<PAGE>

                                  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, 2006
                                                        --------------

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

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
 incorporation or organization)                             Identification No.)

5959 W Century Blvd Suite 573, Los Angeles, CA                    90045
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

                                  310-216-7740
                                  ------------
              (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



<PAGE>

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. $2,681,373.

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.) As of March 31, 2006, approximately $5,786,045.

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

As of March 31, 2006, there were 77,985,587 shares of the issuer's $.001 par
value common stock issued and 62,985,587 shares outstanding, and 15,000,000
shares held in escrow as collateral; and 4,000,000 shares of the issuer's $.001
par value preferred stock issued and outstanding.

Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.

Transitional Small Business Disclosure format (check one):

                         [ ]  Yes          [X]  No





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                                TABLE OF CONTENTS


PART 1

Item 1   Description of Business                                              1
Item 2   Description of Property                                              7
Item 3   Legal Proceedings                                                    8
Item 4   Submission of Matters to a Vote of Security Holders                  8

PART 2

Item 5   Market for Common Equity and Related Stockholder Matters             9
Item 6   Management's Discussion and Analysis or Plan of Operation           10
Item 7   Financial Statements                                               F-1
Item 8   Changed in and Disagreements With Accountants on Accounting
                  And Financial Disclosure                                   27
Item 8A  Internal Control over Financial Reporting                           27

PART 3

Item 9   Directors, Executive Officers, Promoters and Control Persons        27
Item 10  Executive Compensation                                              30
Item 11  Security Ownership of Certain Beneficial Owners and Management      31
Item 12  Certain Relationships and Related Transactions                      31
Item 13  Exhibits                                                            32
Item 14  Principal Accountant Fees and Services                              33
Signatures                                                                   33
Certifications                                                               34


                                       i


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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 March 31, 2004, we acquired 23,000,000 shares of Broadspot Worldwide
Wireless, Inc., a Canadian publicly trading corporation (pink sheet symbol
BWWW), for 9,000,000 shares of our common stock. In March of 2005, the Company
entered into an agreement with a Nevada investment group providing for the
purchase from the Company of the shares of BWWW for an aggregate purchase price
of $200,000. Under the terms of that agreement 13,734,669 shares of the
Company's common stock held by BWWW have been returned to the Company and
cancelled.

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. This acquisition launched our business plan.

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.


                                       1


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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     The local ISP will have national dialup coverage;
      o     Customer support hours will be expanded to 24/7;
      o     Web accelerator/dial broadband service will be introduced;
      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);
      o     Outsource network operations.

We believe that we will be able to leverage the combined dialup volume of the
acquired ISPs to lower COGS by as much as 50%.

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.


                                       2


<PAGE>

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 makes 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.

THE ISP UPON ACQUISITION
A small ISP is comprised of the following four basic components:
      o     Network services;
      o     Technical Support;
      o     Sales; and
      o     Administration

In many cases the small operation will not have separate departments staffed to
specialize in each of the above. In fact, many small ISPs might group the first
three components into one and task the founder and a few assistants with
responsibility for all three, simultaneously. Network services involve the
acquisition, by purchase or lease, and operation of the equipment necessary to
operate a PoP (Point-of-Presence). This includes the purchasing, under contract
of the various telecommunication services required to connect customers to the
Internet.

Technical support is, after telecommunications costs, the second most expensive
component of the operating ISP. In the small markets the ISP generally offers 12
hours of technical support per business day and one-half day on Saturday. E-mail
support is a great way to extend those hours of customer service without
"paying" for them.

Sales is typically an "inbound" rather than "outbound" effort. When the customer
comes through the door, whichever tech (technical support employee) is not on
the phone starts new accounts and accepts payments for established accounts.

Administration includes the following:
      o     Billing and banking;
      o     Collections;
      o     A/P and A/R;
      o     Accounting;

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


                                       3


<PAGE>

ASSIMILATION OF THE ISP
The assimilation of purchased ISP operations involves four basic organizational
changes:
      o     Centralization of administrative services;
      o     Outsourced customer support;
      o     Outsourced network services; and
      o     Purchase of bandwidth from an aggregation ISP.

With consolidation, administrative services such as accounting, billing,
accounts receivable and payable, and collections can be centralized to reduce
administrative cost.

Outsourced customer support (technical support) delivers significant support
cost reduction and increased customer service coverage to 24/7 (24 hours/7 days
per week).

Outsourced network services deliver a number of significant advantages:
      o     Eliminates capital investment in equipment and the attendant
            obsolescence;
      o     The network operates in a secure environment;
      o     Redundant data storage, power, air conditioning, and Internet
            connections increase reliability;
      o     Fire suppression is state-of-the-art;
      o     Individual ISP upstream expense is nearly eliminated.

We believe that multiple ISPs merged into one purchasing entity can reduce COGS
by up to 50% and provide the added benefit of national dialup coverage for small
local brand ISPs.

When fully implemented, management believes these organizational changes can
deliver 100% increases in EBITDA. However, the success of this plan does not
depend solely on functional reorganization. Customer brand loyalty and
satisfaction are key elements to long-term success. We will retain the local
brand, the local storefront, and, as much as possible, the former owner/manager.
Our plan is that the "acquired" customers will not be required to change their
e-mail address or dialup setting in their computers. We believe this is of
paramount significance since:
      o     Changed e-mail addresses require bulk notification of friends and
            family and, in many cases, may force small business owners to invest
            in new business cards, marketing materials, etc.; and
      o     Changed access settings are often viewed by the customer as
            technical "breakage" that is a significant inconvenience.

We also intend to provide expanded and upgraded services to include:
      o     Nationwide dialup;
      o     V.92 (quick-connect, Modem on Hold, 48k upstream, improved
            downstream compression);
      o     24/7 Customer Support (just like AOL, MSN, and Earthlink);
      o     Web acceleration (Accelerated web site delivery using compression);
      o     Enhanced filtering (Reduced Spam and improved Web site blocking);
      o     VOIP (Voice over IP - long distance telephony for cents/hour vs
            cents/minute).


                                       4


<PAGE>

Management believes that small ISPs face many financial challenges. And
consequently marketing, which becomes discretionary, often suffers. We intend to
allocate up to 12% of our revenues to market a full range of ISP services.

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.

Progress has been made toward that goal. AppState.Net. located in Boone, North
Carolina has been utilized by IVI as a test market and proof of concept for its
fixed wireless broadband Internet access deployment plan. AppState's Motorola
Canopy network covers approximately 60% of Boone's student housing. AppState's
customer base is 80% broadband and 20% dialup. This fact is a significant
indicator of demand for broadband Internet access in rural communities and
demonstrates the potential for deployment of fixed wireless networks by existing
Internet service providers who typically provide broadband Internet access to
only 20% of their customer base.

Internet Business Consulting, Inc. (IBC) was selected as the exclusive wireless
systems integrator by the City of Roper, NC to design, procure, and install a
fixed wireless network to serve the township's citizens and surrounding areas.

IBC and AppState.Net, LLC. were selected by Fastransit Communications, Inc. as
the exclusive wireless systems integrator to redesign, recertify, procure,
install, and manage their fixed wireless network service, Peak Connect, for the
citizens West Jefferson and surrounding areas in Ashe County, North Carolina.

Internet Business Consulting launched a feature rich VoIP (Internet Telephony)
service. We believe that VoIP telephony services will as essential as email in
the Internet Service provider's service offering.

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.


                                       5


<PAGE>

We have wireless experience dating back to 1996 in both licensed (2.5 GHz) and
license exempt (900 MHz, 2.4 and 5.8 GHz) frequencies. We have entered initial
discussions with Motorola (Canopy) and Alvarion (formerly BreezeCom) for the
supply of fixed wireless equipment. There can be no assurance that these
discussions will lead to an agreement between the parties. If we are not able to
enter into agreements with Motorola and/or Alvarion, we will be forced to find
an alternative supply of fixed wireless equipment.

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.

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


                                       6


<PAGE>

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, 2006 there are 3 corporate employees.

ITEM 2            DESCRIPTION OF PROPERTY

Corporate headquarters are located at 5959 W. Century Blvd., Suite 579, Los
Angeles, CA, 90045. The Company occupies approximately 318 square feet of office
space on a six-month renewable lease at $750 per month.

The 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
$1,195 per month.

Operating facilities for subsidiaries IBC in Matthews, NC, AppState.net in
Boone, NC, and Futura in Cabot, AR, are leased.


                                       7


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ITEM 3            LEGAL PROCEEDINGS

The Company has two lawsuits outstanding.

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. After discussions with legal counsel, the Company believes the
amount of the judgment would be mitigated in a full hearing on the matter, which
the company intends to vigorously pursue. The Company currently has $473,548
recorded in notes and interest payable and $934,782 as a contingent liability.
The judgment is currently under appeal in the Superior Court of California,
County of San Joaquin, Stockton Branch, No. CV022344. The Company's counsel is
in negotiations with the plaintiff's counsel to try and reach an amicable
settlement.

On October 19, 2005, a complaint was erroneously served on IVI Communications,
Inc., fka Internet Ventures, Inc. by Annette S. Paoletti, as Successor Trustee
of the Clare P. and Evelyn B. McEnerney Family Trust, for unspecified damages
resulting from the delinquent payment of principal and interest on a note
payable from Internet Ventures, Inc. IVI Communications, Inc. has contested this
complaint, No. CV027700 in the Superior Court of California, County of San
Joaquin. A note payable and accrued interest in the amount of $241,051 is
recorded in notes and interest payable. The Company's counsel has answered the
complaint and in addition is currently in negotiations with plaintiff's counsel
to settle the matter amicably.

In addition, The Company has seven default judgments against it for a total
amount of $163,367.

Five of these judgments have settlements in place with total balances of
$85,778. The amounts are recorded in accounts payable.

One judgment in the amount of $62,328 is in favor of an equipment leasing
company and is against a wholly owned subsidiary of Internet Ventures, Inc. This
is recorded under accounts payable and installment debt.

One judgment in the amount of $15,261 is in favor of a debenture holder against
Internet Ventures, Inc. The amount is recorded in debentures payable, debenture
interest payable, and accounts payable.

ITEM 4            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


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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 IVCM.PK 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, 2006                          High             Low
-------------------------------------------------- ---------------- ------------
First Quarter ended June 30, 2005                  $0.14            $0.05
Second Quarter ended September 30, 2005            $0.55            $0.05
Third Quarter ended December 31, 2005              $0.603           $0.22
Fourth Quarter ended March 31, 2006                $0.24            $0.105

Year ended March 31, 2005                          High             Low
-------------------------------------------------- ---------------- ------------
First Quarter ended June 30, 2004                  $0.10            $0.10
Second Quarter ended September 30, 2004            $0.43            $0.095
Third Quarter ended December 31, 2004              $0.40            $0.13
Fourth Quarter ended March 31, 2005                $0.18            $0.10

Stockholders

As of March 31, 2006, we believe there were approximately 684 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, 2006, we issued the following:

         (a) In the three months ended June 30, 2005 we issued 2,574,312 shares
of common stock to James Hollis in accordance with the Internet Business
Consulting and AppState.Net, LLC acquisition agreement.

         (b) In the three months ended September 30, 2005, we issued 350,000
shares of our common stock to a consultant as compensation for the performance
of services valued at $103,250 and 2,250,000 shares of our common stock to
management as compensation.


                                       9


<PAGE>

         (c) In the three months ended December 31, 2005, we issued 3,200,000
shares of our common stock to consultants as compensation for the performance of
services valued at $1,392,250.

         (d) An aggregate of 5,691,967 shares of common stock were issued in the
quarter ended March 31, 2006 for conversions of debentures (2,865,000), the
acquisition of Futura Internet (2,813,300), and in settlement of a debt
(13,667).

         (e) On March 13, 2006, we issued 2,400,000 shares Series A Preferred
Stock to Nyhl Henson at a price of $0.05, 900,000 shares Series A Preferred
Stock to Charles Roodenburg at a price of $0.05, and 700,000 shares Series A
Preferred Stock to Robin Tjon at a price of $0.05, in consideration for bona
fide services rendered.

         (f) On March 21, 2006 the Company issued 15,000,000 shares of its
common stock in its own name in accordance with a Pledge and Escrow Agreement to
secure the full and prompt payment when due of all of the Company's obligations
to Cornell Capital Partners L.P.

         All of the foregoing were issued pursuant to Rule 506 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"), and/or
Section 4(2) of the Act.


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 quarterly 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 three subsidiaries:

      o     Internet Business Consulting, Inc. ("IBC")
      IBC is a provider of turnkey wireless networks that have the expertise
      required to engineer, install, and support wireless applications and
      solutions.


                                       10


<PAGE>

      o     AppState.Net, LLC
      AppState.Net is an Internet Service Provider founded in July 1999 in the
      Appalachian State University town of Boone, NC.

      o     Futura, Inc.
      Futura, Inc. is an Internet Service Provider founded in 1995 in Cabot,
      Arkansas


RECENT ACQUISITION

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, 2006 the Company has an accumulated operating deficit of
$25,644,651 and negative stockholders' equity of $1,074,393.

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.

$775,000 was received between August and December 2005 from the exercise of
4,500,000 options for common stock at prices ranging from $.075 to $.35.

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 with a conversion price of $.05 per common share. This
debenture has been converted to 100,000 shares of common stock.

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 with a conversion price of $.05 per common share. This
debenture has been converted to 400,000 shares of common stock.


                                       11


<PAGE>

The Company sold a security for $257,000 to one entity in March 2006. This
debenture, which was for services rendered, accrues interest at 9% per annum and
is due May 15, 2006. 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) shall immediately become due and payable to the holder. The conversion
price is $.05 per common share.

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 will be advanced two (2) business
days after the date the registration statement is 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 4.9% of the then issued and outstanding shares
of Common Stock, including shares issuable upon conversion of, and payment of
interest.

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


                                       12


<PAGE>

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.

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 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.

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, 2006 and 2005
------------------------------------------------------------------

Revenue for the year ending March 31, 2006 was $2,681,373 compared to $775,594
for the year ending March 31, 2005. The revenue for the year ending March 31,
2005 was one quarter of revenue for the newly acquired subsidiaries of IBC and
AppState.net. The revenue for the year ending March 31, 2006 included $235,050
in corporate consulting and management services; $2,120,609 in equipment sales
and consulting services for IBC Wireless; $238,992 in internet services for
AppState.net; and $86,722 for internet services for Futura, newly acquired in
February 2006.

Cost of operations for the year ending March 31, 2006 was $1,798,869 compared to
$576,436 for the year ending March 31, 2005. The increase in cost of operations
is due to a full year of operations for IBC/AppState.net in the year ending
March 31, 2006 compared to a quarter of operations for the year ending March 31,
2005.


                                       13


<PAGE>

General and administrative expenses for the year ending March 31, 2006 were
$3,396,181 compared to $1,546,799 for the year ending March 31, 2005. The
largest components of general and administrative for the year ending March 31,
2006, were compensation of $1,004,852, $200,000 of which was paid in preferred
stock, and consulting services of $1,842,348, of which $1,807,292 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.

Selling expenses for year ending March 31, 2006 were $324,777 compared to $0 for
the year ending March 31, 2005. $318,668 of selling expenses in the year ending
March 31, 2006 was public relations expense and $6,109 was selling expense.
There were no public relations or selling expenses in the year ending March 31,
2005.

Depreciation expense for the year ending March 31, 2006 was $21,624 compared to
$4,320 for the year ending March 31, 2005. Depreciation for the year ending
March 31, 2006 is for equipment in the subsidiaries.

Interest expense for the year ending March 31, 2006 was $530,348 compared to
$236,432 for the year ending march 31, 2005. The increase in interest was due to
an increase in the balances due on notes payable, debentures, and equipment
leases at the subsidiaries, and beneficial interest expense in the conversion of
debentures.

The Company had a net loss for the year ending March 31, 2006 of $4,158,104
compared to a loss of $1,588,393 for the year ending March 31, 2005. The loss
per share was ($0.07) and ($0.03)in the fiscal years ended March 31,2006 and
2005 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."


New Accounting Pronouncements
-----------------------------



                                       14


<PAGE>

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)). Management is
assessing the implications of this revised standard, which may materially impact
the Company's results of operations in the first quarter of fiscal year 2007 and
thereafter.

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.

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 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.



Inflation
---------

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


                                       15


<PAGE>

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, 2006 and 2005, we generated revenues of $2,681,373
and $775,594, respectively and incurred consolidated net losses of $4,158,104
and $1,588,393, respectively. 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, 2006 and 2005 and have sustained large capital deficits and had sold off of
our operations in Colorado, Oregon and California and were operating as a shell
company until our acquisition of Internet Business Consulting and AppState.net
LLC in January 2005. 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.

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

In March 2006, we received $200,000 in debt financing from Cornell Capital
Partners LP. Pursuant to a securities purchase agreement, it has committed to
advance an additional $200,000 at the time of filing of the registration
statement of which this prospectus forms a part and $200,000 at the time of


                                       16


<PAGE>

effectiveness of the registration statement. In the future, we may be required
to raise additional funds, particularly if we exhaust the funds advanced under
that agreement, 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
implementation of our business plan. Any additional equity financing may involve
substantial dilution to our then existing shareholders.

WE MAY NOT BE SUCCESSFUL IN INTEGRATING THE MANAGEMENT TEAMS OF IBC WIRELESS,
APPSTATE.NET AND 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 teams of the three companies
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:


                                       17


<PAGE>

      o     the performance of our products, services and technology in a manner
            that meets customer expectations;
      o     the success of our efforts to develop effective channels of
            distribution for our products;
      o     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;
      o     general conditions in the wireless communications and internet
            industries;
      o     the success of our efforts to develop, improve and satisfactorily
            address any issues relating to our technology;
      o     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
      o     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.


                                       18


<PAGE>

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.

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.ibconsulting.com, www.appstate.net, www.futura.net, www.lickity-split.net,
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


                                       19


<PAGE>

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.

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


                                       20


<PAGE>

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 Nyhl Henson, our
Chief Executive Officer and Charles Roodenburg, our Chief Financial Officer who
have been critical to the development of our technologies and business. The loss
of the services of Messrs. Henson and Roodenburg could have a material adverse
effect on our operations. We do not have an employment agreement with either of
Messrs. Henson and Roodenburg. Accordingly, there can be no assurance that they
will remain associated with us. The efforts of Messrs. Henson and Roodenburg
will be critical to us as we continue to develop our business. If we were to
lose either of Messrs. Henson and 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
THAT ARE BEING REGISTERED IN THIS PROSPECTUS AND THE SALE OF THESE SHARES MAY
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.

As of May 30, 2006, we had 77,985,587 shares of common stock issued and
62,985,587 Outstanding and 15,000,000 held in escrow as collateral. In
connection with the financing arrangements that we entered into in March 2006,
we also have outstanding secured convertible debentures that may be converted
into an estimated 8,571,429 shares of common stock at current market prices, and
outstanding warrants to purchase 3,500,000 shares of common stock.


                                       21


<PAGE>

On May 26, 2006, the closing bid price of our common stock was $0.07. 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 May 26,
2006 of $.07:

<TABLE>
<S>     <C>
------------------- --------------------- ----------------------- ----------------------- ----------------
% BELOW MARKET      PRICE PER SHARE       WITH 10% DISCOUNT       NUMBER OF SHARES        PERCENTAGE
------------------- --------------------- ----------------------- ----------------------- ----------------
25%                 $0.053                $0.047                  12,698,413              16.8%
------------------- --------------------- ----------------------- ----------------------- ----------------
50%                 $0.035                $0.032                  19,047,619              23.2%
------------------- --------------------- ----------------------- ----------------------- ----------------
75%                 $0.018                $0.016                  38,095,238              37.7%
------------------- --------------------- ----------------------- ----------------------- ----------------
</TABLE>

* Based upon 77,985,587 shares of common stock issued as of May 26, 2006.

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.


                                       22


<PAGE>

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.

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.

In March 2006, we entered into a Securities Purchase Agreements for the sale of
an aggregate of $600,000 principal amount of secured convertible debentures of
which to date $400,000 has been funded. Pursuant to a securities purchase
agreement, the investor has committed to advance an additional $200,000 at the
time of effectiveness of the registration statement. 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


                                       23


<PAGE>

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.

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.


                                       24


<PAGE>

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


                                       25


<PAGE>

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:

(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 to
obtaining 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.


                                       26


<PAGE>

ITEM 7            FINANCIAL STATEMENTS



                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                             MARCH 31, 2006 AND 2005




<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
                 INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2006 AND 2005



                                                                     PAGE(S)
                                                                     -------

Report of Independent Registered Public Accounting Firm                F-1

Consolidated Balance Sheets as of March 31, 2006 and 2005              F-2

Consolidated Statements of Operations for the Years
   Ended March 31, 2006 and 2005                                       F-3

Consolidated Statement of Changes in Stockholders'
   (Deficit) for the Years Ended March 31, 2006 and 2005               F-4

Consolidated Statements of Cash Flow for the Years Ended
   March 31, 2006 and 2005                                          F-5 - F-7
Notes to Consolidated Financial Statements                          F-8 - F-30




<PAGE>

                        BAGELL, JOSEPHS & 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 as of March 31, 2006 and 2005 and the
related consolidated statements of operations, 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall 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, 2006 and 2005 and the results of its
operations, changes in stockholders' (deficit) and their cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.

The accompanying consolidated financial statements for the years ended March 31,
2006 and 2005 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
May 25, 2006

                MEMBER OF: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
                           NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
                           PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANT


                                      F-1


<PAGE>

<TABLE>
                               IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
                                      CONSOLIDATED BALANCE SHEETS
                                        MARCH 31, 2006 AND 2005

                                                ASSETS

                                                                              2006            2005
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
CURRENT ASSETS
    Cash and cash equivalents                                             $    233,544    $    124,071
    Accounts receivable, net                                                   322,806         346,421
    Inventory                                                                  145,395          62,300
    Other current assets                                                        18,624           4,507
                                                                          ------------    ------------

              TOTAL CURRENT ASSET                                              720,369         537,299

Equipment, net of $25,944 and $4,320 in accumulated depreciation                91,319          47,520

OTHER ASSETS
   Goodwill, net of impairment                                               4,112,482       3,437,548
   Other                                                                         6,513               -
                                                                          ------------    ------------


TOTAL ASSETS                                                              $  4,930,683    $  4,022,367
                                                                          ============    ============

                               LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
    Current portion of installment debt                                   $      1,116    $     18,989
    Current portion of notes payable                                           767,311       1,100,523
    Accounts payable and accrued liabilities                                 2,671,533       2,686,713
    Current portion of obligations under capital lease                          32,348          15,561
    Acquisition contracts                                                      295,000               -
    Contingent liability                                                       934,782               -
    Deferred revenue                                                            15,292               -
    Liability for stock to be issued                                                 -       2,574,312
    Derivative liability                                                       216,312               -
    Convertible debentures, net of discount of $200,000 and $0                 619,250         576,750
                                                                          ------------    ------------
              TOTAL CURRENT LIABILITIES                                      5,552,944       6,972,848
                                                                          ------------    ------------

LONG-TERM LIABILITIES
    Installment debt, net of current portion                                         -           1,116
    Acquisition contracts, net of current portion                                    -         220,000
    Obligations under capital lease, net of current portion                     33,339          30,755
    Loan payable officer                                                       418,793          25,349
                                                                          ------------    ------------
              TOTAL LONG-TERM LIABILITIES                                      452,132         277,220
                                                                          ------------    ------------

TOTAL LIABILITIES                                                            6,005,076       7,250,068
                                                                          ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' (DEFICIT)
    Preferred stock, $.001 par value; 5,000,000 shares authorized;
       4,000,000 and 0 shares issued and outstanding                             4,000               -
    Common stock, $.001 par value; 100,000,000 and 50,000,000 shares
       authorized, 77,985,587 and 66,539,685 issued and                         77,986          66,539
       62,985,587 and 66,539,685 outstanding, 15,000,000 share held
       in escrow as collateral
    Additional paid-in capital                                              27,334,017      20,215,480
    Additional paid-in capital - warrants                                      154,255               -
    Subscription receivable                                                          -      (2,023,173)
    Shares issued and held as collateral                                    (3,000,000)              -
    Accumulated deficit                                                    (25,644,651)    (21,486,547)
                                                                          ------------    ------------
              TOTAL STOCKHOLDERS' (DEFICIT)                                 (1,074,393)     (3,227,701)
                                                                          ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                             $  4,930,683    $  4,022,367
                                                                          ============    ============


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

                                                  F-2
</TABLE>


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED MARCH 31, 2006 AND 2005


                                                    2006            2005
                                                ------------    ------------

OPERATING REVENUE                               $  2,681,373    $    775,594

COST OF OPERATIONS                                 1,798,869         576,436
                                                ------------    ------------

GROSS PROFIT                                         882,504         199,158
                                                ------------    ------------

OPERATING EXPENSES
   Selling                                           324,777               -
   General and administrative                      3,396,181       1,546,799
   Depreciation                                       21,624           4,320
                                                ------------    ------------

              TOTAL OPERATING EXPENSES             3,742,582       1,551,119
                                                ------------    ------------

OPERATING (LOSS)                                  (2,860,078)     (1,351,961)
                                                ------------    ------------

OTHER INCOME (EXPENSES)
    Other income                                     167,104               -
    Litigation damages                              (934,782)              -
    Interest expense                                (530,348)       (236,432)
                                                ------------    ------------
              TOTAL OTHER (EXPENSE)               (1,298,026)       (236,432)
                                                ------------    ------------

LOSS BEFORE INCOME TAXES                          (4,158,104)     (1,588,393)
    Provision for income taxes                             -               -
                                                ------------    ------------

NET LOSS ATTRIBUTED TO COMMON SHAREHOLDERS        (4,158,104)     (1,588,393)
                                                ============    ============

BASIC AND DILUTED (LOSS) PER SHARE
    Basic and diluted                           $      (0.07)   $      (0.03)
                                                ============    ============

AVERAGE WEIGHTED NUMBER OF COMMON
 SHARES OUTSTANDING                               62,256,813      58,988,111
                                                ============    ============

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

                                       F-3


<PAGE>

<TABLE>
                                        IVI COMMUNICATIONS, INC. AND SUBSIDIAIRES
                              CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)
                                       FOR THE YEARS ENDED MARCH 31, 2006 AND 2005

                                                                                                             ADDITIONAL
                                                                                             ADDITIONAL       PAID-IN
                                    PREFERRED STOCK                COMMON STOCK               PAID-IN         CAPITAL -
                                 SHARES         AMOUNT         SHARES          AMOUNT         CAPITAL         WARRANTS
                              ------------   ------------   ------------    ------------    ------------    ------------
<S>                              <C>         <C>              <C>           <C>             <C>             <C>
Balance, March 31, 2004                  -              -     45,420,514    $     45,420    $ 14,467,608               -

Issuance of shares for
   services, compensation
   and legal settlements                 -              -     11,648,786          11,649         691,230               -

Issuance of shares for cash              -              -      8,609,385           8,609       2,349,564               -

Issuance of shares for
   acquisition                           -              -        100,000             100          99,900               -

Issuance of shares in
   conversion of notes
   payable                               -              -        362,703             363         123,249               -

Issuance of shares in
   conversion of accounts
   payable and accrued
   interest                              -              -        398,297             398         135,072               -

Settlement of vendor
   payables                              -              -              -               -       1,089,637               -

Settlement of arbitration/
   litigation claims                     -              -              -               -       1,259,220               -

Net loss for the year                    -              -              -               -               -               -
                              ------------   ------------   ------------    ------------    ------------    ------------

Balance, March 31, 2005                  -   $          -     66,539,685    $     66,539    $ 20,215,480    $          -

Issuance of shares for
   compensation                  4,000,000          4,000              -               -         196,000               -

Issuance of shares for
   services                              -              -      3,824,660           3,825       1,569,519               -

Issuance of shares for
   acquisition of
   subsidiary                            -              -      5,387,612           5,388       3,118,925               -

Issuance of shares issued
   for conversion of
   debentures                            -              -      2,865,000           2,865         563,785               -

Issuance of shares for
   conversion of
   outstanding payables                  -              -         40,667              41           7,809               -

Options exercised                        -              -      4,500,000           4,500         770,500               -

Shares cancelled for
   failed acquisition                    -              -    (13,734,669)        (13,735)         13,735               -

Issuance costs associated
   with equity financing                 -              -              -               -         (90,000)              -

Warrants issued with
   equity financing
   (Debt discount)                                      -              -               -               -         154,255

Cancellation of shares
   in investment                         -              -     (6,437,368)         (6,437)     (2,016,736)              -

Shares issued as
   collateral                            -              -     15,000,000          15,000       2,985,000

Net loss for the year                    -              -              -               -               -               -
                              ------------   ------------   ------------    ------------    ------------    ------------

Balance, March 31, 2006          4,000,000   $      4,000     77,985,587    $     77,986    $ 27,334,017    $    154,255
                              ============   ============   ============    ============    ============    ============

                                                                                          (TABLE CONTINUED ON NEXT PAGE)


                                                          F-4-A
</TABLE>


<PAGE>

<TABLE>
                         IVI COMMUNICATIONS, INC. AND SUBSIDIAIRES
               CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT)
                        FOR THE YEARS ENDED MARCH 31, 2006 AND 2005


(CONTINUED FROM PREVIOUS PAGE)

                                             SHARES ISSUED
                              SUBSCRIPTION    AND HELD AS      ACCUMULATED
                               RECEIVABLE      COLLATERAL       DEFICITS          TOTAL
                              ------------    ------------    ------------    ------------
<S>                           <C>             <C>             <C>             <C>
Balance, March 31, 2004                  -               -    $(19,898,154)     (5,385,126)

Issuance of shares for
   services, compensation
   and legal settlements                 -               -               -         702,879

Issuance of shares for cash     (2,023,173)              -               -         335,000

Issuance of shares for
   acquisition                           -               -               -         100,000

Issuance of shares in
   conversion of notes
   payable                               -               -               -         123,612

Issuance of shares in
   conversion of accounts
   payable and accrued
   interest                              -               -               -         135,470

Settlement of vendor
   payables                              -               -               -       1,089,637

Settlement of arbitration/
   litigation claims                     -               -               -       1,259,220

Net loss for the year                    -               -      (1,588,393)     (1,588,393)
                              ------------    ------------    ------------    ------------

Balance, March 31, 2005       $ (2,023,173)   $          -    $(21,486,547)   $ (3,227,701)

Issuance of shares for
   compensation                          -               -               -         200,000

Issuance of shares for
   services                              -               -               -       1,573,344

Issuance of shares for
   acquisition of
   subsidiary                            -               -               -       3,124,313

Issuance of shares issued
   for conversion of
   debentures                            -               -               -         566,650

Issuance of shares for
   conversion of
   outstanding payables                  -               -               -           7,850

Options exercised                        -               -               -         775,000

Shares cancelled for
   failed acquisition                    -               -               -               -

Issuance costs associated
   with equity financing                 -               -               -         (90,000)

Warrants issued with
   equity financing
   (Debt discount)                       -               -               -         154,255

Cancellation of shares
   in investment                 2,023,173               -               -               -

Shares issued as
   collateral                                   (3,000,000)                              -

Net loss for the year                    -               -      (4,158,104)     (4,158,104)
                              ------------    ------------    ------------    ------------

Balance, March 31, 2006       $          -    $ (3,000,000)   $(25,644,651)   $ (1,074,393)
                              ============    ============    ============    ============


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

                                           F-4-B
</TABLE>


<PAGE>

<TABLE>
                             IVI COMMUNICATIONS, INC. AND SUBSIDIARIES 123
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                              FOR THE YEARS ENDED MARCH 31, 2006 AND 2005

                                                                              2006            2005
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                               $ (4,158,104)   $ (1,588,393)
                                                                          ------------    ------------
   ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
      (USED IN) OPERATING ACTIVITIES:
     Depreciation                                                               21,624           4,320
  STOCK ISSUED FOR-
     Compensation                                                              200,000               -
     Services                                                                1,573,344         702,879
     Accounts and interest payable                                               7,850         135,470
     Convertible debenture issued for services                                       -          25,000
     Cash received in acquisition                                               26,352               -
  CHANGES IN ASSETS AND LIABILITIES
     (Increase) decrease in accounts receivable                                 44,011        (150,894)
     (Increase) in inventory                                                   (83,095)        (62,300)
     (Increase) decrease in other current assets                               (19,310)         (3,081)
     Increase (decrease) in accounts payable and accrued liabilities           (46,832)        626,480
     Increase in contingent liabilty                                           934,782               -
     Increase in deferred revenue                                               15,292               -
     Increase in acquisition contracts                                         295,000               -
                                                                          ------------    ------------
     Total adjustments                                                       2,969,018       1,277,874
                                                                          ------------    ------------

     NET CASH (USED IN) OPERATING ACTIVITIES                                (1,189,086)       (310,519)
                                                                          ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of capital expenditures                                          (35,273)         (1,840)
     Acquisition of business assets                                            (75,000)              -
                                                                          ------------    ------------
       NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                    (110,273)         (1,840)
                                                                          ------------    ------------

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

                                                  F-5
</TABLE>


<PAGE>

<TABLE>
                             IVI COMMUNICATIONS, INC. AND SUBSIDIARIES 123
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                              FOR THE YEARS ENDED MARCH 31, 2006 AND 2005

                                                                              2006            2005
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of common stock                                          -         335,000
     Proceeds from exercise of stock options                                   775,000               -
     Proceeds from note payable                                                      -          10,000
     Proceeds from convertible debentures                                      242,500         215,000
     Payments on installment note payable                                     (109,440)        (25,242)
     Payments for equity financing                                             (90,000)              -
     Increase in derivative liability                                          216,317               -
     Proceeds (payments) on obligation of capital lease                        (18,989)         (3,684)
     Proceeds from officer loans                                               393,444               -
     Payments on note payable                                                        -         (94,749)
                                                                          ------------    ------------
       NET CASH PROVIDED BY FINANCING ACTIVITIES                             1,408,832         436,325
                                                                          ------------    ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                      109,473         123,966

CASH AND CASH EQUIVALENTS -
    BEGINNING OF YEAR                                                          124,071             105
                                                                          ------------    ------------

CASH AND CASH EQUIVALENTS - END OF YEAR                                   $    233,544    $    124,071
                                                                          ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:
     Cash paid during the year for interest:                              $          -    $      9,563
                                                                          ============    ============
     Cash paid during the year for income taxes                           $     13,147    $          -
                                                                          ============    ============


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


                                                  F-6
</TABLE>


<PAGE>

<TABLE>
                             IVI COMMUNICATIONS, INC. AND SUBSIDIARIES 123
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                              FOR THE YEARS ENDED MARCH 31, 2006 AND 2005


SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION:

                                                                              2006            2005
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
Acquisition of Internet Business Consulting / AppState.net, LLC
    Cash                                                                  $     26,352    $          -
    Accounts receivable                                                         20,396          94,108
    Equipment                                                                   30,150          50,000
    Deposits - security                                                          1,320               -
    Accounts payable and accrued expenses                                      (53,152)       (277,344)
    Obligation under capital lease                                                   -         (50,000)
                                                                          ------------    ------------
    Net assets (liabilities) acquired                                           25,066        (183,236)

    Notes payable to Futura Inc.                                               (75,000)              -
    Notes payable to IBC/AppState                                                    -        (580,000)
    Issuance of stock ($100,000 issued in FY 2005)                            (550,000)     (2,674,312)
    Goodwill                                                                   599,934       3,437,548
                                                                          ------------    ------------

     TOTAL                                                                $          -    $          -
                                                                          ============    ============


   Common stock issued for vendor payables and accrued interest           $     29,350    $    135,470
                                                                          ============    ============
   Common stock issued in conversion of notes payable                     $    566,650    $    123,612
                                                                          ============    ============
   Common stock issued for services and debt settlement                   $  1,773,344    $    702,879
                                                                          ============    ============
   Settlement of vendor payables and arbitration/litigation claims        $          -    $  2,348,857
                                                                          ============    ============
   Reduction in liability for stock to be issued                          $ (2,574,312)   $          -
                                                                          ============    ============
   Warrants issued in connection with convertible debt                    $    154,255    $          -
                                                                          ============    ============


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


                                                  F-7
</TABLE>


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             MARCH 31, 2006 AND 2005


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 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.

          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.

          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.


                                      F-8


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


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, 2006 and 2005.

          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, 2006 and 2005, the
          Company had $105,126 and $-0- of funds in excess of the insured limit.

          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.

          INVENTORY
          ---------

          Inventory is stated at the lower of cost or market, utilizing the
          first-in, first-out method. The cost of finished goods includes the
          cost of raw materials, packaging supplies, direct and indirect labor
          and other indirect manufacturing costs.


                                      F-9


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
          ------------------------------------------

          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, 2006 and 2005. Advertising costs for the
          years ended March 31, 2006 and 2005 were $6,109 and $0 respectively.

          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


                                      F-10


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
          ------------------------------------------

          ACCOUNTS RECEIVABLE CONTINUED
          -----------------------------

          circumstances. The allowance for doubtful accounts at March 31, 2006
          and 2005 is $83,142 and $150,595 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.

          The following is a reconciliation of the computation for basic and
          diluted EPS:

                                                 MARCH 31,          MARCH 31,
                                                   2006               2005
                                              --------------    --------------

          Net loss                               $(4,158,104)      $(1,588,393)
                                              --------------    --------------

          Weighted-average common shares
          Outstanding (Basic)                     62,256,813        58,988,111

          Weighted-average common stock
          Equivalents
               Stock options                               -                 -
               Warrants                                    -                 -
                                              --------------    --------------

          Weighted-average common shares
          Outstanding (Diluted)                   62,256,813        58,988,111
                                              ==============    ==============

          Options and warrants outstanding to purchase stock were not included
          in the computation of diluted EPS for March 31, 2006 and 2005 because
          inclusion would have been antidilutive.

          The options that would have been available at March 31, 2006 and 2005
          are 50,000 and 264,000, respectively. The warrants that would have
          been available at March 31, 2006 and 2005 are 4,027,705 and 527,705
          respectively.


                                      F-11


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
          ------------------------------------------

          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. Management has determined that there
          has been no impairment of any goodwill as of March 31, 2006.

          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


                                      F-12


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
          ------------------------------------------

          STOCK-BASED COMPENSATION (CONTINUED)
          ------------------------------------

          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.

          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. Changes in the fair value of the derivative is 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,
          2006, the fair value of the derivatives was $216,312.

          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 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)). Management is assessing
          the implications of this revised standard, which may materially impact
          the Company's results of operations in the first quarter of fiscal
          year 2007 and thereafter.


                                      F-13


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
          ------------------------------------------

          RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
          --------------------------------------------

          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.

          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 plans to adopt FAS 154 beginning
          January 1, 2006. Because SAS 154 is directly dependent


                                      F-14


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 2-   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
          ------------------------------------------

          RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
          --------------------------------------------

          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.

NOTE 3-   EQUIPMENT
          ---------

          Equipment as of March 31, 2006 and 2005 was as follows:

                                           Estimated
                                             Useful
                                          Lives (Years)      2006        2005
                                          -------------      ----        ----
          Equipment                            3-5         $117,263    $ 51,840

          Less accumulated depreciation                     (25,944)     (4,320)
                                                           --------    --------
          Equipment, net                                   $ 91,319    $ 47,520
                                                           ========    ========

          Depreciation expense was $21,624 and $4,320 for the years ended March
          31, 2006 and 2005, 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.


                                      F-15


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 4-   INSTALLMENT DEBT CONTINUED
          --------------------------

          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, 2006 and 2005 is $1,116
          and $20,105, respectively.

NOTE 5-   NOTES PAYABLE AND ACQUISITION CONTRACTS
          ---------------------------------------

          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.

          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. 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 James Hollis,
          the owner of IBC, as compensation. The Company made 13 payments in
          fiscal 2005 and 2006 and has a remaining balance of $220,000 reflected
          as a current liability in the consolidated balance sheet at March 31,
          2006 under the caption, Acquisition Contracts.

          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 balance of $75,000
          is classified as a current liability under the caption, Acquisition
          Contracts.

          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, 2006 and 2005, all amounts unpaid are overdue. As of
          March 31, 2006 and 2005, the note payable balance is $767,311 and
          $1,100,523 and the accrued interest on those notes as of March 31,
          2006 and 2005 is $581,273 and $434,680, respectively. These amounts
          are reflected as current liabilities in the consolidated balance sheet
          at March 31, 2006.


                                      F-16


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 5-   NOTES PAYABLE AND ACQUISITION CONTRACTS (CONTINUED)
          ---------------------------------------

          NOTES PAYABLE (CONTINUED)
          -------------------------

          During the year ended March 31, 2005, 603,498 shares of common stock
          were issued to convert $123,612 in notes payable and $81,920 in
          accrued interest associated with the debt. The stock and values were
          converted at fair market value.

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.

          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, 2006.

          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


                                      F-17


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 6-   CONVERTIBLE DEBENTURES CONTINUED
          --------------------------------

          of at least Six Hundred Thousand Dollars ($600,000), Forty Five
          Thousand Dollars ($45,000) is immediately becomes due and payable to
          the holder. The conversion price is $.05 per common share.

          DERIVATIVE LIABILITY
          --------------------

          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 will be advanced
          two (2) business days after the date the registration statement is
          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 4.9% of the
          then issued and outstanding shares of Common Stock, including shares
          issuable upon conversion of, and payment of interest.

          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
          $216,312 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:


                                      F-18


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 6-   CONVERTIBLE DEBENTURES CONTINUED
          --------------------------------

          DERIVATIVE LIABILITY (CONTINUED)
          --------------------------------

                  Fair market value of stock                   $0.20
                  Exercise price                               $0.18
                  Dividend yield                               0.00%
                  Risk free interest rate                      4.00%
                  Expected volatility                         192.95%
                  Expected life                              5.0 Years

          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                   $0.20
                  Exercise price                          $0.30 and $0.40
                  Dividend yield                               0.00%
                  Risk free interest rate                      4.00%
                  Expected volatility                         192.95%
                  Expected life                              5.0 Years


                                      F-19


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


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.

          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.


                                      F-20


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 7-   OBLIGATION UNDER CAPITAL LEASE
          ------------------------------

          AppState is the lessee of equipment under two capital leases expiring
          in December 2007 and June 2008 with aggregate monthly payments of
          approximately $2,770.

          Minimum lease payments under capital leases at March 31, 2006, are as
          follows:

               2007                                       $  33,286
               2008                                          33,086
               2009                                           3,536
                                                          ---------
                    Total minimum lease payments             69,908

                    Less: amounts representing interest      (4,221)
                                                          ---------

                    Present value of net minimum
                      lease payments                         65,687

                    Less: current portion                   (32,348)
                                                          ---------

                          Long-term portion               $  33,339
                                                          =========

          The present value of minimum future obligations shown above are
          calculated based on an interest rate of 8%.

NOTE 8-   STOCKHOLDERS' DEFICIT
          ---------------------

          COMMON STOCK
          ------------

          As of March 31, 2006 and 2005, the Company has 100,000,000 and
          50,000,000 shares of common stock authorized, 77,985,587 and
          66,539,685 issued and 62,985,587 and 66,539,685 outstanding,
          respectively. There are currently 15,000,000 common shares held as
          collateral

          The following details the stock transactions for the year ended March
          ---------------------------------------------------------------------
          31, 2005.
          ---------

          On July 2, 2004, the Company's board of directors approved a 2:1 stock
          split that increased the issued and outstanding shares 27,235,257.

          The Company issued 50,000 shares of common stock to the lender of a
          $10,000 note payable for entering into the note agreement. Since the
          Company's stock at the time of issuance was not trading, the Company
          has valued these shares at par ($50).

          The Company issued 9,000,000 shares to consultants and management in
          the form of S-8 stock, which was issued July 1, 2004 (subsequent to
          the 2:1 split). These shares were valued at $225,000 ($.025 per
          share), the fair value of the stock at the date the shares were
          issued.


                                      F-21


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 8-   STOCKHOLDERS' DEFICIT (CONTINUED)
          ---------------------

          COMMON STOCK (CONTINUED)
          ------------------------

          The Company issued 6,130,827 shares of common stock in the quarter
          ended September 30, 2004 under a stock subscription agreement. The
          shares have been valued at $2,023,173 and reflected as a subscription
          receivable on the condensed consolidated balance sheet. There have
          been no amounts received of this subscription receivable as of March
          31, 2005.

          The Company in the quarter ended September 30, 2004 issued a total of
          1,838,017 shares of stock to consultants (1,077,017), and for
          conversions of notes (362,703) and accounts payable (398,297) valued
          at $586,804 (an average of $.31 per share), the fair value of the
          stock at the date the shares were issued.

          The Company issued 1,999,987 shares of common stock for cash of
          $280,000 in the quarter ended September 30, 2004.

          The Company issued 1,057,769 shares of common stock for services
          valued at $193,113 in the quarter ended December 31, 2004 (275,000 of
          these shares were cancelled in the quarter ended March 31, 2005).

          The Company issued 178,571 shares of common stock for cash of $25,000
          in the quarter ended December 31, 2004.

          The Company issued 300,000 shares of common stock for cash of $30,000
          in the quarter ended March 31, 2005.

          In the quarter ended March 31, 2005, the Company issued 669,000 shares
          of common stock for consulting services and legal services valued at
          $14,569; and 70,000 shares of common stock in connection with a legal
          settlement valued at $11,200; and 100,000 shares of common stock as
          the initial installment of shares in connection with the Internet
          Business Consulting and AppState.Net, LLC acquisition agreement valued
          at $100,000.

          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


                                      F-22


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 8-   STOCKHOLDERS' DEFICIT (CONTINUED)
          ---------------------

          COMMON STOCK (CONTINUED)
          ------------------------

          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.

          15,000,000 shares were issued as collateral on the Cornell Capital
          Partners convertible debenture. These shares are issued, but not
          outstanding.

          PREFERRED STOCK
          ---------------

          The Company has 5,000,000 shares of preferred stock authorized and
          4,000,000 and 0 shares of preferred stock issued and outstanding as of
          March 31, 2006 and 2005, respectively.

          In the quarter ended March 31, 2006, 4,000,000 shares of preferred
          stock valued at $200,000 were issued as compensation.

          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.


                                      F-23


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 8-   STOCKHOLDERS' DEFICIT (CONTINUED)
          ---------------------

          STOCK OPTIONS AND WARRANTS
          --------------------------

          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, 2006 and 2005.

          The following tables summarize the activity of the Company's stock
          option plan:

                                                 Year Ended March 31, 2006

                                                                Weighted-
                                                                 average
                                                  Number of     Exercise
                                                   Options        Price
                                                ------------  ------------

          Outstanding - beginning of period          264,000         $0.63
          Granted                                          0
          Forfeited                                  214,000         $0.54
                                                ------------  ------------
          Outstanding - end of period                 50,000         $0.50
                                                ============  ============

          Exercisable - end of period                 50,000         $0.50
                                                ============  ============


                                      F-24


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 8-   STOCKHOLDERS' DEFICIT (CONTINUED)
          ---------------------

          STOCK OPTIONS AND WARRANTS (CONTINUED)
          --------------------------

                                                 Year Ended March 31, 2005

                                                                Weighted-
                                                                 average
                                                  Number of     Exercise
                                                   Options        Price
                                                ------------  ------------
          Outstanding - beginning of period          324,000         $1.60
          Granted                                          0
          Forfeited                                  (60,000)       ($6.00)
                                                ------------  ------------
          Outstanding - end of period                264,000         $0.63
                                                ============  ============

          Exercisable - end of period                264,000         $0.63
                                                ============  ============

          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.

          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:

                                                         Year Ended March 31,
                                                          2006         2005
                                                          ----         ----
          Net loss:
            As reported                               ($4,158,104)  ($1,588,393)
            Total stock-based employee compensation
               expense determined under fair value
               based method for all awards, net of
               related tax effects                         (0)          (0)
                                                          -----        -----
             Pro forma                                ($4,158,104)  ($1,588,393)
          Net loss per share:
             As reported:
                Basic                                    ($0.05)      ($0.03)
                Diluted                                  ($0.05)      ($003)
             Pro forma:
                Basic                                    ($0.05)      ($0.03)
                Diluted                                  ($0.05)      ($0.03)

          The Company has 4,027,705 and 527,705 stock warrants outstanding and
          vested as of March 31, 2006 and 2005. There were 2,000,000 warrants at
          $.30 and 1,500,000 warrants at $.40 issued during 2006 and none issued
          during 2005.


                                      F-25


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 8-   STOCKHOLDERS' DEFICIT (CONTINUED)
          ---------------------

          STOCK OPTIONS AND WARRANTS (CONTINUED)
          --------------------------

          The Company has the following warrants exercisable for the purchase of
          its common stock:

                                                               Year Ended
                                                                March 31,
          Exercise                                              ---------
           Price      Expiration Date                       2006         2005
           -----      ---------------

           $0.50   February, 2007                          26,880       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                          2,000,000
           $0.40   March, 2011                          1,500,000

                                                      ------------------------
                                                        4,027,705      527,705
                                                      ========================
                   Weighted average exercise price          $0.34        $3.72
                                                            -----        -----


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, 2006 and 2005, 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 was operating essentially as a shell company up until
          January 2005, when it acquired 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.


                                      F-26


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


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.

          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.


                                      F-27


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 10-  ACQUISITIONS (CONTINUED)
          ------------

          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.

          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-  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, 2006 and 2005, deferred tax assets approximated the
          following:

                                              2006             2005
                                           ----------       ----------
          Deferred tax assets              $8,380,000       $7,305,000
          Less:  valuation allowance       (8,380,000)      (7,305,000)
                                           ----------       ----------

          Net deferred tax assets          $      -0-       $      -0-
                                           ==========       ==========

          At March 31, 2006 and 2005, the Company had accumulated deficits
          approximating $25,644,000 and $21,486,000 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-28


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 12-  LITIGATION/ ARBITRATION
          -----------------------

          The Company was involved in arbitration with one of their vendors that
          was scheduled for November 15, 2004. The vendor had claimed the
          Company owed them in excess of $900,000, and the Company had
          previously filed a complaint against this vendor for breaches of
          contract, fraud, misrepresentation, unfair business practices,
          injunction and accounting. Pursuant to mutual agreement of the
          parties, their respective disputes and claims were pending resolution
          through binding arbitration. The Company reached a confidential
          settlement and all parties dismissed their complaints during the
          quarter ended March 31, 2005.

          The Company had another arbitration hearing set for November 15, 2004
          with another vendor over charges the Company was billed for improper
          termination fees. The Company reached a confidential settlement and
          all parties dismissed their complaints during the quarter ended March
          31, 2005.

          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. After discussions with legal
          counsel, the Company believes the amount of the judgment would be
          mitigated in a full hearing on the matter, which the Company intends
          to vigorously pursue. The Company currently has $473,548 recorded in
          notes and interest payable and $934,782 as a contingent liability, and
          legal counsel and management believe this amount is adequate to
          resolve this matter. The judgment is currently under appeal in the
          Superior Court of San Joaquin County, Stockton, CA. The Company's
          counsel is in negotiations with the plaintiff's counsel to try and
          reach an amicable settlement.

          The Company has seven default judgments against it for a total amount
          of $163,367. They are as follows:

               Five of these judgments have settlements in place with total
               balances of $85,778. The balances are recorded in accounts
               payable.

               One judgment in the amount of $62,328 is in favor of an equipment
               leasing company and is against a wholly owned subsidiary of
               Internet Ventures, Inc. This is recorded under accounts payable
               and installment debt.

               One judgment in the amount of $15,261 is in favor of a debenture
               holder against Internet Ventures, Inc. The amount is recorded in
               debentures payable, debenture interest payable, and accounts
               payable.

          On October 19, 2005, a complaint was erroneously served on IVI
          Communications, Inc., fka Internet Ventures, Inc. by Annette S.
          Paoletti, as


                                      F-29


<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 2006 AND 2005


NOTE 12-  LITIGATION/ ARBITRATION (CONTINUED)
          -----------------------

          Successor Trustee of the Clare P. and Evelyn B. McEnerney Family
          Trust, for unspecified damages resulting from the delinquent payment
          of principal and interest on a note payable from Internet Ventures,
          Inc. IVI Communications, Inc. has contested this complaint. A note
          payable and accrued interest in the amount of $241,051 is recorded in
          notes and interest payable. Our counsel has answered the complaint and
          in addition is currently in negotiations with plaintiff's counsel to
          settle the matter amicably.

          In addition, the Company is currently negotiating settlements with
          vendors and debt holders for amounts currently outstanding. The
          Company has converted $2,356,707 in old vendor payables to equity.


NOTE 13-  SUBSEQUENT EVENTS
          -----------------

          On April 18, 2006, the Company received $200,000 from Cornell Capital
          Partners, L.P. and on April 19 it filed the SB2 Registration statement
          to register 22,250,000 shares of common stock in accordance with the
          securities purchase agreement. This is the second installment on the
          12% secured convertible debenture in the aggregate principal amount of
          $600,000. The last installment of $200,000 will be advanced two (2)
          business days after the date the registration statement becomes
          effective.



                                      F-30


<PAGE>

ITEM 8            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE

Since July 2, 2004, when the Registrant engaged Bagell, Josephs, Levine &
Company, LLC as the Registrant's independent accountants, and there has been no
change.


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, 2006, 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,
2006.

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, 2006.



                                     PART 3


ITEM 9            DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Directors and Executive Officers

Name                           Age          Position
----                           ---          --------

Nyhl Henson                    58           Chief Executive Officer, President,
                                            Chairman and Director
Charles Roodenburg             53           Chief Financial Officer,
                                            Chief Operating Officer and Director

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.


                                       27


<PAGE>

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


                                       28


<PAGE>

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.


Significant Employees
---------------------

Name                               Age             Position
----                               ---             --------
Robin Tjon                         61              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 years prior to that time.


                                       29


<PAGE>

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.

<TABLE>
                                           SUMMARY COMPENSATION TABLE


                                                             Annual                             Long-Term
                                                          Compensation                         Compensation
----------------------------------------------------------------------------------------------------------------
              (a)                     (b)                (c)         (d)           (e)              (f)
                                                                                                 Restricted
            Name and                                                           Other Annual        Stock
            principal                                  Salary       Bonus      Compensation        Awards
            position                 Year                ($)         ($)           ($)              ($)
----------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>    <C>          <C>           <C>               <C>
Nyhl Henson-                       3/31/2006    (1)    240,000      None          None              120,000
CEO / Chairman                     3/31/2005    (2)    240,000      None          None               15,625
                                   3/31/2004           240,000      None          None                 None
                                   3/31/2003    (3)    240,000      None          None              320,000
                                   3/31/2002    (4)    228,333      None          None               80,000
----------------------------------------------------------------------------------------------------------------
Charles Roodenburg-                3/31/2006    (5)     84,000      None          None               45,000
CFO/Director                       3/31/2005    (6)     84,000      None          None                7,500
                                   3/31/2004            84,000      None          None                 None
                                   3/31/2003    (7)     84,000      None          None               20,000
                                   3/31/2002    (8)     37,000      None          None               70,000
----------------------------------------------------------------------------------------------------------------
</TABLE>

---------------
(1) In fiscal 2006 Nyhl Henson received $207,356 cash salary, $32,644 accrued
salary and 2,400,000 shares of the Company's preferred stock valued at $120,000.

(2) In fiscal 2005 Nyhl Henson received $121,175 cash salary, $118,825 accrued
salary and 625,000 shares of the Company's stock valued at $15,625.

(3) In fiscal 2003 Nyhl Henson received $240,000 cash salary and 800,000
shares of the Company's stock valued at $0.40 per share.

(4) In fiscal 2002 Nyhl Henson received $228,333 cash salary and 200,000
shares of the Company's stock valued at $0.40 per share.

(5) In fiscal 2006 Charles Roodenburg received $82,221 cash salary, $1,779
accrued salary and 900,000 shares of the Company's preferred stock valued at
$45,000.

(6) In fiscal 2005 Charles Roodenburg received $40,684 cash salary, $43,316
accrued
salary and 300,000 shares of the Company's stock valued at $7,500.

(7) In fiscal 2003 Charles Roodenburg received $84,000 cash salary and
50,000 shares of the Company's stock valued at $0.40 per share.

(8) In fiscal 2002 Charles Roodenburg received $37,000 cash salary and
175,000 shares of the Company's stock valued at $0.40 per share.


                                       30


<PAGE>

ITEM 11           SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 31, 2006 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.

<TABLE>
<S>     <C>
   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                   33.05%
                 5959 W Century Blvd Suite 573
                 Los Angeles, CA 90045
                 Nyhl Henson, Trustee


Common Stock     Nyhl Henson, CEO/Director (2)             1,335,000                    1.71%
                 5959 W Century Blvd Suite 573
                 Los Angeles, CA 90045

Common Stock*    Charles Roodenburg, CFO/Director(3)         600,000                     .77%
                 5959 W Century Blvd Suite 573
                 Los Angeles, CA 90045

Common Stock     Directors & Officers As A Group (4)      27,705,514                   35.53%
</TABLE>

------------------
* less than 1%

     (1)  This table is based on 77,985,587 shares of Common Stock issued on
          March 31, 2006.

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

     (3)  Does not include 900,000 shares of preferred 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.


                                       31


<PAGE>

ITEM 13           EXHIBITS

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


EXHIBIT
NUMBER          TITLE OF EXHIBIT
------          ----------------

2.1             Agreement and Plan of Reorganization(2)
2.2             Certificate of Amendment to Articles of Incorporation(2)
2.3             Certificate of Amendment to Articles of Incorporation increasing
                authorized shares of common stock (6)
2.4             Business Purchase Agreement Between IVI Communications, Inc.,
                Internet Business Consulting, Inc. and AppState.Net, Llc.(9)
2.5             Purchase Agreement between IVI Communications, Inc. and Francis
                and Lois Allen (11)
3.1             Articles of Incorporation(2)
3.2             Bylaws (2)
3.3             Certificate of Designation, Powers, Preferences and Rights of
                Series A Preferred Stock, filed with the State of Nevada on
                March 20, 2006 (12)
4.1             2005 Employee Stock Compensation Plan (3)
4.2             Amended 2005 Employee Stock Compensation Plan (7)
4.3             Convertible Debenture dated March 27, 2006 (13)
4.4             Warrant CCP-001 dated March 27, 2006 (13)
4.5             Warrant CCP-002 dated March 27, 2006 (13)
5.1             Opinion of Sichenzia Ross Friedman Ference LLP (14)
9               Voting Trust Agreement(2)
10.1            Employment Agreement for Nyhl Henson dated May 1, 2001(2)
10.2 A & B      Sale Agreements for California ISPs(2)
10.3            Sale Agreement for Oregon ISPs (2)
10.4            Purchase Agreement for Quik Communications (2)
10.5            Sale Agreement for Colorado ISPs(2)
10.6 A B & C    Settlement Agreements with Quik Communications (1)
10.7            Stock Exchange Agreement IVIC and Broadspot World Wide Wireless
                (5)
10.8            Consulting Contract with Keith Jablon dated July 1, 2004 (6)
10.9            Consulting Contract with Big Apple Consulting USA, Inc. dated
                July 6, 2004 (6)
10.1            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)
10.2            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)
14              Code of Ethics (2)
16.1            Malone & Bailey, PLLC letter on change in accountants(4)
21              Subsidiaries of IVI Communications, Inc. (14)
23.1            Consent of Sichenzia Ross Friedman Ference LLP (14)
23.2            Consent of Bagel, Josephs & Company, LLC (14)

-----------------
(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


                                       32


<PAGE>

(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


ITEM 14           PRINCIPAL ACCOUNTANT FEES AND SERVICES

During the year ending March 31, 2006 Bagell Josephs, Levine & Company, LLC were
paid $27,665 for audit-related services and $16,800 for tax preparation and
other services. During year ending March 31, 2005 Bagell Josephs, Levine &
Company, LLC were paid $11,000 for audit-related services and were not paid for
any other services; and Malone & Bailey, PLLC were paid $5,825.00 for auditing
related services and not paid for any other services.



                                   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:    June 2, 2006                        By:   /s/ Nyhl Henson
                                                       -----------------------
                                                       Nyhl Henson
                                                       Chief Executive Officer



Date:    June 2, 2006                        By:   /s/ Charles Roodenburg
                                                       -----------------------
                                                       Charles Roodenburg
                                                       Chief Financial Officer


                                       33