**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-KSB**





**[X]**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**
              **For
                the fiscal year ended March 31,
                2007**





**[  ]**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**
              **For
                the transition period
                fromto**





Commission
      File Number: 000-32797





**IVI
      Communications, Inc.**


(Exact
      name of registrant as specified in its charter)




**Nevada**
              **33-0965560**(State
                  or other jurisdiction of
              (I.R.S.
                  Employer Identification No.)incorporation
                  or organization)**555
                  H St., Suite H , Eureka, CA**
              **95501**(Address
                  of principal executive offices)
              (Zip
                  Code)





**707-444-6617**


(Registrant's
      Telephone Number, Including Area Code)





Securities
      registered under Section 12(b) of the Act:




**Title
                  of Each Class**
              **Name
                  of Each Exchange on which****to
                  be so Registered:**
              **Each
                  Class is to be Registered:**None
              None





Securities
      registered under Section 12(g) of the Act:





**Common
      Stock, Par Value $.001**


(Title
      of
      Class)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


[X]  Yes  [
       ]  No










Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. [X]





Indicate
      by check mark whether registrant is a shell company (as defined in Rule 12b-2
      of
      the Exchange Act).


[
       ]  Yes  [X]  No





State
      issuer's revenues for its most recent fiscal year. $1,859,811.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in Rule
      12b-2 of the Exchange Act.) Approximately $703,976 based on the average bid
      and
      asked price on March 31, 2007.





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the last practicable date.


Shares
      outstanding as of March 31, 2007:


110,788,677
      shares of common stock, par value $.001


4,000,000
      shares of preferred class A stock, par value $.001


1,000,000
      shares of preferred class B stock, par value $.001







Transitional
      Small Business Disclosure format (check one):





[
       ]  Yes      [X]  No









**TABLE
      OF CONTENTS**




**PART
      1**





**Page**Item
              1
            Description
              of Business
            1Item
              2
            Description
              of Property
            4Item
                3
            Legal
              Proceedings
            5Item
              4
            Submission
              of Matters to a Vote of Security Holders
            5




**PART
      2**




Item
              5
            Market
              for Common Equity and Related Stockholder Matters
            6Item
              6
            Management’s
              Discussion and Analysis or Plan of Operation
            7Item
              7
            Financial
              Statements
            22Item
              8
            Changed
              in and Disagreements With Accountants on AccountingAnd
              Financial Disclosure
            23Item
              8A
            Internal
              Control over Financial Reporting
            23




**PART
      3**





Item
              9
            Directors,
              Executive Officers, Promoters and Control Persons
            23Item
              10
            Executive
              Compensation
            25Item
              11
            Security
              Ownership of Certain Beneficial Owners and Management
            26Item
              12
            Certain
              Relationships and Related Transactions
            26Item
              13
            Exhibits
            27Item
              14
            Principal
              Accountant Fees and Services
            28Signatures
            
            29Certifications
            
            attached










**PART
      1**





**Item
      1 Description of
      Business**





CORPORATE
      HISTORY





Internet
      Ventures, Inc., our wholly owned subsidiary, was incorporated in September
      1995. Its mission was to acquire and operate ISPs in Tier 3 markets and
      to
      rollout a hybrid broadband product that was delivered to the customer in
      partnership with local cable companies. Effective May 23, 2002, Internet Ventures,
      Inc. agreed to recapitalize with Turer Corporation by becoming a wholly
      owned subsidiary of Turer. To accommodate this recapitalization, the 12,350,000
      shares then outstanding of Internet Ventures, Inc. were exchanged for 12,350,000
      shares of Turer. In August 2002, Turer changed its name to IVI Communications,
      Inc. Because original Turer shareholders retained only five percent
      of the combined entity, the purchase was accounted for as a reverse merger.
      Turer was formed as a Nevada corporation on May 8, 2001.





On
      January 31, 2005, we completed the purchase of Internet Business Consulting,
      Inc. and AppState.Net, LLC from James R. Hollis by acquiring 100% of the stock
      of IBC and AppState.net. We paid one times annual revenue in a dollar-for-dollar
      stock exchange with our stock valued at $1.00 per share, plus $580,000 cash
      to
      be paid over two years.





Due
      to
      lack of funding we were unable to complete the cash payments for IBC and
      AppState. We have been unable to come to mutually acceptable terms to cure
      the
      default by the Company on the terms of the Purchase Agreement (“Agreement”)
      dated January 1, 2005 by and between IVI Communications, Inc. (“Buyer”),
      Internet Business Consulting, Inc. (“IBC”) and AppState.Net, LLC (“AppState”),
      jointly referred to as (“Sellers”). Sellers have exercised the remedies for
      default as provided in the Agreement and confirmed that the Remedies, which
      were
      that foreclosure and repossession occurred December 31, 2006, are in effect.
      “Seller Exercising Remedies” dated February 1, 2007, Exhibit 2.6, is
      incorporated by reference to the exhibits filed in the Company’s Form 8-K filed
      May 31, 2007.





Pursuant
      to those remedies, ownership of Sellers reverts to James Hollis, effective
      December 31, 2006.





Per
      the
      terms of the Agreement, Sellers will return 2,574,312 shares of IVI common
      stock.




On
      July 6, 2007 the stock was returned and
      cancelled.





On
      February 6, 2006 we entered into a Purchase Agreement and acquired 100% of
      the
      outstanding stock of Futura, Inc. from Francis and Lois Allen, the shareholders
      of Futura, Inc. Futura, Inc. is an operating subsidiary, and is an Internet
      Service Provider founded in 1995 in Cabot, Arkansas, that provides dialup and
      DSL broadband Internet access, and associated services such as Email spam and
      virus filtering, VoIP telephony, "Kid Safe" surfing (Parental Control), and
      web
      accelerator services, to communities surrounding Little Rock Arkansas including
      Cabot, Carlisle, Clarendon, DeValls Bluff, DeWitt, England, Hazen, Jacksonville,
      and Stuttgart.




On
      March
      28, 2007 we issued 2,500,000 shares of unregistered common stock valued at
      $25,000 to Francis Allen to pay the remainder of the agreed upon cash component
      of the purchase agreement between IVI Communications, Inc. and Futura, Inc.
      thus
      completing the purchase.





Futura
      currently operates a network operation center (NOC) located in the one of the
      tallest buildings in Little Rock that will serve as an excellent base of
      operations.





Futura,
      has completed the installation of three wireless broadband tower sites, serving
      Cabot (population 15,000) and Ward (population 2,580) and the rural households
      surrounding the local Country Club that brings Futura's total service area
      to
      150 square miles.





1




Our
      business plan is to:





o
            Acquire
                Positive Cash Flow ISP's for Recurring
                Revenue


o
            Preserve
                the Brand and Maintain Local
                Presence


o
            Consolidate
                to Achieve Economy of Scale


o
            Deploy
                Nationally Branded Fixed Wireless
                Broadband


o
            Migrate
                Dialup Customers to Broadband to Increase
                Revenue


o
            Deliver
                VoIP and Rich Media Content





Our
      objective is to be an ex-urban provider of highly focused broadband services
      for
      businesses, schools, libraries and residential consumers. Our products include
      high-speed broadband access that is comparable to DSL and cable-based broadband
      products and offerings that scale from 128 kbps (residential opportunities)
      to
      155 Mbps (OC3 equivalent) for customers with very large bandwidth needs. In
      addition to providing high-speed access, we will offer a complete suite of
      telecom products by serving as a full service Internet Service Provider (ISP),
      and providing toll grade (where applicable) voice over Internet protocol
      ("VoIP"), local and long distance services, and other aggregated value added
      services that management believes will improve our competitive
      position.





OUR
      STRATEGY





We
      are
      focused principally on acquiring dial-up ISP's and aggregating them into
      regional clusters primarily in tier III and tier IV markets. In addition to
      this
      "roll-up" strategy, we intend to develop a fixed wireless infrastructure that
      will be deployed in each independent market or "cluster". Management believes
      this will allow us to migrate our existing dial-up customer base to a broadband
      fixed wireless alternative that could increase the average revenue per unit
      ("ARPU"). The fundamental structure of this strategy is to "up-sell" or upgrade
      to a captive audience. We believe that this strategy will greatly impact our
      ability to garner immediate market share while improving our financial
      condition.




We
      intend
      to exploit what we believe is a competitive void in tier III & IV cities
      nationwide left by the collapse of many Competitive Local Exchange Companies
      ("CLECs") and the limited competition inherent with ex-urban and smaller
      markets. We believe that these markets hold valuable demographic pockets that
      are currently ignored by Incumbent Local Exchange Companies ("ILECs") In
      addition, management believes that the combination of the lack of CLECs,
      limited   DSL/cable competitors and poor service offered by the
      incumbent local exchange carriers suggest great opportunity for a new entrant
      that can offer a better product at a more competitive price.





We
      will
      seek to take full advantage of local brand loyalty by maintaining the local
      brand, the store-front, and sales staff.





We
      intend
      to market expanded and enhanced services to attract new customers:





o
            A
                fixed wireless broadband service will be
                launched;


o
            Customer
                support hours will be expanded to
                24/7;


o
            VOIP
                (Voice over IP) services will be
                offered;


o
            Enhanced
                filtering (Spam and Web).





We
      intend
      to generate economies of scale by consolidating the ISPs various operational
      functions:





o
            Centralize
                all administration (accounting, billing, collections, A/R and
                A/P);


o
            Outsource
                customer support (technical
                support);





2




FORCES
      OF
      CONVERGENCE




Management
      believes that the opportunity afforded to us is a result of the convergence
      of many forces simultaneously. Convergence means that voice, data, and video
      share the same format for transmission and ultimately share the same delivery
      mechanism for receipt. With convergence, management believes that each service
      provider must ultimately differentiate on performance rather than relying on
      branding, geographical boundaries or regulatory policies for success. With
      the
      transformation to an IP world, co-ax, twisted pair copper and wireless all
      become access methods for delivery of a wide variety of services. However,
      unlike co-ax and copper, wireless is portable and affords a number of other
      advantages.





We
      believe that our plan to utilize license exempt spectrum creates greater coverage
      potential and increases the size of the potential addressable market while
      only limiting expansion to what our management believes makes good financial
      and
      business sense. While the nature of wireless technology allows for the
      deployment of capital efficiently, it also allows us to only provide areas
      covering customers who we believe have the ability to pay. We believe that
      this
      selective method of customer acquisition combined with e-billing methods and
      credit card subscriptions, will allow us to limit bad debt, minimize traditional
      telecom back office expenses, while maximizing cash flow.




ACQUISITION
      COST




We
      anticipate an acquisition cost of $155 per subscriber. We have established
      a
      cash budget $15,500,000 for ISP acquisition.




FIXED
      WIRELESS STRATEGY




We
      believe that fixed wireless broadband is the most plausible alternative for
      hard-to-reach areas. We intend to deploy, market, and maintain a nationally
      branded fixed wireless broadband solution with newly acquired ISPs.





Fixed
      wireless systems use microwave frequencies allocated by the Federal Communications
      Commission ("FCC") to transmit signals over the air from a transmission
      tower to a microwave receiver installed at the subscriber's home or business.
      Because microwave signals are transmitted over the air, wireless Internet
      technology does not require the large networks of fiber optics, cables or copper
      wire that are required by local telephone or cable television companies. Thus,
      wireless technology has been developed as a reliable, yet relatively low cost,
      medium to provide services to subscribers in single family homes, multiple
      dwelling units and commercial properties.





Management
      believes that as more compelling content becomes available, the demand
      for and profitability of broadband services will increase dramatically. ISPs
      having a track record of success in broadband will not only retain customers
      by
      converting dialup to broadband but will gain new customers migrating from other
      dialup providers.





We
      intend
      to deploy, market, and maintain a nationally branded fixed wireless broadband
      solution with newly acquired ISPs.





OPERATIONAL
      SYNERGIES




Management
      believes that deploying a fixed wireless broadband product via the acquired
      ISPs offers a unique opportunity to re-purpose local assets during the
      assimilation process. As dialup customers are transitioned to the outsourced
      network, management believes that new wireless customers will be accessing
      the
      Internet on existing upstream circuits.





TECHNOLOGY
      ADVANCES




Other
      benefits to the forces of convergence impact the technology selection and
      strategy to utilize such technology. We propose to utilize equipment that will
      be compatible with the Institute of Electrical and Electronics Engineers ("IEEE")
      standard known as 802.16 - Worldwide Interoperability for Microwave Access
      -
      (often termed "WiMAX"). Standards-based equipment ensures that infrastructure
      costs will decrease similarly to the history of the cost efficiencies
      realized from the mass adoption of wireless products such as GSM or IEEE
      standard 802.11 a/b/g "WI-FI" based equipment. The promise of retail mass-market
      end user products reduces the expected cost of providing service over
      time
      while preserving the technical capabilities of the offering. WiMAX has wide
      support from companies such as Siemens, Alcatel, Motorola, Alvarion and Intel
      and is envisioned to be the fourth generation ("4G") evolution of wireless
      technology that offers broadband and voice, while maintaining portable features.
      The standards process is important in that it removes the reliance upon
      proprietary standards and their vendors and reduces the technology risks for
      the
      venture. The WiMAX standard addresses the security concerns of earlier WI-FI
      while allowing for multiple bands of frequencies to share the standard. With
      adoption of WiMAX, the possibility of software definable radios provides a
      path
      for rural subscribers to "roam" with broadband closer to reality.





3




Our
      business model follows what management believes to be a typical telecom investment
      cycle. Capital-intensive infrastructure investments early in the project
      support increasing subscriber growth and generate very strong revenue streams.
      Incremental capital for network capacity is largely supported by positive
      cash flow from these revenues. Significant footprint expansion follows similar
      investment cycles although infrastructure is increasingly funded by retained
      earnings and efficiencies gained in staffing, back-office systems, and core
      networks.





COMPETITION




In
      the
      past year, competitive conditions in the wireless industry have increased
      dramatically. Currently, our existing and potential competitors in the wireless
      arena consist of a broad range of companies engaged in the communications and
      entertainment businesses, including franchise cable operators, digital satellite
      program providers, competitive local exchange carriers ("CLECs") and regional
      bell operating companies ("RBOCs"). To date, we have sought to differentiate
      ourselves from our competitors through lower prices, streamlined pricing plans,
      service guarantees, high-quality customer service, system performance, and
      local
      community involvement and support. As the number of companies entering the
      industry increases, the impact of these differentiating factors begins to
      decrease. Many of the current digital satellite providers and cable companies
      are offering services similar to our services, but at comparable or lower
      monthly rates. Many of our existing or potential competitors have substantially
      greater name recognition and financial, technical and human resources than
      us
      and may be better equipped to develop and operate systems providing subscription
      television service. Our principal existing competitors are described
      below.





MARKETS




We
      intend
      to operate under a decentralized management structure in order to maximize
      our local presence in each market. To enhance our operating efficiency and
      maintain quality customer service, we intend to consolidate or "cluster"
      operations of systems by geographical areas. Most of our operational systems
      or
      system clusters will be managed by a regional manager. Each operating system
      will be staffed with customer service and sales representatives and service
      technicians. We intend to offer most of our non-executive employees incentive
      compensation programs that are tied to service quality levels and sales goals.
      Pricing and programming decisions will be made at the local level, subject
      to
      review by our executive management.





EQUIPMENT
      AND FACILITIES




Our
      wireless systems will utilize a diverse array of subscriber equipment based
      on
      many topographical considerations. We are not dependent upon any one supplier
      for its equipment.  We depend upon access provided by telephone
      companies where there is considerable Governmental regulation.





There
      has
      been no research and development.





The
      Company is not aware of any governmental regulations or approvals that would
      affect our business at the present time, nor any environmental laws that would
      affect the Company.





As
      of
      March 31, 2007 there are 3 corporate employees**.**




**Item
        2 Description of
        Property**
 
 The
        Company corporate, accounting and administrative offices are located at 555
        H
        Street, Suite H, Eureka, CA.  The Company has 1,104 square feet on a
        month-to-month lease at $1,222 per month.
 
 Operating
        facilities for our subsidiary , Futura, in Cabot, AR, are
        leased.





4




**Item
      3 Legal
      Proceedings**





At
      March
      31, 2006, The Company had two lawsuits outstanding, both of which were settled
      prior to March 31, 2007 as follows:





On
      December 1, 2004, a judgment was entered against Internet Ventures, Inc., the
      predecessor Company, in favor of Catherine and Joe Santistevan in the amount
      of
      $1,367,500.  On September 30, 2006 a confidential Settlement Agreement
      and Release was entered by and among Joe and Catherine Santistevan and
      IVI
      Communications, Inc., successor in interest defendant Internet Ventures, Inc.,
      to
      set aside the default judgment entered against Internet Ventures, Inc in
      the
      amount of $1,367,500.  Under the terms of the agreement IVI
      Communications will
      pay
      the Santistevans a total four hundred and fifty thousand dollars ($450,000),
      to settle a claim of $1,367,500.  If IVI Communications, Inc. defaults
      on the agreement a judgment would be entered by stipulation in the amount
      of
      $1,367,500.  The balance on this settlement at March 31, 2007 is
      $448,675.





On
      October 7, 2005, a Complaint for Damages was filed in Superior Court of the
      State of California, County of San Joaquin, Case No. CV027700, by Annette S.
      Paoletti as Successor Trustee of the Clare P. Evelyn B. McEnerney Family
      Trust.  No dollar amount was stated, but a note payable and accrued
      interest in the amount of $263,403 was recorded in notes payable and interest
      on
      notes payable.  On March 31, 2007 a confidential Settlement Agreement
      was reached between Paoletti and The Company.  Under the terms of the
      agreement IVI Communications, Inc. will pay the Paolettis a total of
      $110,000.  If IVI Communications, Inc. defaults on the agreement a
      judgment would be entered by stipulation in the amount of $143,000 minus any
      amounts actually paid.





The
      Company has six default judgments against it for a total amount of
      $146,504.  The amounts are recorded in other liabilities and
      contingencies.





On
      September 14, 2006, the Company was notified of a Demand for arbitration to
      obtain judgment on a settlement default of $28,000. The default of $28,000
      was
      settled for 280,000 shares of common stock.





The
      Company is currently negotiating settlements with vendors and debt holders
      for
      amounts currently outstanding. As of March  31, 2007, the Company has
      recognized the full liability for all amounts that are due.


On
        March
        31, 2007, on advice of legal counsel, the Company realized income in the
        amount
        of $1,504,441 for the forgiveness of debt for notes, debentures and vendor
        payables.




**Item
        4 Submission of Matters
        to a Vote of Security Holders**
 
 None.


5




**PART
      2**




**Item
      5 Market
      for Common Equity and Related Stockholder Matters**





Our
      common stock has been quoted on the Pink Sheets under the symbol IVCMPK and
      moved to the OTC Bulletin Board under the symbol "IVCM.OB" on September 8,
      2005.
      The following table shows the reported high and low closing bid quotations
      per
      share for our common stock based on information provided by the OTC Bulletin
      Board. Particularly since our common stock is traded infrequently, such
      over-the-counter market quotations reflect inter-dealer prices, without markup,
      markdown or commissions and may not necessarily represent actual transactions
      or
      a liquid trading market.




**Year
                  Ended March 31, 2007**
              **High**
              **Low**First
                  Quarter ended June 30, 2006
              $0.13
              $0.045Second
                  Quarter ended September 30, 2006
              $0.055
              $0.035Third
                  Quarter ended December 31, 2006
              $0.040
              $0.014Fourth
                  Quarter ended March 31, 2007
              $0.038
              $0.0075
 
 **Year
                  ended March 31, 2006**
              **High**
              **Low**First
                  Quarter ended June 30, 2005
              $0.14
              $0.05Second
                  Quarter ended September 30, 2005
              $0.55
              $0.05Third
                  Quarter ended December 31, 2005
              $0.603
              $0.22Fourth
                  Quarter ended March 31, 2006
              $0.24
              $0.105




Stockholders





As
      of
      March 31, 2007, we believe there were approximately 795 holders of record of
      our
      common stock.





Dividends





We
      have
      never declared or paid cash dividends on our common stock. We currently intend
      to retain all available funds and any future earnings to fund the development
      and growth of our business and do not anticipate declaring or paying any cash
      dividends on our common stock in the foreseeable future.





Recent
      Issuances of Securities without registering under the Securities
      Act.




In
      the
      fiscal year ending March 31, 2007, we issued the following:




On
        August
        8, 2006, the Company issued 14,764,413 unregistered shares of common stock
        to
        Big Apple Consulting for consulting services. Exhibit 10.29 is incorporated
        by
        reference to the exhibits filed in the Company’s Form 8-K filed September 15,
        2006.
 
 On
        October 10, 2006 we issued 280,000 shares of unregistered common stock valued
        at
        $11,200 in settlement of an outstanding judgment.
 
 On
        November 2, 2006 we issued an aggregate of 1,200,000 shares of unregistered
        common stock to consultants as compensation for services valued at
        $61,000.


6





On
      December 19, 2006 we issued 309,917 shares of unregistered common stock valued
      at $7,500 for public relations services.





On
      January 29, 2007 we issued 3,500,000 shares of unregistered common stock to
      a
      consultant as compensation for services valued at $157,500.





On
      March
      28, 2007 we issued 2,500,000 shares of unregistered common stock valued at
      $25,000 to Francis Allen to pay the remainder of the agreed upon cash component
      of the purchase agreement between IVI Communications, Inc. and Futura, Inc.
      thus
      completing the purchase





Each
      of
      the above issuances of common stock were exempt from registration pursuant
      to
      Section 4(2) of the Securities Act of 1933.




**Item
      6 Management’s
      Discussion and Analysis or Plan of Operation**





Overview





The
      following discussion should be read in conjunction with our consolidated financial
      statements and notes to those statements. In addition to historical information,
      the following discussion and other parts of this annual report contain
      forward-looking information that involves risks and uncertainties.





OVERVIEW





We
      are an
      ISP Management Company. We intend to acquire, consolidate and operate
      locally branded ISPs offering state of the art dialup and nationally branded
      wireless Internet access to residential and business customers. Management
      believes that local ISPs are hampered in their ability to provide the highest
      quality services and achieve profitability because they lack buying power.
      Through consolidation, economies of scale are achieved and profit can be
      maximized. We intend to deploy, market, and maintain a nationally branded fixed
      wireless broadband solution with newly acquired ISPs in tier 3
      markets.





We
      currently operate one subsidiary, Futura, Inc.





On
      February 6, 2006 we entered into a Purchase Agreement to acquire 100% of the
      outstanding stock of Futura, Inc. from Francis and Lois Allen, the shareholders
      of Futura, Inc. In consideration for the Futura stock, we paid to the Allens
      $150,000 in cash (to be paid over a 10-month period) and $550,000 in shares
      of
      the Company's restricted common stock (an aggregate of 2,813,299 shares
      calculated as of the close of the transaction). Futura is an Internet Service
      Provider that provides dialup and DSL broadband Internet access, and associated
      services such as Email spam and virus filtering, VoIP telephony, "Kid Safe"
      surfing (Parental Control), and web accelerator services, to communities
      surrounding Little Rock Arkansas including Cabot, Carlisle, Clarendon, DeValls
      Bluff, DeWitt, England, Hazen, Jacksonville, and Stuttgart.




The
        Company expects operating losses and negative operating cash flows to continue
        for at least the next twelve months, because of expected additional costs
        and
        expenses related to brand development; marketing and other promotional
        activities; strategic relationship development; and potential acquisitions
        of
        related complementary businesses.
 
 Liquidity
        and Capital Resources
 
 As
        of
        March 31, 2007 the Company has an accumulated operating deficit of $25,331,368
        and negative stockholders' equity of $2,230,981.
 
 The
        Company’s principal source of operating capital has been provided by the sale of
        its stock and securities, corporate consulting services, and operations of
        its
        wholly owned subsidiaries.





7




On
      March
      27, 2006, the Company entered into a securities purchase agreement with Cornell
      Capital Partners L.P. providing for the sale by the Company to Cornell of our
      12% secured convertible debentures in the aggregate principal amount of $600,000
      of which $200,000 was advanced immediately. The second installment of $200,000
      was advanced on April 18, 2006 upon the filing of the SB2 Registration
      Statement. The last installment of $200,000 was advanced August 21, 2006, two
      (2) business days after the registration statement was declared
      effective.




The
      Convertible Debentures mature on the third anniversary of the date of issuance
      and the Company is not required to make any payments until the maturity date.
      Holders of the Debentures may convert at any time amounts outstanding under
      the
      debentures into shares of our common stock at a conversion price per share
      equal
      to the lower of (i) $0.20 or (ii) ninety percent (90%) of the lowest closing
      Bid
      Price of the Common Stock during the thirty (30) trading days immediately
      preceding the conversion date as quoted by Bloomberg, LP. Cornell has agreed
      not
      to short any of the shares of Common Stock. The Company has the right to redeem
      a portion or all amounts outstanding under the debenture prior to the maturity
      date at a 20% redemption premium provided that the closing bid price of our
      common stock is less than $0.20.





A
      holder
      of the Convertible Debenture may not convert or receive shares as payment of
      interest to the extent such conversion or receipt of such interest payment
      would
      result in the holder, together with any affiliate of the holder, beneficially
      owning in excess of 4.99% of the then issued and outstanding shares of Common
      Stock, including shares issuable upon conversion of, and payment of
      interest.




On
      August
      22, 2006, the debenture holder converted $5,000 of principal for 158,730 shares
      of common stock; the conversion price was $.0315, 90% of the lowest closing
      bid
      price of $.035 during the prior 30 days.





On
      September 21, 2006, the debenture holder converted $10,000 of principal for
      336,700 shares of common stock; the conversion price was $.0297, 90% of the
      lowest closing bid price of  $.033 during the prior 30
      days.





On
      October 17, 2006, the debenture holder converted $10,000 of principal for
      444,444 shares of common stock; the conversion price was $.0225, 90% of the
      lowest closing bid price of $.025 during the prior 30 days.





On
      November 9, 2006, the debenture holder converted $20,000 of principal for
      1,388,889 shares of common stock; the conversion price was $.0144, 90% of the
      lowest closing bid price of $.016 during the prior 30 days.





On
      December 20, 2006, the debenture holder converted $20,000 of principal for
      1,481,481 shares of common stock; the conversion price was $.0135, 90% of the
      lowest closing bid price of $.015 during the prior 30 days.





On
      January 23, 2007, the debenture holder converted $25,000 of principal for
      2,314,815 shares of common stock; the conversion price was $.0108, 90% of the
      lowest closing bid price of $.012 during the prior 30 days.





On
      February 9, 2007, the debenture holder converted $20,000 of principal for
      2,222,222 shares of common stock; the conversion price was $.009, 90% of the
      lowest closing bid price of $.01 during the prior 30 days.





On
      March
      1, 2007, the debenture holder converted $20,000 of principal for 2,222,222
      shares of common stock; the conversion price was $.009, 90% of the lowest
      closing bid price of $.01 during the prior 30 days.





On
      March
      27, 2007, the debenture holder converted $20,000 of principal for 2,469,136
      shares of common stock; the conversion price was $.0081, 90% of the lowest
      closing bid price of $.009 during the prior 30 days.





8




Beneficial
      interest of $47,205 was recognized on the conversions in the year ending March
      31, 2007.




The
      Company also issued to Cornell five-year warrants to purchase 2,000,000 and
      1,500,000 shares of Common Stock at prices of $0.30, and $0.40, respectively.
      If
      at the time of exercise of the Warrants, the shares of Common Stock underlying
      the Warrant are not subject to an effective registration statement under the
      Securities Act of 1933, as amended (the "Act") or if an event of default under
      the Convertible Debentures has occurred, which is not cured in any applicable
      cure period, the holder of the Warrant, in lieu of making payment of the
      Exercise Price in cash, may elect a cashless exercise in accordance with the
      formula set forth in the Warrant.If, subject to the exceptions set forth in
      the
      warrants, during the time that the Warrants are outstanding, the Company issues
      or sells, or is deemed to have issued or sold, any shares of Common Stock for
      a
      consideration per share less than a price equal to the then exercise price,
      then
      the exercise price will be reduced to an amount equal to such consideration
      per
      share. Upon each such adjustment, the number of shares of Common Stock issuable
      upon exercise of the Warrants will be adjusted to the number of shares
      determined by multiplying the exercise price in effect immediately prior to
      such
      adjustment by the number of shares issuable upon exercise of the warrants
      immediately prior to such adjustment and dividing the product by the exercise
      price resulting from such adjustment. Similar adjustments will be made upon
      any
      issuance or sale by us of options to purchase Common Stock or convertible
      securities.




On
      August
      8, 2006 the company issued stock at a market price of $.04.  This
      increased the number of warrants from 3,500,000 to 30,000,000 at $.04 exercise
      price.




On
      December 29, 2006 the company issued stock at a market price of
      $.0242.  This increased the number of warrants from 30,000,000 to
      49,586,777 at $.0242 exercise price.




On
      January 17, 2007, by Board Resolution, the exercise price on the warrants was
      reduced to $.0085, resulting in an increase in the number of warrant shares
      to
      141,176,471.




On
      February 22, 2007, Cornell exercised 3,500,000 warrants at a price of $.0085
      for
      $29,750.  Beneficial interest of $12,250 was recoginzed.





In
      connection with the Purchase Agreement, the Company also entered into a
      registration rights agreement with Cornell providing for the registration of
      the
      shares of common stock issuable upon conversion of the debentures and exercise
      of the warrants. The Company is obligated to use its best efforts to cause
      the
      registration statement to be declared effective no later than July 25, 2006
      and
      to insure that the registration statement remains in effect until all of the
      shares of common stock issuable upon conversion of the debentures and exercise
      of the warrants have been sold. In the event of a default of the Company’s
      obligations under the registration rights agreement, including its agreement
      to
      file the registration statement no later than May 11, 2006, or if the
      registration statement is not declared effective by July 25, 2006, the Company
      is required to pay to Cornell, as liquidated damages, for each month that the
      registration statement has not been filed or declared effective, as the case
      may
      be, either a cash amount or shares of its common stock equal to 2% of the
      liquidated value of the Debentures.





The
      registration statement was declared effective on August 14, 2006.





The
      Company’s obligations under the purchase agreement are secured by substantially
      all of its assets and the assets of its subsidiaries. As further security for
      its obligations thereunder, Nyhl Henson, Former Chief Executive Officer, and
      Charles Roodenburg, Chief Executive Officer, have granted a security
      interest in an aggregate of 925,000 shares of their common stock and 3,300,000
      shares of their Series A Preferred Stock. The Company also granted a security
      interest in 15,000,000 shares of its stock, issued from treasury.





On
      July
      14, 2006, the Company entered into an agreement with Cornell Capital Partners
      to
      cancel the security interest in the 15,000,000 shares. These shares were
      subsequently returned and cancelled.





9




In
      May
      2006 the company borrowed $5,000 on a one year note due May 22,
      2007.  This note carries no interest.





The
      Company sold a security for $12,500 to one entity in September
      2006.  This debenture carries no interest and has a conversion rate of
      50% discount to market of the ten day average closing bid price.





The
      Company sold a security for $12,500 to one entity in October
      2006.  This debenture carries no interest and has a conversion rate of
      50% discount to market of the ten day average closing bid price.





In
      December 2006 the company borrowed $4,000 on a one year note due December 22,
      2007.  This note carries no interest.





In
      January 2007 the company borrowed $6,756 from Nyhl Henson, President, on a
      one
      year note due January 19, 2008.   This note carries no interest
      and is convertible at the previous 10-day average closing price.





In
      January 2007 the company borrowed $3,243 from Charles Roodenburg, CFO, on a
      one
      year note due January 19, 2008.  This note carries no interest and is
      convertible at the previous 10-day average closing price.





In
      February 2007 the company borrowed $20,000 from Nyhl Henson, President, on
      a
      note due on demand.  The note carries no interest and is convertible
      at the previous 10-day average closing price.





In
      February 2007 the company borrowed $25,000 from Nyhl Henson, President, on
      a
      note due on demand.  The note carries no interest and is convertible
      at the previous 10-day average closing price.





The
      Company anticipates expenditures for acquisitions in excess of $1,000,000 to
      expand its operation during the next twelve months. The Company believes that
      the current cash flows generated from its revenues will not be sufficient to
      fund the anticipated expansion of operations. The Company will require
      additional funding to finance its operations through private sales and public
      debt or equity offerings. However, there is no assurance that the Company can
      obtain such financing. Recurring revenues are anticipated from ISP management
      services but no management service contracts have been executed at this time.
      There can be no assurance that the Company will secure these
      contracts.




Results
        of Operations- Twelve Months Ended March 31, 2007 and 2006
 
 Revenue
        for the year ending March 31, 2007 was $1,859,811 compared to $2,681,373
        for the
        year ending March 31, 2006.  The revenue for the year ending March 31,
        2007 included nine months only of IBC and AppState, while the revenue for
        the
        year ending March 31, 2006 included twelve months of IBC and AppState.net
        and
        only 53 days of Futura, Inc. which was acquired February 6, 2006.  The
        revenue for the year ending March 31, 2007 included $89,400 in corporate
        consulting and management services; $3,410 in corporate rental income; $11,371
        in operations consulting services; $1,063,096 in operations equipment sales;
        $692,034 in internet services; and $500 for other services provided by the
        operations.
 
 Cost
        of
        operations for the year ending March 31, 2007 was $1,200,215 compared to
        $1,798,869 for the year ending March 31, 2006.  The reduction in cost
        of operations is due to the loss of the IBC and AppState.net operations December
        31, 2006.




10




General
        and administrative expenses for the year ending March 31, 2007 were $2,028,031
        compared to $3,396,181 for the year ending March 31, 2006.  The
        largest components of general and administrative for the year ending March
        31,
        2007, were corporate and operations compensation of $862,448, and consulting
        services of $667,414, of which $654,169 was paid in common stock. The
        consultants were engaged to assist the Company to obtain new business, provide
        introductions to suitable merger and acquisition candidates, and facilitate
        introductions to various Investment Bankers, Broker Dealer Organizations,
        Exchanges’ and Registered Associations’ market participants, Brokerage Firms,
        Financial institutions, and Money Managers.
 
 There
        was
        a loss on settlement of a contract for the year ending March 31, 2007 in
        the
        amount of $553,643.  We have been unable to come to mutually
        acceptable terms to cure the default by the Company on the terms of the Purchase
        Agreement (“Agreement”) dated January 1, 2005 by and between IVI Communications,
        Inc. (“Buyer”), Internet Business Consulting, Inc. (“IBC”) and AppState.Net, LLC
        (“AppState”), jointly referred to as (“Sellers”).  Sellers have
        exercised the remedies for default as provided in the Agreement and confirmed
        that the Remedies, which were that foreclosure and repossession occurred
        December 31, 2006, are in effect.  Pursuant to those remedies,
        ownership of Sellers reverts to James Hollis, effective December 31,
        2006.
 
 Selling
        expenses for year ending March 31, 2007 were $14,671 compared to $324,777
        for
        the year ending March 31, 2006. $318,668 of selling expenses in the year
        ending
        March 31, 2006 was public relations expense, and no public relations expense
        was
        recorded in the fiscal year ending March 31, 2007.
 
 Depreciation
        and amortization expense for the year ending March 31, 2007 was $186,026
        compared to $21,624 for the year ending March 31, 2006.  Depreciation
        on equipment in the subsidiaries was $42,358, and $143,668 was amortization
        of
        the Cornell Capital Partners debenture.
 
 Interest
        expense for the year ending March 31, 2007 was $604,600 compared to $530,348
        for
        the year ending March 31, 2006.  The largest components of interest
        for the year ending March 31, 2007 were corporate with convertible debenture
        interest of $149,104, promissory note interest of $112,898, and beneficial
        interest of $342,472 on debenture conversions.
 
 Other
        income for the year ending March 31, 2007 was $1,035,742 compared to $167,104
        for the year ending March 31, 2006. For the year ending March 31, 2007 Other
        income was realized from a $986,524 litigation settlement, and $49,218 in
        various smaller settlements of debt.
 
 Forgiveness
        of debt for the year ending March 31, 2007 was $1,657,853 compared to $0
        for the
        year ending March 31, 2006.  This debt included $1,504,441
        of notes, debentures and vendor payables that was discharged on advice of
        legal counsel, and $153,402 was a debt settlement.
 
 The
        Company had a gain on the revaluation of derivatives of $390,794 for the
        year
        ending March 31, 2007 compared to $0 for the year ending March 31,
        2006.
 
 The
        Company had miscellaneous other expenses of $43,905 for the year ending March
        31, 2007 compared to $0 for the year ending March 31, 2006.
 
 The
        Company had interest income of $174 for the year ending March 31, 2007 compared
        to $0 for the year ending March 31, 2006.
 
 The
        Company had a net profit for the year ending March 31, 2007 of $313,283 compared
        to a loss of $4,158,104 for the year ending March 31, 2006.  The loss
        per share was ($0.00) and ($0.07)in the fiscal years ended March 31,2007
        and
        2006 respectively.  The Company expects the trend of losses to
        continue through the next fiscal year.




Critical
        Accounting Policies
  Revenue
        Recognition
 
 The
        Company recognizes revenues in accordance to Staff Accounting Bulletin No.
        101,
        "Revenue Recognition in Financial Statements."


11





New
      Accounting Pronouncements





On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
      Statement of Financial Accounting Standards No. 123 (Revised 2004),
“*Share-Based Payment*” (“SFAS 123R”).  SFAS 123R requires that
      compensation cost related to share-based payment transactions be recognized
      in
      the financial statements. Share-based payment transactions within the scope
      of
      SFAS 123R include stock options, restricted stock plans, performance-based
      awards, stock appreciation rights, and employee share purchase
      plans.  The provisions of SFAS 123R, as amended, are effective for
      small business issuers beginning as of the next fiscal year after December
      15,
      2005.  Accordingly, the Company will implement the revised standard in
      the first quarter of fiscal year 2007.  Currently, the Company
      accounts for its share-based payment transactions under the provisions of APB
      25, which does not necessarily require the recognition of compensation cost
      in
      the financial statements (note 3(e)).  The implementation of this
      standard did not have a material impact on its financial position, results
      of
      operations or cash flows.





In
      November 2004, the FASB issued Financial Accounting Standards No. 151 (FAS
      151),
“*Inventory Costs – an amendment of ARB No. 43, Chapter
      4*”.  FAS 151 clarifies the accounting for abnormal amounts of
      idle facility expense, freight, handling costs and spoilage.  In
      addition, FAS 151 requires companies to base the allocation of fixed production
      overhead to the costs of conversion on the normal capacity of production
      facilities.  FAS 151 is effective for the Company in
      2006.  The Company does not expect FAS 151 to have a material impact
      on its results or financial statements.





On
      December 16, 2004, the Financial Accounting Standards Board ("FASB") published
      FAS No. 123 (Revised 2004), Share-Based Payment ("FAS 123R").  FAS
      123R requires that compensation cost related to share-based payment transactions
      be recognized in the financial statements.  Share-based payment
      transactions within the scope of FAS 123R include stock options, restricted
      stock plans, performance-based awards, stock appreciation rights, and employee
      share purchase plans.  The provisions of FAS 123R are effective for
      small business issuers as of the first interim period that begins after December
      15, 2005.  The implementation of this standard did not have a material
      impact on its financial position, results of operations or cash
      flows.





On
      December 16, 2004, FASB issued Financial Accounting Standards No. 153, Exchanges
      of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for
      Non-monetary Transactions ("FAS 153").  This statement amends APB
      Opinion 29 to eliminate the exception for non-monetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      non-monetary assets that do not have commercial substance.  Under FAS
      153, if a non-monetary exchange of similar productive assets meets a
      commercial-substance criterion and fair value is determinable, the transaction
      must be accounted for at fair value resulting in recognition of any gain or
      loss.  FAS153 is effective for non-monetary transactions in fiscal
      periods that begin after June 15, 2005.  The implementation of this
      standard did not have a material impact on its financial position, results
      of
      operations or cash flows.




In
      March
      2005, the FASB issued Statement of Financial Accounting Standards Interpretation
      Number 47 (“FIN 47”), “Accounting for Conditional Asset Retirement
      Obligations.”  FIN 47 provides clarification regarding the meaning of
      the term “conditional asset retirement obligation” as used in FAS 143,
“Accounting for Asset Retirement Obligations.”  FIN 47 is effective
      for the year ended December 31, 2005.  The implementation of this
      standard did not have a material impact on its financial position, results
      of
      operations or cash flows.




12





In
      May
      2005, the FASB issued SFAS 154, “Accounting for Changes and Error Corrections—a
      replacement of APB Opinion No. 20 and FASB Statement
      No. 3.”  FAS 154 changes the requirements with regard to the
      accounting for and reporting a change in an accounting principle.  The
      provisions of FAS 154 require, unless impracticable, retrospective application
      to prior periods presented in financial statements for all voluntary changes
      in
      an accounting principle and changes required by the adoption of a new accounting
      pronouncement in the unusual instance that the new pronouncement does not
      indicate a specific transition method.  FAS 154 also requires that a
      change in depreciation, amortization or depletion method for long-lived,
      non-financial assets be accounted for as a change in an accounting estimate,
      which requires prospective application of the new method.  FAS 154 is
      effective for all changes in an accounting principle made in fiscal years
      beginning after December 15, 2005.  The Company plans to adopt
      FAS 154 beginning January 1, 2006.  Because SAS 154 is directly
      dependent upon future events, the Company cannot determine what effect, if
      any,
      the expected adoption of FAS 154 will have on its financial condition, results
      of operations or cash flows.





In
      February 2006, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards (FAS) No. 155, Accounting
      for


Certain
      Hybrid Financial Instruments.  FAS No. 155 replaces FAS
      No. 133 Accounting for Derivative Instruments and Hedging Activities, and
      FAS No. 140 Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities.  FAS No. 155 resolves issues
      addressed in Statement 133 Implementation Issue No. D1, “Application of
      Statement 133 to Beneficial Interests in Securitized Financial Assets” This
      statement will be effective for all financial instruments acquired or issued
      after the beginning of an entity’s fiscal year that begins after
      September 15, 2006. The Company is currently analyzing whether this new
      standard will have impact on its financial position and results of
      operations.





In
      September 2006, the FASB issued SFAS No. 157 “Fair Value
      Measurements,” which provides a definition of fair value, establishes a
      framework for measuring fair value and requires expanded disclosures about
      fair
      value measurements. SFAS No. 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007 and interim
      periods within those fiscal years. The provisions of SFAS No. 157
      should be applied prospectively. The Company is currently analyzing whether
      this
      new standard will have impact on its financial position and results of
      operations.




In
      September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting
      for Defined Benefit Pension and Other Postretirement Plans”, which amends
      SFAS No. 87 “Employers’ Accounting for Pensions”
(SFAS No. 87), SFAS No. 88 “Employers’ Accounting for
      Settlements and Curtailments of Defined Benefit Pension Plans and for
      Termination Benefits” (SFAS No. 88), SFAS No. 106
“Employers’ Accounting for Postretirement Benefits Other Than Pensions”
(SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures
      about Pensions and Other Postretirement Benefits (revised 2003)”
(SFAS No. 132R). This Statement requires companies to recognize an
      asset or liability for the overfunded or underfunded status of their benefit
      plans in their financial statements. SFAS No. 158 also requires the
      measurement date for plan assets and liabilities to coincide with the sponsor’s
      year end. The standard provides two transition alternatives related to the
      change in measurement date provisions. The recognition of an asset and liability
      related to the funded status provision is effective for fiscal year ending
      after
      December 15, 2006 and the change in measurement date provisions is
      effective for fiscal years ending after December 15, 2008 The
      implementation of this standard did not have a material impact on its financial
      position, results of operations or cash flows.




13




Inflation





In
      our
      opinion, inflation has not had a material effect on our operations.





Risk
      Factors and Cautionary Statements





Forward-looking
      statements in this report are made pursuant to the "safe harbor" provisions
      of
      the Private Securities Litigation Reform Act of 1995. The Company wishes to
      advise readers that actual results may differ substantially from such
      forward-looking statements. Forward-looking statements involve risks and
      uncertainties that could cause actual results to differ materially from those
      expressed in or implied by the statements, including, but not limited to, the
      following: our ability to meet our cash and working capital needs, our ability
      to successfully market our product, and other risks detailed in our periodic
      report filings with the Securities and Exchange Commission.





WE
      HAVE A
      HISTORY OF LOSSES, EXPECT CONTINUING LOSSES AND MAY NEVER ACHIEVE
      PROFITABILITY





For
      the
      years ended March 31, 2007 and 2006, we generated revenues of $1,859,811 and
      $2,681,373 respectively and incurred consolidated net
      profit in the year ending March 31, 2007 of $313,283 and net loss in the year
      ending March 31, 2006 of $4,158,104 .
      We
      cannot assure you that we can achieve or sustain profitability on a quarterly
      or
      annual basis in the future. Our operations are subject to the risks and
      competition inherent in the establishment of a business enterprise.




There
      can
      be no assurance that future operations will be profitable. Revenues and profits,
      if any, will depend upon various factors, including whether our services will
      achieve market acceptance. We may not achieve our business objectives and the
      failure to achieve such goals would have an adverse impact on us. These matters
      raise substantial doubt about our ability to continue as a going
      concern.




OUR
      AUDITORS HAVE INCLUDED A GOING CONCERN MODIFICATION IN THEIR
      OPINION





Our
      auditors have modified their opinion to our financial statements because of
      concerns about our ability to continue as a going concern. These concerns arise
      from the fact that we have sustained operating losses for the years ending
      March
      31, 2007 and 2006 and have sustained large capital deficits and have been unable
      to come to mutually acceptable terms to cure the default by the Company on
      the
      terms of the Purchase Agreement (“Agreement”) dated January 1, 2005 by and
      between IVI Communications, Inc. (“Buyer”), Internet Business Consulting, Inc.
      (“IBC”) and AppState.Net, LLC (“AppState”), jointly referred to as (“Sellers”).
      Sellers have exercised the remedies for default as provided in the Agreement
      and
      confirmed that the Remedies, which were that foreclosure and repossession
      occurred December 31, 2006, are in effect. Purchase Agreement, Exhibit 2.4,
      is
      incorporated by reference to the exhibits filed in the Company’s Form 8-K filed
      February 4, 2005.





Pursuant
      to those remedies, ownership of Sellers reverts to James Hollis, effective
      December 31, 2006.





Per
      the
      terms of the Agreement, Sellers will return 2,574,312 shares of IVI common
      stock.  This has been classified as Stock Receivable in the Equity section
      of the Balance Sheet.




The
      stock was returned and cancelled on July 6,
      2007.




In
      addition there has been no formal settlement
      agreement signed by all parties.





Our
      future success is dependent upon our ability to achieve profitable operations
      and generate cash from operating activities, and upon additional established
      an
      ongoing source of revenues sufficient to cover our operating costs and that
      we
      must raise additional capital in order to continue to operate our business.
      If
      we are unable to continue as a going concern, you could lose your entire
      investment in us.





14




WE
      MAY
      NEED TO RAISE ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE
      TERMS OR AT ALL





On
      March
      27, 2006, the Company entered into a securities purchase agreement with Cornell
      Capital Partners L.P. providing for the sale by the Company to Cornell of our
      12% secured convertible debentures in the aggregate principal amount of $600,000
      of which $200,000 was advanced immediately. The second installment of $200,000
      was advanced on April 18, 2006. The last installment of $200,000 was advanced
      on
      August 16, two (2) business days after the date the registration statement
      was
      declared effective.




In
      addition the Company received $75,000 in funds from
      outside sources and recorded them as debentures.





The
      Convertible Debentures mature on the third anniversary of the date of issuance
      and the Company is not required to make any payments until the maturity date.
      Holders of the Debentures may convert at any time amounts outstanding under
      the
      debentures into shares of our common stock at a conversion price per share
      equal
      to the lower of (i) $0.20 or (ii) ninety percent (90%) of the lowest closing
      Bid
      Price of the Common Stock during the thirty (30) trading days immediately
      preceding the conversion date as quoted by Bloomberg, LP. Cornell has agreed
      not
      to short any of the shares of Common Stock. The Company has the right to redeem
      a portion or all amounts outstanding under the debenture prior to the maturity
      date at a 20% redemption premium provided that the closing bid price of our
      common stock is less than $0.20.




In
      the
      future, we may be required to raise additional funds, particularly if are unable
      to generate positive cash flow as a result of our operations and are required
      to
      repay the convertible debentures as a result of Cornell Capital's failure to
      convert the debentures into common stock. There can be no assurance that
      financing will be available in amounts or on terms acceptable to us, if at
      all.
      The inability to obtain additional capital may reduce our ability to continue
      to
      conduct business operations. If we are unable to obtain additional financing,
      we
      will likely be required to curtail our wireless network deployment plans. Any
      additional equity financing may involve substantial dilution to our then
      existing shareholders.





WE
      MAY
      NOT BE SUCCESSFUL IN INTEGRATING THE MANAGEMENT TEAM OF FUTURA, INC., WHICH
      COULD ADVERSELY AFFECT THE LEADERSHIP OF OUR COMPANY, DIVERT MANAGEMENT TIME
      AND
      ADVERSELY AFFECT THE BUSINESS AND RESULTS OF OPERATIONS.





Failure
      to successfully integrate the management team of Futura could
      divert management time and resources, which would adversely affect our
      operations.





Our
      future success also depends on our ability to identify, attract, hire, retain
      and motivate other well-qualified managerial, technical, sales and marketing
      personnel. There can be no assurance that these professionals will be available
      in the market or that we will be able to meet their compensation
      requirements.





We
      intend
      to pursue additional acquisitions to further the development of our Internet
      services business. Our strategy is unproven and the revenue and income potential
      from our strategy is unproven. We will encounter risks and difficulties
      frequently encountered by early-stage companies in new and rapidly changing
      markets, including the risks described elsewhere in this section. Our business
      strategy may not be successful and we may not be able to successfully address
      these risks.





OUR
      BUSINESS REVENUE GENERATION MODEL IS UNPROVEN AND COULD FAIL





Our
      revenue model is new and evolving, and we cannot be certain that it will be
      successful. Our ability to generate revenue depends, among other things, on
      our
      ability to provide quality internet connectivity and services to our customers.
      Our success is largely dependent upon our ability to successfully integrate
      and
      manage our acquisitions. Accordingly, we cannot assure you that our business
      model will be successful or that we can sustain revenue growth or achieve or
      sustain profitability.





IF
      WE ARE
      NOT ABLE TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE INTERNET SERVICE
      PROVIDER AND WIRELESS COMMUNICATIONS INDUSTRIES WE MAY BE FORCED TO REDUCE
      OR
      CEASE OPERATIONS.





Our
      ability to compete effectively with our competitors depends on the following
      factors, among others:





15




the
                performance of our products, services and technology in a manner
                that
                meets customer expectations;




the
                success of our efforts to develop effective channels
                of




distribution
                for our products;




our
                ability to price our products that are of a quality and at a price
                point
                that is competitive with similar or comparable products offered by
                our
                competitors;




general
                conditions in the wireless communications and internet
                industries;




the
                success of our efforts to develop, improve and satisfactorily address
                any
                issues relating to our technology;




our
                ability to effectively compete with companies that have substantially
                greater market presence and financial, technical, marketing and other
                resources than the Company including (i) local ISPs, (ii) national
                and
                regional ISPs, (iii) established online services; (iv) nonprofit
                or
                educational ISPs; (v) national telecommunications companies; (vi)
                Regional
                Bell Operating Companies ("RBOCs"); (vii) competitive local exchange
                carriers; and (viii)cable operators; and our ability to adapt to
                the
                consolidation of existing ISPs with or into larger entities, or entry
                of
                new entities into the Internet services market, would likely result
                in
                greater competition for the
                Company.




CONSOLIDATIONS
      IN THE INDUSTRIES IN WHICH WE COMPETE COULD ADVERSELY AFFECT OUR BUSINESSES
      TO
      INCLUDE A REDUCTION OR ELIMINATION OF OUR PROPORTIONATE SHARE OF THOSE
      MARKETS





The
      wireless communications industry has experienced consolidation of participants,
      and this trend may continue. If wireless carriers consolidate with companies
      that utilize technologies that are similar to or compete with our wireless
      technology, our proportionate share of the emerging market for wireless
      technologies may be reduced or eliminated. This reduction or elimination of
      our
      market share could reduce our ability to obtain profitable operations and could
      cause us to reduce or cease operations. We believe that our ability to compete
      successfully in the Internet services market depends on a number of factors,
      including market presence; the adequacy of our member and technical support
      services; the capacity, reliability and security of our network infrastructure;
      the ease of access to and navigation of the Internet provided by our services;
      our pricing policies, our competitors and our suppliers; the timing of
      introductions of new services by us and our competitors; our ability to support
      existing and emerging industry standards; and industry and general economic
      trends. There can be no assurance that we will have the financial resources,
      technical expertise or marketing and support capabilities to compete
      successfully.




WE
      MAY
      NOT EFFECTIVELY MANAGE THE GROWTH NECESSARY TO EXECUTE OUR BUSINESS PLAN, WHICH
      COULD ADVERSELY AFFECT THE QUALITY OF OUR OPERATIONS AND OUR COSTS.





In
      order
      to achieve the critical mass of business activity necessary to successfully
      execute our business plan, we must significantly increase the number of
      strategic partners and customers that use our technology. This growth will
      place
      significant strain on our personnel, systems and resources. We also expect
      that
      we will continue to hire employees, including technical, management-level
      employees, and sales staff for the foreseeable future. This growth will require
      us to improve management, technical, information and accounting systems,
      controls and procedures. We may not be able to maintain the quality of our
      operations, control our costs, continue complying with all applicable
      regulations and expand our internal management, technical information and
      accounting systems in order to support our desired growth. We cannot be sure
      that we will manage our growth effectively, and our failure to do so could
      cause
      us to reduce or cease operations.





16




WE
      MAY
      NOT BE ABLE TO PREVENT THIRD PARTIES FROM ACQUIRING DOMAIN NAMES THAT INFRINGE
      OR OTHERWISE DECREASE THE VALUE OF OUR TRADEMARKS AND OTHER PROPRIETARY
      RIGHTS





We
      own
      several Internet domain names, including, among others, www.ivn.net,
www.ivcm.net, www.futura.net, www.lickity-split.net,
www.lickity-split.tv, and www.lickitysplit.tv. The regulation of
      domain
      names in the United States and in foreign countries may change. Regulatory
      bodies could establish additional top-level domains or modify the requirements
      for holding domain names, any or all of which may dilute the strength of our
      name. We may not acquire or maintain our domain name or additional common names
      in all of the countries in which our marketplace may be accessed, or for any
      or
      all of the top-level domains that may be introduced. The relationship between
      regulations governing domain names and laws protecting proprietary rights is
      unclear. Therefore, we may not be able to prevent third parties from acquiring
      domain names that infringe or otherwise decrease the value of our trademarks
      and
      other proprietary rights.





We
      may
      have to resort to litigation to enforce our intellectual property rights,
      determine the validity and scope of the proprietary rights of others, or defend
      ourselves from claims of infringement, invalidity or unenforceability Litigation
      may be expensive and divert resources even if we win. This could adversely
      affect our business, financial condition and operating results such that it
      could cause us to reduce or cease operations.





WE
      MAY
      NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES, WHICH COULD RENDER
      OUR
      PRODUCTS AND PROCESSES OBSOLETE





The
      wireless communications industry is characterized by rapid technological change,
      changes in customer requirements and preferences, frequent introduction of
      products and services embodying new technologies and the emergence of new
      industry standards and practices that could render our existing technology
      and
      systems obsolete. Our future success will depend on our ability to enhance
      and
      improve the responsiveness, functionality, accessibility and features of our
      products. We expect that our marketplace will require extensive technological
      upgrades and enhancements to accommodate many of the new products and services
      that we anticipate will be added to our marketplace. We cannot assure you that
      we will be able to expand and upgrade our technology and systems, or
      successfully integrate new technologies or systems we develop in the future,
      to
      accommodate such increases in a timely manner.




WE
      MAY
      NOT SUCCESSFULLY EXECUTE OR INTEGRATE OUR ACQUISITIONS





Our
      business model is dependent upon growth through acquisition of other Internet
      service providers. Acquisitions involve numerous risks, including the
      following:





o
            Difficulties
                in integrating the operations, technologies, products and personnel
                of the
                acquired companies;


o
            Diversion
                of management's attention from normal daily operations of the
                business;


o
            Difficulties
                in entering markets in which we have no or limited direct prior experience
                and where competitors in such markets have stronger market
                positions;


o
            Initial
                dependence on unfamiliar partners;


o
            Insufficient
                revenues to offset increased expenses associated with acquisitions;
                and


o
            The
                potential loss of key employees of the acquired
                companies.





17




Acquisitions
      may also cause us to:





o
            Issue
                common stock that would dilute our current shareholders' percentage
                ownership;


o
            Assume
                liabilities;


o
            Record
                goodwill and non-amortizable intangible assets that will be subject
                to
                impairment testing on a regular basis and potential periodic impairment
                charges;


o
            Incur
                amortization expenses related to certain intangible assets;


o
            Incur
                large and immediate write-offs, and restructuring and other related
                expenses; or


o
            Become
                subject to litigation.





Mergers
      and acquisitions of high-technology companies are inherently risky, and no
      assurance can be given that our previous or future acquisitions will be
      successful and will not materially adversely affect our business, operating
      results or financial condition. Failure to manage and successfully integrate
      acquisitions we make could harm our business and operating results in a material
      way.





OUR
      BUSINESS DEPENDS ON THE GROWTH AND MAINTENANCE OF THE INTERNET INFRASTRUCTURE





Our
      success will depend on the continued growth and maintenance of the internet
      infrastructure. This includes maintenance of a reliable network backbone with
      the necessary speed, data capacity and security for providing reliable internet
      services. Internet infrastructure may be unable to support the demands placed
      on
      it if the number of internet users continues to increase, or if existing or
      future internet users access the internet more often or increase their bandwidth
      requirements. In addition, viruses, worms and similar programs may harm the
      performance of the internet. The Internet has experienced a variety of outages
      and other delays as a result of damage to portions of its infrastructure, and
      it
      could face outages and delays in the future. These outages and delays could
      reduce the level of internet usage as well as our ability to provide our
      solutions. Additionally, for many of our customers we rely upon ILECs to assist
      in provisioning T-1 and dial-up lines. In the event that these ILECs are unable
      or unwilling to provide service, our ability to service existing customers
      or
      add new customers could be impaired.




IF
      WE
      LOSE KEY EMPLOYEES OR ARE UNABLE TO ATTRACT OR RETAIN QUALIFIED PERSONNEL,
      OUR
      BUSINESS COULD SUFFER





Our
      success is highly dependent on our ability to attract and retain qualified
      personnel. We are highly dependent on our management, including Charles
      Roodenburg, our Chief Executive Officer who has been critical to the development
      of our technologies and business. The loss of the services of Mr. Roodenburg
      could have a material adverse effect on our operations. We do not have an
      employment agreement with Mr. Roodenburg. Accordingly, there can be no assurance
      that he will remain associated with us. The efforts of Mr. Roodenburg will
      be
      critical to us as we continue to develop our business. If we were to lose Mr.
      Roodenburg, or any other key employees, we may experience difficulties in
      competing effectively, developing our technology and implementing our business
      strategies.





WE
      MAY
      FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS.





We
      believe that the establishment of strategic partnerships will greatly benefit
      the growth of our business, and we intend to seek out and enter into strategic
      alliances. We may not be able to enter into these strategic partnerships on
      commercially reasonable terms or at all. Even if we enter into strategic
      alliances, our partners may not attract significant numbers of customers or
      otherwise prove advantageous to our business. Our inability to enter into new
      distribution relationships or strategic alliances could have a material and
      adverse effect on our business.





RISKS
      RELATING TO OUR CONVERTIBLE DEBENTURES:





THERE
      ARE
      A LARGE NUMBER OF SHARES UNDERLYING OUR CONVERTIBLE NOTES AND
      WARRANTS.





As
      of
      March 31, 2007, we had 110,788,677 shares of common stock issued and
      outstanding. In connection with the financing arrangements that we entered
      into
      in March 2006, we also have outstanding secured convertible debentures or an
      obligation to issue callable secured convertible notes that may be converted
      into an estimated 139,919,128 shares of common stock at current market prices,
      and outstanding warrants to purchase 138,177,295 shares of common
      stock.





18




On
      July
      11, 2007, the closing bid price of our common stock was $0.0061. The debentures
      issued in March are convertible at the lower of (i) $0.20 or (ii) ninety percent
      (90%) of the lowest closing Bid Price of the Common Stock during the thirty
      (30)
      trading days immediately preceding the conversion date as quoted by Bloomberg,
      LP. Cornell has agreed not to short any of the shares of Common Stock Therefore,
      the number of shares of common stock issuable upon conversion of the secured
      convertible debentures may increase if the market price of our stock declines.
      Upon effectiveness of the registration statement of which this prospectus forms
      a part, all of the shares, including all of the shares issuable upon conversion
      of the notes and upon exercise of our warrants, may be sold without restriction.
      The sale of these shares may adversely affect the market price of our common
      stock.




The
      variable price feature of our convertible debentures could require us to issue
      a
      substantially greater number of shares, which will cause dilution to our
      existing stockholders. The number of shares we will be required to issue upon
      conversion of the debentures will increase if the market price of our stock
      decreases. This will cause dilution to our existing stockholders.





The
      following is an example of the amount of shares of our common stock issuable
      upon conversion of the entire $600,000 in convertible debentures, based on
      market prices assumed to be 25%, 50% and 75% below the closing price on March
      31, 2007 of $.009.




**%
                  BELOW MARKET**
              **PRICE
                  PER SHARE**
              **WITH
                  10% DISCOUNT**
              **NUMBER
                  OF SHARES**
              **PERCENTAGE
                  OF TOTAL***25%
              $0.0068
              $0.0061
              83,594,897
              43.01%50%
              $0.0045
              $0.0041
              125,392,346
              53.09%75%
              $0.0023
              $0.0020
              250,784,691
              69.36%





*
      Based
      upon 110,788,677 shares of common stock issued as of March 31, 2007







THE
      LOWER
      THE STOCK PRICE, THE GREATER THE NUMBER OF SHARES ISSUABLE UNDER THE CONVERTIBLE
      DEBENTURES





The
      number of shares issuable upon conversion of the debentures is determined by
      the
      market price of our common stock prevailing at the time of each conversion.
      The
      lower the market price, the greater the number of shares issuable under the
      debentures. Upon issuance of the shares, to the extent that holders of
      those  shares will attempt to sell the shares into the market, these
      sales may further reduce the market price of our common stock. This in turn
      will
      increase the number of shares issuable under the debentures. This may lead
      to an
      escalation of lower market prices and an increasing number of shares to be
      issued. A larger number of shares issuable at a discount to a continuously
      declining stock price will expose our shareholders to greater dilution and
      a
      reduction of the value of their investment.





THE
      ISSUANCE OF OUR STOCK UPON CONVERSION OF THE DEBENTURES COULD ENCOURAGE SHORT
      SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE DECLINE OF OUR
      STOCK PRICE AND MATERIALLY DILUTE EXISTING STOCKHOLDERS' EQUITY AND VOTING
      RIGHTS.





The
      debentures have the potential to cause significant downward pressure on the
      price of our common stock. This is particularly the case if the shares being
      placed into the market exceed the market's ability to absorb the increased
      number of shares of stock. Such an event could place further downward pressure
      on the price of our common stock, which presents an opportunity to short sellers
      and others to contribute to the future decline of our stock price. If there
      are
      significant short sales of our stock, the price decline that would result from
      this activity will cause the share price to decline more so, which, in turn,
      may
      cause long holders of the stock to sell their shares thereby contributing to
      sales of stock in the market. If there is an imbalance on the sell side of
      the
      market for the stock, our stock price will decline. If this occurs, the number
      of shares of our common stock that is issuable upon conversion of the debentures
      will increase, which will materially dilute existing stockholders' equity and
      voting rights.





19




IF
      WE ARE
      REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING SECURED CONVERTIBLE DEBENTURES,
      WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL, IF AVAILABLE, OR RAISE
      ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE SECURED CONVERTIBLE DEBENTURES,
      IF
      REQUIRED, COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE
      SALE
      OF SUBSTANTIAL ASSETS.





On
      March
      27, 2006, the Company entered into a securities purchase agreement with Cornell
      Capital Partners L.P. providing for the sale by the Company to Cornell of our
      12% secured convertible debentures in the aggregate principal amount of $600,000
      of which $200,000 was advanced immediately. The second installment of $200,000
      was advanced on April 18, 2006. The last installment of $200,000 was advanced
      on
      August 16, two (2) business days after the date the registration statement
      was
      declared effective.




In
        addition the Company received $75,000 in funds from
        outside sources and recorded them as debentures.





The
      Convertible Debentures mature on the third anniversary of the date of issuance
      and the Company is not required to make any payments until the maturity date.
      Holders of the Debentures may convert at any time amounts outstanding under
      the
      debentures into shares of our common stock at a conversion price per share
      equal
      to the lower of (i) $0.20 or (ii) ninety percent (90%) of the lowest closing
      Bid
      Price of the Common Stock during the thirty (30) trading days immediately
      preceding the conversion date as quoted by Bloomberg, LP. Cornell has agreed
      not
      to short any of the shares of Common Stock. The Company has the right to redeem
      a portion or all amounts outstanding under the debenture prior to the maturity
      date at a 20% redemption premium provided that the closing bid price of our
      common stock is less than $0.20.





These
      debentures are due and payable, with interest, three years from their respective
      dates of issuance, unless sooner converted into shares of our common stock.
      Any
      event of default such as our failure to repay the principal or interest when
      due, our failure to issue shares of common stock upon conversion by the holder,
      or our failure to timely file a registration statement or have such registration
      statement declared effective, could require the early repayment of the
      convertible debentures. We anticipate that the full amount of the convertible
      debentures will be converted into shares of our common stock, in accordance
      with
      the terms of these debentures. If we were required to repay the convertible
      debentures, we would be required to use our limited working capital and raise
      additional funds. If we were unable to repay the debentures when required,
      the
      holders could commence legal action against us and foreclose on all of our
      assets to recover the amounts due. Any such action would require us to curtail
      or cease operations.




THE
      LARGE
      NUMBER OF SHARES ISSUABLE UPON CONVERSION OF THE SECURED CONVERTIBLE DEBENTURES
      MAY RESULT IN A CHANGE OF CONTROL





As
      there
      is no limit on the number of shares that may be issued upon conversion of the
      convertible debentures, these issuances may result in Cornell controlling us.
      It
      may be able to exert substantial influence over all matters submitted to a
      vote
      of the shareholders, including the election and removal of directors, amendments
      to our articles of incorporation and by-laws, and the approval of a merger,
      consolidation or sale of all or substantially all of our assets. In addition,
      this concentration of ownership could inhibit the management of our business
      and
      affairs and have the effect of delaying, deferring or preventing a change in
      control or impeding a merger, consolidation, takeover or other business
      combination which our shareholder, may view favorably.





THE
      FOLLOWING RISKS RELATE PRINCIPALLY TO OUR COMMON STOCK AND ITS MARKET
      VALUE:





THERE
      IS
      A LIMITED MARKET FOR OUR COMMON STOCK





Our
      common stock is quoted on the OTC Bulletin Board under the symbol "IVCM.OB."
      There is a limited trading market for our common stock. Accordingly, there
      can
      be no assurance as to the liquidity of any markets that may develop for our
      common stock, the ability of holders of our common stock to sell our common
      stock, or the prices at which holders may be able to sell our common
      stock.





20




OUR
      STOCK
      PRICE MAY BE VOLATILE





The
      market price of our common stock is likely to be highly volatile and could
      fluctuate widely in price in response to various factors, many of which are
      beyond our control, including:





o
            technological
                innovations or new products and services by us or our
                competitors;


o
            additions
                or departures of key personnel;


o
            sales
                of our common stock;


o
            our
                ability to integrate operations, technology, products and
                services;


o
            our
                ability to execute our business
                plan;


o
            operating
                results below expectations;


o
            loss
                of any strategic relationship;


o
            industry
                developments;


o
            economic
                and other external factors; and


o
            period-to-period
                fluctuations in our financial
                results.





Because
      we have a limited operating history with limited revenues to date, you may
      consider any one of these factors to be material. Our stock price may fluctuate
      widely as a result of any of the above.





In
      addition, the securities markets have from time to time experienced significant
      price and volume fluctuations that are unrelated to the operating performance
      of
      particular companies. These market fluctuations may also materially and
      adversely affect the market price of our common stock.




WE
      HAVE
      NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE.
      ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON
      STOCK





We
      have
      never paid cash dividends on our common stock and do not anticipate paying
      cash
      dividends in the foreseeable future. The payment of dividends on our common
      stock will depend on earnings, financial condition and other business and
      economic factors affecting it at such time as the board of directors may
      consider relevant. If we do not pay dividends, our common stock may be less
      valuable because a return on your investment will only occur if its stock price
      appreciates.





OUR
      COMMON STOCK IS DEEMED PENNY STOCK WITH A LIMITED TRADING MARKET





Our
      common stock is currently listed for trading on the OTC Bulletin Board which
      is
      generally considered to be a less efficient market than markets such as NASDAQ
      or other national exchanges, and which may cause difficulty in conducting trades
      and difficulty in obtaining future financing. Further, our securities are
      subject to the "penny stock rules" adopted pursuant to Section 15 (g) of the
      Securities Exchange Act of 1934, as amended, or Exchange Act. The penny stock
      rules apply to non-NASDAQ companies whose common stock trades at less than
      $5.00
      per share or which have tangible net worth of less than $5,000,000 ($2,000,000
      if the company has been operating for three or more years). Such rules require,
      among other things, that brokers who trade "penny stock" to persons other than
      "established customers" complete certain documentation, make suitability
      inquiries of investors and provide investors with certain information concerning
      trading in the security, including a risk disclosure document and quote
      information under certain circumstances. Many brokers have decided not to trade
      "penny stock" because of the requirements of the penny stock rules and, as
      a
      result, the number of broker-dealers willing to act as market makers in such
      securities is limited. In the event that we remain subject to the "penny stock
      rules" for any significant period, there may develop an adverse impact on the
      market, if any, for our securities. Because our securities are subject to the
      "penny stock rules," investors will find it more difficult to dispose of our
      securities. Further, for companies whose securities are traded in the OTC
      Bulletin Board, it is more difficult: (i) to obtain accurate quotations, (ii)
      to
      obtain coverage for significant news events because major wire services, such
      as
      the Dow Jones News Service, generally do not publish press releases about such
      companies, and (iii) to obtain needed capital.







FORWARD-LOOKING
      STATEMENTS





We
      and
      our representatives may from time to time make written or oral statements that
      are "forward-looking," including statements contained in this prospectus and
      other filings with the Securities and Exchange Commission, reports to our
      stockholders and news releases. All statements that express expectations,
      estimates, forecasts or projections are forward-looking statements within the
      meaning of the Act. In addition, other written or oral statements which
      constitute forward-looking statements may be made by us or on our behalf. Words
      such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
      "estimates," "projects," "forecasts," "may," "should," variations of such words
      and similar expressions are intended to identify such forward-looking
      statements. These statements are not guarantees of future performance and
      involve risks, uncertainties and assumptions which are difficult to predict.
      Therefore, actual outcomes and results may differ materially from what is
      expressed or forecasted in or suggested by such forward-looking statements.
      We
      undertake no obligation to update publicly any forward-looking statements,
      whether as a result of new information, future events or otherwise. Important
      factors on which such statements are based are assumptions concerning
      uncertainties, including but not limited to uncertainties associated with the
      following:





21




(a)
            volatility
                or decline of our stock price;





(b)
            potential
                fluctuation in quarterly results;





(c)
            our
                failure to earn revenues or
                profits;





(d)
            inadequate
                capital and barriers to raising the additional capital or toobtaining
                the financing needed to implement its business
                plans;





(e)
            inadequate
                capital to continue business;





(f)
            changes
                in demand for our products and
                services;





(g)
            rapid
                and significant changes in markets;





(h)
            litigation
                with or legal claims and allegations by outside
                parties;





(i)
            insufficient
                revenues to cover operating costs.




**Item
      7 Financial
      Statements**


**INDEX**
 
 **Page(s)**Report
                          of Independent Registered Public Accounting Firm
                      1
                          -
                          2Consolidated
                          Balance Sheets as of March 31, 2007 and 2006
                      3
                          -
                          4Consolidated
                          Statements of Income and Loss for the YearsEnded
                          March 31, 2007 and 2006
                      5Consolidated
                          Statement of Changes in Stockholders’(Deficit)
                          for the Years Ended March 31, 2007 and 2006
                      6Consolidated
                          Statements of Cash Flow for the Years EndedMarch
                          31, 2007 and 2006
                      7
                          -
                          10Notes
                          to Consolidated Financial Statements
                      11
                          - 37
 
 
 22
 **BAGELL,
              JOSEPHS, LEVINE & COMPANY, L.L.C.**
 Certified
              Public Accountants
 High
              Ridge Commons
 Suites
              400-403
 200
              Haddonfield Berlin Road
 Gibbsboro,
              New Jersey 08026
 (856)
              346-2828  Fax (856) 346-2882
 
 
 **REPORT
              OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 Board
              of
              Directors
 IVI
              Communications, Inc. and Subsidiaries
 Los
              Angeles, California
  We
                have
                audited the accompanying consolidated balance sheets of IVI Communications,
                Inc.
                and Subsidiaries (“the Company”) as of March 31, 2007 and 2006 and the related
                consolidated statements of income, changes in stockholders’ deficit, and cash
                flows for the years then ended.  These consolidated financial
                statements are the responsibility of the Company’s management.  Our
                responsibility is to express an opinion on these consolidated financial
                statements based on our audits.
 
 We
                have
                conducted our audits in accordance with standards of the Public Company
                Accounting Oversight Board (United States).  Those standards require
                that we plan and perform the audits to obtain reasonable assurance
                about whether
                the consolidated financial statements are free of material
                misstatement.  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 consolidated financial statements, assessing the
                accounting
                principles used and significant estimates made by management, as
                well as
                evaluating the overall financial statement presentation.  We believe
                that our audits provide a reasonable basis for our opinion.
 
 In
                our
                opinion, the consolidated financial statements referred to above
                present fairly,
                in all material respects, the financial position of IVI Communications,
                Inc. and
                Subsidiaries as of March 31, 2007 and 2006 and the results of its
                operations and
                cash flows for the years then ended in conformity with accounting
                principles
                generally accepted in the United States of America.
  F-1
  The
                accompanying consolidated financial statements for the years ended
                March 31,
                2007 and 2006 have been prepared assuming that the Company will continue
                as a
                going concern.   As discussed in Note 9 to the consolidated
                financial statements, the Company has sustained operating losses
                and capital
                deficits that raise substantial doubt about its ability to continue
                as a going
                concern.  Management’s operating and financing plans in regard to
                these matters are also discussed in Note 9.  The consolidated
                financial statements do not include any adjustments that might result
                from the
                outcome of these uncertainties.
 
 
 **BAGELL,
              JOSEPHS, LEVINE& COMPANY, L.L.C.**
 BAGELL,
              JOSEPHS, LEVINE & COMPANY, L.L.C.
 Certified
              Public Accountants
 Gibbsboro,
              New Jersey
 July
              13,
              2007
 
 
 MEMBER
                        OF:
                    AMERICAN
                        INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS NEW JERSEY SOCIETY
                        OF CERTIFIED
                        PUBLIC ACCOUNTANTS PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC
                        ACCOUNTANT
  F-2
 **IVI
                          COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                          BALANCE SHEETS****MARCH
                          31,**
 **ASSETS**
 **2007**
                        
                        
                        **2006****CURRENT
                            ASSETS**Cash
                            and
                            cash equivalents
                        
                        $
                        4,827
                        
                        
                        $
                        233,544Accounts
                            receivable, net
                        
                        
                        246,210
                        
                        
                        
                        322,806Inventory
                        
                        
                        -
                        
                        
                        
                        145,395Other
                            current assets
                        
                        
                        6,449
                        
                        
                        
                        18,624**Total
                            current
                            asset**
                        
                        
                        257,486
                        
                        
                        
                        720,369Equipment, net of $19,147 and $25,944 in accumulated
                            depreciation
                        
                        
                        20,741
                        
                        
                        
                        91,319**OTHER
                            ASSETS**Goodwill
                        
                        
                        674,934
                        
                        
                        
                        4,112,482Deposits
                        
                        
                        -
                        
                        
                        
                        6,513**Total
                            other
                            assets**
                        
                        
                        674,934
                        
                        
                        
                        4,118,995**TOTAL
                            ASSETS**
                        
                        $
                        953,161
                        
                        
                        $
                        4,930,683**LIABILITIES
                            AND STOCKHOLDERS'
                            DEFICIT****CURRENT
                            LIABILITIES**Installment
                            debt
                        
                        $
                        -
                        
                        
                        $
                        1,116Notes
                            payable
                        
                        
                        186,489
                        
                        
                        
                        767,311Current
                            portion of obligations under capital lease
                        
                        
                        -
                        
                        
                        
                        32,348Accounts
                            payable and accrued liabilities
                        
                        
                        1,798,145
                        
                        
                        
                        2,671,533Acquisition
                            contracts
                        
                        
                        -
                        
                        
                        
                        295,000Contingent
                            liability
                        
                        
                        -
                        
                        
                        
                        934,782Litigation
                            settlement
                        
                        
                        448,675
                        
                        
                        
                        -Deferred
                            revenue
                        
                        
                        2,522
                        
                        
                        
                        15,292Liability
                            for stock to be issued
                        
                        
                        138,949
                        
                        
                        
                        -Derivative
                            liability
                        
                        
                        164,077
                        
                        
                        
                        216,312Convertible
                            debentures, net of discount of $312,215 and
                            $200,000
                        
                        
                        445,285
                        
                        
                        
                        619,250**Total
                            current
                            liabilities**
                        
                        
                        3,184,142
                        
                        
                        
                        5,552,944**LONG-TERM
                            LIABILITIES**Obligations
                            under capital lease, net of current portion
                        
                        
                        -
                        
                        
                        
                        33,339Loan
                            payable officer
                        
                        
                        -
                        
                        
                        
                        418,793**Total
                            long-term
                            liabilities**
                        
                        
                        -
                        
                        
                        
                        452,132**TOTAL
                            LIABILITIES**
                        
                        
                        3,184,142
                        
                        
                        
                        6,005,076
 **The
                accompanying notes are an integral part to
                these consolidated financial statements.**
 F-3
 **IVI
                            COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                            BALANCE SHEETS (CONTINUED)****MARCH
                            31,**
  **2007**
                          
                          
                          ****
                          **2,006****STOCKHOLDERS'
                              DEFICIT**Preferred
                              stock, $.001 par value; 5,000,000 shares
                              authorized;4,000,000  issued
                              and outstanding series A
                          
                          
                          4,000
                          
                          
                          
                          4,0001,000,000  issued
                              and outstanding series B
                          
                          
                          1,000
                          
                          
                          
                          -Common
                              stock, $.001 par value; 400,000,000  shares
                              authorized;110,788,677
                              and 77,985,587 issued and outstanding
                          
                          
                          110,787
                          
                          
                          
                          77,986Prepaid
                              consulting fees
                          
                          
                          (333,331
                          )
                          
                          
                          -Additional
                              paid-in capital
                          
                          
                          25,699,488
                          
                          
                          
                          27,334,017Additional
                              paid-in capital - warrants
                          
                          
                          192,755
                          
                          
                          
                          154,255Stock
                              receivable
                          
                          
                          (2,574,312
                          )
                          
                          
                          -Shares
                              issued and held as collateral
                          
                          
                          -
                          
                          
                          
                          (3,000,000
                          )Accumulated
                              deficit
                          
                          
                          (25,331,368
                          )
                          
                          
                          (25,644,651
                          )**Total
                              stockholders'
                              deficit**
                          
                          
                          (2,230,981
                          )
                          
                          
                          (1,074,393
                          )**TOTAL
                              LIABILITIES AND
                              STOCKHOLDERS' DEFICIT**
                          
                          $
                          953,161
                          
                          
                          $
                          4,930,683
 **The
                  accompanying notes are an integral part to
                  these consolidated financial
                  statements.**
 F-4
 **IVI
                          COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                          STATEMENTS OF INCOME AND LOSS****FOR
                          THE YEARS ENDED MARCH 31,**
  **2007**
                        
                        
                        **2006****OPERATING
                            REVENUE**
                        
                        $
                        1,859,811
                        
                        
                        $
                        2,681,373**COST
                            OF
                            OPERATIONS**
                        
                        
                        1,200,215
                        
                        
                        
                        1,798,869**GROSS
                            PROFIT**
                        
                        
                        659,596
                        
                        
                        
                        882,504**OPERATING
                            EXPENSES**Selling
                        
                        
                        14,671
                        
                        
                        
                        324,777General
                            and
                            administrative
                        
                        
                        2,028,031
                        
                        
                        
                        3,396,181Loss
                            on
                            settlement of contract
                        
                        
                        553,643
                        
                        
                        
                        -Depreciation
                            and
                            amortization
                        
                        
                        186,026
                        
                        
                        
                        21,624**Total
                            operating
                            expenses**
                        
                        
                        2,782,371
                        
                        
                        
                        3,742,582**OPERATING
                            (LOSS)**
                        
                        
                        (2,122,775
                        )
                        
                        
                        (2,860,078
                        )**OTHER
                            INCOME
                            (EXPENSES)**Other
                            income
                        
                        
                        1,035,742
                        
                        
                        
                        167,104Forgiveness
                            of debt
                        
                        
                        1,657,853
                        
                        
                        
                        -Gain
                            on
                            revaluation of derivatives
                        
                        
                        390,794
                        
                        
                        
                        -Litigation
                            damages
                        
                        
                        -
                        
                        
                        
                        (934,782
                        )Other
                            expense
                        
                        
                        (43,905
                        )
                        
                        
                        -Interest
                            expense
                        
                        
                        (604,600
                        )
                        
                        
                        (530,348
                        )Interest
                            income
                        
                        
                        174
                        
                        
                        
                        -**Total
                            other income
                            (expense)**
                        
                        
                        2,436,058
                        
                        
                        
                        (1,298,026
                        )**INCOME
                            (LOSS) BEFORE PROVISION FOR
                            INCOME TAXES**
                        
                        
                        313,283
                        
                        
                        
                        (4,158,104
                        )Provision
                            for income taxes
                        
                        
                        -
                        
                        
                        
                        -**NET
                            INCOME (LOSS) APPLICABLE
                            TO****COMMON
                            SHAREHOLDERS**
                        
                        $
                        313,283
                        
                        
                        $
                        (4,158,104
                        )**BASIC
                            INCOME (LOSS) PER
                            SHARE**
                        
                        $
                        0.00
                        
                        
                        $
                        (0.07
                        )**DILUTED
                            INCOME (LOSS) PER
                            SHARE**
                        
                        $
                        0.00
                        
                        
                        $
                        (0.07
                        )**WEIGHTED
                            AVERAGE SHARES
                            OUTSTANDING****BASIC**
                        
                        
                        82,157,193
                        
                        
                        
                        62,256,813**DILUTED**
                        
                        
                        220,334,488
                        
                        
                        
                        62,256,813
 **The
                accompanying notes are an integral part to
                these consolidated financial statements.**
  F-5
 **IVI
                            COMMUNICATIONS, INC. AND SUBSIDIAIRES****CONSOLIDATED
                            STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT****FOR
                            THE YEARS ENDED MARCH 31, 2007 AND
                            2006**
  **Prepaid**
                          
                          
                          **Additional**
                          
                          
                          **Additional**
                            **Paid-in**
                          
                          
                          
                          
                          
                          **Shares
                              issued****Preferred
                              Stock**
                          
                          
                          **Common
                              Stock**
                          
                          
                          **Consulting**
                          
                          
                          **Paid-in**
                          
                          
                          **Capital
                              -**
                          
                          
                          **Subscription**
                          
                          
                          **and
                              held
                              as**
                          
                          
                          **Accumulated****Shares**
                          
                          
                          **Amount**
                          
                          
                          **Shares**
                          
                          
                          **Amount**
                          
                          
                          **Fees**
                          
                          
                          **Capital**
                          
                          
                          **warrants**
                          
                          
                          **Receivable**
                          
                          
                          **Collateral**
                          
                          
                          **Deficits**
                          
                          
                          **Total**Balance,
                            March 31,2005
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          66,539,685
                          
                          
                          $
                          66,539
                          
                          
                          $
                          -
                          
                          
                          $
                          20,215,480
                          
                          
                          $
                          -
                          
                          
                          $
                          (2,023,173
                          )
                          
                          $
                          -
                          
                          
                          $
                          (21,486,547
                          )
                          
                          $
                          (3,227,701
                          )Issuance
                            of sharesfor
                              compensation
                          
                          
                          4,000,000
                          
                          
                          
                          4,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          196,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          200,000Issuance
                            of sharesfor
                              services
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,824,660
                          
                          
                          
                          3,825
                          
                          
                          
                          -
                          
                          
                          
                          1,569,519
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,573,344Issuance
                            of sharesfor
                              acquisition ofsubsidiary
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          5,387,612
                          
                          
                          
                          5,388
                          
                          
                          
                          -
                          
                          
                          
                          3,118,925
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,124,313Issuance
                            of sharesissued
                              forconversion
                              ofdebentures
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,865,000
                          
                          
                          
                          2,865
                          
                          
                          
                          -
                          
                          
                          
                          563,785
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          566,650Issuance
                            of sharesfor
                              conversion
                              ofoutstandingpayables
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          40,667
                          
                          
                          
                          41
                          
                          
                          
                          -
                          
                          
                          
                          7,809
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          7,850Options
                              exercised
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,500,000
                          
                          
                          
                          4,500
                          
                          
                          
                          -
                          
                          
                          
                          770,500
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          775,000Shares
                            cancelled forfailed
                              acquisition
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (13,734,669
                          )
                          
                          
                          (13,735
                          )
                          
                          
                          -
                          
                          
                          
                          13,735
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Issuance
                            costsassociated
                              withequity
                              financing
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (90,000
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (90,000
                          )Warrants
                            issued withequity
                              financing(Debt
                              discount)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          154,255
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          154,255Cancellation
                            ofshares
                              ininvestment
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (6,437,368
                          )
                          
                          
                          (6,437
                          )
                          
                          
                          -
                          
                          
                          
                          (2,016,736
                          )
                          
                          
                          -
                          
                          
                          
                          2,023,173
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Shares
                            issued ascollateral
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          15,000,000
                          
                          
                          
                          15,000
                          
                          
                          
                          -
                          
                          
                          
                          2,985,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (3,000,000
                          )
                          
                          
                          -
                          
                          
                          
                          -Net
                              loss for the
                              year
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (4,158,104
                          )
                          
                          
                          (4,158,104
                          )Balance,
                            March 31,2006
                          
                          
                          4,000,000
                          
                          
                          $
                          4,000
                          
                          
                          
                          77,985,587
                          
                          
                          $
                          77,986
                          
                          
                          $
                          -
                          
                          
                          $
                          27,334,017
                          
                          
                          $
                          154,255
                          
                          
                          $
                          -
                          
                          
                          $
                          (3,000,000
                          )
                          
                          $
                          (25,644,651
                          )
                          
                          $
                          (1,074,393
                          )Issuance
                            of sharesfor
                              services
                          
                          
                          1,000,000
                          
                          
                          
                          1,000
                          
                          
                          
                          19,774,330
                          
                          
                          
                          19,774
                          
                          
                          
                          (333,331
                          )
                          
                          
                          986,225
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          673,668Derivative
                            createdin
                              excess ofdebtdiscounton
                              convertibledebenture
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (27,671
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (27,671
                          )Issuance
                            of sharesfor
                              conversionof
                              debentures
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          13,038,639
                          
                          
                          
                          13,037
                          
                          
                          
                          -
                          
                          
                          
                          184,167
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          197,204Issuance
                            of sharesfor
                              convertiblenote
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          8,710,121
                          
                          
                          
                          8,710
                          
                          
                          
                          -
                          
                          
                          
                          245,580
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          254,290Warrants
                              exercised
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,500,000
                          
                          
                          
                          3,500
                          
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          38,500
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          42,000Issuance
                            of sharesfor
                              debt
                              settlement
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          280,000
                          
                          
                          
                          280
                          
                          
                          
                          -
                          
                          
                          
                          10,920
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          11,200Issuance
                            of sharesfor
                              completion ofacquisition
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,500,000
                          
                          
                          
                          2,500
                          
                          
                          
                          -
                          
                          
                          
                          21,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          23,750Cancel
                            shares issuedas
                              collateral
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (15,000,000
                          )
                          
                          
                          (15,000
                          )
                          
                          
                          -
                          
                          
                          
                          (2,985,000
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,000,000
                          
                          
                          
                          -
                          
                          
                          
                          -Issuance
                            costsassociated
                              withequity
                              financing
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (70,000
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (70,000
                          )Stock
                            receivable fromdefault
                              onacquisition
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (2,574,312
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (2,574,312
                          )Net
                            income for theyear
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          313,283
                          
                          
                          
                          313,283Balance,
                            March 31,2007
                          
                          
                          5,000,000
                          
                          
                          $
                          5,000
                          
                          
                          
                          110,788,678
                          
                          
                          $
                          110,787
                          
                          
                          $
                          (333,331
                          )
                          
                          $
                          25,699,488
                          
                          
                          $
                          192,755
                          
                          
                          $
                          (2,574,312
                          )
                          
                          $
                          -
                          
                          
                          $
                          (25,331,368
                          )
                          
                          $
                          (2,230,981
                          )
   **The
                  accompanying notes are an integral part to
                  these consolidated financial
                  statements.**
  F-6
 **IVI
                          COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                          STATEMENTS OF CASH FLOWS****FOR
                          THE YEARS ENDED MARCH 31,**
  **2007**
                        
                        
                        **2006****CASH
                            FLOW FROM OPERATING ACTIVITIES**Net
                            income (loss)
                        
                        $
                        313,283
                        
                        
                        $
                        (4,158,104
                        )**Adjustments
                            to reconcile net income (loss) to net cash****used
                            in operating activities:**Common
                            stock issued for services and compensation
                        
                        
                        673,668
                        
                        
                        
                        1,773,344Settlement
                            of notes and vendor payables
                        
                        
                        -
                        
                        
                        
                        7,850Cash
                            received in acquisition
                        
                        
                        -
                        
                        
                        
                        26,352Depreciation
                        
                        
                        42,360
                        
                        
                        
                        21,624Amortization
                        
                        
                        143,668
                        
                        
                        
                        -Loss
                            on settlement of contract
                        
                        
                        553,645
                        
                        
                        
                        -Gain
                            (loss) on revaluation of derivatives
                        
                        
                        (390,794
                        )
                        
                        
                        216,317Gain
                            on forgiveness of debt
                        
                        
                        (1,657,853
                        )
                        
                        
                        -Gain
                            on contingent liability settlement
                        
                        
                        (987,169
                        )
                        
                        
                        -Gain
                            on settlement of debentures
                        
                        
                        (19,514
                        )
                        
                        
                        -Allowance
                            for doubtful accounts
                        
                        
                        35,705
                        
                        
                        
                        -**Changes
                            in assets and liabilities**Decrease
                            in accounts receivable
                        
                        
                        17,890
                        
                        
                        
                        44,011(Increase)
                            decrease in inventory
                        
                        
                        50,090
                        
                        
                        
                        (83,095
                        )Decrease
                            in prepaid assets
                        
                        
                        (1,512
                        )
                        
                        
                        (19,310
                        )Increase
                            (decrease) in accounts payable and accrued liabilities
                        
                        
                        997,173
                        
                        
                        
                        (46,832
                        )Increase
                            in contingent liability
                        
                        
                        -
                        
                        
                        
                        934,782Increase
                            (decrease) in acquisition contracts
                        
                        
                        (270,000
                        )
                        
                        
                        295,000Increase
                            (decrease) in deferred revenue
                        
                        
                        (6,969
                        )
                        
                        
                        15,292Total
                            adjustments
                        
                        
                        (819,612
                        )
                        
                        
                        3,185,335**Net
                            cash (used in) operating activities**
                        
                        
                        (506,329
                        )
                        
                        
                        (972,769
                        )**CASH
                            FLOWS FROM INVESTING ACTIVITIES**Purchase
                            of fixed assets
                        
                        
                        (34,181
                        )
                        
                        
                        (35,273
                        )Acquisition
                            of business assets
                        
                        
                        -
                        
                        
                        
                        (75,000
                        )**Net
                            cash (used in) investing activities**
                        
                        
                        (34,181
                        )
                        
                        
                        (110,273
                        )
  **The
                accompanying notes are an integral part to
                these consolidated financial statements.**
 F-7
 **IVI
                          COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                          STATEMENTS OF CASH FLOWS (CONTINUED)****FOR
                          THE YEARS ENDED MARCH 31,**
  **2007**
                        
                        
                        **2006****CASH
                            FLOWS FROM FINANCING
                            ACTIVITIES**Issuance
                            costs for equity financing
                        
                        
                        (70,000
                        )
                        
                        
                        (90,000
                        )Proceeds
                            from stock to be issued
                        
                        
                        138,949
                        
                        
                        
                        -Proceeds
                            from derivative liability
                        
                        
                        55,000
                        
                        
                        
                        -(Payments)
                            on derivative liability
                        
                        
                        (39,312
                        )
                        
                        
                        -Proceeds
                            from convertible debentures
                        
                        
                        475,000
                        
                        
                        
                        242,500Cash
                            paid on settlement of contract
                        
                        
                        (261,357
                        )
                        
                        
                        -Proceeds
                            from exercise of stock options
                        
                        
                        -
                        
                        
                        
                        775,000Proceeds
                            from installment debt and capital lease obligations
                        
                        
                        24,724
                        
                        
                        
                        -Payments
                            on installment debt and capital lease obligations
                        
                        
                        (1,116
                        )
                        
                        
                        (128,429
                        )Proceeds
                            (payments) on officer loans
                        
                        
                        (50,770
                        )
                        
                        
                        393,444Proceeds
                            from exercise of warrants
                        
                        
                        42,000
                        
                        
                        
                        -Payments
                            on litigation settlement
                        
                        
                        (1,325
                        )
                        
                        
                        -**Net
                            cash provided by financing activities**
                        
                        
                        311,793
                        
                        
                        
                        1,192,515**NET
                            INCREASE (DECREASE) IN****CASH
                            AND CASH EQUIVALENTS**
                        
                        
                        (228,717
                        )
                        
                        
                        109,473**CASH
                            AND CASH EQUIVALENTS -****BEGINNING
                            OF YEAR**
                        
                        
                        233,544
                        
                        
                        
                        124,071**CASH
                            AND CASH EQUIVALENTS - END OF YEAR**
                        
                        $
                        4,827
                        
                        
                        $
                        233,544**SUPPLEMENTAL
                            DISCLOSURE OF CASH FLOW INFORMATION:**During
                            the year, cash was paid for the following:Interest
                        
                        $
                        1,403
                        
                        
                        $
                        -Income
                            taxes
                        
                        
                        9,722
                        
                        
                        
                        13,147
 **The
                accompanying notes are an integral part to
                these consolidated financial statements.**
 F-8
 **IVI
                            COMMUNICATIONS, INC. AND SUBSIDIARIES****CONSOLIDATED
                            STATEMENTS OF CASH FLOWS (CONTINUED)****FOR
                            THE YEARS ENDED MARCH 31,**
  **2007**
                          
                          
                          **2006****SUPPLEMENTAL
                              DISCLOSURE OF
                              NON-CASH INFORMATION:**Common
                              stock issued for prepaid
                              consulting fees, classified as equity
                          
                          $
                          987,500
                          
                          
                          $
                          -Common
                              stock issued for services
                              and compensation
                          
                          $
                          179,916
                          
                          
                          $
                          1,773,344Common
                              stock issued for debt
                              settlements and payables
                          
                          $
                          486,444
                          
                          
                          $
                          2,369,344Common
                              stock receivable for
                              settlement of contract
                          
                          $
                          2,574,312
                          
                          
                          $
                          -Cancellation
                              of
                              shares
                          
                          $
                          3,000,000
                          
                          
                          $
                          -Accounts
                              payable coverted to note
                              payable
                          
                          $
                          283,398
                          
                          
                          $
                          -Note
                              payable converted to
                              litigation settlement
                          
                          $
                          450,000
                          
                          
                          $
                          -Embedded
                              derivatives on
                              convertible debt and notes payable
                          
                          $
                          283,554
                          
                          
                          $
                          -Warrants
                              issued in connection with
                              convertible debt
                          
                          $
                          -
                          
                          
                          $
                          154,255Reduction
                              in liability for stock
                              to be issued
                          
                          $
                          -
                          
                          
                          $
                          2,574,312Acquisition
                              of Futura,
                              Inc.Cash
                          
                          
                          26,352Accounts
                              receivable
                          
                          
                          20,396Equipment
                          
                          
                          30,150Deposits
                              -
                              security
                          
                          
                          1,320Accounts
                              payable and
                              accrued expenses
                          
                          
                          (53,152
                          )Net
                              assets
                              acquired
                          
                          
                          25,066Notes
                              to Futura,
                              Inc.
                          
                          
                          (75,000
                          )Issuance
                              of
                              stock
                          
                          
                          (550,000
                          )Goodwill
                          
                          
                          599,934Total
                          
                          $
                          -
 **The
                accompanying notes are an integral part to
                these consolidated financial statements.**
 F-9
 
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **CONSOLIDATED
                    STATEMENTS OF CASH FLOWS
                    (CONTINUED)** **FOR
                      THE YEARS ENDED MARCH
                      31,**
 **CONTRACT
                            SETTLEMENT**For
                            the year ended March 31, 2007,
                            the following amounts were utilized in the settlement
                            of the
                            contractupon
                            the default of the two
                            subsidiaries, Internet Business Consultants, Inc. and
                            Appstate.net,
                            Inc.Cash
                        
                        $
                        261,357Accounts
                            receviable
                        
                        
                        58,706Inventory
                        
                        
                        95,305Prepaid
                            expenses
                        
                        
                        20,200Fixed
                            assets
                        
                        
                        111,556Goodwill
                        
                        
                        3,437,548Allowance
                            for doubtful accounts
                        
                        
                        (35,705
                        )Accumulated
                            depreciation
                        
                        
                        (49,157
                        )Accounts
                            payable
                        
                        
                        (216,618
                        )Acquisition
                            contracts
                        
                        
                        (100,000
                        )Deferred
                            revenue
                        
                        
                        (5,801
                        )Obligations
                            under capital lease
                        
                        
                        (81,411
                        )Loan
                            payable officer
                        
                        
                        (368,023
                        )Stock
                            receivable
                        
                        
                        (2,574,312
                        )Loss
                            on settlement of contract
                        
                        
                        (553,645
                        )TOTAL
                        
                        $
                        -
  **The
                  accompanying notes are an integral part to
                  these consolidated financial statements.**
  F-10
 **IVI
                  COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
                  TO CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
                  31, 2007 AND 2006**
 **NOTE
                            1-**
                        **ORGANIZATION
                            AND BASIS OF
                            PRESENTATION**
 
 The
                  Company was formed in California in September 1995 to acquire traditional
                  local
                  and regional Internet access Service Providers (ISP’s) in the Western States to
                  achieve economies of operation and accelerated growth through centralized
                  management.
 
 Effective
                  May 23, 2002, Internet Ventures, Inc. agreed to recapitalize with
                  Turer
                  Corporation by becoming a wholly owned subsidiary of Turer. To
                  accommodate this
                  recapitalization, the 11,930,746 shares then outstanding of Internet
                  Ventures,
                  Inc. were exchanged for 11,930,746 shares of Turer. In August 2002,
                  Turer
                  changed its name to IVI Communications, Inc.
 
 For
                  accounting purposes, the transaction has been accounted for as
                  a reverse
                  acquisition under the purchase method of accounting. Accordingly,
                  IVI
                  Communications, Inc. will be treated as the continuing entity for
                  accounting
                  purposes, and the financial statements presented herein are those
                  of IVI
                  Communications, Inc.
 
 From
                  inception through September 1999, 13 acquisitions were completed
                  in the states
                  of Colorado, California, Oregon and Washington.  In August 2000, all
                  of the Washington state operations were sold. In December 2002
                  and March 2003,
                  all of the California operations were sold. In May 2003, all of
                  the Oregon
                  operations were sold, and in July 2003, the Colorado operations
                  were
                  sold.
 
 On
                  June
                  29, 2004, the Company issued 4,500,000 shares of common stock to
                  management and
                  consultants as an S-8 stock issuance. On July 1, 2004, the Company
                  amended its
                  Articles of Incorporation and pursuant to a board resolution, increased
                  the
                  authorized level of common stock from 50,000,000 to 100,000,000.  In
                  addition, the Company’s board of directors’ authorized a 2:1 stock split on July
                  2, 2004. All share and per share amounts have been restated to
                  reflect
                  retroactive treatment of this stock split in 2004 and for 2005
                  shares issued
                  prior to the stock split.
 
 On
                  October 27, 2004, the Company filed an amended S-8, bringing the
                  total number of
                  registered shares that will be classified as unrestricted to
                  12,000,000.
 
 On
                  January 31, 2005, the Company completed the purchase of Internet
                  Business
                  Consulting, Inc. and AppState.Net, LLC. The Company paid one times
                  annual
                  revenue in a stock exchange with the shares valued at $1.00 per
                  share, plus
                  $580,000 cash to be paid over a two-year period.  The purchase
                  approximated 3.2 million dollars.
  Effective
                  December 31, 2006 the Company defaulted on
                  this acquisition contract, See Note 11: Contract Settlement.
  F-11
 **IVI
                      COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
                      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                      31, 2007 AND 2006**
 
 **NOTE
                            1-**
                        **ORGANIZATION
                            AND BASIS OF PRESENTATION
                            (CONTINUED)**
 
 On
                  February 6, 2006, the Company completed the purchase of Futura,
                  Inc.  The Company issued 2,813,300 shares with a fair market value of
                  $550,000, plus $150,000 cash, of which $75,000 was paid at close
                  and the balance
                  to be paid in three increments of  $25,000, due on June 1, September
                  1, and December 1, 2006.
 
 On
                  October 4, 2006, by vote of a majority of the issued and outstanding
                  shares of
                  IVI Communications common and preferred stock as of the date of
                  record for the
                  Annual Meeting of the shareholders, the Articles of Incorporation
                  were amended
                  to increase the Company's authorized shares of common stock to
                  four hundred
                  million shares and to approve the   Amendment of the
                  Articles  of Incorporation  to increase
                  the  authorized  capital from  100,000,000 to
                  400,000,000 common shares.
  **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING
                            POLICIES**
 
 **Principles
                  of Consolidation**
 
 The
                  consolidated financial statements include the accounts of the Company
                  and its
                  wholly owned subsidiaries.  All significant inter-company accounts and
                  transactions have been eliminated in consolidation.
 
 **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 disclosure of contingent assets and liabilities
                  at the date of
                  the financial statements and the reported amounts of revenues and
                  expenses
                  during the reporting period.  Actual results could differ from those
                  estimates.
 
 **Cash
                  and Cash Equivalents**
 
 The
                  Company considers all highly liquid debt instruments and other
                  short-term
                  investments with an initial maturity of three months or less to
                  be cash or cash
                  equivalents. There were no cash equivalents as of March 31, 2007
                  and
                  2006.
 
 The
                  Company maintains cash and cash equivalent balances at several
                  financial
                  institutions that are insured by the Federal Deposit Insurance
                  Corporation up to
                  $100,000.  At March 31, 2007 and 2006, the Company had $-0- and $-0-
                  of funds in excess of the insured limit.
  F-12
 ******IVI
                    COMMUNICATIONS, INC. AND
                    SUBSIDIARIES****** **NOTES
                      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                      31, 2007 AND 2006**
 
 **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING POLICIES
                            CONTINUED)**
 
 **Revenue
                  Recognition**
 
 Internet
                  service subscription revenues are recognized over the period that
                  services are
                  provided.  The Company generally bills for Internet access service on
                  the terms that range from one month to one year in advance.  Monthly
                  access fees are not prorated, and refunds are not given for partial
                  months.  Therefore, revenues for the first month of service paid in
                  advance are recognized at the inception of the service
                  month.  Revenues for terms of service greater than one month that are
                  paid in advance are deferred and amortized over the period in which
                  the services
                  are provided.
 
 Consulting
                  revenues are recognized upon the service being provided. All equipment
                  sales are
                  final upon delivery of the merchandise.
 
 **Income
                  Taxes**
 
 The
                  Company has adopted the provisions of Statement of Financial Accounting
                  Standards No. 109 (the Statement), Accounting for Income Taxes.  The
                  Statement requires an asset and liability approach for financial
                  accounting and
                  reporting for income taxes, and the recognition of deferred tax
                  assets and
                  liabilities for the temporary differences between the financial
                  reporting bases
                  and tax bases of the Company’s assets and liabilities at enacted tax rates
                  expected to be in effect when such amounts are realized or settled.
 
 **Fair
                  Value of Financial Instruments**
 
 The
                  carrying amounts reported in the consolidated balance sheets for
                  cash and cash
                  equivalents, accounts receivable, accounts payable, accrued expenses
                  and notes
                  payable approximate fair value because of the immediate or short-term
                  maturity
                  of these financial instruments.
 
 **Advertising
                  Costs**
 
 The
                  Company expenses the costs associated with advertising as
                  incurred.  Advertising expenses are included in general and
                  administrative expenses in the consolidated statements of operations
                  for the
                  years ended March 31, 2007 and 2006.  Advertising costs for the years
                  ended March 31, 2007 and 2006 were $5,508 and $318,920
                  respectively.
  F-13
 ****IVI
                    COMMUNICATIONS, INC. AND SUBSIDIARIES**** **NOTES
                      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                      31, 2007 AND 2006**
 
 **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING POLICIES
                            CONTINUED)**
 
 **Equipment**
 
 Equipment
                  is stated at cost.  Depreciation is computed using the straight-line
                  method over the estimated useful lives of the assets, generally
                  three to five
                  years.
 
 When
                  the
                  assets are retired or otherwise disposed of, the costs and related
                  accumulated
                  depreciation are removed from the accounts, and any resulting gain
                  or loss is
                  recognized in income for the period.  The cost of maintenance and
                  repairs is charged to expense as incurred; significant renewals
                  and betterments
                  are capitalized.  Deduction is made for retirements resulting from
                  renewals or betterments.
 
 **Accounts
                  Receivable**
 
 The
                  Company conducts business and extends credit based on an evaluation
                  of the
                  customers’ financial condition, generally without requiring
                  collateral.  Exposure to losses on receivables is expected to vary by
                  customer due to the financial condition of each customer.  The Company
                  monitors exposure to credit losses and maintains allowances for
                  anticipated
                  losses considered necessary under the circumstances. The allowance
                  for doubtful
                  accounts at March 31, 2007 and 2006 is $-0- and $2,397
                  respectively.
 
 **Earnings
                            (Loss) Per Share of Common
                            Stock**
 
 Historical
                  net income (loss) per common share is computed using the weighted
                  average number
                  of common shares outstanding.  Diluted earnings per share (EPS)
                  include additional dilution from common stock equivalents, such
                  as stock
                  issuable pursuant to the exercise of stock options and
                  warrants.  Common stock equivalents were not included in the
                  computation of diluted earnings per share when the Company reported
                  a loss
                  because to do so would be antidilutive for periods presented.
  F-14
 ****IVI
                    COMMUNICATIONS, INC. AND SUBSIDIARIES**** **NOTES
                      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                      31, 2007 AND 2006**
  **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING POLICIES
                            CONTINUED)**
 
 **Earnings
                  (Loss) Per Share of Common Stock (continued)**
 
 The
                  following is a reconciliation of the computation for basic and
                  diluted EPS as of
                  March 31;
  **2007**
                          ****
                          ****
                          **2006**Net
                              income (loss)
                          
                          $
                          313,283
                          
                          
                          $
                          (4,158,104
                          )Weighted
                              average common shares
                            Outstanding
                              (Basic)
                          
                          
                          82,157,193
                          
                          
                          
                          62,256,813Weighted
                              average common stock
                            Equivalents:
                              Warrants
                          
                          
                          138,177,295
                          
                          
                          
                          -0-Weighted
                              average common shares
                            Outstanding
                              (Diluted)
                          
                          
                          220,334,488
                          
                          
                          
                          62,256,813
  Options
                  and warrants outstanding to purchase stock were not included in
                  the computation
                  of diluted EPS for March 31, 2006 because inclusion would have
                  been
                  anti-dilutive.  However, options and warrants that would have been
                  available at March 31, 2006 were 50,000 and 4,027,705,
                  respectively.
 
 **Goodwill
                  and Other Intangible Assets**
 
 In
                  June
                  2001, the FASB issued Statement No. 142 “Goodwill and Other Intangible Assets”.
                  This statement addresses financial accounting and reporting for
                  acquired
                  goodwill and other intangible assets and supersedes APB Opinion
                  No. 17,
                  Intangible Assets. It addresses how intangible assets that are
                  acquired
                  individually or with a group of other assets (but not those acquired
                  in a
                  business combination) should be accounted for in financial statements
                  upon their
                  acquisition. This Statement also addresses how goodwill and other
                  intangible
                  assets should be accounted for after they have been initially recognized
                  in the
                  financial statements. The Company recorded $3,437,548 in goodwill
                  in its
                  acquisition of Internet Business Consulting and AppState.Net,
                  LLC.  The Company recorded $674,934 in goodwill in its acquisition of
                  Futura, Inc. on February 6, 2006.  The goodwill recorded for Internet
                  Business Consulting and AppState.Net, LLC was written-off with
                  the disposal of
                  the operations, and management has determined that there has been
                  no impairment
                  of the Futura, Inc.  goodwill as of March 31, 2007.
  F-15
 **IVI
                  COMMUNICATIONS, INC. AND SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING POLICIES
                            CONTINUED)**
 
 **Stock-Based
                  Compensation**
 
 Employee
                  stock awards under the Company's compensation plans are accounted
                  for in
                  accordance with Accounting Principles Board Opinion No. 25 (“APB 25”),
“*Accounting for Stock Issued to Employees*”, and related
                  interpretations. The Company provides the disclosure requirements
                  of Statement
                  of Financial Accounting Standards No. 123, “*Accounting for Stock-Based
                  Compensation*” (“SFAS 123”), and related
                  interpretations.  Stock-based awards to non-employees are accounted
                  for under the provisions of SFAS 123 and has adopted the enhanced
                  disclosure
                  provisions of SFAS No. 148 “Accounting for Stock-Based Compensation- Transition
                  and Disclosure, an amendment of SFAS No. 123”.
 
 The
                  Company measures compensation expense for its employee stock-based
                  compensation
                  using the intrinsic-value method.  Under the intrinsic-value method of
                  accounting for stock-based compensation, when the exercise price
                  of options
                  granted to employees is less than the estimated fair value of the
                  underlying
                  stock on the date of grant, deferred compensation is recognized
                  and is amortized
                  to compensation expense over the applicable vesting period. In
                  each of the
                  periods presented, the vesting period was the period in which the
                  options were
                  granted. All options were expensed to compensation in the period
                  granted rather
                  than the exercise date.
 
 The
                  Company measures compensation expense for its non-employee stock-based
                  compensation under the Financial Accounting Standards Board (FASB)
                  Emerging
                  Issues Task Force (EITF) Issue No. 96-18, “*Accounting for Equity Instruments
                  that are Issued to Other Than Employees for Acquiring, or in Conjunction
                  with
                  Selling, Goods or Services*”.  The fair value of the option issued
                  is used to measure the transaction, as this is more reliable than
                  the fair value
                  of the services received.  The fair value is measured at the value of
                  the Company’s common stock on the date that the commitment for performance
                  by
                  the counterparty has been reached or the counterparty’s performance is complete.
                  The fair value of the equity instrument is charged directly to
                  compensation
                  expense and additional paid-in capital.
  F-16
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING POLICIES
                            CONTINUED)**
  **Derivative
                  Instruments**
  The
                  Company has an outstanding convertible debt instrument that contains
                  an embedded
                  derivative.  The Company accounts for this derivative in accordance
                  with FAS No. 133, “*Accounting for Derivative Instruments and Hedging
                  Activities*”, and EITF Issue No. 00-19, “*Accounting for Derivative
                  Financial Instruments Indexed to, and Potentially Settled in, a
                  Company’s Own
                  Stock*.”  In accordance with the provisions of FAS No. 133 and
                  EITF Issue No. 00-19, the embedded derivative is required to be
                  bifurcated from
                  the debt instrument and recorded as a liability at fair value on
                  the
                  consolidated balance sheet.  The Company also has notes payable with
                  conversion features that qualify as derivative instruments.  Changes
                  in the fair value of the derivatives are recorded at each reporting
                  period and
                  recorded in net gain (loss) on derivative, a separate component
                  of the other
                  income (expense).  As of March 31, 2007 and 2006, the fair value of
                  the derivatives was $164,077 and 216,312, respectively.
  **Recent
                  Accounting Pronouncements**
 
 On
                  December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
                  Statement of Financial Accounting Standards No. 123 (Revised 2004),
                  “*Share-Based Payment*” (“SFAS 123R”).  SFAS 123R requires that
                  compensation cost related to share-based payment transactions be
                  recognized in
                  the financial statements. Share-based payment transactions within
                  the scope of
                  SFAS 123R include stock options, restricted stock plans, performance-based
                  awards, stock appreciation rights, and employee share purchase
                  plans.  The provisions of SFAS 123R, as amended, are effective for
                  small business issuers beginning as of the next fiscal year after
                  December 15,
                  2005.  Accordingly, the Company has implemented the revised standard
                  in the first quarter of fiscal year 2007.
 
 In
                  November 2004, the FASB issued Financial Accounting Standards No.
                  151 (FAS 151),
“*Inventory Costs – an amendment of ARB No. 43, Chapter
                  4*”.  FAS 151 clarifies the accounting for abnormal amounts of
                  idle facility expense, freight, handling costs and spoilage.  In
                  addition, FAS 151 requires companies to base the allocation of
                  fixed production
                  overhead to the costs of conversion on the normal capacity of production
                  facilities.  FAS 151 is effective for the Company in
                  2006.  FAS 151 did not have a material impact on its results or
                  financial statements.
  F-17
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 
 **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING POLICIES
                            CONTINUED)**
 
 **Recent
                  Accounting Pronouncements (continued)**
 
 On
                  December 16, 2004, FASB issued Financial Accounting Standards No.
                  153, Exchanges
                  of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting
                  for
                  Non-monetary Transactions ("FAS 153").  This statement amends APB
                  Opinion 29 to eliminate the exception for non-monetary exchanges
                  of similar
                  productive assets and replaces it with a general exception for
                  exchanges of
                  non-monetary assets that do not have commercial substance.  Under FAS
                  153, if a
 non-monetary
                  exchange of similar productive assets meets a commercial-substance
                  criterion and
                  fair value is determinable, the transaction must be accounted for
                  at fair value
                  resulting in recognition of any gain or loss.  FAS153 is effective for
                  non-monetary transactions in fiscal periods that begin after June
                  15,
                  2005.  The implementation of this standard did not have a material
                  impact on its financial position, results of operations or cash
                  flows.
 
 In
                  March 2005, the FASB issued Statement
                  of Financial Accounting Standards Interpretation Number 47 (“FIN 47”),
“Accounting for Conditional Asset Retirement Obligations.”  FIN 47
                  provides clarification regarding the meaning of the term “conditional asset
                  retirement obligation” as used in FAS 143, “Accounting for Asset Retirement
                  Obligations.”  FIN 47 is effective for the year ended December 31,
                  2005.  The implementation of this standard did not have a
                  material impact on its financial position, results of operations
                  or cash
                  flows.
 
 In
                  May
                  2005, the FASB issued SFAS 154, “Accounting for Changes and Error Corrections—a
                  replacement of APB Opinion No. 20 and FASB Statement
                  No. 3.”  FAS 154 changes the requirements with regard to the
                  accounting for and reporting a change in an accounting principal.  The
                  provisions of FAS 154 require, unless impracticable, retrospective
                  application
                  to prior periods presented in financial statements for all voluntary
                  changes in
                  an accounting principle and changes required by the adoption of
                  a new accounting
                  pronouncement in the unusual instance that the new pronouncement
                  does not
                  indicate a specific transition method.  FAS 154 also requires that a
                  change in depreciation, amortization or depletion method for long-lived,
                  non-financial assets be accounted for as a change in an accounting estimate,
                  which requires prospective application of the new method.  FAS 154 is
                  effective for all changes in an accounting principle made in fiscal
                  years
                  beginning after December 15, 2005.  The Company adopted FAS 154
                  beginning January 1, 2006.  Because SAS 154 is directly dependent upon
                  future events, the Company cannot determine what effect, if any,
                  the expected
                  adoption of FAS 154 will have on its financial condition, results
                  of operations
                  or cash flows.
  F-18
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 
 **NOTE
                            2-**
                        **SUMMARY
                            OF SIGNIFICANT ACCOUNTING POLICIES
                            CONTINUED)**
 
 **Recent
                  Accounting Pronouncements (continued)**
 
 In
                  February 2006, the Financial Accounting Standards Board (FASB)
                  issued Statement
                  of Financial Accounting Standards (FAS) No. 155, Accounting for Certain
                  Hybrid Financial Instruments.  FAS No. 155 replaces FAS
                  No. 133 Accounting for Derivative Instruments and Hedging Activities,
                  and
                  FAS No. 140 Accounting for Transfers and Servicing of Financial Assets
                  and
                  Extinguishments of Liabilities.  FAS No. 155 resolves issues
                  addressed in Statement 133 Implementation Issue No. D1, “Application of
                  Statement 133 to Beneficial Interests in Securitized Financial
                  Assets.” This
                  statement will be effective for all financial instruments acquired
                  or issued
                  after the beginning of an entity’s fiscal year that begins after
                  September 15, 2006. The Company is currently analyzing whether this new
                  standard will have impact on its financial position and results
                  of
                  operations.
 
 In
                  September 2006, the FASB issued
                  SFAS No. 157 “Fair Value Measurements,” which provides a definition of
                  fair value, establishes a framework for measuring fair value and
                  requires
                  expanded disclosures about fair value measurements. SFAS No. 157 is
                  effective for financial statements issued for fiscal years beginning
                  after
                  November 15, 2007 and interim periods within those fiscal years. The
                  provisions of SFAS No. 157 should be applied prospectively.The
                  Company is currently analyzing whether this new standard will have
                  impact on its
                  financial position and results of operations.
 
 In
                  September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting
                  for Defined Benefit Pension and Other Postretirement Plans”, which amends
                  SFAS No. 87 “Employers’ Accounting for Pensions”
(SFAS No. 87), SFAS No. 88 “Employers’ Accounting for
                  Settlements and Curtailments of Defined Benefit Pension Plans and
                  for
                  Termination Benefits” (SFAS No. 88), SFAS No. 106
“Employers’ Accounting for Postretirement Benefits Other Than Pensions”
(SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures
                  about Pensions and Other Postretirement Benefits (revised 2003)”
(SFAS No. 132R). This Statement requires companies to recognize an
                  asset or liability for the overfunded or underfunded status of
                  their benefit
                  plans in their financial statements. SFAS No. 158 also requires the
                  measurement date for plan assets and liabilities to coincide with
                  the sponsor’s
                  year end. The standard provides two transition alternatives related
                  to the
                  change in measurement date provisions. The recognition of an asset
                  and liability
                  related to the funded status provision is effective for fiscal
                  year ending after
                  December 15, 2006 and the change in measurement date provisions is
                  effective for fiscal years ending after December 15, 2008. The
                  implementation of this standard did not have a material impact
                  on its financial
                  position, results of operations or cash flows.
  F-19
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 
 **NOTE
                            3-**
                        **EQUIPMENT**
 
 Equipment
                  as of March 31, 2007 and 2006 was as follows:
 
 **Estimated
                            Useful**
                        ****
                        ****
                        ****
                        ****
                        ****
                        ****
                        ********
                        ****
                        **Lives
                            (Years)******
                        ****
                        **2007**
                        ****
                        ****
                        **2006**Equipment
                        
                        
                        3-5
                        
                        
                        $
                        39,888
                        
                        
                        $
                        117,263Less
                            accumulated depreciation
                        
                        
                        
                        
                        
                        
                        (19,147
                        )
                        
                        
                        (25,944
                        )Equipment,
                            net
                        
                        
                        
                        
                        
                        $
                        20,741
                        
                        
                        $
                        91,319
  Depreciation
                  expense was $42,360 and $21,624 for the years ended March 31, 2007
                  and 2006,
                  respectively.
  **NOTE
                            4-**
                        **INSTALLMENT
                            DEBT**
 
 Installment
                  debt consists of approximately 11 notes for various pieces of equipment.
                  The
                  Company has not reflected the asset value on the books because
                  the assets are
                  considered to have no value remaining. These assets are however
                  collateral for
                  the debt. The Company has reflected these balances in the consolidated
                  balance
                  sheets as installment debt and in accounts payable. The portion
                  in accounts
                  payable represents the amounts overdue, and the portion in installment
                  debt
                  represents the amounts still due under the agreements.
 
 The
                  installment debt liability at March 31, 2007 and 2006 is $0 and
                  $1,116
                  respectively.
 
 **NOTE
                            5-**
                        **ACQUISITION
                            CONTRACTS AND NOTES
                            PAYABLE**
 
 **Acquisition
                  Contracts**
 
 In
                  accordance with the purchase agreement between the Company and
                  Internet Business
                  Consulting and AppState.net, LLC, the Company entered into two
                  separate note
                  agreements.
  F-20
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            5-**
                        **ACQUISITION
                            CONTRACTS AND NOTES PAYABLE
                            (Continued)**
 
 **Acquisition
                  Contracts (Continued)**
 
 The
                  Company agrees to make 12 monthly payments of $8,334 with the first
                  payment due
                  with the signing of the agreement. The Company has completed these
                  payments as
                  of March 31, 2006. The Company also entered into an agreement to
                  make 24
                  payments of $20,000 all due no later than the 1st day of the month
                  following
                  completion of IBC’s and AppState’s audits (April 2005) and then on the 1st day
                  of each subsequent month thereafter until paid in full.  The Company
                  was in default on January 1, 2007.  See Note 11:  Contract
                  Settlement.
 
 In
                  association with the acquisition of Futura, Inc., the Company agreed
                  to make 3
                  installment payments in $25,000 increments on June 1, 2006, September
                  1, 2006
                  and December 1, 2006.  The acquisition contract has been paid in
                  full.
 
 **Notes
                  Payable**
 
 The
                  Company borrowed a total of  $1,077,955 from 22 different individuals
                  during 1999 through the present, at interest rates ranging from
                  7-12%, with no
                  collateral and payment terms of 2 or 3 years. As of March 31, 2007
                  and 2006, all
                  amounts unpaid are overdue. As of March 31, 2007 and 2006, the
                  notes payable
                  balance is $186,489 and $767,311, and the accrued interest on those
                  notes as of
                  March 31, 2007 and 2006 is $92,599 and $581,273 respectively. These
                  amounts are
                  reflected as current liabilities in the consolidated balance sheet
                  at March 31,
                  2007 and 2006.
  F-21
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            5-**
                        **ACQUISITION
                            CONTRACTS AND NOTES PAYABLE
                            (CONTINUED)**
 
 **Notes
                  Payable (Continued)**
 
 The
                  following transactions occurred for the year ended March 31, 2007:
 
 During
                  the year ended March 31, 2007, $240,451 in principal and $265,772
                  in accrued
                  interest was written-off due to state jurisdiction time bar.
 
 A
                  settlement was reached whereby a note for $305,000 with accrued
                  interest of
                  $197,387 was replaced with a litigation settlement of $450,000.
 
 A
                  settlement was reached whereby a note for $124,994 with accrued
                  interest of
                  $138,409 was replaced with a contingent settlement for $110,000,
                  which has been
                  classified as an accrued liability.
 
 In
                  November 2006 a note was issued to Nyhl Henson for $80,623 for
                  compensation.  The note carries no interest and was due November 30,
                  2007 and is convertible at current market price.  The note has not
                  been repaid or converted.
 
 In
                  May
                  2006 the Company borrowed $5,000 on a one-year note due May 22,
                  2007.  This note carries no interest.
 
 In
                  December 2006 the Company borrowed $4,000 on a one-year note due
                  December 22,
                  2007.  This note carries no interest.
  **NOTE
                            6-**
                        **CONVERTIBLE
                            DEBENTURES**
 
 The
                  Company sold units of securities for $984,428 to approximately
                  100 individuals
                  during 1998 and 1999. Each unit consisted of one share of common
                  stock and one
                  debenture with interest at 12%, no collateral, and an original
                  due date of
                  December 2001. The debentures are convertible at any time at $7.50
                  per share. In
                  late 1999 to early 2000, the Company converted $373,128 of debentures
                  into
                  common stock. In mid-2002, the Company offered conversions at $.40
                  per share and
                  32 individuals with a face amount of $274,550 plus accrued interest
                  of $101,254
                  accepted this conversion to 939,511 shares of common stock.  During
                  the year ended March 31, 2007, $329,250 face value and $427,314
                  in accrued
                  interest was written-off and charged to other income and $7,500
                  was reclassified
                  as an accrued expense due to the settlement arrangements made with
                  the
                  holder.
  F-22
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            6-**
                        **CONVERTIBLE
                            DEBENTURES CONTINUED**
 
 The
                  Company sold units of securities for $215,000 to 14 individuals/entities
                  in
                  December 2004. The debentures accrue interest at 10% per annum
                  and are due
                  December 31, 2005. The conversion price is $.10 per common share.  In
                  January 2006, the debentures were converted to 2,365,00 shares
                  of common
                  stock.  A beneficial interest expense of $249,150 was realized on the
                  conversion.
 
 The
                  Company sold a security for $25,000 to one entity in January 2005.
                  This
                  debenture, which was for services rendered, also accrues interest
                  at 10% per
                  annum and is due January 31, 2006. The conversion price is $.10
                  per common
                  share. No conversion or repayment of the debenture has occurred
                  as of March 31,
                  2007.
 
 The
                  Company sold a security for $5,000 to one entity in January
                  2006.  This debenture, which was for services rendered, accrues
                  interest at 9% per annum and is due January 1, 2007.  The conversion
                  price is $.05 per common share.  This debenture has been converted to
                  100,000 shares of common stock.  A beneficial interest expense
                  of  $16,000 was realized on the conversion.
 
 The
                  Company sold a security for $20,000 to one entity in March 2006.  This
                  debenture, which was for services rendered, accrues interest at
                  9% per annum and
                  is due April 1, 2007.  The conversion price is $.05 per common
                  share.  This debenture was converted to 400,000 shares of common
                  stock.  A beneficial interest expense of $40,000 was realized on the
                  conversion.
 
 The
                  Company sold a security for $257,500 to one entity in March
                  2006.  This debenture, which was for services rendered, accrues
                  interest at 9% per annum and is due May 15, 2007.    In the
                  event the Company receives funding in the amount of at least Six
                  Hundred
                  Thousand Dollars ($600,000), Forty Five Thousand Dollars ($45,000)
                  immediately
                  becomes due and payable to the holder.  The conversion price is $.05
                  per common share.
  F-23
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 
  **NOTE
                            6-**
                        **CONVERTIBLE
                            DEBENTURES CONTINUED**
  On
                  March
                  27, 2006, the Company entered into a securities purchase agreement
                  with Cornell
                  Capital Partners L.P. providing for the sale by the Company to
                  Cornell of our
                  12% secured convertible debentures in the aggregate principal amount
                  of $600,000
                  of which $200,000 was advanced immediately. The second installment
                  of $200,000
                  was advanced on April 18, 2006. The last installment of $200,000
                  was advanced
                  August 14, 2006, two (2) business days after the registration statement
                  was
                  declared effective.
  The
                  Convertible Debentures mature on the third anniversary of the date
                  of issuance
                  and the Company is not required to make any payments until the
                  maturity date.
                  Holders of the Debentures may convert at any time amounts outstanding
                  under the
                  debentures into shares of our common stock at a conversion price
                  per share equal
                  to the lower of (i) $0.20
                  or (ii)
                  ninety percent (90%) of the lowest closing Bid Price of the Common
                  Stock during
                  the thirty (30) trading days immediately preceding the conversion
                  date as quoted
                  by Bloomberg, LP.Cornell has agreed not to short any of the shares of
                  Common Stock. The Company has the right to redeem a portion or
                  all amounts
                  outstanding under the debenture prior to the maturity date at a
                  20% redemption
                  premium provided that the closing bid price of our common stock
                  is less than
                  $0.20.
 
 During
                  the year ended March 31, 2007, the debenture holder converted $150,000
                  of
                  principal for 13,038,639 shares of common stock.  Beneficial interest
                  of $25,072 was recognized on the conversions.
  The
                    Company sold a security for $12,500 to one entity in September
                    2006.  This debenture carries no interest and has a conversion rate
                    of
                    50% discount to market of the ten-day average closing bid price.
                    This has been
                    recorded as a derivative liability.
  The
                    Company sold a security for $12,500 to one entity
                    in October 2006.  This debenture carries no interest and has a
                    conversion rate of 50% discount to market of the ten-day average
                    closing bid
                    price. This has been recorded as a derivative liability.
 On
                  February 22, 2007, Cornell exercised 3,500,000 warrants at a price
                  of $.0085 for
                  $29,750.  Beneficial interest of $12,250 was recognized.
 
 **Derivative
                  Liability**
 
 A
                  holder of the Convertible Debenture
                  may not convert or receive shares as payment of interest to the
                  extent such
                  conversion or receipt of such interest payment would result in
                  the holder,
                  together with any affiliate of the holder, beneficially owning
                  in excess of
                  4.99% of the then issued and outstanding shares of Common Stock,
                  including
                  shares issuable upon conversion of, and payment of interest.
  F-24
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 **NOTE
                            6-**
                        **CONVERTIBLE
                            DEBENTURES CONTINUED**
 
 **Derivative
                  Liability
                  (Continued)**
 
 In
                  January 2007 the Company borrowed $6,756 from Nyhl Henson, President,
                  on a
                  one-year note due January 19, 2008.   This note carries no
                  interest and is convertible at the previous 10-day closing price.
 
 In
                  January 2007 the Company borrowed $3,243 from Charles Roodenburg,
                  CFO, on a
                  one-year note due January 19, 2008.  This note carries no interest and
                  is convertible at the previous 10-day closing price.
 
 In
                  February 2007 the Company borrowed $45,000 from Nyhl Henson, President,
                  on a
                  note due on demand.  The note carries no interest and is convertible
                  at the previous 10-day closing price.
 
 In
                  accordance with SFAS 133, *“Accounting for Derivative Instruments and Hedging
                  Activities”* and EITF 00-19, *“Accounting for Derivative Financial
                  Instruments Indexed to, and Potentially Settled in, a Company's
                  Own Stock”*,
                  the conversion feature associated with the $600,000 convertible
                  debenture
                  represents an embedded derivative. The Company has recognized the
                  embedded
                  derivative in the amount of $9,451 as a liability in the accompanying
                  consolidated balance sheet and has measured it at its estimated
                  fair value. The
                  estimated fair value of the embedded derivative has been calculated
                  based on a
                  Black-Scholes pricing model using the following assumptions:
  Fair
                            market value of stock
                          $0.20Exercise
                            price
                          $0.18Dividend
                            yield
                          0.00%Risk
                            free interest rate
                          4.00%Expected
                            volatility
                          192.95%Expected
                            life
                          5.0
                            Years
  F-25
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
  **NOTE
                            6-**
                        **CONVERTIBLE
                            DEBENTURES CONTINUED**
 
 **Derivative
                  Liability (Continued)**
  The
                  Company also issued to Cornell five-year warrants to purchase 2,000,000
                  and
                  1,500,000 shares of Common Stock at prices of $0.30, and $0.40,
                  respectively.If at the time
                  of
                  exercise of the Warrants, the shares of Common Stock underlying
                  the Warrant are
                  not subject to an effective registration statement under the Securities
                  Act of
                  1933, as amended (the "Act") or if an event of default under the
                  Convertible
                  Debentures has occurred, which is not cured in any applicable cure
                  period, the
                  holder of the Warrant, in lieu of making payment of the Exercise
                  Price in cash,
                  may elect a cashless exercise in accordance with the formula set
                  forth in the
                  Warrant.If, subject
                  to the
                  exceptions set forth in the warrants, during the time that the
                  Warrants are
                  outstanding, the Company issues or sells, or is deemed to have
                  issued or sold,
                  any shares of Common Stock for a consideration per share less than
                  a price equal
                  to the then exercise price, then the exercise price will be reduced
                  to an amount
                  equal to such consideration per share. Upon each such adjustment,
                  the number of
                  shares of Common Stock issuable upon exercise of the Warrants will
                  be adjusted
                  to the number of shares determined by multiplying the exercise
                  price in effect
                  immediately prior to such adjustment by the number of shares issuable
                  upon
                  exercise of the warrants immediately prior to such adjustment and
                  dividing the
                  product by the exercise price resulting from such adjustment. Similar
                  adjustments will be made upon any issuance or sale by us of options
                  to purchase
                  Common Stock or convertible securities.
  As
                  of
                  March 31, 2006, the fixed freestanding warrants issued in connection
                  with the
                  $600,000 convertible debenture has been valued at $674,417 based
                  on a
                  Black-Scholes pricing model using the following assumptions:
  Fair
                              market value of stock
                            $0.20Exercise
                              price
                            $0.30
                              and $0.40Dividend
                              yield
                            0.00%Risk
                              free interest rate
                            4.00%Expected
                              volatility
                            192.95%Expected
                              life
                            5.0
                              Years
  On
                  August 8, 2006 the Company issued
                  stock at a market price of $.04.  This increased the number of
                  warrants from 3,500,000 to 30,000,000 at $.04 exercise
                  price.
  F-26
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            6-**
                        **CONVERTIBLE
                            DEBENTURES CONTINUED**
 
 **Derivative
                  Liability (Continued)**
 
 The
                  allocation of the proceeds of the convertible debenture to the
                  warrants and the
                  recognition of the embedded derivative resulted in discounts to
                  the convertible
                  debenture of $154,255 and $45,745, respectively. The discount on
                  debt of
                  $200,000 is being amortized to interest through March 31, 2009
                  using the
                  effective interest method.
 
 In
                  connection with the Purchase Agreement, the Company also entered
                  into a
                  registration rights agreement with Cornell providing for the registration
                  of the
                  shares of common stock issuable upon conversion of the debentures
                  and exercise
                  of the warrants. The Company is obligated to use its best efforts
                  to cause the
                  registration statement to be declared effective no later than July
                  25, 2006 and
                  to insure that the registration statement remains in effect until
                  all of the
                  shares of common stock issuable upon conversion of the debentures
                  and exercise
                  of the warrants have been sold. In the event of a default of the
                  Company’s
                  obligations under the registration rights agreement, including
                  its agreement to
                  file the registration statement no later than May 11, 2006, or
                  if the
                  registration statement is not declared effective by July 25, 2006,
                  the Company
                  is required to pay to Cornell, as liquidated damages, for each
                  month that the
                  registration statement has not been filed or declared effective,
                  as the case may
                  be, either a cash amount or shares of its common stock equal to
                  2% of the
                  liquidated value of the Debentures.
 
 On
                  August
                  14, 2006, the registration statement for 22,500,000 shares of common
                  stock for
                  Cornell Capital Partners L.P. was declared effective.  The Company was
                  liable for liquidated damages up to 2% per month for failure to
                  have an
                  effective registration statement by July 25, 2006.  Cornell Capital
                  Partners has verbally agreed to waive said damages.
 
 In
                  January 2007 the Company borrowed $6,756 from Nyhl Henson, President,
                  on a
                  one-year note due January 19, 2008.   This note carries no
                  interest and is convertible at the previous 10-day closing price.
 
 In
                  January 2007 the Company borrowed $3,243 from Charles Roodenburg,
                  CFO, on a
                  one-year note due January 19, 2008.  This note carries no interest and
                  is convertible at the previous 10-day closing price.
 
 In
                  February 2007 the Company borrowed $45,000 from Nyhl Henson, President,
                  on a
                  note due on demand.  The note carries no interest and is convertible
                  at the previous 10-day closing price.
  F-27
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 
 
 **NOTE
                            6-**
                        **CONVERTIBLE
                            DEBENTURES CONTINUED**
 
 **Derivative
                  Liability (Continued)**
  The
                  Company’s obligations under the purchase agreement are secured by substantially
                  all of its assets and the assets of its subsidiaries. As further
                  security for
                  its obligations thereunder, Nyhl Henson, Chief Executive Officer,
                  and Charles
                  Roodenburg, Chief Operating Officer, have granted a security interest
                  in an
                  aggregate of 925,000 shares of their common stock and 3,300,000
                  shares of their
                  Series A Preferred Stock. The Company also granted a security interest
                  in
                  15,000,000 shares of its stock, issued from treasury.
 
 On
                  July
                  14, 2006, the Company entered into an agreement with Cornell Capital
                  Partners to
                  cancel the security interest in the 15,000,000 shares. These shares
                  were
                  subsequently returned and cancelled.
  **NOTE
                            7-**
                        **OBLIGATION
                            UNDER CAPITAL LEASE**
 
 The
                  Company has no capital lease obligations at March 31, 2007.  See Note
                  11: Contract Settlement.
  **NOTE
                            8-**
                        **STOCKHOLDERS’
                            DEFICIT**
 
 **Preferred
                  Stock**
 
 The
                  Company has 5,000,000 shares of preferred stock authorized, 4,000,000
                  Class A
                  and 1,000,000 Class B; and 5,000,000 and 4,000,000 shares of preferred
                  stock
                  issued and outstanding as of March 31, 2007 and 2006, respectively.
 
 For
                  the
                  year ended March 31, 2006, 4,000,000 shares of preferred Class
                  A stock valued at
                  $200,000 were issued as compensation.
 
 For
                  the
                  year ended March 31, 2007, 1,000,000 shares of preferred Class
                  B stock valued at
                  $1,000 were issued as compensation.
  F-28
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            8-**
                        **STOCKHOLDERS’
                            DEFICIT(CONTINUED)**
 
 **Common
                  Stock**
 
 On
                  October 4, 2006, IVI Communications held its annual shareholder
                  meeting.  The Company increased its authorized shares of common stock
                  from 100,000,000 to 400,000,000 common shares.
 
 As
                  of
                  March 31, 2007 and 2006, the Company has 400,000,000 and 100,000,000
                  shares of
                  common stock authorized, 110,788,677 and 77,985,587 issued and
                  outstanding,
                  respectively.   There are 2,574,312 shares of stock receivable,
                  see Note 11:  Contract Settlement.
 
 The
                  following details the stock transactions for the year ended March
                  31,
                  2006
 
 In
                  the
                  quarter ended June 30, 2005, 2,574,312 shares were issued to James
                  Hollis to
                  complete the acquisition of Internet Business Consulting and
                  AppState.net.
 
 In
                  the
                  quarter ended September 30, 2005, 1,750,000 shares were issued
                  to exercise
                  options valued at $.075; 350,000 shares were issued for consulting
                  services
                  valued at $103,250 and 6,439,368 shares were cancelled.  The Company
                  had issued 6,130,827 shares of common stock to be held in escrow
                  under a
                  subscription agreement with a London Investment Fund. In the event
                  the Fund
                  failed in its efforts to receive trading status, the subscription
                  agreement
                  would be null and void and the shares held in escrow, as well as
                  the 380,541
                  shares issued for consulting, would be cancelled.
 
 In
                  the
                  quarter ended December 31, 2005, 1,500,000 shares were issued to
                  exercise
                  options valued from $.075 to $.25; 3,281,014 shares valued at $1,424,201
                  were
                  issued for consulting services; and 13,734,669 shares were returned
                  and
                  cancelled as part of the agreement when the Company sold it’s interest in
                  Broadspot World Wide Wireless, Inc.
 
 In
                  the
                  quarter ended March 31, 2006, 1,250,000 shares were issued to exercise
                  options
                  valued from $.25 to $.35; 2,813,300 shares valued at $550,000 were
                  issued for
                  the acquisition of Futura, Inc.; 195,646 shares valued at $40,500
                  were issued
                  for consulting; 40,667 shares valued at $7,201 were issued for
                  services;
                  2,365,000 shares were issued for the December 2004 debenture conversions
                  valued
                  at $236,500; and 100,000 shares were issued for the conversion
                  of a $5,000
                  debenture issued in January 2006 with a conversion price of $.05;
                  and 400,000
                  shares were issued for the conversion of a $20,000 debenture issued
                  in March
                  2006 with a conversion price of $.05.
  F-29
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 **NOTE
                            8-**
                        **STOCKHOLDERS’
                            DEFICIT(CONTINUED)**
 
 **Common
                  Stock (Continued)**
 
 15,000,000
                  shares were issued as collateral on the Cornell Capital Partners
                  convertible
                  debenture.  These shares are issued, but not outstanding.
 
 The
                  following details the stock transactions for the year ended March
                  31,
                  2007
 
 15,000,000
                  shares issued as collateral on the Cornell Capital Partners convertible
                  debenture were returned to the C/ompany.
 
 In
                  the
                  quarter ended September 30, 2006, 14,764,413 shares were issued
                  for prepaid
                  consulting services valued at $780,000; and 495,430 shares were
                  issued for
                  Cornell debenture conversions (see Note 6 Convertible Debentures).
 
 In
                  the
                  quarter ended December 31, 2006, 280,000 shares were issued for
                  debt settlement
                  valued at $28,000; 200,000 shares were issued for consulting services
                  valued at
                  $11,000; 1,000,000 shares were issued for prepaid consulting services
                  valued at
                  $50,000; 309,917 shares were issued for public relations services
                  valued at
                  $7,500; and 3,314,814 shares were issued for Cornell debenture
                  conversions (see
                  Note 6 Convertible Debentures).
 
 In
                  the
                  quarter ended March 31, 2007, 3,500,000 shares were issued for
                  prepaid
                  consulting services valued at $157,500; 8,710,121 shares were issued
                  to convert
                  a note in the amount of $122,812; 2,500,000 shares were issued
                  in exchange for
                  the $25,000 final payment for the completion of the Futura, Inc.
                  purchase;
                  3,500,000 shares were issued for the exercise of warrants by Cornell
                  for
                  $42,000; and 9,228,395 shares were issued for Cornell debenture
                  conversions (see
                  Note 6 Convertible Debentures).
 
 **Stock
                  Options and Warrants**
 
 The
                  Company in 1995 adopted three stock option plans allowing the issuance
                  of both
                  qualified and nonqualified options for up to 1,200,000 shares to
                  directors,
                  employees and consultants of the Company. The plans and warrants
                  issuance are
                  administered by the Board of Directors, who have substantial discretion
                  with
                  regards to persons, amounts, time, price, exercise terms, and restrictions,
                  if
                  any.
 
 Under
                  the
                  Black-Scholes option-pricing model, the total value of the stock
                  options granted
                  in 2003 is charged to operations as these options are fully vested.
                  SFAS No.
                  123, “*Accounting for Stock-Based Compensation*”, encourages adoption of
                  a fair-value-based method for valuing the cost of stock-based compensation.
                  However, it allows companies to continue to use the intrinsic-value
                  method for
                  options granted to employees and disclose pro forma net loss. All
                  of these
                  options are vested as of March 31, 2007 and 2006.
  F-30
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 **NOTE
                            8-**
                        **STOCKHOLDERS’
                            DEFICIT(CONTINUED)**
 
 **Stock
                  Options and Warrants (continued)**
 
 The
                  following tables summarize the activity of the Company's stock
                  option
                  plan:
  **Year
                              Ended March 31, 2007**
                          ********
                          ****
                          **Number
                              of**
                          ****
                          ****
                          **Weighted-average**
                          ********
                          ****
                          **Options**
                          ****
                          ****
                          **Exercise
                              Price**Outstanding
                              - beginning of period
                          
                          
                          50,000
                          
                          
                          $
                          0.50Granted
                          
                          
                          0Forfeited
                          
                          
                          50,000
                          
                          
                          $
                          0.50Outstanding
                              - end of period
                          
                          
                          0
  For
                  disclosure purposes, the fair value of each stock option granted
                  is estimated on
                  the date of grant using the Black-Scholes option-pricing model,
                  which
                  approximates fair value.
  **Year
                              Ended March 31, 2006**
                          ********
                          ****
                          **Number
                              of**
                          ****
                          ****
                          **Weighted-average**
                          ********
                          ****
                          **Options**
                          ****
                          ****
                          **Exercise
                              Price**Outstanding
                              - beginning of period
                          
                          
                          264,000
                          
                          
                          $
                          0.63Granted
                          
                          
                          0Forfeited
                          
                          
                          214,000
                          
                          
                          $
                          0.54Outstanding
                              - end of period
                          
                          
                          50,000
                          
                          
                          $
                          0.50Exercisable
                              - end of period
                          
                          
                          50,000
                          
                          
                          $
                          0.50
  If
                  compensation expense for the
                  Company's stock-based compensation plans had been determined consistent
                  with
                  SFAS 123, the Company's net income and net income per share including
                  pro
                  forma results would have been the amounts indicated below:
  F-31
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 **NOTE
                            8-**
                        **STOCKHOLDERS’
                            DEFICIT(CONTINUED)**
 
 **Stock
                  Options and Warrants (continued)**
  **Year
                            Ended
                            March 31,**
                        ********
                        ****
                        **2007**
                        ****
                        ****
                        **2006**Net
                            income
                            (loss):As
                            reported
                        
                        $
                        313,283
                        
                        
                        $
                        (4,158,104
                        )Total
                            stock-based employee
                            compensation
                          expense
                            determined under fair value based
                          method
                            for all awards, net of related tax effects
                        
                        
                        (0
                        )
                        
                        
                        (0
                        )Pro
                            forma
                        
                        $
                        313,283
                        
                        
                        $
                        (4,158,104)Net
                            loss per
                            share:As
                            reported:Basic
                        
                        $
                        0.00
                        
                        
                        $
                        (0.07
                        )Pro
                            forma:Basic
                        
                        $
                        0.00
                        
                        
                        $
                        (0.07
                        )
 
 The
                  Company has 138,177,295 and 527,705 stock warrants outstanding
                  and vested as of
                  March 31, 2007 and 2006.   In 2007 the 3,500,000 warrants issued
                  in 2006 were adjusted to 141,176,470.  3,500,000 warrants were
                  exercised and 26,880 warrants expired in 2007.
  The
                  Company has the following warrants exercisable for the purchase
                  of its common
                  stock:
 
 **Year
                            Ended****Exercise**
                        ****
                        ****
                        **March
                            31,****Price**
                        ****
                        **Expiration
                            Date**
                        **2007**
                        ****
                        **2006**$0.50
                        
                        February,
                            2007
                        -0-
                        
                        26,880$5.00
                        
                        June,
                            2010
                        250,000
                        
                        250,000$2.50
                        
                        June,
                            2010
                        80,000
                        
                        80,000$5.00
                        
                        July,
                            2010
                        50,000
                        
                        50,000$2.50
                        
                        July,
                            2010
                        2,500
                        
                        2,500$2.50
                        
                        August,
                            2010
                        18,325
                        
                        18,325$2.00
                        
                        August,
                            2010
                        100,000
                        
                        100,000$0.30
                        
                        March,
                            2011
                        -0-
                        
                        2,000,000$0.40
                        
                        March,
                            2011
                        -0-
                        
                        1,500,000$0.0085
                        
                        March,
                            2011
                        137,676,470
                        
                        -0-138,177,295
                        
                        4,027,705Weighted
                            average exercise price
                        $0.022
                        
                        $.785
  F-32
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                            9-**
                        **GOING
                            CONCERN**
 
 As
                  shown
                  in the accompanying consolidated financial statements the Company
                  has sustained
                  net operating losses for the years ended March 31, 2007 and 2006,
                  has sustained
                  large accumulated deficits, and currently does not have the revenues
                  to sustain
                  its operations. In addition, the Company sold off its operations
                  in Colorado,
                  Oregon and California, and has defaulted on the acquisition of
                  Internet Business
                  Consulting/AppState.net, LLC.  This raises substantial doubt about the
                  Company’s ability to continue as a going concern.
 
 Management
                  is in the process of restructuring the Company and is continuing
                  to search for
                  more profitable internet and communications related service companies
                  to
                  acquire. The Company’s future success is dependent upon its ability to achieve
                  profitable operations and generate cash from operating activities,
                  and upon
                  additional financing. There is no guarantee that the Company will
                  be able to
                  raise enough capital or generate revenues to sustain its
                  operations.
 
 The
                  consolidated financial statements do not include any adjustments
                  that might
                  result from the outcome of this uncertainty.
 **NOTE
                              10-**
                          **ACQUISITIONS**
 On
                  January 31, 2005, the Company completed the purchase of Internet
                  Business
                  Consulting, Inc. and AppState.Net, LLC from James R. Hollis by
                  acquiring 100% of
                  the stock of IBC and AppState.
 
 The
                  Company acquired 100% of the stock in IBC and the corporation of
                  AppState in
                  exchange for restricted shares of the Company’s common stock valued at $1 per
                  share on a dollar-for-dollar exchange equal to one times the annual
                  revenue of
                  IBC plus one times the annualized revenue of AppState estimated
                  at 2,674,312
                  shares. Such shares will be restricted stock with 100,000 shares
                  paid within 10
                  days of the agreement (which were issued in the quarter ended March
                  31, 2005 and
                  the balance issued no later than 10 days after completion of the
                  audits of IBC
                  and AppState (which occurred in April 2005). The Company agrees
                  that should the
                  market value of its stock not be $1 per share by January 1, 2007,
                  this will
                  result in an adjustment of the number of shares issued in conjunction
                  with the
                  purchase price ("make-good" clause).
 
 The
                  Company also agreed to make 12 monthly payments of $28,334 with
                  the first
                  payment due with the signing of this agreement, followed by 12
                  payments of
                  $20,000 all due no later than the 1st day of the month following
                  completion of
                  IBC’s and AppState’s audits and then on the 1st day of each subsequent month
                  thereafter until paid in full. IBC and AppState may, at their option
                  up and
                  until all payments have been made, have any or all of this paid
                  as part of an
                  employment contract with Hollis as compensation.
  F-33
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
  **NOTE
                                10-**
                            **ACQUISITIONS
                                    (Continued)**
 The
                  Company also agreed to authorize Internet Business Consulting,
                  Inc. and
                  AppState.Net, LLC to enter into a `sell leaseback' financial transaction
                  ("Lease") so that certain assets may, at the Company’s option, be put on the
                  Lease to enable IBC and AppState to be paid for the assets. The
                  Company agreed
                  to select certain assets to be put on the Lease no later than April
                  15,
                  2005.
 
 Any
                  assets not on the Lease shall remain the property of IBC and AppState.
                  IBC and
                  AppState have the option to store the assets at the offices of
                  IBC and AppState
                  until all consideration due to IBC and AppState has been paid in
                  full. IBC and
                  AppState agreed to the following terms of the Lease and the full
                  terms and
                  conditions of the Lease:
 
 1.
                        24-month
                            term with 24 equal payments.
 2.
                        $1.00
                            Purchase Option at the end of the
                            Lease.
 3.
                        Acceptance
                            Date of January 1 and a Commencement Date of May 1, 2005
                            (120   day `no
                            pay'  period).
 4.
                        10%
                            Interest Rate (rate factor of
                            .04577).
 5.
                        Up
                            to $100,000. The allocation of the total purchase price
                            paid shall be
                            determined solely by IBC and AppState, and adhere to
                            generally acceptable
                            accounting principals, and notice given to the Company
                            by December 31,
                            2005.
 
 In
                  February 2007, the Company was notified it was in default of the
                  contract,
                  effective December 31, 2006.  See Note 11:  Contract
                  Settlement.
 
 On
                  February 6, 2006 the Company acquired Futura, Inc., an ISP in the
                  Little Rock,
                  Arkansas area.  The purchase price was $550,000 in Company stock
                  (2,813,300 shares determined at the close), and $150,000 cash,
                  $75,000 paid at
                  close and three $25,000 payments June 1, September 1, and December
                  1,
                  2006.  The Company acquired all the assets and liabilities of Futura,
                  Inc.
  **NOTE
                                11-**
                            **CONTRACT
                                    SETTLEMENT**
 We
                  have
                  been unable to come to mutually acceptable terms to cure the default
                  by the
                  Company on the terms of the Purchase Agreement (“Agreement”) dated January 1,
                  2005 by and between IVI Communications, Inc. (“Buyer”), Internet Business
                  Consulting, Inc. (“IBC”) and AppState.Net, LLC (“AppState”), jointly referred to
                  as (“Sellers”).  Sellers have exercised the remedies for default as
                  provided in the Agreement and confirmed that the Remedies, which
                  were that
                  foreclosure and repossession occurred December 31, 2006, are in
                  effect.
 
 Pursuant
                  to those remedies, ownership of Sellers reverts to James Hollis,
                  effective
                  December 31, 2006.
  F-34
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
   **NOTE
                                11-**
                            **CONTRACT
                                    SETTLEMENT
                                    (CONTINUED)**
 Per
                  the
                  terms of the Agreement, Sellers will return 2,574,312 shares of
                  IVI common
                  stock.  This has been recorded as Stock Receivable.
  The
                    stock was returned and cancelled on July 6,
                    2007.
  In
                    addition there has been no formal settlement
                    agreement signed by all parties.
 
 The
                  loss
                  on the settlement of the contract was $553,643.
  **NOTE
                                12-**
                            **PROVISION
                                    FOR INCOME
                                    TAXES**
 Deferred
                  income taxes will be determined using the liability method for
                  the temporary
                  differences between the financial reporting basis and income tax
                  basis of the
                  Company’s assets and liabilities.  Deferred income taxes will be
                  measured based on the tax rates expected to be in effect when the
                  temporary
                  differences are included in the Company’s consolidated tax
                  return.  Deferred tax assets and liabilities are recognized based on
                  anticipated future tax consequences attributable to differences
                  between
                  financial statement carrying amounts of assets and liabilities
                  and their
                  respective tax bases.
 
 At
                  March
                  31, 2007 and 2006, deferred tax assets approximated the following:
  **2007**
                          ****
                          ****
                          **2006**Deferred
                              tax assets
                          
                          $
                          8,264,000
                          
                          
                          $
                          8,380,000Less:  valuation
                              allowance
                          
                          
                          (8,264,000
                          )
                          
                          
                          (8,380,000
                          )Net
                              deferred tax assets
                          
                          $
                          -0-
                          
                          
                          $
                          -0-
 
 At
                  March
                  31, 2007 and 2006, the Company had accumulated deficits approximating
                  $25,330,000 and $25,644,000 respectively, available to offset future
                  taxable
                  income through 2026. The Company established valuation allowances
                  equal to the
                  full amount of the deferred tax assets due to the uncertainty of
                  the utilization
                  of the operating losses in future periods.
  F-35
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 
 **NOTE
                                13-**
                            **LITIGATION
                                    / ARBITRATION / OTHER
                                    INCOME**
 The
                  Company is currently negotiating settlements with vendors and debt
                  holders for
                  amounts currently outstanding. As of March 31, 2007, the Company
                  has recognized
                  the full liability for all amounts that are due.
 
 On
                  December 1, 2004, a judgment was entered against Internet Ventures,
                  Inc., the
                  predecessor Company, in favor of Catherine and Joe Santistevan
                  in the amount of
                  $1,367,500.  On September 30, 2006 a confidential Settlement Agreement
                  and Release was entered by and among Joe and Catherine Santistevan
                  (“Santistevans”) and IVI Communications, Inc., successor in interest defendant
                  Internet Ventures, Inc., to set aside the default judgment entered
                  against
                  Internet Ventures, Inc. in the amount of $1,367,500 plus accrued
                  interest.  Under the terms of the agreement IVI Communications will
                  pay the Santistevans a total four hundred and fifty thousand dollars
                  ($450,000),
                  to settle a claim of $1,367,500.  If IVI Communications, Inc. defaults
                  on the agreement a judgment would be entered by stipulation in
                  the amount of
                  1,367,500.  The balance on this settlement at March 31, 2007 and 2006
                  was $448,675 and $934,782.  The Company realized income for the year
                  ended March 31, 2007 in the amount of $986,523.
 
 The
                  Company has six default judgments against it for a total amount
                  of
                  $146,504.  The amounts are recorded in other liabilities and
                  contingencies.
 
 On
                  September 14, 2006, the Company was notified of a Demand for Arbitration
                  to
                  obtain judgment on a settlement default of $28,000. The default
                  of $28,000 was
                  settled for 280,000 shares of common stock. The Company realized
                  income in the
                  amount of $16,800 for the year ended March 31, 2007.
 
 On
                  October 7, 2005, a Complaint for Damages was filed in Superior
                  Court of the
                  State of California, County of San Joaquin, Case No. CV027700,
                  by Annette S.
                  Paoletti as Successor Trustee of the Clare P. Evelyn B. McEnerney
                  Family
                  Trust.  No dollar amount was stated, but a note payable and accrued
                  interest in the amount of $263,403 was recorded in notes payable
                  and interest on
                  notes payable.  On March 31, 2007 a confidential Settlement Agreement
                  was reached between Paoletti and The Company.  Under the terms of the
                  agreement IVI Communications will pay the Paolettis a total of
                  $110,000.  The Company realized income in the amount of $153,403 for
                  the year ended March 31, 2007.
 
 The
                  Company had various other settlements and other income aggregating
                  to $32,419
                  for the year ended March 31, 2007.
  **NOTE
                                14-**
                            **FORGIVENESS
                                    OF
                                    DEBT**
  On
                  March
                  31, 2007, on advice of legal counsel, which rendered an opinion
                  citing
                  California Statutes of Limitations on time barred debt, the Company
                  realized
                  income in the amount of $1,504,450 for the forgiveness of such
                  debt for notes,
                  debentures and vendor payables.
  F-36
 **IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES** **NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
                    31, 2007 AND 2006**
 **NOTE
                                15-**
                            **SUBSEQUENT
                                    EVENTS**
 In
                  April
                  17, 2007, Cornell Capital Partners converted $40,000 of principal
                  for 7,407,408
                  shares of common stock; the conversion price was $.0054, 90% of
                  the lowest
                  closing bid price of $.006 during the prior 30 days.
 
 On
                  May 3,
                  2007, 3,814,510 shares valued at $19,454 were issued for accrued
                  compensation.
 
 On
                  June
                  6, 2007, 5,807,848 shares valued at $42,405 were issued to resolve
                  a
                  subscription rescission offer.
  F-37


**Item
      8** **Changes
      in and Disagreements With Accountants on Accounting and financial
      Disclosure**





None




**Item
      8A** **Internal
      Control over Financial Reporting**





Evaluation
      of disclosure controls and procedures.




The
      Company maintains controls and procedures designed to ensure that information
      required to be disclosed in this report is recorded, processed, accumulated
      and
      communicated to the management, including the chief executive officer and the
      chief financial officer, to allow timely decisions regarding the required
      disclosure.





As
      of
      March 31, 2007, the management, with the participation of the chief executive
      officer and chief financial officer, carried out an evaluation of the
      effectiveness of the design and operation of these disclosure controls and
      procedures. The chief executive officer and chief financial officer concluded
      that these disclosure controls and procedures are effective as of March 31,
      2007.





Changes
      in internal controls.





The
      Company has made no changes in its internal controls or in other factors that
      could significantly affect these controls, nor did it take any corrective
      action, as the evaluation revealed no significant deficiencies or material
      weaknesses, in the period ended March 31, 2007.





**Item
      8B Other
      Information**





None






**PART
      3**








**Item
      9** **Directors,
      Executive Officers, Promoters and Control Persons**





Directors
      and Executive Officers





**Name**
            **Age**
            **Position**Nyhl
                Henson*
            59
            Chief
                Executive Officer, President, Chairman and DirectorCharles
                Roodenburg*
            54
            Chief
                Financial Officer, Chief Operating Officer and
                Director





*In
      a
      subsequent event, effective April 24, 2007 Charles Roodenburg has been named
      as
      President and Chairman of the Board of Directors of IVI Communications, Inc.
      Nyhl Henson has resigned his position as President and Chairman of the Board
      of
      Directors of IVI Communications, Inc.





Terms
      of Directors





The
      Director’s terms expire at the next annual shareholder’s meeting following their
      election.  Mr. Henson and Mr. Roodenburg have served as directors of
      IVI Communications, Inc. since the Turer acquisition in May 2002, and prior
      to
      that, Mr. Henson was a director of Internet Ventures, Inc.





23




Business
      Experience of the Directors and Executive Officers





Nyhl
      Henson, President, Chief Executive Officer and Chairman of the Board of
      Directors





Nyhl
      Henson is Chairman and CEO of IVI Communications, Inc.  Mr. Henson
      served as Chairman and CEO of  Internet Ventures, Inc. from June 2000
      until the reverse merge in Turer Corporation in April 2002. Under Mr. Henson’s
      leadership, IVI Communications is developing a nationally branded broadband
      network, Lickity-SplitSM, currently being tested in the company’s Boone, North
      Carolina ISP, Appstate.Net.  IVI Communications recently acquired IBC
      Wireless, a leading broadband network system designer and equipment reseller
      since 1997.  By these strategic acquisitions Mr. Henson has positioned
      IVI Communications to implement the Company’s plan to deliver broadband Internet
      access to underserved markets across the country.





Mr.
      Henson is most noted for his role in the development of Nickelodeon, MTV
      Networks, Inc., and CMT (Country Music Television).  He is considered
      to be a pioneer in pay-per-view television spearheading such live events as
      the
      boxing matches of Leonard vs. Hearns and Holmes vs. Cooney, “Rolling Stones” and
“The Who” rock concerts, and the musical “Sophisticated Ladies,” live from
      Broadway.  Previously, Mr. Henson served on the task force for Warner
      Cable’s precursor to the Internet, Qube, the nation’s first 30 channel two-way
      interactive cable system.





Mr.
      Henson helped to create Music Village Group, a Nashville-based entertainment
      Company, and Music Village USA, a 40-acre theme park.  Mr. Henson was
      named Chairman and CEO of Country Music Television when Music Village acquired
      the fledgling network.  Mr. Henson has served as CEO of Craftsman and
      Scribes Creative Workshop, an award-winning New York City-based children’s
      television production company.  He also has been involved in the
      development of several land-based entertainment complexes including projects
      in
      Branson, Missouri and Nashville, Tennessee.





While
      completing a graduate level curriculum in broadband communications at Southern
      Illinois University Mr. Henson obtained cable franchises and produced original
      programming for two local markets.  He was subsequently recruited by
      TelePromTer, then the nation’s largest cable operator, to create a 24 hour cable
      programming format for their Reno, Nevada system.  While there, he
      developed TeleAuction, considered to be the nation’s first home shopping
      program, later airing in Los Angeles and in seventeen other
      markets.




Charlie
      Roodenburg, Chief Financial Offier, Chief Operating Officer and Member of the
      Board of Directors




Charlie
      Roodenburg has more than 25 years of business management experience in fields
      as
      diverse as distribution, automotive parts marketing and the Internet
      communications industry.  Mr. Roodenburg has a B.S. in Finance from
      the University of Southern California and an M.B.A. from Pepperdine
      University.  From 1982-92 he held various corporate management
      positions in the Japanese import automotive industry, working for such giants
      as
      Mitsubishi, Toyota and Mazda. During an eight-year period with Mazda (1984-1992)
      Mr. Roodenburg was accessory development manager, overseeing inventory control,
      purchasing, marketing management and international business.  His
      entrepreneurial skills were honed by a six-year consulting stint which included
      such projects as the design and production of direct mail marketing programs,
      sales incentive programs and the development of an intranet based collateral
      material ordering software package.  In 1997, Mr. Roodenburg, who
      perceived that the Internet industry offered significant long term opportunity,
      accepted a management position with Northcoast Internet, an Internet Ventures
      subsidiary located in Eureka, California.  He was responsible for the
      launch of PeRKInet, a telco return cable broadband service in 1998 and launched
      a DSL broadband offering in 1999.  Subsequent to his promotion to
      California Regional Manager, he was responsible for the operation of five brands
      throughout the state and completed the assimilation of a sixth brand, TomatoWeb,
      located in Sacramento, California. Mr. Roodenburg’s division has achieved and
      maintained EBITDA earnings in excess of 20% until it was sold in December
      2002.  In October 2002, Mr. Roodenburg was elevated to Executive Vice
      President and moved to corporate headquarters to assume responsibility for
      corporate administration and all IVI ISP operations.  In May 2003 Mr.
      Roodenburg was named Chief Financial Officer.




24




Significant
      Employees





**Name**
            **Age**
            **Position**Robin
                Tjon
            62
            Vice
                President and Controller





Robin
      Tjon, Vice President and Controller, has been with the Company since 1997 and
      has 40 years of experience in both public and private companies in a variety
      of
      industries. She was instrumental in setting accounting policies and procedures
      and was a key member of the team that implemented the standardized billing
      system for the Company.  Ms. Tjon assumed total responsibility for
      IVIC accounting and was named VP & Controller in May 2002.





Family
      Relationships





There
      are
      no family relationships among directors or executive officers.





Involvement
      in Certain Legal Proceedings





The
      Company is not aware of any
      material legal proceedings that have occurred within the past five years
      concerning any director, director nominee, promoter or control person which
      involved a criminal conviction, a pending criminal proceeding, a pending or
      concluded administrative or civil proceeding limiting one’s participation in the
      securities or banking industries, or a finding of securities or commodities
      law
      violations.  Moreover, no bankruptcy petition has been filed by or
      against any business of which a director, director nominee, promoter or control
      person was a general partner or executive officer either at the time of such
      bankruptcy or within two yearsprior to that
      time.




**Item
        10 Executive
        Compensation**
 
 The
        following table sets forth the compensation paid by the Company to its Chief
        Executive Officer and Directors for services in all capacities to the
        Company.
 
 **SUMMARY
                    COMPENSATION TABLE****(a)**
                **(b)**
                ****
                **(
                    c)**
                **(d)**
                **(e)**
                **(j)******
                ****
                ****
                ****
                ****
                ****
                ******Name
                    and**
                ****
                ****
                ****
                ****
                **Stock**
                ******principal**
                ****
                ****
                **Salary**
                **Bonus**
                **Awards**
                **Total****position**
                **Year**
                ****
                **($)**
                **($)**
                **($)**
                **($)**Nyhl
                    Henson-CEO/Chairman
                3/31/2007
                (1)
                240,000
                None
                None
                240,0003/31/2006
                (2)
                240,000
                None
                120,000
                360,000Charles
                    Roodenburg-CFO/Director
                3/31/2007
                (3)
                84,000
                None
                1,000
                85,0003/31/2006
                (4)
                84,000
                None
                45,000
                129,000
 
 (1)
                    In fiscal 2007 Nyhl Henson received $50,070 cash salary and $189,930
                    accrued salary.(2)
                    In fiscal 2006 Nyhl Henson received $207,356 cash salary, $32,644
                    accrued
                    salary and 2,400,000 shares of the company's preferred series
                    A stock
                    valued at $120,000.(3)
                    In fiscal 2007 Charles Roodenburg received $46,552 cash salary,
                    $37,448
                    accrued salary and 1,000,000 shares of the Company's preferred
                    series B
                    stock valued at $1,000.(4)
                    In fiscal 2006 Charles Roodenburg received $82,221 cash salary,
                    $1,779
                    accrued salary and 900,000 shares of the Company's preferred
                    series A
                    stock valued at
                    $45,000.





25




**Item
      11 Security Ownership of
      Certain Beneficial Owners and Management**





The
      following table sets forth as of March 31, 2007 information regarding the
      beneficial ownership of Common Stock (i) by each stockholder who is known by
      the
      Company to own beneficially in excess of 5% of the outstanding Common Stock;
      (ii) by each director; (iii) by each executive officer; and (iv) by all
      executive officers and directors as a group.  Except as otherwise
      indicated, all persons listed below have (i) sole voting power and investment
      power with respect to their shares of Common Stock, except to the extent that
      authority is shared by spouses under applicable law, and (ii) record and
      beneficial ownership with respect to their shares of Common Stock.




**Title
                  of**
              **Name
                  and Address of**
              **Amount
                  and Nature of**
              **Percent
                  of****Class**
              **Beneficial
                  Owner**
              **Beneficial
                  Ownership**
              **Class
                  (1)**Common
                  Stock
              IVI
                  Shareholder Trust
              25,770,514
              
              23.26%555
                  H St., Suite HEureka,
                  CA 95501Nyhl
                  Henson, TrusteeCommon
                  Stock
              Big
                  Apple Consulting USA, Inc.
              14,764,413
              
              13.33%280
                  Wekiva Springs Rd., Suite 201Longwood,
                  FL  32779Common
                  Stock*
              Nyhl
                  Henson, CEO/Director (2)
              710,000
              
              0.64%555
                  H St., Suite HEureka,
                  CA 95501Common
                  Stock*
              Charles
                  Roodenburg, CFO/Director(3)
              300,000
              
              0.27%555
                  H St., Suite HEureka,
                  CA 95501Common
                  Stock
              Directors
                  & Officers As A Group (4)
              26,780,514
              
              24.17%


_________________________


*
      less
      than 1%





(1)
            This
                table is based on 110,788,677 shares of Common Stock issued and
                outstanding on March 31, 2007.


(2)
            Does
                not include 2,400,000 shares of preferred series A stock held by
                Mr.
                Henson.


(3)
            Does
                not include 900,000 shares of preferred series A stock and 1,000,000
                shares preferred series B stock held by Mr.
                Roodenburg.


(4)
            Includes
                shares held by IVI Shareholder Trust of which Mr. Henson is the
                Trustee.




**Item
      12 Certain Relationships
      and Related Transactions**





There
      are
      no related transactions or relationships.





26




**Item
      13 Exhibits**





The
      following exhibits are filed with this Annual Report or are incorporated by
      reference:




EXHIBIT


NUMBER
            TITLE
                OF EXHIBIT





2.10
            Agreement
                and Plan of Reorganization(2)


2.20
            Certificate
                of Amendment to Articles of
                Incorporation(2)


2.30
            Certificate
                of Amendment to Articles of Incorporation increasing authorized shares
                of
                common stock (6)


2.40
            Business
                Purchase Agreement Between IVI Communications, Inc., Internet Business
                Consulting, Inc.and AppState.Net,
                Llc.(9)


2.50
            Purchase
                Agreement between IVI Communications, Inc. and Francis and Lois Allen
                (11)


2.60
            Purchase
                Default Seller Exercising Remedies dated February 1,
                2007 (18)


3.10
            Articles
                of Incorporation(2)


3.20
            Bylaws
                (2)


3.30
            Certificate
                of Designation, Powers, Preferences and Rights of Series A Preferred
                Stock, filed with the State of Nevada on March 20, 2006
                (12)


3.40
            Certificate
                of Designation, Powers, Preferences and Rights of Series B Preferred
                Stock, filed with the State of Nevada on March 12, 2007
                (17)


4.10
            2005
                Employee Stock Compensation Plan
                (3)


4.20
            Amended
                2005 Employee Stock Compensation Plan
                (7)


4.30
            Convertible
                Debenture dated March 27, 2006 (13)


4.40
            Warrant
                CCP-001 dated March 27, 2006 (13)


4.50
            Warrant
                CCP-002 dated March 27, 2006 (13)


5.10
            Opinion
                of Sichenzia Ross Friedman Ference LLP
                (14)


9.00
            Voting
                Trust Agreement(2)


10.10
            Employment
                Agreement for Nyhl Henson dated May 1,
                2001(2)


10.2
                A & B
            Sale
                Agreements for California ISPs(2)


10.30
            Sale
                Agreement for Oregon ISPs (2)


10.40
            Purchase
                Agreement for Quik Communications
                (2)


10.50
            Sale
                Agreement for Colorado ISPs(2)


10.6
                A B & C
            Settlement
                Agreements with Quik Communications
                (1)


10.70
            Stock
                Exchange Agreement IVIC and Broadspot World Wide Wireless
                (5)


10.80
            Consulting
                Contract with Keith Jablon dated July 1, 2004
                (6)


10.90
            Consulting
                Contract with Big Apple Consulting USA, Inc. dated July 6, 2004
                (6)


10.10
            Advisory
                Agreement with Hunter Wise, LLC dated August 17,
                2004


10.11
            Agreement
                with The Research Works dated August 31,
                2004


10.12
            Stock
                Purchase Agreement between IVIC and Seaside Investments PLC dated
                August
                16, 2004 (8)


10.13
            Consulting
                Contract between IVIC and James Farinella dated August 15, 2005
                (10)


10.14
            Consulting
                Contract between IVIC and 729759 Alberta Ltd. dated September 19,
                2005
                (10)


10.15
            Channel
                Partner Agreement between IVIC and TeleMedium Corporation dated October
                11, 2005 (10)


10.16
            Letter
                of Intent between IVIC and Larry W. Barnes dated October 12, 2005
                (10)


10.17
            Letter
                of Intent between IVIC and Larry W. Barnes dated October 12, 2005
                (10)


10.18
            Securities
                Purchase Agreement, dated March 27,
                2006.(13)


10.19
            Investor
                Registration Rights Agreement dated March 27, 2006
                (13)


10.20
            Pledge
                and Escrow Agreement (Issuer) dated March 27,
                2006(13)


10.21
            Pledge
                and Escrow Agreement (Insider) dated March 27, 2006
                (13)


10.22
            Pledge
                and Escrow Agreement (Insider) dated March 27,
                2006(13)


10.23
            Security
                Agreement dated March 27, 2006 (13)


10.24
            Subsidiary
                Security Agreement dated March 27, 2006
                (13)


10.25
            Subsidiary
                Security Agreement dated March 27, 2006
                (13)


10.26
            Subsidiary
                Security Agreement dated March 27, 2006
                (13)


10.27
            Irrevocable
                Transfer Agent Instructions (13)


10.28
            Pledge
                and Escrow Agreement Termination dated July 13, 2006
                (15)


10.29
            Consulting
                Contract between IVIC and Big Apple Consulting USA, Inc.
                (16)


14.00
            Code
                of Ethics (2)


16.10
            Malone
                & Bailey, PLLC letter on change in
                accountants(4)


21.00
            Subsidiaries
                of IVI Communications, Inc. (14)


23.10
            Consent
                of Sichenzia Ross Friedman Ference LLP
                (14)


23.20
            Consent
                of Bagel, Josephs & Company, LLC
                (14)





27


(1)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 10QSB/A filed on
                March 8, 2004, File No 00032797


(2)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 10KSB/A filed on
                March 8, 2004, File No 000-32797


(3)
            Incorporated
                by reference to the exhibits filed in the Company’s Form S-8 on June 29,
                2004, File No 333-116954


(4)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on July
                7, 2004, File No 000-32797


(5)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 10KSB filed on
                July 14, 2004, File No 000-32797


(6)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 10QSB filed on
                August 16, 2004, File No 000-32797


(7)
            Incorprated
                by reference to the exhibits filed in the Company’s Form S-8 on November
                11, 2004, File No 333-120231


(8)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 10QSB filed on
                November 15, 2004, File No
                000-32797


(9)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on
                February 4, 2005,File No 000-32797


(10)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 10QSB filed on
                November 21, 2005, File No
                000-32797


(11)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on
                February 21, 2006, File No
                000-32797


(12)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on
                March 24, 2006, File No 000-32797


(13)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on
                March 31, 2006, File No 000-32797


(14)
            Incorprated
                by reference to the exhibits filed in the Company's Form SB-2 filed
                on
                April 19, 2006, file No. 333-133409


(15)
            Incorprated
                by reference to the exhibits filed in the Company's Form SB-2 filed
                on
                July 25, 2006, 2006, file No.
                333-133409


(16)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on
                September 15, 2006, File No
                000-32797


(17)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on
                March 14, 2007, File No 000-32797


(18)
            Incorporated
                by reference to the exhibits filed in the Company’s Form 8-K filed on May
                31, 2007, File No 000-32797




**Item
      14 Principal Accountant
      Fees and Services**





During
      the years ending March 31, 2007 and March 31, 2006, Bagell Josephs, Levine
&
Company, LLC billed the Company as follows:





**Audit/Review**
            **Acquisition**
            **Tax**
            **Other****Year**
            **Fees**
            **Audits**
            **Fees**
            **Fees**
            **Total**2007
            $30,000
            $0
            $6,406
            $25,816
            $62,2222006
            $18,000
            $21,429
            $4,165
            $8,912
            $52,506




28





**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




Date: 
                August 15, 2007
            By:
            /s/ Charles
              J.
              RoodenburgCharles J.
                Roodenburg
              Chief
                Executive Officer







29