fail to execute our business plan and attract new customers from outside of the United States, we may be unable to grow our revenue or offset declines in revenue in the United
States.
Additionally,
current or future competitors may develop and offer competing products or services that are, or are perceived to be, superior to our services in some respect. Our services
may not be sufficiently competitive with those new products or services and, as a result, our revenue may decrease.
Decreasing telecommunications rates may diminish or eliminate our competitive pricing advantage.
The market for communications services is highly competitive and is characterized by decreasing rates for services. Even as traffic
volumes have increased due to the increasing penetration of broadband Internet access services and consumer demand for content over
such services, the rates that service providers pay each other has decreased over time. International and domestic telecommunications rates have decreased significantly over the last few years in most
of the markets in which we operate, and we anticipate these rates will continue to decline in all of the markets in which we do business or expect to do business. If we are unable to reduce our
operating expenses and adjust the rates we charge for our services, the decreasing market rates for the exchange of traffic may diminish or eliminate our competitive pricing position. Continued rate
decreases may require us to lower our rates to remain competitive and could reduce or possibly eliminate any gross profit from our services.
If we fail to accurately forecast our revenue or the commitments we must make to satisfy demand for our services, our results of operations and financial condition could be
adversely affected.
We must continue to invest in our business such that we have sufficient infrastructure and support to transport increasing numbers of
minutes through our Media Peering Grid service. Our investment in our infrastructure depends largely on our forecasts of demand for our services, which is based on historical growth in the use of our
services. If communications traffic declines or does not grow as fast as it has historically grown, our revenue may be less than we forecast, and we may have incurred infrastructure costs in excess of
what was required to facilitate the delivery of communications traffic through our platform. If demand for our services exceeds our forecasts, our infrastructure may not be prepared for such an
increase in demand and we may not be able to capitalize fully on the growth opportunity and increase our revenue in an optimal manner. In either case, the results of operations and our financial
condition could be adversely affected.
We may lose customers if we experience system failures that significantly disrupt the availability and quality of the services that we provide.
Our operations are dependent upon our ability to prevent system interruption. We have experienced system failures from time to time,
including loss of power in a commercially hosted facility, software bugs that prevented calls from routing normally and fiber cuts that denied access to a site from our backbone. In the past, these
system failures caused periods of low quality service lasting from 10 to 180 minutes and total site unavailability of 10 to 60 minutes. Although we have endeavored to mitigate the potential impact of
failures through our distributed platform and redundant operations, there is no guarantee that we will not have system failures in the future, including those that are
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materially
worse in scope or duration. Any interruption in the ability of our customers to use our services reduces our current revenue, could harm our future revenue, and could subject us to
additional regulatory scrutiny. Such interruptions could also undermine customer confidence in the reliability of our services and cause us to lose customers or make it more difficult to attract new
ones.
Our
business also requires us to protect our infrastructure against damage from human error, fire, earthquakes, floods, power loss, sabotage, intentional acts of vandalism, terrorism and
similar events. Despite any precautions we may take, the occurrence of a natural disaster, power outage or other unanticipated problems could result in lengthy interruptions in the availability of our
services. We do not carry business interruption insurance sufficient to compensate us for losses that may result from interruptions in the availability of our services as a result of system failures.
Our offerings are dependent upon third-party facilities, equipment and services, and interruptions or delays in service from our third-party facility providers could impair
our ability to deliver our services to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.
We rely on third parties' facilities and equipment to operate our business as our customers' traffic traverses a variety of facilities
controlled by third parties. We principally buy equipment and software to build and update our system infrastructure from one supplier. If our third-party service providers fail to maintain facilities
properly, if our equipment fails to perform as expected or if the providers of facilities or equipment fail to respond quickly to problems, our customers may experience service interruptions. Such
service interruptions may affect the perceived reliability of our service which could damage our brand and reputation adversely affecting our growth. Additionally, we rely on a single supplier to
provide us with key billing and related services. If that supplier stops providing those services to us for any reason, we could experience disruption in our ability to quickly capture the information
we need to promptly generate invoices for our services. These delays in invoicing could materially delay our receipt of revenue from our customers.
Our IP telephony offering relies, in some instances, on third parties to originate and deliver all calls placed and received by such customers.
In offering IP telephony services, we rely on the infrastructure of the third-party network service providers who are our peering
partners to provide telephone numbers, PSTN call termination and origination services and local number portability. In relying on such third parties, we are able to offer our services over a greater
geographic area and can compete with other providers of such services in a broader marketplace. But in relying on such third parties, we have less control over the quality and reliability of our
service. Moreover, if any of these third-party service providers cease operations or otherwise terminate services on which we depend, we could suffer customer loss or increased costs for our services,
which could have a material adverse impact on us and our reputation.
We face significant competition from both established and new service providers, as well as from our customers, and if we do not compete successfully, we could lose market
share, experience reduced revenue or suffer losses.
The services we provide are also offered by others and in the future may be offered by an increasing number of parties. Currently, we
face competition from legacy telecommunications service providers as well as emerging providers of voice peering services. Our competitors include traditional telecommunications carriers and other
providers of specialized communications services.
There
are few substantial barriers to pursuing business from our customers, and we expect to face additional competition from new market entrants in the future. Many of our current and
potential competitors have substantially greater financial, technical and marketing resources, larger customer bases, greater name recognition and more established relationships in the industry than
we have. As a
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result,
certain of our competitors may be able to develop and expand their network infrastructures and service offerings more quickly, adapt to new or emerging technologies and changes in customer
requirements more quickly, take advantage of acquisitions and other opportunities more readily, devote greater resources to the marketing and sale of their services and adopt more aggressive pricing
and incentive policies than we can. Those service providers may attract communications traffic that is currently utilizing our CloudWorx CaaS Platform.
Moreover,
some of the potentially biggest users of our peering services, like incumbent local exchange carriers, competitive local exchange carriers and wireless and cable companies, may
enter into direct peering arrangements between and among themselves and with other service providers. Such direct connections may result in lower traffic volumes for us and negatively impact our
business.
Our
ability to compete effectively will depend on a number of factors, including without limitation:
•
our ability to offer cost-effective and high-quality services consistently and without delay;
•
our ability to respond quickly and effectively to market demand for new services;
•
our ability to adopt or adapt to changing regulatory standards and industry practices;
•
the number and nature of our competitors and competitiveness of their services; and
•
the entrance of new competitors into our markets.
Many
of these factors are outside of our control. For these reasons, we may not be able to compete successfully against our current or future competitors.
Consolidation in the telecommunications industry could lead to an unexpected and significant reduction in revenue.
The telecommunications industry has historically been marked by significant consolidation. If two service providers that are currently
connecting traffic through our platform become part of a single entity and network infrastructure, those parties may no longer need to route telecommunications traffic through our platform, which will
adversely affect the revenue we generate from such traffic.
If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs, our services may become less competitive
or obsolete, and we could lose customers or market share.
Our future success will depend in part on our ability to modify or enhance our services to meet customer needs, to add functionality
and to address technological advancements. The telecommunications industry is characterized by rapid technological change and new service offerings, which could make our service offerings obsolete or
too costly or inefficient on a relative basis. We must adapt to this rapidly changing market by continually improving the features,
functionality, reliability and responsiveness of our services, and by developing new features, services and applications to meet changing customer needs or developing industry standards. We cannot
assure you that we will be able to adapt to these challenges or respond successfully or in a cost effective way. Failure to do so would adversely affect our ability to compete and retain customers or
market share. In addition, our innovations may not achieve the market penetration or price levels necessary for profitability.
The market for next generation communications services may not develop as we anticipate.
The market for multimodal communications and unified communications services is at an early stage of development, and the market for
these services may not achieve high levels of demand. Our success depends on the willingness of enterprises to adopt these next generation communications services. If demand for these services does
not develop as we expect, it may adversely affect our revenue growth from enterprise customers.
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Our sales channels may not be effective in selling our communications services to enterprise customers.
Currently, we rely on sales channels to acquire enterprise customers. If our sales channel partners are not effective in generating
demand from enterprise customers for our services, we may have to evaluate alternative customer acquisition models, including introducing a direct sales model for attracting and retaining enterprise
customers. As a result, our operating costs may be significantly increased, which may adversely affect our ability to achieve or maintain profitability.
Our CloudWorx CaaS Platform could subject us to litigation and other disputes from third parties.
Our CloudWorx CaaS Platform relies on multiple service providers to deliver communications traffic. We enter into contractual or other
arrangements with the service provider from which we receive traffic and with the peering partner to which we deliver communications traffic. However, we do not have written contractual arrangements
with all of the parties that participate in the origination, transit or termination of traffic through our platform. Our
partners provide us assurances that they are in compliance with applicable laws and regulations. While our contracts address compensation issues, they also recognize that the market is subject to
regulatory uncertainty and changes in law. We may be subject to litigation or other disputes as a result of our indirect peering business. We may not have recourse through contractual indemnification.
Our inability to seek recourse either from those with which we enter into written contracts or third parties may adversely impact our business.
We may be vulnerable to security breaches, which could disrupt our operations and have a material adverse effect on our financial performance and operating results.
A party who is able to compromise the security of our facilities could misappropriate either our proprietary information or the
personal information of our customers, or cause interruptions or malfunctions in our operations. We may be required to expend significant capital and financial resources to protect against such
threats or to alleviate problems caused by breaches in security. As techniques used to breach security change frequently, and are generally not recognized until launched against a target, we may not
be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits,
loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial performance and operating results.
If our security measures are breached and unauthorized access is obtained to a customer's stored data or any consumer data that we may store from time to time or if data is
lost due to hardware failures or errors, our services may be perceived as not being secure, customers may curtail or stop using our services and we may incur significant legal and financial exposure
and liabilities.
Certain of our services involve the storage and transmission of customers' proprietary information, including certain consumer data.
Security breaches related to this information could expose us to a risk of loss of this information, litigation and possible liability, as well as damage our relationships with our customers. If our
security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, during transfer of data to additional data centers or at any time, and, as a result, someone
obtains unauthorized access to our data or our customers' data, our reputation could be damaged, our business may suffer and we could incur significant liability. Additionally, third parties may
attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our data or our customers'
data, which could result in significant legal and financial exposure and a loss of confidence in the security of our service, which would harm our future business prospects. Furthermore, our ability
to collect and report data may be interrupted by a number of factors, including our inability to access the Internet, the failure of our platform, security breaches or variability in user traffic on
customer
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websites.
In addition, computer viruses may harm our systems causing us to lose data, and the transmission of computer viruses could expose us to litigation. Because the techniques used to obtain
unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement
adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and
customers. Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover any claim against us for
loss of data or other indirect or consequential damages and defending a suit, regardless of its merit, could be costly and divert management's attention.
The loss of key members of our senior management team could prevent us from executing our business strategy and could have a material adverse effect on our business.
Additionally, the failure to attract and retain qualified personnel could prevent us from executing our business strategy.
Our future performance depends substantially on the continued services of our management and other key personnel, including members of
our technical, marketing and sales teams, and our ability to retain and motivate those persons. We do not have long-term employment agreements with any of our key personnel and we do not
maintain any "key person" life insurance policies. Competition for qualified personnel is intense and we may not be successful in attracting and retaining the key personnel that we need to compete
effectively. The value of our common stock may adversely affect our efforts to motivate the performance of our key personnel. It
may be difficult to retain those employees who have substantial in-the-money, vested options or other equity awards. Conversely, if options granted to our employees have
exercise prices that are substantially above our then-current share price, it may be difficult to motivate and retain those employees. Additionally, if the market price of our common stock
does not increase or declines, it may limit our ability to attract new employees with equity incentives.
We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our
operations and harm our operating results
.
We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our
application suite, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur
various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
In
addition, we do not have any experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate successfully the acquired personnel,
operations and technologies, or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of
factors, including:
•
unanticipated costs or liabilities associated with the acquisition;
•
incurrence of acquisition-related costs;
•
diversion of management's attention from other business concerns;
•
harm to our existing business relationships with business partners and customers as a result of the acquisition;
•
the potential loss of key employees;
•
use of resources that are needed in other parts of our business; and
•
use of substantial portions of our available cash to consummate the acquisition.
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In
addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment
at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which
could harm our results of operations.
Acquisitions
could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired
business fails to meet our expectations, our operating results, business and financial condition may suffer.
If we are unable to protect our proprietary technology and other intellectual property rights, our ability to compete for business or exclude others from competing with us
may be adversely affected. Our solutions and services may infringe on the intellectual property rights of others, which may subject us to legal liability, harm our reputation, prevent us from offering
certain solutions and services to our customers or distract management. Any claims or litigation involving intellectual property, whether we ultimately win or lose, could be extremely
time-consuming, costly and harmful to our reputation.
We regard the protection of our trademarks, service marks, copyrights, patents, domain names, trade dress and trade secrets as critical
to our success. To protect our intellectual property rights, we rely on national, state and common law rights, as well as a variety of
administrative procedures, and we seek protection through trade secrets, confidentiality agreements and other security measures, including patent law protection. To date, we have one issued patent.
The process of seeking patent protection takes a long time and is expensive. We are unable to guarantee that additional patents will issue from pending or future applications or that, if patents
issue, they will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. Some of our
technologies are not covered by any patent or patent application. The confidentiality agreements on which we rely to protect certain technologies may be breached and may not be adequate to protect our
proprietary technologies. There can be no assurance that other countries in which we market our services will have applicable laws to protect our intellectual property rights to the same extent as the
United States.
Our
ability to compete successfully also depends on our ability to operate without infringing the proprietary rights of others. We have no means of knowing what patent applications have
been filed in the United States until they are published. In addition, the technology sector in which we operate is characterized by frequent claims and litigation regarding patents, trademarks and
other intellectual property rights. We may need to file lawsuits to enforce our intellectual property rights, and we may need to defend against claimed infringement of the rights of others. Any
litigation could result in substantial costs to us and divert our resources. Despite our efforts in bringing or defending lawsuits, we may not be able to prevent third parties from infringing upon or
misappropriating our intellectual property, or offering solutions or services that are directly competitive with ours. In the event of an adverse outcome in any such litigation, we may be required to
stop our use of infringing technologies, expend significant resources to develop or acquire non-infringing technologies or obtain licenses to the intellectual property we are found to have
infringed. There can be no assurance that we would be successful in such development or acquisition or that necessary licenses would be available on reasonable terms, or at all.
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Risks Related to Our Industry, Including Regulation by Governmental Authorities
We operate in a dynamic legal and regulatory environment where changes in law and regulations could adversely impact our business.
Certain of our service offerings are subject to regulation at the international, federal, state and local levels. Regulations affect
our business and can change the marketplace. The adoption and enactment of new regulations, or the modifications to existing ones, can have a material adverse effect on our business. Additionally,
future legislative, judicial and regulatory agency actions could have an adverse effect on our business.
Our communications service offerings depend on complex compensation arrangements between service providers where federal and state regulatory reform and judicial decisions
can have unpredictable results and may make our communications service offerings less viable or potentially unsustainable.
How service providers compensate each other varies based on a variety of factors, including
•
whether a call terminates on a wireline or wireless network;
•
whether the call is local or long distance;
•
whether the call is intrastate, interstate or international; and
•
the classification of IP traffic as either traditional telecommunications or information services traffic.
Depending
on the nature of the traffic and the arrangements between the service providers, compensation may be determined by federal or state rules, contracts entered into between
service providers, tariffs or other arrangements.
Although
we provide our communications services pursuant to contracts with those service providers who connect directly to us, much of the traffic routed using our service is ultimately
originated or terminated by other parties with whom we are connected only indirectly, and the rights and obligations of these indirectly connected parties, including the rates they pay for the
origination and termination of the traffic they carry, are often governed by regulated tariffs rather than by contracts. Those rates, in turn, have a material effect on the rates that we pay our
peering partners to transmit and terminate our traffic. The Federal Communications Commission, or FCC, is considering reform of the system under which service providers compensate each other for
interstate, intrastate and local traffic origination and termination services. Recently, the FCC announced its intention to comprehensively reform this system. A number of states are also actively
considering compensation reform that could impact our business.
Existing rules governing compensation may be changed as a result of these regulatory proceedings, or as a result of legislative or judicial actions, in ways that are impossible to predict.
Reform
of the intercarrier compensation system could alter any of a myriad of factors that could adversely impact our business. For example, the FCC could establish an unfavorable rate
that may be assessed for the transmission and termination of certain traffic that we deliver over our platform or adopt other rules, which may negatively impact our business. It is also possible that
the FCC could classify certain traffic in a manner that negatively impacts our business.
It
is unclear at this time what measures the FCC may take to reform compensation arrangements between service providers. Certain models we use today may be prohibited in the future or
subject to rules that make the way we currently do business less profitable or unprofitable. If certain rules are adopted, we may have to change the way in which we route traffic, discontinue
relationships with existing partners, or modify our business practices materially. Depending on the rules adopted, some of our offerings, to the extent they are sustainable, may not be as profitable
in the future. We cannot predict how changes in FCC and/or state rules will impact us at this time.
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We may be subject to increased liability for Federal Universal Service Fund contributions.
We are required to contribute to the Federal Universal Service Fund, or USF, a percentage (which varies quarterly) of certain of our
revenue derived from providing retail interstate and international telecommunications and communications services. We are required to report our revenue periodically to enable the Universal Service
Administrative Company, which administers the Fund on behalf of the FCC, to determine our contribution requirement. Based on these reports, we pass through our estimated contribution obligation to
customers in the form of an assessment. We are also required to obtain and maintain exemption certifications for our service provider customers. The rules governing allocation of our revenue between
telecommunications services (which are subject to assessment) and information services (which are not) are complex and in some situations ambiguous. If we are determined to have allocated our revenue
incorrectly or otherwise failed to report all required revenue from end-users, we could be subject to liability for underpayment of contributions to the Fund, which would be extremely
difficult to recover from customers. If the certifications that some of our customers provide to justify the exemption of their charges from USF assessments are found to be defective and we cannot
show we reasonably expected such customers to contribute to the Fund, we may be subject to additional USF contribution liabilities. While we may be legally entitled to collect any shortfall USF
contribution from our customers, we may not be able to do so and this could have a material adverse impact on our business.
The FCC is actively considering reform of the USF and, depending on the reforms adopted, the ultimate cost of our services to our customers may rise.
The FCC is actively considering ways to reform the USF in a manner that does not require additional statutory authority. The FCC could
adopt a number of different reforms that change the methodology for contributing to the USF. Depending on the reform adopted, this could increase what we are required to contribute to the USF, which
could result in increasing the price of our offerings. We cannot predict the impact of this proceeding on our business. Additionally, the U.S. Congress, the FCC, state legislatures and/or state
agencies may target, among other things, state USF contribution methodologies, access or settlement charges that are exchanged between service providers, imposing taxes related to Internet
communications, imposing tariffs or other regulations based on encryption concerns, or the characteristics and quality of products and services that we may offer. New laws or regulations concerning
these or other areas of our business could restrict our growth or increase our cost of doing business.
The outcome of pending regulatory proceedings, litigation or other disputes may subject us to retroactive liability for intercarrier compensation arrangements.
The regulations and other arrangements that govern compensation between service providers are complex and, depending on the traffic at
issue, subject to federal and state jurisdiction, including regulation by the FCC and state public utilities commissions. Application of current intercarrier compensation rules is constantly under
review. A number of state commissions are actively considering disputes between service providers that could adversely affect us. Additionally, there is ongoing litigation in the industry that could
affect certain components of our indirect peering business, such as the charges our indirect peering partners pay to transport and terminate our traffic. When and how the FCC, state commission or
other entities with jurisdiction and authority ultimately resolve the intercarrier compensation disputes, or interpret regulatory rulings, we may be subject to retroactive liability for intercarrier
compensation charges. Due to this legal uncertainty, we are unable to predict the impact on our business. Moreover, it is possible that we may be subject to retroactive liability for certain traffic.
It may be difficult to collect from our customers for such retroactive liability. Should we be subject to retroactive liability and be unable to collect on such liabilities from our customers or third
parties, our business may be adversely impacted.
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We are subject to federal and state regulation for certain of our communications service offerings and we may be subject to enforcement actions or other adverse proceedings
that may have a material adverse impact on our reputation or our future results of operations.
For certain of our communications services offerings, we are subject to regulation by the FCC and state public utilities commissions.
Among other requirements, we must obtain and maintain certificates of authority to offer communications services at the state and federal level and we are subject to reporting requirements. Interstate
and intrastate telecommunications services are subject to a wide range of frequently changing state and federal regulations, rules and laws and we cannot ensure that we are always in compliance with
all of these requirements at any single point in time. The agencies responsible for the enforcement of these laws, rules and regulations have initiated and may continue to initiate inquiries or
actions based on customer complaints or on their own initiative. While we believe our actions and positions are in compliance with the related rules and in accordance with accepted industry practices,
we cannot predict with certainty the timing or outcome of these various reviews. We may be subject to fines, penalties, forfeitures or other enforcement actions as well as complaints seeking damages
that could result in monetary or reputational harm. Any of these outcomes could have material adverse impact on our future results of operations.
The FCC could classify some of our offerings as telecommunications services, which could result in additional federal and state regulatory obligations.
Federal and state authorities are currently considering the appropriate classification of certain of our offerings. For example, on
February 12, 2004, the FCC initiated a notice of proposed rulemaking to consider the appropriate regulatory classification for VoIP and other IP-enabled services. On November 9, 2004,
the FCC ruled that Vonage DigitalVoice and similar nomadic VoIP services are not subject to state certification, tariffing and other similar common-carrier service provider regulations. This ruling
was appealed by several states. On March 21, 2007, the United States Court of Appeals for the Eighth Circuit affirmed the FCC's declaratory ruling.
The
FCC has yet to classify IP-enabled services, particularly interconnected VoIP services, as either telecommunications services or information services. If the FCC
classifies certain or all of our IP-enabled service offerings as telecommunications, we may be subject to additional regulatory obligations at both the federal and state levels and less
favorable rates associated with such traffic. It is possible that certain states may classify IP-enabled services like those that we offer as telecommunications services. At least one
state, Maine, has already classified particular interconnected VoIP service offerings as telecommunications services. This may adversely impact our business by increasing the cost of offering such
services and the rates we pay to terminate such traffic.
The FCC and certain state regulatory agencies must grant approval before we engage in certain transactions or other activities which may result in delay or increase our
transaction costs.
Certain transactions and agreements, including among other things mergers, acquisitions of other regulated companies, and asset sales,
require regulatory approval either at the federal or state level, or sometimes from both federal and state regulatory agencies. Delays in receiving required regulatory approvals (including approvals
relating to stock issuance, acquisitions, financing activities, or transactions relating in transfers of control) and completing interconnection agreements with other carriers may have a material
adverse effect on our business.
Internet service providers might restrict our ability to provide services to our customers.
Some of our offerings depend on the ability of our customers to access our services through broadband Internet connections and certain
of our products require significant bandwidth to work effectively. Broadband access to the Internet is provided by companies that have increasing market power in the broadband Internet access
marketplace, including incumbent telephone companies, cable
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companies
and mobile communications companies. Some of these providers have stated that they may take measures that could degrade, disrupt or increase the cost of user access to certain of our
products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings, while others,
including some of the largest providers of broadband Internet access services, have committed to not engaging in such behavior. The ability of the FCC to regulate broadband Internet access services
has been called into question by a recent ruling of the United States Court of Appeals for the D.C. Circuit.
On
December 23, 2010, the FCC adopted an order that would impose non-discrimination rules on providers of fixed and wireless broadband Internet access services, with
wireless providers subject to a more limited set of rules. While the substance of the rules and the process used by the FCC in adopting the rules differs from the FCC's previous Internet policy
principles that were called into question by the D.C. Circuit, questions remain concerning the FCC's legal authority to adopt rules governing the conduct of fixed and wireless broadband Internet
access providers. The FCC's rules are not effective yet and there is uncertainty as to whether the rules will become effective. We cannot predict whether the rules will become effective and
enforceable, nor can we predict what impact these rules may have on our business at this time. While we believe that substantial interference with access to our products and services is unlikely, such
broadband Internet access provider interference has occurred in very limited circumstances in the U.S., and could result in a loss of existing users and increased costs, and could impair our ability
to attract new users, thereby harming our revenue and growth.
Our ability to offer services outside the U.S. is subject to the local regulatory environment, which is different than the U.S. and our growth may be impeded.
As we expand into new markets outside of the United States, the regulatory structure of foreign markets differ in significant ways than
the United States communications marketplace. We will have to adapt our business strategies to reflect the regulatory realities of these marketplaces which could impede our growth.
If our emergency and E-911 calling services do not function properly, we may be exposed to significant liability from our users.
Certain of our IP telephony offerings are subject to FCC rules governing the delivery of emergency calling services. Similar to other
providers of similar IP telephony services, our emergency calling and E-911 service are different than those associated with traditional telecommunications services. These differences may
lead to an inability to make and complete calls that would not occur for users of traditional telephony services. For example, to provide the emergency calling services required by the FCC's rules to
our IP telephony consumers, we must use components of both the wireline and wireless infrastructure in unique ways that can result in failed connections and calls. Access to emergency services call
centers provided over the Internet may be adversely affected by power outages and network congestion that may not occur for users of traditional telephony services. Emergency call centers may not be
equipped with appropriate hardware or software to accurately process and respond to emergency calls initiated by consumers of our IP telephony services. Users that use our IP telephony services
nomadically are required to manually update their location information, and failure to do so may result in dispatching of assistance to the wrong location. As a result, we could be subject to
enforcement action by the FCC or other entities—possibly exposing us to significant monetary penalties, cease and desist orders, civil liability and other adverse consequences. The FCC's
rules also impose other obligations on us, such as properly recording our customers' registered locations. Failure to comply with these requirements may result in FCC enforcement action, potential
monetary penalties and other adverse consequences.
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The FCC has an open proceeding considering the imposition of additional E-911 obligations on providers of Internet protocol telephony.
The FCC is considering modifying the emergency calling rules applicable to providers of IP telephony services. In June 2007, the FCC
released a Notice of Proposed Rulemaking to consider whether it should impose additional obligations on interconnected VoIP providers. Among other things, the FCC is considering requiring that certain
providers of IP telephony—including some of our offerings—to implement a solution to automatically determine the location of their customers for purposes of E-911
rather than allowing customers to manually update their existing location. The FCC notice includes a tentative conclusion that certain IP telephony offerings that allow their service to be used in
more than one location—including some of our offerings—to be required to meet the same customer location accuracy standards applicable to providers of mobile telecommunications
services.
In
September 2010, the FCC released a Notice of Inquiry again requesting comment on auto-location obligations and standards for certain IP telephony offerings which would
include some of our offerings. The Notice of Inquiry is seeking comment on whether the FCC's rules concerning the delivery of emergency services should be extended to non-interconnected
VoIP services as well as to mobile IP telephony applications used on smartphones, computers and other devices. We are currently unable to predict the outcome of these proceedings and the impact on our
business.
States are attempting to regulate certain forms of IP telephony which could result in making such offerings less competitive with traditional offerings of telecommunications
services and states are imposing additional surcharges and fees on providers of IP telephony services.
We offer certain services through IP telephony. IP telephony is subject to less regulation than traditional telecommunications
services. IP telephony has grown substantially over the last few years leading to increased scrutiny by federal and state legislatures and regulatory agencies. Historically, the FCC has preempted
states from imposing entry, tariffing and other traditional common carrier requirements on nomadic IP telephony offerings and instead subjects such offerings to discrete regulatory obligations. But
the FCC has recently allowed states to impose certain state-related funding obligations on providers of IP telephony. Additionally, a number of states are aggressively trying to exert jurisdiction
over certain forms of IP telephony, including some of our offerings, making the legal status of our services uncertain and subject to change as a result of future regulatory action, judicial decisions
or legislation in any of the jurisdictions in which we operate. Increased regulation at the state level could increase the costs associated with our service offerings.
Our
retail offerings of both telecommunications and IP telephony require us to collect and remit various federal and state surcharges. We pass these regulatory fees along to our
customers consistent with federal and state law. With respect to our IP telephony offering, an increasing number of states are considering the imposition of additional state-based surcharges and fees.
We would likely pass such
surcharges and fees along to our customers resulting in increasing the overall bill for our customers. The resulting increase in cost associated with our service may make our services less competitive
with traditional providers of telecommunications services and may also put us at a competitive disadvantage to providers of IP telephony that choose not to comply with these obligations.
There may be risks associated with our ability to comply with the requirements of federal and other regulations related to Customer Proprietary Network Information.
The FCC's existing rules provide that service providers may not use customer proprietary network information, or CPNI, without customer
approval except under specific circumstances, and must comply with detailed customer approval processes when using CPNI outside of such circumstances. The FCC's CPNI rules also impose, among other
obligations, data security requirements on service providers and interconnected VoIP providers like us.
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At
the present time, we do not utilize our customer's CPNI in a manner which would require us to obtain consent from our customers but, in the event that we do in the future, we will be
required to adhere to specific CPNI rules targeted at marketing such services. Our failure to achieve compliance with any future CPNI orders, rules, filings or standards, or any enforcement action
initiated by the FCC, other federal agencies, state public utilities commissions, or other state entities, against us could have a material adverse effect on our business, financial condition or
operating results.
User concerns about our use and protection of personal data and the privacy of their communications and data protection breaches could harm our brand, reduce demand for our
products and expose us to government proceedings and actions. Failure or perceived failure by us to comply with our privacy policy or legal or regulatory requirements in one or multiple jurisdictions
could result in proceedings, actions or penalties against us.
The effectiveness of our solutions relies on our customers' storage and use of data concerning their customers, including financial,
personally identifying and other sensitive data. Our customers' collection and use of data for consumer profiling may raise privacy and security concerns and negatively impact the demand for our
solutions. We have implemented various features intended to enable our customers to better comply with privacy and security requirements, such as opt-out messaging and checking, the use of
anonymous identifiers for sensitive data, and restricted data access, but these security measures may not be effective against all potential privacy
concerns and security threats. If a breach of customer data security were to occur, our solutions may be perceived as less desirable, which would negatively affect our business and operating results.
In
addition, governments in some jurisdictions have enacted or are considering enacting consumer data privacy legislation, including laws and regulations applying to the solicitation,
collection, processing and use of consumer data. This legislation could reduce the demand for our solutions if we fail to design or enhance our solutions to enable our customers to comply with the
privacy and security measures required by the legislation. Moreover, we may be exposed to liability under existing or new consumer data privacy legislation.
Our business is subject to certain risks associated with our ability to comply with the Communications Assistance for Law Enforcement Act.
When we provide certain services we are subject to the Communications Assistance for Law Enforcement Act, or CALEA. CALEA requires us
to have the capability to provide to law enforcement agencies certain information about traffic that our customers originate. This requires, among other things, that we have the capability to provide
information concerning the origination and destination of communications traffic as well as the ability to provide real-time surveillance. CALEA further requires that we have the
capability to deliver such information in a specific format and to a particular destination identified by law enforcement. The FCC's rules allow us to use third parties to comply with these
obligations but we are ultimately responsible for compliance. We may be unable to comply with CALEA in all instances, subjecting us to fines, penalties and other enforcement actions.
Risks Related to Our Common Stock and this Offering
Being a public company will increase the administrative costs of operating our business, including maintaining and improving our financial controls and complying with rules
and regulations, and may be a significant burden on our management team, thus requiring considerable expenditures of our resources.
As a public company, we will incur additional legal, accounting and other expenses that we do not incur as a private company. The
Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules of the exchange on which our shares are listed, will apply to us as a
public company. Compliance with these rules and regulations will necessitate significant increases in our legal and financial budgets and may also strain our personnel, systems and
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resources.
The Exchange Act requires, among other things, filing of annual, quarterly and current reports with respect to our business and financial results and condition. The Sarbanes-Oxley Act
requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Satisfying these requirements involves a commitment of
significant resources and management oversight. As a result of management's efforts to comply with such requirements, other important business concerns may receive insufficient attention, which could
have a material adverse effect on our business, financial condition and results of operations. Failure to meet certain of these regulatory requirements may also cause us to be delisted from the New
York Stock Exchange or Nasdaq Global Market. In addition, we currently have a relatively small finance staff and may have difficulty recruiting additional legal, accounting and financial staff with
appropriate public company experience and technical accounting knowledge. The hiring of such personnel will also increase our operating expenses in future periods.
We
also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept
reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate director and officer insurance, it may be more difficult for us to attract and retain
qualified persons to serve on our board of directors or as executive officers.
If we are unable to successfully remediate material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be
adversely affected.
In connection with the audit of our financial statements for the year ended December 31, 2010, our management and independent
registered public accounting firm identified two material weaknesses in our internal control over financial reporting. A material weakness is a control deficiency, or a combination of control
deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Our management and independent
registered public accounting firm did not
perform an evaluation of our internal control over financial reporting as of December 31, 2010 in accordance with the provisions of the Sarbanes-Oxley Act. Had we and our independent registered
public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have
been identified by management or our independent registered public accounting firm, and those control deficiencies could have also represented one or more material weaknesses.
Our
management and independent registered public accounting firm identified material weaknesses related to (i) a lack of adequate control over the accounting for complex financial
instruments, including accounting for certain stock warrants and convertible instruments and (ii) a lack of adequate control to identify, evaluate, monitor and adjust our accrued liability for
peering partner disputes. Both of these control deficiencies resulted in a more than remote likelihood that a material misstatement of our annual and interim financial statements would not be
prevented or detected. As a result, audit adjustments to our financial statements were identified during the course of the audit. In an effort to remediate these material weaknesses, with respect to
complex financial instruments, we have retained consultants to assist us in properly accounting for complex financial instruments and have also developed in-house knowledge and expertise
related to the accounting literature surrounding complex financial instruments. With respect to peering partner disputes, we have developed, documented and initiated enhanced procedures over our
peering partner disputes to improve our ability to make reasonable estimates with respect to the amounts for which such disputes will ultimately be settled.
We
cannot assure you that these measures will significantly improve or remediate the material weakness described above. We also cannot assure you that we have identified all or that we
will not in the future have additional material weaknesses. Accordingly, material weaknesses may still exist when we report on the effectiveness of our internal control over financial reporting for
purposes of our
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attestation
required by reporting requirements under the Exchange Act or Section 404 of the Sarbanes-Oxley Act after this offering. The standards required for a Section 404 assessment
under the Sarbanes-Oxley Act will require us to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. These stringent
standards require that our audit committee be advised and regularly updated on management's review of internal controls. Our management may not be able to effectively and timely implement controls and
procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable to us as a public company. If we fail to staff our accounting and finance
function adequately or maintain internal controls adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable
to report our financial results accurately or in a timely manner and our business and stock price may suffer.
We may need additional capital in the future and such capital may be limited or unavailable. Failure to raise capital when needed could prevent us from growing in accordance
with our plans.
We may require more capital in the future from equity or debt financings to fund our operations, finance investments in equipment and
infrastructure, acquire complementary businesses and technologies, and respond to competitive pressures and potential strategic opportunities. We believe that our existing working capital, together
with the proceeds of this offering, will be sufficient to fund our working capital requirements, capital expenditures and operations for at least the next 12 months. However, the assumptions on
which this assessment has been made may prove to be wrong, and it is possible that we could expend available financial resources sooner than we currently expect. If we are required to raise additional
funds through further issuances of equity or other securities convertible into equity, our existing stockholders could suffer significant dilution, and any new shares we issue could have rights,
preferences or privileges senior to those of the holders of our common stock, including the shares of common stock sold in this offering. The additional capital we may seek may not be available or, if
available, may not be available on favorable terms. In addition, our existing debt instruments limit our ability to incur additional indebtedness under certain circumstances. If we are unable to
obtain capital on favorable terms, or if we are unable to obtain capital at all, we may have to reduce our operations or forego opportunities, and this may have a material adverse effect on our
business, financial condition and results of operations.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our
business and stock price.
We will be subject to rules adopted by the Securities and Exchange Commission, or SEC, pursuant to Section 404 of the
Sarbanes-Oxley Act, which require us to include in our Annual Report on Form 10-K our report on, and assessment of the effectiveness of, our internal controls over financial
reporting beginning with our year ending December 31, 2012. Our independent auditors will also be required to attest to and report on the effectiveness of our internal controls over financial
reporting. If we fail to achieve and maintain the adequacy of our internal controls, there is a risk that we will not comply with all of the requirements imposed by Section 404. Moreover,
effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. Any of these possible outcomes could result in an adverse
reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements and could result in investigations or sanctions by the SEC, our stock exchange
or other regulatory authorities or in stockholder litigation. Any of these factors ultimately could harm our business and could negatively impact the market price of our securities. Ineffective
control over financial reporting could also cause investors to lose confidence in our reported financial information, which could adversely affect the trading price of our common stock.
Our
disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, our management, including our chief financial officer and
chief executive
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officer,
does not expect that our disclosure controls and procedures can prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances
of fraud, if any, have been detected.
There is no existing market for our common stock, and an active, liquid and orderly market for our common stock may not develop.
Currently, there is no public market for our common stock. Investor interest in us may not lead to the development of an active trading
market. The initial public offering price for the shares of our common stock will be negotiated between us and representatives of the underwriters and may not be indicative of prices that will prevail
in the open market following this offering. You may not be able to resell our common stock at or above the initial public offering price.
The trading value of our common stock may be volatile, and you might not be able to sell your shares at or above the initial public offering price.
Though our common stock has no prior trading history, the trading prices of technology company securities in general have been highly
volatile. Accordingly, the trading price of our common stock is likely to be subject to wide fluctuations, and you may not be able to resell our common stock at or above the initial public offering
price. Factors, in addition to those outlined elsewhere in this prospectus, that may affect the trading price of our common stock include:
•
actual or anticipated variations in our operating results;
•
changes in recommendations by any securities analysts that elect to follow our common stock;
•
the financial projections we may provide to the public, any changes in these projections or our failure to meet these
projections;
•
the loss of, or significant decrease in use of our services by, a key customer;
•
market conditions in industry categories that we serve and the economy as a whole;
•
the loss of key personnel;
•
regulatory changes affecting the delivery or overall value of our services;
•
lawsuits filed against us;
•
price and volume fluctuations in the overall stock market; and
•
other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
Future sales of shares by existing stockholders could cause our stock price to decline.
Attempts by existing stockholders to sell substantial amounts of our common stock in the public market after the contractual
lock-up and other legal restrictions on resale discussed in this prospectus lapse could cause the trading price of our common stock to decline significantly. Based on shares outstanding as
of March 31, 2011, upon completion of this offering, we will have outstanding                        shares of common stock,
assuming no exercise of the underwriters' over-allotment
option. Of these shares, only shares of common stock sold in this offering to investors other than those subject to a 180-day contractual lock-up will be freely tradable,
without restriction, in the public market. J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. may, in their sole discretion,
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permit
our officers, directors, employees and current stockholders who are subject to a 180-day contractual lock-up to sell shares prior to the expiration of the
lock-up agreements. The lock-up is subject to extension under certain circumstances. For additional information, see "Underwriting."
After
the lock-up agreements pertaining to this offering expire, substantially all of our shares will be eligible for sale in the public market, including shares held by
directors, executive officers and other affiliates, which will be subject to volume limitations under Rule 144 under the Securities Act. In addition, shares subject to outstanding options and
reserved for future issuance under our stock option plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, the
lock-up agreements and Rules 144 and 701 under the Securities Act. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the
trading price of our common stock could decline. See "Shares Eligible for Future Sale" for more information regarding shares of our common stock that existing stockholders may sell after this
offering.
If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.
The research and reports that industry or financial analysts publish about us or our business will likely have an effect on the trading
price of our common stock. If an industry analyst decides not to cover our company, or if an industry analyst decides to cease covering our company at some point in the future, we could lose
visibility in the market, which in turn could cause our stock price to decline. If an industry analyst downgrades our stock, our stock price would likely decline rapidly in response.
The concentration of our capital stock ownership with insiders upon the completion of this offering will likely limit your ability to influence corporate matters including
the ability to influence the outcome of director elections and other matters requiring stockholder approval.
We anticipate that our executive officers, directors, current five percent or greater stockholders and affiliated entities will
together beneficially own approximately        percent of our common stock outstanding after this offering, assuming full exercise of the underwriters' over-allotment option. As a
result, these stockholders, acting together, will have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant
corporate transactions. Corporate action might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have
the effect of delaying or preventing a change of control of our company that other stockholders may view as beneficial.
Our management will have broad discretion over the use of the proceeds from this offering and might not apply the proceeds of this offering in ways that increase the value
of your investment.
Our management will have broad discretion to use the net proceeds from this offering. We expect to use the net proceeds from this
offering for general corporate purposes, including working capital. We may also use net proceeds for other purposes, including possible investments in, or acquisitions of, complementary products or
technologies, although we have no specific plans at this time to do so. We may fail to use these funds effectively to yield a significant return, or any return, on any investment of these net
proceeds.
You will incur immediate and substantial dilution and may experience further dilution.
The initial public offering price of our common stock is substantially higher than $0.19, the net tangible book value per share of our
common stock as of December 31, 2010, calculated on a pro forma basis for this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of
$            in net tangible book value per share from the price you paid,
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based
on the initial offering price of $            per share. The exercise of options to purchase shares of our common stock outstanding as of December 31, 2010 at a weighted average
exercise price of $0.46 per share will result in further dilution.
Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management
and, as a result, depress the trading price of our common stock.
Our certificate of incorporation and bylaws contain provisions that could discourage, delay or prevent a change of control of our
company or changes in our management that the stockholders of our company may deem advantageous. These provisions:
•
establish a classified board of directors so that not all members of our board are elected at one time;
•
require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;
•
authorize the issuance of "blank check" preferred stock that our board could issue to increase the number of outstanding
shares and to discourage a takeover attempt;
•
limit the ability of our stockholders to call special meetings of stockholders;
•
prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our
stockholders;
•
provide that the board of directors is expressly authorized to adopt, alter or repeal our bylaws; and
•
establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted
upon by stockholders at stockholder meetings.
These
anti-takeover defenses could discourage, delay or prevent a transaction involving a change of control of our company. These provisions could also discourage proxy
contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take corporate actions other than those you desire.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable
future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future
will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any
future gains on their investments.
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, including statements that involve expectations, plans or intentions (such as those
relating to future business or financial results, new features, products or services, or management strategies). You can identify these forward-looking statements by words such as "may," "will,"
"would," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. These forward-looking statements involve risks and uncertainties that could
cause our actual results to differ materially from those expressed or implied in these forward-looking statements. These risks and uncertainties include, among others, those described under "Risk
Factors" and elsewhere in this prospectus, including in our financial statements and related notes appearing in this prospectus, and the following:
•
our ability to maintain or improve our growth rate, and fluctuations in our financial performance;
•
intense competition from legacy and emerging communications service providers, including traditional telecommunications
carriers and other providers of specialized communications services;
•
availability and performance of third parties and third-party facilities, equipment and services;
•
our ability to protect our intellectual property, technology and brand;
•
regulation of our business and the risk that compliance with regulatory requirements may be costly and may require that we
change the services we offer, the price for our services or the way we do business in particular states or other regions;
•
the growth and availability of broadband Internet access;
•
our ability to retain key personnel;
•
risks associated with acquisitions and other strategic transactions;
•
our ability to expand our service offerings; and
•
the costs associated with being an independent public company and our ability to comply with the internal control and
reporting obligations of public companies.
We
do not intend, and undertake no obligation, to update any of our forward-looking statements to reflect actual results, changes in circumstances, assumptions or beliefs, or future events or
circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
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USE OF PROCEEDS
We estimate that the net proceeds from the sale of shares of our common stock that we are selling in this offering will be
$             million, or $             million if the underwriters' over-allotment option is exercised in full, based
on an assumed initial public offering price of
$            per share, the midpoint of the estimated price range shown on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated
offering
expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders.
A
$1.00 increase or decrease in the assumed initial public offering price of $            per share would increase or decrease the net proceeds to us from the offering by
approximately $             million, assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions and estimated
offering
expenses payable by us. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would increase or decrease the net proceeds to us from this
offering by approximately $             million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions
and
estimated offering expenses payable by us.
The
principal purposes of this offering are to obtain additional capital, to create a public market for our common stock and to facilitate our future access to the public equity markets.
We
currently intend to use the net proceeds received by us from this offering for working capital and general corporate purposes. We may also use a portion of our net proceeds to acquire
and invest in complementary products, technologies or businesses; however, we currently have no agreements or commitments to complete any such transaction and are not involved in negotiations to do
so.
We
cannot specify with certainty the particular uses for the net proceeds to be received by us from this offering. Accordingly, our management team will have broad discretion in using
the net proceeds to be received by us from this offering.
Pending
the use of proceeds from this offering as described above, we plan to invest the net proceeds in short- and intermediate-term, interest-bearing obligations,
investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not
expect to pay any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on a number of
factors, including our earnings, capital requirements, financial condition, future prospects and other factors that our board of directors deems relevant. Additionally, under the terms of our Loan and
Security Agreement dated as of May 5, 2010 by and between us and Hercules Technology II, L.P., and Comerica Bank, we must obtain written consent from the lenders prior to paying any cash
dividends.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2010, as
follows:
•
on an actual basis;
•
on a pro forma basis after giving effect to the automatic conversion of all outstanding shares of our convertible
preferred stock into 41,695,608 shares of common stock, assuming the conversion immediately upon the completion of this offering, and the resulting reclassification of the convertible preferred stock
warrant liability to additional paid-in capital; and
•
on a pro forma as adjusted basis after giving effect to the automatic conversion of all outstanding shares of our
convertible preferred stock into 41,695,608 shares of common stock assuming the conversion immediately upon the completion of this offering, the resulting reclassification of the convertible preferred
stock warrant liability to additional paid-in capital, and our receipt of the net proceeds from the sale of            shares of common stock offered by us in this offering, at an
assumed initial public offering price of $            per share, the midpoint of the estimated price range set forth on the cover page of the prospectus, after deducting estimated
underwriting
discounts and commissions and estimated offering expenses payable by us.
You
should read this table in conjunction with the sections titled "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and our financial statements and related notes included elsewhere in this prospectus.
As of December 31, 2010
Actual
Pro Forma
Pro Forma as
Adjusted
(unaudited)
(unaudited)
(in thousands, except share
and per share data)
Cash and cash equivalents
$9,159
$9,159
$
Total indebtedness(1)
$18,675
$18,675
Warrant liabilities
12,400
1,007
Convertible preferred stock, $0.0001 par value per share: 44,760,592 shares authorized, 41,695,608 shares issued and outstanding actual; no shares
authorized, issued and outstanding pro forma and pro forma as adjusted (unaudited)
33,379
—
—
Stockholders' equity (deficit):
Common stock, $0.0001 par value per share: 80,000,000 shares authorized, 8,802,409(2) shares issued and outstanding actual; 80,000,000 shares authorized,
50,498,017(2) shares issued and outstanding pro forma (unaudited);            shares issued and outstanding pro forma as adjusted (unaudited)
1
5
Additional paid-in capital
3,719
48,487
Accumulated deficit
(36,611
)
(36,611
)
Total stockholders' equity (deficit)
(32,891
)
11,881
Total capitalization
$31,563
$31,563
$
(1)
Total
indebtedness includes $18.2 million in equipment financing obligations and $0.5 million payable under our capital lease obligation (see
Notes 4 and 10 to our audited financial statements).
(2)
Does
not include 1,538,640 shares provided as security for obligations under non-recourse notes from certain stockholders, as such shares are treated as
options for purposes of accounting, though they are legally issued and outstanding.
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Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, the midpoint of the
estimated price
range set forth on the cover page of the prospectus, would increase (decrease)
the amount of pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and net proceeds we receive from this offering
by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the
estimated
underwriting discounts and commissions and estimated offering expenses. Similarly, each increase (decrease) of one million shares in the number of shares of common stock offered by us would increase
(decrease) cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and net proceeds we receive from this offering by approximately
$             million, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
If
the underwriters' over-allotment option is exercised in full, pro forma as adjusted cash and cash equivalents, common stock and additional paid-in capital,
stockholders' equity (deficit) and shares issued and outstanding as of December 31, 2010 would be $             million,
$             million,
$             million and            , respectively.
The
number of shares of common stock issued and outstanding actual, pro forma, and pro forma as adjusted in the table above excludes the following shares:
•
14,722,328 shares of common stock issuable upon the exercise of options outstanding, at a weighted average exercise price
of $0.46 per share;
•
807,850 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock, at a weighted
average exercise price of $0.71 per share; and
•
2,743,077 shares of common stock, on an as-converted basis, issuable upon the exercise of outstanding warrants
to purchase convertible preferred stock assuming the conversion immediately upon the completion of this offering, at a weighted average exercise price of $0.41 per share.
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DILUTION
If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the
assumed initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible
book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma as adjusted net
tangible book value per share of common stock immediately after completion of this offering.
Net
tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of common stock outstanding. Our historical net
tangible book value (deficit) as of December 31, 2010, was $(1.6) million, or $(0.18) per share. Our pro forma net tangible book value as of December 31, 2010 was $9.8 million, or
$0.19 per share, based on the total number of shares of our common stock outstanding as of December 31, 2010, after giving effect to the conversion of all outstanding shares of our convertible
preferred stock into common stock assuming the conversion immediately upon the completion of this offering and the resulting reclassification of the convertible preferred stock warrant liability to
additional paid-in capital.
After
giving effect to our sale of shares of common stock in this offering at the assumed initial public offering price of $            per share, and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value as of December 31, 2010 would have been
$             million, or $            per share. This represents an immediate increase in net tangible book value of
$            per share to existing stockholders and an immediate
dilution in net tangible book value of $            per share to purchasers of common stock in this offering, as illustrated in the following table:
Assumed initial public offering price per share
$
Pro forma net tangible book value (deficit) per share as of December 31, 2010
$
Increase in pro forma net tangible book value (deficit) per share attributable to new investors
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to investors in this offering
$
A
$1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the estimated price range listed on the cover page of
this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share by $            , assuming the number of shares offered by us remains the same as set
forth on
the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
If
the underwriters' over-allotment option to purchase additional shares from us is exercised in full, the pro forma as adjusted net tangible book value per share after this
offering would be $            per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be
$            per share and the dilution to
new investors purchasing shares in this offering would be $            per share.
The
following table presents on a pro forma as adjusted basis as of December 31, 2010, after giving effect to the conversion of all outstanding shares of convertible preferred
stock into common stock assuming the conversion immediately upon the closing of this offering, the differences between the existing stockholders and the purchasers of shares in this offering with
respect to the number of shares purchased from us, the total consideration paid, which includes net proceeds received from the issuance of common and convertible preferred stock, cash received from
the exercise of stock options
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and
the value of any stock issued for services and the average price paid per share (in thousands, except per share amounts and percentages):
Shares Purchased
Total Consideration
Average Price
Per Share
Number
Percent
Amount
Percent
Existing stockholders
%
$
%
$
New investors in this offering
Totals
100.0
%
$
100.0
%
A
$1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the range listed on the cover page of this prospectus,
would increase (decrease) total consideration paid by new investors by $            , total consideration paid by all stockholders by
$            and the average price per share paid by all
stockholders by $            , in each case assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, and without deducting the estimated
underwriting discounts and commissions and estimated offering payable by us. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would
increase or decrease cash and cash equivalents, additional paid-in capital, total stockholders' equity, total capitalization and the net proceeds to us from this offering by approximately
$             million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering
expenses payable by us.
If
the underwriters exercise their over-allotment option in full, our existing stockholders would own        percent and our new investors would own
        percent of the total number of shares of our common stock outstanding after this offering.
The
foregoing calculations are based on our shares outstanding as of December 31, 2010 assuming our outstanding convertible preferred stock converts into 41,695,608 shares of
common stock and excludes the following shares:
•
14,722,328 shares of common stock issuable upon the exercise of options outstanding, at a weighted average exercise price
of $0.46 per share;
•
807,850 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock, at a weighted
average exercise price of $0.71 per share;
•
2,743,077 shares of common stock, on an as-converted basis, issuable upon the exercise of outstanding warrants
to purchase convertible preferred stock assuming the conversion immediately upon the completion of this offering, at a weighted average exercise price of $0.41 per share; and
•
1,538,640 shares provided as security for obligations under non-recourse notes from certain stockholders, as such shares
are treated as options for purposes of accounting though they are legally issued and outstanding.
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SELECTED FINANCIAL DATA
The selected statement of operations data for the years ended December 31, 2008, 2009 and 2010 and the balance sheet data as of
December 31, 2009 and 2010 are derived from our audited financial statements included elsewhere in this prospectus. The selected balance sheet data as of December 31, 2008 are derived
from our audited financial statements that are not included in this prospectus. The selected statement of operations data for the years ended December 31, 2006 and 2007 and the balance sheet
data as of December 31, 2006 and 2007 are derived from our unaudited financial statements, which are not included in this prospectus. The unaudited results for the years ended
December 31, 2006 and 2007 have been prepared on the same basis as the audited financial statements, and reflect all adjustments necessary to fairly reflect our financial position of
December 31, 2006 and 2007 and the results of operations for the years then ended. Our historical results are not necessarily indicative of the results that may be expected in the future. You
should read the following selected historical financial data below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial
statements, related notes, and other financial information included elsewhere in this prospectus. The selected financial data in this section is not intended to replace the financial statements and is
qualified in its entirety by the financial statements and related notes included in this prospectus.
Year Ended December 31,
2006
2007
2008
2009
2010
(in thousands, except share and per share data)
(unaudited)
(unaudited)
Statement of Operations Data:
Revenue
$18,970
$27,586
$43,352
$76,194
$111,549
Operating expenses:
Peering partner compensation
14,051
19,506
29,824
50,232
78,820
Infrastructure costs
895
2,426
2,987
5,265
6,636
Operations(1)
2,118
2,830
3,353
4,673
5,578
Research and development(1)
1,258
2,527
2,447
3,567
4,069
Sales and marketing(1)
3,506
5,596
4,741
6,367
7,693
General and administrative(1)
1,032
2,879
2,177
4,568
5,547
Depreciation and amortization
264
1,635
1,852
2,373
3,719
Total operating expenses
23,124
37,399
47,381
77,045
112,062
Loss from operations
(4,154
)
(9,813
)
(4,029
)
(851
)
(513
)
Interest expense, net
(101
)
(487
)
(1,274
)
(1,488
)
(2,614
)
Change in fair value of warrant liabilities
118
86
163
(1,004
)
(8,492
)
Net loss
$(4,137
)
$(10,214
)
$(5,140
)
$(3,343
)
$(11,619
)
Net loss per share of common stock, basic and diluted(2)
$(0.43
)
$(1.15
)
$(0.59
)
$(0.38
)
$(1.33
)
Shares used in computing net loss per share of common stock, basic and diluted(2)
9,525,979
8,874,075
8,757,955
8,757,955
8,759,925
Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)
$(0.07
)
Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)(2)
50,447,513
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December 31,
2006
2007
2008
2009
2010
(in thousands)
(unaudited)
(unaudited)
Balance Sheet Data:
Cash and cash equivalents
$5,990
$1,943
$11,764
$10,134
$9,159
Working capital (deficit)
6,721
(288
)
11,256
4,710
(3,536
)
Total assets
12,714
9,661
28,099
36,462
47,187
Total indebtedness
1,528
5,117
6,608
12,035
18,675
Warrant liabilities
298
1,322
1,311
2,945
12,400
Redeemable convertible preferred stock
13,164
15,170
33,345
33,345
33,379
Total stockholders' deficit
(4,560
)
(14,558
)
(18,829
)
(21,875
)
(32,891
)
(1)
The
following table presents stock-based compensation expense included in each expense category:
Year Ended December 31,
2006
2007
2008
2009
2010
(in thousands)
Operations
$1
$8
$27
$31
$144
Research and development
—
3
16
49
81
Sales and marketing
271
52
185
111
153
General and administrative
2
52
91
106
186
Total stock-based compensation
$274
$115
$319
$297
$564
(2)
Please
see Notes 1 and 12 to our audited financial statements included elsewhere in this prospectus for an explanation of the calculations of our
basic and diluted net loss per share of common stock and pro forma net loss per share of common stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified
below and elsewhere in this prospectus, particularly those discussed in the section entitled "Risk Factors."
Overview
We are a leading provider of on-demand, cloud-based communications services to service providers and enterprises. Our
customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we
refer to as our CloudWorx CaaS Platform, to deliver multimodal communications services, including voice, unified communications, video and other rich-media applications, to communications
devices with reduced cost and improved quality compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to
our flexible, software-based, multimodal, IP-based solutions.
The
global telecommunications industry is undergoing a shift to next-generation IP-based communications technologies from legacy telephone networks. This transition is being
driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models such as Software as a
Service, or SaaS. We believe these trends, along with the inability of legacy infrastructures to support the convergence of business and next-generation communications services, such as
VoIP and rich-media communications, will continue to drive demand for a flexible and high-quality cloud-based communications platform such as ours.
Our
revenue is derived principally from the delivery of communications services over our CloudWorx CaaS Platform. Substantially all of our revenue to date has been derived from the
transmission of voice traffic and related value-added services. Service provider and enterprise customers direct communications traffic to us, which we route through our peering partners so that the
traffic can be delivered to the ultimate recipient of the communication, which is the end-point device. We typically charge our customers based upon minutes of use for traffic delivered through our
platform. Our revenue has grown from $43.4 million for the year ended December 31, 2008 to $111.5 million for the year ended December 31, 2010. The minutes of use for
traffic delivered through our platform increased from 3.8 billion in 2008 to almost 17 billion in 2010, and our number of customers increased from 78 to 147. Similarly, the number of our
service provider peering partners increased from 34 in 2008 to more than 40 in 2010, and the number of telephone numbers and end point identifying addresses in our SuperRegistry directory increased to
over 400 million in 2010. Our revenue growth has been driven by a combination of increases in revenue from existing customers and the addition of new customers.
Historically,
substantially all of our revenue was derived from service provider customers. In 2010, revenue from enterprise customers increased significantly but still represented a
small percentage of our revenue. We have made investments in research and development to create services more targeted to enterprise customers and in sales and marketing to build and manage our
enterprise focused sales channels. As a result, we expect that revenue from enterprise customers will represent an increasing percentage of our revenue in future periods.
Our
single largest cost is the amount we pay to our peering partners for delivering communications to the ultimate end-point device user. Peering partners are the parties with whom we
have contractual arrangements pursuant to which we direct the communications traffic routed through our CloudWorx CaaS Platform. When the end-point device user is also a customer of one of our peering
partners, we
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refer
to this as direct peering, and when the end-point device user is not a customer of one of our peering partners, we refer to this as indirect peering. Our peering partner compensation expense has
historically increased largely in line with our increases in revenue. As we continue to grow the size of our SuperRegistry directory, we expect an increasing portion of our traffic will be delivered
as a result of direct peering and that our costs, as a percentage of revenue, will decrease.
Our
cloud-based software architecture has been designed to be scalable and enable us to continue to increase revenue without incurring a proportionate increase in our employee,
infrastructure, and other operating costs. Since our platform is software-based, our CloudWorx CaaS Platform can be scaled quickly and efficiently and we are able to increase our revenue without
making substantial investments in capital expenditures, regardless of geography. Because we have relied primarily on technology and software to respond to the increased demand for our services, our
revenue growth has not required a proportionate increase in headcount. In addition, since we are able to use third-party data centers and third-party fiber networks to deliver IP-based
traffic, we have a limited need for investments in our internal physical infrastructure.
We
operate in a competitive and dynamic pricing environment. We monitor and, as appropriate, update the pricing that we offer our customers based upon multiple factors as we seek to
offer our customers competitive pricing while satisfying their needs for carrier level quality and reliability. Likewise, the amounts we must pay to our peering partners are subject to change. Our
proprietary software enables us to collect and quickly analyze information on communications traffic and provide our services at a competitive price without compromising the quality of our service. In
addition, as the volume of traffic through our CloudWorx CaaS Platform increases, we expect we will be able to enter into better pricing arrangements with our peering partners.
Our
contracts with customers and peering partners do not include volume or pricing commitments and a significant portion of our revenue has historically been concentrated in a relatively
limited number of customers. Although we have periodically experienced significant period-to-period variations in the revenue we derive from some of our largest customers, in
each quarter but one since the quarter ended March 31, 2008, our aggregate revenue derived from existing customers increased over the revenue from the prior period. We have established and
maintain deep relationships with our customers, allowing us to have significant visibility into our customers' changing business plans and deployment decisions. Additionally, because we serve a
substantial number of the larger service providers in the U.S. market, we are able to monitor and benefit from the evolving trends among these service providers with respect to communications traffic
shifting between wireline and wireless providers, the continued migration of networks from the PSTN to SIP/IP-based networks and the changes in end-user customers among service
providers.
We
intend to continue to grow our business by generating additional revenue from existing and new service provider and enterprise customers. We also intend to continue to expand our
relationships with channel and technology partners to increase our number of enterprise customers. To date, we have generated our revenue principally from customers in the United States. We expect to
expand our business internationally in future periods.
We
have incurred losses since inception as we have grown our business and invested in our CloudWorx CaaS Platform and selling and administrative functions. As of December 31,
2010, we had an accumulated deficit of $36.6 million.
Key Metrics of Our Business
We monitor revenue as a measure of our overall business performance. We continually analyze and adjust the prices we charge our
customers based on market conditions. Although our revenue is generally not impacted by seasonality, our revenue is principally driven by business communications usage and is impacted by the weighted
number of business days in each quarter. To derive the weighted
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number
of business days in each quarter, we weight each day of the week and each holiday based upon historical traffic levels on those days.
We
also track operating margin to monitor operating costs, including peering partner compensation, infrastructure costs, capital expenditures and headcount, as a percentage of revenue.
We expect our operating costs as a percentage of revenue will decrease as our business continues to grow.
Key Components of Our Results of Operations
Revenue
We
derive our revenue primarily from service provider and enterprise customer usage of our CloudWorx CaaS Platform services to connect our customers' traffic to the ultimate end-point
device and charge on a minute of use basis. Our revenue growth has resulted from a combination of delivering additional minutes from existing customers and adding new customers. The rates charged per
minute are determined by contractual terms between us and our customers and are subject to periodic changes. To date, our revenue has principally been derived from service provider customers and
substantially all of such revenue has been for voice traffic and related value added services. In addition to revenue based upon minutes of use from service providers, we also derive revenue from
communication services provided to enterprise customers either on a minutes of use or on a monthly recurring basis per subscriber as the services are provided. While this revenue has not been a
significant percentage of our revenue to date, we expect that revenue from enterprise customers will comprise an increasing portion of our revenue in future periods as we increase and expand
relationships with our customers, channel partners and technology partners, and those customers and channel partners develop additional applications that utilize our services.
Revenue
is impacted by a variety of factors regarding the composition of the minutes of use, including whether they are wireless or VoIP minutes, on the one hand, or wireline minutes, on
the other hand.
Operating Expenses
Operating
expenses consist of peering partner compensation, infrastructure, operations, research and development, sales and marketing, general and administrative and depreciation and
amortization costs.
Peering Partner Compensation
Peering partner compensation represents the costs we incur to connect our customers' traffic to the ultimate end-point device. These
costs consist primarily of charges for access to our peering partners' networks and are recorded at the time of usage. They are typically charged based upon minutes of use, and vary based upon
negotiated rates with each peering partner. Peering partner compensation costs are impacted by a variety of factors relating to the composition of the minutes, including whether they are wireless or
VoIP, on the one hand, or wireline, on the other hand. These costs are also impacted by whether the delivery is the result of direct or indirect peering. For indirect peering, our peering partner
generally must pay another service provider who ultimately delivers the traffic to the end-user. As such, our peering partner compensation costs for this traffic increase accordingly. As
we continue to grow the size of our SuperRegistry directory, we expect an increasing portion of our traffic will be delivered as a result of direct peering and that our costs as a percentage of
revenue will decrease.
We
recognize peering partner compensation costs as they are incurred in accordance with contractual requirements. Invoices received from our peering partners often cover billing for
millions of minutes. We perform monthly bill verification procedures to identify errors in peering partners' billing processes. These verification procedures include the examination of the bills,
review of call detail records, comparing billing rates used with contractual billing rates, evaluating the trends of invoiced
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amounts
by peering partner and reviewing the types of charges being processed. If we discover a billing discrepancy as a result of our review, we then proactively seek to resolve the matter with our
peering partner. When applicable, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on our estimate of the amount that will eventually
be payable. If we subsequently determine that the disputed amounts will be settled for an amount different than the amount which we originally accrued, we will recognize the difference as an
adjustment to peering partner compensation. We believe that our procedures are designed to properly assess dispute accruals, however, changes to the estimates used in its calculation could result in a
material impact on our statement of operations.
Infrastructure Costs
Infrastructure costs include the costs of utilizing third party telecommunications networks, amounts we pay for use of
co-location facilities and interconnection services, and costs of equipment and software maintenance and support. The majority of these costs are fixed in nature. We make commitments for
infrastructure usage in anticipation of our future growth, balancing cost against the length of the commitment to cost effectively offer the quality and reliability that our customers require. We seek
to expand our capacity in advance of expected future growth needs. As such, our infrastructure costs may vary as a percentage of revenue in any particular period based upon the timing of these
investments in additional capacity. However, we expect that these costs will decline as a percentage of revenue over time.
Operations
Operations expenses consist of the costs of our administrative facilities and the costs related to our personnel who are directly
responsible for maintaining and expanding our CloudWorx CaaS Platform. Although there may be fluctuations from period to period as we hire additional personnel to expand our operations, we expect that
these costs will decline as a percentage of revenue in future periods.
Research and Development
Research and development expenses consist of costs incurred for internal development projects and are comprised of personnel costs,
testing and compliance services, and facilities costs. We are currently devoting substantial resources to the development of additional functionality for our existing products and the development of
new application components and APIs. We generally expense research and development costs as incurred. Some direct development costs related to the internally developed software used to provide our
services are capitalized and depreciated over their useful life. The capitalized cost of this internally developed software for use in providing our services may increase as we continue to develop
additional functionality to facilitate the delivery of our services.
Sales and Marketing
Sales and marketing expenses consist of personnel-related costs, sales commissions, travel costs and facilities costs and, to a lesser
extent, costs associated with marketing and publicizing our products and services. We primarily use a direct sales approach for our service provider customers and an indirect approach using sales
channels for our enterprise customers. We plan to continue to invest in sales and marketing to expand and grow our business. However, we expect that these costs as a percentage of revenue will decline
in future periods.
General and Administrative
General and administrative expenses consist of personnel-related costs, professional services, and facilities costs related to our
executive, finance, human resources and information technology functions.
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Professional
services consist of outside legal and accounting services and information technology consulting costs. These costs have generally increased as we have invested in our administrative
infrastructure to support our growth. Following the completion of this offering, we expect to incur additional expenses associated with being a public company, including increased legal and accounting
costs, investor relations costs and compliance costs in connection with the internal control requirements of the Sarbanes-Oxley Act.
Depreciation and Amortization
Depreciation and amortization expenses relate to our property and equipment and finite-lived intangible assets. Depreciation expense
for property and equipment is primarily related to equipment that hosts our CloudWorx CaaS Platform housed at co-location facilities and is computed using the straight-line
method over the estimated useful lives of the assets. This equipment is depreciated over seven years and all other equipment is depreciated over three years. Amortization for leasehold improvements is
computed using the straight-line method over the shorter of the term of the lease or estimated useful lives of the assets. Amortization of finite-lived intangible assets is computed using
the straight-line method over the estimated economic life of the asset. For the capitalized development costs related to our CloudCentral customer portal, the amortization period is seven
years. For capitalized patent costs, the amortization period is the term of the patent, generally 14 years, or the estimated economic life if deemed to be shorter. We expect depreciation and
amortization expenses to continue to increase on an absolute level as we increase our investments in equipment, but to decrease as a percentage of our revenue.
Other Income (Expense)
Interest Expense, Net
Interest expense, net consists primarily of interest accrued or paid on our equipment financing obligations and our loan and security
agreements, as well as the amortization of debt discount and deferred financing costs.
Change in Fair Value of Warrant Liabilities
The change in fair value of warrant liabilities consists of the change in the fair value of our warrants to purchase convertible
preferred stock and those warrants to purchase common stock with price protection features. These outstanding warrants are classified as liabilities and, as such, are remeasured to fair value at each
balance sheet date with the corresponding gain or loss from the adjustment recorded in our statement of operations. The fair value of the warrants is estimated using the Black-Scholes option-pricing
model and incorporating considerations of the potential value associated with price protection features. We will continue to record adjustments to the fair value of the warrants until the earlier of
the exercise or expiration of the warrants. Following the
completion of this offering, we will no longer be subject to these charges relating to the warrants for the purchase of our convertible preferred stock as they will be converted into warrants for
common stock and will not have price protection features. However, we will continue to adjust our existing common stock warrants with price protection features for changes in fair value until the
earlier of the exercise or expiration of the warrants.
Internal Control Over Financial Reporting
In connection with the audit of our financial statements for the year ended December 31, 2010, our management and independent
registered public accounting firm identified two material weaknesses in our internal control over financial reporting, as defined in rules established by the Public Company Accounting Oversight Board,
or PCAOB. These material weaknesses related to (i) a lack of adequate
42
Table of Contents
control
over the accounting for complex financial instruments, including accounting for certain stock warrants and convertible instruments and (ii) a lack of adequate controls to identify,
evaluate, monitor and adjust our accrued liability for peering partner disputes. As a result, audit adjustments to our financial statements were identified during the course of the audit. In an effort
to remediate these material weaknesses, with respect to complex financial instruments, we have retained consultants to assist us in properly accounting for complex financial instruments and have also
developed in-house knowledge and expertise related to the accounting literature surrounding complex financial instruments. With respect to peering partner disputes, we have developed,
documented and initiated enhanced procedures over our peering partner disputes to improve our ability to make reasonable estimates with respect to the amounts that such disputes will ultimately be
settled. We cannot assure you that these measures will significantly improve or remediate the material weaknesses described above.
Assessing
our procedures to improve our internal control over financial reporting is an ongoing process. We are currently not required to comply with Section 404 of the
Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. As a result, our management did not perform an
evaluation of our internal control over financial reporting as of December 31, 2010. Further, our independent registered public accounting firm has not been engaged to express, nor have they
expressed, an opinion on the effectiveness of our internal control over financial reporting. We currently do not have an internal audit function.
For
the year ending December 31, 2012, pursuant to Section 404 of the Sarbanes-Oxley Act, management will be required to deliver a report that assesses the effectiveness of
our internal control over financial reporting. Under current SEC rules, if we are an accelerated filer, our independent registered public accounting firm will be required to deliver an attestation
report on the effectiveness of our internal control over financial reporting beginning with the year ending December 31, 2012.
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Results of Operations
The following table presents our statement of operations for the periods indicated (in thousands):
Year Ended December 31,
2008
2009
2010
Revenue
$
43,352
$
76,194
$
111,549
Operating expenses:
Peering partner compensation
29,824
50,232
78,820
Infrastructure costs
2,987
5,265
6,636
Operations(1)
3,353
4,673
5,578
Research and development(1)
2,447
3,567
4,069
Sales and marketing(1)
4,741
6,367
7,693
General and administrative(1)
2,177
4,568
5,547
Depreciation and amortization
1,852
2,373
3,719
Total operating expenses
47,381
77,045
112,062
Loss from operations
(4,029
)
(851
)
(513
)
Interest expense, net
(1,274
)
(1,488
)
(2,614
)
Change in fair value of warrant liabilities
163
(1,004
)
(8,492
)
Net loss
$
(5,140
)
$
(3,343
)
$
(11,619
)
(1)
Includes
stock-based compensation expense as follows (in thousands):
Year Ended December 31,
2008
2009
2010
Operations
$27
$31
$
144
Research and development
16
49
81
Sales and marketing
185
111
153
General and administrative
91
106
186
Total stock-based compensation
$319
$297
$
564
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The following table sets forth the results of operations for the specified periods as a percentage of our revenue for those periods:
Year Ended December 31,
2008
2009
2010
Revenue
100
%
100
%
100
%
Operating expenses:
Peering partner compensation
69
66
71
Infrastructure costs
7
7
6
Operations
8
6
5
Research and development
6
5
4
Sales and marketing
11
8
7
General and administrative
5
6
5
Depreciation and amortization
4
3
3
Total operating expenses
109
101
100
Loss from operations
(9
)
(1
)
(0
)
Interest expense, net
(3
)
(2
)
(2
)
Change in fair value of warrant liabilities
0
(1
)
(8
)
Net loss
(12
)%
(4
)%
(10
)%
Year ended December 31, 2010 compared to the year ended December 31, 2009
Revenue
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Revenue
$
76,194
$
111,549
$
35,355
46
%
Our
revenue increased by $35.3 million, or 46 percent, to $111.5 million in 2010 from $76.2 million in 2009. This increase primarily reflected an increase of
$28.8 million resulting from the addition in late 2009 of a large service provider customer and an aggregate $10.9 million in revenue due to increased usage from other existing service
provider customers offset in part by a decrease of $17.1 million in revenue from one customer. The remaining increase was due to revenue from new customers in 2010. Revenue from our three
largest customers represented 50 percent of our revenue in 2010 as compared to 61 percent in 2009. Revenue from particular customers may vary from period to period as our contracts do not include
volume or pricing commitments. Revenue from particular customers has also varied as a result of industry consolidation and as our customers have added or lost end-users, and their
associated communications traffic, over time.
Operating Expenses
Peering Partner Compensation
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Peering partner compensation
$
50,232
$
78,820
$
28,588
57
%
Our
peering partner compensation costs increased by $28.6 million, or 57 percent, to $78.8 million in 2010 from $50.2 million in 2009. This increase was primarily
due to increased traffic through our CloudWorx CaaS Platform. Peering partner compensation increased as a percentage of revenue from
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66 percent
in 2009 to 71 percent in 2010. In 2009, we benefited from a more favorable revenue mix than in 2010 due to the composition of minutes, causing peering partner compensation as a
percentage of revenue to be lower in 2009.
Infrastructure Costs
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Infrastructure costs
$
5,265
$
6,636
$
1,371
26
%
Infrastructure
costs increased by $1.4 million, or 26 percent, to $6.6 million in 2010 from $5.3 million in 2009. This increase was necessary to support the
increase in minutes of use by our customers. In addition, our maintenance costs increased by $0.7 million due to a year-over-year increase in costs related to the
equipment that hosts our CloudWorx CaaS Platform. Infrastructure costs decreased as a percentage of revenue from 7 percent in 2009 to 6 percent in 2010, as we were able to process the
increase in minutes of use without having to make a proportional investment in our infrastructure.
Operations
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Operations
$
4,673
$
5,578
$
905
19
%
Operations
expenses increased by $0.9 million, or 19 percent, to $5.6 million in 2010 from $4.7 million in 2009. This increase was primarily the result of a
$0.8 million increase in costs related to personnel due to an increase in the headcount in our operations group. Operations expenses decreased as a percentage of revenue from 6 percent
in 2009 to 5 percent in 2010, as we were able to increase our revenue without a proportional increase in our operations staff. Operations expenses included $31,000 in stock compensation expense
in 2009 and $0.1 million in 2010.
Research and Development
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Research and development
$
3,567
$
4,069
$
502
14
%
Research
and development expenses increased by $0.5 million, or 14 percent, to $4.1 million in 2010 from $3.6 million in 2009. This increase was primarily the
result of a $0.4 million increase in costs related to personnel due to an increase in headcount as we expanded our product development efforts, in particular for our CloudCentral portal and
other new and enhanced services for our enterprise customers. Research and development expenses decreased as a percentage of revenue from 5 percent in 2009 to 4 percent in 2010,
notwithstanding an increase in research and development headcount, as a portion of research and development costs were capitalized. Capitalized software development costs increased from $0 in 2009 to
$0.7 million in 2010. Research and development expenses included $49,000 in stock compensation expense in 2009 and $81,000 in 2010.
Sales and Marketing
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Sales and marketing
$
6,367
$
7,693
$
1,326
21
%
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Sales
and marketing expenses increased by $1.3 million, or 21 percent, to $7.7 million in 2010 from $6.4 million in 2009. This increase was primarily the
result of a $1.3 million increase in costs related to personnel due to an increase in headcount and a $0.5 million increase in sales commissions and sales agent fees due to the increase
in revenue in 2010. These increases were offset by a $0.4 million decrease in contractor and consulting fees, as we hired more employees. Sales and marketing expenses decreased as a percentage
of revenue from 8 percent in 2009 to 7 percent in 2010. Sales and marketing expenses included $0.1 million in stock compensation expense in 2009 and $0.2 million in 2010.
General and Administrative
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
General and administrative
$
4,568
$
5,547
$
979
21
%
General
and administrative expenses increased by $1.0 million, or 21 percent in 2010 to $5.5 million from $4.6 million in 2009. This increase was primarily
the result of an increase of $1.0 million in costs related to personnel due to an increase in headcount as we continued to invest in our administrative infrastructure in anticipation of future
growth, $0.5 million for regulatory filings and related professional services and $0.1 million in recruiting costs. These increases were offset by decreases in bad debt expense of
$0.6 million and legal costs of $0.3 million. The decrease in bad debt expense was due to larger provisions taken in 2009 for customers whose receivables became uncollectible in that
year. General and administrative expenses decreased as a percentage of revenue from 6 percent in 2009 to 5 percent in 2010 due to a decrease in bad debt expense and an increase in
revenue without a need for a proportionate increase in administrative staff. General and administrative expenses included $0.1 million in stock compensation expense in 2009 and
$0.2 million in 2010.
Depreciation and Amortization
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Depreciation and amortization
$
2,373
$
3,719
$
1,346
57
%
Depreciation
and amortization expenses increased by $1.3 million, or 57 percent in 2010 to $3.7 million from $2.4 million in 2009 primarily due to an increase
in costs related to the equipment that hosts our CloudWorx CaaS Platform, as we added more capacity to address the increase in minutes of use and expansion of our customer base.
Interest Expense, Net
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Interest expense, net
$
1,488
$
2,614
$
1,126
76
%
Interest
expense, net increased by $1.1 million, or 76 percent, in 2010 to $2.6 million from $1.5 million in 2009. This increase was primarily a result of
additional borrowings under our equipment financing agreements and the amortization of debt discount and deferred financing fees on all our debt obligations.
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Table of Contents
Change in Fair Value of Warrant Liabilities
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2009
2010
(in thousands, except for percentages)
Change in fair value of warrant liabilities
$
1,004
$
8,492
$
7,488
746
%
The
change in fair value of warrant liabilities increased by $7.5 million to an expense of $8.5 million in 2010 from an expense of $1.0 million in 2009. The change
was primarily due to the increase in the fair value of the stock underlying the warrants.
Year ended December 31, 2009 compared to the year ended December 31, 2008
Revenue
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Revenue
$
43,352
$
76,194
$
32,842
76
%
Our
revenue increased by $32.8 million, or 76 percent, to $76.2 million in 2009 from $43.4 million in 2008. This increase primarily reflected a
$17.3 million increase in revenue from our largest customer and $8.9 million from new customers in 2009. Revenue from our three largest customers represented 61 percent of our
revenue in 2009 as compared to 56 percent in 2008.
Operating Expenses
Peering Partner Compensation
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Peering partner compensation
$
29,824
$
50,232
$
20,408
68
%
Our
peering partner compensation costs increased by $20.4 million, or 68 percent, to $50.2 million in 2009 from $29.8 million in 2008 due to increased traffic
over our CloudWorx CaaS Platform. Peering partner compensation decreased as a percentage of revenue from 69 percent in 2008 to 66 percent in 2009 primarily as a result of a more
favorable revenue mix due to the composition of minutes in 2009.
Infrastructure Costs
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Infrastructure costs
$
2,987
$
5,265
$
2,278
76
%
Infrastructure
costs increased by $2.3 million, or 76 percent, to $5.3 million in 2009 from $3.0 million in 2008. This increase was primarily the result of
the increase in minutes of use by our customers. In addition, we maintained additional capacity during 2009 as we invested in additional infrastructure in anticipation of future growth. Infrastructure
costs as a percentage of revenue was unchanged at 7 percent in 2008 and 2009, as the additional capacity was in line with the growth in minutes of use by our customers.
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Operations
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Operations
$
3,353
$
4,673
$
1,320
39
%
Operations
expenses increased by $1.3 million, or 39 percent, to $4.7 million in 2009 from $3.4 million in 2008. This increase was primarily the result of a
$1.1 million increase in costs related to personnel due to an increase in the headcount of our operations group and $0.2 million in fees paid to contractors due to the growth of our
business in 2009. Operations expenses decreased as a percentage of revenue from 8 percent in 2008 to 6 percent in 2009 as we were able to increase our revenue without needing a
proportionate increase in our operations staff. Operations expenses included $27,000 in stock compensation expense in 2008 and $31,000 in 2009.
Research and Development
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Research and development
$
2,447
$
3,567
$
1,120
46
%
Research
and development expenses increased by $1.1 million, or 46 percent, to $3.6 million in 2009 from $2.4 million in 2008. This increase was primarily the
result of a $1.3 million increase in costs related to personnel offset by a decrease of $0.3 million in contract employee costs, as we hired more personnel for our product development
activities and reduced our reliance on outside services. We also expanded our research and development activities in 2009, as we began to develop new and enhanced services for our enterprise
customers. Research and development expenses decreased as a percentage of revenue from 6 percent in 2008 to 5 percent in 2009, as we decreased our reliance on outside contractors.
Research and development expenses included $16,000 in stock compensation expense in 2008 and $49,000 in 2009.
Sales and Marketing
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Sales and marketing
$
4,741
$
6,367
$
1,626
34
%
Sales
and marketing expenses increased by $1.6 million, or 34 percent, to $6.4 million in 2009 from $4.7 million in 2008. This increase was primarily the
result of an increase of $0.5 million in costs related to personnel, $0.2 million in recruiting fees, $0.1 million in sales commissions and $0.1 million in travel costs due
to an increase in the number of sales and marketing employees in 2009. We also increased our marketing expenses by $0.1 million, and our consulting and contractor costs increased by
$0.5 million due to the expansion of our operations in 2009. Sales and marketing expenses decreased as a percentage of revenue from 11 percent in 2008 to 8 percent in 2009 as we
increased our revenue without a proportionate increase in our sales and marketing staff. Sales and marketing expenses included $0.2 million in stock compensation expense in 2008 and
$0.1 million in 2009.
General and Administrative
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
General and administrative
$
2,177
$
4,568
$
2,391
110
%
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Table of Contents
General
and administrative expenses increased by $2.4 million, or 110 percent, to $4.6 million in 2009 from $2.2 million in 2008. This increase was primarily
the result of an increase of $0.7 million in costs related to personnel due to higher headcount, $0.6 million in professional services primarily due to higher legal costs,
$0.3 million in contractor and consulting expenses and $0.5 million in bad debt expense. Professional services and contractor and consulting costs increased, as we expanded our
operations and entered into more contracts with customers and peering partners, as well as a higher level of business development activity. General and administrative expenses increased as a
percentage of revenue from five percent in 2008 to six percent in 2009 due to an increase in bad debt expense and an increase in administrative staff. General and administrative expenses included
$91,000 in stock compensation expense in 2008 and $0.1 million in 2009.
Depreciation and Amortization
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Depreciation and amortization
$
1,852
$
2,373
$
521
28
%
Depreciation
and amortization expenses increased by $0.5 million, or 28 percent, to $2.4 million in 2009 from $1.9 million in 2008. This increase was due to
additional costs related to the equipment that hosts our CloudWorx CaaS Platform, as we added more capacity to address the increased traffic and expansion of our customer base.
Interest Expense, Net
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Interest expense, net
$
1,274
$
1,488
$
214
17
%
Interest
expense, net increased by $0.2 million, or 17 percent, to $1.5 million in 2009 from $1.3 million in 2008. This change was primarily a result of an
increase in interest expense from our equipment financings in 2009. This increase was offset by a non-recurring $0.5 million beneficial conversion charge from the conversion of
$2.1 million in convertible promissory notes and related accrued interest into our Series C convertible preferred stock in October 2008 at a discount.
Change in Fair Value of Warrant Liabilities
Year Ended December 31,
Increase/
(Decrease)
% Increase/
(Decrease)
2008
2009
(in thousands, except for percentages)
Change in fair value of warrant liabilities
$
163
$
(1,004
)
$
(1,167
)
(716
)%
The
fair value of warrant liabilities changed by $1.2 million to an expense of $1.0 million in 2009 from a gain of $0.1 million in 2008. This change was primarily
due to an increase in the fair value of the stock underlying the warrants.
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Quarterly Results of Operations
The following table sets forth our unaudited quarterly statement of operations data for each of the eight quarters in the period ended
December 31, 2010. The data below has been prepared on the same basis as the audited financial statements included elsewhere in this prospectus, and, in management's opinion, reflects all
necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of this data. The results of historical periods are not necessarily indicative of the results of
operations for a full year or any future period.
Three Months Ended
Mar 31,
2009
June 30,
2009
Sept 30,
2009
Dec 31,
2009
Mar 31,
2010
June 30,
2010
Sept 30,
2010
Dec 31,
2010
(in thousands)
(unaudited)
Revenue
$
14,783
$
17,544
$
21,138
$
22,729
$
22,697
$
28,419
$
29,329
$
31,104
Operating expenses:
Peering partner compensation
9,446
11,353
14,132
15,301
15,949
19,949
20,952
21,970
Infrastructure costs
992
1,340
1,552
1,381
1,471
1,434
1,681
2,050
Operations(1)
1,197
1,138
1,246
1,092
1,311
1,419
1,451
1,397
Research and development(1)
834
932
968
833
1,005
1,011
1,026
1,027
Sales and marketing(1)
1,766
1,455
1,641
1,505
1,547
1,976
2,113
2,057
General and administrative(1)
1,141
1,277
1,049
1,101
1,361
1,365
1,451
1,370
Depreciation and amortization
481
564
641
687
774
827
1,026
1,092
Total operating expenses
15,857
18,059
21,229
21,900
23,418
27,981
29,700
30,963
Income (loss) from operations
(1,074
)
(515
)
(91
)
829
(721
)
438
(371
)
141
Interest expense, net
(225
)
(426
)
(381
)
(456
)
(491
)
(602
)
(749
)
(772
)
Change in fair value of warrant liabilities
(459
)
1
7
(553
)
(2,740
)
(839
)
(1,681
)
(3,232
)
Net loss
$(1,758
)
$(940
)
$(465
)
$(180
)
$(3,952
)
$(1,003
)
$(2,801
)
$(3,863
)
(1)
Includes stock-based compensation expense as follows:
Three Months Ended
Mar 31,
2009
June 30,
2009
Sept 30,
2009
Dec 31,
2009
Mar 31,
2010
June 30,
2010
Sept 30,
2010
Dec 31,
2010
(in thousands)
Operations
$9
$7
$7
$8
$32
$33
$35
$44
Research and development
10
11
14
14
17
19
20
25
Sales and marketing
31
19
19
42
15
34
50
53
General and administrative
26
26
27
27
39
57
42
49
Total stock-based compensation
$76
$63
$67
$91
$103
$143
$147
$171
Quarterly Trends
Revenue continued to increase over each quarter in 2009 and 2010, except for the quarter ended March 31, 2010, when revenue
decreased by $32,000 resulting from a more favorable mix of higher-priced minutes from one significant customer in the quarter ended December 31, 2009 compared to the quarter ended
March 31, 2010. Revenue in each quarter is impacted by the weighted number of business days in the quarter.
Peering
partner compensation increased over each quarter in 2009 and 2010 due to increased traffic over our CloudWorx CaaS Platform.
Infrastructure
costs increased beginning in the second quarter of 2009 as we added capacity for the delivery of higher traffic levels, and then remained consistent until the latter part
of 2010 when we again expanded our capacity for the anticipated increase in minutes of use and maintenance costs due to our purchases of more equipment in 2010.
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Operations,
research and development, sales and marketing, and general and administrative expenses increased in 2009 and 2010 primarily due to the addition of personnel in connection
with the expansion of our business.
Depreciation
and amortization expense increased quarter over quarter in 2009 and 2010 due to an increase in our purchases of equipment as we added more capacity to address the increased
traffic over our CloudWorx CaaS Platform.
Interest
expense varied from quarter to quarter due to increased borrowings under our equipment financing arrangements and a loan modification in the quarter ended March 31, 2010.
Change
in fair value of warrants was impacted by changes in the valuation of our stock which did not change significantly in the quarters ended June 30, 2009 and
September 30, 2009, and then continued to increase in subsequent quarters as the estimated fair value of our stock increased.
Net
loss decreased from the quarter ended March 31, 2009 through the quarter ended December 31, 2009 as we continued to benefit from higher income from operations. Our net
loss in the quarters ended March 31 and June 30, 2010 varied significantly primarily due to higher charges for the change in fair value of warrant liabilities.
Liquidity and Capital Resources
Since inception, we have funded our operations primarily with proceeds from issuances of common stock, convertible preferred stock,
convertible promissory notes and debt facilities. From inception to December 31, 2010, we raised an aggregate of $36.1 million from the sale of our convertible preferred stock, including
amounts received from the issuance of convertible promissory notes. We have also funded purchases of equipment with proceeds from our long-term debt.
Our
debt agreements contain certain affirmative and negative covenants, including restrictions with respect to payment of cash dividends, merger or consolidation, changes in the nature
of our business, disposal of assets and obtaining additional loans. Our debt agreements also contain certain financial covenants and cross-default provisions whereby a default, including a violation
of covenants, under the terms of one agreement would result in a default under another agreement. As of December 31, 2010, we were in compliance with our debt covenants in all material
respects. Our debt agreements are collateralized by all of our assets. In the event we fail to comply with our debt covenants, the amounts outstanding under our debt agreements would become due and
payable absent a waiver by our lenders, which could materially and adversely affect our liquidity.
We
have incurred recurring operating losses since inception and have negative working capital of $3.5 million, an accumulated deficit of $36.6 million and a total
stockholders' deficit of $32.9 million as of December 31, 2010. We believe our existing cash and cash equivalents combined with the amounts available under our debt facilities, will be
sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.
We
currently expect to continue to finance operations with a combination of cash provided by operations and debt arrangements. However, there can be no assurance that additional funding
will be available to us on acceptable terms on a timely basis, if at all, or that we will generate sufficient cash from operations to adequately fund our operating needs or ultimately achieve
profitability. If we are unable to raise additional capital to fund our operations, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our
ability to execute on our business plans.
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Cash Flows
The following summary of our cash flows is for the periods indicated, and has been derived from our financial statements which are
included elsewhere in this prospectus:
Year Ended December 31,
2008
2009
2010
Cash provided by (used in) operating activities
$(5,577
)
$3,166
$4,676
Cash used in investing activities
$(4,380
)
$(10,343
)
$(11,706
)
Cash provided by financing activities
$19,778
$5,547
$6,055
Cash Flows from Operating Activities
Our primary uses of cash from operating activities have been for personnel related expenditures, product development and costs related
to our facilities. Our cash flows from operating activities will continue to be affected principally by our working capital requirements and the extent to which we increase spending on personnel as
our business grows. Our largest source of operating cash flows is cash collections from our customers. We generally bill our customers on a monthly or weekly basis with payment due within 30 or
15 days. We have similar payment terms with our peering partners.
Cash
used in operating activities of $5.6 million in 2008 reflected a net loss of $5.1 million, partially offset by non-cash interest of $0.6 million
primarily related to the discount on the conversion of promissory notes into Series C convertible preferred stock. The increase in our net operating assets and liabilities was primarily a
result of an increase of $6.0 million in accounts receivable
due to the increase in revenue in the latter part of 2010 partially offset by an increase of $2.4 million in accounts payable as we expanded our business.
Cash
provided by operating activities of $3.2 million in 2009 reflected a net loss of $3.3 million, partially offset by non-cash charges of $2.4 million
for depreciation and amortization and $1.0 million related to our warrants as a result of the issuance of additional warrants and an increase in the fair value of the stock underlying these
warrants. The increase in our net operating assets and liabilities was primarily a result of an increase of $4.3 million in accounts payable and accrued liabilities as our business grew, offset
by an increase of $2.6 million on our accounts receivable balances, primarily due to the increase in revenue year over year and the timing of when we collect on the receivables.
Cash
provided by operating activities of $4.7 million in 2010 reflected a net loss of $11.6 million, offset by aggregate non-cash charges of
$12.2 million due to depreciation expenses and the change in fair value of warrant liabilities and an increase of $2.6 million in our net operating assets and liabilities. This increase
in our net operating assets and liabilities was primarily a result of an increase of $5.6 million in accounts payable and accrued liabilities offset by an increase in our accounts receivable
balances of $2.4 million which was primarily due to the increase in revenue year over year and the timing of when we collected on the receivables. As we have grown our business, we have been
able to obtain more favorable payment terms from our customers and peering partners.
Cash Flows from Investing Activities
Our investing activities have consisted primarily of capital expenditures to purchase equipment that hosts our CloudWorx CaaS Platform
and to a lesser degree purchase of intangible assets. We have historically made investments each year for the acquisition of additional equipment to support our current and anticipated revenue growth
and expect to continue to do so in the future.
In
2008, cash used in investing activities was $4.4 million as a result of our capital expenditures.
In
2009, cash used in investing activities was $10.3 million as a result of $9.9 million in capital expenditures and $0.5 million for the purchase of intangible
assets.
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In 2010, cash used in investing activities was $11.7 million as a result of $10.4 million in capital expenditures and $1.5 million for the
purchase of intangible assets, including the capitalization of our CloudCentral portal costs.
Cash Flows from Financing Activities
To date, we have financed our operations primarily with proceeds from the sale of convertible preferred stock and debt facilities. As
of December 31, 2010, we had outstanding debt of $18.7 million.
In
2008, cash provided by financing activities was $19.8 million, primarily as a result of $16.2 million of net proceeds from the issuance of our Series C
convertible preferred stock and net borrowings of $3.6 million from an equipment loan facility that we entered into in 2007.
In
2009, cash provided by financing activities was $5.5 million, primarily as a result of the receipt of $9.6 million from equipment loan facilities that we entered into in
2007 and 2009, offset by repayments on our debt of $4.1 million.
In
2010, cash provided by financing activities was $6.1 million, primarily as a result of the receipt of $10.2 million from equipment loan facilities and a loan and
security agreement that we entered into in 2010, offset by repayments on our debt of $4.1 million.
Contractual Obligations
The following summarizes our contractual obligations as of December 31, 2010:
Payments Due by Period
Contractual Obligations:
Less than
1 Year
1 to 3 Years
3 to 5 Years
More than
5 Years
Total
(in thousands)
Long-term debt obligations, including current portion(1)
$
10,990
$
9,555
$
—
$
—
$
20,545
Capital lease obligation
131
393
77
—
601
Operating lease obligations(2)
1,704
517
—
—
2,221
Purchase commitments
4,500
—
—
—
4,500
Total
$
17,325
$
10,465
$
77
$
—
$
27,867
(1)
Long-term
debt includes $18.2 million in principal and $2.3 million in accrued interest under the equipment financing agreements
entered into in 2007 and 2009 and a loan and security agreement entered into in 2010.
(2)
Operating
lease agreements represent our obligation to make payments under our non-cancelable lease agreements for office facilities and
telecommunications equipment.
Off-Balance Sheet Arrangements
As of December 31, 2010, we did not have any off-balance sheet arrangement and we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include risk related to interest rate
sensitivities.
We
had cash and cash equivalents of $10.1 million and $9.2 million as of December 31, 2009 and 2010. These amounts were held primarily in cash deposits and money
market funds and have been held
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for
working capital purposes. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of the interest rates in the United States. Due to
the short-term nature of these instruments, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or our results of
operations.
We
had long-term debt of $12.0 million and $18.7 million at December 31, 2009 and 2010 consisting of our outstanding obligations under our equipment
financing arrangements, capital lease obligation, and the loan and security agreement that we entered into in May 2010. Our obligations under the equipment financing arrangements are fixed and are not
subject to fluctuations. During the year ended December 31, 2010, a 10 percent increase or decrease in the prime rate would not have had a material impact on our interest expense.
To
the extent that in the future we enter into other long-term debt arrangements, we would be subject to fluctuations in interest rates which could have a material impact on
our future financial condition and results of operations.
Critical Accounting Policies
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation
of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, operating expenses and related disclosures. We base our
estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. In many instances, we could have reasonably used different accounting
estimates, and in other instances changes in the accounting estimates are reasonably likely to occur from period-to-period. Accordingly, actual results could differ
significantly
from the estimates made by our management. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial
condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these
policies relate to the more significant areas involving management's judgments and estimates.
Revenue Recognition
We recognize revenue when all of the following have occurred: (1) we have entered into a legally binding arrangement;
(2) services have been rendered; (3) payment is deemed fixed or determinable; and (4) collection is probable. The sales prices for our services are typically considered to be
fixed or determinable at the inception of an arrangement.
Our
revenue is primarily derived from customer usage of our CloudWorx CaaS Platform on a minute of use basis. We recognize revenue based upon documented minutes of traffic over our
CloudWorx CaaS Platform at the time of customer usage. The rates we charge per minute are determined by contracts between us and our customers and are subject to periodic changes.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of customers to make required payments.
When we are aware of circumstances that may impair a specific customer's ability to meet its financial obligations, we provide a specific allowance against the amounts due and thereby reduce the net
receivable to the amount we believe will be collected. For all other customers, we base the amount of our allowance on our historical experience, current economic trends, and an analysis of our aged
outstanding accounts receivable balances. If the financial condition of a customer deteriorates, resulting in additional risk in their ability to make payments to us, then additional allowances may be
required which would result in an additional expense in the period that determination is made.
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Stock-Based Compensation
We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the
date of grant, net of estimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date
fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.
The
fair value of the option awards during the years ended December 31, 2008, 2009 and 2010 was calculated using the Black-Scholes option valuation model with the following
assumptions:
Year Ended December 31,
2008
2009
2010
Expected term (in years)
6.25
6.25
6.25
Risk-free interest rate
2.6%-4.1%
2.6%-3.8%
1.7%-2.6%
Expected volatility
42-52%
52%
52%
Expected dividend rate
0%
0%
0%
The
Black-Scholes model requires the use of highly subjective and complex assumptions which determine the fair value of share-based awards. These assumptions include:
Expected Term.
The expected term represents the period that our share-based awards are expected to be outstanding and was primarily
determined using the simplified method in accordance with guidance provided by the SEC. For option grants considered to be on standard terms, the simplified method calculates the expected term as the
average of the time-to-vesting and the contractual life of the awards. For awards not considered on standard terms, the expected term is based on the historical option exercise
behavior of our employees and posting-vesting cancellations.
Risk-Free Interest Rate.
The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of
grant for zero coupon U.S. Treasury notes with maturities approximately equal to each award's expected term.
Expected Volatility.
The expected volatility is derived from historical volatilities of several unrelated public companies within the
telecommunications services and Software-as-a-Service, or SaaS, industries that are deemed to be comparable to our business because we have limited information on
the volatility of our common stock since we have no trading history. When making the selections of our industry peer companies to be used in the volatility calculation, we considered the size,
operational and economic similarities to our principal business operations.
Expected Dividend.
The expected dividend was assumed to be zero as we have never paid dividends and have no current plans to do so.
In
addition to assumptions used in the Black-Scholes option-pricing model, we must also estimate a forfeiture rate to calculate the stock-based compensation for our awards. Our
forfeiture rate is based on an analysis of our actual historical forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of
employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the
rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a
decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that
will result in an increase to the stock-based compensation expense recognized in the financial statements.
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We
will continue to use judgment in evaluating the expected term, expected volatility and forfeiture rate related to our own stock-based compensation on a prospective basis. As we
continue to accumulate additional data related to our common stock, we may have refinements to the estimates of our expected volatility, expected terms and forfeiture rates, which could materially
impact our future stock-based compensation expense.
We
are also required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations with the Black-Scholes option-pricing
model. The fair values of the common stock underlying our stock-based awards were estimated on each grant date by our board of directors, with input from management. Our board of directors has
historically been
comprised of a majority of non-employee directors with significant experience in various industries including the telecommunications, software, and technology sectors. We believe that our
board of directors has the relevant experience and expertise to determine a fair value of our common stock on each respective grant date. Given the absence of a public trading market of our common
stock, and in accordance with the American Institute of Certified Public Accountants Practice Guide,
Valuation of Privately-Held-Company Equity
Securities Issued as Compensation
, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate
of the fair value of our common stock including:
•
contemporaneous and retrospective valuations performed by unrelated third party specialists;
•
prices for our convertible preferred stock sold to outside investors in arm's-length transactions;
•
rights, preferences and privileges of our convertible preferred stock relative to those of our common stock;
•
actual operating and financial performance;
•
hiring of key personnel and the experience of our management;
•
risks inherent in the development and deployment of our products and services;
•
likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of our company
given prevailing market conditions and the nature and history of our business;
•
market value of a comparable group of public companies;
•
illiquidity of stock-based awards involving securities in a private company;
•
industry information such as market size and growth; and
•
macroeconomic conditions.
Since
March 2010, we have used the Probability-Weighted Expected Return Method, or PWERM, to estimate the fair value of our common and preferred stock. This valuation method was
considered to be most appropriate given the status of our business and the anticipated liquidity events. Under the PWERM method, management assigned probabilities and timing estimates to potential
liquidity events for our business based on a variety of factors, including primarily our recent operating history, the amount of cash held by us, and our business outlook. Three principal scenarios
were examined: a merger or acquisition, or M&A, scenario; an initial public offering, or IPO, scenario; and a scenario in which the company continues to operate as a private entity. For each valuation
date, we prepared a financial forecast to be used in the computation of the enterprise value. The financial forecasts took into account our past experience and future expectations.
To
arrive at a value for common shares under the M&A scenario and the IPO scenario, the Guideline Public Company Method was used to estimate our enterprise value at the time of the
respective anticipated liquidity event. The Guideline Public Company Method estimates the fair value
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of
a company by applying to that company market revenue multiples of publicly traded companies in similar lines of business. When choosing the comparable companies to be used for the Guideline Public
Company Method, we focused on companies in the telecommunication services and SaaS industries. Some of the specific criteria we used to select and analyze comparable companies within our industry
included the business description, business size, projected growth, financial condition, and historical operating results. We analyzed the business and financial profiles of the selected companies for
relative similarity to us, and once such differences and similarities were determined and proper adjustments were made, we selected an appropriate enterprise value revenue multiple. This revenue
multiple was
applied to the trailing twelve months' revenue at the time of the anticipated future liquidity event to arrive at our anticipated enterprise value and total stockholder value at the time of the
respective liquidity event. The total stockholder value was then allocated among share classes based on the amount of liquidation preferences (or, in the case of the IPO scenario, the conversion
ratios of each of the preferred shares), and the resulting equity values were discounted to the present using a discount rate which accounted for the market cost of capital and risk.
We
also used a Guideline Public Company Method to estimate our enterprise value under the continuing to operate as a private entity scenario. As our business continued to grow, and
developing multi-year forecasts became possible, starting on December 31, 2010, we supplemented the Guideline Public Company Method of estimating our enterprise value under the
continuing to operate as a private entity scenario with a Discounted Cash Flow approach. Under the Discounted Cash Flow approach, we analyzed the forecast of our expected future financial performance,
and discounted those to a present value using an appropriate discount rate which reflected our then-current cost of capital. We weighted the enterprise values and total stockholder values
determined by the Guideline Public Company Method and the Discounted Cash Flow approach to arrive at a single total stockholder value for the continuing to operate as a private entity scenario. Once
we arrived at an enterprise value under the continuing to operate as a private entity scenario, we apportioned this total stockholder value to the various share classes, based on their respective
liquidation preferences to arrive at a value for the common shares under the continuing to operate as a private entity scenario. Next, we applied a marketability discount to reflect the fact that our
common stockholders were unable to liquidate their holdings at will, or possibly at all, which resulted in a value for the common shares under the continuing to operate as a private entity scenario.
Lastly, we probability-weighted the common stockholder values under each of the scenarios to arrive at an indication of value for our common equity.
Information
regarding stock option grants to our employees since January 1, 2010 is summarized as follows:
Grant Date
Number of Options
Granted
Exercise
Price
Fair Value Per Share
of Common Stock
Aggregate Grant
Date Fair Value
May 7, 2010
692,500
$
1.70
$
1.70
$
620,000
June 24, 2010
82,500
1.70
1.70
73,000
September 23, 2010
147,500
2.02
2.02
153,000
October 27, 2010
67,500
2.57
2.57
89,000
The
intrinsic value of all outstanding options as of December 31, 2010 was $             million based on the estimated fair value for our common stock of
$          per share, the mid-point of the estimated price range set forth on the cover of this prospectus.
The
factors described above were considered by our board of directors each time it determined the fair value of our common stock. No single event caused the valuation of our common stock
to increase or decrease through December 31, 2010. Instead, a combination of the factors described below in each period led to the changes in the fair value of the underlying common stock. The
following additional
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factors
had particular relevance in connection with the board of directors' determination during each of the following periods:
March 31, 2010 to June 29, 2010: $1.70 per common share fair value
•
general, albeit slow, improvement in the economic environment, and a slight increase in the multiples of the peer
guideline public companies;
•
continued growth in our revenue, and stable operating margins;
•
our updated liquidity scenarios, which reflected the possibility of a liquidity event in the year to year-and-a-half
horizon; and
•
the most recent independent contemporaneous valuation report as of March 31, 2010.
June 30, 2010 to September 29, 2010: $2.02 per common share fair value
•
decline in the overall economic environment, and a corresponding decline in the valuation of our peer guideline public
companies;
•
continued growth in our revenue, and stable operating margins;
•
our updated liquidity scenarios which reflected a slight increase in the possibility of a liquidity event in the year to
year and a half horizon; and
•
the most recent independent contemporaneous valuation report as of June 30, 2010.
September 30, 2010 to December 30, 2010: $2.57 per common share fair value
•
slight improvement in the overall economic environment, and a corresponding slight improvement in the valuation of our
peer guideline public companies;
•
continued growth in our revenue, and continued operating margin stability;
•
our updated liquidity scenarios which reflected a one quarter delay in the timing of a liquidity event; and
•
the most recent independent contemporaneous valuation report as of September 30, 2010.
December 31, 2010 to March 30, 2011: $3.52 per common share fair value
•
improvement in the overall economic environment, and a corresponding improvement in the valuation of our peer guideline
public companies;
•
continued growth in our revenue, and continued operating margin stability;
•
our updated liquidity scenarios which reflected a delay in the timing of a liquidity event to the end of 2011; and
•
the most recent independent contemporaneous valuation report as of December 31, 2010.
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Our
calculations are sensitive to highly subjective assumptions that we were required to make at each valuation date relating to an appropriate present value discount rate. The following
table summarizes these assumptions at the end of each quarter since March 31, 2010:
Valuation Date
Present Value
Discount Rate
March 31, 2010
29.0
%
June 30, 2010
28.5
%
September 30, 2010
29.0
%
December 31, 2010
29.0
%
Our
present value discount rate was determined using a Capital Asset Pricing Model, or CAPM. The discount rate was based on an analysis of comparable companies in the telecommunications
services and SaaS industries. We also compared the results of the CAPM discount rate to discount rates published in various studies of venture capital required rates of return for investments in
companies of an equivalent stage of development.
Determining
the fair market value of our common stock involves complex and subjective judgments including estimates of revenue, assumed market growth rates and estimated costs, as well
as appropriate discount rates. At the time of each valuation, the significant estimates used in the discounted cash flow approach included estimates of our revenue and revenue growth rates for several
years into the future. Although each time we prepared such forecasts for use in the preparation of a valuation report, we did so based on assumptions that we believed to be reasonable and appropriate,
there can be no assurance that any such estimates for earlier periods or for future periods will prove to be accurate. There is also significant volatility in the telecommunications services and SaaS
industries. Our valuations incorporate the volatility in the markets based on the Guideline Public Company Method described above. We also experience fluctuations in our own financial forecasts on a
quarter-to-quarter basis which impacts the related valuations.
Our
stock-based compensation expense for awards granted is as follows (in thousands):
Year Ended December 31,
2008
2009
2010
Operations
$
27
$
31
$
144
Research and development
16
49
81
Sales and marketing
185
111
153
General and administrative
91
106
186
Total stock-based compensation
$
319
$
297
$
564
As
of December 31, 2010 we had $1.3 million of unrecognized stock-based compensation expense, net of estimated forfeitures, that is expected to be recognized over a
weighted average period of 1.5 years. In future periods, our stock-based compensation expense is expected to increase as a result of our existing unrecognized stock-based compensation to be
recognized as these awards vest and as we issue additional stock-based awards to attract and retain employees.
Liability Associated with Warrants to Purchase Convertible Preferred Stock and Common Stock
Freestanding warrants to purchase shares of our convertible preferred stock are classified as liabilities on our balance sheets at fair
value because the warrants may conditionally obligate us to redeem the underlying convertible preferred stock at some point in the future. Certain freestanding
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warrants
to purchase shares of our common stock are also classified as liabilities on our balance sheets at fair value because those warrants have price protection features.
These
convertible preferred stock and common stock warrants are subject to remeasurement at each balance sheet date, and any change in fair value is recognized as change in fair value of
warrant liabilities in the statements of operations. We estimated the fair value of these warrants at the respective balance sheet dates using the Black-Scholes option-pricing model and incorporating
considerations of the potential value associated with price protection features. We use assumptions to estimate the fair value of these warrants including the remaining contractual terms of the
warrants, risk-free interest rates, expected dividend yields and the expected volatility of the underlying stock. These assumptions are subjective and the fair value of these warrants
could have differed significantly had we used different assumptions.
We
will continue to record adjustments to the fair value of the convertible preferred stock warrants until they are exercised, expire or, upon the closing of an initial public offering,
when they become warrants to purchase shares of our common stock, at which time the warrants will no longer be accounted for as a liability. At that time, the then-current aggregate fair
value of these warrants will be reclassified from non-current liabilities to additional paid-in capital, a component of stockholders' equity, and we will cease to record any
related periodic changes in fair value. The common stock warrants with price protection features will continue to be classified as a liability and will be remeasured until they are exercised or
expire.
Recoverability of Intangible Assets
Intangible assets on our balance sheets consist primarily of capitalized costs to acquire and develop trademarks, patents, our
CloudCentral portal and regulatory licenses to operate as a telecommunications company. The trademarks and regulatory licenses have no expiration
date and thus are classified as indefinite lived intangible assets on our balance sheets. As of December 31, 2010, we had $0.9 million in indefinite-lived intangible assets.
Our
capitalized portal development costs and capitalized patent have an economic useful life and/or expire after a specified period of time and thus are classified as finite-lived
intangible assets on our balance sheets. Amortization of finite-lived intangible assets is computed using the straight-line method over the estimated economic life of the assets. For the
CloudCentral portal, the amortization period is seven years. For capitalized patent assets, the amortization period is the term of the patent, generally 14 years, or the estimated economic life
if deemed to be shorter. As of December 31, 2010, we had $1.1 million of finite-lived intangible assets on our balance sheets.
For
our indefinite-lived intangible assets, we conduct a long-lived asset impairment analysis on an annual basis and whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable. We perform our annual impairment test in the third quarter of each year. Factors we consider important which could cause us to assess potential
impairment include significant changes in the manner of our use of the asset or the strategy for our overall business and significant negative industry or economic trends. An impairment loss is
recorded when the carrying amount of the indefinite-lived asset is not recoverable and exceeds its fair value. The carrying amount of an asset is not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of the asset exceeds
its fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. Our ability to utilize the assets in growing our business, as well as the
market value of our company are variables considered in evaluating if impairment has occurred. These variables require management judgment and include inherent uncertainties such as customer
acceptance of our value proposition, our ability to manage operating costs and growing our business, as well as the impact of technology changes in our business.
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A
variation in the assumptions used could lead to a different conclusion regarding the realizability of an asset and, thus, could have a significant effect on our conclusions regarding whether an
asset is impaired and the amount of impairment loss recorded in our financial statements. We have used a replacement cost approach to determine the fair value of regulatory licenses for the purpose of
conducting an impairment test. This approach implies that the opportunity cost represents the foregone cash flows during the period it takes to obtain or create the asset, as compared to the cash
flows that would be earned if the intangible asset was on hand today. We have not recognized an impairment charge in our statements of operations on our indefinite-lived intangible assets in 2008,
2009 and 2010.
We
periodically review our finite-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset is impaired or the estimated
useful lives are no longer appropriate. If indicators of impairment exist and the undiscounted projected cash flows associated with such assets are less than the carrying amount of the asset, an
impairment loss is recorded to write the asset down to their estimated fair values. Fair value is estimated based on
discounted future cash flows. We have not recognized an impairment charge in our statement of operations on our finite-lived intangible assets in 2008, 2009 and 2010.
Reserve for Peering Partner Disputes
When applicable, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on
our estimate of the amount that will eventually be payable. If we subsequently determine that the disputed amounts will be settled for an amount different than the amount which we originally accrued,
we will recognize the difference as an adjustment to peering partner compensation. We believe that our procedures are designed to properly assess dispute accruals, however, changes to the estimates
used in its calculation could result in a material impact on our statement of operations.
Income Taxes
Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and
any valuation allowance recorded against our net deferred tax assets. We make these estimates and judgments about our future taxable income that are based on assumptions that are consistent with our
future plans. As of December 31, 2009 and 2010, we have recorded a full valuation allowance on our net deferred tax assets due to uncertainties related to our ability to utilize our deferred
tax assets in the foreseeable future. These deferred tax assets primarily consist of certain net operating loss carryforwards. Should the actual amounts differ from our estimates, the amount of our
valuation allowance could be materially impacted.
Since
inception, we have incurred operating losses, and, thus, we have not recorded a provision for income taxes for any of the periods presented for income tax. Accordingly, there have
not been significant changes to our provision for income taxes during 2008, 2009 or 2010, and we do not expect any significant changes until we are no longer incurring losses.
As
of December 31, 2010, we had federal net operating loss carryforwards of $26.8 million and state net operating loss carryforwards of $15.2 million. Realization of
deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance.
If not utilized, the federal net operating loss and tax credit carryforwards will expire beginning in 2023 and the state net operating loss will begin expiring in 2024. Utilization of these net
operating losses and credit carryforwards may be subject to an annual limitation due to applicable provisions of the Internal Revenue Code of 1986, as amended, and state and local tax laws if we have
experienced an "ownership change" in the past, or if an ownership
change occurs in the future, including, for example, as a result of the shares issued in this offering aggregated with certain other sales of our stock before or after this offering.
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Recent Accounting Pronouncements
Fair Value Measurements
Effective January 1, 2010, we adopted new authoritative guidance on fair value measurements and disclosures. The new guidance
requires additional disclosures regarding fair value measurements, amends disclosures about postretirement benefit plan assets, and provides clarification regarding the level of disaggregation of fair
value disclosures by investment class. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for certain Level 3 activity
disclosure requirements that will be effective for reporting periods beginning after December 15, 2010. Accordingly, we adopted this new guidance beginning January 1, 2010, except for
the additional Level 3 requirements, which will be adopted in 2011. Level 3 assets and liabilities are those whose fair value inputs are unobservable and reflect management's best
estimate of what market participants would use in pricing the asset or liability at the measurement date. The adoption of this guidance did not have a material impact on our financial statements in
2010 and is not expected to have a material impact on our financial statements in 2011.
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BUSINESS
Overview
We are a leading provider of on-demand, cloud-based communications services to service providers and enterprises. Our
customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our CloudWorx CaaS Platform, to deliver multimodal
communications services, including voice, unified communications, video and other rich-media applications, to communications devices with reduced cost and improved quality compared to
existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible, software-based, multimodal,
IP-based solutions. Our service provider customers include wireless and wireline carriers, as well as cable and voice over IP, or VoIP, providers. Our enterprise customers include
businesses seeking integrated multimodal communications solutions.
The
global telecommunications industry is undergoing a shift to next-generation IP-based communication technologies from legacy telephone networks. This transition is being
driven by the widespread availability of broadband Internet connectivity and the emergence of cloud-based infrastructures and on-demand service delivery models such as Software as a
Service, or SaaS. We believe these trends, along with the inability of legacy infrastructures to support user demand for next-generation multimodal communications services, have created an
opportunity and a need for a flexible and high-quality cloud-based communications platform.
Our
on-demand CloudWorx CaaS Platform is fast to implement, easy to administer through our self-service web-based CloudCentral Portal and highly
scalable. It is based on a sophisticated and integrated multi-layer approach, which includes:
•
our software-based Media Peering Grid service, providing any-to-any connection capabilities and
allowing service providers and enterprises to cost-effectively interconnect, transport and transact communications traffic, at a rate of more than 20 billion minutes annually based on our
traffic in the first quarter of 2011;
•
our SuperRegistry directory, currently containing more than 400 million telephone numbers and end-point
identifying addresses for wireless, wireline and other communication devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and
•
our AppWorx open and secure communications application development environment, which includes a complete set of
application programming interfaces, or APIs, developer tools, documentation and reference applications for building full-featured, rich-media applications that leverage our
Media Peering Grid service and our SuperRegistry directory.
These
three layers are fully integrated to allow simplified delivery of enhanced voice and rich-media services connecting through the industry-standard Session Initiation
Protocol, or SIP, to IP devices and enabling connectivity to traditional non-IP communication devices, such as legacy telephones. Our software-based platform scales easily without
requiring significant additional capital expenditures to create and implement new services for new and existing customers and provides significant benefits versus traditional neutral and direct
interconnection arrangements.
Our
CloudWorx CaaS Platform is used by service provider customers, such as Sprint and Qwest and enterprise customers, as well as our channel partners delivering communications services
to enterprises using equipment and software supplied by technology partners such as Microsoft, Cisco, Avaya and Siemens. Service providers rely on our solutions to respond to the rapidly changing
demands from their customers for high-quality multimodal communications through a variety of media and devices. Our platform allows service providers to eliminate or significantly reduce
their dependency on the higher cost legacy networks by avoiding those networks and directly delivering their communications traffic to other service providers' end-points through our
CloudWorx CaaS Platform services. Enterprise customers use our solutions to provide the connectivity necessary to support next-generation communication services, such as unified
communications, or UC, platforms that can be
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used
by businesses to embed a full suite of IP-based applications into their daily communications, including VoIP, email, instant messaging, collaboration and video conferencing, as well
as advanced contact center communications.
We
believe that our cloud-based architecture, the scale of our proprietary, multi-layer fully-integrated CloudWorx CaaS Platform, and the network effects arising out of the breadth of
our relationships with service provider customers, enterprise customers and channel partners, provide us with a significant competitive advantage.
For
2008, 2009 and 2010 our total revenue was $43.4 million, $76.2 million and $111.5 million, representing year-over-year organic growth
rates of 57 percent, 76 percent and 46 percent, respectively.
Industry
Overview
Despite significant developments in communications technology, the basic public telephone system, which is known as the Public Switched
Telephone Network, or PSTN, continues to rely on legacy networks using many of the same techniques that have been used for
decades to connect one voice caller to another. The PSTN is comprised of numerous local and long distance service providers that interconnect through hops and switches within their networks and often
across networks of other service providers to form a circuit and connect a call. This structure requires coordination across service providers and creates significant costs, including transit
charges and other payments to intermediate service providers. In addition, the transit of communications across multiple service providers can degrade voice quality and reduce reliability. This
structure also lacks flexibility to support multimodal communications and creates obstacles to the introduction of new forms of communications services and applications.
The
graphic below illustrates how a call from one end-user must pass through multiple connections and service providers to be routed to another end-user over the
traditional PSTN.
Legacy service provider PSTN architecture
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The increasing availability of broadband Internet connections continues to drive the growth of next-generation communications services, devices and
content. This growth has led to the development of the SIP protocol to provide a uniform standard for controlling multimedia communications sessions among IP networks, unified communications systems
and end-user communications devices. Infrastructure investments in, and widespread availability of, broadband Internet connections have led to increased adoption of unified communications
systems, offering more advanced features such as VoIP, email, instant messaging, collaboration and video conferencing as well as the ability to combine different forms of multimodal communications
such as voice and video. SIP-based communications enable substantial cost savings, operating flexibility and features relative to traditional telephony. However, due to the lack of an
end-to-end SIP-based communications platform, the legacy PSTN has had to serve as a bridge for traffic between and among VoIP and other SIP networks as well as for
connections to non-IP-based networks and end-point devices thus losing the advantages of SIP. This legacy PSTN infrastructure has become increasingly difficult to support as
service providers balance the need to upgrade networks and introduce new communications services for their enterprise customers, wireless communication and application users and consumers
demanding multimodal connectivity, with the goal of reducing operating costs and capital expenditures. Without the ability to keep communications traffic on an end-to-end
connection over IP, it is challenging for service providers to achieve the operational and financial benefits associated with the adoption of all-IP protocols, such as SIP, and to support
enterprises and consumers that are increasingly demanding higher quality, multimodal communications solutions to ensure consistent features and interoperability across such applications.
Reliance on legacy PSTN network
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Limitations of traditional approaches
•
Lack of support for software-based communications and rich media
applications.
The legacy PSTN infrastructure was not designed to support the high-bandwidth and feature-rich requirements of unified communications and
software-based rich media applications, such as video conferencing, SMS, instant messaging and collaboration using SIP and IP-based devices. In addition, legacy approaches lack an open and
secure application development environment with APIs, which further inhibits the development, distribution, access and integration of full-featured rich-media applications that can take
full advantage of IP-based communications.
•
Higher capital costs.
The legacy PSTN infrastructure is
characterized by limited functionality, fixed capacity cost and significant physical infrastructure requirements. Most service providers and enterprises maintain separate networks for
IP-related communications and traditional voice transport through dedicated circuits, resulting in additional infrastructure costs. The legacy PSTN's hierarchical architecture requires
switches to be housed in multiple regional and local physical facilities, resulting in high initial capital expenditures. In addition, service providers using the PSTN must install switches and other
infrastructure sufficient to handle the full volume of potential usage and do not have the capability to scale up or down on demand, thereby resulting in underutilized capacity and inefficient capital
investment.
•
Higher operating costs.
The legacy PSTN infrastructure
architecture uses hardware-based, circuit-intensive networks that require ongoing maintenance and higher operating costs. In addition, due to the multiple regional and local physical facilities
required by legacy service providers' hierarchical architecture, the operating costs of the circuits connecting these facilities significantly add to the network operating costs. These maintenance and
operating costs, along with the lengthy activation periods associated with legacy PSTN infrastructures erode the potential operating cost benefits that could be obtained by using an all-IP
network.
•
Inefficient routing and lack of dynamic network capacity
allocation.
In the legacy PSTN, a call must follow a specific path, passing through multiple switches and hops, as it travels between
end-points. Transit costs increase and the call quality deteriorates as the number of switches and hops in a route increases. SIP-based communications often rely upon the
legacy PSTN as a bridge to connect disparate IP networks. This inefficient routing structure of the legacy PSTN imposes constraints on SIP-based communications, limiting the
full-potential of multimodal communications. Additionally, the legacy PSTN lacks the capability to support dynamic allocation of network capacity in order to enable on-demand
traffic volume changes and facilitate more efficient and cost-effective administration of networks.
•
Lack of a centralized directory for multimodal
communications.
The legacy PSTN was designed to deliver voice communications between devices connected to a fixed switching site. As a
result, directories included only limited identifying information such as user names and phone numbers. As devices have become increasingly feature-rich and offer multimodal
communications, there is a growing need for a directory that not only maps the unique device addresses but also has the ability to determine the location and detect the capabilities of each device.
•
Limitations of direct and existing neutral interconnect
arrangements.
Some service providers that exchange significant volumes of traffic have used SIP to directly interconnect with other
service providers. These direct connect approaches require unique solutions for each individual partner, which are complex to implement and costly to manage because of the large number of direct
interconnects required and the inefficiency of managing multiple partner relationships. In addition, existing neutral interconnect solution providers offering peering services use a series of hardware
switches that rely on legacy protocols and hierarchical architecture that must be deployed in every local market where communication services are to be provided. This approach requires switches to be
housed in a large number of physical facilities in each local area,
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resulting
in high initial capital expenditures, ongoing maintenance costs and limited scalability. Further, these neutral interconnect solution providers still rely upon the PSTN hierarchical
architecture and are not capable of providing large scale multimodal communications solutions.
•
Lack of SIP-based interconnect solutions of
scale.
With the increased demand for unified communications platforms and multimodal communications, service providers and enterprises
are seeking SIP-based communication interconnect solutions of scale. Historically, these users were forced either to implement dedicated point-to-point IP
connections, or to rely on the legacy PSTN to serve as a bridge between networks. The former approach is limited in scale, costly and hard to manage, while the latter eliminates the ability to keep
communication traffic on IP connections end-to-end, limiting the ability to deliver the full benefits of multimodal communications. Having a large number of
SIP-based end-users provides the necessary scale to deliver the advantages of multimodal communications.
•
Lack of an integrated, on-demand
solution.
Traditionally, there has been a lack of integrated, on-demand solutions enabling service providers and enterprises
to deliver IP communications services. Service providers and enterprises seeking to deliver such services would have to combine various hardware, software and network solutions from different vendors,
requiring internal and external development and integration costs. Such approaches are expensive, have limited flexibility and features, pose interoperability challenges and require significant time
to implement.
Demand drivers for a new CaaS platform
By migrating to IP networks, service providers can leverage the flexibility of a software and cloud-based platform to increase the
variety of communications services delivered to customers as hosted offerings. Further, customers recognize that, in addition to the many service improvements, adoption of SIP as a protocol for
controlling multimedia communication sessions, such as voice and video over IP, provides the potential to drive down telecommunications costs as IP-based networks are more efficient and
cost-effective than those that rely on legacy PSTN infrastructure. According to IDC, the total U.S. telecommunications services market is expected to reach $326.5 billion by
2014.
(3)
Additionally, Infonetics Research has forecasted that the worldwide market for VoIP services could reach $74.5 billion by 2015.
(4)
Connecting
IP-based networks to each other or the PSTN, which is refered to as SIP trunking, represents one of the fastest growing segments within the VoIP services market, and is forecasted to
increase at a compound annual growth rate of 52 percent from $599 million in 2010 to $4.8 billion in 2015.
(4)
In addition to the migration of communications traffic
from the PSTN to IP networks, a number of other trends in the industry are driving the growth in demand for a new cloud-based communications service platform:
•
Proliferation of broadband connectivity.
Broadband
connectivity continues to expand worldwide at a rapid pace due to the increasing number of Internet users and the implementation of government-supported programs to bolster broadband infrastructure
deployment. This broadband proliferation increases the number of users that have access to and can benefit from all-IP communications services.
(3)
IDC, "U.S. Telecommunications Services 2010-2014 Forecast," IDC #223323, July 2010.
(4)
Infonetics
Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March 28,
2011.
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•
Emergence of cloud-based services
architectures.
On-demand delivery models are changing the way services are being delivered, providing significant benefits
such as minimizing up-front capital cost requirements, providing global reach, enabling customized pricing plans and centralized, highly redundant offerings with greater flexibility over
traditional on-premise models. As a result, cloud-based architectures are being rapidly adopted across organizations of all sizes. According to IDC, the
software-as-a-service market in the cloud, which also includes infrastructure-as-a-service and
platform-as-a-service, is expected to grow at a compound annual growth rate of 24 percent from $17.1 billion in 2010 to $40.5 billion in
2014.
(5)
•
Proliferation of SIP/IP-based
devices.
Continuing improvements in technology are driving the convergence of computer functionality and Internet connectivity in
communications devices. At the same time, the industry continues to adopt SIP as the primary protocol for multimedia communications. The large-scale deployment of IP networks and broad adoption of
SIP-based devices, including SIP phones, SIP video devices and SIP-enabled private branch exchanges, or PBXs, are driving increasing growth in SIP usage. According to
Infonetics, worldwide business VoIP seats are expected to grow at a compound annual growth rate of 27 percent from 19.9 million in 2010 to 65.3 million in
2015.
(6)
•
Demand for unified communications.
Organizations are
continuing to invest heavily in unified communications and mobility to increase collaboration, improve the productivity of their workforces and enhance relationships with customers and partners. In
addition, enterprises are looking for ways to augment their communications capabilities and leverage unified communications systems to enhance functionality and drive down costs. According to the
results of a survey conducted by IDC, one-fourth of medium-sized and large U.S. businesses surveyed indicated that they plan to implement a unified communications solution in the next
12 months and nearly one-third of small businesses indicated that they plan to use unified communications in the same period.
(7)
•
Increased outsourcing by communications service
providers.
Service providers are increasingly focused on providing on-demand multi-media services to their customers without
incurring significant additional operational and capital expenditures. They are increasingly choosing to outsource certain network operations and services which allows them to focus on strategic
investments to acquire customers and increase customer spending on new services. In a 2009 Booz & Co. survey of global carriers, 25 percent had already outsourced and 50 percent
indicated that they could outsource their network operations and administration.
(8)
(5)
IDC, "Worldwide Software as a Service 2010-2014 Forecast: Software Will Never Be the Same," IDC #223628,
June 2010.
(6)
Infonetics
Research, "VoIP and UC Services and Subscribers Biannual Worldwide and Regional Market Share, Size, and Forecasts," March 28, 2011.
(7)
IDC,
"Worldwide Unified Communications 2011 Top 10 Predictions," IDC #226900, February 2011.
(8)
Booz & Co.,
"Outsourcing Network Operations: Maximizing the Potential," 2009.
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Our CaaS Platform
IntelePeer CloudWorx CaaS platform
We have designed and developed a proprietary cloud-based communications service platform to address the challenges associated with the legacy PSTN. We believe
that our CloudWorx CaaS Platform cost-effectively leverages both a cloud-based architecture and the widespread availability of broadband connectivity to provide a carrier-grade, highly
flexible, software-based communications solution. Our on-demand CloudWorx CaaS Platform is fast to implement, easy to administer and highly scalable. It is based on a sophisticated,
integrated multi-layer approach, which includes:
•
our Media Peering Grid service, providing any-to-any connection capabilities and supporting both
SIP/IP-based networks and the legacy PSTN, allowing service providers and enterprises to cost-effectively interconnect, transport and transact communications traffic, currently
at a rate of more than 20 billion minutes annually;
•
our SuperRegistry directory, currently containing more than 400 million telephone numbers and end-point
identifying addresses for wireless, wireline and other communication devices, enabling intelligent routing of communications traffic over our Media Peering Grid service; and
•
our AppWorx open and secure communications application development environment, which includes a complete set of APIs,
developer tools, documentation and reference applications. These applications allow our customers and partners to offer on-demand delivery of a growing set of multimodal communications
applications, which our customers can use to generate additional revenue. Our AppWorx development environment enhances customer engagement and retention with our CloudWorx CaaS Platform and increases
communications traffic over our platform.
These
three layers are fully integrated via interconnecting software components, which enable our platform to be easily delivered and administered through our self-service
web portal.
Peering Layer: Media Peering Grid Service
Our Media Peering Grid layer is a software-based set of components and services, delivered via a cloud architecture that allows us to
directly connect IP sessions between service providers and enterprises as well as to connect to legacy non-IP communication devices. Our Media Peering Grid service automatically
establishes individual peering relationships and direct connections that provide increased reliability, expanded multimodal functionality and fewer toll-generating hops as compared to
legacy call transport architectures used by the PSTN. For example, in a VoIP peering arrangement,
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VoIP
operators can benefit from direct all-IP sessions using our Media Peering Grid service rather than traveling through multiple intermediate handoff points or hops over the legacy PSTN.
In addition to enabling direct connections between multiple service providers and enterprises, both across our IP-based platform and outside to the legacy PSTN, our cloud-based
architecture enables us to deploy new and expanded services to our customers without requiring them to make costly incremental investments in hardware. Additionally, our redundant,
geographically-dispersed, cloud-based architecture reduces the risk of regional disruptions.
In
addition to the efficiency and reliability of direct connections, our direct peering service can be used to link, or federate, self-contained, disparate networks to one
another, including enterprise, wireline, wireless and VoIP service providers, thus allowing these isolated networks to exchange traffic more efficiently than through the legacy PSTN.
Registry and Routing Layer: SuperRegistry Directory
Our SuperRegistry directory is a comprehensive database of telephone numbers and end-point identifying addresses for
wireless, wireline and other devices. We believe that our directory, which currently contains more than 400 million numbers, is the largest independent multi-carrier, multimodal database of its
kind, and continues to grow through contributions from our service provider peering partners and enterprise customers. Our SuperRegistry directory includes routing paths, pricing and route costs,
route quality and other features and related information. This information enables us to cost-effectively route voice calls, messages and rich media over IP and legacy PSTN connections to
the correct end-points, across various service providers, regardless of end-point location, device type or communications platform. By taking advantage of our proprietary
routing software, directory and interconnections, enterprises and service providers are able to send traffic directly, without geographic constraints, to any of the numbers and addresses in our
directory, eliminating intermediate hops and the costs associated with them.
Using
our SuperRegistry directory and routing technologies, our enterprise customers can move beyond the limitations of the PSTN to achieve rich media, all-IP unified
communications with other enterprises across disparate communications technologies and to stand-alone SIP devices.
Application Services Layer: AppWorx Software Development Environment
Our AppWorx software development environment allows our customers to offer software developers and web designers an open development
platform to easily create innovative, communication-enabled applications. These applications include functions such as click-to-call, which enable an end-user to
initiate a phone call directly from a website, widespread message dissemination via voice and SMS, voice and text marketing campaign management, on-demand audio conferencing and
integration of communications into business processes and applications. The full integration of our AppWorx development environment with our other CloudWorx CaaS Platform layers enables
on-demand delivery of these applications to meet our customers' changing needs. The applications that we or our customers create using these tools and open interfaces can be used to drive
innovative business applications and models that take advantage of the convergence between telephony and the web.
The
open architecture of our AppWorx development environment encourages third party developers and channel partners to leverage our technology to build new applications that can be
rapidly deployed. Developers can use these applications to generate incremental revenue streams or differentiate their products and services.
The
three layers of our CloudWorx CaaS Platform are integrated to provide a simple and cost-effective approach to delivering enhanced voice and rich-media
services to any IP-connected device
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worldwide.
Our proprietary platform enables service providers to offer incremental services expeditiously without needing to invest in new communications infrastructure.
Legacy service provider network
IntelePeer peering platform solution
Legacy enterprise network
IntelePeer enterprise federation
Our Competitive Strengths
Our solutions address the needs of service providers and enterprises while maintaining capital and operating efficiency. We believe the
following strengths differentiate us and position us for continued growth:
•
Cloud-based services architecture.
Our solutions are
delivered on demand through a cloud-based architecture that can serve customers anytime and anywhere. This flexible and scalable architecture also enables us to customize our services to match each
new customer's needs, thereby eliminating the challenges often associated with the adoption and implementation of fixed, one-size-fits-all solutions. Our ability to
rapidly and easily deploy a customized solution on a service-by-service basis, helps us attract customers making a complete transition as well as those preferring to take a
gradual migration path from PSTN-based to SIP-based communications services. Our architecture also allows us to easily introduce and deploy new service offerings to our
existing customers and enables them to adjust their level of use based on demand, thereby allowing customers to address issues such as seasonal demand fluctuations. Using our architecture, our
customers can add new services or increase use of services quickly and with minimal incremental expense. Whereas other architectures require expensive, site-specific,
time-consuming hardware installations to extend their network systems into new territories, our cloud-based approach allows us to help our customers reach new geographic regions and
implement new services quickly and cost-effectively by leveraging the availability of the cloud.
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•
Fully-managed, IP-based Media Peering Grid
service.
Our proprietary software-based, fully-managed, distributed Media Peering Grid service provides carrier-grade,
high-quality voice and connectivity that can be relied on as a primary communications network. Our flexible Media Peering Grid software supports both legacy and VoIP network
interoperability and enables our customers to efficiently and cost-effectively transition their communications infrastructures from the legacy PSTN to an IP network incrementally and on demand, thus
reducing expenses associated with legacy architecture as well as call delivery services, tolls and circuit expenses.
•
Extensive, secure, multimodal SuperRegistry directory.
Our
SuperRegistry directory currently includes a database of more than 400 million telephone numbers and end-point identifying addresses corresponding to wireline, wireless and
IP-enabled devices. The scale and multimodal nature of this directory give us the ability to complete a call to any connected end-point device, regardless of whether it is a
PSTN-based handset or a SIP-connected device. This feature provides us with a significant competitive advantage in that it allows us to discover and direct sessions to both
traditional phones and IP-connected devices. Using our proprietary intelligent routing software and the numbers in our SuperRegistry directory, we are able to determine the interface type
necessary to complete the connection. We have been building this extensive SuperRegistry directory since 2006 through partnering efforts with service providers and enterprises. This expanding database
of telephone numbers and end-point addresses enables us to route traffic more efficiently from end-to-end, through our Media Peering Grid service, providing real-time optimal
routing for both service provider and enterprise originated calls, improving call reliability and decreasing call transport tolls. Furthermore, our SuperRegistry directory enables our enterprise
customers to achieve rich media, all-IP unified communications across disparate communications technologies, such as Microsoft, Cisco, Avaya and Siemens unified communications platforms,
with other enterprises and IP connected devices.
•
AppWorx open application development environment.
Our
AppWorx open application development environment provides software developers and channel partners with access to powerful tools for rapid development and integration of new communications services.
The tools in our AppWorx development environment include a set of APIs as well as fully customizable and scriptable command and control of calls that enable developers with little or no telecom
experience to easily build robust, rich media applications. These applications and new services can be accessed from anywhere, deployed quickly over our platform and easily integrated into existing
web services or software applications. Our AppWorx development environment enables our customers to develop and use these applications to provide additional functionality and new and differentiated
services to their end-users, which our customers can use to develop a stronger relationship with their end-customers.
•
Powerful network effects.
We benefit from strong network
effects driven by the large volume of numbers in our SuperRegistry directory. As our service provider peering partnerships and enterprise customer base grow, the benefits each existing customer
realizes by using our platform increase, resulting in reduced costs for our customers and increased traffic through our platform. New features and partnerships broaden our value proposition,
attracting more customers, peering partners and channel partners. For example, each new service provider or enterprise customer that allows us to add their end-point identifying numbers to our
SuperRegistry directory results in more calls that we can connect directly, providing increased quality and efficiency benefits and lower costs. In addition, every time we add an
IP-connected device, it increases our ability to provide multimodal communications capabilities to our customers. This helps us grow our revenue while at the same time increasing the
volume of traffic for which we compensate the service providers that make their numbers available through our SuperRegistry. The scale of our business and breadth of our relationships not only attract
new customers but also serve as barriers to entry for potential competitors.
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•
Fully integrated communications platform.
Our multi-layer
platform, which integrates transport, peering, registering services and APIs, offers our customers a one-stop, flexible and full-featured solution for developing and extending
their communications services as compared to alternatives that focus on local market, hardware-based solutions. Our fully integrated platform also enables us to be flexible and to easily add and
deploy new IP-enabled communications and collaboration services as our customers' needs evolve. Customers choosing our integrated platform solution benefit from a significant time, cost
and quality advantage as compared to the alternative of building a similarly functional solution that would require arrangements with multiple vendors and partners.
Our Strategy
Our objective is to continue to leverage our CloudWorx CaaS Platform to enhance our position as a leading provider of communications
solutions for service providers and enterprises. We intend to accomplish this by pursuing the following strategies:
•
Extend the technology leadership of our CloudWorx CaaS
Platform.
We have developed an innovative multi-layer platform and modular technology architecture that effectively transforms the
delivery of SIP-enabled communications, provides significant cost savings and enables faster and more flexible deployment. We intend to continue to invest in our platform through internal
development, or by acquiring complementary technology. These activities are expected to broaden our support for new collaboration and communications features, enhance the capabilities of our
SuperRegistry directory, and expand our AppWorx application development environment to drive broader adoption among new customers and developer communities.
•
Extend the reach and breadth of our peering
partnerships.
We plan to add additional telephone numbers and end-point identifying addresses to our SuperRegistry directory
from new and expanded relationships with service providers and enterprise customers to increase our capacity for the benefit of our service provider and enterprise customers. As we add additional
direct peering partners, we expect to increase our communications traffic and revenue without needing to utilize the legacy PSTN, which we expect will reduce our traffic delivery costs.
•
Grow our relationships with existing customers.
We have
built a diverse customer base of service providers and enterprises by cost-effectively connecting disparate networks over IP and providing highly flexible and high quality cloud-based
services. Our sales team works closely with our customers to understand their challenges and industry trends, determine the services that we can provide to better serve their needs as well as to
identify areas of focus for our ongoing research and development activities. These relationships allow our support team to respond more quickly and effectively to customer needs and our development
team to provide customized solutions for our customers. We intend to continue to leverage the work of our sales team to identify and deliver additional services to expand our relationships.
•
Expand our customer base and technology partnerships.
We
intend to expand our base of enterprise customers by deepening our existing technology partnerships with industry leaders such as Microsoft, Cisco, Avaya and Siemens, developing new technology
partnerships with additional industry leaders and expanding our network of channel partners. We also intend to focus on expanding our service provider customer base by leveraging our CloudWorx CaaS
Platform, investing in our direct sales force and educating service providers on the potential opportunity to reduce or eliminate capital expenditures and reduce operating costs by leveraging our
platform.
•
Broaden our international presence.
We currently have an
extensive peering partner network that serves U.S. customers through five U.S. regional data centers to connect with U.S. customers and connects with international service providers through data
centers in London, Los Angeles
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and
New York. We plan to extend our geographic reach and coverage by expanding our peering partner network and SuperRegistry directory globally through the addition of international service provider
peering partners, and global enterprise customers.
Sales and Marketing
We market and sell our solutions through our direct sales force, agents and channel partners. As of March 31, 2011, we employed
20 sales professionals and sales engineers and had relationships with 42 channel partners. We sell to service providers primarily through our direct sales force and we sell to enterprises primarily
through our indirect sales force that works with our channel partners.
Our
service provider direct sales force is composed of experienced sales professionals as well as sales engineers who promote the advantages of our CloudWorx CaaS Platform. This focus
provides a higher level of service and understanding of our customers' unique needs. Our enterprise sales team uses a channel sales strategy and seeks to partner with leading technology companies that
provide technology products and services to enterprises. Through this strategy, we benefit from the reach of dedicated sales agents, knowledgeable, certified resellers and technology providers who
resell or white label our services. Currently, our channel partners include resellers who sell and implement unified communications solutions, such as Microsoft, Cisco, Avaya and Siemens based
solutions, and who offer call center solutions. Our sales personnel work closely with these partners to assist them in selling customized solutions to their end-customers. We actively
support our channel partners on an ongoing basis. This support includes sales training, white papers, solution guides, hosted partner events and our on-demand self-service
CloudCentral portal.
Our
marketing team is principally engaged in the development of marketing collateral and support for our sales activities. We seek to play an active role in industry-related thought
leadership matters through speaking engagements, white papers and webinars. Our marketing also includes attendance at industry trade shows and conferences, as well as targeted corporate advertising.
Our Customers
Today, we sell our solutions to service provider and enterprise customers primarily located in the United States. As of
March 31, 2011, we had 92 service provider customers and 81 enterprise customers. For the year ended December 31, 2010, Sprint and Qwest represented 29 percent and
16 percent of our revenue, respectively.
Our
service provider customers currently include major wireline and wireless carriers, competitive local exchange carriers, or CLECs, cable companies and VoIP providers, among others, as
well as other smaller service providers that provide services to limited regions or market segments. These service provider customers use our CloudWorx CaaS Platform to deliver traffic destined for
geographic areas
where the service providers do not own and operate their networks or where they are migrating from the PSTN to an IP-based solution.
With
respect to enterprise customers, we have initially targeted mid-sized enterprises, including companies of 200 to 5,000 employees, which are seeking to migrate from a
legacy network architecture to a SIP/IP unified communications platform. We also target enterprises of all sizes that operate customer contact centers. Many of these enterprises are updating their
communications infrastructures to take advantage of their existing broadband Internet services to connect a growing number of geographically dispersed workers with highly productive and
cost-effective communications solutions. Furthermore, the increased use of video, SMS and other rich media applications in the enterprise business environment is driving a need for
sophisticated unified communications platforms, which can all be delivered by our CloudWorx CaaS Platform.
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We
believe the following case studies illustrate the value we offer to our customers:
Wireless service provider case study:
A major wireless provider in the midst of a technical and operational transition associated with its
migration to a SIP network was seeking a partner that could provide the SIP connectivity, carrier-grade quality, speed and flexibility that it was unable to achieve through alternative solutions. We
successfully partnered with this service provider and enabled it to introduce new SIP voice capabilities while simultaneously adapting a new outsourced network operation model. We believe our ability
to deliver consistent, high quality service, coupled with material cost savings and our strong industry reputation, positioned us as a preferred partner for the initial engagement. This initial sale
also created an opportunity for us to expand our relationship with this service provider customer by offering new services and features on an ongoing basis. This customer soon expanded the services
purchased from us by adding VoIP termination services. Since that time, we have further grown the business relationship by executing a direct peering agreement. More recently, this customer has
further increased the scope of services by contracting with us to provide them with direct inward dialing, or DID, services. We are also currently in discussions regarding providing additional
services to this customer.
Enterprise customer through a channel partner case study:
A fast growing sports club company with over 350 locations in 22 U.S. states as
well as Canada, recently upgraded its entire corporate communications infrastructure with a new unified communications channel partner who recommended our services to them. During the engagement, we
expeditiously implemented our service in less than a month and further validated our reputation within the vendor partner community by replacing larger service providers who faced challenges in
delivering SIP trunking services. Through our SIP trunking services, the enterprise customer was able to integrate its communications experience with its business applications, standardize
capabilities across every location and simplify its network environment,
resulting in productivity gains and immediate annual cost savings of over $600,000, representing a significant reduction from the operating costs of its prior communications solutions.
Enterprise customer contact center case study:
A global leader in on-demand, multi-channel contact center services was looking
for a solution that could help it manage its increasing call volume more efficiently and cost-effectively. Our on-demand capabilities, along with outbound local and long distance services
to support large volumes of event-based notification calls, enabled the customer to significantly increase its capacity and grow its revenue. The scalability of our CloudWorx CaaS Platform enabled
this customer to increase its usage by more than 60 percent over a one-month period, allowing them to capitalize on a time-sensitive campaign opportunity to deliver millions of
calls. We further expanded the relationship by developing and reviewing key call metrics, critical to the contact center's business, to increase call success and optimize network utilization.
Technology
We have developed a proprietary, multi-layer stack, cloud communications platform, our CloudWorx Caas Platform, which hosts our core
technologies and services. Our proprietary, software-based platform currently includes three layers: a peering layer, called the Media Peering Grid, a directory layer, named the SuperRegistry, and an
applications layer, known as AppWorx. The three layers are integrated with our proprietary interconnection components.
Our
communications services are provided according to the functionality required by the selected application by following routing rules and preferences associated with individual devices
and users. These rules and preferences are maintained in and processed by the SuperRegistry directory layer. The AppWorx applications layer receives and processes communication session requests. The
Media Peering Grid peering layer receives device, user and routing rules and preferences from the directory layer, and establishes connections between devices accordingly.
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Together,
the elements of our multi-layer platform run on a cloud-based architecture to deliver communication services between a wide variety of communication end-points.
The Media Peering Grid or Peering Layer
The Media Peering Grid peering layer is a software-based solution that manages connections and capabilities between our CloudWorx CaaS
Platform and service provider and enterprise networks, providing the actual connections between devices or end-points. This peering layer processes incoming and outgoing communications,
enabling devices to connect by following specific routing policies based on user, device and routing information that is stored in our SuperRegistry directory. This peering layer connects calls and
interoperates the networks of various types of customers such as wireless and wireline service providers, CLECs, local exchange carriers, or LECs, enterprise customers, federation partners,
application service providers, VoIP service providers and peering partners. Our peering layer software supports various technologies and call types, including voice, video and SMS. If a call or
communication session is delivered between two devices running on different network architectures, it may be necessary to transcode, or convert, the call to a format that is compatible with the
specific destination device. Our peering layer determines the signaling protocol of each end-point and if necessary, automatically converts the call to a format compatible with the
destination device. Our peering layer supports SIP for VoIP calls as well as SS7 signaling for legacy PSTN calls.
Key
features of our peering layer include:
•
Security architecture: We have designed and implemented a security system of multi-layered defense, which we believe to be
industry best practice. This protects our Media Peering Grid service and our communications with our customers. These layers include: access control lists on routers and stateful firewalls to block
unwanted traffic. Our security devices also block rogue media such as distributed denial of service attacks, or DDoS, and have embedded digital signal processors for media transcoding that deliver
optimal performance under load/attack. Our solution also includes a rich set of security features including encryption, transport layer security rogue real-time transport protocol protection, dynamic
blacklisting and toll fraud prevention.
•
Resiliency: We have designed a fully redundant, geographically diverse transport infrastructure dedicated to delivering
low latency and low jitter media services across the peering grid. We have taken a comprehensive approach to design from the wide area network, or WAN, level down to the individual cards and ports
providing high availability to our Media Peering Grid service. This design includes data center facilities, diverse fiber routes, and other redundancy measures. Additional elements of our service
designed to maintain our high availability of our platform include redundant power feeds with full UPS and generator backup, redundant cooling systems, humidification control, minimum 72 hours
fuel storage on site, minimum two contracts for additional fuel per site, SAS 70 Type 2 compliance and physical security including on-site security guards, cameras and biometrics.
•
Transcoding capabilities: We offer full support for wireless devices whether they use 3G, 4G or the emerging long term
evolution, or LTE, standard. We also support wireline codecs, such as G711, including fax and modem transmission capabilities. Our applications also include high-definition voice from VoIP
service providers. While the majority of our traffic comes from our IP active trunk groups including public SIP/IP and private GigE SIP, we also process time division multiplexing, or TDM,
DS-3 SS7 ISUP and dedicated clear channel DS-3. Furthermore, to enable our multimodal application development and distribution, we support a full range of both audio and video
coder and decoder technology or codecs. The peering layer receives the device, user, and routing rules and preferences and establishes connections between devices based on those elements.
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The SuperRegistry Directory or Directory Layer
Our directory layer is a policy-based engine that stores and maintains directory (or registry) entries, including user and routing
information, and then uses that information to determine a routing policy for each communications session. We use a combination of intelligent software and business rules to route communications
traffic based on quality level, cost constraints and registration for each device to be used for direct call connection.
Our
SuperRegistry directory is a secure database environment that combines cost information, quality of service metrics and optimal routing policy software with telephone numbers, IP
addresses, SIP trunk groups, telephone number portability data, SS7 point codes, used for PSTN end-point routing and connections to external federations, enabling heterogeneous peering.
We
are developing enhancements to our policy-based routing, such as user contact preferences by device, based on criteria such as time of day, day of the week, user location and nature
of incoming calls. Our software will enable use of this directory data to deliver intelligent policy-based communications.
Key
features of our SuperRegistry directory and related services include:
•
Any-digit peering: Our software enables peering between service provider and enterprise networks using
10-digit (based upon the E.164 or industry standard international public telecommunication numbering plan) or 6-digit (area code and exchange for North America) phone numbers.
•
Regulatory: Our software includes support for U.S. regulatory designations such as interstate, intrastate and local
jurisdictions and the cost structure, tolls and tariffs associated with each of these jurisdictions.
•
Voice or video federation: We expect to release a new version of our service, that we believe will allow us to deliver
multimodal communications and federation capabilities whether inside a single enterprise or at different external enterprises. We expect to release this service in the second half of 2011.
The AppWorx Application Services Layer
Our application layer software enables creation and distribution of fully featured applications and offers a set of standards-based
APIs for managing use of these applications and activation services. This layer is also responsible for recognizing and initiating various application requests. When an application is accessed via a
user device, the application layer receives and identifies a communication session request which includes specific configuration information related to the request. The application layer software
includes numerous application scripts corresponding to specific features. An application script is a set of instructions which, when executed, causes specific actions to occur such as establishing a
communication session between two or more devices.
Examples
of application script uses include:
•
click-to-call, providing a voice connection between end-points initiated from a
website;
•
SMS messaging, providing messaging capabilities between end-points;
•
blast SMS, providing mass delivery of outbound messages;
•
blast voice, delivering media to one or more end-points;
•
auto conference, scheduling automatic dialing for conference call bridging;
•
reporting, for generating records of usage and performance of calls;
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•
real time call events, allowing applications to take action based on call progress;
•
recording, enabling recording, storage and delivery of media sessions;
•
text to speech engine processing that converts text into speech in a given language;
•
scripted interactive voice response, or IVR, which allows users to define IVRs to be applied to voice calls; and
•
media management, which allows media to be converted and included in call sessions.
Within
our application layer is our CloudCentral Portal software, which enables our customers to activate and manage their services and is also used as our internal management portal to
manage aspects of our relationship with these customers. Our CloudCentral Portal is used for enterprise management, user management, SIP trunking, DID, toll-free number ordering,
management and reporting.
Our
software supports capabilities such as capacity planning, performance reporting, event monitoring and notification, call media and signaling analysis, as well as our billing and
invoicing report generation. These end applications connect to our business intelligence layer which tracks peering grid and vendor performance, service levels, traffic analysis, usage reporting and
billing service assurance. The business functions enabled by our software correspond to our peering grid tracking intelligence that handles automatic number identification, or ANI, including fax/modem
detection and routing, route loop detection and prevention, as well as tracking capacity data, processing network topology for fault analysis and traffic rerouting, and providing call detail record,
or CDR, correlation, summarization and warehousing.
The Interconnection Components
The various layers of our CloudWorx CaaS Platform are integrated by our proprietary software interconnection components that coordinate
activities between our peering, application and directory layers. The application layer delivers messages to the interconnection component for subsequent transmission to the peering layer, which
leverages the SuperRegistry directory layer for optimal routing policy.
Research and Development
As of March 31, 2011, we had 25 employees dedicated to research and development. Our total research and development expenses
were $2.4 million, $3.6 million and $4.1 million for the years ended December 31, 2008, 2009 and 2010, respectively.
Intellectual Property
Our success depends upon our ability to protect our core technology and intellectual property. To accomplish this, we rely on a
combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, as well as customary confidentiality and other contractual protections. We have been issued a
patent in the United States. Additionally, we have eight patent applications pending in the United States, two provisional patent applications pending in the United States and four patent applications
pending in each of Europe, Japan and South Korea. Our registered trademarks in the United States include IntelePeer, IntelePeer AppWorx, AppWorx and SuperRegistry. We have four pending trademark
applications in the United States.
In
addition to the protections described above, we generally control access to and use of our proprietary software and other confidential information through the use of internal and
external controls, including contractual protections with employees, consultants, customers and vendors. U.S.
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and
international copyright laws protect our software. We also license software from third parties for integration into our service offerings.
We
license our software to customers pursuant to agreements that impose restrictions on the customers' ability to use the software, including prohibitions on reverse engineering and
limitations on the use. We also seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute nondisclosure and
assignment of intellectual property agreements and by restricting access to our source code.
Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or obtain and use information that we regard as proprietary. We
cannot assure you that the steps taken by us will prevent misappropriation of our technology. We cannot assure you that other patents will issue from our pending or future applications or that, with
respect to our issued or any
future patents, they will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide us with meaningful protection or any commercial advantage. In
addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as
diligently as government agencies and private parties in the United States.
Our
industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. In
particular, leading telecommunications companies have extensive patent portfolios. From time-to-time, third parties, including certain of these leading companies, may assert
patent, copyright, trademark or other intellectual property rights against us, our channel partners or our end-customers. Successful claims of infringement by a third party could prevent
us from performing certain services or require us to pay substantial damages, royalties or other fees. Even if third parties may offer a license to their technology, the terms of any offered license
may not be acceptable and the failure to obtain a license or the costs associated with any license could cause our business, operating results or financial condition to be materially and adversely
affected. We typically indemnify our end-customers and distributors against claims that our products infringe the intellectual property of third parties.
Even
if our efforts to obtain patent protection are successful, third parties may not respect our rights and we may be required to initiate litigation to enforce any patents issued to
us, or to determine the scope or validity of a third party's patent or other proprietary rights. Patent litigation is expensive and time consuming, and may adversely affect our business.
Competition
The markets for our products are extremely competitive and are characterized by rapid technological change. Our competitors include
traditional telecommunications carriers and other providers of specialized communications services.
The
principal competitive factors in our markets include the following:
•
brand recognition and financial strength;
•
scope and scale of communication services offered;
•
quality, reliability and availability of services;
•
cost of services;
•
speed of activation and implementation;
•
wireless, wireline and other end-point coverage; and
•
customer service and support.
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We
believe that we compete favorably with our competitors on the basis of these factors. In the competitive markets we seek to serve, we have tried to differentiate our service offerings
in several ways:
•
Innovative multimodal services—we provide cloud-based, rich media communication services that exceed the
capabilities of PSTN voice services;
•
Rapid activation—we can quickly activate new customers;
•
High reliability—our fully managed, geographically distributed platform provides carrier-grade quality and
reliability for our communication services;
•
On-demand availability—our customers can quickly increase or decrease amount and types of services
they purchase using our online portals; and
•
Platform neutrality—allowing service providers to use our peering and registry services despite competitive
pressures between each other in their service areas.
We
operate in an industry with limited barriers to entry and expect to have new competitors in the future. Additionally, some of our larger, more well-known competitors have
greater brand recognition, longer operating histories, larger installed customer bases, larger sales and marketing budgets, as well as greater financial and other resources. Our biggest customers may
enter into direct peering relationships, which could substantially diminish our business opportunities.
Our
ability to compete effectively could be adversely affected by changes in regulation affecting our industry, consolidation among our competitors and our customers, entrance of new
competitors, rapid change in technology and market demands for new services, all of which are factors largely outside of our control.
Employees
As of March 31, 2011, we had 115 full-time employees, including 25 in sales and marketing, 43 in operations, 25 in
research and development and 22 in general and administrative and other functions. None of our employees are covered by collective bargaining agreements. We consider our relationships with our
employees to be good.
Facilities
Our headquarters are located in a 6,680 square-foot facility in San Mateo, California that we lease. The lease expires in
September 2013. We also operate our Engineering, Development and Operations center in Denver, Colorado in a 13,777 square-foot facility that we lease. The lease expires in August 2011. We
also have small offices in Seattle, Washington and Austin, Texas that we lease. We also have several co-location production facilities in New York, New York, Chicago, Illinois, Atlanta,
Georgia, Dallas, Texas, Los Angeles, California, and London, United Kingdom as well as a testing co-location facility in Englewood, Colorado, all of which are leased facilities. We believe
that our current facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable
additional or substitute space will be available as needed to accommodate any such expansion of our operations.
Legal Proceedings
From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party
to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or
financial condition.
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REGULATION
Overview
The United States has a dual regulatory structure applicable to the offering of telecommunications services. The Federal Communications
Commission, or FCC, in general regulates interstate and international telecommunications services; while state public utilities commissions, or PUCs, regulate telecommunications services that are
within a state's boundaries. Certain of our offerings are subject to regulation by both the FCC and state PUCs. Under the Communications Act of 1934, as amended by the Telecommunications Act of 1996,
or the Communications Act, we are subject to a variety of rules at the federal level that govern the rates we charge for certain services, customer privacy, public safety, contribution requirements to
a variety of federal telecommunications-related funds including the USF as well as reporting obligations. States impose similar obligations and may, in certain instances, regulate the rates we can
charge for certain offerings. A number of states impose USF contribution obligations that are in addition to federal USF
contribution requirements. The FCC and state PUCs will monitor our compliance with their rules and regulations, and may impose fines, fees and additional assessments if they determine our efforts do
not fully satisfy those requirements.
Our
communications services are also subject to international regulation. Such regulations may affect our plans to expand our business internationally.
We
have obtained licenses to offer telecommunications services from the FCC and authorization to offer facilities-based and resold telecommunications services from PUCs in 43 states and
the District of Columbia. We are still pursuing licenses in the remaining states and expect to receive the necessary authorizations in the near future. Most states require us to file tariffs or price
lists setting forth the terms, conditions and prices for telecommunications services that are classified as intrastate. Rates, terms and conditions for certain services and access to network elements
provided by certain Incumbent Local Exchange Carriers, or ILECs, and Regional Bell Operating Companies, or RBOCs, are, in many cases, determined by arbitration before the applicable state PUC. The
precise jurisdictional reach of the various federal, state and local authorities depends on the offering and can be uncertain because it is subject to ongoing controversy and judicial review.
As
a regulated provider of telecommunications services, we are also entitled to certain rights. For example, other telecommunications service providers are required to interconnect their
networks with ours. We have the right to access certain elements of ILEC networks at rates that are just, reasonable and non-discriminatory. We also have the right to obtain telephone numbering
resources for our network use and for assignment to our customers. At the state level, we are generally entitled to tariff our service offerings, which allows us to set the terms, conditions and
prices of our offerings in accordance with state law for large numbers of customers without entering into individually negotiated agreements. These rights provide us benefits and protections that are
not available to unregulated entities. We leverage our status as a regulated provider to develop commercially beneficial relationships with our peering partners.
As
technologies and the communications industry continue to change, the international, federal, state and local statutes and rules governing the communications industry may be modified
significantly. Such a change could substantially affect the demand and pricing for our services. Such changes could include, but are not limited to, an increase in regulatory oversight; regulation of
the prices that we can charge for some or all of our services; modification of statutes, rules or policies that could affect our current or future plans or that would require modification of the terms
and conditions of our tariffs, contracts, or other agreements that we rely on for our business; modifications to the operations or costs of the operations, including the pricing of our services to our
customers; a decrease in the amount of traffic our customers exchange with us; a change in the types of traffic our customers exchange with us (including our customers exchanging, on average, lower
priced minutes or services); changes in the rates governing the rates, terms and conditions under which voice service providers exchange traffic;
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changes
in state or federal universal service programs; and changes or modifications in taxes or surcharges that could cause a decrease in the amount of traffic our customers deliver to us or affect
our sources of revenue. We cannot predict when, or upon what terms and conditions, further federal, state or local regulation or deregulation might occur or the effect future regulation or
deregulation may have on our business or the rights we enjoy as a regulated telecommunications service provider.
Federal and State Regulation of Voice Peering Services
As a competitive service provider, the pricing of our communications services is generally not heavily regulated by the FCC or state
utility agencies. However, these agencies have greater regulatory authority over the pricing of ILECs' tandem transit and access services. Regulation of these services and rates generally sets the
benchmark for the prices of competitive service providers including the communications services that we offer. To the extent that ILEC transit or access rates are reduced or capped, it could
negatively impact us as we may need to reduce our rates in order to comply with the law and compete with the ILEC or other service providers.
A
number of PUCs assert regulatory authority over the provision of local and intrastate transit services. Some PUCs have initiated proceedings to examine the regulatory status of
services such as ours. Some states have taken the position that voice peering service is an element of the "transport and termination of traffic" services that incumbent ILECs are required to provide
at rates based on a reasonable approximation of the additional costs of completing the calls under the Communications Act, while other PUCs have determined that the Communications Act does not apply
to these services. The PUC regulatory framework associated with local and intrastate transit services is constantly under review. If the FCC or a federal court determines that a particular state's
interpretation of the Communications Act was incorrect, the incumbent LECs' tandem transit rates may either increase or decrease substantially, which could affect our ability to offer competing
services profitably.
We
also offer access services, which include origination and termination of long-distance calls, through our platform in certain jurisdictions. The FCC and many state PUCs
currently limit the rates we may charge for originating and terminating access services. See "Regulation of Access Rates" below. The FCC is considering a proposal to reform the pricing of access
which, if adopted, would substantially reduce both intrastate and interstate access charges over an unknown transition period. While the exact length of the transition period is unknown at this time,
we expect that it will be over a number of years and could extend as long as 10 years. Such services are also subject to the direct costs of exchanging traffic with other carriers in the form
of access rates. See "Other Proceedings That May Impact Our Business or Service Offerings—Intercarrier Compensation Reform."
Regulation of Access Rates
While we do not directly access local exchanges pursuant to federal or state tariffs, the cost of such access can affect the amounts we
pay our indirect peering partners and ultimately impact our operations, margins and profitability. Like many other market participants, we are involved in billing disputes concerning the appropriate
data that should be used when determining intercarrier payments. The FCC and state PUCs are currently considering substantial modifications with respect to the way carriers compensate one another for
the exchange of traffic. See "Other Proceedings That May Impact Our Business or Service Offerings—Intercarrier Compensation Reform."
Interstate Access Charges
Access charges that local exchange carriers, or LECs, impose upon us consist of both usage-sensitive switched access charges and
flat-rated transport and special access charges. The FCC regulates ILEC interstate access services. We also enter into commercial carrier-to-carrier contracts with
peering partners to transport and terminate our traffic, and such agreements are typically not subject to tariff
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regulation.
The industry is subject to a significant amount of litigation related to how much access will cost and what services should pay for access. The regulatory structure governing the cost of
access is complex and tends to lag behind technological and service advancements, which creates a high level of uncertainty in the industry, as well as rate arbitrage. The cost of billing disputes
between carriers and service providers can be significant, and such disputes could result in litigation.
The
FCC has adopted a mandatory detariffing regime for access services that wireless carriers wish to provide. Wireless carriers may not file tariffs for access services and must,
instead, enter into voluntary contracts. As the volume of wireless traffic increases, the potential for wireless access charges poses a risk to our cost structure. Our current business practice is to
pay commercially agreed upon rates to wireless carriers when handling traffic destined to wireless customer. If the FCC adopts an access charge regime for wireless traffic, we may have to pay more to
wireless carriers. The future of how much access will cost for wireless traffic is another question being addressed in the FCC's intercarrier compensation rulemaking.
Intrastate Access Charges
Intrastate access charges that incumbent and competitive LECs assess us, or that our competitive local exchange carriers, or CLECs, are
permitted to charge other carriers, are regulated by the PUCs. Intrastate access rates have historically been higher than interstate access rates, and continue to be so in many but not all states.
Intrastate access charges are also being examined in the FCC's intercarrier compensation proceeding. The disparity between interstate and intrastate access rates results in a significant number of
billing disputes and litigation throughout the industry. It is particularly difficult to determine the appropriate jurisdiction when a call originates or terminates on a mobile network, or on the
Internet, since the user's location can change at any time and may be different from that indicated by their telephone number. For these reasons, among others, a number of states have concluded that
intrastate access rates should be lowered to parity with interstate access, which is consistent with the FCC's tentative findings in its intercarrier compensation rulemaking.
Many,
but not all, states have rules limiting the rates CLECs can tariff for intrastate access services, similar to the FCC rules discussed in the preceding sections. In these states,
CLEC rates generally cannot be higher than those of the competing ILEC.
Local Reciprocal Compensation
Local telephone companies that deliver calls to the networks of other local carriers in the same geographic area for termination
typically compensate one another for terminating such traffic. The FCC has established a general framework and ratemaking methodology governing such compensation. The specific rates are regulated by
the PUCs. These rates vary from "bill-and-keep" to rates that approximate those for switched access services. Rates for local reciprocal compensation are often significantly
lower than rates for switched access, which may result in billing disputes and litigation.
Regulation of Interconnected VoIP Services
In addition to telecommunications services, we offer a variety of VoIP services. VoIP services are a form of communications services
that use the IP standard instead of the legacy time division multiplexing, or TDM technology. Depending on the needs of the customer, we may offer services via the public Internet or over a
private or managed connection to the Internet. The FCC has asserted its regulatory authority over certain configurations of our VoIP services, known as interconnected VoIP. The FCC, however, to date
has not classified interconnected VoIP services as telecommunications services.
Interconnected
VoIP services are those services that enable real-time two-way voice communications, require a broadband Internet connection from the user's
location, require the use of
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IP-compatible
customer premises equipment and permit users generally both to receive calls from and to terminate calls to the PSTN. The FCC requires interconnected VoIP offerings to comply
with certain regulations including, but not limited to, the Communications Assistance for Law Enforcement Act, or CALEA, customer privacy regulations, discontinuance rules, E911 obligations, and
reporting obligations. These offerings must also contribute to a number of federal funds including the USF. Each of these regulations covers matters that, because we are a licensed telecommunications
carrier, our communications services would have been obligated to comply with even if we were not treated as an interconnected VoIP provider. Increased regulation of VoIP services by the FCC therefore
benefits us by ensuring parity in regulatory obligations between us and our competitors.
The
authority of the states to regulate certain types of interconnected VoIP services is uncertain at this time. In 2004, the FCC ruled that states could not impose certification,
tariffing or other similar common carrier requirements on a provider of nomadic interconnected VoIP service that relied on the public Internet for connections to its customers. However, the FCC did
not rule then, and generally has not subsequently addressed, to what extent the states could exercise jurisdiction over other interconnected VoIP services that use fixed connections to customers
rather than connecting over the public Internet. While the FCC has recently clarified that states may require nomadic interconnected VoIP service providers to contribute to state USF programs, it is
unclear what other regulatory authority states may have over interconnected VoIP services. Several states have recently sought to impose registration or other similar requirements on interconnected
VoIP providers that they believe are not covered by the FCC's ruling concerning VoIP services that rely on the public Internet for connections to their customers. Even if states are ultimately able to
require providers of certain types of interconnected VoIP services to seek approval to offer services, we believe the impact on us would be minimal as we are licensed in most states and the District
of Columbia, and intend to be licensed in all fifty states in the near future.
As
discussed below, there are a number of open proceedings at the FCC that could impose additional obligations on interconnected VoIP providers. For example, the FCC continues to examine
whether to expand E911 obligations that apply to interconnected VoIP services including the possible imposition of automatic location requirements. Further, as part of its intercarrier compensation
proceeding, the FCC is considering the appropriate regulatory classification of interconnected VoIP providers as either regulated telecommunications services or information services. The FCC is also
considering whether and how to impose access charges on VoIP traffic that involves an interstate or intrastate long distance communication.
Enhanced 911 Services
In June 2005, the FCC concluded that interconnected VoIP service providers must support enhanced 911 emergency services. The FCC rules,
among other things, also require interconnected VoIP providers to distribute stickers and labels informing customers of the limitations on their emergency services as compared with traditional
wireline E911 service to notify and obtain affirmative acknowledgement from customers that they are aware of those limitations to obtain from each customer, prior to the initiation of service, the
physical location at which the service will first be utilized, and to provide its customers one or more methods to update their "Registered Locations." Our VoIP E911 services, like those offered by
other interconnected VoIP service providers, are more limited than the 911 services offered by traditional wireline telephone companies. These limitations may cause significant delays, or even
failures, in callers' receipt of emergency assistance. Despite the fact that we have notified our customers and received affirmative acknowledgement from all of our customers that they understand
these differences, affected parties may attempt to hold us responsible for any loss, damage, injury or death suffered as a result of certain technical failures of the mandated E911 service for
interconnected VoIP providers.
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In
September 2010, the FCC released a "Further Notice of Proposed Rulemaking" seeking additional comments on a number of issues including, but not limited to, whether nomadic
interconnected VoIP providers should be required to offer automatic location information of their users without customers providing location information. The FCC also sought comment on how far it can
extend E911 obligations to other types of companies including device manufacturers, software developers and others. At this time we cannot predict the outcome of this proceeding nor can we predict its
potential impact on our business.
Communications Assistance for Law Enforcement Act
In September 2005, the FCC concluded that interconnected VoIP service providers must comply with the CALEA and configure their network
and services to support law enforcement activity in the area of wiretaps and call records.
Universal Service Fund
The FCC and a number of states administer "universal service" funds to provide for affordable local telephone service in rural and
high-cost areas and to fund other social programs, such as Internet access to schools and libraries. There are numerous regulatory and legislative efforts to reform universal service
funding requirements and we cannot predict the outcome of these efforts. In June 2006, the FCC issued an order holding that interconnected VoIP providers must contribute to the federal USF. In
November 2010, the FCC clarified that states may impose USF contribution requirements on the intrastate revenues of nomadic interconnected VoIP providers to the extent that such contribution systems
do not conflict with federal law and the intrastate universal service assessments do not apply to revenues generated by services provided in other states.
On
April 21, 2010, the FCC issued a notice that could lead to new proposals regarding contributions to the USF that, if adopted, could materially affect the magnitude of our
contributions to the fund. The Commission continues to analyze contribution requirements for USF. It is impossible to predict the impact of the FCC's proposals on our operations and financial results.
In addition, AT&T Inc. filed a "Petition for Immediate Commission Action" on July 10, 2009, requesting that the FCC adopt a new mechanism for calculating federal USF contribution that
would be applicable to all contributors. The specific proposal, which has been pending at the FCC for some time, is to determine contributions to the USF based on "assessable telephone numbers" rather
than interstate and international revenue. This AT&T proposal remains pending. We cannot predict whether the FCC will adopt this or some other contribution methodology, nor can we predict the
potential impact on our business at this time. In addition, in February 2011, the FCC issued a notice of proposed rulemaking to adopt reforms to the USF program that would shift support from
narrowband services to broadband services.
Customer Proprietary Network Information
The FCC has determined that its Customer Proprietary Network Information, or CPNI, rules apply to interconnected VoIP providers.
Interconnected VoIP providers must adhere to particular customer approval processes when using CPNI outside of
pre-defined limits and when using CPNI, for marketing purposes. The rules also require such providers to take certain steps to verify a customer's identity before releasing any CPNI over
the telephone or the Internet, and to report unauthorized disclosures of CPNI. Interconnected VoIP providers must also file certain CPNI certification information annually with the FCC.
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Local Number Portability
The FCC has extended to interconnected VoIP providers the obligation to provide local number portability. Interconnected VoIP providers
are required to permit customers to retain their assigned telephone numbers when changing carriers, and are required to undertake porting requests on an expedited basis. Providers are also subject to
local number portability fees historically imposed on local exchange carriers.
Disability Access
The FCC has required interconnected VoIP providers to offer "711" dialing (for telecommunications relay), and to make their services
and equipment (including software used for interconnected VoIP) accessible to persons with disabilities, if doing so is readily achievable. Interconnected VoIP providers are also required to
contribute to the Telecommunications Relay Services Fund. In April 2010 the FCC announced plans to adopt a further order with respect to hearing aid compatibility requirements applicable to various
services. We cannot predict at this time what new requirements the FCC will establish, if any, or how any such new requirements may affect us.
In
October, 2010, the Twenty-First Century Communications and Video Accessibility Act was signed into law. The statute imposes a number of accessibility and other obligations on
providers of Advanced Communications Services, which include interconnected VoIP services, and on manufacturers of equipment, including software, used for services covered by the law. The FCC has
initiated a rulemaking to implement the new accessibility requirements. We cannot predict whether we will be subject to additional accessibility requirements or whether any of our service offerings
that are not currently subject to disabilities access requirements will be subject to such obligations.
Other Proceedings That May Impact Our Business or Service Offerings
The FCC and state PUCs are considering a number of issues that could impact the structure of the market in which we operate. The FCC
and certain states continue to consider the pricing of services offered by incumbent providers that compete with our regulated offerings. New price regulation of incumbent offerings would likely
result in decreasing prevailing incumbent rates for services that compete with ours, making our services less attractive and potentially decreasing the prices we can charge for such services.
Intercarrier Compensation Reform
As described above, the current regime governing intercarrier compensation consists of a patchwork of federal and state regulation
depending upon such factors as the provider, jurisdiction and nature of traffic. This has led to a significant amount of disputes and litigation throughout the industry. In February 2011, the FCC
released a Notice of Proposed Rulemaking that proposes significant changes in the industry with respect to carrier compensation reform. The FCC proposes that intercarrier compensation rates be reduced
or eliminated entirely over time, and distinctions between interstate, intrastate, local, wireless and VoIP traffic also be reduced or eliminated. Finally, the FCC also proposes to address on a faster
track three pressing intercarrier compensation issues: phantom traffic, access charges for VoIP traffic, and access stimulation. The intercarrier compensation proposals that could impact our business
include, for example:
•
the type and amount of rate reductions that should be imposed for originating and terminating access charges, both
intrastate and interstate;
•
whether intercarrier compensation should remain at per minute rates in the long term or transition to
bill-and-keep or flat-rated charges;
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•
if and how rate changes should be incorporated in commercial contracts and interconnection agreements;
•
what framework should govern intercarrier compensation obligations for interconnected VoIP traffic:
bill-and-keep, immediate obligation to pay VoIP-specific rates, obligation to pay specific compensation in the future, immediate obligation to pay existing rates
that apply to TDM traffic, or some other arrangement;
•
whether the FCC should assert jurisdiction over all wireless termination charges (for traffic delivered by and to
commercial mobile radio service carriers) and establish different rates or rate transitions for such traffic;
•
whether all providers, including interconnected VoIP providers and intermediate carriers, should pass the calling party
number, charge number, and signaling information concerning the financially responsible party with no alterations other than those permitted by published industry standards or FCC rules;
•
whether a CLEC that shares access revenue with a customer resulting in net payments to the customer should be subject to
different interstate access tariff rules, or whether all revenue sharing arrangements should be declared unjust and unreasonable;
•
whether the FCC should regulate transit and whether it has the authority to do so; and
•
whether IP interconnection fits within the existing legal and technical framework, what steps can the FCC take to
encourage IP-to-IP interconnection, and whether the FCC should address point of interconnection or network edge issues as part of intercarrier compensation reform.
We
cannot predict the outcome of this proceeding nor can we predict its potential impact on our business. For example, if the FCC makes all revenue sharing an unreasonable practice, we
likely would have to reform certain agreements. Depending on the final rules adopted by the FCC, we may be required to discontinue using certain carrier partners to deliver traffic to the PSTN, which
could increase our costs. If ILEC transit services are regulated and their rates reduced, it could reduce our profit margins on our indirect peering services. If per minute of use intercarrier
compensation goes away and/or IP-to-IP interconnection is required by law, it is not clear how that would impact our customers' incentives to continue using our Media Peering Grid service.
Network Neutrality Rules
In December 2010, the FCC adopted rules governing the provision of consumer wireline broadband Internet access services. Among other
things, the rules: (1) require providers of consumer broadband Internet access to publicly disclose their network management practices and the performance and commercial terms of their
broadband Internet access services; (2) prevent broadband Internet access providers from blocking lawful content, applications, services, or non-harmful devices, subject to
reasonable network management; and (3) prevent broadband Internet access providers from unreasonably discriminating in the transmission of lawful network traffic over a consumer's broadband
Internet access service. While these rules are focused on broadband Internet access services for consumers and small business, it is possible that they may likewise affect enterprise or carrier
Internet access services. It is likely that the FCC rules will be subject to court appeals, the outcome of which we cannot predict.
Outage Reporting
In July 2010, the FCC's Public Safety and Homeland Security Bureau sought comment on whether to extend the FCC's outage reporting rates
to broadband Internet service providers and interconnected
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VoIP
service providers. The FCC is in the process of considering rules to extend the outage reporting requirements in Part 4 of the rules to interconnected VoIP and broadband service providers.
Federal Trade Commission "Red Flag" Identity Theft Rules
We are subject to Section 114 of the Fair and Accurate Credit Transactions Act of 2003, or FACTA, and rules of the Federal Trade
Commission that require "creditors" to develop and effectuate written internal programs to detect, prevent, and mitigate identity theft in connection with their accounts. We likely would be deemed to
be a "creditor" as defined in the FACTA.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding our executive officers and directors:
Name
Age
Title
Frank Fawzi
48
President, Chief Executive Officer and Chairman of the Board
Shaun Andrews
38
General Manager, Service Providers
John Belanger
47
Senior Vice President of Service Provider Sales
Phillip Bronsdon
47
Senior Vice President of Engineering, Development and Operations
Haydar Haba
46
Founder, Chief Visionary Officer and Director
Margaret Norton
57
General Manager, Enterprises
Andre Simone
53
Chief Financial Officer, Secretary
William Harding(2)(3)
63
Director
Lawrence Irving(1)
54
Director
Javier Rojas(1)(2)(3)
48
Director
Raymond Smets(1)(2)
47
Director
(1)
Member
of our audit committee.
(2)
Member
of our compensation committee.
(3)
Member
of our nominating and corporate governance committee.
Executive Officers
Frank Fawzi
has served as a director and Chairman of our board of directors since June
2006. In 2007, Mr. Fawzi assumed the role of chief executive officer and president. Before joining us, between 1991 and 2001, Mr. Fawzi founded and was the chief executive officer for
CommTech Corporation, a leader in the communications software industry until it was acquired by ADC, where he subsequently served as chief technology officer for ADC's Software & Integration
Group, from 2001 to 2002. Mr. Fawzi also served as a partner with First Oakmount Corporation, an investment firm, from 2004 to 2006. Mr. Fawzi received a Bachelor of Science in
Engineering and Computer Science and a Masters of Science in Management Information Systems from Stevens Institute of Technology, and has participated in the Wharton Executive Management Program at
the University of Pennsylvania.
Shaun Andrews
has served as our general manager, Service Providers since May 2010. Before joining us, Mr. Andrews served in various
executive roles, ultimately as the vice president of commercial services for the wholesale marketing group with Level 3 Communications, an international provider of fiber-based communications
services. Mr. Andrews worked at Level 3 Communications from January 2006 to April 2010. Mr. Andrews holds a Bachelor of Science degree in marketing from Miami University of Ohio
and a Masters of Business Administration from the Kellogg Graduate School of Management at Northwestern University.
John Belanger
has served as our senior vice president of service provider sales since January 2004. Before joining us, Mr. Belanger
served as senior director of the carrier services division, covering the western United States for France Telecom, Inc. Mr. Belanger worked at France Telecom, Inc. from May 2002
to January 2004. Mr. Belanger attended Capital University in Ohio.
Phillip Bronsdon
has served as our senior vice president of engineering, development and operations since September 2007. Before joining
us, Mr. Bronsdon served as a client principal in the Americas consulting and integration vertical for communications, media and entertainment at Hewlett Packard Corporation from August 2006 to
August 2007. Prior to joining Hewlett Packard, Mr. Bronsdon served as vice president of operations for Ooma, a VoIP service provider, from
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November
2005 to August 2006. Mr. Bronsdon has served as a Brigade Commander, with the 37th Armored Brigade, Ohio Army National Guard. Mr. Bronsdon holds a Bachelors of Science
degree in computer science engineering from Ohio State University and a Masters of Business Administration from Ohio University.
Haydar Haba
has served as our chief visionary officer since October 2007 and as a member of our board of directors since
co-founding the company in 2003. Mr. Haba served as our president and chief executive officer from July 2003 to October 2007. Before founding the company, Mr. Haba was
founder and chief technology officer of Telco 214, an international voice communications provider from 1997 to 2000. Mr. Haba began his career at Symetrics Industries, a public company
specializing in the design and manufacture of communications systems and computer telephony platforms for the United States Department of Defense, NASA, and other large enterprises. Mr. Haba
completed PhD course work in electrical engineering and holds Bachelors of Science and Masters of Science degrees in electrical engineering and computer science from the Florida Institute of
Technology.
Margaret Norton
has served as our general manager, enterprises, since September 2009. Before joining us, Ms. Norton served in
various senior executive roles, ultimately as president and chief executive officer, with Mobilitec, Inc., a provider of integrated software products that enable mobile content delivery which
was acquired by Alcatel Lucent, from September 2003 to January 2008, after which she decided to take time off for personal development purposes. Prior to Mobilitec, Ms. Norton was a self
employed consultant and served on the board of directors of Roguewave Software, a developer of software tools for developers which was acquired by Quovadx, Inc., from January 2000 to September
2003. Ms. Norton holds a Bachelor of Arts degree in economics from the University of Arizona and a Masters of Business Administration from the University of Connecticut.
Andre Simone
has served as our chief financial officer since February 2007. Before joining us, Mr. Simone served as chief financial
officer of Dimatix, Inc., a provider of piezoelectric inkjet print heads, from February 2005 to October 2006. Prior to Dimatix, Mr. Simone served as chief financial officer of SAP
Markets, Inc., a provider of technology platforms and business solutions, from November 2002 to December 2004. Mr. Simone holds a Bachelor of Arts degree in economics from Stanford
University and a Masters of Business Administration from The Wharton School of Business at the University of Pennsylvania.
Directors
William J. Harding, Ph.D.,
has served as a member of our board of directors since
October 2008. Dr. Harding has served as a managing director of VantagePoint Capital Partners, a venture capital firm, since October 2007. Before joining VantagePoint, Dr. Harding held
several positions including as a managing director of Morgan Stanley & Co., president of Morgan Stanley Venture Partners and a managing member of several venture capital funds affiliated
with Morgan Stanley, where he was employed from 1994 through 2007. Dr. Harding also served as an officer in the Military Intelligence Branch of the U.S. Army Reserve. In the last five years,
Dr. Harding has served as a director for InterNap Network Services Corporation and Aviza Technology, Inc. Dr. Harding holds a Bachelors of Science degree in engineering
mathematics and a Masters of Science degree in Systems Engineering from the University of Arizona and a Ph.D. in engineering from Arizona State University. Dr. Harding brings to our board his
extensive prior experience as an investor in technology companies, as well as his prior experience serving on the boards of directors of technology companies. Dr. Harding is a designee of
VantagePoint Venture Partners 2006 (Q), L.P.
Lawrence R. Irving
has served as a member of our board of directors since January 2011. Mr. Irving has served as the chief
financial officer and treasurer of Synchronoss Technologies, Inc., a provider of on-demand transaction, content and connectivity management solutions, since July 2001. Before
joining Synchronoss, Mr. Irving served as chief financial officer and treasurer at CommTech
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Corporation
from 1998 to 2001. Mr. Irving holds a Bachelors of Business Administration degree in accounting from Pace University and is a certified public accountant. Mr. Irving brings
to our board his extensive experience as a senior finance executive in leading public and private high-growth technology companies in the telecommunications and IT industries.
Mr. Irving is currently a designee of VantagePoint Capital Partners 2006 (Q), L.P.
Javier Rojas
has served as a member of our board of directors since June 2006. Mr. Rojas has served as a managing director of
Kennet Partners LLC, a venture capital firm, since December 2000, where he leads their United States investment activities. Before joining Kennet, Mr. Rojas was a managing director of
Broadview International and led their west coast software and services practice. Mr. Rojas holds a Bachelors of Science degree in finance from Georgetown University and a Masters of Business
Administration from Harvard University. Mr. Rojas brings to our board his extensive prior experience as an investor in technology companies, as well as his prior experience serving on the
boards of directors of technology companies. Mr. Rojas is a designee of Kennet II, L.P.
Raymond Smets
has served as a member of our board of directors since January 2011. Mr. Smets has served as the vice president and
general manager of the wireless networking business unit of Cisco Systems, Inc. since December 2008, where he is responsible for technology and product development for Cisco's 802.11n wireless
LAN access point products, controllers and software for management and
mobile services solutions. Before joining Cisco Systems, Mr. Smets served from September 2007 to August 2008, as the executive vice president of sales and marketing for Packeteer, Inc.,
an application classification and traffic prioritization systems provider. Mr. Smets also served as the senior vice president of Netopia, Inc., a provider of carrier-class broadband
customer premise equipment, from February 2006 to September 2008. Mr. Smets holds a Bachelors of Science degree in engineering from the University of Florida and a Masters of Business
Administration from Nova Southeastern University. Mr. Smets brings to our board his extensive experience as a senior executive leading public and private high-growth technology
business teams in the IT telecom, networking and security industries.
Board Composition and Independence
All of our current directors were elected or appointed to our board of directors in accordance with an agreement that we entered into
with certain holders of our common stock and holders of our preferred stock, including entities with which certain of our directors are affiliated. The holders of a majority of our common stock,
voting as a separate class, have designated Frank Fawzi and Haydar Haba for election to our board of directors. The holders of a majority of our shares of Series C Preferred Stock, voting as a
separate class, have designated William Harding for election to our board of directors. The holders of a majority of our shares of Series B Preferred Stock, voting as a separate class, have
designated Javier Rojas for election to our board of directors. Lawrence Irving and Raymond Smets were appointed by members of our board of directors to fill vacancies in directorships for independent
directors. Upon the completion of this offering, the voting agreement and these board designation rights will terminate.
Upon
the completion of this offering, our certificate of incorporation and bylaws will authorize a board of directors of six members. Our board of directors will be divided into three
classes with staggered three-year terms as follows:
•
Class I directors will
be                        and                 
       , and their terms will expire at the annual general
meeting of stockholders to be held in 2012;
•
Class II directors will
be                        and                 
       , and their terms will expire at the annual general
meeting of stockholders to be held in 2013; and
•
Class III directors will
be                        and                 
       , and their terms will expire at the annual general
meeting of stockholders to be held in 2014.
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The
authorized number of directors may be changed only by resolution of our board of directors. This classification of our board of directors into three classes with staggered
three-year terms may have the effect of delaying or preventing changes in our control or management.
There
are no family relationships among any of our current directors or executive officers. Our board of directors has determined that other than Mr. Fawzi, our president and
chief executive officer, and Mr. Haba, our founder and chief visionary officer, each of the members of our board of directors is an "independent" director for purposes of the listing
requirements and rules and regulations of the New York Stock Exchange or Nasdaq Global Market.
Board Leadership Structure
We do not have a policy on whether the role of the chairperson and chief executive officer should be separated and our board of
directors believes that it is currently in the best interest of the company and its stockholders for Mr. Fawzi to serve in both roles, which he has done since October 2007, in light of his
knowledge of our company and our industry. Our board of directors believes combining these roles promotes effective leadership and provides the clear focus needed to execute our business strategies
and objectives. However, our board of directors does not believe these roles must be combined, and may in the future separate these roles. We do not have a lead independent director. Our board of
directors believes it will be able to effectively provide independent oversight of our business and affairs, including the risks facing our company, without an independent chairman or a lead
independent director through the composition of our board of directors and committees, the strong leadership of our independent directors and the other corporate governance policies and processes that
will be in place upon completion of this offering.
Board Committees
Our board of directors directs the management of our business and affairs, as provided by Delaware law, and conducts its business
through meetings of our board of directors. Our board of directors has established three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance
committee. In addition, from time to time, special committees may be established under the direction of our board of directors when
necessary to address specific issues. Our board of directors has adopted a written charter for each of the standing committees. These charters will be available on our corporate website at
www.intelepeer.com following the completion of the offering. We intend to rely on the transition periods provided by applicable stock exchange rules and Rule 10A-3 of the Exchange
Act, which provide for phase-in compliance for companies that are listing on the exchange in connection with their initial public offering. As a result, we plan to have our audit,
compensation and nominating and governance committees comprised of a majority of independent directors within ninety days of our listing and comprised solely of independent directors within one year
of our listing.
Audit Committee.
Our audit committee is comprised of Lawrence Irving, the committee chairman, Javier Rojas and Raymond Smets. Each of
Mr. Irving and Mr. Smets satisfies the independence requirements of the New York Stock Exchange or Nasdaq Global Market and Rule 10A-3 of the Exchange Act. After the
completion of this offering, our audit committee will be directly responsible for, among other things, the appointment, compensation, retention, and management of our independent registered public
accounting firm. The committee will be responsible for reviewing the plans and results of the audit engagement with the firm, approving any additional professional services provided by the firm and
reviewing the firm's independence. Beginning with our first report on internal control over financial reporting, the committee will also be responsible for discussing the effectiveness of our internal
control over financial reporting with the public accounting firm and our relevant financial management. Our board of directors has determined that all of the members of the audit
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committee
possess the level of financial literacy required by the applicable rules of the SEC, and that Lawrence Irving is an audit committee financial expert as currently defined by SEC rules.
Compensation Committee.
Our compensation committee is comprised of William Harding, the committee chairman, Javier Rojas and Raymond
Smets, each of
whom satisfies the independence requirements of the New York Stock Exchange or Nasdaq Global Market. In addition, Mr. Smets qualifies as a "non-employee director" under
Section 16 of the Exchange Act and an "outside director" for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code. After the completion of this
offering, the compensation committee will be responsible for, among other things, supervising and reviewing our affairs as they relate to the compensation and benefits of our executive officers. In
carrying out these responsibilities, the compensation committee will review all components of executive compensation for consistency with our compensation philosophy and with the interests of our
stockholders.
Nominating and Corporate Governance Committee.
Our nominating and corporate governance committee is comprised of William Harding and
Javier Rojas,
each of whom satisfies the independence
requirements of the New York Stock Exchange or Nasdaq Global Market. After the completion of this offering, the nominating and corporate governance committee will be responsible for, among other
things, identifying individuals qualified to become board members; selecting, or recommending to our board of directors, director nominees for each election of directors; developing and recommending
to our board of directors criteria for selecting qualified director candidates; considering committee member qualifications, appointment and removal; recommending corporate governance principles,
codes of conduct and compliance mechanisms; and providing oversight in the evaluation of our board of directors and each committee.
Compensation Committee Interlocks and Insider Participation
During 2010, our compensation committee was comprised of Javier Rojas and William Harding. There are no interlocking relationships
between our board of directors or compensation committee and the board of directors or compensation committee of any other entity, nor has any interlocking relationship existed in the past. None of
our directors who served on our compensation committee during 2010 has served our company or any of our subsidiaries as an officer or employee. In addition, none of our executive officers serves as a
member of the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of our board of directors or our compensation committee.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics, which outlines the principles of legal and ethical business conduct
under which we do business. The code is applicable to all of our directors, officers and employees. This code will be available on our corporate website at www.intelepeer.com following the completion
of the offering. Any substantive amendment or waiver of the code relating to executive officers or directors will be made only after approval by a committee comprised of a majority of our independent
directors and will be disclosed on our website identified above within four business days.
Limitation of Liability and Indemnification
For information concerning limitation of liability and indemnification applicable to our directors, executive officers and, in certain
cases, employees, see "Description of Capital Stock—Limitations of Director Liability and Indemnification of Directors, Officers, and Employees" located elsewhere in this prospectus.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis of compensation arrangements of our named executive officers for 2010
should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations,
expectations, and determinations regarding our compensation programs. The actual amount and form of compensation and the compensation programs that we adopt in future periods may differ materially
from current or planned programs as summarized in this discussion.
Objectives
The compensation committee of our board of directors has overall responsibility for our compensation program for our executive
officers. For 2010, our named executive officers were:
•
Frank Fawzi, president, chief executive officer, and chairman of the board of directors;
•
Andre Simone, chief financial officer;
•
Haydar Haba, chief visionary officer;
•
Phillip Bronsdon, senior vice president of engineering, development and operations; and
•
John Belanger, senior vice president of service provider sales.
The
compensation committee's objective is to provide a total compensation package for executives that is reasonable, competitive and reflective of corporate and individual performance.
The compensation committee's decisions are driven by our desire to recruit and retain highly talented executives and to incentivize and reward aggressive corporate growth, achievement of
long-term corporate objectives and individual performance that meets or exceeds our expectations.
Because
we operate in a highly competitive market, hiring and retaining officers and other key employees is critically important to our success. As a private company, our ability to
provide cash compensation has historically been limited by the needs of the business. Accordingly, the primary
component of our incentive compensation program has been the grant and vesting of equity awards. This allowed us conserve cash while still offering key employees the opportunity to share in future
gains as we worked towards a liquidity event for our investors, such as an initial public offering of our stock.
As
we transition from being a privately-held company to a publicly-traded company, we will evaluate our philosophy and compensation programs as circumstances require. As part
of this review process, we will apply our corporate values and objectives to determine the types and levels of compensation required to meet our retention objectives.
Role of Executives in Executive Compensation Decisions
Our compensation committee seeks input and specific recommendations from our chief executive officer when discussing the performance
of, and compensation levels for, executives other than himself. The chief executive officer provides recommendations to the compensation committee regarding each executive officer's level of
individual achievement other than himself. However, he is not a member of the compensation committee and does not vote.
The
compensation committee also works with our chief executive officer, our chief financial officer and the head of our human resources department to evaluate the financial, accounting,
tax and retention implications of our various compensation programs. Neither our chief executive officer nor any of our other executives participates in deliberations relating to his or her own
compensation.
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Role of Compensation Consultants in Executive Compensation Decisions
The compensation committee has the authority to retain the services of third-party executive compensation specialists in connection
with the establishment of cash and equity compensation and related policies. While the compensation committee did not use a compensation consultant in connection with setting 2010 executive
compensation, the compensation committee reviewed and considered various market data, including the professional and market experience of our committee members and the Radford Executive Survey and the
Survey Totals Report, to assist the
committee in establishing compensation levels for our executive officers, with an emphasis on technology companies with revenue in a range similar to ours.
In
February 2011, the compensation committee engaged Compensia, Inc., a national compensation consulting firm providing executive compensation advisory services, to assist it in
developing a set of executive compensation guiding principles, to evaluate the competitiveness of our executive officers' compensation and to assist the compensation committee in developing a public
company-oriented executive compensation program, including the establishment of reference points and guidelines with respect to base salary, incentive compensation and equity compensation. Compensia
is engaged by, and serves at the discretion of, the compensation committee. Compensia did not provide any services to us in 2010.
Timing of Compensation Decisions
At the end of each fiscal year, our chief executive officer reviews the performance of the executive officers other than himself and
presents his conclusions and recommendations to the compensation committee. At that time and throughout the year, the compensation committee will also evaluate the performance of our chief executive
officer, which is measured in substantial part against our financial performance. In the first quarter of the following fiscal year, the compensation committee then assesses the overall effectiveness
of our compensation plans against our goals, and determines whether any changes to the allocation of compensation elements, or the structure or level of any particular compensation element, are
warranted.
In
connection with this process, our compensation committee generally establishes the elements of our performance-based cash bonus plan and determines whether to grant equity awards to
our executive officers. With respect to newly hired employees, our practice is typically to approve equity grants at the first meeting of the board of directors following such employee's hire date
provided that the board has received a third party valuation of the Company's common stock which incorporates all material information. We do not have any program, plan or practice to time equity
award grants in coordination with the release of material non-public information. From time to time, additional equity
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awards
may be granted to executive officers during the fiscal year. In May 2011, we granted the following options to named executive officers:
Name
Grant
Date
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
Option
Exercise Price
($)
Option
Expiration Date
Frank Fawzi
May 3, 2011
—
190,000
$
5.50
May 3, 2021
Andre Simone
May 3, 2011
—
105,000
$
5.50
May 3, 2021
Haydar Haba
May 3, 2011
—
85,000
$
5.50
May 3, 2021
Phil Bronsdon
May 3, 2011
—
55,000
$
5.50
May 3, 2021
John Belanger
May 3, 2011
—
55,000
$
5.50
May 3, 2021
(1)
1/4
th
of the total number of shares subject to the option will vest on May 3, 2012, and the remainder will vest in equal monthly
installments over a 36-month period thereafter, subject to the grantee's continued service to us on each such vesting date.
Role of the Compensation Committee in Setting Executive Compensation
The compensation committee is responsible for overseeing our executive compensation philosophy and administering our executive
compensation program, as well as determining and approving the compensation for our executive officers, including the named executive officers. The compensation committee regularly reports to our full
board of directors on its deliberations. Historically, the compensation committee has advised the full board of directors on executive compensation matters, and the board of directors has set
compensation levels.
In
anticipation of the initial public offering of our stock, the board of directors has delegated authority to make compensation decisions to our compensation committee, as described in
the compensation committee charter.
Members
of the compensation committee are appointed by the board of directors. Currently, the compensation committee consists of William Harding, Javier Rojas and Raymond Smets, none of
whom are executive officers of the Company, and each of whom qualifies as an "independent director" under the standards applicable to our stock exchange listing. In addition, Mr. Smets
qualifies as an "outside director" under Section 162(m) of the Code. See "Management—Board Committees—Compensation Committee" above.
The
compensation committee will perform, at least annually, a strategic review of the compensation program for our executive officers to determine whether it provides adequate incentives
and motivation to our executive officers and whether it adequately compensates them relative to comparable officers in other companies with which we compete for executives.
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Elements of Compensation Program
The compensation package for our named executive officers is composed of the following elements:
•
annual base salary;
•
short-term performance-based cash compensation, in the form of an annual bonus;
•
long-term equity compensation, in the form of stock option grants; and
•
a benefits package that is generally available to all of our employees.
We
combine these elements to formulate compensation packages that provide competitive pay, reward achievement of financial, operational and strategic objectives and align the interests
of our named executive officers and other senior management personnel with those of our stockholders.
Determining the Amount of Each Element of Compensation
On an annual basis, the compensation committee establishes our executive compensation program, considering such factors
as:
•
our short-term and long-term financial and strategic objectives;
•
individual responsibilities and performance;
•
the amount earned by our executive officers in prior years;
•
comparison to other executives within our company having similar levels of expertise and experience;
•
the external competitive market for senior management personnel; and
•
general economic factors and market outlook for the coming year.
The
compensation committee believes that the most effective executive compensation program is one that delivers base salary and target incentive compensation at levels generally
consistent with market practice, but also provides for opportunities in the form of incremental bonus and long-term equity awards that may result in above market levels if company
objectives are exceeded and if executive officers remain for an extended period of time as our employees.
Base Salary
Base salaries represent compensation for performing the basic obligations expected of each executive officer. The compensation
committee generally sets annual base salaries at a level which it believes is sufficient to attract and retain the level of executive talent that we believe is necessary to manage and foster our
growth and development. Historically, base salaries have approximated the 50th percentile of the competitive market, based primarily on the information set forth in the Radford Technology
Survey. However, dependent upon an individual employee's background and experience or performance review, base salaries have also been targeted at the 25th, 75th or 90th percentile of
the competitive market. Any changes in base salary are discretionary, and are made by the compensation committee based upon our performance and the responsibilities and continued success of each of
our
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executive
officers in contributing to that performance. The following table sets forth the guidelines we have historically used in targeting base salaries and setting merit increases:
Current Salary as Compared to Competitive Market and
Suggested Annual Merit Increase for Each Level
Performance Rating
Market Rate
Compensation
Less than 85%
85-95%
95-105%
105-110%
110-115%
115-120%
Exceptional
90th Percentile
10.0
%
7.0
%
3.5
%
3.0
%
2.5
%
1.5
%
Exceeds Expectations
75th Percentile
8.0
%
6.0
%
3.0
%
2.5
%
2.0
%
1.0
%
Successfully Meets Expectations
50th Percentile
6.0
%
3.5
%
2.0
%
1.5
%
1.0
%
0.0
%
Occasionally Meets Expectations
25th Percentile
0
%
0
%
0
%
0
%
0
%
0
%
Fails to Meet Requirements
25th Percentile
0
%
0
%
0
%
0
%
0
%
0
%
In January 2011, the annual base salaries for each of our named executive officers for 2011 were set, effective as of January 1, 2011. Each
of our executive officers, other than Mr. Belanger, due to the nature of his commission plan as described in greater detail below, received an increase in their base salary based on their
individual performance reviews for 2010. Following the engagement of Compensia in March 2011, the compensation committee reviewed the base salaries that had been set in January 2011 and determined to
make a change to the base salary arrangement for 2011 for Mr. Fawzi and Mr. Haba. Under Mr. Fawzi's employment agreement with us, upon the completion of this offering,
Mr. Fawzi's salary will increase to $442,000 on an annualized basis. In connection with the execution of Mr. Haba's employment agreement with us, Mr. Haba's salary for 2011
increased from $242,459 to $250,459.
The
2010 and 2011 base salaries for our named executive officers are set forth below:
Named Executive Officer
2010 Base Salary
2011 Base Salary
2011 Salary Percentage as Compared to the
Percentile of the Radford Executive Survey
Applicable to an Executive with the Named
Executive Officer's Peformance Rating
Frank Fawzi
$
375,000
$
412,500
86
%
Andre Simone
$
275,000
$
302,500
91
%
Haydar Haba
$
237,705
$
250,459
105
%
Phil Bronsdon
$
225,000
$
238,500
96
%
John Belanger
$
125,000
$
125,000
n/a
Short-Term Performance-Based Cash Compensation
We use short-term performance-based cash compensation to incentivize performance consistent with our
shorter-term corporate financial and strategic objectives while making progress towards our longer-term growth and other
goals. The compensation committee determines cash bonus amounts for our executive officers, including the named executive officers, based on achievement of corporate financial targets established in
our annual operating plan and individual performance requirements, as described further below.
Each
of our executive officers, including our named executive officers, other than Mr. Belanger, who participates in a separate sales commission plan, is eligible to participate
in a performance-based cash bonus plan under which he may earn an annual target amount based on achievement of our corporate financial objectives and his individual performance. The corporate
performance element accounts for 75 percent of the eligible bonus, and the individual's performance element accounts for the remaining 25 percent. As explained in more detail below, the
bonus pool is accrued and funded quarterly based on performance against plan for each of the corporate financial objectives. Payment of any portion of the target bonus attributable to individual
performance is dependent upon the executive officer receiving a performance review of no less than "Successfully Meets Expectations." The
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aggregate
annual target amounts are computed as a percentage target rate of annual base salary. The target amounts in 2010 for our named executive officers were as follows:
Named Executive Officer
Annual Cash
Bonus Target
Frank Fawzi
50
%
Andre Simone
50
Haydar Haba
50
Phil Bronsdon
50
For
2010, the compensation committee established the following corporate financial objectives. The annual cash bonus pool was created and funded to support our annual operating plan, to
enhance long-term value creation, and to fund annual cash bonus awards. These corporate objectives comprised 75 percent of the target bonus opportunity for 2010, and their relative
weightings were as follows:
Corporate Objective
Weighting
Quarterly Revenue Targets
33.33
%
Quarterly Gross Margin Targets
33.33
Quarterly Adjusted EBITDA Targets
33.33
The quarterly targets for each of the above objectives for 2010 were as follows:
Corporate Objective
Q1
Q2
Q3
Q4
Quarterly Revenue Targets
$
22,309,668
$
25,424,142
$
27,694,706
$
29,866,317
Quarterly Gross Margin Targets
30.5%
29.65%
30.49%
31.05%
Quarterly Adjusted EBITDA Targets
$
704,048
$
583,560
$
1,406,703
$
2,241,280
The compensation committee selected the above measures because it considered them to be appropriate indicators of our success in achieving the
objectives expressed and outlined in our annual plan as a private company. We historically calculated Gross Margin as total revenue less peering partner compensation divided by total revenue. We
historically calculated Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, change in fair value of warrant liability and stock-based compensation. In 2010, we
used Adjusted EBITDA as a key performance measure because we believed it facilitated operating performance comparisons from period to period by excluding potential differences caused by variations in
capital structures (affecting net interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or fluctuations in permanent differences or discrete
quarterly items) and the impact of depreciation and amortization expense on finite-lived intangible assets.
These
target levels were based upon expected growth from the prior year, but were set at an amount the compensation committee believed to be reasonably attainable in light of our
performance in prior years and our strategic and market outlook for 2010. In the event the minimum performance threshold was not met for any individual corporate quarterly objective, no bonus would be
accrued for that specific corporate target for the quarter.
Individual
achievement by our named executive officers comprised the remaining 25 percent of the target bonus opportunity for 2010 and was based on each executive officer's 2010
annual performance review. Individual performance for each our named executive officers was assessed by our chief executive officer, other than for himself. The performance of our chief executive
officer was assessed by the compensation committee. Performance was evaluated following the end of the year and was based on three major areas of measurement: quality of work performed, quantity of
work performed and teamwork/initiative and management effectiveness. Individual performance for our named executive officers, and eligibility for a cash bonus, is ranked on the following scale: "Fails
to Meet Expectations,"
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"Occasionally
Meets Expectations," "Successfully Meets Expectations," "Exceeds Expectations" and "Exceptional."
An
executive officer must achieve a ranking of at least "Successfully Meets Expectations" to be eligible for a payment of that portion of the bonus attributable to achievement of
individual objectives. Executive officers who rank at "Exceeds Expectations" or "Exceptional" are eligible for a discretionary bonus if reasonable, considering the achievement of our corporate
financial objectives.
For
2010, the annualized target bonus pool available to fund the plan was set at $2,269,424, or approximately $567,356 per quarter, divided equally among the three corporate financial
objectives. Bonuses accrued quarterly based on actual achievement against plan for each of the financial measures, ranging from 25 percent of the target bonus amount to 150 percent of
the target bonus amount, as follows:
Revenue
Performance
Payout Percent
Payout Amount
Target minus 10%
25
%
$
47,280
Target minus 5%
62.5
118,199
Target
100
189,119
Target plus 5%
112.5
212,759
Target plus 10%
125
236,399
Target plus 15%
150
283,679
Gross Margin
Performance
Payout Percent
Payout Amount
Target minus 5.6%
25
%
$
47,280
Target minus 3.5%
62.5
118,199
Target
100
189,119
Target plus 5%
112.5
212,759
Target plus 7.5%
125
236,399
Target plus 10%
150
283,679
Adjusted EBITDA
Performance
Payout Percent
Payout Amount
Target minus 30%
25
%
$
47,280
Target minus 15%
62.5
118,199
Target
100
189,119
Target plus 5%
112.5
212,759
Target plus 10%
125
236,399
Target plus 25%
137.5
260,039
Target plus 50%
150
283,679
Based
on the above tables, the maximum annual bonus pool available for 2010 was $3,404,136, or 150 percent of the target amount. For 2010, our corporate financial performance was
118 percent of plan, and the total available pool to be distributed among plan participants was $2,674,542. Based upon
our corporate performance and each individual's personal achievement of performance objectives, bonuses were paid in February 2011.
The
corporate performance element was directly tied to our annual performance against the designated financial measures. For 2010, the corporate performance element was paid out at
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118 percent—accounting
for 75 percent of an individual's bonus. For example, if a named executive officer's target bonus was $100,000 for 2010, he or she earned
75 percent of $118,000 (118 percent of $100,000), or $88,500, for the corporate performance element.
The
individual performance element was not directly tied to our annual corporate performance, but was instead based on an individual's annual performance review. The individual bonus
performance element for top performers is subject to adjustment at the discretion of our chief executive officer, and to board approval. For 2010, participants who achieved an annual performance
rating of "Successfully Meets Expectations" were eligible to receive 100 percent of their individual performance element. At the discretion of our chief executive officer, participants who
achieved an annual performance rating of "Exceeds Expectations" were eligible to receive 121.5 percent of their individual performance element and participants who achieved an annual
performance rating of "Exceptional" were eligible to receive 143 percent of their individual performance element. The plan is budgeted based upon the assumption that all eligible executive
officers will achieve requisite performance ratings. Individuals receiving more than 100 percent of their performance element were paid out of bonus amounts not earned by employee participants
who performed at a level below "Successfully Meets Expectations." Based on the above, if a named executive officer's target bonus amount was $100,000 for 2010, they would have earned $25,000 for a
performance level of "Successfully Meets Expectations," $30,375 for "Exceeds Expectations" or $35,750 for being rated "Exceptional."
The
actual bonuses paid to our named executive officers during 2010 are set forth in the Summary Compensation Table below.
For
2011, the compensation committee, in consultation with Compensia, decided to keep the same overall structure for our short-term performance-based cash compensation plan,
but decided to replace Gross Margin and Adjusted EBITDA with quarterly Operating Margin, calculated as revenue less total expenses plus stock-based compensation, and annual Unlevered Free Cash Flow,
calculated as Adjusted EBITDA less capital expenditures, as target objectives. Quarterly Total Revenue will remain as a target objective for 2011. The 2011 objectives and relative weighting are as
follows:
Corporate Objective
Weighting
Quarterly Revenue Targets
33.33
%
Quarterly Operating Margin Targets
33.33
Annual Unlevered Free Cash Flow Target
33.33
The
compensation committee decided to change the objectives for our short-term performance-based cash compensation plan because it believes Operating Margin and Unlevered
Free Cash Flow are more representative of our business success and our overall performance, particularly as a public company, and our strategic plans to scale our business while remaining focused on
capital efficiency.
In
addition, while the target bonus pool dollar amounts have yet to be determined, the compensation committee, upon the recommendation of Compensia, decided (i) to increase the
target bonus amount for Mr. Fawzi to 100 percent of his annual base salary and that of Mr. Simone to 65 percent of his annual base salary and (ii) to modify the
range such that the maximum target bonus amount that may be achieved for each objective will be 200 percent of the target bonus amounts. These changes were made to better align our compensation
with other publicly-traded companies identified by Compensia as comparable companies.
Discretionary Bonus
In addition to payments made under our 2010 short-term performance-based cash compensation plan, our board of directors
also awarded a discretionary bonus in the amount of approximately $17,000 to Mr. Fawzi for exceptional performance for 2010. As a result of Mr. Fawzi's leadership, we significantly
improved financial and operating performance, positioning us to pursue an initial public
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offering.
The amount of the discretionary bonus was determined by the board of directors based on the total amount remaining available for distribution under the 2010 bonus pool after distribution to
the plan participants.
Sales Commission Plan
Mr. Belanger did not participate in our short-term performance-based cash compensation plan in 2010, but instead
participated in a separate sales commission plan. For 2010, Mr. Belanger was paid a fixed percentage on all net profits (revenue multiplied by net margin %) generated by his assigned accounts
under the standard sales commission plan applicable to all of our sales professionals. As a result of his position as the leader of our sales team he was also entitled to a separate "override
commission," which was a fixed percentage on all net profits generated by accounts not assigned to Mr. Belanger, but instead assigned to sales professionals who report to Mr. Belanger.
For both the assigned accounts and the override accounts, the fixed percentage earned by Mr. Belanger increased once total net profits exceeded the net profits achieved during the month of
December 2009. The commission percentages for Mr. Belanger for 2010 were as follows:
Assigned Accounts
Override Accounts
Up to December 2009 Total Monthly Net Profit Achievement
3% of total monthly net profit
0.775% of total monthly net profit
In excess of December 2009 Total Monthly Net Profit Achievement
7% of net profit in excess of December 2009 total monthly net profit
1% of net profit in excess of December 2009 monthly net profit
A
fixed percentage was used to make the plan easy to understand and to directly tie Mr. Belanger's compensation to our success. Because our management wanted to incentivize
Mr. Belanger to maximize sales of our services and thereby maximize his own compensation, there were no target or maximum amounts established for Mr. Belanger's sales commission plan.
Mr. Belanger's actual commission payout for 2010 is set forth in the Summary Compensation Table presented later in this prospectus.
Long-Term Equity Compensation
We use equity awards to motivate and reward our executive officers, including our named executive officers, to encourage
long-term corporate performance based on the value of our common stock and to align the interests of our executive officers with those of our stockholders. We believe that stock options,
when granted with exercise prices equal to the fair market value of our common stock on the date of grant, provide an appropriate long-term incentive for our executive officers. Stock
options reward our executive officers only to the extent that, following their grant date, our stock price increases.
Historically,
we have not applied a rigid formula to determine the size of the stock option awards that are granted to our executive officers. Instead, these awards are determined in the
judgment of the compensation committee, taking into consideration, among other things, our performance and that of the executive officer during the past year, the prospective role and responsibility
of the executive officer, competitive factors, the amount of equity-based compensation held by the executive officer and the cash compensation received by the executive officer. Based on these
factors, the compensation committee sets the size of each stock option award at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of
long-term stockholder value. There were no equity awards granted to our named executive officers during 2009 or 2010 due to the fact that the equity ownership of our named executive
officers had not changed appreciably since our last round of equity financing in 2008. However, our compensation committee did recently review supplemental market studies regarding executive
compensation as well as the number of vested options held by key
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employees.
As a result, in May 2011, the compensation committee granted equity awards to certain of our named executive officers in May 2011, as set forth above in "Timing of Compensation Decisions."
We
have not granted any equity awards to our named executive officers other than stock options. Typically, our named executive officers have received an initial stock option grant at the
time of hire, with only discretionary additional awards thereafter. We have adopted a long-term equity incentive plan to become effective following the completion of this offering. While
this plan provides for a variety of different types of equity awards, we expect that, reflecting our focus on long-term growth, the compensation committee will continue to use stock
options as our primary form of long-term incentive compensation.
Exercise Price of Equity Awards
The exercise price of stock options granted to our executives under our equity incentive plans is equal to or greater than the fair
market value of our common stock on the grant date. As a privately held company, our board of directors has historically determined the fair market value of our common stock based on various factors,
including (1) our recent and historical company performance; (2) our liquidity and cash resources; (3) our projections regarding our future financial results; (4) company
developments since the last time option grants were approved by our board of directors; (5) independent third party valuations; (6) the value of comparable companies; and (7) the
rights, preferences and privileges of our preferred stock relative to those of our common stock. See "Management's Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Policies—Stock Based Compensation" for further information. Upon the completion of this offering, we will use the market price of our common
stock on the date of grant for purposes of establishing the exercise price of stock options.
Other Compensation Policies
Retirement and Other Benefits; Perquisites
Our executive officers, including the named executive officers, are eligible to participate in our tax-qualified
Section 401(k) retirement savings plan on the same basis as our other employees who satisfy the plan's eligibility requirements, including requirements relating to age and length of service.
Under this plan, participants may elect to make pre-tax contributions of up to 90 percent of their current compensation, not to exceed the applicable statutory income tax
limitation, which was $16,500 in 2010.
Additional
benefits received by our executive officers, including the named executive officers, include medical, dental and vision benefits, medical and dependent care flexible spending
accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance. These benefits are provided on the same basis
as to all of our full-time employees. We also maintain a corporate apartment for use by employees visiting our Denver operations, including our named executive officers.
We
do not have a formal perquisite policy, and we do not emphasize special perquisites for our executive officers. The compensation committee may periodically review perquisites for our
executive officers, particularly in the context of new employment agreements.
Executive Equity Ownership
We encourage our executive officers to hold a significant equity interest in our company. However, we do not have specific share
retention and ownership guidelines for our executive officers.
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Executive Hedging and Trading
We have adopted a policy that, once we become a publicly traded company following this offering, we will not permit our executive
officers to sell short our stock, will prohibit our executive officers from holding our stock in a margin account, and will discourage the purchase and sale of exchange-traded options on our stock by
our executive officers.
Compensation Committee Philosophy on Acceleration of Vesting of Equity, Change of Control and Severance Benefits
Pursuant to our agreements with them, certain of our named executive officers may receive certain cash payments, continuation of
medical and welfare insurance benefits, and acceleration of vesting under outstanding equity awards in connection with a termination of employment or a change of control or the initial public offering
of the company. See "Executive Employment Agreements" and "Potential Payments Upon Termination, Change of Control or Initial Public Offering" below for more information. When establishing these
arrangements, the compensation committee believed that they were necessary to attract or retain qualified executives who may have pursued attractive alternatives absent these benefits. With respect to
benefits related to a change of control, the board of directors elected to provide for these benefits to partially mitigate the risks that exist for executives working in an environment where there is
a potential for a change of control. With respect to benefits related to an initial public offering, the board of directors elected to provide for these benefits to incentivize our executives for the
achievement of an initial public offering of the company. The compensation committee sought to provide change of control-related arrangements which would allow executives to focus on the value of
strategic alternatives to stockholders without concern for the impact of a change of control on their continued employment.
Effect of Tax and Accounting Treatment on Compensation Decisions
We consider the anticipated accounting and tax implications to us and our executives in determining our compensation programs. However,
these factors alone are not dispositive,
and we also consider the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives. Section 162(m) of the
Code imposes a limit on the amount of compensation that we may deduct in any one year with respect to our chief executive officer and each of our next three most highly compensated executive officers
(other than our chief financial officer), unless specific and detailed criteria are satisfied. "Performance-based compensation," as defined in the Code, is fully deductible if the programs are
approved by stockholders and meet other requirements. We believe that grants of equity awards under our existing stock plan qualify as performance-based for purposes of satisfying the conditions of
Section 162(m), thereby permitting us to receive a federal income tax deduction in connection with such awards. In general, we have determined that we will not seek to limit executive
compensation so that it is deductible under Section 162(m). However, from time to time, we monitor whether it might be in our interests to structure our compensation programs to satisfy the
requirements of Section 162(m). We seek to maintain flexibility in compensating our executives in a manner designed to promote our corporate goals and therefore our compensation committee has
not adopted a policy requiring all compensation to be deductible. Our compensation committee will continue to assess the impact of Section 162(m) on our compensation practices and determine
what further action, if any, is appropriate.
We
follow the Financial Accounting Standards Board's Accounting Standards Codification Topic 718 for our stock-based compensation awards. ASC 718 requires companies to
calculate the grant date "fair value" of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables that
accompany this Compensation Discussion and Analysis, even though recipients may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of
their stock-based
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awards
in their income statements over the period that an employee is required to render service in exchange for the award.
Analysis of Risk Relating to Our Compensation Programs
After reviewing the various design elements of our compensation programs to determine whether any of their aspects encourage excessive
or inappropriate risk-taking, the compensation committee has determined that our compensation programs do not encourage excessive risk or inappropriate risk taking, as our compensation
programs have been balanced to focus on our short-and long-term financial and operational performance. The determination was based on the following
factors:
•
the base salaries we pay to our employees are set at levels sufficient to match compensation paid by similarly situated
companies and are designed to provide a steady income regardless of our stock price performance, which we believe discourages risk taking;
•
our various non-equity incentive compensation programs contain company-wide and individual
elements that we believe are attainable without the need to take inappropriate risks or make material changes to our business or strategy;
•
other than payments that may be made under our sales commission plans, which are not capped, the cash payments that may be
made to our employees under our non-equity incentive compensation programs are subject to maximum limits, which we believe mitigates the risks our employees may take; and
•
equity grants to participants under our equity incentive plans generally vest over a period of four years, which we
believe discourages excessive or inappropriate short-term risk taking.
Summary Compensation Table
The following table sets forth the total compensation earned for services rendered by our principal executive officer, our principal
financial officer, and our three other most highly compensated executive officers whose total compensation for the year ended December 31, 2010 was in excess of $100,000 and who were serving as
executive officers at the end of that fiscal year. The listed individuals are referred to herein as our "named executive officers."
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SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2010
Name and Principal Position
Year
Salary
Bonus
Non-Equity
Incentive Plan
Compensation
Total
Frank Fawzi
2010
$
375,000
$
17,031
(1)
$
232,969
(2)
$
625,000
President, Chief Executive Officer and Chairman
Andre Simone
2010
275,000
—
170,586
(2)
445,586
Chief Financial Officer, Secretary
Haydar Haba
2010
237,705
—
136,675
(2)
374,380
Chief Visionary Officer
Phil Bronsdon
2010
225,000
—
133,523
(2)
358,523
Senior Vice President, Engineering, Development and Operations
John Belanger
2010
125,000
—
324,555
(3)
449,555
Senior Vice President, Service Provider Sales
(1)
Represents
an amount awarded to Mr. Fawzi as a discretionary bonus by our board of directors for exceptional performance in 2010.
(2)
Represents
cash compensation paid to our named executive officers under our short-term performance-based cash compensation plan for the year
ended December 31, 2010.
(3)
Represents
the total performance-based commissions earned by Mr. Belanger pursuant to his sales commission plan for the year ended
December 31, 2010.
See discussion of the material terms of the employment agreements for each of the named executive officers under the heading "Executive Employment
Agreements," below.
Grants of Plan-Based Awards
The following table sets forth certain information with grants of non-equity incentive plan-based awards
granted during the year ended December 31, 2010 to our named executive officers:
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2010
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)
Name
Plan Adoption Date
Threshold
Target
Maximum
Frank Fawzi
May 7, 2010
$
46,875
$
187,500
$
281,250
Andre Simone
May 7, 2010
34,375
137,500
206,250
Haydar Haba
May 7, 2010
29,713
118,852
178,279
Phil Bronsdon
May 7, 2010
28,125
112,500
168,750
John Belanger(2)
—
—
—
(1)
We
award non-equity incentive plan compensation under our short-term performance-based cash compensation plan, as described above
under the section entitled "Compensation Discussion and Analysis." The figures listed represent amounts that could have been earned for the year ended December 31, 2010. The actual amount
earned by each named executive officer for 2010 is set forth above in the Summary Compensation Table.
(2)
Mr. Belanger
does not participate in our short-term performance-based cash compensation plan and has a separate commission plan as
described above under the section entitled "Compensation Discussion and Analysis."
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2010
The following table sets forth certain information with respect to the unexercised options held by our named executive officers as of
December 31, 2010:
Name
Grant
Date
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
Option
Exercise Price
($)
Option
Expiration
Date
Frank Fawzi
5/10/2007
(1)
218,809
—
$
0.39
5/10/2017
2/14/2008
(2)
1,978,802
520,739
0.14
2/14/2018
2/14/2008
(3)
428,571
—
0.14
2/14/2018
12/11/2008
(4)
104,159
104,160
0.44
12/11/2018
Andre Simone
5/10/2007
(5)
798,463
34,717
0.39
5/10/2017
2/14/2008
(6)
840,139
249,772
0.14
2/14/2018
12/11/2008
(7)
104,159
104,160
0.44
12/11/2018
Haydar Haba
5/28/2004
(8)
85,890
—
0.815
5/28/2011
8/18/2004
(9)
42,945
—
0.815
8/18/2011
5/10/2007
(10)
—
459,299
0.39
5/10/2017
2/14/2008
(11)
367,476
109,251
0.14
2/14/2018
12/11/2008
(12)
104,159
104,160
0.44
12/11/2018
John Belanger
5/28/2004
(13)
27,112
—
0.815
5/28/2011
8/4/2004
(14)
300,000
—
0.815
8/4/2011
8/18/2004
(15)
15,338
—
0.815
8/18/2011
1/15/2005
(16)
243,684
—
0.95
1/15/2012
5/10/2007
(17)
100,000
—
0.39
5/10/2017
2/14/2008
(18)
78,881
23,452
0.14
2/14/2018
Phillip Bronsdon
10/15/2007
(19)
81,249
18,751
0.39
10/15/2017
2/14/2008
(20)
478,809
142,350
0.14
2/14/2018
12/11/2008
(21)
34,719
34,720
0.44
12/11/2018
(1)
1/2
of the total number of shares issued pursuant to the option vested on May 10, 2007, and the remainder vested in equal monthly installments over
an 18-month period thereafter.
(2)
1/48
th
of
the total number of shares subject to the option vest monthly commencing November 1, 2007, subject to
Mr. Fawzi's continued service to us on each such vesting date, with all shares subject to the option being vested by September 30, 2011.
(3)
1/12
th
of
the total number of shares subject to the option vested monthly commencing November 1, 2007 with all shares subject to
the option having vested by September 30, 2008.
(4)
1/4
th
of
the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Fawzi's continued service to us on each such vesting date.
(5)
1/4
th
of
the total number of shares subject to the option vested on February 5, 2008, and the remainder vested in equal monthly
installments over a 36-month period thereafter, subject to Mr. Simone's continued service to us on each such vesting date.
(6)
1/48
th
of
the total number of shares subject to the option vest monthly commencing November 14, 2007, subject to
Mr. Simone's continued service to us on each such vesting date.
(7)
1/4
th
of
the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Simone's continued service to us on each such vesting date.
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(8)
100 percent
of the total number of shares subject to the option vested on May 28, 2004.
(9)
100 percent
of the total number of shares subject to the option vested on August 18, 2004.
(10)
100 percent
of the total number of shares subject to the option vest upon the earlier to occur of (i) a change of control of us in which the
holders of our Series B preferred stock receive consideration with a fair market value of at least $7.374 per share of Series B preferred stock (as adjusted for stock splits,
combinations and the like) or (ii) the initial public offering of our common stock, pursuant to which a share of our Series B preferred stock (or our common stock upon conversion
thereof) has a fair market value of at least $7.374 per share (as adjusted for stock splits, combinations and the like), in each case subject to Mr. Haba's continued service to us on either
such occurrence.
(11)
1/4
th
of
the total number of shares subject to the option vested on November 14, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Haba's continued service to us on each such vesting date.
(12)
1/4
th
of
the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Haba's continued service to us on each such vesting date.
(13)
100 percent
of the total number of shares subject to the option vested on May 28, 2004.
(14)
1/3
rd
of the total number of shares subject to the option vested on August 4, 2004, 1/3
rd
of the total number of shares
subject to the option vested upon our attaining of $833,333 in collected monthly GAAP revenue for two consecutive fiscal months following the date of grant and the remaining 1/3
rd
of the
total number of shares subject to the option vested upon our attaining of $2,083,333 in collected monthly GAAP revenue for two consecutive fiscal months following the date of grant.
(15)
100 percent
of the total number of shares subject to the option vested on August 18, 2004.
(16)
1/24
th
of
the total number of shares subject to the option vested monthly commencing in the month of our attaining of $833,333 in
collected monthly GAAP revenue for two consecutive fiscal months following the date of grant.
(17)
100 percent
of the total number of shares subject to the option vested on May 16, 2007.
(18)
1/4
th
of
the total number of shares subject to the option vested on November 14, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Belanger's continued service to us on each such vesting date.
(19)
1/4
th
of
the total number of shares subject to the option vested on September 6, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Bronsdon's continued service to us on each such vesting date.
(20)
1/4
th
of
the total number of shares subject to the option vested on November 14, 2008, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Bronsdon's continued service to us on each such vesting date.
(21)
1/4
th
of
the total number of shares subject to the option vested on December 11, 2009, and the remainder vest in equal monthly
installments over a 36-month period thereafter, subject to Mr. Bronsdon's continued service to us on each such vesting date.
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Option Exercises and Stock Vested
None of our named executive officers exercised options, or became vested in shares of stock subject to stock awards, during the year
ended December 31, 2010.
Pension Benefits
We do not maintain any defined benefit pension plans.
Nonqualified Deferred Compensation
We do not maintain any nonqualified deferred compensation plans.
Potential Payments upon Termination, Change of Control or Initial Public Offering
Our named executive officers are eligible to receive certain payments and benefits in connection with the following events pursuant to
the terms of their employment agreements, offer letter agreements and/or option agreements. The terms "cause," "termination without cause," "resignation for good reason" and "change of control" as
used below have the meanings given to them in the applicable agreements with us which we have filed as exhibits to the registration statement on Form S-1 of which this prospectus is
a part. The term "cause" generally includes the executive's refusal to perform assigned duties, acts of willful misconduct, personal dishonesty intended to result in substantial personal enrichment
and felony convictions or other willful acts which have a material adverse effect on us. The terms "involuntary termination without cause" and "resignation for good reason" generally mean the
executive's resignation in connection with the occurrence of certain events, which generally include a disproportionate salary reduction, materially adverse changes in responsibilities, an involuntary
relocation of greater than a certain number of miles or our material breach of the executive's employment agreement. The term "change of control" generally means the acquisition of our company
pursuant to which our stockholders prior to the event do not retain at least a majority of our outstanding voting securities after such event, or the sale of all or substantially all of our assets.
Termination without Cause, Resignation for Good Reason and Death or Permanent Disability
Upon his involuntary termination without cause, his resignation for good reason or his death or permanent disability (as defined in his
agreement), Mr. Fawzi will be entitled to receive continuation of his then annual base salary over a 12-month period paid in accordance with our then existing payroll schedule, plus a lump sum
cash payment equal to the pro rata amount of his corresponding annual target bonus amount. In addition, Mr. Fawzi will be entitled to continuation of health and other benefits, including
coverage under our directors and officers liability insurance policy, for a six-month period. If such involuntary termination without cause or resignation for good reason occurs within 24
months following a change of control, Mr. Fawzi will be entitled to receive a lump sum cash payment equal to 100 percent of his then annual base salary plus a pro rata amount of his
corresponding annual target bonus amount. In addition, 100 percent of any then unvested equity awards will vest at the time of such termination without cause or resignation for good reason, and
Mr. Fawzi will be entitled to continuation of health and other benefits, including coverage under our director's and officer's liability insurance policy, for a period of 12 months.
Mr. Fawzi's right to receive the foregoing benefits is subject to his execution of a release of claims against us.
Upon
his involuntary termination without cause, his resignation for good reason or his death or permanent disability (as defined in his agreement), Mr. Simone will be entitled to
receive continuation of his then annual base salary over a six-month period paid in accordance with our then existing payroll schedule, plus a lump sum cash payment equal to the pro rata
amount of his corresponding annual target bonus amount. In addition, Mr. Simone will be entitled to continuation of health and other benefits, including coverage under our directors and
officers liability insurance policy, for a six-month
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period.
If such involuntary termination without cause or resignation for good reason occurs within 24 months following a change of control, Mr. Simone will be entitled to receive a lump sum
cash payment equal to 100 percent of his then annual base salary plus a pro rata amount of his corresponding annual target bonus amount. In addition, 100 percent of any then unvested
equity awards will vest at the time of such termination without cause or resignation for good reason, and Mr. Simone will be entitled to continuation of health and other benefits, including
coverage under our directors and officers liability insurance policy, for a period of 12 months. Mr. Simone's right to receive the foregoing benefits is subject to his execution of a release of
claims against us.
Upon
his involuntary termination without cause or his resignation for good reason (as defined in his agreement), Mr. Haba will be entitled to receive continuation of his then
annual base salary over a 12-month period paid in accordance with our then existing payroll schedule, plus a lump sum cash payment equal to the pro rata amount of his corresponding annual
target bonus amount. In addition, Mr. Haba will be entitled to continuation of health and other benefits, including coverage under our directors and officers liability insurance policy, for a
six-month period. If such involuntary termination without cause or resignation for good reason occurs within 24 months following a change of control, Mr. Haba will be entitled to
receive a lump sum cash payment equal to 100 percent of his then annual base salary plus a pro rata amount of his corresponding annual target bonus amount. In addition, 100 percent of
any then unvested equity awards will vest at the time of such termination without cause or resignation for good reason, and Mr. Haba will be entitled to continuation of health and other
benefits, including coverage under our directors and officers liability insurance policy, for a period of 12 months. Mr. Haba's right to receive the foregoing benefits is subject to his
execution of a release of claims against us.
Neither
Mr. Belanger nor Mr. Bronsdon will be entitled to any payments upon termination without cause or for resignation for good reason.
The
following table presents our estimate of the dollar value of the payments and benefits payable to our named executive officers upon the occurrence of a termination without cause or
resignation for
good reason in the circumstances noted below, assuming that such event occurred on December 31, 2010:
Name
Event
Cash
Severance
Payment
Continuation
of Benefits
(1)
Value of Option
Acceleration
(2)
Frank Fawzi(3)
Termination without Cause in Absence of Change of Control(4)
$
375,000
$
8,100
$
—
Termination without Cause within 24 months after Change of Control(5)
562,500
16,200
2,080,911
Resignation for Good Reason in Absence of Change of Control(4)
375,000
8,100
—
Resignation for Good Reason within 24 months after Change of Control(5)
562,500
16,200
2,080,911
Andre Simone(3)
Termination without Cause in Absence of Change of Control(6)
$
137,500
$
—
$
—
Termination without Cause within 12 months after Change of Control(6)
137,500
—
1,273,706
Resignation for Good Reason in Absence of Change of Control
—
—
—
Resignation for Good Reason within 12 months after Change of Control(6)
137,500
—
1,273,706
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Name
Event
Cash
Severance
Payment
Continuation
of Benefits
(1)
Value of Option
Acceleration
(2)
Haydar Haba(3)
Termination without Cause in Absence of Change of Control(7)
$
356,558
$
16,200
$
—
Termination without Cause within 24 months after Change of Control(8)
713,315
16,200
2,127,687
Resignation for Good Reason in Absence of Change of Control(7)
356,558
16,200
—
Resignation for Good Reason within 24 months after Change of Control(8)
713,315
16,200
2,127,687
John Belanger
Termination without Cause in Absence of Change of Control
—
—
—
Termination without Cause in connection with Change of Control
—
—
—
Resignation for Good Reason in Absence of Change of Control
—
—
—
Resignation for Good Reason following Change of Control
—
—
—
Phillip Bronsdon
Termination without Cause in Absence of Change of Control
—
—
—
Termination without Cause in connection with Change of Control
—
—
—
Resignation for Good Reason in Absence of Change of Control
—
—
—
Resignation for Good Reason following Change of Control
—
—
—
(1)
Represents
the aggregate value of continuation of health insurance benefits after the date of termination. For the purposes of this calculation, expected
costs have not been adjusted for any likelihood that the executives will find other employment.
(2)
Represents
the aggregate value of the accelerated vesting of the named executive officer's unvested stock options. With respect to each option award,
amounts were calculated by multiplying (i) the difference between the fair market value of our common stock on December 31, 2010, $3.52, and the applicable exercise price of such option
award by (ii) the assumed number of option shares subject to such award vesting on an accelerated basis on December 31, 2010.
(3)
The
respective rights of Messrs. Fawzi, Simone and Haba to receive the listed benefits are subject to such person's execution of a release of claims
against us.
(4)
Cash
severance for Mr. Fawzi, as of December 31, 2010, was equal to 50 percent of his annual base salary at December 31, 2010,
plus his annual bonus target amount of $187,500 for fiscal year 2010. Cash severance payable to Mr. Fawzi related to salary was payable over six months pursuant to regular payroll procedures.
Cash severance payable to Mr. Fawzi related to bonus amounts was payable in a lump sum.
(5)
Cash
severance for Mr. Fawzi, as of December 31, 2010, was equal to his annual base salary at December 31, 2010, plus his annual bonus
target amount of $187,500 for fiscal year 2010, and was payable in a lump sum.
(6)
Cash
severance for Mr. Simone, as of December 31, 2010, was equal to 50 percent of his annual base salary at December 31, 2010
and was payable over six months pursuant to regular payroll procedures.
(7)
Cash
severance for Mr. Haba, as of December 31, 2010, was equal to his annual base salary at December 31, 2010, plus his annual bonus
target amount of $118,853 for fiscal year 2010, and was payable in a lump sum.
(8)
Cash
severance for Mr. Haba, as of December 31, 2010, was equal to 300 percent of his annual base salary at December 31, 2010
and was payable in a lump sum. Mr. Haba's salary and the terms of Mr. Haba's severance were changed in May 2011. For additional information, see "Executive Employment
Agreements—Haydar Haba" located elsewhere in this prospectus.
Change of Control or Initial Public Offering
Certain of our stock option award agreements with our named executive officers provide that 100 percent of the shares of common
stock subject to such option agreements will vest immediately prior to a change of control or the initial public offering of our securities. In addition, in the event of a change of control,
Mr. Simone's offer letter agreement, as amended, calls for the acceleration of
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100 percent
of the unvested options subject to the option grant Mr. Simone received in connection with the entering into of his offer letter agreement.
The
following table presents our estimate of the dollar value of the payments and benefits payable to our named executive officers in connection with a change of control or initial
public offering of securities, assuming that such event occurred on December 31, 2010:
Name
Event
Value of Option
Acceleration
(1)
Frank Fawzi
Change of Control
$2,080,911
Initial Public Offering
1,760,098
Andre Simone
Change of Control
1,273,706
Initial Public Offering
—
Haydar Haba
(2)
Change of Control
320,813
Initial Public Offering
—
John Belanger
Change of Control
—
Initial Public Offering
—
Phillip Bronsdon
Change of Control
106,936
Initial Public Offering
—
(1)
Represents
the aggregate value of the accelerated vesting of the named executive officer's unvested stock options. With respect to each option award,
amounts were calculated by multiplying (i) the difference between the fair market value of our common stock on December 31, 2010, $3.52, and the applicable exercise price of such option
award by (ii) the assumed number of option shares subject to such award vesting on an accelerated basis on December 31, 2010. For any award with a purchase price greater than $3.52, no
additional value is represented by the acceleration of outstanding unvested options subject to such award.
(2)
Mr. Haba
is entitled to acceleration of certain options held by him in the event the price of our common stock exceeds $7.374 per share following the
completion of our initial public offering or in the event of a change of control of us in which the holders of our Series B preferred stock receive consideration with a fair market value of at
least $7.374 per share.
Neither of the above tables includes:
•
any accrued benefits that were earned and payable as of December 31, 2010, including bonuses deemed earned by the
executive pursuant to the terms of our 2010 short-term performance-based cash compensation plan;
•
payments and benefits to the extent they are provided generally to all salaried employees and do not discriminate in
scope, terms or operation in favor of our named executive officers; or
•
the value to the executive of the continuing right to indemnification and continuing coverage under our directors' and
officers' liability insurance, if applicable.
Executive Employment Agreements
We have entered into employment agreements or offer letter agreements with each of our named executive officers, which are summarized
below. For additional information regarding executive bonuses and severance and/or other benefits to be payable in connection with a named executive officer's termination, resignation for good reason
or in connection with a change of control and/or the initial public offering of our securities, see the sections under the heading "Executive Compensation" entitled "Compensation Discussion and
Analysis," and "Potential Payments upon Termination, Change of Control or Initial Public Offering," respectively. For additional information regarding equity awards, see the tables under the heading
"Executive Compensation" entitled "Summary Compensation Table," "Grants of Plan-Based Awards" and "Outstanding Awards at Fiscal Year-End."
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Frank Fawzi
We entered into an amended and restated employment agreement with Mr. Fawzi in May 2011 to serve as our president, chief
executive officer and chairman of the board. The agreement provides Mr. Fawzi's annual base salary is $412,500, subject to increase to $442,000 in the event of the initial public offering of
our securities on a national securities exchange. Mr. Fawzi's annual base salary is to be reviewed on at least an annual basis and may be increased, but not decreased, as determined by the
board. In addition, Mr. Fawzi is eligible to participate in our annual short-term performance based cash compensation plan with an annual target of 100 percent of his then
annual base salary. The agreement has no specific term and constitutes
at-will employment. Pursuant to the agreement, each of Mr. Fawzi's previously granted equity awards shall continue to vest subject to their original terms; provided, however, that
the post-termination exercise period for each of his grants, notwithstanding the terms of each such grant, shall be extended to a term that is the shorter of three years following
Mr. Fawzi's termination for any reason other than for cause (as defined in the agreement) or the expiration date of the respective option grant. Pursuant to the agreement, Mr. Fawzi has
agreed that for one year following the termination of his employment with us for any reason, he will not, without our prior written consent, directly or indirectly, induce or attempt to induce any
person who is an employee or contractor of us or any of our affiliates to terminate his or her relationship with us or any of our affiliates. In addition to participating in the Company's standard
benefit plans, Mr. Fawzi's agreement also provides for certain severance and/or other benefits to be payable in connection with his termination, resignation for good reason, or in connection
with a change of control and/or the initial public offering of our securities. See "Potential Payments upon Termination, Change of Control or Initial Public Offering" above.
Andre Simone
We entered into an amended and restated employment agreement with Mr. Simone in May 2011 to serve as our chief financial
officer. The agreement provides Mr. Simone's annual base salary is $302,500, subject to review on at least an annual basis, and may be increased, but not decreased, as determined by the board.
In addition, Mr. Simone is eligible to participate in our annual short-term performance based cash compensation plan with an annual target of 65 percent of his then annual
base salary. The agreement has no specific term and constitutes at-will employment. Pursuant to the agreement, each of Mr. Simone's previously granted equity awards shall continue
to vest subject to their original terms; provided, however, that the post-termination exercise period for each of his grants, notwithstanding the terms of each such grant, shall be
extended to a term that is the shorter of twelve months following Mr. Simone's termination for any reason other than for cause (as defined in the agreement) or the expiration date of the
respective option grant. Pursuant to the agreement, Mr. Simone has agreed that for one year following the termination of his employment with us for any reason, he will not, without our prior
written consent, directly or indirectly, induce or attempt to induce any person who is an employee or contractor of us or any of our affiliates to terminate his or her relationship with us or any of
our affiliates. In addition to participating in the Company's standard benefit plans, Mr. Simone's agreement also provides for certain severance and/or other benefits to be payable in
connection with his termination, resignation for good reason, or in connection with a change of control and/or the initial public offering of our securities. See "Potential Payments upon Termination,
Change of Control or Initial Public Offering" above.
Haydar Haba
We entered into an amended and restated employment agreement with Mr. Haba in May 2011 to serve as our chief visionary officer.
The agreement provides Mr. Haba's annual base salary is $250,459, subject to review on at least an annual basis, and may be increased, but not decreased, as determined by the board. In
addition, Mr. Haba is eligible to participate in our annual short-term performance
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based
cash compensation plan with an annual target of 50 percent of his then annual base salary. The agreement has no specific term and constitutes at-will employment. Pursuant to
the agreement, each of Mr. Haba's previously granted equity awards shall continue to vest subject to their original terms; provided, however, that the post-termination exercise
period for each of his grants, notwithstanding the terms of each such grant, shall be extended to a term that is the shorter of twelve months following Mr. Haba's termination for any reason
other than for cause (as defined in the agreement) or the expiration date of the respective option grant. Pursuant to the agreement, Mr. Haba has agreed that for one year following the
termination of his employment with us for any reason, he will not, without our prior written consent, directly or indirectly, induce or attempt to induce any person who is an employee or contractor of
us or any of our affiliates to terminate his or her relationship with us or any of our affiliates. In addition to participating in the Company's standard benefit plans, Mr. Haba's agreement
also provides for certain severance and/or other benefits to be payable in connection with his termination, resignation for good reason, or in connection with a change of control and/or the initial
public offering of our securities. See "Potential Payments upon Termination, Change of Control or Initial Public Offering" above.
John Belanger
We entered into an offer letter agreement with Mr. Belanger to serve as our vice president of sales and marketing, dated
December 10, 2003. Mr. Belanger was subsequently appointed as our senior vice president of service provider sales. Mr. Belanger's annual base salary was initially $120,000 which
has subsequently been raised to $125,000. Under the terms of the agreement, Mr. Belanger is eligible to participate in a commission plan on such terms as our board of directors may determine.
See "Compensation Discussion and Analysis—Elements of Executive Compensation—Sales Commission Plan" above. The agreement also contemplates that Mr. Belanger will receive
an initial option grant as provided therein. The agreement does not provide for any severance and/or other benefits to be payable in connection with his termination, resignation for good reason or in
connection with a change of control and/or the initial public offering of our securities.
Phillip Bronsdon
We entered into an offer letter agreement with Mr. Bronsdon to serve as our vice president of operations, dated
August 21, 2007. Mr. Bronsdon was subsequently appointed as our senior vice president of engineering, development and operations. Mr. Bronsdon's annual base salary was initially
$175,000 which has subsequently been raised to $238,500. Under the terms of the agreement, Mr. Bronsdon is eligible to receive an annual performance bonus of up to 50 percent of his
annual base salary based upon achievement of individual performance goals to be agreed upon by us and Mr. Bronsdon as well as company performance goals to be determined by our board of
directors. The agreement contemplates that Mr. Bronsdon will receive an initial option grant as provided therein. The agreement does not provide for any severance and/or other benefits to be
payable in connection with his termination, resignation for good reason or in connection with a change of control and/or the initial public offering of our securities.
Director Compensation
To date, and other than as set forth in the following disclosure, we have not compensated our non-employee directors for
their services as directors. We do reimburse both employee and non-employee directors for reasonable travel and lodging expenses incurred by them to attend our board and committee
meetings.
On
February 7, 2011, Raymond Smets received an option grant to purchase 100,000 shares of our common stock at an exercise price equal to $3.52 per share, the fair market value of
our common stock on the grant date, as determined by our board of directors. Pursuant to our letter agreement with
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Mr. Smets
dated January 11, 2011, Mr. Smets receives a $25,000 annual retainer for his services as a director.
On
February 7, 2011, Lawrence Irving received an option grant to purchase 100,000 shares of our common stock at an exercise price equal to $3.52 per share, the fair market value
of our common stock on the grant date, as determined by our board of directors. Pursuant to our letter agreement with Mr. Irving dated January 26, 2011, Mr. Irving receives a
$35,000 annual retainer for his services as a director.
On
the day after completion of this offering, Javier Rojas and William Harding will each receive an option grant under our 2011 Equity Incentive Plan, or 2011 Equity Plan, to purchase
100,000 shares of our common stock with an exercise price per share equal to the fair market value of our common stock on the date of grant.
Beginning
upon the completion of this offering, all of our non-employee directors will be eligible to receive cash compensation of $25,000 per year for service as a director.
The chair of our audit committee will be entitled to receive an additional $15,000 per year, the chair of our compensation committee entitled to receive an additional $10,000 per year and the chair of
our nominating and corporate governance committee entitled to an additional $7,500 per year. Other members of the audit committee will be entitled to receive an additional $10,000 per year, other
members of the compensation committee entitled to an additional $5,000 per year and other members of the nominating and corporate governance committee entitled to an additional $3,000 per year.
Additionally, all non-employee directors will also be eligible to receive an option grant under our 2011 Equity Plan to purchase 25,000 shares of our common stock with an exercise price
per share equal to the fair market value of our common stock on the date of grant, which will be the first day after the Company holds its annual meeting. We will continue to reimburse all directors
for reasonable travel and lodging expenses incurred by them to attend our board and board committee meetings.
Employee Benefit Plans
Amended and Restated 2003 Stock Option and Restricted Stock Plan
On June 10, 2003, our board of directors adopted, and the Company's stockholders later approved, our 2003 Stock Option and
Restricted Stock Plan and on May 10, 2007, such plan was amended and restated. The Amended and Restated 2003 Stock Option and Restricted Stock Plan, or 2003 Stock Plan, provides for the grant
of incentive and nonstatutory stock options and stock purchase right awards to employees, consultants and members of our board of directors or of any of parent or subsidiary corporation of ours.
However, only options have been granted under the 2003 Stock Plan.
Subject
to adjustment in the event of certain changes in capital structure, the maximum aggregate number of shares of common stock authorized for issuance under the 2003 Stock Plan is
18,529,587. As of December 31, 2010, options were outstanding under the 2003 Stock Plan and outside the plan to purchase 14,722,328 shares of common stock, at a weighted average exercise price
of $0.455 per share,
and 758,808 shares remained available for future grant. Shares subject to awards that expire, are forfeited or otherwise terminate will again be available for grant under the 2003 Stock Plan.
Our
board of directors will terminate the 2003 Stock Plan effective upon the closing of this offering, and no additional options or other equity awards may be granted under the 2003
Stock Plan following its termination. However, options granted under the 2003 Stock Plan prior to its termination will remain outstanding until they are either exercised or expire.
2011 Equity Incentive Plan
Our
2011 Equity Plan was approved by our board of directors and our stockholders in May 2011.
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The
number of shares of our common stock that has been initially authorized and reserved for issuance under the 2011 Equity Plan is equal to the total number of shares still available
for issuance under the 2003 Stock Plan as of the closing of this offering. This reserve will automatically increase on January 1, 2012 and each subsequent anniversary through 2020, by an amount
equal to the smaller of (a) 4.0 percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined
by the board. The reserve will also increase automatically by the number of any shares subject to awards outstanding under the 2003 Stock Plan which expire or are cancelled or forfeited after the
closing of this offering. Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the 2011 Equity Plan and in outstanding awards to prevent dilution or
enlargement of participants' rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are cancelled or forfeited will again become
available for issuance under the 2011 Equity Plan. The shares available will not be reduced by awards settled in cash or by shares withheld to satisfy tax withholding obligations. Only the net number
of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares will be deducted from the shares available under
the 2011 Equity Plan.
The
2011 Equity Plan will be administered by the compensation committee of our board of directors. Awards may be granted under the 2011 Equity Plan to our employees, including officers,
directors, or consultants or those of any present or future parent or subsidiary or other affiliated entity. While we may grant incentive stock options only to employees, we may grant nonstatutory
stock options, stock appreciation rights, restricted stock purchase rights or bonuses, restricted stock units, performance shares, performance units and cash-based awards or other
stock-based awards to any eligible participant.
In
the event of a change of control as described in the 2011 Equity Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the 2011 Equity
Plan or substitute substantially equivalent awards. Any awards which are not assumed or continued in connection with a change of control or are not exercised or settled prior to the change of control
will terminate effective as of the time of the change of control. The compensation committee may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such
extent as it determines, except that the vesting of all awards held by members of the board of directors who are not employees will automatically be accelerated in full. The 2011 Equity Plan also
authorizes the compensation committee, in its discretion and without the consent of any participant, to cancel each or any outstanding award denominated in shares upon a change of control in exchange
for a payment to the participant with respect to each share subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change of
control transaction over the exercise price per share, if any, under the award.
401(k) Plan
Through our relationship with Trinet, we offer our employees a defined contribution employee retirement plan, or 401(k) plan. Our
executive officers are also eligible to participate in the 401(k) plan on the same basis as our other employees. The 401(k) plan is intended to qualify as a tax-qualified plan under
Section 401(k) of the Code. The plan provides that each participant may contribute up to the statutory limit, which is $16,500 for calendar year 2011. Participants that are 50 years or
older can also make "catch-up" contributions, which in calendar year 2011 may be up to an additional $5,500 above the statutory limit. The plan permits us to make discretionary
contributions and matching contributions, subject to established limits and a vesting schedule. In fiscal year 2010, we did not make any discretionary or matching contributions on behalf of our named
executive officers.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Policies and Procedures for Related Person Transactions
All future transactions, if any, between us and our officers, directors and principal stockholders and their affiliates, as well as any
transactions between us and any entity with which our officers, directors or principal stockholders are affiliated will be reviewed and approved or ratified in accordance with policies and procedures
that our board of directors intends to adopt effective upon the completion of this offering. Such policies and procedures will require that related person transactions be approved by the audit
committee or our board of directors or otherwise in accordance with the then applicable SEC, NYSE or Nasdaq rules and regulations governing the approval of such transactions. These policies and
procedures have not been and will not be applied to the transactions described below.
Related Person Transactions
Since January 1, 2008, we have not been a party to, and we have no plans to be a party to, any transaction or series of similar
transactions in which the amount involved exceeded or will exceed $120,000 and in which any current or former director, executive officer, holder of more than five percent of our capital stock, any
member of the immediate family of or any entities affiliated with any of the foregoing persons or entities affiliated with them, had or will have a direct or indirect material interest, other than as
described above under the heading "Executive Compensation" and in the transactions described below.
Securities Issued to Insiders
On June 5, 2008, June 17, 2008, and August 1, 2008 we collectively issued and sold an aggregate principal amount
of $2,050,000 of subordinated convertible promissory notes that accrued interest at a rate of eight percent per annum. As described below, on October 31, 2008, all outstanding principal and
interest, equal to an aggregate amount of $2,117,003, converted into shares of our Series C preferred stock. The table below summarizes purchases of these convertible promissory notes by our
directors, executive officers, holders of more than five percent of any class of our voting securities, and any member of the immediate family of or any entities affiliated with any of the foregoing
persons.
Purchasers
Principal Amount of
Notes
Entities affiliated with Kennet II L.P.(1)
$1,193,798
Entities affiliated with IVS Fund II K/S(2)
457,364
Entities affiliated with EDF Ventures III, Limited Partnership(3)
348,837
(1)
Consists
of $1,188,472 principal amount purchased by Kennet II L.P. and $5,326 principal amount purchased by King Street Partners L.P.
  Javier Rojas is a managing director of Kennet Partners LLC, and is a member of our board of directors. Kennet Capital Management (Jersey) LTD. is the manager of each of
Kennet II L.P. and King Street Partners L.P.
(2)
Consists
of $304,909 principal amount purchased by IVS Fund II K/S and $152,455 principal amount purchased by IVS A/S.
(3)
Consists
of $313,954 principal amount purchased by EDF Ventures III, Limited Partnership and $34,883 principal amount purchased by EDF
Ventures III Sidecar, Limited Partnership.
On October 31, 2008, we issued and sold an aggregate of 17,541,050 shares of our Series C preferred stock at a per share price of
approximately $1.0597 with respect to shares purchased for cash and a per share price of approximately $0.8478 with respect to shares issued upon conversion of outstanding debt, for aggregate
consideration of approximately $18.1 million (approximately $2.1 million via conversion of debt and $16.0 million in cash). The table below summarizes purchases of shares of our
Series C preferred stock by our directors, executive officers, holders of more than five percent of any class of our voting securities, and any member of the immediate family of or any entities
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affiliated
with any of the foregoing persons. In connection with these sales, we granted the purchasers certain registration rights with respect to their securities. See "Description of Capital
Stock—Registration Rights." Each outstanding share of our Series C preferred stock will be converted automatically into one share of our common stock immediately prior to the
completion of this offering.
Purchasers
Shares of Series C
Preferred Stock
Aggregate
Purchase
Price
(1)
VantagePoint Venture Partners 2006(Q), L.P.(2)
15,049,776
$15,948,248
Entities affiliated with IVS Fund II K/S(3)
555,815
471,198
Entities affiliated with Kennet II L.P.(4)
1,450,771
1,229,906
Entities affiliated with EDF Ventures III, Limited Partnership(5)
423,926
359,388
(1)
Payment
via cash and conversion of outstanding debt at a 20 percent discount to the cash purchase price.
(2)
William
J. Harding is a member of VantagePoint Venture Associates 2006, LLC, the general partner of VantagePoint Venture Partners
2006(Q), L.P., and is a member of our board of directors.
(3)
Consists
of 185,272 shares purchased by IVS A/S and 370,543 shares purchased by IVS Fund II K/S.
(4)
Consists
of 1,444,299 shares purchased by Kennet II L.P. and 6,472 shares purchased King Street Partners L.P. Javier Rojas is a
managing director of Kennet Partners LLC, and is a member of our board of directors. Kennet Capital Management (Jersey) LTD. is the manager of each of Kennet II L.P. and
King Street Partners L.P.
(5)
Consists
of 381,534 shares purchased by EDF Ventures III, Limited Partnership and 42,392 shares purchased EDF Ventures III Sidecar, Limited
Partnership.
Amended and Restated Registration Rights Agreement
We have entered into a registration rights agreement with the purchasers of our outstanding convertible preferred stock, including
entities with which certain of our directors are affiliated, and certain holders of our outstanding common stock, including certain of our executive officers. As of December 31, 2010, the
holders of up to 59,431,206 shares of our common stock, including the common stock issuable upon the conversion of our preferred stock and upon the exercise of warrants, are entitled to rights with
respect to the registration of their shares following this offering under the Securities Act. For a description of these registration rights and other registration rights held by certain holders of
our common stock, see "Description of Capital Stock—Registration Rights."
Indemnification Agreements
We have entered into, or will enter into, an indemnification agreement with each of our directors and executive officers. The
indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. See
"Description of Capital Stock—Limitations of Director Liability and Indemnification of Directors, Officers, and Employees."
Offer Letters
We have entered into employment agreements and proprietary information and inventions agreements with our executive officers. For more
information regarding these agreements, see "Executive Compensation—Executive Employment Agreements."
Indebtedness of Management
In June 2006, we issued an aggregate of 769,320 shares of our common stock to Fawzi Common Stock, Inc., an entity
affiliated with Frank Fawzi, our chief executive officer and chairman, in exchange for a promissory note in the original principal amount of $932,493. Interest on the note originally accrued at a rate
of 5.06% per annum, and the note had an initial maturity date of the earlier of
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(i) June 30,
2011 or (ii) the day immediately prior to a public offering. The note was a non-recourse note and was secured by a pledge of the 769,320 shares of common
stock. In May 2007, in accordance with its terms, the note was amended to reduce the principal to $788,058 to reflect a reduction in the value of the shares of common stock following a reduction in
the conversion price of our Series B preferred stock. In December 2010, the note was amended in order to change the interest rate to 0.32% per annum and to change the maturity date to
the earlier of (i) June 30, 2012 or (ii) the day immediately prior to a public offering. The largest aggregate amount of indebtedness outstanding pursuant to the note was
$983,771, which represented the full amount of principal and accrued interest outstanding at May 4, 2011, the date the note was repaid in full.
Recent Stock Sales
On May 4, 2011, certain of our executive officers or their affiliates sold an aggregate of 727,274 shares of our common
stock to an institutional investor. The institutional investor was not previously a company stockholder or an affiliate of a company stockholder. All transactions were completed at a price per share
of $5.50. The transaction for Fawzi Common Stock, Inc., an entity affiliated with Frank Fawzi, our chief executive officer and chairman, allowed Fawzi Common Stock, Inc. to satisfy the
indebtedness owed by Fawzi Common Stock, Inc. to us in an amount equal to $983,737, and tax liability associated with gains on the sale of such shares.
Fawzi
Common Stock, Inc. sold an aggregate of 280,238 shares, representing approximately 6.2 percent of the 4,517,574 shares then beneficially owned by Mr. Fawzi,
including shares subject to options held by Mr. Fawzi that were then exercisable or exercisable within 60 days of the date of such transaction.
Mr. Simone
sold an aggregate of 47,146 shares, representing approximately 2.4 percent of the 2,000,857 shares then beneficially owned by Mr. Simone, including shares
subject to options held by Mr. Simone that were then exercisable or exercisable within 60 days of the date of such transaction.
Mr. Haba
sold an aggregate of 81,685 shares, representing approximately 2.0 percent of the 4,079,808 shares then beneficially owned by Mr. Haba, including shares
subject to options held by Mr. Haba that were then exercisable or exercisable within 60 days of the date of such transaction.
The
institutional investor that purchased the shares of common stock sold by Messrs. Fawzi, Simone and Haba has entered into a lock-up agreement with the underwriters,
and the shares of common stock that were purchased are subject to the restrictions contained in such lock-up agreement, which are described elsewhere in this prospectus. See
"Underwriting."
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to us regarding the beneficial ownership of our common stock as of March 31,
2011 for:
•
each person, or group of affiliated persons, known to us to beneficially own more than five percent of our common
stock;
•
each of our directors;
•
each of our named executive officers;
•
all of our directors and executive officers as a group; and
•
each of the selling stockholders.
The
information in the following table has been presented in accordance with the rules of the SEC. Under the SEC's rules, beneficial ownership of a class of capital stock includes any
shares of such class as to which a person, directly or indirectly, has or shares voting power or investment power and also any shares as to which a person has the right to acquire such voting or
investment power within 60 days following March 31, 2011 through the exercise of any stock option, warrant or other right. Except as otherwise noted, unvested options granted under our
2003 Stock Plan are not immediately exercisable and therefore are not considered beneficially owned by their holder. If two or more persons share voting power or investment power with respect to
specific securities, each such person is deemed to be the beneficial owner of such securities. Except as we otherwise indicate below and subject to applicable community property laws, we believe that
the beneficial owners of the common stock listed below, based on information they have furnished to us, have sole voting and investment power with respect to the shares shown. Unless otherwise noted
below, the address for each holder listed below is c/o IntelePeer, Inc., 2855 Campus Drive, Suite 200, San Mateo, CA 94403.
For
purposes of calculating beneficial ownership, we have assumed that:
•
as of March 31, 2011, 53,483,915 shares of common stock were outstanding, assuming the conversion of all of our
outstanding convertible preferred stock, which will occur immediately prior to the completion of this offering; and
•
we will issue                        shares of common
stock in the offering (assuming the underwriters do not exercise their
over-allotment option).
Because
the selling stockholders may offer all or a portion of the shares at any time and from time to time after the date hereof, no estimate can be made of the number of shares that
each selling stockholder may retain upon completing the offering. Assuming all of the shares offered hereunder are sold by the selling stockholders, after completing the offering, none of the selling
stockholders will own
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more
than one percent of the shares of common stock outstanding except as noted below. Beneficial ownership after the offering will depend on the number of shares sold by each selling
stockholder.
Number of Shares
Beneficially Owned
Percent
Beneficially Owned
Total Shares
Offered if Over-
Allotment is
Exercised
Name and Address of Beneficial Owner
Before
Offering
After
Offering
Number
of Shares
Offered
Before
Offering
After
Offering
5% Stockholders:
VantagePoint Venture Partners 2006(Q), L.P.(1)
15,049,776
28.1
%
Entities affiliated with Kennet II L.P.(2)
15,049,776
28.1
%
Entities affiliated with IVS Fund II K/S(3)
5,765,821
10.8
%
Entities affiliated with EDF Ventures III, Limited Partnership(4)
4,397,660
8.2
%
Frank M. Fawzi(5)
4,517,574
8.0
%
Haydar Haba(6)
3,478,458
6.4
%
Directors and Executive Officers:
Frank M. Fawzi(5)
4,517,574
8.0
%
Shaun Andrews(7)
125,000
*
John Belanger(8)
775,675
1.4
%
Phillip Bronsdon(9)
677,133
1.3
%
Haydar Haba(6)
3,478,458
6.4
%
Margaret Norton(10)
437,249
*
Andre Simone(11)
2,000,857
3.6
%
William J. Harding
—
*
Lawrence Irving
—
—
Javier Rojas
—
—
Raymond Smets
—
—
All Directors and Executive Officers as a Group (11 persons)
(12)
12,011,946
19.6
%
Additional Selling Stockholders:
*
Represents
beneficial ownership of less than one percent.
(1)
The
General Partner of VantagePoint Venture Partners 2006(Q), L.P. is VantagePoint Venture Associates 2006, LLC. Due to his authority as a
Managing Member of VantagePoint Venture Associates 2006, LLC, Alan E. Salzman may be deemed to have beneficial ownership over shares held by VantagePoint Venture Partners 2006(Q), L.P.
Mr. Salzman disclaims beneficial ownership except to the extent of his pecuniary interest in those shares. The address for each VantagePoint entity and for Mr. Salzman is 1001 Bayhill
Drive, Suite 300, San Bruno, CA 94066.
(2)
Includes
14,982,634 shares held by Kennet II L.P., or KII; and 67,142 shares held by King Street Partners L.P., or KSP. Pursuant to a
management agreement, Kennet Capital Management (Jersey) Limited, or KCMJL, has sole voting and investment power over the shares held by KII and KSP. KCMJL is a wholly owned subsidiary of Kennet
Partners LLP. The board of directors of KCMJL consists of Michael Harrop and Jane Stammers, who share such voting and investment power. KCMJL has appointed Javier Rojas, an affiliate of Kennet
Partners LLP and a limited partner of KSP, as its representative to the Company's board of directors. Each of Michael Harrop, Jane Stammers and Javier Rojas disclaim beneficial ownership except
to the extent of his or her pecuniary interest in these shares. The address of KCMJL is 47 Esplanade, St. Helier, Jersey JE1 0BD Channel Islands.
(3)
Includes
(i) 3,843,880 shares held by IVS Fund II K/S and (ii) 1,921,941 shares held by IVS A/S. The Board of Directors of IVS A/S has sole
voting power over the shares held by IVS Fund II K/S and IVS A/S. The board of directors of IVS A/S consists of Lars Bruhn, Peter Aagaard, Soren Fogtdal, Preben Mejer, and Frank Ewald, who
share such voting and investment power. Each of Lars Bruhn, Peter Aagaard, Soren Fogtdal, Preben Mejer, and Frank Ewald disclaim beneficial ownership except to the extent of his or her pecuniary
interest in these shares.
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(4)
Includes
(i) 3,957,898 shares held by EDF Ventures III, Limited Partnership and (ii) 439,762 shares held by EDF Ventures III
Sidecar, Limited Partnership. The general partner of EDF Ventures III, Limited Partnership is Enterprise Ventures III, Limited Partnership of which the general partner is EDM III,
Inc. The general partner of EDF Ventures III Sidecar, Limited Partnership is Enterprise Ventures III Sidecar, Limited Partnership of which the general partner is EDM III Sidecar,
Inc. Mary Campbell and Mike Devries collectively own all of the outstanding equity interests of each of EDM III, Inc. and EDM III Sidecar, Inc. and collectively have ultimate voting power over
the Company's shares held by EDF Ventures III, Limited Partnership and EDF Ventures III Sidecar, Limited Partnership. Each of Mary Campbell and Mike Devries disclaim beneficial ownership except
to the extent of his or her pecuniary interest in these shares.
(5)
Includes
(i) 769,320 shares held by Fawzi Common Stock, Inc., and (ii) 3,272,280 shares issuable upon exercise of options exercisable within
60 days following March 31, 2011. Frank Fawzi has sole control over the shares held by Fawzi Common Stock, Inc.
(6)
Includes
(i) 671,830 shares issuable upon exercise of options and 2,454 shares issuable upon exercise of a warrant, all of which are exercisable
within 60 days following March 31, 2011 and (ii) 2,156,210 shares held by UIS LLC of which Mr. Haba is the managing member. An additional 459,299 of
Mr. Haba's options shall become exercisable in the event the fair market value of our common stock exceeds $7.374 per share following the completion of our initial public offering, subject to
his continuous service to the Company.
(7)
Represents
125,000 shares issuable upon options exercisable within 60 days following March 31, 2011.
(8)
Represents
775,675 shares issuable upon options exercisable within 60 days following March 31, 2011.
(9)
Includes
677,133 shares issuable upon options exercisable within 60 days following March 31, 2011.
(10)
Represents
437,249 shares issuable upon options exercisable within 60 days following March 31, 2011.
(11)
Includes
1,912,711 shares issuable upon options exercisable within 60 days following March 31, 2011.
(12)
See
note (5) through (11). Includes 7,874,832 shares issuable pursuant to options or warrants exercisable within 60 days following
March 31, 2011.
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DESCRIPTION OF CAPITAL STOCK
General
Upon completion of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, $0.0001 par value
per share, and 5,000,000 shares of undesignated preferred stock, $0.0001 par value per share.
The
following description of the material provisions of our capital stock and our charter and bylaws is only a summary, does not purport to be complete and is qualified by applicable law
and the full provisions of our charter and bylaws. You should refer to our charter and bylaws as in effect upon the closing of this offering, which are included as exhibits to the registration
statement of which this prospectus is a part.
Common Stock
As of March 31, 2011, there were 53,483,915 shares of our common stock outstanding and held of record by 57 stockholders. The
foregoing assumes the automatic conversion of all of our outstanding convertible preferred stock into shares of our common stock, which will occur immediately prior to the completion of this offering.
All of the outstanding shares of our common stock are fully paid and nonassessable. The rights, preferences and privileges of the holders of our common stock are subject to the rights of the holders
of shares of any series of preferred stock which we may issue in the future.
Voting Rights.
Holders of common stock are entitled to one vote per share on any matter to be voted upon by stockholders. All shares of
common stock
rank equally as to voting and all other matters. The shares of common stock have no preemptive or conversion rights, no redemption or sinking fund provisions, are not liable for further call or
assessment and are not entitled to cumulative voting rights.
Dividend Rights.
For as long as such stock is outstanding, the holders of common stock are entitled to receive ratably any dividends
when and as
declared from time to time by our board of directors out of funds legally available for dividends. We currently intend to retain all future earnings for the operation and expansion of our business and
do not anticipate paying cash dividends on the common stock in the foreseeable future.
Liquidation Rights.
Upon a liquidation or dissolution of our company, whether voluntary or involuntary, creditors will be paid before
any
distribution to holders of our common stock. After such distribution, and subject to the liquidation preferences of any outstanding preferred stock, holders of common stock are entitled to receive a
pro rata distribution per share of any excess amount.
Preferred Stock
Immediately prior to the completion of this offering, and assuming there are no exercises of outstanding warrants after
March 31, 2011, all outstanding shares of our preferred
stock will be automatically converted into an aggregate of 43,139,866 shares of common stock provided that the aggregate offering price of the shares offered in this offering equals or exceeds
$50,000,000 and the per share offering price is at least $3.1791.
Undesignated Preferred Stock.
Under our charter, as it will be amended and restated effective upon the completion of this offering, our
board of
directors has authority to issue undesignated preferred stock without stockholder approval. Our board of directors may also determine or alter for each class of preferred stock the voting powers,
designations, preferences, and special rights, qualifications, limitations, or restrictions as permitted by law. Our board of directors may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. Issuing preferred stock provides flexibility in
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connection
with possible acquisitions and other corporate purposes, but could also, among other things, have the effect of delaying, deferring or preventing a change of control of our company and may
adversely affect the market price of our common stock and the voting and other rights of the holders of common stock.
Warrants
Immediately following the completion of this offering, there will be outstanding and held of record by eleven holders warrants to
purchase 1,867,134 shares of our common stock, assuming no voluntary exercise of any of these warrants prior to the completion of this offering. This total includes warrants to purchase 1,082,404
shares of our preferred stock that will convert into warrants to purchase the same number of shares of our common stock upon the conversion of our preferred stock into common stock as a result of the
offering. The warrants that will remain outstanding following the completion of this offering have a weighted average exercise price of $0.83 per share and have termination dates that range from
October 4, 2011 to May 5, 2020.
Registration Rights
Immediately prior to this offering all outstanding shares of our preferred stock will be converted into shares of our common stock and
all outstanding warrants to purchase shares of our preferred stock will become exercisable for shares of our common stock. After the completion of this offering, certain holders of our common stock
and warrants exercisable for our
common stock, assuming exercise of such warrants, will be entitled to rights with respect to the registration of their shares under the Securities Act. These registration rights are contained in our
Registration Rights Agreement, dated as of October 31, 2008, as amended by Amendment No. 1 thereto, dated April 15, 2009, and Amendment No. 2 thereto, dated May 5,
2010, or the Registration Rights Agreement, and are described in additional detail below.
In
connection with this offering, each securityholder that has registration rights has entered into lock-up agreements or is otherwise subject to contractual restrictions
pursuant to which they have agreed not to transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of
common stock, for a period of at least 180 days after the date of this prospectus, which is subject to extension in some circumstances, as described under the heading "Underwriting."
Registration Rights Agreement
The registration rights provided for in the Registration Rights Agreement, will expire seven years following the completion of this
offering, or, with respect to any particular securityholder, when such securityholder is able to sell all of its shares pursuant to Rule 144 of the Securities Act or a similar exemption during
any 90-day period. Subject to certain conditions, we will pay the registration expenses of the holders of the shares registered pursuant to the registrations described below. In an
underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares such holders may include in the offering.
Demand Registration Rights.
After the completion of this offering, the holders of an aggregate of 47,228,017 shares of our common stock
will be
entitled to certain demand registration rights. Any time after October 1, 2011, the holders of at least a majority of these shares can, on not more than two occasions, request that we register
all or a portion of their shares. The request for registration must cover at least that number of shares with an anticipated aggregate offering price, of at least $50,000,000. If in the good faith
judgment of our board of directors, we determine that it would be seriously detrimental to us and to our stockholders to effect such a demand registration, we have the right to defer such
registration, not more than once in any one-year period, for a period of up to 120 days.
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Piggyback Registration Rights.
In connection with this offering, the holders of an aggregate of 59,431,206 shares of our common stock
were entitled
to, and the necessary percentage of holders waived, their rights to notice of this offering and to include their shares of registrable securities in this offering. Following the date of this offering,
in the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other securityholders, the holders of these shares will be
entitled to certain "piggyback" registration rights allowing the holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we
propose to file a registration statement under the Securities Act, other than with respect to a registration related to a company stock plan, the exchange of securities in certain corporate
reorganizations or certain other transactions, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the
number of shares included in the registration, to include their shares in the registration.
S-3 Registration Rights.
After the completion of this offering, the holders of an aggregate of 47,228,017 shares of our common stock
may
make a written request that we register their shares on Form S-3. We are obligated to effect such registration on Form S-3 if we are eligible to file a
registration statement on Form S-3, the request is made by the holders of not less than 30 percent of the registrable securities then outstanding, and the request covers at
least that number of shares with an anticipated aggregate offering price of at least $1,000,000. These holders may make an unlimited number of requests for registration on Form S-3.
However, we will not be required to effect a registration on Form S-3 if in the good faith judgment of our board of directors, we determine that it would be seriously detrimental to
us and to our stockholders to effect such a Form S-3 registration, in which case we have the right to defer such registration for not more than 120 days from the date of
request, provided that we have not utilized this right more than twice in any 12-month period.
Anti-Takeover Matters
Certificate of Incorporation and Bylaw Provisions
Our amended and restated certificate of incorporation and bylaws to be in effect upon the closing of this offering will include a
number of provisions that may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than
pursue non-negotiated takeover
attempts. They are intended to enhance our long-term value to our stockholders by increasing the likelihood of continued stability in the composition of our board of directors and its
policies and discouraging certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are also designed to reduce our vulnerability to an unsolicited
acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares
and, as a consequence, they also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts. These provisions include the items described
below.
Board Composition and Filling Vacancies.
Our board of directors shall be divided into three classes with staggered three-year terms.
Only
one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. In addition,
because our stockholders will not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. Our amended
and restated bylaws will provide that directors may be removed only for cause by the affirmative vote of the holders of a majority of the voting power of all the outstanding shares of capital stock
entitled to vote generally in the election of directors voting together as a single class. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an
increase in the size of our board of directors, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum.
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No Written Consent of Stockholders.
Our amended and restated certificate of incorporation will provide that all stockholder actions are
required to
be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting.
Meetings of Stockholders.
Our amended and restated bylaws will provide that only our board of directors, the chairman of the board, the
chief
executive officer or the president may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting
of stockholders. Our amended and restated bylaws will limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.
Advance Notice Requirements.
Our amended and restated bylaws will establish advance notice procedures with regard to stockholder
proposals relating
to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be
timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less
than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. The notice must contain certain information specified in the amended
and restated bylaws.
Amendment to Bylaws and Certificate of Incorporation.
As required by the Delaware General Corporation Law, or DGCL, any amendment of
our certificate
of incorporation must first be approved by a majority of our board of directors and, if required by law or our certificate of incorporation, thereafter be approved by a majority of the outstanding
shares entitled to vote on the amendment, and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to management
of our business, stockholder action, directors, limitation of liability and the amendment of our bylaws and certificate of incorporation must be approved by no less than
66
2
/
3
percent of the voting power of all of the shares of capital stock issued and outstanding and entitled to vote generally in any election of directors, voting together as a
single class. Our bylaws may be amended by the affirmative vote of a majority vote of the directors then in office, subject to any limitations set forth in the bylaws; and may also be amended by the
affirmative vote of at least 66
2
/
3
percent of the voting power of all of the shares of capital stock issued and outstanding and entitled to vote generally in any election of
directors, voting together as a single class.
Blank Check Preferred Stock.
Our amended and restated certificate of incorporation will provide for 5,000,000 authorized shares of
preferred stock.
The existence of authorized but unissued shares of preferred stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger,
tender offer, proxy contest, or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best
interests of our company or our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other
transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our amended and restated certificate of incorporation
grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the
amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders
and may have the effect of delaying, deterring, or preventing a change of control of us.
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Limitations of Director Liability and Indemnification of Directors, Officers and Employees
As permitted by the DGCL, provisions in our amended and restated certificate of incorporation and amended and restated bylaws that will
be in effect upon the closing of this offering will limit or substantially eliminate the personal liability of our directors. Consequently, directors will not be personally liable to us or our
stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:
•
any breach of the director's duty of loyalty to us or our stockholders;
•
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•
any unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or
•
any transaction from which the director derived an improper personal benefit.
These
limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies, such as an injunction or
rescission.
In
addition, our amended and restated bylaws will provide that:
•
we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees, to the
fullest extent permitted by the DGCL, subject to limited exceptions, including an exception for indemnification in connection with a proceeding (or counterclaim) initiated by such persons; and
•
we will advance expenses, including attorneys' fees, to our directors and, in the discretion of our board of directors,
certain officers and employees, in connection with legal proceedings, subject to limited exceptions.
We
have entered into indemnification agreements with each of our executive officers and directors. These agreements provide that, subject to limited exceptions and among other things, we
will indemnify each of our executive officers and directors to the fullest extent permitted by law and advance expenses to each indemnitee in connection with any proceeding in which a right to
indemnification is available.
We
also intend to maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their
capacities as directors or officers, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors,
officers, or persons who control us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable.
These
provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the
likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment
may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these provisions,
the indemnification agreements and the insurance policy are necessary to attract and retain talented and experienced directors and officers.
At
present, there is no pending litigation or proceeding involving any of our directors or officers where indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such indemnification.
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Exchange Listing
Before the date of this prospectus, there has been no public market for our common stock. We intend to apply to have our common stock
approved for listing on the New York Stock Exchange or Nasdaq Global Market, subject to notice of issuance, under the symbol "PEER."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare, Inc.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to our initial public offering, there has not been a public market for shares of our common stock. Future sales of substantial
amounts of shares of our common stock, including shares issued upon the exercise of outstanding options and warrants, in the public market after this offering, or the possibility of these sales
occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future.
Upon
the closing of this offering, and assuming that there are no exercises of outstanding options or warrants after March 31, 2011 and assuming the underwriters do not exercise
their over-allotment option, we will have outstanding an aggregate of approximately                        shares of common stock.
Of these shares,                        shares of common stock to be
sold in this offering, plus an additional                        shares if the underwriters exercise their over-allotment option
in full, will be freely tradable in the public market without
restriction or further registration under the Securities Act, unless the shares are held by any of our affiliates, as that term is defined in Rule 144 of the Securities Act.
The
remaining                        shares of our common stock outstanding after this offering are restricted securities, as such
term is defined in Rule 144 under the Securities Act.
These shares were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or sold in accordance with Rule 144 or
Rule 701 under the Securities Act, each of which is discussed below. In addition, the holders of substantially all of our currently outstanding shares of our common stock are subject to
lock-up agreements or other contractual restrictions under which they have agreed not to transfer or dispose of, directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of our common stock, for a period of at least 180 days after the date of this prospectus, which is subject to extension in some
circumstances, as discussed under the heading "Underwriting."
As
a result of the lock-up agreements described below and the provisions of Rule 144 and Rule 701, the shares of our common stock (excluding the shares to be
sold in this offering) will be available for sale in the public market as follows:
•
substantially all of such shares will be subject to lock-up agreements and will not be eligible for immediate
sale upon the completion of this offering; and
•
all of such shares will be eligible for sale under Rule 144 or Rule 701 upon expiration of
lock-up agreements 180 days after the date of this offering, subject to any extension of the lock-up period under circumstances described under the heading
"Underwriting," and provided that certain shares held by affiliates will be subject to volume limitations and other requirements of Rule 144 described below.
Rule 144
In general, under Rule 144, beginning 90 days after the date of this prospectus, a person who is not our affiliate, has
not been our affiliate for the previous three months,
and who has beneficially owned shares of our common stock for at least six months, may sell all such shares. An affiliate or a person who has been our affiliate within the previous 90 days, and
who has beneficially owned shares of our common stock for at least six months, may sell within any three-month period a number of shares that does not exceed the greater of:
•
one percent of the number of shares of our common stock then outstanding, which will equal
approximately                                    
shares immediately after this offering, assuming no exercise of the underwriters' over-allotment option and based upon the number of shares of our common stock outstanding as of
March 31, 2011; or
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•
the average weekly trading volume of our common stock on the New York Stock Exchange or Nasdaq Global Market during the
four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
provided,
in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale, and subject to the lock-up agreements described
below. Sales under Rule 144 by affiliates or persons who have been affiliates within the previous 90 days are also subject to manner of sale provisions and notice requirements.
Rule 701
In general, under Rule 701 as currently in effect, any of our employees, directors, consultants or advisors who purchased shares
from us in connection with a compensatory stock or option plan or other written agreement in a transaction before the effective date of this offering that was completed in reliance on Rule 701
and complied with the requirements of Rule 701 will, subject to the lock-up agreements described below, be eligible to resell such shares 90 days after the effective date of
this offering in reliance on Rule 144, but without compliance with certain restrictions, including the holding period, contained in Rule 144.
Registration Rights
Upon completion of this offering, the holders
of                                    shares of our common stock
outstanding and/or issued upon the
automatic conversion of our preferred stock upon the closing of our initial public offering, and the holders
of                                    shares of our common stock
issuable upon exercise of outstanding
warrants will be entitled to various rights with respect to the registration of these shares under the Securities Act. Subject to the lock-up agreements described below, registration of
these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration statement
for such shares, subject to restrictions imposed on shares held by affiliates. See "Description of Capital Stock—Registration Rights" for additional information.
Registration Statement on Form S-8
We intend to file one or more registration statements on Form S-8 under the Securities Act covering up to
                                    shares of common stock reserved
for issuance under our Amended and Restated 2003 Stock Option and Restricted Stock Plan and our 2011 Equity Plan. These registration statements are
expected to be filed soon after the date of this prospectus and will automatically become effective upon filing. Accordingly, after expiration of lock-up agreements 180 days after
the date of this offering, subject to any extension of the lock-up period under circumstances described under the heading "Underwriting," shares registered under such registration
statements will be available for sale in the public market, unless such shares are subject to vesting restrictions with us and requirements that apply to affiliates under Rule 144 described
above.
Lock-up Agreements
For a description of the lock-up agreements with the underwriters that restrict sales of shares by us, our officers and
directors, all of the selling stockholders and substantially all of our other securityholders, see the information under the heading "Underwriting."
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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a discussion of the material U.S. federal income and estate tax consequences to non-U.S. holders with
respect to their ownership and disposition of our common stock issued pursuant to this offering. In general, a "non-U.S. holder" is any beneficial owner of our common stock who is not, for
U.S. federal income tax purposes:
•
an individual who is a citizen or resident of the United States;
•
a corporation or any other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in
the United States or under the laws of the United States, any state thereof, or the District of Columbia;
•
an estate, the income of which is subject to U.S. federal income tax regardless of its source; or
•
a trust, if (i) a U.S. court can exercise primary supervision over the administration of the trust and one or more
U.S. persons can control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person in
effect.
Generally,
an individual may be treated as a resident of the United States in any calendar year for U.S. federal income tax purposes by, among other ways, being present in the United
States for at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of
this calculation, such individual would count all of the days in which the individual was present in the current year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year. Residents are taxed for U.S. federal income tax purposes as if they were citizens of the United States.
This
discussion is based on current provisions of the Internal Revenue Code, U.S. Treasury Regulations promulgated under the Internal Revenue Code, judicial opinions, published positions
of the Internal Revenue Service, or IRS, and all other applicable authorities, all of which are subject to change, possibly with retroactive effect. No ruling has been or will be sought from the IRS
with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position or that any such contrary position would not be sustained by a court. This
discussion assumes that the non-U.S. holder will hold our common stock as a capital asset (generally property held for investment).
This
discussion does not address all aspects of U.S. federal income and estate taxation or any aspects of state, local, or non-U.S. taxation, nor does it consider any
specific facts or circumstances that may apply to particular non-U.S. holders that may be subject to special treatment under the U.S. federal income tax laws, such
as:
•
insurance companies;
•
tax-exempt organizations;
•
financial institutions;
•
regulated investment companies;
•
tax-qualified retirement plans;
•
brokers or dealers in securities;
•
investors that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other
integrated investment;
•
controlled foreign corporations;
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•
passive foreign investment companies; and
•
U.S. expatriates.
If
a partnership or any other entity taxed as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the treatment of a partner in the partnership
or other entity taxed as a partnership will generally depend upon the status of the equity owner of such partnership or entity taxed as a partnership and the activities of the partnership or other
entity taxed as a partnership. Accordingly, partnerships and entities taxed as a partnership that hold our common stock and owners in such partnerships or other entities taxed as a partnership are
urged to consult their tax advisors regarding the specific U.S. federal income tax consequences to them of acquiring, owning or disposing of our common stock.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND
DISPOSING OF SHARES OF OUR COMMON STOCK, AS WELL AS THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS OF ACQUIRING, OWNING AND DISPOSING OF SHARES OF COMMON
STOCK.
Dividends
As described above under the heading "Dividend Policy," we do not anticipate declaring or paying any cash dividends on our common stock
in the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, they will constitute a return
of capital and will first reduce the recipient's adjusted tax basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under the
heading "Gain on Sale or Other Disposition of Common Stock."
Dividends
paid to a non-U.S. holder will be subject to U.S. federal withholding tax at a rate equal to 30 percent of the gross amount of the dividend, or a lower rate
prescribed by an applicable income tax treaty, unless the dividends are effectively connected with a trade or business carried on by the non-U.S. holder within the United States (and, if
required by an applicable income tax treaty, are attributable to a U.S. permanent establishment maintained by the non-U.S. holder). Under applicable Treasury Regulations, a
non-U.S. holder will be required to satisfy certain certification requirements, generally on IRS Form W-8BEN (or applicable successor form), directly or through an
intermediary, in order to claim a reduced rate of withholding under an applicable income tax treaty. If tax is withheld in an amount in excess of the amount prescribed by an applicable income tax
treaty, a refund of the excess amount may be obtained by timely filing an appropriate claim for refund with the IRS.
Dividends
that are effectively connected with such a U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment
maintained by the recipient) will not be subject to U.S. withholding tax if the non-U.S. holder files the required forms, usually an IRS Form W-8ECI (or applicable
successor form), with the payor of the dividend, but instead will be subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a resident
of the United States. A corporate non-U.S. holder that receives effectively connected dividends may be subject to an additional branch profits tax at a rate of 30 percent, or a
lower rate prescribed by an applicable income tax treaty, with respect to effectively connected dividends.
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Gain on Sale or Other Disposition of Common Stock
A non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable
disposition of the non-U.S. holder's shares of common stock unless:
•
the gain is effectively connected with a trade or business carried on by the non-U.S. holder within the United
States (and, if required by an applicable tax treaty, is attributable to a U.S. permanent establishment or a fixed base maintained by the non-U.S. holder), in which case the
non-U.S. holder generally will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates and, if the non-U.S. holder is
a corporation, the branch profits tax may apply, at a 30 percent rate or such lower rate as may be specified by an applicable income tax treaty;
•
the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days
or more in the taxable year of disposition and certain other conditions are met, in which case the non-U.S. holder will be required to pay a flat 30 percent tax (or such lower rate
as may be specified by an applicable income tax treaty between the United States and such non-U.S. holder's country of residence) on the net gain derived from the disposition, which tax
may be offset by U.S. source capital losses, if any, provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or
•
our common stock constitutes a U.S. real property interest by reason of our status as a "United States real property
holding corporation," or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the non-U.S. holder's
holding period for our common stock.
We
believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real
property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our
common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if the non-U.S. holder actually or
constructively held more than five percent of our common stock at any time during the shorter of the five-year period preceding the disposition or the non-U.S. holder's holding
period for our common stock. We expect our common stock to be regularly traded on an established securities market, although we cannot guarantee that it will be so traded.
Information Reporting and Backup Withholding
We must report annually to the IRS and to each non-U.S. holder the amount of dividends on our common stock, the name and
address of the recipient and the amount, if any, of tax withheld. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected
dividends or withholding was reduced by an applicable income tax treaty. Under tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient's country of
residence.
Dividend
payments made to a non-U.S. holder that is not an exempt recipient generally will be subject to backup withholding, currently at a rate of 28 percent, unless
a non-U.S. holder certifies as to its foreign status, which certification may be made on IRS Form W-8BEN. Notwithstanding the foregoing, backup withholding may apply if
either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient.
Proceeds
from the disposition of common stock by a non-U.S. holder effected by or through a U.S. office of a broker will be subject to information reporting and backup
withholding, currently at a rate of 28 percent of the gross proceeds, unless the non-U.S. holder certifies to the payor under penalties of
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perjury
as to, among other things, its address and status as a non-U.S. holder or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not
apply to a payment of disposition proceeds if the transaction is effected outside the United States by or through a non-U.S. office of a broker. However, if the broker is, for U.S. federal
income tax purposes, a U.S. person, a controlled foreign corporation, a foreign person who derives 50 percent or more of its gross income for specified periods from the conduct of a U.S. trade
or business, a specified U.S. branch of a foreign bank or insurance company or a foreign partnership with certain connections to the United States, information reporting but not backup withholding
will apply unless the broker has documentary evidence in its files that the holder is a non-U.S. holder and other conditions are met; or the holder otherwise establishes an exemption.
Backup
withholding is not an additional tax. Rather, the amount of tax withheld is applied to the U.S. federal income tax liability of persons subject to backup withholding. If backup
withholding results in an overpayment of U.S. federal income taxes, a refund may be obtained, provided the required documents are timely filed with the IRS.
Recent Legislation Relating to Foreign Accounts
Recently enacted legislation generally will impose a U.S. federal withholding tax of 30 percent on dividends and the gross
proceeds of a disposition of our common stock paid after December 31, 2012 to a "foreign financial institution" (as specifically defined for this purpose) unless such institution enters into an
agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution
(which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners). The legislation also will generally impose a U.S.
federal withholding tax of 30 percent on dividends and the gross proceeds of a disposition of our common stock paid after December 31, 2012 to a non-financial foreign entity
unless such entity provides the withholding agent with either a certification that it does not have any substantial direct or indirect U.S. owners or provides information regarding direct and indirect
U.S. owners of the entity. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. Holders are encouraged to consult with their own tax
advisors regarding the possible implications of the legislation on their investment in our common stock.
Estate Tax
Our common stock owned or treated as owned by an individual who is not a citizen or resident of the United States (as specifically
defined for U.S. federal estate tax purposes) at the time of death will be includible in the individual's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise.
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UNDERWRITING
We and the selling stockholders are offering the shares of common stock described in this prospectus through a number of underwriters.
J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and Barclays Capital Inc. are acting as joint book-running managers of the offering and as representatives of
the underwriters. We and the selling stockholders have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and the
selling stockholders have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set
forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:
Name
Number of Shares
J.P. Morgan Securities LLC
Deutsche Bank Securities Inc.
Barclays Capital Inc.
RBC Capital Markets, LLC
William Blair & Company, L.L.C.
Total
The
underwriters are committed to purchase all the shares of common stock offered by us and the selling stockholders if they purchase any shares. The underwriting agreement also provides
that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.
The
underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain
dealers at that price less a concession not in excess of $            per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to
$            per
share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made
outside of the United States may be made by affiliates of the underwriters. The representatives have advised us that the underwriters do not intend to confirm discretionary sales in excess of five
percent of the shares of common stock offered in this offering.
The
underwriters have an option to buy up to                        additional shares of common stock from us and the selling
stockholders to cover sales of shares by the underwriters which
exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are
purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock
are purchased, the
underwriters will offer the additional shares on the same terms as those on which the shares are being offered.
The
underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us and the selling stockholders per share of common
stock. The underwriting fee is $            per share.
The
following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us and the selling stockholders. These
amounts are
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shown
assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.
Total
Per share
Without
over-allotment
exercise
With full
over-allotment
exercise
Public offering price
$
$
$
Underwriting discounts and commissions to be paid by:
Us
$
$
$
The selling stockholders
$
$
$
Proceeds, before expenses, to us
$
$
$
Proceeds, before expenses, to selling stockholders
$
$
$
We
estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting
discounts and commissions, will be approximately $            .
A
prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The
underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the
representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
We
have agreed that we will not (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the
Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make
any offer, sale, pledge, disposition or filing or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any
shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or
otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. for a period of 180 days after the date of this
prospectus, other than the shares of our common stock to be sold hereunder and any shares of our common stock issued upon the exercise of options granted under our existing equity incentive plans.
Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to
our company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning
on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event.
Our
directors and executive officers, and certain of our significant stockholders have entered into lock-up agreements with the underwriters prior to the commencement of this
offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of
J.P. Morgan Securities LLC and Deutsche Bank Securities Inc., (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock
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(including,
without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the
rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), (2) enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the common stock or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery
of common stock or such other securities, in cash or otherwise or (3) make any demand for or exercise any right with respect to the registration of any shares of our common stock or any
security convertible into or exercisable or
exchangeable for our common stock. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material
news or a material event relating to our company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during
the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the occurrence of the material news or material event.
We
and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
We
intend to apply to have our common stock approved for listing/quotation on the New York Stock Exchange or the Nasdaq Global Market under the symbol "PEER."
In
connection with this offering, the underwriters may engage in stabilizing transactions, which involve making bids for, purchasing and selling shares of common stock in the open market
for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the
common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on
the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' over-allotment
option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their
over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of
shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more
likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in
this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.
The
underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the
price of our common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or
to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.
These
activities may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock, and, as
a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any
time. The underwriters
may carry out these transactions on the New York Stock Exchange or the Nasdaq Global Market, in the over-the-counter market or otherwise.
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Prior
to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of
the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:
•
the information set forth in this prospectus and otherwise available to the representatives;
•
our prospects and the history and prospects for the industry in which we compete;
•
an assessment of our management;
•
our prospects for future earnings;
•
the general condition of the securities markets at the time of this offering;
•
the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and
•
other factors deemed relevant by the underwriters and us.
Neither
we nor the underwriters can assure investors that an active trading market will develop for our shares of common stock, or that the shares will trade in the public market at or
above the initial public offering price.
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction
where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the
offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any
jurisdiction in which such an offer or a solicitation is unlawful.
This
document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order, or (iii) high net worth entities, and other persons to whom it may lawfully
be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any
invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or
rely on this document or any of its contents.
In
relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or a Relevant Member State, from and including the date on which the
European Union Prospectus Directive, or the EU Prospectus Directive is implemented in that Relevant Member State, or Relevant Implementation Date, an offer of securities described in this prospectus
may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant
Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive,
except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:
•
to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in securities;
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•
to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial
year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or
consolidated accounts;
•
to fewer than 100 natural or legal persons (other than qualified investors as defined in the EU Prospectus Directive)
subject to obtaining the prior consent of the book-running managers for any such offer; or
•
in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3
of the Prospectus Directive.
For
the purposes of this provision, the expression an "offer of securities to the public" in relation to any securities in any Relevant Member State means the communication in any form
and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may
be varied in that Member State by any measure implementing the EU Prospectus Directive in that Member State and the expression EU Prospectus Directive means Directive 2003/71/EC and includes any
relevant implementing measure in each Relevant Member State.
Certain
of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial
advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and
commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of
themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.
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LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus and other legal matters will be passed upon for us by DLA
Piper LLP (US), East Palo Alto, California. Goodwin Procter LLP, Menlo Park, California, has acted as counsel for the underwriters in connection with certain legal matters related to
this offering.
EXPERTS
The financial statements as of December 31, 2009 and 2010 and for each of the three years in the period ended
December 31, 2010 included in this prospectus and in the registration statement have been so included in reliance on the report of BDO USA, LLP, an independent registered public
accounting firm, appearing elsewhere herein and in the registration statement, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1, which includes amendments and exhibits, under the
Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information that is in the registration statement and its exhibits and schedules. Certain portions of the registration statement have been omitted
as allowed by the rules and regulations of the SEC. Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document
filed as an exhibit to the registration statement. You may read and copy the registration statement, including exhibits and schedules filed with it, and reports or other information we may file with
the SEC at the public reference facilities of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330
for further information on the operation
of the public reference rooms. In addition, the registration statement and other public filings can be obtained from the SEC's Internet site at www.sec.gov.
Upon
completion of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act and we will file annual, quarterly and current reports,
proxy statements, and other information with the SEC. We also maintain a website at www.intelepeer.com, at which you may access these materials free of charge as soon as reasonably practicable after
they are electronically filed with, or furnished to, the SEC. The inclusion of our website address in this prospectus does not include or incorporate by reference the information contained in, or that
can be accessed through, our website into this prospectus.
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INTELEPEER, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
F-2
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Deficit
F-5
Statements of Cash Flows
F-6
Notes to Financial Statements
F-7
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of Directors and Stockholders
IntelePeer, Inc.
San Mateo, California
We
have audited the accompanying balance sheets of IntelePeer, Inc. as of December 31, 2009 and 2010 and the related statements of operations, redeemable convertible
preferred stock and stockholders' deficit, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IntelePeer, Inc. at December 31, 2009 and
2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the
United States of America.
/s/
BDO USA, LLP
San
Francisco, California
May 9, 2011
F-2
Table of Contents
INTELEPEER, INC.
BALANCE SHEETS
(in thousands, except for share and per share amounts)
December 31,
2009
December 31,
2010
Pro Forma
Stockholders'
Equity
as of
December 31,
2010
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
10,134
$
9,159
Accounts receivable, net of allowance for doubtful accounts of $89 and $67 as of December 31, 2009 and 2010
9,859
12,164
Prepaid expenses and other current assets
96
287
Total current assets
20,089
21,610
Property and equipment, net
15,134
22,224
Intangible assets, net
558
2,049
Other assets
681
1,304
TOTAL ASSETS
$
36,462
$
47,187
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable
$
6,987
$
10,630
Accrued liabilities
3,025
4,994
Equipment loans
5,367
9,422
Capital lease obligation
—
100
Total current liabilities
15,379
25,146
Equipment loans, non-current
6,668
8,735
Capital lease obligation, non-current
—
418
Warrant liabilities
2,945
12,400
$
1,007
Total liabilities
24,992
46,699
Commitments and contingencies (Note 10)
Redeemable convertible preferred stock, $0.0001 par value—44,760,592 shares authorized; 41,685,408, 41,695,608 and no shares issued and outstanding as
of December 31, 2009 and 2010 and pro forma (unaudited); liquidation preference of $36,088 as of December 31, 2010
33,345
33,379
$
—
STOCKHOLDERS' DEFICIT:
Common stock, $0.0001 par value—80,000,000 shares authorized; 8,757,955, 8,802,409 and 50,498,017 shares issued and outstanding as of December 31,
2009 and 2010, and pro forma (unaudited)
1
1
5
Additional paid-in capital
3,116
3,719
48,487
Accumulated deficit
(24,992
)
(36,611
)
(36,611
)
Total stockholders' deficit
(21,875
)
(32,891
)
$
11,881
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
$
36,462
$
47,187
See notes to financial statements.
F-3
Table of Contents
INTELEPEER, INC.
STATEMENTS OF OPERATIONS
(in thousands, except for share and per share amounts)
Year Ended December 31,
2008
2009
2010
Revenue
$
43,352
$
76,194
$
111,549
Operating expenses:
Peering partner compensation
29,824
50,232
78,820
Infrastructure costs
2,987
5,265
6,636
Operations
3,353
4,673
5,578
Research and development
2,447
3,567
4,069
Sales and marketing
4,741
6,367
7,693
General and administrative
2,177
4,568
5,547
Depreciation and amortization
1,852
2,373
3,719
Total operating expenses
47,381
77,045
112,062
Loss from operations
(4,029
)
(851
)
(513
)
Interest expense, net
(1,274
)
(1,488
)
(2,614
)
Change in fair value of warrant liabilities
163
(1,004
)
(8,492
)
Net loss
$
(5,140
)
$
(3,343
)
$
(11,619
)
Net loss per share of common stock, basic and diluted
$
(0.59
)
$
(0.38
)
$
(1.33
)
Shares used in computing net loss per share of common stock, basic and diluted
8,757,955
8,757,955
8,759,925
Pro forma net loss per share of common stock, basic and diluted (unaudited)
$
(0.07
)
Shares used in computing pro forma net loss per share of common stock, basic and diluted (unaudited)
50,447,513
See
notes to financial statements.
F-4
Table of Contents
INTELEPEER, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
(in thousands, except for share amounts)
Redeemable
Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders'
Deficit
Shares
Amount
Shares
Amount
BALANCE—January 1, 2008
23,228,885
$
15,170
8,757,955
$
1
$
1,950
$
(16,509
)
$
(14,558
)
Issuance of Series B convertible preferred stock and warrants (net of issuance costs of $151 and value of warrants of $152)
915,473
372
—
—
—
—
—
Issuance of Series C convertible preferred stock (net of issuance costs of $210)
15,049,776
15,691
—
—
—
—
—
Issuance of Series C convertible preferred stock due to conversion of promissory notes
2,491,274
2,112
—
—
—
—
—
Beneficial conversion feature for convertible promissory notes
—
—
—
—
528
—
528
Stock-based compensation
—
—
—
—
319
—
319
Warrants issued for debt financing
—
—
—
—
22
—
22
Net loss
—
—
—
—
—
(5,140
)
(5,140
)
BALANCE—December 31, 2008
41,685,408
33,345
8,757,955
1
2,819
(21,649
)
(18,829
)
Stock-based compensation
—
—
—
—
297
—
297
Net loss
—
—
—
—
—
(3,343
)
(3,343
)
BALANCE—December 31, 2009
41,685,408
33,345
8,757,955
1
3,116
(24,992
)
(21,875
)
Issuance of Series B convertible preferred stock upon exercise of warrant
10,200
34
—
—
—
—
—
Stock-based compensation
—
—
—
—
564
—
564
Warrants issued for debt financing
—
—
—
—
28
—
28
Issuance of common stock upon exercise of options
—
—
42,000
—
9
—
9
Issuance of common stock upon exercise of warrants
—
—
2,454
—
2
—
2
Net loss
—
—
—
—
—
(11,619
)
(11,619
)
BALANCE—December 31, 2010
41,695,608
$
33,379
8,802,409
$
1
$
3,719
$
(36,611
)
$
(32,891
)
See
notes to financial statements.
F-5
Table of Contents
INTELEPEER, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2008
2009
2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(5,140
)
$
(3,343
)
$
(11,619
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
1,852
2,373
3,719
Change in fair value of warrant liabilities
(163
)
1,004
8,492
Provision for doubtful accounts
129
667
74
Stock-based compensation expense
319
297
564
Non-cash interest expense
631
228
899
Gain on disposal of fixed assets
(62
)
(19
)
(34
)
Changes in operating assets and liabilities:
Accounts receivable
(5,995
)
(2,584
)
(2,379
)
Prepaid expenses and other current assets
(161
)
257
(191
)
Other assets
(41
)
(62
)
(461
)
Accounts payable
2,433
3,040
3,643
Accrued liabilities
621
1,308
1,969
Net cash provided by (used in) operating activities
(5,577
)
3,166
4,676
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(4,443
)
(9,920
)
(10,362
)
Purchase of intangible assets
(37
)
(521
)
(1,491
)
Proceeds from disposal of property and equipment
100
98
147
Net cash used in investing activities
(4,380
)
(10,343
)
(11,706
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings
5,726
9,623
10,171
Payments on borrowings
(2,163
)
(4,076
)
(4,128
)
Proceeds from exercise of common stock options
—
—
9
Proceeds from exercise of common stock and preferred stock warrants
—
—
3
Issuance of Series B and C convertible preferred stock and warrants, net of issuance costs
16,215
—
—
Net cash provided by financing activities
19,778
5,547
6,055
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
9,821
(1,630
)
(975
)
CASH AND CASH EQUIVALENTS—Beginning of period
1,943
11,764
10,134
CASH AND CASH EQUIVALENTS—End of period
$
11,764
$
10,134
$
9,159
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest
$
734
$
1,122
$
1,732
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock warrants for credit facilities
$
22
$
—
$
28
Issuance of Series C convertible preferred stock warrants in connection with loans
$
—
$
630
$
637
Conversion of bridge loans to Series C convertible preferred stock
$
2,112
$
—
$
—
Purchase of equipment with capital lease obligation
$
—
$
—
$
560
See notes to financial statements.
F-6
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS
1. Business and Summary of Significant Accounting Policies
Business
IntelePeer, Inc. (the "Company" or "we" or "our" or "us") is a leading provider of on-demand, cloud-based communications
services to service providers and enterprises. Our customers can leverage our proprietary Communications-as-a-Service, or CaaS, platform, which we refer to as our
CloudWorx CaaS Platform, to deliver multimodal communication services, including voice, unified communications, video and other rich-media applications to communications devices with reduced cost and
improved quality as compared to existing alternatives. Our CloudWorx CaaS Platform allows customers to rapidly and easily transition from legacy network infrastructures to our flexible,
software-based, multimodal, IP-based solutions.
We
were incorporated in June 2003 under the laws of the State of Washington. We are the successor entity to a July 1, 2003 acquisition transaction with a limited liability company
and asset purchase of the VoIP business line of another limited liability company, both of which were previously affiliated with us through common ownership. We were reincorporated under the laws of
the State of Delaware in October 2006.
Basis of Presentation
These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming we will continue as a going concern. We have incurred recurring operating losses since inception and have an accumulated
deficit of $36.6 million, negative working capital of $3.5 million, and a total stockholders' deficit of $32.9 million as of December 31, 2010. Notwithstanding the
foregoing, we have $33.4 million in redeemable convertible preferred stock not included in the calculation of stockholders' deficit. Additionally, our operating results in the years ended
December 31, 2009 and 2010 showed improvement as compared to prior years, as reflected in higher revenue, lower operating losses and in the generation of positive cash flows from operations.
Since inception, we have relied primarily on the proceeds from equity offerings and debt proceeds to finance our operations. We plan to continue to finance operations with a combination of equity
issuances, debt arrangements, lines of credit and cash provided by operations. However, there can be no assurance that additional funding will be available to us on acceptable terms on a timely basis,
if at all, or that we will generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability. If we are unable to raise additional capital or generate
sufficient cash from operating activities to adequately fund our operations, we will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on our ability
to execute on our business plan. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Segment Reporting
Operating segments are defined as components of a company about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our chief executive
officer and our board of directors. We have one business activity and there are no segment managers who are held accountable for operations. Accordingly, we have a
F-7
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
single
reporting segment. All of our principal operations, revenue and decision-making functions are located in the United States.
Unaudited Pro Forma Stockholders' Equity
The pro forma stockholders' equity as of December 31, 2010 presents our stockholders' equity as though all of our convertible
preferred stock outstanding had converted into 41,695,608 shares of common stock upon the completion of a qualifying initial public offering (IPO) of our common stock. In addition, the pro forma
stockholders' equity assumes the reclassification of the preferred stock warrant liability to additional paid-in capital upon completion of a qualifying IPO of our common stock, as the
warrants either expire upon an IPO or become common stock warrants that are not subject to remeasurement. The pro forma stockholders' equity does not give effect to any proceeds from the IPO itself.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Such management estimates include allowance for doubtful accounts, reserves for disputes, fair value of common
stock, stock-based compensation expense, fair value of warrants, useful lives of intangible assets and valuation of deferred tax assets. We base our estimates on historical experience and also on
assumptions that we believe are reasonable, however, actual results could differ materially from those estimates.
Concentrations of Credit Risk
We maintain the majority of our cash and cash equivalents at a highly qualified financial institution. All amounts of cash exceed
federally insured limits. To date we have not experienced a material loss or lack of access to our invested cash and cash equivalents. However, no assurance can be provided that access to our invested
cash and cash equivalents will not be impacted by adverse economic conditions in the financial markets.
We
perform periodic credit evaluations of our customers and generally do not require collateral, and evaluate the need for maintaining an allowance for doubtful accounts.
As
of December 31, 2009, one customer individually accounted for 52% of total accounts receivable. As of December 31, 2010, three customers individually accounted for 19%,
17% and 11% of total accounts receivable.
F-8
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
Customers
representing 10% or greater of revenues for the periods presented were as follows (in percentages):
Year Ended December 31,
Customers
2008
2009
2010
Customer A
41
%
46
%
16
%
Customer B
—
*
29
%
Customer C
*
10
%
*
*
Less
than 10%
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and
cash equivalents consist of demand and money market fund deposits with a federally insured financial institution.
Accounts Receivable
Accounts receivable are carried at original invoice amount less an allowance made for doubtful accounts. We record an allowance for
doubtful accounts based on the probability of future collection. When we are aware of circumstances that may decrease the likelihood of collection, we record a specific allowance against amounts due
and thereby reduces the net receivable to the amount we reasonably believe will be collected. For all other customers, management determines the adequacy of the allowance based upon reviews of
individual creditworthiness, payment history, age of the accounts receivable balances, current economic conditions and other pertinent factors. Accounts are written off when deemed uncollectible.
Increases in the allowance are charged to expense in the period incurred.
The
following table presents the changes in the allowance for doubtful accounts (in thousands):
Year Ended December 31,
2008
2009
2010
Allowance for doubtful accounts:
Balance, beginning of period
$
49
$
117
$
89
Add: provision for doubtful accounts
129
667
74
Less: write-offs, net of recoveries and other adjustments
(61
)
(695
)
(96
)
Balance, end of period
$
117
$
89
$
67
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally seven years for CloudWorx CaaS Platform equipment and three years for furniture, fixtures and other equipment.
Amortization for leasehold improvements is computed using the straight-line
F-9
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
method
over the shorter of the term of the lease or estimated useful lives of the assets. Expenditures for repairs and maintenance are expensed as incurred.
Amortization
expense of assets acquired through capital leases is included in depreciation and amortization expense in the statements of operations.
Accounting for Internal-Use Computer Software
We capitalize certain external and internal costs, including internal payroll costs incurred in connection with the development or
acquisition of software for internal use. These costs are capitalized when we have entered the application development stage. Capitalization ceases when the software is substantially complete and is
ready for its intended use. We purchased and capitalized costs related to our CloudCentral portal of $749,000 during the year ended December 31, 2010. We did not incur similar costs during the
years ended December 31, 2008 and 2009. The capitalized development costs related to our CloudCentral portal are included in intangible assets and are amortized using the
straight-line method over the estimated useful life of seven years.
Deferred Offering Costs
Deferred offering costs, consisting of legal, accounting and filing fees relating to the IPO, are capitalized. The deferred offering
costs will be offset against IPO proceeds upon the effectiveness of the offering. In the event the offering is terminated, deferred offering costs
will be expensed. As of December 31, 2010, we had capitalized $241,000 of deferred offering costs in other assets on the balance sheet. No amounts were deferred as of December 31, 2009.
Intangible Assets
We capitalized certain costs to acquire trademarks, patents and regulatory licenses deemed essential to operate as a telecommunications
company. The trademarks and regulatory licenses have no expiration date and thus are classified as indefinite-lived assets.
We
amortize our capitalized patent costs using the straight-line method over the shorter of the contractual term of the patent up to 14 years or the estimated economic
life of the patent.
Our
trademarks and regulatory licenses are considered to be indefinite-lived assets and accordingly are not amortized. We conduct a long-lived asset impairment analysis for
these assets on an annual basis and whenever events or changes in circumstances indicate the carrying value of an asset may be impaired. We believe that no material events or changes in circumstances
have occurred that would require an impairment test for these assets.
Impairment of Long-Lived Assets
We evaluate our long-lived assets for impairment and continue to evaluate them as events or changes in circumstances
indicate that the carrying amount of such assets may not be fully recoverable. We evaluate the recoverability of the long-lived assets by measuring the carrying amount of the assets
against the estimated undiscounted future cash flows associated with them. At the times such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are
not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. We have used a replacement cost approach to determine the fair value of regulatory licenses
for the
F-10
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
purpose
of conducting an impairment test. This approach implies that opportunity cost represents the foregone cash flows during the period it takes to obtain or create the asset, as compared to the
cash flows that would be earned if the intangible asset was on hand today. As of December 31, 2010, we have not written down any of our long-lived assets as a result of impairment.
Warrant Liabilities
We account for freestanding warrants for shares of our convertible preferred stock that are contingently redeemable as liabilities at
fair value on the balance sheets because these warrants may obligate us to redeem the underlying preferred stock at some point in the future. The warrants are subject to remeasurement at each balance
sheet date, and any change in fair value is recognized in the change in fair value of warrant liabilities line on the statements of operations. We will continue to adjust the liability for changes in
fair value until the earlier of the exercise or expiration of the convertible preferred stock warrants, the completion of a deemed liquidation event, conversion of convertible preferred stock into
common stock, or until holders of the convertible preferred stock can no longer trigger a deemed liquidation event. At that time, the portion of the warrant liabilities related to the convertible
preferred stock warrants will be reclassified to additional paid-in capital.
Warrants
to purchase shares of our common stock are also outstanding as of December 31, 2010. Some of the common stock warrants include down round protection features which are
outside our control and, accordingly, these warrants are recorded as liabilities at fair value. The common stock warrants with down round protection features are subject to remeasurement at each
balance sheet date with any changes in fair value being recognized in the change in fair value of warrant liabilities line on the statements of operations. We will continue to adjust the liability for
changes in fair value until the earlier of the exercise or expiration of the warrants. At that time, the liability related to the common stock warrants with down round protection features will be
reclassified to additional paid-in capital.
Revenue Recognition
We recognize revenue when there is persuasive evidence of an arrangement, services have been rendered, the fees are fixed or
determinable and collection is reasonably assured.
Our
revenues are derived from customer usage of our CloudWorx Caas Platform on a minute of use basis. We recognize revenue based upon documented minutes of traffic delivered over our
CloudWorx CaaS Platform at the time of customer usage. The rates charged per minute are determined by contracts between us and our customers. We also recognize revenue from communication services
provided to certain enterprise customers on a monthly recurring basis as the services are provided based on contractual amounts expected to be collected. These revenues have not been significant to
date.
Peering Partner Compensation and Infrastructure Costs
Peering partner compensation represents the costs we incur to connect our customers' traffic to the ultimate end-point
device. These costs consist primarily of charges for access to our peering partners' networks, and are recorded at the time of usage.
We
recognize peering partner compensation costs as they are incurred in accordance with contractual requirements. We perform monthly bill verification procedures to identify errors in
the
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INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
peering
partners' billing processes. These verification procedures include the examination of the bills, comparing billing rates used with contractual billing rates, evaluating the trends of invoiced
amounts by peering partner and reviewing the types of charges being processed. If we discover a billing discrepancy as a result of our review, we then proactively seek to resolve the matter with our
peering partner. When applicable, we record a charge to peering partner compensation and a corresponding increase to our reserve for disputes based on our estimate of the amount that will eventually
be payable. As we receive additional information that indicates the disputed amounts will be settled for an amount which is different than the amount which we originally accrued, we will recognize the
difference as an adjustment to peering partner compensation costs. We believe that our procedures are designed to properly assess dispute accruals; however, changes to the estimates used in the
calculation could result in a material impact on our statements of operations.
Infrastructure
costs include the costs of utilizing third party telecommunications networks, amounts we pay for use of co-location facilities and interconnection services,
and costs of equipment and software maintenance and support.
Research and Development
Research and development expenses consist of personnel costs, testing and compliance services, and facility costs, and are expensed as
incurred. However, some direct development costs related to the internally developed software used to provide our services may be capitalized and depreciated over the estimated useful life.
Income Taxes
We recognize deferred tax assets and liabilities for the expected future income tax consequences of events that have been recognized in
our financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts and
their tax basis using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. Valuation allowances are provided when we are unable to conclude that the
realization of deferred tax assets is more likely than not.
We
follow the accounting guidance for accounting for uncertainty in income taxes. The accounting guidance requires a more likely than not threshold for financial statement recognition
and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and the tax position taken or
expected to be taken on our tax return. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We
establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that
certain positions might be challenged despite our belief that the tax return positions are fully supportable. The reserves are adjusted in light of changing facts and circumstances, such as the
outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. As of December 31, 2009 and 2010, we
had no unrecognized tax benefits. Our policy is to recognize interest and penalties related to income tax matters as an income tax expense. Through December 31, 2010, we did not have any
interest or penalties associated with unrecognized tax benefits.
F-12
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair value based on the
liquidity of these financial instruments and based on their short-term nature. Based on borrowing rates currently available to us for loans with similar terms, the carrying value of the
long-term debt approximates fair value.
Fair
value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the
use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:
Level 1—Unadjusted
quoted prices in active markets for identical assets or liabilities;
Level 2—Inputs
other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3—Unobservable
inputs that are supported by little or no market activity for the related assets or liabilities.
In
determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as
considering counter-party credit risk in our assessment of fair value.
The
valuation of certain items, including the valuation of outstanding warrants, involves significant estimates with underlying assumptions judgmentally determined. The valuation of
warrants for convertible preferred stock and common stock is based upon the Black-Scholes option-pricing model, which requires estimates of stock volatility and other assumptions. Certain
of the warrants are exercisable for preferred stock that is contingently redeemable. Certain of the common stock warrants and the conversion feature of the Series B and C convertible preferred
stock contain down round protection features.
Our
financial instruments consist of Level 3 liabilities only, which include the convertible preferred stock warrant liabilities and the common stock warrant liabilities. The
determination of the fair value of the warrant liabilities is discussed in Note 8.
F-13
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
Stock-Based Compensation
We recognize compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. We
determine the grant date fair value of the awards using the Black-Scholes option-pricing model and generally recognize the fair value as stock-based compensation expense on a straight-line
basis over the vesting period of the respective awards. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As
such, our stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In
the event of a modification, the fair value of the grant immediately before and after the modification is determined and the difference in values, if any, is also recognized over the remaining vesting
period or immediately if the option is fully vested.
We
account for stock options granted to non-employees also based on the fair value of the awards determined using the Black-Scholes option-pricing model. The fair value of
the awards granted to non-employees is remeasured as the awards vest, and the resulting change in value, if any, is recognized in the statement of operations during the period the related
services are rendered, which is generally the vesting period.
Net Loss per Share of Common Stock
Our basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common
stock outstanding for the period. The weighted-average number of shares of common stock used to calculate our basic net loss per share of common stock excludes those shares purchased with the notes
receivable from stockholders (see Note 11) as these shares are not deemed to be issued for accounting purposes until the notes are paid off. The diluted net loss per share of common stock is
computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, convertible preferred
stock, stock options to purchase common stock, warrants to purchase convertible preferred stock and warrants to purchase common stock are considered to be common stock equivalents but have been
excluded from the calculation of diluted net loss per share of common stock as their effect is antidilutive for all periods presented.
Unaudited Pro Forma Net Loss per Share of Common Stock
Pro forma basic and diluted net loss per share of common stock has been computed to give effect to the conversion of the convertible
preferred stock into common stock. Also, the numerator in the pro forma basic and diluted net loss per share calculation has been adjusted to remove gains and losses resulting from remeasurements of
the portion of the warrant liability related to warrants to purchase shares of convertible preferred stock as these amounts will be reclassified to additional paid-in capital upon a
qualifying initial public offering of our common stock. The gains and losses resulting from remeasurements of the portion of the warrant liability related to warrants to purchase shares of common
stock with down round protection features have not been removed from the pro forma basic and diluted net loss per share of common stock calculation because the liability classification of these
warrants will not be impacted by a qualifying initial public offering of our common stock.
F-14
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Business and Summary of Significant Accounting Policies (Continued)
Recently Issued Accounting Pronouncements
Effective January 1, 2010, we adopted new authoritative guidance on fair value measurements and disclosures. The new guidance
requires additional disclosures regarding fair value measurements, amends disclosures about postretirement benefit plan assets, and provides clarification regarding the level of disaggregation of fair
value disclosures by investment class. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for certain Level 3 activity
disclosure requirements that will be effective for reporting periods beginning after December 15, 2010. Accordingly, we adopted this new guidance beginning January 1, 2010, except for
the additional Level 3 requirements, which will be adopted in 2011. Level 3 assets and liabilities are those whose fair value inputs are unobservable and reflect management's best
estimate of what market participants would use in pricing the asset or liability at the measurement date. The adoption of this guidance did not have a material impact on our financial statements in
2010 and is not expected to have a material impact on our financial statements in 2011.
2. Balance Sheet Items
Property and equipment, net consist of the following (in thousands):
December 31,
2009
2010
CloudWorx CaaS Platform equipment
$
19,393
$
29,345
Office furniture, fixtures and other equipment
1,137
1,686
Leasehold improvements
451
709
Total property and equipment
20,981
31,740
Less accumulated depreciation and amortization
(5,847
)
(9,516
)
Property and equipment, net
$
15,134
$
22,224
Depreciation
and amortization expense was $1.9 million, $2.4 million and $3.7 million during the years ended December 31, 2008, 2009 and 2010.
Accrued
liabilities consist of the following (in thousands):
December 31,
2009
2010
Accrued compensation and benefits
$
2,093
$
2,796
Reserve for peering partner disputes
95
1,249
Accrued commissions
187
226
Accrued interest
110
146
Other liabilities
540
577
Accrued liabilities
$
3,025
$
4,994
F-15
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Intangible Assets
The following table presents the components of our intangible assets (in thousands):
Carrying Amount as of
December 31, 2009
Carrying Amount as of
December 31, 2010
Indefinite-lived assets:
Trade name and trademarks
$
21
$
127
Regulatory licenses
499
817
Sub-total indefinite-lived assets
520
944
Finite-lived assets:
Patents
38
356
CloudCentral portal
—
749
Sub-total finite-lived assets
38
1,105
Total intangible assets
$
558
$
2,049
The
patents have zero amortization expense reflected in the statements of operations during the years ended December 31, 2008, 2009 and 2010 as the assets are not yet in service.
The CloudCentral portal was placed into service on December 15, 2010 and therefore had no accumulated amortization as of December 31, 2010.
Amortization
expense for the estimated useful life of the patents and the CloudCentral portal, the finite-lived assets, is as follows during the years ended December 31 (in
thousands):
Year Ending December 31:
Amortization of
Intangible Assets
2011
$
114
2012
158
2013
158
2014
158
2015
158
Thereafter
359
Total
$
1,105
4. Long-Term Debt
Equipment Financing Obligations
In June 2007, we entered into an equipment loan of up to $6.0 million (borrowing limit) pursuant to a Master Lease Agreement
(amended on December 3, 2008 to increase borrowings to $6.5 million), under which advances are repayable over a 36-month period from each borrowing commencement date. Each
advance bears interest that ranges from 10.0% to 10.75%. The commitment to make advances terminated on October 30, 2010. In March 2010, $1.3 million of the principal repayments due in
2010 were deferred until January 1, 2011 and later periods. There were outstanding borrowings of $5.2 million and $4.1 million under this agreement as of December 31, 2009
and 2010.
F-16
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Long-Term Debt (Continued)
In
connection with this agreement, in June 2007 we issued immediately exercisable and fully vested warrants to purchase 247,935 shares of our common stock at an exercise price of $0.39
per share. The fair value of the common stock warrant on the date of issuance was $58,000, as determined using the Black-Scholes option-pricing model, and was recorded as additional
paid-in capital and as a deferred financing cost. Also, in connection with the increase in credit line pursuant to the October 2009 amendment, we issued immediately exercisable and fully
vested warrants to purchase 94,366 shares of our Series C convertible preferred stock at an exercise price of $1.0597 per share. The fair value of the Series C warrant was $112,000, as
determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the debt. The deferred financing cost and the discount are being amortized to
interest expense over the term of the debt.
In
April 2009, we entered into an equipment loan of up to $4.0 million. Under this agreement, advances are repayable over a 36-month period from each loan commencement
date. Each advance bears a monthly interest rate factor. The monthly interest rate factor is indexed to the yield for U.S. Treasury Notes maturing closest to the date 36 months from each loan's
commencement date (the "Index Instrument"). The monthly interest rate factor is adjusted to provide for any increase or decrease in the yield of the Index Instrument. The monthly interest rate factor
is fixed as of the date of the final acceptance of each item of equipment. The current loans under this facility bear interest at approximately 15%. The equipment purchased under the agreement serves
as the collateral for the loan. There were outstanding borrowings of $3.5 million and $2.3 million under this agreement as of December 31, 2009 and 2010.
In
connection with this agreement, in May 2009 we issued immediately exercisable and fully vested warrants to purchase 226,479 shares of our Series C convertible preferred stock
at an exercise price of $1.0597 per share. The fair value of the Series C warrant on the date of issuance was $225,000, as determined using the Black-Scholes option-pricing model, and was
recorded as a warrant liability and as a deferred financing cost that is being amortized to interest expense over the term of the debt.
In
May 2009, we entered into an equipment and security agreement with a total commitment of $4.0 million. The commitment to make advances terminated on December 31, 2009.
Advances are repayable over a 36-month period from each loan commencement date. Each advance bears interest equal to the greater of (a) 12.33% or (b) 12.33% plus the positive
or negative difference between (i) the one month LIBOR Rate as reported in the Wall Street Journal, on the date which is three business days before the funding date for such loan, and
(ii) 0.33%. The interest rate is 13.0875% on balances outstanding as of December 31, 2010. The equipment purchased under the agreement serves as collateral for the loan. There were
outstanding borrowings of $3.5 million and $2.3 million under this agreement as of December 31, 2009 and 2010.
In
connection with this agreement, in May 2009 we issued immediately exercisable and fully vested warrants to purchase shares of our Series C convertible preferred stock at an
exercise price of $1.0597 per share. A warrant to purchase 150,000 shares of Series C convertible preferred stock was issued upon signing of the agreement and another warrant to purchase 36,322
shares of Series C convertible preferred stock was issued upon first draw under this agreement. The fair value of the warrant to purchase 150,000 shares of Series C convertible preferred
stock issued upon signing of the agreement was $149,000, as determined using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a deferred financing cost. The fair
value of the warrant to purchase 36,322 shares of Series C convertible preferred stock issued upon the first draw of funds was $36,000, as
F-17
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Long-Term Debt (Continued)
determined
using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the debt. We issued additional warrants for the purchase of 96,777 shares of our
Series C convertible preferred stock with an exercise price of $1.0597 per share upon draws under the agreement in 2009. The fair value of these additional warrants was $108,000, as determined
using the Black-Scholes option-pricing model, and was recorded as a warrant liability and as a discount to the
debt. The deferred financing cost and the discounts are being amortized to interest expense over the term of the debt.
Loan and Security Agreement
In May 2010, we entered into a loan and security agreement that provided us with up to $10.0 million in equipment financing and
a revolving accounts receivable loan facility of $10.0 million.
Under
the agreement, the advances for equipment were available until December 31, 2010, and bear interest at the prime rate plus 7% per year. The advances are payable over a
36-month period, and the payments due through December 31, 2010 were interest only. As of December 31, 2010, the total amount outstanding under the $10.0 million
equipment loan was $9.5 million.
In
connection with this agreement, in May 2010 we issued immediately exercisable and fully vested warrants to purchase 283,099 shares of our Series C convertible preferred stock
at an exercise price of $1.0597 per share. The fair value of the Series C warrant on the date of issuance was $637,000, as determined using the Black-Scholes option-pricing model, and was
recorded as a warrant liability and as a deferred financing cost that is being amortized to interest expense over the term of the debt.
At
our option, we may prepay all, but not less than all, of the outstanding equipment loan advances by paying the entire principal balance, all accrued and unpaid interest, together with
a payment charge equal to the following percentage of the equipment loan balance being prepaid: 3% if prepaid in the first 12 months following the closing date (May 5, 2010); 2% if
prepaid after 12 months but prior to 24 months following the closing date, and thereafter 1%.
The
$10.0 million revolving accounts receivable loan facility bears interest at the prime rate plus 2.05% per year. The advances are based on 80% of our eligible accounts
receivable. The loan is repayable in interest only payments until the maturity date, at which time the entire principal and accrued interest is to be paid in full. The original maturity date for the
$10.0 million revolving loan was May 5, 2011, but was automatically extended to May 5, 2012. There are no borrowings outstanding under the $10.0 million revolving loan as
of December 31, 2010.
The
loan and security agreement borrowings are secured by all assets of the Company, including intellectual property.
Other Matters
All of the equipment financings and debt agreements contain certain covenants and information reporting requirements. The loan and
security agreement allows the lender to call the debt in the event there is a material adverse change in our business or financial condition. Additionally, under the terms of the loan agreement, we
cannot pay any cash dividends without the approval of the lenders.
As
of December 31, 2010, we were in compliance with the covenants set forth in our various debt agreements.
F-18
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Long-Term Debt (Continued)
Schedule of Payments Due
The following is a schedule of payments due on our long-term debt as of December 31, 2010 (in thousands):
Year Ending December 31:
2011
$
9,422
2012
6,830
2013
2,008
18,260
Less:
Discount
(103
)
Current portion
(9,422
)
Non-current portion of equipment loans
$
8,735
5. Convertible Promissory Notes Payable to Related Parties
In June 2008, we entered into a set of convertible promissory note payable agreements totaling $2.0 million with several of our major investors. The notes accrued simple interest
at a fixed rate of 8%
per annum. The notes and accrued interest were repayable on January 31, 2009. The notes were convertible into the Company's next equity financing upon written request from the major investors.
In
October 2008, the note holders authorized the conversion of the outstanding principal balance plus accrued unpaid interest totaling $2.1 million into 2,491,274 shares of
Series C convertible preferred stock. The conversion was in connection with the issuance of Series C convertible preferred stock in October 2008. As the notes were converted into the
Series C convertible preferred stock at a 20% discount from the purchase price of the stock, we recognized a beneficial conversion charge in the amount of $528,000 as interest expense during
the year ended December 31, 2008.
6. Common Stock Reserved for Issuance
As of December 31, 2010, we had reserved shares of common stock, on an as-if converted basis, for issuance as follows:
December 31, 2010
Issuance under stock option plan
14,722,328
Available for issuance under stock option plan
758,808
Conversion of convertible preferred stock
41,695,608
Issuance upon exercise of convertible preferred stock warrants
2,743,077
Issuance upon exercise of common stock warrants
807,850
60,727,671
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Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. Convertible Preferred Stock
In January 2008, we sold 915,473 shares of Series B convertible preferred stock ("Series B") at a price of $0.7374 per share for gross proceeds of $675,000.
In
connection with the January 2008 Series B stock purchase, we issued warrants to the investors for the purchase of 274,639 shares of Series B with an exercise price of
$0.01 per share and an expiration date of December 18, 2017. The fair value of the Series B warrants on the date of issuance of $152,000, as determined using the Black-Scholes
option-pricing model, was recorded as a warrant liability.
In
October 2008, we sold 15,049,776 shares of Series C convertible preferred stock ("Series C") at a price of $1.0597 per share for gross proceeds of $15.9 million.
In connection with the equity financing, convertible promissory notes from related parties were converted into 2,491,274 shares of Series C at $0.8478 per share, a 20% discount from the
purchase price of the preferred stock. The discount has been accounted for as a beneficial conversion feature charge of $528,000 (see Note 5).
Authorized
and outstanding convertible preferred stock as of December 31, 2009 and 2010 was as follows (in thousands, except share data):
As of December 31, 2009
Shares Authorized
Shares Issued and
Outstanding
Aggregate
Liquidation
Preference
Series A
1,280,210
1,124,198
$
517
Series B
24,730,382
23,020,160
16,975
Series C
18,750,000
17,541,050
18,588
Total
44,760,592
41,685,408
$
36,080
As of December 31, 2010
Shares Authorized
Shares Issued and
Outstanding
Aggregate
Liquidation
Preference
Series A
1,280,210
1,124,198
$
517
Series B
24,730,382
23,030,360
16,983
Series C
18,750,000
17,541,050
18,588
Total
44,760,592
41,695,608
$
36,088
The
rights, preferences and privileges of the convertible preferred stock are as follows:
Liquidation Preferences
Series A preferred stock has a liquidation preference of $0.46 per share plus unpaid dividends if declared by the board of
directors. Series B preferred stock has a liquidation preference of $0.7374 per share plus unpaid dividends if declared by the board of directors. Series C preferred stock has a
liquidation preference of $1.0597 per share plus unpaid dividends if declared by the board of directors. The liquidation preference amounts are to be paid in the following order of
priority: first to the holders of Series C preferred stock, then to the holders of the Series B preferred stock, then to the holders of the Series A preferred stock and then to
the holders of common stock.
F-20
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. Convertible Preferred Stock (Continued)
Voting Rights
Each share of convertible preferred stock has a number of votes equal to the number of shares of common stock into which it is
convertible. The outstanding shares of preferred and common stock vote together as a single class on all matters, except with respect to the election of directors. The holders of Series B and C
preferred stock, voting as two separate classes, are currently each entitled to elect one director of the Company.
The
holders of common stock, voting as a separate class, are currently entitled to elect two directors of the Company. The holders of preferred and common stock, voting together as a
single class and not a separate series, are currently entitled to elect three directors of the Company.
Conversion Rights
Each share of preferred stock is convertible, at the option of the holder, at any time into such number of shares of common stock as is
determined by dividing the applicable original issue price for such series by the applicable conversion price for such series (the "Conversion Rate"). The initial conversion price per share for each
series of preferred stock is the original issue price applicable to such series. As of December 31, 2010 the conversion rate for all series of the outstanding shares of preferred stock is 1 to
1.
Each
share of preferred stock will be automatically converted into shares of common stock at the Conversion Rate at the time in effect for such series of preferred stock immediately upon
the sale of our common stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 or Form SB-2 under the Securities
Act of 1933 that results in gross proceeds to us, net of underwriting expenses, in excess of $50 million at an offer price per share equal to three times (3x) the original issue price for the
Series C preferred (calculated to be $3.1791 as of December 31, 2010). In addition, each share of preferred stock shall automatically be
converted into shares of common stock at the respective Conversion Rates at the time in effect for each such series of preferred stock upon consent or agreement of the holders of at least 66% of the
then outstanding shares of Series B preferred stock and Series C preferred stock (voting together as a single class and not as a separate series, and on an as-converted
basis).
Redemption Rights
Upon receiving a written request at any time after September 30, 2013, from the holders of 66% of the outstanding shares of
Series B and C preferred stock, we shall redeem, on the date three (3) months following our receipt of such written redemption request and on the last day of each calendar quarter
thereafter, the amount equal to all of the shares of Series B and C preferred stock that are outstanding on the date we receive such written redemption request.
We
recorded the convertible preferred stock at fair value on the dates of issuance, net of issuance costs. We classify the convertible preferred stock outside of stockholders' equity
(deficit) because the shares contain redemption features that are not solely within our control. During the years ended December 31, 2008, 2009 and 2010, we did not adjust the carrying values
of the redeemable convertible preferred stock to the deemed redemption values of such shares since a liquidation event was not probable. Subsequent adjustments to increase the carrying values to the
ultimate redemption values will be made only when it becomes probable that such a liquidation event will occur.
F-21
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. Warrants
In connection with issuing preferred stock and obtaining lease credit facilities, lines of credit, equipment financing and loans, we issued common stock warrants, and Series A, B
and C convertible preferred stock warrants.
We
have issued warrants to purchase shares of our common stock at various times since 2004. Some of the common stock warrants include a down round protection feature and used to provide
the holder an option to put these warrants to us for cash. In February 2010, these common stock warrants were extended for another five years, or to February 2015, and the put feature was removed.
These common stock warrants are recorded as liabilities at fair value and are subject to remeasurement at each balance sheet date due to the down round protection feature.
We
have issued warrants to purchase shares of our convertible preferred stock at various times since 2004. Our convertible preferred stock warrants are generally exercisable immediately
and can only be exercised for cash or net share settled. Freestanding warrants to purchase our convertible preferred stock are valued at fair value and classified as liabilities in the balance sheets
because the warrants may conditionally obligate us to transfer assets at some point in the future.
As
of December 31, 2010, the following common stock warrants, which are not subject to remeasurement, were outstanding:
Issue Date
Reason for Grant
Number of Shares Into
Which the Warrant Is
Exercisable
Exercise Price
per Share
Expiration
November 2004
Debt financing
19,632
$
0.815
November 12, 2011
October 2004
Debt financing
22,826
$
0.01
October 4, 2011
June 2007
Debt financing
247,935
$
0.39
June 14, 2017
September 2006
Debt financing
61,922
$
1.211
September 20, 2016
December 2008
Debt financing
70,775
$
0.44
December 3, 2018
May 2010
Debt financing
23,120
$
1.70
May 4, 2020
446,210
F-22
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. Warrants (Continued)
As
of December 31, 2010, the following common stock and preferred stock warrants, which are subject to remeasurement, were outstanding:
Issue Date
Reason for Grant
Type of Stock
Into Which the
Warrant Is
Exercisable
Number of Shares
Into Which the
Warrant Is
Exercisable
Exercise
Price per
Share
Expiration
October 2004
Debt financing
Series A
50,000
$
0.46
October 20, 2014
January 2005
Debt financing
Series A
106,012
$
0.815
January 28, 2012
February 2005
Debt financing
Common
230,061
$
0.815
February 24, 2015
August 2005
Debt financing
Common
131,579
$
0.95
February 24, 2015
June 2006
Debt financing
Series B
105,296
$
0.496
December 3, 2014
December 2007
Debt financing
Series B
28,419
$
0.737
June 12, 2016
December 2007
Equity financing
Series B
1,301,868
$
0.01
Earlier of (i) the closing of an IPO or (ii) December 18, 2017
January 2008
Equity financing
Series B
264,439
$
0.01
Earlier of (i) the closing of an IPO or (ii) December 18, 2017
May 2009
Debt financing
Series C
186,322
$
1.0597
May 1, 2019
May 2009
Debt financing
Series C
226,479
$
1.0597
May 14, 2019
June 2009
Debt financing
Series C
36,652
$
1.0597
June 25, 2019
October 2009
Debt financing
Series C
94,366
$
1.0597
October 28, 2019
October 2009
Debt financing
Series C
60,125
$
1.0597
October 30, 2019
May 2010
Debt financing
Series C
283,099
$
1.0597
May 5, 2020
3,104,717
Fair Value of Warrant Liabilities
The following is a summary of the warrants to purchase common stock that are subject to remeasurement and the warrants to purchase
convertible preferred stock outstanding and their fair values as of December 31, 2009 and 2010 (dollar amounts in thousands):
Shares as of
Fair Value as of
December 31,
2009
December 31,
2010
December 31,
2009
December 31,
2010
Common stock
361,640
361,640
$
48
$
1,007
Preferred stock
2,470,178
2,743,077
2,897
11,393
2,831,818
3,104,717
$
2,945
$
12,400
F-23
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. Warrants (Continued)
The
changes in Level 3 liabilities measured at fair value on a recurring basis are summarized as follows during the years ended December 31, 2008, 2009 and 2010 (in
thousands):
Year Ended December 31,
2008
2009
2010
Fair value of warrant liabilities—beginning of period
$
1,322
$
1,311
$
2,945
Fair value of preferred stock warrants issued during the period
152
630
637
Fair value of common stock warrants extended during the period
—
—
359
Less: fair value of warrants exercised
—
—
(33
)
Change in fair value of the warrant liabilities
(163
)
1,004
8,492
Fair value of warrant liabilities—end of period
$
1,311
$
2,945
$
12,400
The
fair values of outstanding common stock warrants that are subject to remeasurement were estimated using the Black-Scholes option-pricing model, including consideration of any
potential additional value associated with pricing protection features, with the following weighted-average assumptions:
Year Ended
December 31,
2008
2009
2010
Expected term (in years)
5.9
4.9
3.9
Risk-free interest rate
1.7
%
2.3
%
1.5
%
Expected volatility
68
%
66
%
55
%
Expected dividend rate
0
%
0
%
0
%
The
fair values of outstanding convertible preferred stock warrants were estimated using the Black-Scholes option-pricing model, including consideration of any potential additional value
associated with pricing protection features, with the following weighted-average assumptions:
Year Ended December 31,
2008
2009
2010
Expected term (in years)
3.1 - 9.0
2.1 - 9.3
1.1 - 9.4
Risk-free interest rate
1.3% - 2.2%
1.4% - 3.6%
0.6% - 3.3%
Expected volatility
50% - 61%
58% - 66%
43% - 61%
Expected dividend rate
0%
0%
0%
9. Stock-Based Compensation
Our 2003 Stock Option and Restricted Stock Plan (the "Plan"), as amended, provides for the grant of options to purchase up to 15,629,587 shares of our common stock. Stock options are
exercisable at prices generally equal to the fair value of our common stock at the date of grant, as determined by the board of directors. Options generally vest over a four year period and may be
exercised for a period of up to ten years. Vested options generally expire 90 days after termination of employment with certain exceptions described in the Plan.
F-24
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
9. Stock-Based Compensation (Continued)
The
following table summarizes stock option activity related to shares of common stock for the years ended December 31, 2008, 2009 and 2010:
Shares
Available
for Grant
Number
of Stock Options
Outstanding
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding—January 1, 2008
6,002,330
4,692,563
$
0.575
6.9
Additional options authorized
2,828,243
—
Granted
(8,374,366
)
8,374,366
0.177
Forfeited
287,934
(287,934
)
0.288
Expired
116,031
(116,031
)
0.390
Outstanding—December 31, 2008
860,172
12,662,964
0.320
8.0
Additional options authorized
1,000,000
—
Granted
(2,304,032
)
2,304,032
0.637
Forfeited
924,708
(924,708
)
0.586
Expired
210,460
(210,460
)
0.128
Outstanding—December 31, 2009
691,308
13,831,828
0.358
7.4
Additional options authorized
1,000,000
—
Granted
(990,000
)
990,000
1.807
Forfeited
53,333
(53,333
)
0.461
Expired
4,167
(4,167
)
0.041
Exercised
—
(42,000
)
0.200
Outstanding—December 31, 2010
758,808
14,722,328
0.455
6.6
$
45,122
Vested and expected to vest—December 31, 2010
14,042,334
0.459
6.6
$
42,977
Vested—December 31, 2010
10,450,828
0.356
6.0
$
33,062
The
fair value of the option awards during the years ended December 31, 2008, 2009 and 2010 was calculated using the Black-Scholes option valuation model with the following
assumptions:
Year Ended December 31,
2008
2009
2010
Expected term (in years)
6.25
6.25
6.25
Risk-free interest rate
2.6% - 4.1%
2.6% - 3.8%
1.7% - 2.6%
Expected volatility
42% - 52%
52%
52%
Expected dividend rate
0%
0%
0%
F-25
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
9. Stock-Based Compensation (Continued)
The expected term of the options represents the estimated time from the date of the grant until the date of exercise and is primarily based on the simplified method which calculates the
expected term as the average of the time-to-vesting and the contractual life of the awards. Expected volatility is determined based on the historical volatility of a peer group
of publicly-traded companies over the expected term of the options. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with
a similar term. The expected dividend yield was assumed to be zero as we have never paid dividends and have no current plans to do so.
The
aggregate intrinsic value of options exercised during the year ended December 31, 2010 was $100,000.
The
weighted-average grant date fair value of our stock options during the years ended December 31, 2008, 2009 and 2010 was $0.08, $0.22 and $0.94 per share. The aggregate grant
date fair value of our stock options granted to employees during the years ended December 31, 2008, 2009 and 2010 was $676,000, $518,000 and $935,000.
Stock-Based Compensation Expense
The total stock-based compensation expense during the years ended December 31, 2008, 2009 and 2010 are recognized in the
statements of operations as follows (in thousands):
Year Ended December 31,
2008
2009
2010
Operations
$
27
$
31
$
144
Research and development
16
49
81
Sales and marketing
185
111
153
General and administrative
91
106
186
$
319
$
297
$
564
As
of December 31, 2010, total compensation expense related to unvested stock-based awards granted under the Plan, but not yet recognized, was $1.3 million, net of
estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted-average remaining period of 1.5 years. There was no capitalized stock-based compensation
expense during the years ended December 31, 2008, 2009 and 2010.
F-26
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
9. Stock-Based Compensation (Continued)
Additional
information regarding our stock options outstanding and vested and exercisable as of December 31, 2010 is summarized below:
Options Outstanding
Options Vested and Exercisable
Exercise Prices
Number of
Stock Options
Outstanding
Weighted-
Average
Remaining
Contractual
Life (Years)
Weighted-
Average
Exercise
Price
per Share
Shares Subject
to Stock Options
Weighted-
Average
Exercise
Price
per Share
$0.03
150,000
2.5
$
0.03
150,000
$
0.03
$0.14
7,107,970
7.1
$
0.14
5,768,311
$
0.14
$0.39-$0.44
3,225,375
5.9
$
0.41
2,182,079
$
0.40
$0.66-$0.95
2,926,184
4.4
$
0.76
2,002,639
$
0.80
$1.02-$1.23
322,799
3.7
$
1.19
322,799
$
1.19
$1.70-$2.02
922,500
9.4
$
1.75
25,000
$
1.70
$2.57
67,500
9.8
$
2.57
—
$
—
$0.03-$2.57
14,722,328
10,450,828
Non-Employee Stock-Based Compensation Expense
During the years ended December 31, 2008, 2009 and 2010, we granted 25,000, 20,000 and 25,000 stock options to
non-employees of the Company. As of December 31, 2010, we had non-employee options to purchase 379,489 shares of
common stock outstanding with exercise prices ranging from $0.08 to $1.70 and contractual terms up to 10 years. We have recorded stock-based compensation expense for these
non-employee options of $9,000, $7,000 and $81,000 for the years ended December 31, 2008, 2009 and 2010, which is included in total stock-based compensation expense.
10. Commitments and Contingencies
Capital Lease Obligation
We entered into a capital lease obligation of $560,000 during the year ended December 31, 2010 for CloudWorx CaaS Platform
equipment. Related accumulated amortization totaled $33,000 at December 31, 2010.
F-27
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
10. Commitments and Contingencies (Continued)
The
following is a schedule of future minimum lease payments due under the capital lease obligation as of December 31, 2010 (in thousands):
Year Ending December 31:
2011
$
131
2012
131
2013
131
2014
131
2015
77
Total minimum lease payments
601
Less: amount representing interest
(83
)
Present value of minimum lease payments
518
Less: current portion
(100
)
Capital lease obligation, non-current
$
418
Operating Leases
We have non-cancelable operating leases for office space and infrastructure facilities expiring at various dates through
August 2013. Rent expense for non-cancellable operating leases with scheduled rent increases is recognized on a straight line basis over the lease term. Certain leases allow us, at our
option, to renew the leases for various periods. Rent expense for the years ended December 31, 2008, 2009 and 2010 was $437,000, $547,000 and $592,000.
The
following is a schedule of future minimum lease payments under non-cancelable operating leases as of December 31, 2010 (in thousands):
Year Ending December 31:
2011
$
1,704
2012
313
2013
204
Total
$
2,221
Purchase Commitment
We have a purchase commitment for CloudWorx CaaS Platform equipment to be ordered and delivered in 2011. As of December 31,
2010, the outstanding purchase commitment under the agreement amounted to $4.5 million.
Litigation
We are not a party to any litigation and do not have contingent reserves established for any litigation liabilities.
F-28
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
11. Notes Receivable from Stockholders
In June 2006, we issued 1,538,640 common shares to two of our executives in exchange for two promissory notes amounting to $1.6 million. The notes receivable carry an annual
interest rate of 5.06% and will mature on the earlier of June 30, 2011 or the day immediately prior to a public offering. These notes are non-recourse notes and are secured by a
pledge of the common stock, however, the notes were considered to be nonsubstantive and, as a result, the notes and related legally outstanding shares were not recorded on the balance sheet.
In
December 2010, the notes receivable were amended to change the maturity date to the earlier of June 30, 2012 or the day immediately prior to a public offering. In addition, the
annual interest rate was reduced to 0.32%.
12. Net Loss per Share of Common Stock
The following table sets for the computation of our basic and diluted net loss per share of common stock during the years ended December 31, 2008, 2009 and 2010 (in thousands,
except for share and per
share amounts). The shares purchased with the notes receivable from stockholders have been excluded as these shares are not deemed to be issued for accounting purposes until the notes are paid off.
Year Ended December 31,
2008
2009
2010
Net loss
$
(5,140
)
$
(3,343
)
$
(11,619
)
Shares used in computing net loss per share of common stock, basic and diluted
8,757,955
8,757,955
8,759,925
Net loss per share of common stock, basic and diluted
$
(0.59
)
$
(0.38
)
$
(1.33
)
The
following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including
them would have been antidilutive:
December 31,
2008
2009
2010
Convertible preferred stock
41,685,408
41,685,408
41,695,608
Stock options to purchase common stock
12,662,964
13,831,828
14,722,328
Convertible preferred stock warrants
1,866,234
2,470,178
2,743,077
Common stock warrants
2,289,125
2,289,125
807,850
Shares purchased with stockholder notes
1,538,640
1,538,640
1,538,640
F-29
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
12. Net Loss per Share of Common Stock (Continued)
The
following table sets forth the computation of our pro forma basic and diluted net loss per share of common stock during the year ended December 31, 2010 (in thousands, except
for share and per share amounts):
Year Ended
December 31, 2010
(Unaudited)
Net loss
$
(11,619
)
Change in fair value of convertible preferred stock warrant liabilities
7,892
Net loss used in computing pro forma net loss per share of common stock, basic and diluted
$
(3,727
)
Shares used in computing net loss per share of common stock, basic and diluted
8,759,925
Pro forma adjustments to reflect assumed conversion of convertible preferred stock
41,687,588
Shares used in computing pro forma net loss per share of common stock, basic and diluted
50,447,513
Pro forma net loss per share of common stock, basic and diluted
$
(0.07
)
13. Income Taxes
We did not record a provision or benefit for income taxes during the years ended December 31, 2008, 2009 and 2010.
Net
deferred tax assets as of December 31, 2009 and 2010 consist of the following (in thousands):
December 31,
2009
December 31,
2010
Deferred tax assets:
Net operating loss carryforward
$
8,512
$
10,077
Allowance for doubtful accounts
153
1
Accrued compensation
805
1,088
Accruals, reserves and other
397
1,052
Gross deferred tax assets
9,867
12,218
Valuation allowance
(8,349
)
(9,559
)
Net deferred tax assets
1,518
2,659
Deferred tax liabilities:
Depreciation and amortization
1,518
2,659
Net deferred tax assets
$
—
$
—
F-30
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
13. Income Taxes (Continued)
Reconciliations
of the statutory federal income tax to our effective tax during the years ended December 31, 2008, 2009 and 2010 are as follows (in thousands):
Year Ended December 31,
2008
2009
2010
Tax at statutory federal rate
$
(1,799
)
$
(1,170
)
$
(4,067
)
State tax—net of federal benefit
(120
)
(78
)
(106
)
Change in valuation allowance
1,873
830
1,210
Fair market value adjustment to warrants
(57
)
352
2,972
Other
103
66
(9
)
Provision (benefit) for income taxes
$
—
$
—
$
—
The
valuation allowance for deferred tax assets as of December 31, 2009 and 2010 was $8.4 million and $9.6 million, respectively. The net change in the total
valuation allowance for each of the years ended December 31, 2008, 2009 and 2010 was an increase of $1.9 million, $0.6 million and $1.2 million,
respectively. The valuation allowance was substantially related to net operating loss carryforwards that, in the judgment of management, are not more likely than not to be realized. In assessing the
realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax
liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment.
As
of December 31, 2010, we had federal net operating loss carryforwards of $26.8 million expiring beginning in 2023. As of December 31, 2010, we had state net
operating loss carryforwards of $15.2 million, expiring beginning in 2024.
Internal
Revenue Code section 382 places a limitation (the Section 382 Limitation) on the amount of taxable income that can be offset by federal net operating carryforwards
after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. Generally, after a control change, a loss corporation cannot deduct
operating loss carryforwards in excess of the Section 382 Limitation. Management has considered the impact such limitation may have on the utilization of our operating loss carryforwards
against taxable income in future periods.
As
of December 31, 2009 and 2010, we had no unrecognized tax benefits.
We
file income tax returns in the United States and various states. The tax years 2006 through 2010 remain open in most jurisdictions. We are not currently under examination by income
tax authorities in federal or any state jurisdiction.
14. Subsequent Events
In February 2011, warrant holders exercised warrants for the purchase of 1,444,258 shares of Series B convertible preferred stock with an exercise price of $0.01 per share,
resulting in gross proceeds to us of approximately $14,000. The portion of the warrant liability related to the exercised preferred stock warrants will be reclassified from warrant liabilities to
convertible preferred stock.
F-31
Table of Contents
INTELEPEER, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
14. Subsequent Events (Continued)
On
May 3, 2011, we increased the number of shares available for grant under our 2003 Stock Option and Restricted Stock Plan by 2.9 million shares.
On
May 4, 2011, the two executives with outstanding notes receivable related to the purchase of common stock (see Note 11) repaid all of the outstanding principal and
accrued interest due under the notes receivable.
We
have evaluated subsequent events through May 9, 2011, the date the financial statements were available to be issued.
F-32
Shares
Common Stock
Prospectus
Joint Book-Running Managers
J.P. Morgan
Deutsche Bank Securities
Barclays Capital
Co-Managers
RBC Capital Markets
William Blair & Company
,
2011
Until                               
     ,
all dealers that effect transactions in these securities, whether or not participating in the offering, may be required to deliver a prospectus. This is in
addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.    Other Expenses of Issuance and Distribution.
The following are the estimated expenses to be incurred in connection with the issuance and distribution of the securities registered
under this registration statement, other than underwriting discounts and commissions. All amounts shown are estimates except the SEC registration fee and the Financial Industry Regulatory
Authority, Inc. filing fee. The following expenses will be borne solely by the registrant.
SEC registration fee
$
11,610
FINRA filing fee
$
10,500
Exchange listing fee
*
Legal fees and expenses
*
Accounting fees and expenses
*
Printing expenses
*
Transfer agent fees and expenses
*
Miscellaneous expenses
*
Total
$
*
Estimate
Item 14.    Indemnification of Directors and Officers.
Section 145(a) of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right
of the corporation), because he or she is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit, or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 145(b)
of the DGCL provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending,
or completed action or suit by or in the right of the corporation to procure a judgment in its favor because the person is or was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made with respect to any claim, issue, or matter as to which he or she
shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but
in view of all of the circumstances of the case, he or she is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other adjudicating court shall deem proper.
II-1
Table of Contents
Section 145(e)
of the DGCL provides that expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized by Section 145 of the DGCL. Section 145(e) of the DGCL further provides that
such expenses (including attorneys' fees) incurred by former directors and officers or other employees or agents of the corporation may be so paid upon such terms and conditions as the corporation
deems appropriate.
Section 145(g)
of the DGCL provides, in general, that a corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have
the power to indemnify the person against such liability under Section 145 of the DGCL.
Our
amended and restated bylaws that will be in effect upon completion of this offering will provide that we will indemnify, to the fullest extent permitted by the DGCL, any person who
was or is made or is threatened to be made a party or is otherwise involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that he
or she, or a person for whom he or she is the legal representative, is or was one of our directors or officers or, while serving as one of our directors or officers, is or was serving at our request
as a director, officer, employee, or agent of another corporation or of another entity, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such
person, subject to limited exceptions relating to indemnity in connection with a proceeding (or part thereof) initiated by such person. Our amended and restated bylaws that will be in effect upon
completion of this offering will further provide for the advancement of expenses to each of our officers and directors.
Our
amended and restated certificate of incorporation that will be in effect upon completion of this offering will provide that, to the fullest extent permitted by the DGCL, as the same
exists or may be amended from time to time, our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Under
Section 102(b)(7) of the DGCL, the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty can be limited or eliminated except
(i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the DGCL (relating to unlawful payment of dividend or unlawful stock purchase or redemption); or (iv) for any transaction from
which the director derived an improper personal benefit.
We
also currently have and intend to maintain a general liability insurance policy which covers certain liabilities of directors and officers of our company arising out of claims based
on acts or omissions in their capacities as directors or officers, whether or not we would have the power to indemnify such person against such liability under the DGCL or the provisions of our
amended and restated certificate of incorporation or amended and restated bylaws.
We
have entered into indemnification agreements with each of our directors and our executive officers that provide that we will indemnify each of our directors and such officers to the
fullest extent permitted by law and by our amended and restated certificate of incorporation or amended and restated bylaws.
II-2
Table of Contents
Item 15.    Recent Sales of Unregistered Securities.
Since January 1, 2008, we have issued the following securities that were not registered under the Securities
Act:
1.
Between
January 1, 2008 and April 30, 2011, we granted options to employees, directors and consultants to purchase an aggregate of 12,288,398
shares of our common stock under our 2003 Stock Plan at exercise prices ranging from $0.14 to $5.50. During this period, options to purchase (i) 10,000 shares of our common stock have been
exercised for an exercise price of $0.39, (ii) 32,000 shares of our common stock have been exercised for an exercise price of $0.14, and (iii) 3,000 shares of our common stock have been
exercised for an exercise price of $0.44, for cash consideration to us in the aggregate amount of $9,700. Of these options, 4,494,750 were deemed exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, and/or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering.
2.
In
January 2008, we issued 915,473 shares of our Series B preferred Stock to accredited investors at a purchase price of $0.7374 per share for an
aggregate purchase price of approximately $675,000.
3.
In
January 2008, we issued warrants to purchase 274,639 shares of Series B preferred stock with an exercise price of $0.01 per share to accredited
investors.
4.
On
June 5, 2008, June 17, 2008, and August 1, 2008 we collectively issued and sold an aggregate principal amount of $2,050,000 of
subordinated convertible promissory notes to accredited investors.
5.
In
October 2008, we issued 17,541,050 shares of our Series C preferred stock to accredited investors at a purchase price per share of $1.0597 for cash
payments and $0.8478 for issuances upon conversion of the above-mentioned promissory notes.
6.
In
December 2008, we issued a warrant to purchase 70,775 shares of common stock with an exercise price of $0.44 per share to an accredited investor.
7.
In
May 2009, we issued warrants to purchase 412,801 shares of Series C preferred stock with an exercise price of $1.0597 per share to accredited
investors.
8.
In
June 2009, we issued a warrant to purchase 36,652 shares of Series C preferred stock with an exercise price of $1.0597 per share to an accredited
investor.
9.
In
October 2009, we issued warrants to purchase 154,491 shares of Series C preferred stock with an exercise price of $1.0597 per share to accredited
investors.
10.
In
February 2010, the expiration dates with respect to certain warrants to purchase 361,640 shares of common stock were extended to February 24,
2015.
11.
In
May 2010, we issued warrants to purchase 283,099 shares of Series C preferred stock with an exercise price of $1.0597 per share to accredited
investors.
12.
In
May 2010, we issued warrants to purchase 23,120 shares of common stock with an exercise price of $1.70 per share to accredited investors.
13.
In
June 2010, we issued an option to purchase 150,000 shares of common stock at an exercise price of $0.03 per share outside of our stock option plan to
Daniel Quandt in connection with services rendered.
14.
In
October 2010, warrants to purchase 2,454 shares of common stock were exercised for an exercise price of $0.815 for total proceeds to us of $2,000.
II-3
Table of Contents
15.
In
October 2010, warrants to purchase 10,200 shares of Series B preferred stock were exercised for an exercise price of $0.01 for total proceeds to
us of $102.
16.
In
February 2011, warrants to purchase 1,444,258 shares of Series B preferred stock were exercised for an exercise price of $0.01 for total proceeds
to us of $14,442.
Except
as noted above, the issuance of options, shares issued upon exercise of options and restricted stock described in the first item above was deemed exempt from registration under
the Securities Act in reliance on Rule 701 promulgated thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation. The other issuances of
securities described above were deemed exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, and/or Regulation D promulgated thereunder, as
transactions by an issuer not involving a public offering. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.
Item 16.    Exhibits.
(a)
Exhibits.
Number
Description
1.1*
Form of Underwriting Agreement.
3.1
Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
3.2*
Form of Amended and Restated Certificate of Incorporation to be effective upon completion of the offering.
3.3
Amended and Restated Bylaws, as currently in effect.
3.4*
Form of Amended and Restated Bylaws to be effective upon completion of the offering.
4.1*
Specimen of Stock Certificate.
4.2
Registration Rights Agreement by and among IntelePeer, Inc. and the investors listed on Exhibit A thereto, as amended.
4.3
Common Stock Purchase Warrant issued May 4, 2010 to Vogen Funding, L.P.
4.4
Stock Purchase Warrant to Purchase Common Stock issued June 14, 2007 to Vogen Funding, L.P.
4.5
Stock Purchase Warrant to Purchase Common Stock issued December 3, 2008 to Vogen Funding, L.P.
4.6
Stock Purchase Warrant to Purchase Common Stock issued October 4, 2004 to Vencore Solutions LLC.
4.7
Stock Purchase Warrant to Purchase Common Stock issued September 20, 2006 to Vencore Solutions LLC.
4.8
Stock Purchase Warrant to Purchase Series A Preferred Stock issued January 28, 2005 to Vencore Solutions LLC.
4.9
Stock Purchase Warrant to Purchase Series B Preferred Stock issued June 12, 2006 to Vencore Solutions LLC.
4.10
Form of Stock Purchase Warrant to Purchase Common Stock issued in connection with November 12, 2004 Bridge Financing.
II-4
Table of Contents
Number
Description
4.11
Stock Purchase Warrant to Purchase Common Stock issued February 24, 2005 to DNJ Leasing II, L.P.
4.12
Stock Purchase Warrant to Purchase Common Stock issued August 1, 2005 to DNJ Leasing II, L.P.
4.13
Amendment to Stock Purchase Warrants to Purchase Common Stock by and between IntelePeer, Inc. & DNJ Capital Partners II, LLC, dated October 23, 2010.
4.14
Warrant to Purchase Stock issued October 20, 2004 to Silicon Valley Bank.
4.15
Warrant to Purchase Stock issued December 3, 2004 to Silicon Valley Bank.
4.16
Warrant to Purchase Stock issued January 28, 2005 to Silicon Valley Bank.
4.17
Warrant to Purchase Shares of Series C Preferred Stock issued May 1, 2009 to Compass Horizon Funding Company LLC.
4.18
Warrant to Purchase Series C Preferred Stock issued May 14, 2009 to Atel Ventures, Inc.
4.19
Warrant Agreement by and between IntelePeer, Inc. and Hercules Technology II, L.P., dated May 5, 2010.
4.20
Warrant Agreement by and between IntelePeer, Inc. and Comerica Bank, dated May 5, 2010.
5.1*
Opinion of DLA Piper LLP (US).
10.1†
2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the 2003 Stock Option and Restricted Stock Plan.
10.2†
Amended and Restated 2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the Amended and Restated 2003 Stock Option and Restricted Stock Plan.
10.3†
2011 Equity Incentive Plan and Form of Stock Option Agreement, Form of Restricted Stock Units Agreement and Form of Restricted Stock Agreement under the 2011 Equity Incentive Plan.
10.4
Form of Indemnification Agreement to be entered into by and between IntelePeer, Inc. and each of its directors and executive officers.
10.5†
Amended and Restated Executive Employment Agreement with Frank Fawzi, dated May 6, 2011.
10.6†
Amended and Restated Executive Employment Agreement with Andre Simone, dated May 6, 2011.
10.7†
Amended and Restated Executive Employment Agreement with Haydar Haba, dated May 6, 2011.
10.8†
Offer Letter Agreement with John Belanger, dated December 10, 2003.
10.9†
Offer Letter Agreement with Phillip Bronsdon, dated August 21, 2007.
10.10†
Offer Letter Agreement with Raymond Smets, dated January 11, 2011.
10.11†
Offer Letter Agreement with Lawrence Irving, dated January 26, 2011.
10.12
Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated August 1, 2008.
II-5
Table of Contents
Number
Description
10.13
First Amendment to Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated April 12, 2011.
10.14
Commercial Lease Agreement between IntelePeer, Inc. and Garvin Partners, dated August 21, 2008.
10.15
Loan and Security Agreement among IntelePeer, Inc., Hercules Technology II, L.P. and Comerica Bank, dated May 5, 2010.
21.1
List of Subsidiaries.
23.1*
Consent of DLA Piper LLP (US) (included in Exhibit 5.1).
23.2
Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.
24.1
Power of Attorney (see signature page to this registration statement).
*
To
be filed by amendment.
†
Indicates
a management contract or any compensatory plan, contract, or arrangement.
Item 17.    Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer, or controlling person of us in the successful defense
of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by the registrant is against public policy as
expressed in the Securities Act and will be governed by the final adjudication of such issue.
The
undersigned hereby undertakes that:
(i)
For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared effective.
(ii)
For
purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-6
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Mateo, State of California on May 9, 2011.
INTELEPEER, INC.
By:
/s/ FRANK FAWZI
Frank Fawzi
President and Chief Executive Officer, Chairman of the Board of Directors
POWER OF ATTORNEY
Know all men by these presents, that the undersigned directors and officers of the registrant, a Delaware corporation, which is filing
a registration statement on Form S-1 with the SEC, Washington, D.C. 20549 under the provisions of the Securities Act, hereby constitute and appoint Frank Fawzi and Andre Simone, and
each of them, the individual's true and lawful attorney-in-fact and agents, with full power of substitution and resubstitution, for the person and in his or her name, place and
stead, in any and all capacities, to sign such registration statement and any or all amendments, including post-effective amendments to the registration statement, including a prospectus
or an amended prospectus therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act, and all other
documents in connection therewith to be filed with the SEC, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act, this registration statement and the Power of Attorney has been signed by the following persons in the capacities and on the dates
indicated.
Signature
Title
Date
/s/ FRANK FAWZI
Frank Fawzi
President and Chief Executive Officer, Chairman of the Board of Directors (Principal Executive Officer)
May 9, 2011
/s/ ANDRE SIMONE
Andre Simone
Chief Financial Officer and Secretary (Principal Financial Officer)
May 9, 2011
/s/ TODD SMITH
Todd Smith
Vice President and Corporate Controller (Principal Accounting Officer)
May 9, 2011
/s/ HAYDAR HABA
Haydar Haba
Founder, Chief Visionary Officer, Director
May 9, 2011
II-7
Table of Contents
Signature
Title
Date
/s/ WILLIAM HARDING
William Harding
Director
May 9, 2011
/s/ JAVIER ROJAS
Javier Rojas
Director
May 9, 2011
/s/ RAYMOND SMETS
Raymond Smets
Director
May 9, 2011
/s/ LAWRENCE IRVING
Lawrence Irving
Director
May 9, 2011
II-8
Table of Contents
EXHIBIT INDEX
Number
Description
1.1*
Form of Underwriting Agreement.
3.1
Amended and Restated Certificate of Incorporation, as corrected and amended, as currently in effect.
3.2*
Form of Amended and Restated Certificate of Incorporation to be effective upon completion of the offering.
3.3
Amended and Restated Bylaws, as currently in effect.
3.4*
Form of Amended and Restated Bylaws to be effective upon completion of the offering.
4.1*
Specimen of Stock Certificate.
4.2
Registration Rights Agreement by and among IntelePeer, Inc. and the investors listed on Exhibit A thereto, as amended.
4.3
Common Stock Purchase Warrant issued May 4, 2010 to Vogen Funding, L.P.
4.4
Stock Purchase Warrant to Purchase Common Stock issued June 14, 2007 to Vogen Funding, L.P.
4.5
Stock Purchase Warrant to Purchase Common Stock issued December 3, 2008 to Vogen Funding, L.P.
4.6
Stock Purchase Warrant to Purchase Common Stock issued October 4, 2004 to Vencore Solutions LLC.
4.7
Stock Purchase Warrant to Purchase Common Stock issued September 20, 2006 to Vencore Solutions LLC.
4.8
Stock Purchase Warrant to Purchase Series A Preferred Stock issued January 28, 2005 to Vencore Solutions LLC.
4.9
Stock Purchase Warrant to Purchase Series B Preferred Stock issued June 12, 2006 to Vencore Solutions LLC.
4.10
Form of Stock Purchase Warrant to Purchase Common Stock issued in connection with November 12, 2004 Bridge Financing.
4.11
Stock Purchase Warrant to Purchase Common Stock issued February 24, 2005 to DNJ Leasing II, L.P.
4.12
Stock Purchase Warrant to Purchase Common Stock issued August 1, 2005 to DNJ Leasing II, L.P.
4.13
Amendment to Stock Purchase Warrants to Purchase Common Stock by and between IntelePeer, Inc. & DNJ Capital Partners II, LLC, dated October 23, 2010.
4.14
Warrant to Purchase Stock issued October 20, 2004 to Silicon Valley Bank.
4.15
Warrant to Purchase Stock issued December 3, 2004 to Silicon Valley Bank.
4.16
Warrant to Purchase Stock issued January 28, 2005 to Silicon Valley Bank.
4.17
Warrant to Purchase Shares of Series C Preferred Stock issued May 1, 2009 to Compass Horizon Funding Company LLC.
4.18
Warrant to Purchase Series C Preferred Stock issued May 14, 2009 to Atel Ventures, Inc.
4.19
Warrant Agreement by and between IntelePeer, Inc. and Hercules Technology II, L.P., dated May 5, 2010.
Table of Contents
Number
Description
4.20
Warrant Agreement by and between IntelePeer, Inc. and Comerica Bank, dated May 5, 2010.
5.1*
Opinion of DLA Piper LLP (US).
10.1†
2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the 2003 Stock Option and Restricted Stock Plan.
10.2†
Amended and Restated 2003 Stock Option and Restricted Stock Plan and Form of Stock Option Agreement under the Amended and Restated 2003 Stock Option and Restricted Stock Plan.
10.3†
2011 Equity Incentive Plan and Form of Stock Option Agreement, Form of Restricted Stock Units Agreement and Form of Restricted Stock Agreement under the 2011 Equity Incentive Plan.
10.4
Form of Indemnification Agreement to be entered into by and between IntelePeer, Inc. and each of its directors and executive officers.
10.5†
Amended and Restated Executive Employment Agreement with Frank Fawzi, dated May 6, 2011.
10.6†
Amended and Restated Executive Employment Agreement with Andre Simone, dated May 6, 2011.
10.7†
Amended and Restated Executive Employment Agreement with Haydar Haba, dated May 6, 2011.
10.8†
Offer Letter Agreement with John Belanger, dated December 10, 2003.
10.9†
Offer Letter Agreement with Phillip Bronsdon, dated August 21, 2007.
10.10†
Offer Letter Agreement with Raymond Smets, dated January 11, 2011.
10.11†
Offer Letter Agreement with Lawrence Irving, dated January 26, 2011.
10.12
Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated August 1, 2008.
10.13
First Amendment to Sublease Agreement between IntelePeer, Inc. and Con-way, Inc., dated April 12, 2011.
10.14
Commercial Lease Agreement between IntelePeer, Inc. and Garvin Partners, dated August 21, 2008.
10.15
Loan and Security Agreement among IntelePeer, Inc., Hercules Technology II, L.P. and Comerica Bank, dated May 5, 2010.
21.1
List of Subsidiaries.
23.1*
Consent of DLA Piper LLP (US) (included in Exhibit 5.1).
23.2
Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.
24.1
Power of Attorney (see signature page to this registration statement).
*
To
be filed by amendment.
†
Indicates
a management contract or any compensatory plan, contract, or arrangement.