________________________________________________________________________________

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           ___________________________

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

                         COMMISSION FILE NUMBER: 1-15863

                           ___________________________


                                 IA GLOBAL, INC.
             (Exact name of Registrant as specified in its charter)

                           ___________________________


                DELAWARE                             13-4037641
     (State or other jurisdiction of      (IRS Employer Identification No.)
     incorporation or organization)


                          550 N. REO Street, SUITE 300
                                 TAMPA, FL 33609
                    (Address of principal executive offices)


                  REGISTRANT'S TELEPHONE NUMBER: (813) 261-5157

                           ___________________________


         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.

                                 Yes [X] No [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).

                                 Yes [ ] No [X]

         As of August 12, 2005 there were issued and outstanding 97,400,181
shares of the Registrant's Common Stock.
________________________________________________________________________________

<PAGE>
                                 IA GLOBAL, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I.

     Item 1.   Financial Statements ...........................................3

               Consolidated Balance Sheet .....................................3

               Consolidated Statements of Operations ..........................4

               Consolidated Statement of Cash Flows ...........................5

               Notes to Consolidated Financial Statements .....................6

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations ...........................28

     Item 3.   Quantitative and Qualitative Disclosures About Market Risk ....51

     Item 4.   Controls and Procedures .......................................51


PART II.

     Item 1.   Legal Proceedings .............................................52

     Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds....52

     Item 3.   Defaults Upon Senior Securities ...............................52

     Item 4.   Submission of Matters to a Vote of Security Holders ...........53

     Item 5.   Other Information .............................................53

     Item 6.   Exhibits ......................................................53

Signatures ...................................................................55

                                        2
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements
<TABLE>
                                     IA GLOBAL, INC. AND SUBSIDIARIES
                                        CONSOLIDATED BALANCE SHEET
<CAPTION>
                                                                            June 30,         December 31,
                                                                              2005               2004
                                                                          ------------       ------------
                                                                           (unaudited)         (audited)
<S>                                                                       <C>                <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents ........................................      $  3,498,696       $  3,847,813
  Accounts receivable, net of allowance for doubtful accounts of
    $87,025 and $93,338, respectively ..............................         4,440,053          6,431,663
  Notes receivable-trade ...........................................           448,770            641,305
  Inventories ......................................................           705,144            164,046
  Prepaid expenses .................................................           443,281            771,036
  Consumption and deferred tax receivable ..........................           184,111            161,769
  Notes receivable .................................................         1,334,428            150,000
  Other current assets .............................................           224,964            136,102
  Assets held for sale .............................................           555,182            773,582
  Subscription receivable ..........................................         3,809,500                  -
  Income tax receivable- foreign ...................................           611,390                  -
                                                                          ------------       ------------
    Total current assets ...........................................        16,255,519         13,077,316

EQUIPMENT, NET .....................................................           653,307            273,245

OTHER ASSETS
  Intangible assets, net ...........................................         5,490,689          1,271,935
  Deferred tax asset ...............................................           363,693            390,079
  Other assets .....................................................         1,614,162            200,641
                                                                          ------------       ------------

                                                                          $ 24,377,370       $ 15,213,216
                                                                          ============       ============

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
  Accounts payable - trade .........................................      $  2,923,416       $  6,446,656
  Notes payable- trade .............................................         1,036,354          1,474,582
  Accrued liabilities ..............................................         3,563,914            529,198
  Consumption taxes received .......................................           260,577            260,648
  Income taxes payable- foreign ....................................                 -            235,047
  Current portion of long term debt ................................         1,484,608            484,966
  Deferred revenue .................................................         3,638,243                  -
                                                                          ------------       ------------
    Total current liabilities ......................................        12,907,112          9,431,097
                                                                          ------------       ------------

LONG TERM  LIABILITIES:
  Long term debt ...................................................         1,601,084            242,463
  Convertible debentures ...........................................         2,500,000                  -
  Retirement benefits ..............................................            39,138             39,932
                                                                          ------------       ------------
                                                                             4,140,222            282,395
                                                                          ------------       ------------

MINORITY INTERESTS .................................................           525,576          1,365,570
                                                                          ------------       ------------

STOCKHOLDER'S EQUITY:
  Series B Preferred stock, $.01 par value, 5,000 shares authorized
    1,158 issued and outstanding (liquidation value $1,158,000) ....                12                 12
  Common stock, $.01 par value, 200,000,000 shares authorized,
    97,400,181 and 82,400,181 issued and outstanding, respectively .           974,001            824,001
  Paid in capital ..................................................        32,987,339         28,785,839
  Accumulated deficit ..............................................       (27,025,963)       (25,590,820)
  Treasury stock ...................................................           (50,000)           (50,000)
  Other comprehensive income (loss) ................................           (80,929)           165,122
                                                                          ------------       ------------
    Total stockholder's equity .....................................         6,804,460          4,134,154
                                                                          ------------       ------------

                                                                          $ 24,377,370       $ 15,213,216
                                                                          ============       ============

                              See notes to consolidated financial statements.

                                                     3
</TABLE>
<PAGE>
<TABLE>
                                           IA GLOBAL, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>

                                                           Three Months Ended June 30,    Six Months Ended June 30,
                                                           ---------------------------   ---------------------------
                                                               2005           2004           2005           2004
                                                           ------------   ------------   ------------   ------------
                                                            (unaudited)    (unaudited)    (unaudited)    (unaudited)
<S>                                                        <C>            <C>            <C>            <C>
REVENUE .................................................  $  8,585,326   $  9,382,494   $ 14,409,900   $ 11,413,240

COST OF SALES ...........................................     7,580,815      7,916,473     12,103,534      9,427,491
                                                           ------------   ------------   ------------   ------------

GROSS PROFIT ............................................     1,004,511      1,466,021      2,306,366      1,985,749
                                                           ------------   ------------   ------------   ------------

EXPENSES:
  Selling, general and administrative expenses ..........     2,460,779      1,719,918      4,387,514      2,603,086
                                                           ------------   ------------   ------------   ------------
    Total expenses ......................................     2,460,779      1,719,918      4,387,514      2,603,086
                                                           ------------   ------------   ------------   ------------

OPERATING LOSS ..........................................    (1,456,268)      (253,897)    (2,081,148)      (617,337)
                                                           ------------   ------------   ------------   ------------

OTHER INCOME (EXPENSE):
  Interest income .......................................            96          5,325          6,401          7,853
  Interest expense ......................................       (18,487)       (14,518)       (41,386)       (19,525)
  Other income ..........................................         9,078        146,205         39,738        148,853
  Foreign currency transaction adjustment ...............       (91,791)             -        (74,378)         2,255
  Loss on equity investment in QuikCAT Australia Pty Ltd              -        (17,229)             -        (15,273)
  Gain on sale of Fan Club Entertainment Co Ltd .........        99,349              -         99,349              -
                                                           ------------   ------------   ------------   ------------
    Total other income (expense) ........................        (1,755)       119,783         29,724        124,163
                                                           ------------   ------------   ------------   ------------

LOSS FROM CONTINUING OPERATIONS BEFORE
  MINORITY INTERESTS AND INCOME TAXES ...................    (1,458,023)      (134,114)    (2,051,424)      (493,174)

MINORITY INTERESTS ......................................      (273,801)        34,203       (376,864)        68,567
                                                           ------------   ------------   ------------   ------------

LOSS FROM CONTINUING OPERATIONS BEFORE
  INCOME TAXES ..........................................    (1,184,222)      (168,317)    (1,674,560)      (561,741)
                                                           ------------   ------------   ------------   ------------

INCOME TAXES:
  Current (benefit) provision ...........................      (459,445)       114,298       (651,427)       178,421
  Deferred provision ....................................             -         12,866              -         24,281
                                                           ------------   ------------   ------------   ------------

NET LOSS FROM CONTINUING OPERATIONS .....................      (724,777)      (295,481)    (1,023,133)      (764,443)

Loss from discontinued operations .......................      (165,972)             -       (412,010)             -
                                                           ------------   ------------   ------------   ------------

NET LOSS ................................................  $   (890,749)  $   (295,481)  $ (1,435,143)  $   (764,443)
                                                           ============   ============   ============   ============

Per share of Common-
  Basic net loss per share from continuing operations ...  $      (0.01)  $      (0.00)  $      (0.01)  $      (0.01)
  Basic net loss per share from discontinued operations .         (0.00)         (0.00)         (0.00)         (0.00)
                                                           ------------   ------------   ------------   ------------
  Total basic net loss per share ........................  $      (0.01)  $      (0.00)  $      (0.02)  $      (0.01)
                                                           ============   ============   ============   ============

  Diluted net loss per share from continuing operations .  $      (0.01)  $      (0.00)  $      (0.01)  $      (0.01)
  Diluted net loss per share from discontinued operations         (0.00)         (0.00)         (0.00)         (0.00)
                                                           ------------   ------------   ------------   ------------
  Total diluted net loss per share ......................  $      (0.01)  $      (0.00)  $      (0.02)  $      (0.01)
                                                           ============   ============   ============   ============

  Weighted average shares of common stock outstanding ...    84,691,939     73,156,824     83,539,798     72,561,112
  Weighted average shares of common stock and common
    equivalent shares outstanding .......................    84,691,939     73,156,824     83,539,798     72,561,112

                                   See notes to consolidated financial statements.

                                                          4
</TABLE>
<PAGE>
<TABLE>
                                     IA GLOBAL, INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
                                                                               Six Months Ended June 30,
                                                                                  2005            2004
                                                                              -----------     -----------
                                                                              (unaudited)     (unaudited)
<S>                                                                           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ...............................................................    $(1,435,143)    $  (764,443)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
    Depreciation and amortization ........................................         75,590         195,749
    Loss on disposal of leasehold improvements ...........................              -          81,653
    Equity gain from investment in QuikCAT Australia Pty Ltd .............              -          15,273
    Loss from discontinued operations ....................................        412,010               -
    Minority interests ...................................................       (839,994)        478,047
    (Gain) on disposal of discontinued operation .........................        (99,349)              -
    Accrued interest on notes/loans payable ..............................              -          16,820
    Accounts receivable ..................................................      3,366,430         112,308
    Notes receivable - trade .............................................        192,535        (303,153)
    Notes receivable .....................................................       (181,811)              -
    Consumption and deferred tax receivable ..............................        (59,437)         66,543
    Inventory ............................................................       (541,098)       (299,966)
    Prepaid expenses .....................................................        887,754         289,251
    Other current assets .................................................       (341,074)        246,150
    Deferred tax assets ..................................................         26,386          13,020
    Income taxes receivable - foreign ....................................       (611,390)              -
    Other assets .........................................................       (956,659)       (107,705)
    Accounts payable .....................................................     (3,558,104)        126,925
    Notes payable - trade ................................................       (438,228)              -
    Accrued and other liabilities ........................................      1,130,676         (35,901)
    Income taxes payable - foreign .......................................       (235,047)        125,046
    Deferred revenue .....................................................       (558,250)       (463,119)
                                                                              -----------     -----------
Net cash provided by (used in) continuing operations .....................     (3,764,203)       (207,502)
Net cash provided by discontinued operations .............................        295,623               -
                                                                              -----------     -----------
NET CASH PROVIDED BY (USED IN) OPERATIONS ................................     (3,468,580)       (207,502)
                                                                              -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investment in QuikCAT Australia Pty Ltd ................................              -         (50,000)
  Cash of Rex Tokyo Co Ltd immediately following acquisition .............              -       1,934,839
  Purchase of Rex Tokyo Co Ltd ...........................................              -        (941,000)
  Purchases of capital expenditures ......................................        (57,696)       (304,524)
  Purchase of IA Global Acquisition Co ...................................              -        (700,000)
  Repayment of loan receivable from QuikCAT Australia Pty Ltd. ...........        150,000               -
  Proceeds from sale of QuikCAT business unit ............................         30,000               -
  Proceeds from sale of Fan Club .........................................        185,000               -
  Cash of Global Hotline, Inc. immediately following acquisition .........      1,240,037               -
                                                                              -----------     -----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ......................      1,547,341         (60,685)
                                                                              -----------     -----------

CASH PROVIDED BY FINANCING ACTIVITIES:
  Proceeds from loan payable .............................................      2,836,661               -
  Proceeds from loan payable - related party .............................              -       1,500,000
  Repayment of loan payable ..............................................     (1,018,988)              -
  Capital contribution from QuikCAT ......................................            500               -
  Loan to Innovative Computing Group, Inc. ...............................              -        (100,000)
  Loan to QuikCAT Australia Pty Ltd. .....................................              -         (25,000)
  Proceeds from issuance of common stock .................................              -         400,000
  Proceeds from long term debt ...........................................              -         923,275
  Proceeds from exercise of options ......................................              -          40,000
                                                                              -----------     -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES ................................      1,818,173       2,738,275
                                                                              -----------     -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .....................       (103,066)      2,470,088

EFFECT OF EXCHANGE RATE CHANGES ON CASH ..................................       (246,051)        (59,350)

CASH AND CASH EQUIVALENTS, beginning of the period .......................      3,847,813         676,782
                                                                              -----------     -----------

CASH AND CASH EQUIVALENTS, end of the period .............................    $ 3,498,696     $ 3,087,520
                                                                              ===========     ===========

Supplemental disclosures of cash flow information:
  Interest paid ..........................................................    $    40,276     $         -
  Taxes paid .............................................................    $   213,332     $   198,219
Non-cash investing and financing activities:
  Subscription receivable from convertible debentures ....................    $ 3,750,000     $         -
  Common stock issued for Global Hotline, Inc. ...........................    $ 3,097,500     $         -
  Issuance of loan receivable for sale of Fan Club Entertainment Co. Ltd.     $   571,193     $         -
  Issuance of loan receivable from sale of QuikCAT business unit .........    $   200,000     $         -
  Subscription receivable from sale of common stock ......................    $    59,500     $         -
  Common stock issued for Rex Tokyo Co Ltd ...............................    $         -     $   138,600
  Conversion of debt to equity ...........................................    $         -     $ 1,519,511
  Contribution of note to capital ........................................    $         -     $   101,629

                              See notes to consolidated financial statements.

                                                     5
</TABLE>
<PAGE>
                        IA GLOBAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  BASIS OF PRESENTATION:

         IA Global, Inc. is a public holding company focused on acquiring
primarily Japanese companies that operate in the gaming, entertainment and
technology areas. The company owns 60.5% equity interest in Rex Tokyo Co Ltd
("Rex Tokyo"), which is a supplier and installer of parts to the Pachinko and
slot machine gaming industry in Japan. Rex Tokyo supplies such items such as
automatic medal dispensing machines, automatic cigarette butt disposal systems,
lighting systems, Pachinko balls and other Pachinko accessory products as well
as numerous new Pachinko and slot machines. The company also owns a 100% equity
interest in Global Hotline, Inc. ("Global Hotline"), which operates call centers
and is a reseller of telephone and broadband lines in Japan.

         The company has divested several unprofitable operations in 2005,
including Fan Club Entertainment Co Ltd ("Fan Club") on May 12, 2005, IA Global
Acquisition Co on July 1, 2005 and the QuikCAT North America Internet
accelerator business on May 28, 2005.

         The accompanying unaudited CONSOLIDATED financial statements of IA
Global, Inc. and SUBSIDIARIES (the "company") have been prepared in accordance
with generally accepted accounting principles ("GAAP") for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X.

         Accordingly, they do not include all of the information and footnotes
required by U.S. GAAP for complete financial statements. The financial
statements for the period ended June 30, 2005 and 2004 are unaudited and include
all adjustments necessary to a fair statement of the results of operations for
the periods then ended. All such adjustments are of a normal recurring nature.
The results of the company's operations for any interim period are not
necessarily indicative of the results of the company's operations for a full
fiscal year. For further information, refer to the financial statements and
footnotes thereto included in the company's annual report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
2004.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the company and its wholly owned and majority-owned subsidiaries.
The company fully consolidated the results of operations of the IA Global
Acquisition Co. in the Consolidated Statements of Operations for the three and
six months ending June 30, 2005 because the subsidiary incurred losses for this
period and the company does not expect to recover these losses from the minority
owner. In accordance with SFAS 144, the company accounted for the loss for the
three and six months ended June 30, 2005 loss for IA Global Acquisition Co and
Fan Club as discontinued operations in its consolidated statement of operations.
Inter-company items and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS - The company classifies highly liquid temporary
investments with an original maturity of three months or less when purchased as
cash equivalents.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS - Accounts receivable
consists primarily of amounts due to the company from normal business
activities. The company maintains an allowance for doubtful accounts to reflect
the expected non-collection of accounts receivable based on past collection
history and specific risks identified within the portfolio. If the financial
condition of the customers were to deteriorate resulting in an impairment of
their ability to make payments, or if payments from customers are significantly
delayed, additional allowances might be required.

                                       6
<PAGE>

NOTES RECEIVABLE - The company's Japanese subsidiaries, on occasion, accept
notes receivable in payment of accounts receivable with certain customers. These
notes are usually of a short term nature, approximately three to six months in
length. They do not bear interest and are paid by, and secured by, the
customer's bank. Total notes receivable as of June 30, 2005 and December 31,
2004 were $448,770 and $641,305, respectively.

INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out)
or market. The company records a provision for excess and obsolete inventory
whenever an impairment has been identified.

EQUIPMENT - Equipment represents machinery, equipment and software, which are
stated at cost less accumulated depreciation. Depreciation of machinery and
equipment is computed by the accelerated or straight-line methods over the
estimated useful lives of the related assets (approximately 3-15 years).
Software developed or obtained for internal use is depreciated using the
straight-line method over the estimated useful life of the software, generally
not in excess of two years.

INTANGIBLE ASSETS / INTELLECTUAL PROPERTY - The company amortizes the intangible
assets and intellectual property acquired in connection with the acquisition of
Global Hotline, over thirty six months on a straight - line basis, which is the
expected life of the KDDI agreements.

LONG - LIVED ASSETS - The company reviews its long-lived assets for impairment
when changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Long-lived assets under certain circumstances are reported
at the lower of carrying amount or fair value. Assets to be disposed of and
assets not expected to provide any future service potential to the company are
recorded at the lower of carrying amount or fair value less cost to sell. To the
extent carrying values exceed fair values, an impairment loss is recognized in
operating results. The company has performed its impairment tests and determined
there were no impaired long - lived assets as of June 30, 2005.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts reported in the
balance sheet for cash and cash equivalents, accounts receivable, notes
receivable, accounts payable, notes payable and accrued liabilities and current
portion of long term debt approximate fair value based on the short-term
maturity of these instruments.

NOTES PAYABLE - The company's Japanese subsidiaries, on occasion, satisfy the
payment of their accounts payable, through the issuance of notes payable with
certain vendors. These notes are usually of a short term nature, approximately
three to six months in length. They do not bear interest and are paid by the
company's bank to the vendors upon presentation to the company's bank on the
date of maturity. In the event of insufficient funds to repay these notes, the
company's bank can proceed with bankruptcy proceedings in Japan. Total notes
payable as of June 30, 2005 and December 31, 2004 were $1,036,354 and
$1,474,582, respectively.

DEBT AND EQUITY FINANCING OF CAPITAL TRANSACTIONS - BENEFICIAL CONVERSION
FEATURES - The company has adopted EITF issues 98-5, ACCOUNTING FOR CONVERTIBLES
SECURITIES WITH BENEFICIAL CONVERSION FEATURES OR CONTINGENTLY ADJUSTABLE
CONVERSION RATIOS, and 00-27, APPLICATION OF ISSUE NO. 98-5 TO CERTAIN
CONVERTIBLE SECURITIES in accounting for convertible debt. EITF 98-5 requires
recognition of a conversion feature that is in-the-money at issuance as
additional paid-in-capital, measured by allocating a portion of the proceeds
equal to the intrinsic value of that feature. The intrinsic value of the feature
is the difference between the conversion price and the fair value of the stock
into which the security is convertible, multiplied by the number of shares.
According to EITF 00-27, the issuance proceeds should not be reduced by issuance
costs when calculating the intrinsic value of the conversion feature. The
beneficial conversion feature of debt or equity instruments, depending on the
specific facts and circumstances, will determine whether such beneficial
conversion feature is to be recorded as an expense to be amortized over a period
of time, expensed immediately or recorded as a deemed dividend.

                                       7
<PAGE>

REX TOKYO REVENUE RECOGNITION - Rex Tokyo's revenue was derived from the
following:

         o Sale of equipment to major stores.

         o Installation of machines and fittings to major stores.

         o Maintenance of machines and other equipment in major stores.

         The company recognizes Rex Tokyo revenue when it is realized. Revenue
is considered realized when the product has been shipped or the services have
been provided to the customer, the work has been accepted by the customer and
collectibility is reasonably assured. The company accounts for certain
construction contracts/projects on the percentage-of-completion method and under
this method, income is recognized as work on contracts progresses, but estimated
losses on contracts in progress are charged to operations immediately.

GLOBAL HOTLINE REVENUE RECOGNITION - Global Hotline revenue was derived from
operating call centers and reselling of telephone and broadband lines in Japan.
Revenue for the initial KDDI contract has been recorded based on the contract
terms with KDDI because the revenue have been guaranteed by the agent and the
collectibility is reasonably assured. Revenue for the second KDDI contract is
considered realized when the services have been provided to the customer, the
work has been accepted by KDDI and collectibility is reasonably assured.

         Revenues are deferred when cash has been received from KDDI but the
revenue has not been earned. The company has recorded $3,638,243 of deferred
revenue as of June 30, 2005.

ADVERTISING COSTS - Advertising costs are expensed as incurred. There were no
advertising costs incurred for the three and six months ended June 30, 2005 and
2004.

FOREIGN CURRENCY TRANSLATION - Foreign entities whose functional currency is the
local currency translate net assets at the end of period rates and income and
expense accounts at average exchange rates for the three month period.
Adjustments resulting from these translations are reflected in the consolidated
balance sheet under other comprehensive income and the statement of operations
under other income (expense).

STOCK BASED COMPENSATION - The company has stock-based employee compensation
plans. The company accounts for those plans under the recognition and
measurement principles of APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations. No stock-based employee compensation
cost is reflected in the net loss, as all stock options granted under the plans
had an exercise price equal to the market value of the underlying common stock
on the date of grant. The following table illustrates the effect on net loss and
earnings per share if the company had applied the fair value recognition
provisions of FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
to stock-based employee compensation:

                                       8
<PAGE>
<TABLE>
<CAPTION>
                                              For The Three Months Ended       For The Six Months Ended
                                                       June 30,                        June 30,
                                              ---------------------------     ---------------------------
                                                  2005            2004            2005            2004
                                              -----------     -----------     -----------     -----------
<S>                                           <C>             <C>             <C>             <C>
Net loss available to common
    shareholders, as reported ............    $  (890,749)    $  (295,481)    $(1,435,143)    $  (764,443)

Deduct: total stock-based employee
    compensation determined under fair
    value based method for all awards, net
    of related tax effects ...............        (78,887)        (53,102)       (159,229)        (82,821)
                                              -----------     -----------     -----------     -----------

Pro-forma net loss available to common
    shareholders .........................    $  (969,636)    $  (348,583)    $(1,594,372)    $  (847,264)
                                              ===========     ===========     ===========     ===========

Earnings per share:
    Basic and diluted- as reported .......    $     (0.01)    $         -     $     (0.02)    $     (0.01)
    Basic and diluted- pro-forma .........    $     (0.01)    $         -     $     (0.02)    $     (0.01)
</TABLE>

         The company accounts for non-employee stock transactions in accordance
with SFAS No. 123 and EITF 96-18.

         The above stock-based employee compensation expense has been determined
utilizing a fair value method, the Black-Scholes option-pricing model.

         In accordance with SFAS 123, the fair value of each option grant has
been estimated as of the date of the grant using the Black-Scholes option
pricing model with the following weighted average assumptions:

                                        For the Three and Six Months ended
                                                    June 30,
                                               -------------------
                                               2005          2004
                                               ----          ----
         Risk free interest rate ..........    3.75%         3.75%
         Expected life ....................  10 years      10 years
         Dividend rate ....................    0.00%         0.00%
         Expected volatility ..............     65%           65%

MANAGEMENT SERVICES AGREEMENT - The company and Rex Tokyo implemented a
Management Services Agreement during September 2004 that will be automatically
renewed for successive one year periods starting on October 1st in the absence
of written notice of termination by either party delivered no less than three
months prior to the date on which this agreement would otherwise terminate. Rex
Tokyo is required to pay the company approximately $164,000 in April 2005 and
October 2005.

The company and Global Hotline implemented a Management Services Agreement June
1, 2005 that will be renewed for successive one year periods starting on June
1st in the absence of written notice of termination by either party delivered no
less than three months prior to the date on which this agreement would otherwise
terminate. Global Hotline is required to pay the company approximately $82,000
on a quarterly basis.

COMPREHENSIVE INCOME - The company has adopted SFAS No. 130 Reporting
Comprehensive Income. This statement establishes rules for the reporting of
comprehensive income and its components. Comprehensive income consists of net
loss to common shareholders and foreign currency transaction adjustments and is
presented in the Consolidated Statements of Operations and Stockholder's Equity.

                                       9
<PAGE>

INCOME TAXES - Income tax expense is based on reported income before income
taxes. Deferred income taxes reflect the effect of temporary differences between
asset and liability amounts that are recognized for financial reporting purposes
and the amounts that are recognized for income tax purposes. These deferred
taxes are measured by applying currently enacted tax laws. Valuation allowances
are recognized to reduce the deferred tax assets to the amount that is more
likely than not to be realized. In assessing the likelihood of realization,
management considers estimates of future taxable income.

NET LOSS PER SHARE - The company has adopted SFAS 128, "Earnings per Share."
Loss per common share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding during
the period. The common stock equivalents have not been included as they are
anti-dilutive.

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

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -

         In January 2003, FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN No. 46). This interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Statements, provides guidance
for identifying a controlling interest in a variable interest entity established
by means other than voting interests. FIN No. 46 also requires consolidation of
a variable interest entity by an enterprise that holds such a controlling
interest. In December 2003, the FASB completed its deliberations regarding the
proposed modification to FIN No. 46 and issued Interpretation Number 46R,
Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51
(FIN No. 46R). The decisions reached included a deferral of the effective date
and provisions for additional scope exceptions for certain types of variable
interests. Application of FIN No. 46R is required in financial statements of
public entities that have interests in variable interest entities or potential
variable interest entities commonly referred to as special - purpose entities
for periods ending after December 15, 2003. Application by public entities
(other than small business users) for all other types of entities is required in
financial statements for periods ending after March 15, 2004. The adoption of
FIN No. 46R did not have a material effect on the company's consolidated
financial statements.

         In December of 2003, the FASB issued a revised SFAS No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits". The statement
revises employers' disclosures about pension plans and other postretirement
benefit plans but it does not change the measurement or recognition of those
plans. The revised SFAS No. 132 requires additional disclosures to those in the
original SFAS 132 about the assets, obligations, cash flows, and net periodic
benefit cost of defined pension plans and other defined benefit postretirement
plans. The statement also increases quarterly pension plan and postretirement
benefit plan disclosure requirements. Revised SFAS No. 132 domestic plan
disclosure requirements are effective for financial statements with fiscal years
ending after December 15, 2003. However, disclosure of information about foreign
plans required by the Statement is effective for fiscal years ending after June
15, 2004. The company adopted this statement in December of 2003 and it did not
have a material effect on the company's consolidated financial statements.

                                       10
<PAGE>

         SFAS No. 123 (Revised 2004), "Share-Based Payment," issued in December
2004, is a revision of FASB Statement 123, "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related implementation guidance. The Statement focuses
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS No. 123 (Revised 2004)
requires a public entity to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award (with limited exceptions). That cost will be recognized over the
period during which an employee is required to provide service in exchange for
the award. This statement is effective as of the beginning of the first interim
or annual reporting period that begins after January 15, 2006 and the company
will adopt the standard in the second quarter of fiscal 2006. The company has
not determined the impact, if any, that this statement will have on the
company's consolidated financial statements.

         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4," which clarifies the types of costs that
should be expensed rather than capitalized as inventory. This statement also
clarifies the circumstances under which fixed overhead costs associated with
operating facilities involved in inventory processing should be capitalized. The
provisions of SFAS No. 151 are effective for fiscal years beginning after June
15, 2005 and the company will adopt this standard in fiscal 2006. The company
has not determined the impact, if any, that this statement will have on the
company's consolidated financial statements.

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets--An Amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from
fair value measurement for nonmonetary exchanges of similar productive assets in
paragraph 21(b) of APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," and replaces it with an exception for exchanges that do not have
commercial substance. SFAS 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is effective for the
fiscal periods beginning after June 15, 2005 and is required to be adopted by
the company in the first quarter of fiscal 2006. The company not determined the
impact, if any, that this statement will have on the company's consolidated
financial statements.

NOTE 3.  ACQUISITIONS AND DIVESTITURES

         The acquisitions of Rex Tokyo Co. and Global Hotline were key
components of the company's strategy to operate primarily as a holding company.

REX TOKYO CO LTD

         On March 18, 2004, the company executed Share Purchase Agreements and a
Stockholders Agreement with Rex Tokyo and certain of its management, pursuant to
which the company acquired its 60.5% ownership interest in Rex Tokyo. The
company purchased 1,000 shares of Rex Tokyo stock for 100 million Yen, or
approximately $941,000 based on the Japanese Yen/US dollar exchange rate on
March 25, 2004. In addition, the company purchased 150 Rex Tokyo shares from Mr.
Ejima, the Chief Executive Officer of Rex Tokyo, for 462,000 shares of common
stock issued at $.30 per share which is the average closing price the five days
prior to closing. The Stockholders Agreement places restrictions on the sale of
Rex Tokyo stock in the future, requires existing management to operate the
business and places conditions on the board of director composition. This
agreement can be terminated under certain conditions. The company used working
capital to fund the cash portion of the purchase price.

         Rex Tokyo is a supplier and installer of parts to the Pachinko and slot
machine gaming industry in Japan. Rex Tokyo supplies such items such as
automatic medal dispensing machines, automatic cigarette butt disposal systems,
lighting systems, Pachinko balls and other Pachinko accessory products as well
as numerous new Pachinko and slot machines

                                       11
<PAGE>

         The Pachinko industry has experienced significant consolidation since
the late 1990s, with small parlor operators being replaced by large mega-parlor
owners. Rex Tokyo's business expansion is primarily focused on providing support
and services to these mega-parlor owners.

         Rex Tokyo is a member of the Pachinko Chain Store Association and the
East Japan Gaming Machinery Association. As a member of this Association, it is
authorized to certify second hand machines. Also, it is registered as a Gaming
Machinery Sales Operation with the Japan Gaming Related Business Association.
The Japan Gaming Related Business Association conducts training and
qualification testing. Its objective is to ensure that members uphold the rules
and teachings of the association in their everyday work. Once a member passes
the test of the association, it receives the Gaming Machine Handling Manager
Certificate. Approximately half of Rex Tokyo's staff and related contractors
have achieved this qualification.

         The cost to acquire these assets was allocated to the assets acquired
according to estimated fair values. The allocation was as follows:

Purchase price:

Cash ............................................................  $   941,000
Stock ...........................................................      138,600
                                                                   -----------
                                                                     1,079,600
                                                                   -----------
Net Assets Acquired (3/18/04):
Total Assets ....................................................    5,549,826
Liabilities .....................................................   (4,618,949)
                                                                   -----------

Net Assets at 3/18/04 ...........................................      930,877
Reserve .........................................................      (22,159)
Plus 10 million Yen contributed by other ........................       92,328
Plus cash paid by IA Global .....................................      941,000

                                                                   -----------
                                                                     1,942,046

% Acquired ......................................................        60.5%
                                                                   -----------
                                                                     1,174,938
                                                                   -----------

Negative goodwill allocated to property and equipment............  $   (95,338)
                                                                   ===========

         The company expanded this business in 2004 by acquiring new sales
offices in Kyushu and West Tokyo, Japan. In addition, in October 2004, Rex Tokyo
established a joint venture company, Timothy World, with Kyushu Tesco Co Ltd.
for the supply of lighting fixtures to the Pachinko industry and began to sell
slot machines directly rather than as an agent during the 4th quarter of 2004.

         On December 31, 2004, the company invested 50,000,000 Yen or
approximately $488,000 in Rex Tokyo. Under the terms of the Subscription
Agreement, the company agreed to purchase 500 Series A Preference Shares of Rex
Tokyo for the sum of 200,000 Yen per Preference Share, payable in two equal
installments. The initial 50,000,000 Yen was paid by December 31, 2004 and the
balance is to be paid by December 31, 2005. The funds will be used to expand the
Rex Tokyo business.

         On March 25, 2005, Rex Tokyo announced that it has formed a new
wholly-owned subsidiary in Japan, Collaboration Co Ltd, to focus on business
development opportunities for Rex Tokyo, including the design and building of
"gaming machine islands" for Pachinko slot machine stores.

                                       12
<PAGE>

         On June 17, 2005, Rex Tokyo announced that it had formed a new
wholly-owned subsidiary in Japan, Double R, Inc., to focus on the development of
maintenance and repair business in the Pachinko industry.

         The pro-forma financial data for the acquisition for the six months
ended June 30, 2005 was as follows:

                                                 Pre-Acquisition
                                 As Reported,     Operations of     Pro Forma,
                                  Six Months        Rex Tokyo       Six Months
                                     Ended          January 1-         Ended
                                 June 30, 2004    March 18, 2004   June 30, 2004
                                 -------------   ---------------   -------------

Revenues ......................  $ 11,413,240      $ 5,639,384     $ 17,052,624

Loss before extraordinary items      (764,443)         111,505         (652,938)

Net loss ......................      (764,443)         111,505         (652,938)

Loss per common share .........         (0.01)               -            (0.01)

There were no material, nonrecurring items included in the reported the
pro-forma results.

GLOBAL HOTLINE, INC.

         The acquisition of Global Hotline, a privately held Japanese company,
closed June 15, 2005. The transaction was structured as a share exchange in
which the company will issue 15,000,000 shares of its common stock in exchange
for 100% of Global Hotline's equity. The common stock of the company had a value
of $.207 per share, which was the average close price during the twenty days
prior to the signing of the April 20, 2005 Share Exchange Agreement, or an
aggregate value of $3,097,500.

         Global Hotline was established September 7, 2004 as a call center
operator and reseller of telephone and broadband lines in Japan. The Japanese
telecommunications market is experiencing significant growth in alternative
carriers due to recent regulatory changes that now permit individuals and
companies to choose their telephone service provider. The company operates two
call centers with 370 seats and utilizes two agents with an additional 300 seats
to support the business.

         Global Hotline has two contracts with a KDDI, a significant Japanese
telecommunications company. The first contract covers the period October 1, 2004
thru September 30, 2005 and requires Global Hotline to sell subscriber lines
based on agreed monthly targets. Global Hotline expects to be paid 841,000,000
Yen or $7,600,000 under this contract. The second contract covers the period
March 16, 2005 through March 31, 2006 and requires Global Hotline to sell
subscriber lines based on agreed monthly targets. Global Hotline expects to be
paid 2,925,000,000 Yen or $26,400,000, under this contract. If the targets are
not achieved on a quarterly basis, then Global Hotline will be required to
refund a portion of the revenue to the customer. The contracts may be cancelled
by KDDI if Global Hotline commits a material breach as defined in the contracts.
Absent a material breach by Global Hotline, the contracts may be extended.

         Global Hotline entered into a contract with 3S Networks on November 1,
2004 to outsource the call center operation for the first contract with KDDI.
The agreement has a one year term and provides for lines sold and penalties that
protect the revenues and profits of the first KDDI contract. The contract can be
cancelled under certain conditions and Global Hotline can extend the contract.
Global Hotline utilizes two agents to support 3S Networks and has two call
center operations to support the second contract with KDDI.

                                       13
<PAGE>

         Copies of the agreements between the Company and KDDI, and the Company
and 3S Networks are attached hereto as Exhibits 10.12, 10.13, 10.14, 10.15,
10.16, 10.17 and 10.18 and are incorporated herein by reference.

         The company is acquiring its 100% ownership from Mr. Hideki Anan
(67%),Mr. Kyo Nagae (10%) and Mr. Hiroki Isobe (23%). Mr. Anan, who will remain
as Chief Executive Officer of Global Hotline, is an experienced Japanese
telecommunications executive. Mr. Isobe is affiliated with our majority
shareholders. In addition, IAJ, a related party, has loaned GHI approximately
$600,000, at current exchange rates, and guarantees the rent on the two Global
Hotline offices.

         The cost to acquire these assets has been preliminarily allocated to
the assets acquired according to estimated fair values and is subject to
adjustment when additional information concerning asset valuations are
finalized. The preliminary allocation is as follows:

Purchase price:

Stock ............................................................  $ 3,097,500

Net liabilities acquired (6/15/05):

Total assets......................................................    4,393,089
Liabilities.......................................................   (6,901,391)
                                                                    -----------
                                                                     (2,508,302)
                                                                    -----------

Identifiable intangible assets....................................  $ 5,605,802
                                                                    ===========

The pro-forma financial data for the acquisition for the six months ended June
30, 2005 was as follows:

                                                 Pre-Acquisition
                                 As Reported,     Operations of     Pro Forma,
                                  Six Months      Global Hotline    Six Months
                                     Ended          January 1-         Ended
                                 June 30, 2005    June 15, 2005    June 30, 2005
                                 -------------   ---------------   -------------

Revenues ......................  $ 14,409,900     $  5,493,708     $ 19,903,608

Loss before extraordinary items    (1,435,143)      (3,308,117)      (4,743,260)

Net loss ......................    (1,435,143)      (3,308,117)      (4,743,260)

Loss per common share .........         (0.02)               -            (0.06)

There were no material, nonrecurring items included in the reported the
pro-forma results.

IA GLOBAL ACQUISITION CO / QUIKCAT.COM INC / QUIKCAT AUSTRALIA PTY LTD

         On June 10, 2004, the company closed the acquisition of the
intellectual property and other assets of QuikCAT.Com Inc. ("QuikCAT"). The
purchase price was $700,000 in cash, plus the assumption of certain contracts,
agreements and liabilities. QuikCAT had filed for bankruptcy in the United
States Bankruptcy Court, Northern District of Ohio and the company had submitted
a bid on February 5, 2004. The acquisition was funded from working capital.

         QuikCAT was focused on the development of multi-media compression
technologies for use in video, picture and audio products for license sales to
third party vendors.

                                       14
<PAGE>

         The cost to acquire these assets was allocated to the assets acquired
according to estimated fair values. The allocation was as follows:

         Purchase Price:
         Cash ............................... $ 700,000
                                              ---------

         Net Assets Acquired (6/10/04):
         Accounts receivable ................    34,506
         Fixed assets .......................     5,000
                                              ---------

         Total assets .......................    39,506
                                              ---------

         Identifiable intangible assets ..... $ 660,494
                                              =========

         The company contributed the assets of QuikCAT and a loan to Innovative
Computing Group, Inc., parent company of QuikCAT, of $101,629 to IA Global
Acquisition Co. on June 30, 2004 in exchange for a 90.5% equity interest in IA
Global Acquisition Co. The founding shareholder, the wife of the Chief Executive
Officer of our 47.54% owned affiliate, QuikCAT Australia Pty Ltd. ("QuikCAT
Australia"), acquired 9.5% of IA Global Acquisition Co. for $500 on June 30,
2004. The company increased its ownership percentage to 95% on October 8, 2004
and 100% on June 27, 2005.

         The company previously sold its Internet accelerator business outside
North America to QuikCAT Australia for notes totaling $150,000 that were due
from December 2004 thru June 2005. The company has received all payments under
the notes.

         On May 28, 2005, the company entered into an Option Exercise,
Transition and Consolidation Agreement ("Option Agreement") with QuikCAT
Australia, NanoCAT Technologies Pte Ltd and Rose-Marie Pontre. Under the Option
Agreement, QuikCAT Australia exercised its option to acquire our North America
Internet accelerator business for $200,000, which will be paid with an unsecured
note that is due in installments from June 2005 to September 2005. Payments
totaling $55,000 under the note as of July 31, 2005.

         The company announced the closing of the divestiture of its wholly
owned subsidiary, IA Global Acquisition Co and its remaining holdings related to
QuikCAT to Ominira Networks LLC, a Delaware limited liability corporation
("Ominira"), that is affiliated with Innovative Computing Group, Inc., the
founder of QuikCAT. The closing occurred on July 15, 2005, with an effective
date of July 1, 2005. The company has recorded assets held for sale of $555,182
as of June 30, 2005 related to this divestiture.

         As part of this transaction, the company is selling the subsidiary,
including the remaining rights and assets of QuikCAT which were acquired out of
Chapter 11 bankruptcy on June 10, 2004. In addition, the company is assigning
its intellectual property rights related to the Miliki Supercompressor product
and any additions, developments and modifications related to certain projects
and products, and Ominira is assuming certain liabilities of IA Global
Acquisition Co. The total purchase price is $620,000, which will be paid with a
note that is due in installments from September 2005 to June 2006. The note is
secured by the assets sold to Ominira. The company has assumed the rights and
obligations under the previously announced divestitures of its the Internet
accelerator business outside of North America and in North America to its joint
venture partner QuikCAT Australia and its affiliate NanoCAT Technologies Pte
Ltd.

                                       15
<PAGE>

DIVESTITURE OF FAN CLUB ENTERTAINMENT CO LTD

         The company announced the sale of Fan Club as of May 12, 2005 to TK
Partners, Inc. ("TK Partners"), formerly Cyber Holdings Co Ltd. As part of this
transaction, the company is selling the 67% owned business for approximately
$755,000 plus 350,000 shares of IA Global common stock valued at $.16 per share.
The total cash purchase price which will be paid with $185,000 at signing and a
note that is due in monthly installments of approximately $65,000 from June 2005
thru January 2006. The note is unsecured and TK Partners has made payments
totaling $315,000 as of July 31, 2005. The company decided to divest the Fan
Club business as it is no longer core to our operations and the closing of new
license sales was more difficult than the company expected.

NOTE 4.  ACCOUNTS RECEIVABLE/ CUSTOMER CONCENTRATION

         Accounts receivable was $4,440,053 and $6,431,663 as of June 30, 2005
and December 31, 2004, respectively. The company had the following customers
with sales in excess of 10% for the six months ended June 30, 2005 and 2004:

                                   June 30,          June 30,
                                     2005              2004
                                   --------        ------------
         Dainam Co Ltd               45.3%             41.8%

         Dainam is a Rex Tokyo customer. There were no other customers in excess
of 10%in the respective periods.

         The company anticipates that significant customer concentration will
continue for the foreseeable future.

NOTE 5.  INVENTORIES

         Inventories as of June 30, 2005 and December 31, 2004, respectively,
consisted of the following:

                                                   June 30,         December 31,
                                                     2005               2004
                                                   --------         ------------

Raw materials ................................     $ 80,544           $ 67,941

Work in process ..............................      624,600             96,106

Finished goods ...............................            -                  -
                                                   --------           --------

Total inventories ............................      705,144            164,046

Reserve for obsolete inventories .............            -                  -
                                                   --------           --------

Net inventories ..............................     $705,144           $164,046
                                                   ========           ========

NOTE 6.  PREPAID COSTS

         Prepaid expenses were $443,281 and $771,036 as of June 30, 2005 and
December 31, 2004, respectively. Such costs as of June 30, 2005 consisted of
prepaid insurance, prepaid financing costs and other costs incurred by the
company and prepaid expenses incurred by Global Hotline. Such costs as of
December 31, 2004 consisted of prepaid insurance and other costs incurred by the
company, production cost advances incurred by Rex Tokyo and prepaid Fan Club
expenses related to future revenue.

                                       16
<PAGE>

NOTE 7.  NOTES RECEIVABLE

         Notes receivable were $1,334,428 and $150,000 as of June 30, 2005 and
December 31, 2004, respectively. Such assets as of June 30, 2005 included notes
Receivable from (i) QuikCAT Australia from the divestiture of our North America
Internet accelerator business (ii) TK Partners, formerly Cyber Holdings Co Ltd,
from the divestiture of Fan Club, (iii) Kyushu Tesco, which was used to fund the
growth of the Timothy World business, and (iv) officer and employees of Global
Hotline. Such assets as of December 31, 2004 included marketable securities and
other Assets held by Rex Tokyo.

NOTE 8.  EQUIPMENT

         Equipment was $653,307 and $273,245 as of June 30, 2005 and December
31, 2004, respectively, net of accumulated depreciation of $428,844 and
$273,245. The equipment consisted of leasehold improvements, capitalized
software licenses, vehicles and equipment. Total depreciation expense was
$85,120 and $179,182 for the six months ended June 30, 2005 and
2004,respectively.

NOTE 9.  INTANGIBLE ASSETS

         Intangible assets as of June 30, 2005 and December 31, 2004,
respectively, consisted of the following:

                                        June 30,    December 31,
                                          2005          2004      Estimated Life
                                      -----------   -----------   --------------
Customer contracts                    $ 5,568,547   $         -        3 years
Licensing fee .....................             -     1,551,891      2-5 years
Other intangible ..................             -       188,116        5 years
                                      -----------   -----------
                                        5,568,547     1,740,007
Less: accumulated amortization ....       (77,858)     (468,072)
                                      -----------   -----------
         Intangible Assets, net ...   $ 5,490,689   $ 1,271,935
                                      ===========   ===========

         Total amortization expense for the six months ended June 30, 2005 was
$77,858.

         The fair value of the Global Hotline intellectual property acquired was
estimated using a discounted cash flow approach based on future economic
benefits associated with the KDDI contracts.

NOTE 10. OTHER ASSETS

         Other assets were $1,614,162 and $200,641 as of June 30, 2005 and
December 31, 2004, respectively. Such assets as of June 30, 2005 included loans
receivable from Kyushu Tesco Co Ltd used to fund the growth of the Timothy World
Co Ltd business and other deposits and loans held by Rex Tokyo and a bond
related to Global Hotline's leased offices. Such assets as of December 31, 2004
included other deposits and loans held by Rex Tokyo.

         Timothy World Ltd entered into a Loan Agreement dated November 30, 2004
with Kyushu Tesco in the amount of 84,017,248 Yen, or $816,732, for use to
expand the Timothy World business. The loan requires seventeen monthly payments
starting December 2005, with a final payment in June 2007. The loan accrues
interest at 2% and is cosigned by the Chief Executive Officer of Kyushu Tesco.
In addition, the loan is secured by the inventories and other assets of Kyushu
Tesco.

                                       17
<PAGE>

NOTE 11. ACCRUED LIABILITIES

         Accrued liabilities were $3,563,914 and $529,198 as of June 30, 2005
and December 31, 2004, respectively. Such liabilities as of June 30, 2005
included (i) accrued financing fees related to the convertible debentures and
accrued legal at IA Global, (ii) accrued audit fees and employee expenses at Rex
Tokyo, and (iii) accrued agent commissions and salary at Global Hotline. Such
liabilities as of December 31, 2004 included accrued legal at IA Global and
accrued audit fees and employee expenses at Rex Tokyo.

NOTE 12. DEBT AND DEBT - AFFILIATED PARTY

         Debt and debt - affiliated party as of June 30, 2005 and December 31,
2004, was as follows:

                                                    June 30,        December 31,
                                                      2005              2004
                                                  -----------       -----------

Long term debt- ............................      $         -       $         -

Mizuho Bank Co Ltd .........................          765,202                 -

Chiba Bank Ltd .............................        1,732,682                 -

Inter Asset Japan Co Ltd ...................          587,809                 -
                                                  -----------       -----------

Total long term debt .......................        3,085,693                 -

Nihon Shinko Bank Co- affiliated party .....                -           727,429

Convertible debentures .....................        2,500,000                 -
                                                  -----------       -----------

Total debt .................................        5,585,693           727,429

Current portion of long term debt ..........       (1,484,609)         (484,966)
                                                  -----------       -----------

Net long term debt .........................      $ 4,101,084       $   242,463
                                                  ===========       ===========

         On June 30, 2004, Rex Tokyo entered into a 100,000,000 Yen or
approximately $923,275 working capital loan with Nihon Shinko Bank Co for use as
operating capital. The loan required twenty three monthly payments of 4,167,000
Yen or approximately $37,500 plus interest starting July 29, 2004, with a final
payment of 4,159,000 Yen or approximately $37,500 plus interest due on June 29,
2006. The loan accrues interest at 9.75% based on the Japanese Yen TIBOR rate,
which is adjustable quarterly. The loan is cosigned by the CEO of Rex Tokyo and
has certain covenants, including interest coverage, minimum assets and minimum
equity. Certain activities are prohibited without the bank's consent, including
distribution of profits to stockholders, entry into new businesses and leases in
excess of certain targets. The loan is not secured.

         Inter Asset Japan Co. Ltd. ("IAJ"), and Terra Firma Fund Ltd. ("Terra
Firma"), significant shareholders in the company, collectively own approximately
14.5% of Nihon Shinko Bank Co. However, IAJ does not control Nihon Shinko Bank
Co and the transaction and terms were established on an arms-length basis.

         On January 18, 2005, Rex Tokyo refinanced a 100,000,000 Yen working
capital loan with Nihon Shinko Bank Co by entering into a 100,000,000 Yen loan
or approximately $978,761 with Mizuho Bank Co Ltd, an unrelated Japanese bank.
The Nihon Shinko loan was used to expand the Rex Tokyo business.

                                       18
<PAGE>

         The loan requires thirteen quarterly payments of 7,692,000 Yen or
approximately $75,286 plus interest starting March 31, 2005, with a final
payment of 7,696,000 Yen or approximately $75,325 plus interest due on March 31,
2008. The loan accrues interest at 3.2% and is guaranteed by the CEO of Rex
Tokyo. There are no covenants or security requirements related to the loan.

         On March 25, 2005, Rex Tokyo received a 100,000,000 Yen or
approximately $940,000 working capital loan from Chiba Bank Ltd, an unrelated
Japanese bank. The loan was used to fund Rex Tokyo's growth.

         The loan requires thirty five monthly payments of 2,800,000 Yen or
approximately $26,000 plus interest starting April 25, 2005, with a final
payment of 2,000,000 Yen, or approximately $19,000 plus interest, due on March
25, 2008. The loan accrues interest at 2.9% and is guaranteed by the CEO of Rex
Tokyo. There are no covenants or security requirements related to the loan.

         On June 17, 2005, Rex Tokyo received a 100,000,000 Yen or approximately
$917,900 working capital loan from Chiba Bank Ltd, an unrelated Japanese bank.
The loan will be used to fund Rex Tokyo's growth.

         The loan requires thirty four monthly payments of 2,900,000 Yen or
approximately $26,619 plus interest starting July 25, 2005, with a final payment
of 1,400,000 Yen or approximately $12,851 plus interest, due on May 25, 2008.
The loan accrues interest at 2.3% and is guaranteed by the Chief Executive
Officer of Rex Tokyo. There are no covenants or security requirements related to
the loan.

         On June 28, 2005, the company announced that it received commitments
totaling $3,750,000 for convertible debentures. The company will use the
proceeds from this financing to accelerate the formation of IAO Japan (a
subsidiary of IAO that will serve as a holding company for new IAO Japanese
businesses), to continue its merger and acquisition strategy and for general
corporate purposes. This financing included a beneficial conversion feature,
which increased the company's stockholders' equity by $1,250,000. The company
recorded a subscription receivable of $3,750,000 as of June 30, 2005. On August
1, 2005, the company announced that it closed its sale of $3,750,000 of
convertible debentures.

         The company has received subscription agreements from thirty four
private Japanese investors. The terms of the convertible notes provide for a
conversion price of $.30 per share, or 12,500,018 shares, until June 28, 2008,
with an automatic conversion on June 28, 2008 at a 25% discount based on the
trailing five day price prior to June 28, 2008. The coupon rate is 7.5% per
annum payable in cash at the earlier of the conversion date or June 28, 2008.
The company has committed to filing a registration statement covering the shares
issuable upon conversion within thirty days of the closing. JPB (Switzerland)
A.G., a party affiliated with our majority shareholder, advised the company on
the transaction and will receive a 7% or $262,500 fee at funding.

NOTE 13. RELATED PARTY RELATIONSHIPS WITH INTER ASSET JAPAN AND CERTAIN
         RELATIONSHIPS

         As of June 30, 2005, IAJ LBO Fund, PBAA Fund Ltd. ("PBAA"), Terra
Firma, IAJ, Alan Margerison and Hiroki Isobe collectively hold approximately
75.1% of the company's common stock. Such entities stated in a Schedule 13D that
they may be deemed to constitute a "group" for the purposes of Rule 13d-3 under
the Securities Exchange Act of 1934, as amended ("Exchange Act"). Mr. Alan
Margerison, the company's Director, President and Chief Executive Officer,
currently serves as the Chairman of IAJ, and together with his business partner,
Mr. Hiroki Isobe, control each of our Controlling Stockholders. Effective July
31, 2005, Alan Margerison resigned as Chairman of IAJ. On August 1, 2005, the
company announced that Alan Margerison, the previous President and Chief
Executive Officer, resigned from these positions but retains his role as
Chairman and Director of IA Global.

                                       19
<PAGE>

         The following table provides details on the affiliated parties owned or
controlled by each of the company's controlling stockholders and certain other
entities, as of June 30, 2005, that are relevant for purposes of understanding
the related party transactions that have taken place:

Ownership:

   Inter Asset Japan LBO No. 1 Fund owns:

                               IA Global, Inc........................  29.0%

   PBAA Fund Ltd. owns:

                               IA Global, Inc........................  26.2%

   Terra Firma Fund Ltd. owns:

                               IA Global, Inc........................  12.0%

   Inter Asset Japan Co., Ltd. owns:

                               IA Global, Inc........................   3.7%

   IA Global, Inc. owns:

                               Rex Tokyo Co. Ltd.....................  60.5%

                               Global Hotline, Inc................... 100.0% (2)

                               IA Global Acquisition Co.............. 100.0% (1)

   Mr. Hiroki Isobe owns:

                               IA Global, Inc........................   4.1%

   Mr. Alan Margerison

                               IA Global, Inc.........................   .14%

   Rex Tokyo Co Ltd            Timothy World.........................  60.0%

                               Colloboration Co Ltd.................. 100.0% (3)

                               Double R, Inc......................... 100.0% (4)

   Global Hotline, Inc.        Inforidge Co Ltd...................... 100.0%

                               Global Information Services Co Ltd.... 100.0%

   (1) Sold to Innovative Computing Group, Inc. on July 1, 2005. Increased to
       100% on June 27, 2005.

   (2) Acquired June 15, 2005.

   (3) Formed March 25, 2005.

   (4) Formed June 17, 2005.


                                       20
<PAGE>

$1,500,000 CONVERTIBLE NOTE

         On March 21, 2004, PBAA, an affiliate of the company's majority
shareholder, invested an additional $1.5 million into the company in a private
placement transaction. Under the financing terms, the company issued a $1.5
million convertible note, convertible into 5 million shares of our common stock
by July 31, 2004, representing a conversion price per share of $0.30, which was
the fair-market value of the trailing five-day average closing price of our
common stock prior to March 5, 2004, the date PBAA committed to make the
investment. The conversion price was at market value and an allocation was not
required for a beneficial conversion feature under EITF 98-5 or EITF 00-27.

         On June 18, 2004, the company announced that it had reached agreement
with PBAA to convert the $1,500,000 note, plus accrued interest of approximately
$20,000, into 5,065,037 shares of its common stock in accordance with the terms
of the note.

$1,130,000 FINANCING

         On November 10, 2004, the company announced that PBAA, IAJ and Mr.
Isobe have collectively invested an additional $1,130,000 into the company in a
private placement transaction. PBAA and IAJ are existing shareholders of the
company and, together with their affiliates, are the majority shareholders in
the company. Mr. Isobe is affiliated with each of PBAA and IAJ and is a business
partner with Alan Margerison, IA Global's CEO. The company will use the proceeds
from this financing to accelerate the development of the Rex Tokyo business and
for general corporate purposes. This financing will also increase stockholders'
equity which is required in order for the company to maintain its AMEX listing.

         Under the financing terms, 4,448,820 shares of common stock were issued
at a price per share of $0.254, which was the fair-market value of the trailing
five-day average closing price prior to November 8, 2004, the date the investors
committed to make the investment.

REX TOKYO DISTRIBUTION AGREEMENT WITH HIROYUKI EJIMA

         During 1998, Rex Tokyo agreed to pay monthly 5,000,000 Yen or
approximately $47,000 at current exchange rates to a majority-owned company of
the Chief Executive Officer of Rex Tokyo for assigning the distribution rights
for certain lock products for Tokyo, Japan to Rex Tokyo. This distribution
agreement assignment is ongoing and resulted in 2004 sales of approximately
$2,800,000.

NOTE 14. EQUITY TRANSACTIONS

         During the six months ended June 30, 2005, the following stockholder
equity events occurred:

         On February 7, 2005, the company granted 30,000 stock options in total
at an exercise price of $.29 per share to employees of Rex Tokyo. These options
vest quarterly over three years and expire on February 7, 2015.

         On May 12, 2005, the company acquired 350,000 shares of IA Global
common stock valued at $.16 per share when it closed the divestiture of Fan Club
to TK Partners, formerly Cyber Holdings Co Ltd.

         At the 2005 Annual Meeting of Stockholder held on June 3, 2005, the
proposal to amend our certificate of incorporation to increase the number of
authorized shares from 150,000,000 to 200,000,000, was approved.

                                       21
<PAGE>

         On June 15, 2005, the company closed the acquisition of Global Hotline,
a privately held Japanese company. The transaction was structured as a share
exchange in which the company agreed to issue 15,000,000 shares of its common
stock in exchange for 100% of Global Hotline's equity. The common stock of the
company issued had a value of $.207 per share, which was the average close price
during the twenty days prior to the signing of the April 20, 2005 Share Exchange
Agreement, or an aggregate value of $3,097,500.

         On June 23, 2005, the company granted 1,500,000 of stock options at an
exercise price of $.20 per share for the management and employees of Global
Hotline. The stock options vest quarterly over three years and expire in June
23, 2015.

         On June 28, 2005, the company announced that it received commitments
totaling $3,750,000 for convertible debentures. This financing includes a
beneficial conversion feature, which increased the company's stockholders'
equity by $1,250,000 as of June 30, 2005. On July 29, 2005, the company closed
its sale of $3,750,000 of convertible debentures.

         On June 28, 2005, the company signed a subscription agreement with Mr.
Honda, a Japanese investor. The company sold 350,000 shares of restricted common
stock at $.17 per share. The company recorded a subscription receivable of
$59,500 as of June 30, 2005, which was subsequently received on July 25, 2005.

NOTE 15. THIRD PARTY LICENSES AND AGREEMENTS

         Global Hotline has two contracts with a KDDI, a significant Japanese
telecommunications company. The first contract covers the period October 1, 2004
thru September 30, 2005 and requires Global Hotline to sell subscriber lines
based on agreed monthly targets. Global Hotline expects to be paid 841,000,000
Yen or $7,600,000 under this contract. The second contract covers the period
March 16, 2005 through March 31, 2006 and requires Global Hotline to sell
subscriber lines based on agreed monthly targets. Global Hotline expects to be
paid 2,925,000,000 Yen or $26,400,000, under this contract. If the targets are
not achieved on a quarterly basis, then Global Hotline will be required to
refund a portion of the revenue to the customer. The contracts may be cancelled
by KDDI if Global Hotline commits a material breach as defined in the contracts.
Absent a material breach by Global Hotline, the contracts shall be extended.

         Global Hotline entered into a contract with 3S Networks on November 1,
2004 to outsource the call center operation for the first contract. The
agreement has a one year term and provides for lines sold and penalties that
protect the revenues and profits of the first KDDI contract. The contract can be
cancelled under certain conditions and Global Hotline can extend the contract.
Global Hotline utilizes two agents to support 3S Networks Global Hotline has two
call center operations to support the second contract.

NOTE 16. COMMITMENTS AND CONTINGENCIES

         As part of the September 25, 2002 Agreement and Assignment (the
"Agreement and Assignment") between the Company, IAJ and David Badner, a major
stockholder and former consultant to us, Mr. Badner has agreed to indemnify and
hold us harmless against certain expenses, including, among other things, any
fees and damages arising from the Krakowski matter. On November 5, 2004, the
company notified that, in connection with the arbitration matter initiated by
Mr. Badner described below, Mr. Badner intends to contest his indemnification
obligation.

                                       22
<PAGE>

         On November 5, 2004, the company received notice from the American
Arbitration Association in New York City ("Arbitrator") that Mr. Badner has
commenced an arbitration proceeding against the company, our major shareholder,
IAJ, and certain officers of the Company and IAJ relating to the Agreement and
Assignment. Mr. Badner alleges (i) unrestricted shares of the company's stock to
which he was entitled under the agreement were not delivered as per the terms of
the agreement, (ii) unspecified commitments to engage in future business
ventures with Mr. Badner were not made, and (iii) damages resulting from
intentional misrepresentation. Mr. Badner is seeking damages of $6 million plus
interest and costs and punitive and exemplary damages in an amount to be
determined.

         On January 7, 2005, the company received notice from the Arbitrator
that Mr. Badner had amended his arbitration claim against the company and our
major shareholder, IAJ. Mr. Badner alleges (i) unrestricted shares of the
company's stock to which he was entitled under the Agreement and Assignment were
not delivered as per the terms of the agreement, (ii) unspecified commitments to
engage in future business ventures with Mr. Badner were not made, and (iii)
damages resulting from fraud and misrepresentation. Mr. Badner is seeking
damages of $2.5 million plus interest related to the breach of the Agreement and
Assignment, $100,000 for damages suffered related to fraud and
misrepresentations and costs and punitive and exemplary damages in an amount to
be determined.

         On February 4, 2005, the company filed an answer and counterclaim
against Mr. Badner in response to Mr. Badner's amended arbitration claim filed
on January 7, 2005. The company is seeking an award of actual damages in the sum
according to proof, plus interest, costs and attorneys' fees, on our
counterclaims against David Badner. Arbitration is scheduled for December 2005.

         We have appropriately responded to Mr. Badner's allegations by way of
our answer and counterclaims and we intend to vigorously defend against his
claims. We do not have insurance to cover this claim and there is no guarantee
that we will be successful in defending these claims.

         During 1998, Rex Tokyo agreed to pay monthly 5,000,000 Yen or
approximately $47,000 at current exchange rates to a majority-owned company of
the Chief Executive Officer of Rex Tokyo for assigning the distribution rights
for certain lock products in Tokyo, Japan to Rex Tokyo. This distribution
agreement assignment is ongoing and resulted in 2004 sales of approximately
$2,800,000.

         On November 19, 2004, the company amended its employment agreement with
Mark Scott to serve, for a term of two years, as Chief Financial Officer at an
annual rate of $165,000. Mr. Scott is eligible to receive compensation,
including options, bonuses up to $40,000 and benefits, at the discretion of our
compensation committee. Mr. Scott works full time for the company. This
employment agreement also contain provisions for confidentiality for the term of
the agreement and thereafter. The employment agreement also provides for a
severance payment in the amount of 33% of the executive's annual base salary in
the event that the employee is terminated by the company without cause. On May
16, 2005, the company entered into an Amendment to Employment Agreement with
Mark Scott whereby his 2005 bonus program was amended.

         On December 31, 2004, the company invested 50,000,000 Yen or
approximately $488,000 in Rex Tokyo. Under the terms of the Subscription
Agreement, the company agreed to purchase 500 Series A Preference Shares of Rex
Tokyo for the sum of 200,000 Yen per Preference Share, payable in two equal
installments. The initial 50,000,000 Yen was paid by December 31, 2004 and the
balance is to be paid by December 31, 2005. The funds will be used to expand the
Rex Tokyo business.

                                       23
<PAGE>

NOTE 17. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

         The company operates primarily as a holding company and is organized by
subsidiary. Each subsidiary reports to the President who has been designated as
the Chief Operating Decision Maker ("CODM") as defined by SFAS 131 "Disclosures
About Segments of an Enterprise and Related Information". The CODM allocates
resources to each of the companies using information regarding revenues,
operating income (loss) and total assets.

         The following subsidiaries are the only reportable segments under the
criteria of SFAS 131 (i) IA Global, Inc., the parent company, which operates as
a holding company, (ii) Rex Tokyo, a supplier and installer of parts to the
Pachinko and slot machine gaming industry, (iii) Global Hotline, a call center
operator and reseller of telephone and broadband lines in Japan (iv) Fan Club,
which on May 12, 2005, the company announced the sale to TK Partners, formerly
Cyber Holdings Co Ltd and (v) IA Global Acquisition Co, which on July 15, 2005,
with an effective date of July 1, 2005, the company announced the closing of the
divestiture of its wholly owned subsidiary and its remaining holdings related to
QuikCAT to Ominira, that is affiliated with Innovative Computing Group, Inc.,
the founder of QuikCAT. In accordance with SFAS 144, the company accounted for
the losses of Fan Club and IA Global Acquisition Co for the three and six months
ended June 30, 2005 as discontinued operations in its consolidated statement of
operations.

         The following table presents revenues, operating income (loss) and
total assets by company for the three and six months ended June 30, 2005 and
2004:

                                       24
<PAGE>
<TABLE>
(dollars in thousands)
<CAPTION>
                                                             Global
                               IA Global,     Rex Tokyo      Hotline                    Discontinued
Company                           Inc.         Co Ltd        Co Ltd          Total       Operations        Total
-------------------------      ----------     ---------      -------       --------     ------------      --------
<S>                             <C>            <C>           <C>           <C>             <C>            <C>
Three Months Ended:
  June 30, 2005
  Revenue ...............       $     -        $ 7,693       $   893       $  8,586        $     -         $ 8,586

  Operating income (loss)          (168)        (1,083)         (205)        (1,456)             -          (1,456)

  Total assets ..........         5,031          8,632        10,160         23,822            555          24,377

  June 30, 2004
  Revenue ...............       $     -        $ 8,537       $     -       $  8,537        $   845         $ 9,382

  Operating income (loss)          (263)            57             -           (206)           (48)           (254)

  Total assets ..........           837          8,378             -          9,215          2,483          11,698

Six  Months Ended:
  June 30, 2005
  Revenue ...............       $     -        $ 13,517      $   893       $ 14,410        $     -        $ 14,410

  Operating income (loss)          (470)        (1,406)         (205)        (2,081)             -          (2,081)

  Total assets ..........         5,031          8,632        10,160         23,822            555          24,377

  June 30, 2004
  Revenue ...............       $     -        $ 9,638       $     -       $  9,638        $ 1,775        $ 11,413

  Operating income (loss)          (778)           190             -           (588)           (29)           (617)

  Total assets ..........           837          8,378             -          9,215          2,483          11,698

<CAPTION>
                                                                                         Discontinued
Geographic Region                 U.S.          Japan                        Total        Operations        Total
-------------------------       -------        -------                     --------      ------------     --------
<S>                             <C>            <C>                         <C>             <C>            <C>
Three Months Ended:
  June 30, 2005
  Revenue ...............       $     -        $ 8,586                     $  8,586        $     -        $  8,586

  Operating income (loss)          (168)        (1,288)                      (1,456)             -          (1,456)

  Total assets ..........         5,031         18,791                       23,822            555          24,377

  June 30, 2004
  Revenue ...............       $     -        $ 8,537                     $  8,537        $   845        $  9,382

  Operating income (loss)          (263)            57                         (206)           (48)           (254)

  Total assets ..........           837          8,378                        9,215          2,483          11,698

Six Months Ended:
  June 30, 2005
  Revenue ...............       $     -        $14,410                     $ 14,410        $     -        $ 14,410

  Operating income (loss)          (470)        (1,611)                      (2,081)             -          (2,081)

  Total assets ..........         5,031         18,791                       23,822            555          24,377

  June 30, 2004
  Revenue ...............       $     -        $ 9,638                     $  9,638        $ 1,775        $ 11,413

  Operating income (loss)          (778)           190                         (588)           (29)           (617)

  Total assets ..........           837          8,378                        9,215          2,483          11,698

</TABLE>

                                       25
<PAGE>

The following reconciles operating loss to net loss:
<TABLE>
(dollars in thousands)
<CAPTION>
                                                     Three Months Ended             Six Months Ended
                                                          June 30,                      June 30,
                                                   ----------------------        ----------------------
                                                     2005           2004           2005           2004
                                                   -------        -------        -------        -------
<S>                                                <C>            <C>            <C>            <C>
Operating loss .............................       $(1,456)       $  (254)       $(2,081)       $  (617)

Other income (expense) .....................            (2)           120             30            124
                                                   -------        -------        -------        -------

Loss  from continuing operations
  before minority interests and income taxes        (1,458)          (134)        (2,051)          (493)

Minority interests .........................          (274)            34           (376)            69
                                                   -------        -------        -------        -------

Loss from continuing operations
  before income taxes ......................        (1,184)          (168)        (1,675)          (562)

Income tax (benefit) provision .............          (459)           127           (652)           202
                                                   -------        -------        -------        -------

Net loss from continuing operations ........          (725)          (295)        (1,023)          (764)

Loss from discontinued operations ..........          (166)             -           (412)             -
                                                   -------        -------        -------        -------

Net loss ...................................       $  (891)       $  (295)       $(1,435)       $  (764)
                                                   =======        =======        =======        =======
</TABLE>

NOTE 18. SUBSEQUENT EVENTS

         The company announced the closing of the divestiture of its wholly
owned subsidiary, IA Global Acquisition Co and its remaining holdings related to
QuikCAT to Ominira, that is affiliated with Innovative Computing Group, Inc.,
the founder of QuikCAT. The closing occurred on July 15, 2005, with an effective
date of July 1, 2005.

         As part of this transaction, the company sold the subsidiary, including
the remaining rights and assets of QuikCAT which were acquired out of Chapter 11
bankruptcy on June 10, 2004. In addition, the company assigned its intellectual
property rights related to the Miliki Supercompressor product and any additions,
developments and modifications related to certain projects and products, and
Ominira assumed certain IA Global Acquisition Co liabilities. The total purchase
price was $620,000, which will be paid with a note that is due in installments
from September 2005 to June 2006. The note is secured by the assets sold to
Ominira. The company assumed the rights and obligations under the previously
announced divestitures of its Internet accelerator business outside of North
America and in North America to its joint venture partner QuikCAT Australia and
its affiliate NanoCAT Technologies Pte Ltd.

         On July 29, 2005, the company announced that Global Hotline had
received 717,000,000 Yen, or approximately $6,459,000 from KDDI, a significant
Japanese telecommunications company. This amount was primarily an advance of the
quarterly payment under its contract with KDDI and will be used to fund the
operations of Global Hotline.

                                       26
<PAGE>

         Effective July 31, 2005, Alan Margerison resigned as Chairman of IAJ.

         On July 29, 2005, the company closed its sale of $3,750,000 of
convertible debentures, which it previously announced on June 28, 2005.

         On August 1, 2005, the company announced the promotion of Mark Scott to
President and Chief Financial Officer. Alan Margerison, the previous President
and Chief Executive Officer, resigned from these positions but retains his role
as Chairman and Director of IA Global. There was no disagreement on any matter
related to the Company's operations, policies or practices that led to Mr.
Margerison's resignation.

         On August 3, 2005, the compensation committee approved 100,000 of stock
options for each of the directors of the company: Mark Scott, Raymond
Christinson, Jun Kumamoto and Eric La Cara. The options were granted at the fair
market price of $.26 per share on August 1, 2005. In accordance with 2000 stock
option plan, the stock options vest quarterly over three years and expire on
August 1, 2015.

         On August 3, 2005, the compensation committee approved an increase in
Mark Scott's annual compensation to $183,000, which is effective as of August 1,
2005.

         On August 3, 2005, the compensation committee approved a monthly
chairman fee for Alan Margerison of $2,200, which is effective as of August 1,
2005. In addition, Mr. Margerison terminated his employment agreement dated
February 3, 2003 and forfeited 1,000,000 stock options of the 2,000,000 stock
options granted on June 15, 2003 at $.20 per share.

         On August 4, 2005, the company filed a registration statement covering
16,638,772 shares of our common stock related to the Rex Tokyo and Global
Hotline acquisitions and certain private placements.

         On August 11, 2005, the company filed a registration statement covering
12,500,018 shares issuable upon conversion of the $3,750,000 convertible
debentures as required in the subscription agreement.

                                       27
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         Forward-looking statements in this report reflect the good faith
judgment of our management and the statements are based on facts and factors as
we currently know them. Forward-looking statements are subject to risks and
uncertainties and actual results and outcomes may differ materially from the
results and outcomes discussed in the forward-looking statements. Factors that
could cause or contribute to such differences in results and outcomes include,
but are not limited to, those discussed below and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" as well as those
discussed elsewhere in this report. Readers are urged not to place undue
reliance on these forward-looking statements which speak only as of the date of
this report. We undertake no obligation to revise or update any forward-looking
statements in order to reflect any event or circumstance that may arise after
the date of the report.

INTRODUCTION

         We have incurred net losses from continuing operations of $.9 million,
$2.1 million and $1.5 million for the years ended December 31, 2004, 2003 and
2002, respectively. We had revenues of $31.6 million, $1.1 million and $.4
million for the years ended December 31, 2004, 2003 and 2002, respectively. Our
losses have been financed primarily by the sale of equity in our company, by
loans from related parties, and through the issuance of equity for services. We
expect our net loss from operations to decrease in 2005, but to continue for the
foreseeable future.

         We operate primarily as a holding company. We intend to grow our Rex
Tokyo and Global Hotline businesses. Also, we intend to further increase the
number of our majority-owned companies by acquiring primarily Japanese small to
midsize companies at low acquisition costs in the gaming, entertainment and
technology markets.

         Rex Tokyo received a 100,000,000 Yen or approximately $923,275 working
capital loan with Nihon Shinko Bank Co, an affiliated party, for use as
operating capital on June 30, 2004. On January 18, 2005, Rex Tokyo refinanced
this loan by entering into a 100,000,000 Yen or approximately $978,761 loan with
Mizuho Bank Co Ltd, an unrelated Japanese bank.

         On March 25, 2005, Rex Tokyo received a 100,000,000 Yen, or
approximately $940,000 at current exchange rates, working capital loan from
Chiba Bank Ltd, an unrelated Japanese bank. The loan will be used to fund Rex
Tokyo's growth.

         On June 17, 2005, Rex Tokyo received a 100,000,000 Yen or approximately
$917,900 working capital loan from Chiba Bank Ltd, an unrelated Japanese bank.
The loan will be used to fund Rex Tokyo's growth.

         On June 28, 2005, we announced that we had received commitments
totaling $3,750,000 for convertible debentures. We will use the proceeds from
this financing to accelerate the formation of IAO Japan (a subsidiary of IAO
that will serve as a holding company for new IAO Japanese businesses), to
continue our merger and acquisition strategy, and for general corporate
purposes. This financing included a beneficial conversion feature, which
increased our stockholders' equity by $1,250,000. The company closed the sale of
$3,750,000 of convertible debentures on July 29, 2005.

         The acquisition of Global Hotline, a privately held Japanese company,
closed on June 15, 2005. We expect GHI to contribute $16,000,000 to $18,000,000
in sales to IA Global during 2005 and $27,000,000 to $29,000,000 in sales
through March 31, 2006. We expect GHI to be profitable on a stand-alone basis
starting in the third or fourth quarter of 2005 and help IA Global to achieve
our goal of being profitable for 2005.

                                       28
<PAGE>

         We may need to obtain additional financing in order to continue our
current operations, including the cash flow needs of Rex Tokyo and subsidiaries,
Global Hotline and subsidiaries, to acquire businesses and to meet the American
Stock Exchange ("AMEX") requirements of $6 million in stockholders' equity by
July 31, 2005, for continued listing of our shares. Our major shareholders thus
far have indicated a willingness to support our financing efforts. However,
there can be no assurance that we will be able to secure additional funding, or
that if such funding is available, whether the terms or conditions would be
acceptable to us, from our major shareholders or otherwise.

         Moreover, if we raise additional capital through borrowing or other
debt financing, we would incur substantial interest expense. Sales of additional
equity securities will dilute on a pro rata basis the percentage ownership of
all holders of common stock. If we do raise more equity capital in the future,
it is likely that it will result in substantial dilution to our current
stockholders.

KEY MARKET OPPORTUNITIES

         Building on the acquisitions of Rex Tokyo and Global Hotline, our key
market opportunities include:

         o Expanding and strengthening the Rex Tokyo business by opening
additional regional offices in Japan.

         o Vertically integrating the Rex Tokyo business by acquiring or
entering into other Pachinko/Slot machine related business activities.

         o Expanding the sale of unique lighting fixtures through our Timothy
World joint venture with Kyushu Tesco.

         o Expanding the direct sale of slot machines.

         o Recognizing unique needs in Pachinko/ slot machine industry for
improved service and maintenance levels, and adapting to provide these.

         o Meeting the needs of current customers of Rex Tokyo and expanding our
customer base in the Pachinko and Slot machine industry.

         o Continuing focus on servicing Pachinko / Slot machine stores that
operate as "Chain Stores" usually requiring a high level of automation among the
stores in the chain.

         o Expanding the Global Hotline business with additional products and
contracts.

         o Expanding the Global Hotline business by renewing the KDDI contracts.

         o Expanding operations by selectively acquiring other quality companies
in Japan.

PRIMARY RISKS AND UNCERTAINTIES

         We are exposed to risks associated with our AMEX listing, legal claims,
mergers and acquisitions, a volatile share price and limited insurance. These
risks and uncertainties are discussed in "Factors That May Effect Future
Results."

                                       29
<PAGE>

         Over the last few years the Pachinko / Slot Machine industry in Japan
has seen significant growth from operators known as "Chain Stores". Rex Tokyo
has taken advantage of this growth, and focused heavily on servicing these
clients. During the six months ended June 30, 2005, 45.3% of the company's
revenues resulted from sales to one Chain Store. Any slow down in this side of
the industry could significantly impact Rex Tokyo's ability to perform at its
current revenue levels. Further, Chain Stores have thus far focused heavily on a
high level of automation within the stores. Any change in plans by Chain Stores
to decrease the level of automation could adversely affect Rex Tokyo's sales of
machinery and parts. This could have a material adverse effect on our business,
prospects, financial condition and results of operations.

         The Pachinko / Slot machine industry in Japan has seen significant
growth in the Slot machine side of the business, while the Pachinko market has
remained more constant in terms of total number of machines in stores. Rex Tokyo
has focused heavily on the Slot machine side of the business. Any downturn in
growth from the Slot machine market, or change in law that might curtail sales
of Slot machines, could have a material adverse effect on our business,
prospects, financial condition and results of operations.

         Rex Tokyo has expanded its sales offices based on a perceived need for
more local representation in areas where clients are based. In providing clients
with a local office, feedback from clients can be more readily received, thus
helping to improve service levels. There is also a possibility that information
from clients may be filtered prior to reaching head office. This may result in a
less accurate picture of client satisfaction levels and expectations. Rex Tokyo
regularly conducts meetings with managers from the local offices to hear their
views in an effort to combat this, however, a decrease in client satisfaction
levels could have a material adverse effect on our business prospects, financial
condition and results of operations.

         Rex Tokyo has seen an expansion of its business by aligning itself
strongly with a few core clients. If for any reason Rex Tokyo's image was
damaged with those clients or in the industry as a whole, it could have a
material adverse effect on our business, prospects, financial condition and
results of operations.

         Rex Tokyo's business is dependent upon its ability to maintain tight
control on its cash flows. In general, as the amount of work increases, the
amount of cash flow required increases. If Rex Tokyo is not able to maintain
sufficient cash flow to expand its business at the same pace as its clients are
expanding, it may lead to clients moving their accounts to other service
providers.

         Rex Tokyo is dependent upon key suppliers for supply of parts and
machinery to the Pachinko slot machine industry. It also outsources a large
amount of its maintenance and installation work. Failure to secure specific
machines or parts that clients request from suppliers may lead to a decrease in
sales. Failure to maintain good relationships with its suppliers and outsourcing
companies could result in the inability to complete work for clients.

         Revenue recognition is based on completion of work and industry
regulated police inspection being carried out so that stores can open. A change
in this system or the delay of inspections could adversely affect revenue.

         The passing of legislation that may allow for other forms of gaming
within Japan could cause a material change in the business model of Rex Tokyo.
While no legislation has been passed at this time, debate in political circles
over the introduction of legal casinos in Japan has been public knowledge for
some time. It is not known whether such legislation might ever be passed in
Japan, or if it was passed, what impact that may have on Rex Tokyo's business,
prospects, financial condition and results of operations. Further, the existence
and growth of illegal or "underground" casinos in Japan may also have a similar
negative impact.

                                       30
<PAGE>

         The Japanese telecommunications market is experiencing significant
growth in alternative carriers due to recent regulatory changes that now permit
individuals and companies to choose their telephone service provider. Global
Hotline may be affected by the following factors that would impact its ability
to operate as a call center and reseller of telephone and broadband lines in
Japan.

         o  Passing of new or changes in existing legislation;

         o  Impact of privacy laws;

         o  New competitors;

         o  Decreased pricing;

         o  KDDI not renewing its contracts;

         o  Default or lack of performance by its agents;

         o  Changes in the availability of employees or wages paid to employees
            to operate the call centers; and

         o  Loss of key personnel.

         In addition, the Global Hotline business has a concentration of
customers and suppliers with one customer and two agents, respectively. The
Global Hotline business is dependent upon its ability to operate efficiently by
maintaining tight control on its cash flows. Any change in these factors could
adversely affect Global Hotline's ability to achieve the contract rates in the
KDDI contracts and to operate as a call center and reseller of telephone and
broadband lines in Japan. This could result in a repayment of cash paid by KDDI
under the contracts, which would have a material adverse effect on our business,
prospects, financial condition and results of operations.

         We have expanded our operations by acquiring companies, primarily in
Japan. We have been reliant on the company's majority shareholder in assisting
us in raising financing to carry out these acquisitions. We may need to obtain
additional financing in order to continue our current operations, including the
cash flow needs of Rex Tokyo and subsidiaries, Global Hotline, to acquire
businesses and to meet AMEX requirements of $6 million in stockholders' equity
by July 31, 2005 for continued listing of our shares. Our major shareholder has
indicated a willingness to support our financing efforts. However, there can be
no assurance that we will be able to secure additional funding, or that if such
funding is available, whether the terms or conditions would be acceptable to us,
from our major shareholder or otherwise.

KEY TRENDS

         Over the last few years the Pachinko / Slot Machine gaming industry in
Japan has seen significant growth in operators known as "Chain Stores". Rex
Tokyo has taken advantage of this growth, and focused heavily on servicing these
clients. The number of total stores in Japan has decreased during this time from
approximately 18,000 to approximately 16,000. The number of stores owned by
Chain Stores has increased dramatically, while the number of one-owner one-store
establishments have decreased.

         In addition, the increase in market penetration of slot machines as
opposed to the more traditional Pachinko machines, has resulted in slot machines
making over 30% of the market in terms of total number of machines in stores.
Rex Tokyo has focused heavily on the slot machine side of the industry.

         One of the key trends in the Japanese telecommunications market is the
significant growth in alternative carriers due to recent regulatory changes that
now permit individuals and companies to choose their telephone service provider.

                                       31
<PAGE>

KEY DRIVERS

         One of the key drivers in the Pachinko / Slot Machine gaming industry
expansion has been the rapid pace of new store openings by the Chain Stores.
These stores have put an emphasis on automating the operation within the store
as much as possible, and reducing the overhead of labor costs. Suppliers of
automated equipment, such as automatic medal dispenser and cigarette ash
disposal machines, have benefited from this expansion.

         One of the key drivers in the Japanese telecommunications market is the
significant growth in alternative carriers due to recent regulatory changes that
now permit individuals and companies to choose their telephone service provider.

OUR STRATEGY

         We operate primarily as a holding company. We intend to grow our Rex
Tokyo and Global Hotline businesses. Also, we intend to further increase the
number of majority-owned companies by acquiring primarily Japanese small to
midsize companies at low acquisition costs in the gaming, entertainment and
technology markets.

RESULTS OF OPERATIONS

         The following table presents certain consolidated statement of
operations information and presentation of that data as a percentage of change
from period-to-period.

                                       32
<PAGE>
<TABLE>
(dollars in thousands)
<CAPTION>
                                                                       Three Months Ended June 30,
                                                            ---------------------------------------------------
                                                              2005          2004       $ Variance    % Variance
                                                            -------       -------      ----------    ----------
<S>                                                         <C>           <C>           <C>           <C>
Revenue ..............................................      $ 8,586       $ 9,382       $  (796)        -8.5%

Cost of sales ........................................        7,581         7,916          (335)        -4.2%
                                                            -------       -------       -------       -------

Gross profit .........................................        1,005         1,466          (461)       -31.4%
                                                            -------       -------       -------       -------

Expenses:
Selling, general and
  administrative expenses ............................        2,461         1,720           741         43.1%
                                                            -------       -------       -------       -------
Total expenses .......................................        2,461         1,720           741         43.1%
                                                            -------       -------       -------       -------

Operating loss .......................................       (1,456)         (254)       (1,202)       473.2%
                                                            -------       -------       -------       -------

Other Income (Expense):
Interest income ......................................            -             5            (5)          *
Interest expense .....................................          (19)          (14)           (5)        35.7%
Other Income .........................................           10           146          (136)       -93.2%
Foreign currency transaction adjustment ..............          (92)            -           (92)          *
Loss on equity investment in QuikCAT Australia Pty Ltd            -           (17)           17           *
Gain on sale of Fan Club Entertainment Co Ltd ........           99             -            99           *
                                                            -------       -------       -------       -------
Total other income (expense) .........................           (2)          120          (122)      -101.7%
                                                            -------       -------       -------       -------
Loss before minority interests .......................       (1,458)         (134)       (1,324)       988.1%
  and income taxes
Minority interests ...................................         (274)           34          (308)       905.9%
                                                            -------       -------       -------       -------
Loss before income taxes
  taxes ..............................................       (1,184)         (168)       (1,016)       604.8%
Income taxes:
Current (benefit) provision ..........................         (459)          114          (573)       502.6%
Deferred provision ...................................            -            13           (13)          *
                                                            -------       -------       -------       -------
Loss from continuing operations ......................         (725)         (295)         (430)       145.8%
Loss from discontinued operations ....................         (166)            -          (166)          *
                                                            -------       -------       -------       -------
Net loss .............................................      $  (891)      $  (295)      $  (596)       202.0%
                                                            =======       =======       =======       =======
</TABLE>

                                       33
<PAGE>
<TABLE>
(dollars in thousands)
<CAPTION>
                                                                        Six Months Ended June 30,
                                                            ---------------------------------------------------
                                                              2005          2004       $ Variance    % Variance
                                                            -------       -------      ----------    ----------
<S>                                                         <C>           <C>           <C>           <C>
Revenue ..............................................      $14,410       $11,413       $ 2,997          26.3%

Cost of sales ........................................       12,104         9,428         2,676          28.4%
                                                            -------       -------       -------       --------

Gross profit .........................................        2,306         1,985           321          16.2%
                                                            -------       -------       -------       --------

Expenses:
Selling, general and
  administrative expenses ............................        4,387         2,602         1,785          68.6%
                                                            -------       -------       -------       --------
Total expenses .......................................        4,387         2,602         1,785          68.6%
                                                            -------       -------       -------       --------

Operating loss .......................................       (2,081)         (617)       (1,464)        237.3%
                                                            -------       -------       -------       --------

Other Income (Expense):
Interest income ......................................            6             8            (2)        -25.0%
Interest expense .....................................          (42)          (20)          (22)        110.0%
Other Income .........................................           40           149          (109)        -73.2%
Foreign currency transaction adjustment ..............          (73)            2           (75)      -3750.0%
Gain on equity investment in QuikCAT Australia Pty Ltd            -           (15)           15            *
Gain on sale of Fan Club Entertainment Co Ltd ........           99             -            99            *
                                                            -------       -------       -------       --------
Total other income (expense) .........................           30           124           (94)        -75.8%
                                                            -------       -------       -------       --------
Loss before minority interests .......................       (2,051)         (493)       (1,558)        316.0%
  and income taxes
Minority interests ...................................         (376)           69          (445)        644.9%
                                                            -------       -------       -------       --------
Loss before income taxes
  taxes ..............................................       (1,675)         (562)       (1,113)        198.0%
Income taxes:
Current (benefit) provision ..........................         (652)          178          (830)        466.3%
Deferred provision ...................................            -            24           (24)           *
                                                            -------       -------       -------       --------
Loss from continuing operations ......................       (1,023)         (764)         (259)         33.9%
Loss from discontinued operations ....................         (412)            -          (412)           *
                                                            -------       -------       -------       --------
Net loss .............................................      $(1,435)      $  (764)      $  (671)         87.8%
                                                            =======       =======       =======       =======
</TABLE>

                                       34
<PAGE>

THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
2004

NET REVENUE

         Net revenue for the three months ended June 30, 2005 decreased $796,000
to $8,586,000, as compared to the three months ended June 30, 2004. Rex Tokyo
recorded revenue of $7,693,000 and Global Hotline recorded revenue of $893,000.
Global Hotline was acquired on June 15, 2005. The Rex Tokyo decrease was due to
order delays from Rex Tokyo's major customer.

         In the prior year, Rex Tokyo, which was acquired March 18, 2004,
recorded revenue of $8,537,000 and Fan Club recorded revenue of $845,000. Fan
Club was sold on May 12, 2005.

COST OF SALES

         Cost of sales for the three months ended June 30, 2005 decreased
$335,000 to $7,581,000 as compared to the three months ended June 30, 2004. This
was due to Rex Tokyo cost of sales of $7,154,000 consisting primarily of
inventory purchases and outsourced expenses. Rex Tokyo outsources the majority
of its installation and maintenance work. Global Hotline cost of sales was
$427,000 and this is primarily related to outsourced call center operations to
support the KDDI contracts. The Rex Tokyo decrease primarily relates to order
delays from Rex Tokyo's major customer, offset by revenue increases for low
margin products for Timothy World, Collaboration Co Ltd and Double R. Inc.

EXPENSES

         Selling, general and administrative expenses for the three months ended
June 30, 2005 increased $741,000 to $2,461,000, as compared to the three months
ended June 30, 2004. This was due to increased operating expenses of $1,623,000
related to Rex Tokyo and $670,000 related to Global Hotline.

         For 2005 and 2004, the selling, general and administrative expenses
consisted primarily of employee and independent contractor expense, rent,
overhead, equipment and depreciation, amortization of identifiable intangible
assets and intellectual property, professional and consulting fees, sales and
marketing costs, investor relation, legal and other general and administrative
costs. The difference in the current period compared to the prior period is
primarily due to the acquisition of Rex Tokyo on March 18, 2004, IA Global
Acquisition Co on June 10, 2004 and Global Hotline on June 15, 2005 and the sale
of Fan Club on May 12, 2005 and IA Global Acquisition Co on July 1, 2005.

OTHER INCOME/ EXPENSE

         Other expense for the three months ended June 30, 2005 was $2,000 as
compared to other income of $120,000 for the three months ended June 30, 2004.
The 2005 other expense was primarily due to foreign currency translation
adjustment of $92,000, offset by the gain on sale of $99,000, both related to
the sale of Fan Club.

NET LOSS FROM CONTINUING OPERATIONS

         Net loss from continuing operations was $725,000 for the three months
ended June 30, 2005 as compared to a net loss of $295,000 for the three months
ended June 30, 2004. The reasons for the decreased loss were discussed above.

NET LOSS

         Net loss was $891,000 for the three months ended June 30, 2005 as
compared to a net loss of $295,000 for the three months ended June 30, 2004. The
reasons for the decreased loss were discussed above.

                                       35
<PAGE>

         In accordance with SFAS 144, we accounted for the Fan Club loss of
$52,000 and the IA Global Acquisition loss of $114,000 for the quarter ended
June 30, 2005 as discontinued operations in our consolidated statement of
operations.

GRANT OF STOCK OPTIONS

         On June 23, 2005, we granted 1,500,000 of stock options at an exercise
price of $.20 per share for the management and employees of Global Hotline. The
stock options vest quarterly over three years and expire in June 23,2015.

         We have not recorded any compensation expense for stock options granted
to employees during the three months ended June 30, 2005.

SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2004

         Net revenue for the six months ended June 30, 2005 increased $2,997,000
to $14,410,000, as compared to the six months ended June 30, 2004. Rex Tokyo
recorded revenue of $13,517,000 and Global Hotline recorded revenue of $893,000.
Global Hotline was acquired June 15, 2005.

         In the prior year, Rex Tokyo, which was acquired March 18, 2004,
recorded revenue of $9,638,000 and Fan Club recorded revenue of $1,775,000. Fan
Club was sold May 12, 2005.

COST OF SALES

         Cost of sales for the six months ended June 30, 2005 increased
$2,676,000 to $12,104,000 as compared to the six months ended June 30, 2004.
This increase was due to Rex Tokyo cost of sales of $11,677,000 consisting
primarily of inventory purchases and outsourced expenses. Rex Tokyo outsources
the majority of its installation and maintenance work. Global Hotline cost of
sales was $427,000 and this primarily related to outsourced call center
operations to support the KDDI contracts.

EXPENSES

         Selling, general and administrative expenses for the six months ended
June 30, 2005 increased $1,785,000 to $4,387,000, as compared to the six months
ended June 30, 2004. This was due to increased operating expenses of $3,247,000
related to Rex Tokyo and $670,000 related to Global Hotline.

         For 2005 and 2004, the selling, general and administrative expenses
consisted primarily of employee and independent contractor expense, rent,
overhead, equipment and depreciation, amortization of identifiable intangible
assets and intellectual property, professional and consulting fees, sales and
marketing costs, investor relation, legal and other general and administrative
costs. The difference in the current periods compared to the prior periods is
primarily due to the acquisition of Rex Tokyo on March 18, 2004, IA Global
Acquisition Co on June 10, 2004 and Global Hotline on June 15, 2005 and the sale
of Fan Club on May 12, 2005 and IA Global Acquisition Co on July 1, 2005.

OTHER INCOME/ EXPENSE

         Other income for the six months ended June 30, 2005 was $30,000 as
compared to $124,000 for the six months ended June 30, 2004. The 2005 other
income was primarily due to foreign currency translation adjustment of $73,000,
offset by the gain on sale of $99,000, both primarily related to the sale of Fan
Club.

NET LOSS FROM CONTINUING OPERATIONS

         Net loss from continuing operations was $1,023,000 for the six months
ended June 30, 2005 as compared to a net loss of $764,000 for the six months
ended June 30, 2004. The reasons for the decreased loss were discussed above.

                                       36
<PAGE>

NET LOSS

         Net loss was $1,435,000 for the six months ended June 30, 2005 as
compared to a net loss of $764,000 for the six months ended June 30, 2004. The
reasons for the decreased loss were discussed above.

         In accordance with SFAS 144, we accounted for the Fan Club loss of
$257,000 and the IA Global Acquisition loss of $155,000 for the six months ended
June 30, 2005 as discontinued operations in our consolidated statement of
operations.

GRANT OF STOCK OPTIONS

         On June 23, 2005, we granted 1,500,000 of stock options at an exercise
price of $.20 per share for the management and employees of Global Hotline. The
stock options vest quarterly over three years and expire in June 23, 2015.

         On February 7, 2005, we granted 30,000 stock options in total at an
exercise price of $.29 per share to employees of Rex Tokyo. These options vest
quarterly over three years and expire on February 7, 2015.

         We have not recorded any compensation expense for stock options granted
to employees during the six months ended June 30, 2005.

LIQUIDITY AND CAPITAL RESOURCES

         We had cash of approximately $3,499,000 and net working capital of
approximately $3,348,000 as of June 30, 2005. We had a net loss from continuing
operations of approximately $1,023,000 for the six months ended June 30, 2005
and $764,000 for the year ended December 31, 2004. We expect our net loss from
operations to decrease in 2005, but to continue for the foreseeable future.

         Rex Tokyo received a 100,000,000 Yen or approximately $923,275 working
capital loan with Nihon Shinko Bank Co, an affiliated party, for use as
operating capital on June 30, 2004. On January 18, 2005, Rex Tokyo refinanced
this loan by entering into a 100,000,000 Yen or approximately $978,761 loan with
Mizuho Bank Co Ltd, an unrelated Japanese bank.

         On March 25, 2005, Rex Tokyo received a 100,000,000 Yen or
approximately $940,000 working capital loan from Chiba Bank Ltd, an unrelated
Japanese bank. The loan will be used to fund Rex Tokyo's growth.

         On June 17, 2005, Rex Tokyo received a 100,000,000 Yen or approximately
$917,900 working capital loan from Chiba Bank Ltd, an unrelated Japanese bank.
The loan will be used to fund Rex Tokyo's growth.

         On June 28, 2005, we announced that we had received commitments
totaling $3,750,000 for convertible debentures. We will use the proceeds from
this financing to accelerate the formation of IAO Japan (a subsidiary of IAO
that will serve as a holding company for new IAO Japanese businesses), to
continue our merger and acquisition strategy, and for general corporate
purposes. This financing included a beneficial conversion feature, which
increased our stockholders' equity by $1,250,000. The company closed the sale of
$3,750,000 of convertible debentures on July 29, 2005.

         We may need to obtain additional financing in order to continue our
current operations, including the cash flow needs of Rex Tokyo and subsidiaries,
Global Hotline, to acquire businesses and to meet the American Stock Exchange
("AMEX") requirements of $6 million in stockholders' equity by July 31, 2005,
for continued listing of our shares. Our major shareholders thus far have
indicated a willingness to support our financing efforts. However, there can be
no assurance that we will be able to secure additional funding, or that if such
funding is available, whether the terms or conditions would be acceptable to us,
from our major shareholders or otherwise.

                                       37
<PAGE>

         Moreover, if we raise additional capital through borrowing or other
debt financing, we would incur substantial interest expense. Sales of additional
equity securities will dilute on a pro rata basis the percentage ownership of
all holders of common stock. If we do raise more equity capital in the future,
it is likely that it will result in substantial dilution to our current
stockholders.

         Since inception, we have financed our operations primarily through
sales of our equity securities in our initial public offering and from several
private placements, loans and capital contributions, primarily from related
parties. Net cash proceeds from these items have totaled approximately $20.1
million as of June 30, 2005, with approximately $8.8 million raised in the
initial public offering, $7.6 million raised in private placements, $3.6 million
raised in the conversion of debt and $0.1 million raised from a capital
contribution. In addition, we have issued equity for non-cash items totaling
$13.8 million, including $6.9 million issued for services, $3.6 million related
to a beneficial conversion feature, $0.1 million related to the Rex Tokyo
acquisition and $3.1 million related to the Global Hotline acquisition.
Additional funding was obtained from short-term and long-term debt with
approximately $3,086,000 million was outstanding as of June 30, 2005.

OPERATING ACTIVITIES

         Net cash used in operations for the six months ended June 30, 2005 was
$3,469,000. This amount was primarily related to a net loss of $1,435,000, an
increase in inventory of $541,000, an increase in income tax receivable-foreign
of $611,000, an increase in other assets of $957,000, a decrease in minority
interest liability of $840,000, a decrease in accounts payable of $3,558,000 and
a decrease in deferred revenue of $558,000. This was offset by a decrease in
accounts receivable of $3,366,000, a decrease in prepaid expenses of $888,000
and an increase in accrued and other liabilities of $1,131,000.

         Net cash used in operations for the six months ended June 30, 2005
reflects order delays from Rex Tokyo's major customer and normal low sales
quarters for Rex Tokyo.

INVESTING ACTIVITIES

         Net cash provided by investing activities for the six months ended June
30, 2005 was $1,547,000. This amount related to $1,240,000 in cash obtained from
our acquisition of Global Hotline on June 15, 2005.

FINANCING ACTIVITIES

         Net cash provided by financing activities for the six months ended June
30, 2005 was $1,818,000. This amount related to proceeds from long term debt of
$2,837,000, offset by repayment of long term debt-affiliated party and long term
debt of $1,019,000.

         Rex Tokyo received a 100,000,000 Yen, or $923,275 working capital loan
with Nihon Shinko Bank Co, an affiliated party, for use as operating capital on
June 30, 2004. On January 18, 2005, Rex Tokyo refinanced this loan by entering
into a 100,000,000 Yen, or $978,761 loan with Mizuho Bank Co Ltd, an unrelated
Japanese bank.

         On March 25, 2005, Rex Tokyo received a 100,000,000 Yen, or
approximately $940,000 working capital loan from Chiba Bank Ltd, an unrelated
Japanese bank. The loan will be used to fund Rex Tokyo's growth.

         On June 17, 2005, Rex Tokyo received a 100,000,000 Yen, or
approximately $917,900 working capital loan from Chiba Bank Ltd, an unrelated
Japanese bank. The loan will be used to fund Rex Tokyo's growth.

                                       38
<PAGE>

         Other Material Commitments. The Company's contractual cash obligations
as of June 30, 2005 are summarized in the table below (1):

<TABLE>
<CAPTION>
                                                Less Than                                  Greater Than
Contractual Cash Obligations       Total         1 Year         1-3 Years     3-5 Years      5 Years
----------------------------     ----------     ----------     ----------     ---------    ------------
<S>                              <C>            <C>            <C>            <C>              <C>
Operating leases ...........     $1,054,708     $  687,303     $  258,815     $ 108,590        $ 0

Capital lease obligations ..        143,210         39,315         64,629        39,266          0

Long term debt repayment ...      3,085,692      1,484,608      1,601,084             0          0

Capital expenditures .......        100,000        100,000              0             0          0

Acquisitions ...............        100,000        100,000              0             0          0
_________
(1) Based on the end of period exchange rate.
</TABLE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The application of GAAP involves the exercise of varying degrees of
judgment. On an ongoing basis, we evaluate our estimates and judgments based on
historical experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. We believe that of our
significant accounting policies (see summary of significant accounting policies
more fully described in Note 2 of notes to consolidated financial statements),
the following policies involve a higher degree of judgment and/or complexity:

INCOME TAXES

         We are subject to income taxes in both the U.S. and foreign (Japan)
jurisdictions. Significant judgment is required in determining the provision for
income taxes. We recorded a valuation for the deferred tax assets from our net
operating losses carried forward due to us not demonstrating any consistent
profitable operations. In the event that the actual results differ from these
estimates or we adjust these estimates in future periods, we may need to adjust
such valuation recorded.

STOCK-BASED COMPENSATION

         SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, as amended by SFAS
148, ACCOUNTING FOR STOCK-BASED COMPENSATION-- TRANSITION AND DISCLOSURE,
encourages, but does not require, companies to record compensation cost for
stock based employee compensation plans at fair value. We have chosen to
continue to account for stock-based employee compensation using the intrinsic
value method prescribed in Accounting Principles Board (APB) Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, AND RELATED INTERPRETATIONS.
Accordingly, compensation cost for stock options granted to employees is
measured as the excess, if any, of the quoted market price of our stock at the
date of the grant over the amount an employee must pay to acquire the stock.

INTANGIBLE ASSETS

         Other intangible assets primarily relate to the intangible assets and
intellectual property acquired in connection with the acquisition of Global
Hotline over thirty six months on a straight - line basis, which is the expected
life of the KDDI agreements.

                                       39
<PAGE>

REVENUE RECOGNITION

         We recognize revenue when it is realized. We consider revenue realized
when the product has been shipped or the services have been provided to the
customer, and collectibility is reasonably assured. We account for certain Rex
Tokyo construction contracts/projects on the percentage-of-completion method and
under this method, income is recognized as work on contracts progresses, but
estimated losses on contracts in progress are charged to operations immediately.

         Global Hotline revenue was derived from operating call centers and
reselling of telephone and broadband lines in Japan. Revenue for the initial
KDDI contract has been recorded based on the contract with KDDI because the
revenue have been guaranteed by the agent and the collectibility is reasonably
assured. Revenue for the second KDDI contract is considered realized when the
services have been provided to the customer, the work has been accepted by KDDI
and collectibility is reasonably assured.

         Revenues are deferred when cash has been received from KDDI but the
revenue has not been recognized. The company has recorded $3,638,243 of deferred
revenue as of June 30, 2005.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

         Accounts receivable consists primarily of amounts due us from our
normal business activities. We maintain an allowance for doubtful accounts to
reflect the expected non-collection of accounts receivable based on past
collection history and specific risks identified within our portfolio. If the
financial condition of our customers were to deteriorate resulting in an
impairment of their ability to make payments, or if payments from customers are
significantly delayed, additional allowances might be required.

DEBT AND EQUITY FINANCING OF CAPITAL TRANSACTIONS-BENEFICIAL CONVERSION FEATURES

         We have adopted Emerging Issues Task Force ("EITF") Issues 98-5,
ACCOUNTING FOR CONVERTIBLES SECURITIES WITH BENEFICIAL CONVERSION FEATURES OR
CONTINGENTLY ADJUSTABLE CONVERSION RATIOS, and 00-27, APPLICATION OF ISSUE NO.
98-5 TO CERTAIN CONVERTIBLE SECURITIES in accounting for the convertible debt.
EITF 98-5 recognition of a conversion feature that is in-the-money at issuance
as additional paid in-capital, measured by allocating a portion of the proceeds
equal to the intrinsic value of that feature. The intrinsic value of the feature
is the difference between the conversion price and the fair value of the stock
into which the security is convertible, multiplied by the number of shares.
According to EITF 00-27, the issuance proceeds should not be reduced by issuance
costs when calculating the intrinsic value of the conversion feature. These
beneficial conversion features of debt or equity instruments, depending on the
specific facts and circumstances will determine whether such beneficial
conversion feature is to be recorded as an expense to be amortized over a period
of time, expensed immediately or recorded as a deemed dividend.

RECENT ACCOUNTING PRONOUNCEMENTS

         In January 2003, FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN No. 46"). This interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Statements ("ARB No. 51"),
provides guidance for identifying a controlling interest in a variable interest
entity established by means other than voting interests. FIN No. 46 also
requires consolidation of a variable interest entity by an enterprise that holds
such a controlling interest. In December 2003, the FASB completed its
deliberations regarding the proposed modification to FIN No. 46 and issued
Interpretation Number 46R, Consolidation of Variable Interest Entities - an
Interpretation of ARB No. 51 (FIN No. 46R). The decisions reached included a
deferral of the effective date and provisions for additional scope exceptions
for certain types of variable interests. Application of FIN No. 46R is required

                                       40
<PAGE>

in financial statements of public entities that have interests in variable
interest entities or potential variable interest entities commonly referred to
as special - purpose entities for periods ending after December 15, 2003.
Application by public entities (other than small business users) for all other
types of entities is required in financial statements for periods ending after
March 15, 2004. The adoption of FIN No. 46R did not have a material effect on
our consolidated financial statements.

         In December of 2003, the FASB issued a revised SFAS No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits". The statement
revises employers' disclosures about pension plans and other postretirement
benefit plans but it does not change the measurement or recognition of those
plans. The revised SFAS No. 132 requires additional disclosures to those in the
original SFAS 132 about the assets, obligations, cash flows, and net periodic
benefit cost of defined pension plans and other defined benefit postretirement
plans. The statement also increases quarterly pension plan and postretirement
benefit plan disclosure requirements. Revised SFAS No. 132 domestic plan
disclosure requirements are effective for financial statements with fiscal years
ending after December 15, 2003. However, disclosure of information about foreign
plans required by the Statement is effective for fiscal years ending after June
15, 2004. We adopted this statement in December of 2003 and it did not have a
material effect on our consolidated financial statements.

         SFAS No. 123 (Revised 2004), "Share-Based Payment," issued in December
2004, is a revision of FASB Statement 123, "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related implementation guidance. The Statement focuses
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS No. 123 (Revised 2004)
requires a public entity to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of the award (with limited exceptions). That cost will be recognized over the
period during which an employee is required to provide service in exchange for
the award. This statement is effective as of the beginning of the first interim
or annual reporting period that begins after January 15, 2006 and we will adopt
the standard in the second quarter of fiscal 2006. We have not determined the
impact, if any, that this statement will have on our consolidated financial
statements.

         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4," which clarifies the types of costs that
should be expensed rather than capitalized as inventory. This statement also
clarifies the circumstances under which fixed overhead costs associated with
operating facilities involved in inventory processing should be capitalized. The
provisions of SFAS No. 151 are effective for fiscal years beginning after June
15, 2005 and we will adopt this standard in fiscal 2006. We have not determined
the impact, if any, that this statement will have on our consolidated financial
statements.

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets--An Amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from
fair value measurement for nonmonetary exchanges of similar productive assets in
paragraph 21(b) of APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," and replaces it with an exception for exchanges that do not have
commercial substance. SFAS 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is effective for the
fiscal periods beginning after December 15, 2005 and is required to be adopted
by us in the first quarter of fiscal 2006. We have not determined the impact, if
any, that this statement will have on our consolidated financial statements.

                                       41
<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

         The following factors, in addition to the other information contained
in this report, should be considered carefully in evaluating us and our
prospects. This report (including without limitation the following factors that
may affect operating results) contains forward-looking statements (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) regarding us and our business, financial condition, results of operations
and prospects. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions or variations of such
words are intended to identify forward-looking statements, but are not the
exclusive means of identifying forward-looking statements in this report.
Additionally, statements concerning future matters such as the development of
new products, enhancements or technologies, possible changes in legislation and
other statements regarding matters that are not historical are forward-looking
statements.

         Forward-looking statements in this report reflect the good faith
judgment of our management and the statements are based on facts and factors as
we currently know them. Forward-looking statements are subject to risks and
uncertainties and actual results and outcomes may differ materially from the
results and outcomes discussed in the forward-looking statements. Factors that
could cause or contribute to such differences in results and outcomes include,
but are not limited to, those discussed below and in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" as well as those
discussed elsewhere in this report. Readers are urged not to place undue
reliance on these forward-looking statements which speak only as of the date of
this report. We undertake no obligation to revise or update any forward-looking
statements in order to reflect any event or circumstance that may arise after
the date of the report.

OUR COMMON STOCK COULD BE DELISTED FROM AMEX.

         In May 2003, we received notice from the AMEX Staff indicating that we
were below certain of AMEX's continued listing standards, due to losses in two
of our most recent fiscal years with shareholder equity below $2 million, and
had sustained losses so substantial in our overall operations that it appeared
questionable, in the opinion of the AMEX, as to whether we would be able to
continue operations, as set forth in Section 1003(a)(i) and Section 1003(a)(iv)
of the AMEX Company Guide. We were afforded the opportunity to submit a plan of
compliance to AMEX and on July 7, 2003 presented the plan, with a further
amended submission on September 8, 2003. On September 30, 2003, AMEX notified us
that it accepted our plan of compliance and granted us an extension until
November 27, 2004 to regain compliance with the continued listing standards. We
were subject to periodic review by AMEX Staff during the extension period,
during which we were required to make progress consistent with our plan and to
regain compliance with the continued listing standards.

         On October 7, 2004, we received notice from the AMEX Staff that we were
not in compliance with Section 1003(a)(ii), which requires a company to have
shareholders' equity of not less than $4 million if the company has sustained
losses from continuing operations and/or net losses in three of its four most
recent fiscal years. AMEX Staff also informed us in that letter that we must
submit a description of the acquisition and/or investment that would bring the
company into compliance with all continued listing standards by November 27,
2004. In addition, the AMEX Staff notified us that if we did not have at least
$6 million in shareholders' equity in our financial report on Form 10-K for the
fiscal year ending December 31, 2004, that we would also not be in compliance
with Section 1003(a)(iii) of the AMEX Company Guide, which requires a company to
have $6 million in shareholders' equity if the company has sustained losses from
continuing operations and/or net losses in our five most recent fiscal years.

         On November 10, 2004, we announced that PBAA, IAJ and Mr. Isobe
collectively invested an additional $1,130,000 into the company in a private
placement. This increased our stockholder's equity to approximately $4.3 million
on November 9, 2004.

                                       42
<PAGE>

         On December 27, 2004, we received notice from the AMEX Staff that we
evidenced compliance with the requirements for continued listing on AMEX.

         In addition, the AMEX Staff reminded us that we have become subject to
Section 1009(h) of the AMEX Company Guide and our financial report on Form 10-K
for the fiscal year ending December 31, 2004, when it is was filed on
approximately April 15, 2005, must evidence compliance with Section 1003(a)(iii)
of the AMEX Company Guide, which requires a company to have shareholders' equity
above $6 million, provided the company expects to incur losses from continuing
operations and/or net losses in its five most recent fiscal years.

         On June 15, 2005, we announced that the acquisition of Global Hotline,
a privately held Japanese company, had closed. The transaction was structured as
a share exchange in which IAO issued 15,000,000 shares of its common stock in
exchange for 100% of Global Hotline's equity. The IAO common stock had a value
of $0.207 per share, which was the average close price during the twenty days
prior to the signing of the April 20, 2005 Share Exchange Agreement, or an
aggregate value of $3.1 million. We expect the Global Hotline acquisition to
increase our stockholder's equity by $3.1 million to above $6 million and to
help us maintain our AMEX listing.

         On June 28, 2005, the company announced that it had received
commitments totaling $3,750,000 for convertible debentures. This financing
includes a beneficial conversion feature, which is expected to increase the
company's stockholders' equity by $1,250,000 to above $6.0 million as of June
30, 2005 and to help us maintain our AMEX listing.

         As part of the financing, we received subscription agreements from
thirty-four private Japanese investors, which closed July 29, 2005. The terms of
the convertible notes provide for a conversion price of $0.30 per share, or
12,500,018 shares, until June 28, 2008, with an automatic conversion on June 28,
2008 at a 25% discount based on the trailing five day price prior to June 28,
2008. The coupon rate is 7.5% per annum payable in cash at the earlier of the
conversion date or June 28, 2008. The company has committed to filing a
registration statement covering the shares issuable upon conversion within
thirty days of the closing. JPB (Switzerland) A.G., a party affiliated with our
majority shareholder, advised the company on the transaction and will receive a
7% fee at funding. This financing will significantly strengthen the financial
position of the Company and increase our stockholder's equity to above $6
million as of June 30, 2005, which is above the $6 million required to maintain
our AMEX listing.

         We are working to maintain our AMEX listing, but there can be no
guarantee that this listing will be achieved after July 31, 2005. Not achieving
our plan of compliance accepted by AMEX and the listing rules set forth in the
AMEX Company Guide could result in our common stock being delisted from AMEX,
which could materially affect the ability of our stockholders to dispose of
their shares and reduce the liquidity of their investment. In addition,
delisting could affect our ability to obtain financing to support future
operations and acquisitions.

WE MAY NEED ADDITIONAL FINANCING TO SUPPORT OUR OPERATIONS AND ACQUIRE
BUSINESSES.

         We may need to obtain additional financing in order to continue our
current operations, including the cash flow needs of Rex Tokyo and subsidiaries,
Global Hotline and subsidiaries, to acquire businesses and to meet our AMEX
requirements of $6 million in stockholder's equity by July 31, 2005 for
continued listing of our shares. Our major shareholders thus far have indicated
a willingness to support our financing efforts. However, there can be no
assurance that we will be able to secure additional funding, or that if such
funding is available, whether the terms or conditions would be acceptable to us,
from our major shareholders or otherwise.

                                       43
<PAGE>

         Moreover, if we raise additional capital through borrowing or other
debt financing, we would incur substantial interest expense. Sales of additional
equity securities will dilute on a pro rata basis the percentage ownership of
all holders of common stock. If we do raise more equity capital in the future,
it is likely that it will result in substantial dilution to our current
stockholders. Any inability to obtain additional financing may materially affect
our business, financial condition and results of operations.

THE COMPANY IS EXPOSED TO LEGAL CLAIMS.

         As part of the September 25, 2002 Agreement and Assignment (the
"Agreement and Assignment") between the Company, IAJ and David Badner, a major
stockholder and former consultant to us, Mr. Badner has agreed to indemnify and
hold us harmless against certain expenses, including, among other things, any
fees and damages arising from the Krakowski matter. On November 5, 2004, we were
notified that, in connection with the arbitration matter initiated by Mr. Badner
described below, Mr. Badner intends to contest his indemnification obligation.

         On November 5, 2004, we received notice from the American Arbitration
Association in New York City ("Arbitrator") that Mr. Badner has commenced an
arbitration proceeding against us, our major shareholder, IAJ, and certain
officers of the Company and IAJ relating to the Agreement and Assignment. Mr.
Badner alleges (i) unrestricted shares of the Company's stock to which he was
entitled under the agreement were not delivered as per the terms of the
agreement, (ii) unspecified commitments to engage in future business ventures
with Mr. Badner were not made, and (iii) damages resulting from intentional
misrepresentation. Mr. Badner is seeking damages of $6 million plus interest and
costs and punitive and exemplary damages in an amount to be determined.

         On January 7, 2005, we received notice from the Arbitrator that Mr.
Badner had amended his arbitration claim against us and our major shareholder,
IAJ. Mr. Badner alleges (i) unrestricted shares of the Company's stock to which
he was entitled under the Agreement and Assignment were not delivered as per the
terms of the agreement, (ii) unspecified commitments to engage in future
business ventures with Mr. Badner were not made, and (iii) damages resulting
from fraud and misrepresentation. Mr. Badner is seeking damages of $2.5 million
plus interest related to the breach of the Agreement and Assignment, $100,000
for damages suffered related to fraud and misrepresentations and costs and
punitive and exemplary damages in an amount to be determined.

         On February 4, 2005, we filed an answer and counterclaim against Mr.
Badner in response to Mr. Badner's amended arbitration claim filed on January 7,
2005. We are seeking an award of actual damages in the sum according to proof,
plus interest, costs and attorneys' fees, on our counterclaims against Mr.
Badner. Arbitration is scheduled for December 2005.

         We have appropriately responded to Mr. Badner's allegations by way of
our answer and counterclaims and we intend to vigorously defend against his
claims. We do not have insurance to cover this claim and there is no guarantee
that we will be successful in defending these claims.

WE MAY ENGAGE IN ACQUISITIONS, MERGERS, STRATEGIC ALLIANCES, JOINT VENTURES AND
DIVESTITURES THAT COULD RESULT IN FINANCIAL RESULTS THAT ARE DIFFERENT THAN
EXPECTED.

         In the normal course of business, we may engage in discussions relating
to possible acquisitions, mergers, strategic alliances, joint ventures and
divestitures. As part of our business strategy, we completed one acquisition
during early 2003, one acquisition in August 2003, one acquisition in March
2004, one acquisition in June 2004 and one acquisition in June 2005, invested in
a joint venture in July 2003 and expanded the Rex Tokyo business as discussed,
sold a business in December 2003, sold a business in May 2005 and sold a
business in July 2005 and a joint venture in October 2004. Such transactions are
accompanied by a number of risks, including:

                                       44
<PAGE>

         - Use of significant amounts of cash,

         - Potentially dilutive issuances of equity securities on potentially
unfavorable terms,

         - Incurrence of debt on potentially unfavorable terms as well as
amortization expenses related to goodwill and other intangible assets,

         - The possibility that we may pay too much cash or issue too much of
our stock as the purchase price for an acquisition relative to the economic
benefits that we ultimately derive from such acquisition, and

         - The process of integrating any acquisition may create unforeseen
operating difficulties and expenditures and is itself risky. The areas where we
may face difficulties include:

         - Diversion of management time during the period of negotiation through
closing and further diversion of such time after closing from focus on operating
the businesses to issues of integration and future products,

         - Decline in employee morale and retention issues resulting from
changes in compensation, reporting relationships, future prospects or the
direction of the business,

         - The need to integrate each company's accounting, management
information, human resource and other administrative systems to permit effective
management, and the lack of control if such integration is delayed or not
implemented,

         - The need to implement controls, procedures and policies appropriate
for a larger public company at companies that prior to acquisition had been
smaller, private companies,

         - The need to sell acquired technology and products into the
marketplace,

         - The need to incorporate acquired technology, content or rights into
our products and anticipated expenses related to such integration, and

         - The need to successfully develop an acquired in-process technology -
to achieve the value currently capitalized as intangible assets.

         From time to time, we have also engaged in discussions with candidates
regarding the potential acquisitions of our product lines, technologies and
businesses. If divestiture such as this does occur, we cannot be certain that
our business, operating results and financial condition will not be materially
and adversely affected. A successful divestiture depends on various factors,
including our ability to:

         - Effectively transfer liabilities, contracts, facilities and employees
to the purchaser,

         - Identify and separate the intellectual property to be divested from
the intellectual property that we wish to keep,

         - Reduce fixed costs previously associated with the divested assets or
business, and

         - Collect the proceeds from the divestitures.

                                       45
<PAGE>

         In addition, if customers of the divested business do not receive the
same level of service from the new owners, this may adversely affect our other
businesses to the extent that these customers also purchase other products
offered by us. All of these efforts require varying levels of management
resources, which may divert our attention from other business operations.
Further, if market conditions or other factors lead us to change our strategic
direction, we may not realize the expected value from such transactions.

         If we do not realize the expected benefits or synergies of such
transactions, our consolidated financial position, results of operations, cash
flows and stock price could be negatively impacted.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

         The market price of our common stock has been and is likely in the
future to be highly volatile. Our common stock price may fluctuate significantly
in response to factors such as:

         - Quarterly variations in our operating results,

         - Announcements of technological innovations,

         - New product introductions by us or our competitors,

         - Competitive activities,

         - Announcements by us regarding significant acquisitions and
divestitures, strategic relationships, capital expenditure commitments,
liquidity and our AMEX listing,

         - Additions or departures of key personnel,

         - Issuance of convertible or equity securities for general or merger
and acquisition purposes,

         - Issuance of debt or convertible debt for general or merger and
acquisition purposes,

         - General market and economic conditions,

         - Investor relation activities,

         - Defending significant litigation, and

         - Foreign exchange gains and losses.

         The stocks of technology companies have experienced extreme price and
volume fluctuations. These fluctuations often have been unrelated or
disproportionate to the operating performance of these companies. These broad
market and industry factors may have a material adverse effect on the market
price of our common stock, regardless of our actual operating performance.
Factors like this could have a material adverse effect on our business,
financial condition and results of operations.

THE SALE OF A SIGNIFICANT NUMBER OF OUR SHARES COULD DEPRESS THE PRICE OF OUR
STOCK.

         Sales or issuances of a large number of shares of common stock in the
public market or the perception that sales may occur could cause the market
price of our common stock to decline. As of July 31, 2005, 97.4 million shares
of common stock were outstanding. Significant shares were held by our principal
stockholders and other Company insiders. As "affiliates" (as defined under Rule
144 of the Securities Act ("Rule 144")) of the company, our principal
stockholders and other Company insiders may only sell their shares of common
stock in the public market in compliance with Rule 144, including the volume
limitations therein.

                                       46
<PAGE>

WE HAVE LIMITED INSURANCE.

         We have limited director and officer insurance and commercial insurance
policies. Any significant insurance claims would have a material adverse effect
on our business, financial condition and results of operations.

WE HAVE A LIMITED OPERATING HISTORY.

         We have a limited operating history on which to base an evaluation of
our business and prospects, having only commenced our initial business
operations in April 1999. In addition, we have shifted our revenue model from
broadband entertainment channels and revenues derived from advertising to
operating primarily as a holding company. We intend to grow our Rex Tokyo and
Global Hotline businesses. Also, we intend to further increase the number of
majority-owned companies by acquiring primarily Japanese small to midsize
companies at low acquisition costs in the gaming, entertainment and technology
areas. Our prospects must be considered in light of the risks, difficulties and
uncertainties frequently encountered by companies in an early stage of
development, particularly companies in new and rapidly evolving markets such as
the market for gaming, entertainment and technology products and services.

         As we have such a limited history of operations, investors will be
unable to assess our future operating performance or our future financial
results or condition by comparing these criteria against their past or present
equivalents.

WE EXPECT TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.

         We have experienced net losses since inception. We expect our net
losses from operations to decrease during 2005, but to continue for the
foreseeable future. There can be no assurance that we will ever achieve
profitability.

OUR CUSTOMER BASE IS CONCENTRATED.

         Rex Tokyo has one customer that was 45.1% of net revenues for the six
months ended June 30, 2005. Global Hotline has one customer that is 6.1% of net
revenues. We anticipate that significant customer concentration will continue
for the foreseeable future. The loss of a significant customer would have a
material adverse effect on our business, financial condition and results of
operations.

OUR VENDOR BASE IS CONCENTRATED.

         Our vendor base is concentrated in a few major suppliers for Rex Tokyo
and Global Hotline. We anticipate that significant vendor concentration will
continue for the foreseeable future. Such concentration can result in
unfavorable pricing, payment or supply terms and such terms would have a
material adverse effect on our business, financial condition and results of
operations.

WE ARE DEPENDENT ON CERTAIN THIRD PARTY LICENSES AND AGREEMENTS.

         During 1998, Rex Tokyo agreed to pay monthly 5,000,000 Yen or
approximately $47,000 to a majority-owned company of the Chief Executive Officer
of Rex Tokyo for assigning the distribution rights for certain lock products for
Tokyo, Japan to Rex Tokyo. This distribution agreement assignment is ongoing and
resulted in 2004 sales of approximately $2,800,0000.

                                       47
<PAGE>

         We have two contracts with a KDDI, a significant Japanese
telecommunications company. The first contract covers the period October 1, 2004
thru September 30, 2005 and requires us to sell subscriber lines based on agreed
monthly targets. We expect to be paid 841,000,000 Yen or $7,600,000 under this
contract. The second contract covers the period March 16, 2005 through March 31,
2006 and requires us to sell subscriber lines based on agreed monthly targets.
Global Hotline expects to be paid 2,925,000,000 Yen or $26,400,000, under this
contract. If the targets are not achieved on a quarterly basis, then we will be
required to refund a portion of the revenue to the customer. The contracts may
be cancelled by KDDI if we commit a material breach as defined in the contracts.
Absent a material breach by us, the contracts may be extended.

         We entered into a contract with 3S Networks on November 1, 2004 to
outsource the call center operation for the first contract with KDDI. The
agreement has a one year term and provides for lines sold and penalties that
protect the revenues and profits of the first KDDI contract. The contract may be
cancelled under certain conditions and we may extend the contract. We utilizes
two agents to support 3S Networks. We have two call center operations to support
the second contract with KDDI.

         Any cancellation of these agreements or lack of achievement of the
contract targets would have a material adverse effect on our business, financial
condition and results of operations.

WE ARE SUBJECT TO COMPETITIVE PRESSURES.

         While we are not aware of any organization that is providing the
complete suite of services under the same business model we are utilizing, in
general, we face competition from entities that provide supply equipment and
services to the Pachinko and gaming industry or which resell telephone and
broadband lines in Japan. Certain of our competitors may be able to devote
greater resources to marketing, adopt more aggressive pricing policies and
devote substantially more resources to developing their services and products.
We may be unable to compete successfully against current and future competitors,
and competitive pressures may have a material adverse effect on our business.
Further, as a strategic response to changes in the competitive environment, we
may from time to time make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on our business,
prospects, financial condition and results of operations.

         In addition to the foregoing, some of our key customers or potential
customers might decide to supply equipment or services to the Pachinko and
gaming industry or resell telephone and broadband lines in Japan. Although this
has not been the industry trend over the past year, if this were to happen, we
might be adversely impacted thereby.

WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS.

         We regard our copyrights, trade secrets, trademarks, patents, and
similar intellectual property as significant to our growth and success. We rely
upon a combination of copyright and trademark laws, trade secret protection,
confidentiality and non-disclosure agreements and contractual provisions with
our employees and with third parties to establish and protect our proprietary
rights. Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving. We are unable to assure investors as to the future
viability or value of any of our proprietary rights or those of other companies
within the industry. We are also unable to assure investors that the steps taken
by us to protect our proprietary rights will be adequate. Furthermore, we can
give no assurance that our business activities will not infringe upon the
proprietary rights of others, or that other parties will not assert infringement
claims against us.

                                       48
<PAGE>

WE ARE DEPENDENT ON KEY PERSONNEL.

         We have experienced turnover of management and directors. Our success
depends to a significant degree upon the continued contributions of key
management and other personnel, some of whom could be difficult to replace. We
do not maintain key man life insurance covering certain of our officers. Our
success will depend on the performance of our officers, our ability to retain
and motivate our officers, our ability to integrate new officers into our
operations and the ability of all personnel to work together effectively as a
team. Our failure to retain and recruit officers and other key personnel could
have a material adverse effect on our business, financial condition and results
of operations.

OUR PRINCIPAL STOCKHOLDERS HAVE SUBSTANTIAL INFLUENCE OVER OUR COMPANY.

         As of August 1, 2005, IAJ LBO Fund, PBAA, Terra Firma, IAJ, and Hiroki
Isobe collectively hold approximately 75.0% of our common stock (collectively,
the "Controlling Shareholders"). The share ownership percentages described in
this Form 10-Q include the 11,580,000 shares of common stock issuable to IAJ LBO
Fund upon the conversion of 1,158 shares of Series B preferred stock and
excludes 811,285 shares held by GMB Holdings Ltd, and other shareholders for
which Mr. Isobe has personal signing authority and 12,500,018 shares of our
common stock issued by us to selling stockholders upon conversion of the
convertible debentures. Such entities have stated in a Schedule 13D that they
may be deemed to constitute a "group" for the purposes of Rule 13d-3 under the
Exchange Act. Hiroki Isobe controls each of our Controlling Stockholders.

         IAJ has the ability to cause a change of control of our board of
directors by electing candidates of its choice to the board at a stockholder
meeting, and approve or disapprove any matter requiring stockholder approval,
regardless of how our other stockholders may vote. Further, under Delaware law,
IAJ has significant influence over our affairs, including the power to cause,
delay or prevent a change in control or sale of the company, which in turn could
adversely affect the market price of our common stock.

WE ARE EXPOSED TO FOREIGN CURRENCY RISKS.

         The majority of our operations are located in Japan. We do not trade in
hedging instruments or "other than trading" instruments and a significant change
in the foreign currency exchange rate between the Japanese Yen and US Dollar
would have a material adverse effect on our business, financial condition and
results of operations.

WE ARE EXPOSED TO CHANGES IN THE PACHINKO INDUSTRY.

         Over the last few years the Pachinko/Slot Machine industry in Japan has
seen significant growth in operators known as "Chain Stores". Rex Tokyo has
taken advantage of this growth, and focused heavily on servicing these clients.
During the six months ended June 30, 2005, 45.1% of revenues resulted from sales
to one Chain Store. Any slow down from this side of the industry could
significantly impact Rex Tokyo's ability to perform at its current levels of
revenue. Further, Chain Stores have thus far focused heavily on a high level of
automation within the stores. Any change in plan by Chain Stores to decrease the
level of automation could adversely affect Rex Tokyo's sales of machinery and
parts. This could have a material adverse effect on our business, prospects,
financial condition and results of operations.

         The Pachinko/Slot machine industry in Japan has seen a significant
growth in the Slot machine side of the business, while the Pachinko market has
remained more constant in terms of total number of machines in stores. Rex Tokyo
has focused heavily on the Slot machine side of the business. Any downturn in
growth of the Slot machine market, or any change in the law that might curtail
sales of Slot machines in the market, could have a material adverse effect on
our business, prospects, financial condition and results of operations.

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<PAGE>

         Rex Tokyo has expanded its sales offices based on a perceived need for
more local representation in areas where clients are based. In providing clients
with a local office, feedback from clients can be more readily received, thus
helping to improve service levels. There is also a possibility that formation
from clients may be filtered prior to reaching head office. This may result in a
less accurate picture of client satisfaction levels and expectations. Rex Tokyo
regularly conducts meetings with managers from the local offices to hear their
views in an effort to combat this, however, a decrease in client satisfaction
levels could have a material adverse effect on our business prospects, financial
condition and results of operations.

         Rex Tokyo has seen an expansion of its business by aligning itself
strongly with a number of core clients. If for any reason Rex Tokyo's image was
damaged with those clients or in the industry as a whole, it could have a
material adverse effect on our business, prospects, financial condition and
results of operations.

         Rex Tokyo's business is dependent upon its ability to maintain tight
control on its cash flow cycle. In general, as the amount of work increases the
amount of cash flow required increases. If Rex Tokyo is not able to maintain
sufficient cash flow to expand its business at the same pace as it's clients
expansion, it may lead to clients moving their accounts to other service
providers.

         Rex Tokyo is dependent upon key suppliers for supply of parts and
machinery to the Pachinko slot machine gaming industry. It also outsources a
large amount of its maintenance and installation work. Failure to secure
specific machines or parts that clients request from suppliers may lead to a
decrease in sales. Failure to maintain good relationships with its suppliers and
outsourcing companies could result in the inability to complete work for
clients.

         Revenue recognition is based on completion of work and industry
regulated police inspection being carried out so that stores can open. A change
in this system or the delay of inspections could adversely affect revenue.

         The passing of legislation that may allow for other forms of gaming
within Japan could cause a material change in the business model of Rex Tokyo.
While no legislation has been passed at this time, debate in political circles
over the introduction of legal casinos in Japan has been public knowledge for
some time. It is not known whether such legislation might ever be passed in
Japan, or if it was passed, what impact that may have on Rex Tokyo's business,
prospects, financial condition and results of operations. Further, the existence
and growth of illegal or "underground" casinos in Japan may also have a similar
negative impact.

WE ARE EXPOSED TO CHANGES IN THE TELECOMMUNICATION INDUSTRY.

         The Japanese telecommunications market is experiencing significant
growth in alternative carriers due to recent regulatory changes that now permit
individuals and companies to choose their telephone service provider. Global
Hotline may be affected by the following factors that would impact its ability
to operate as a call center and reseller of telephone and broadband lines in
Japan.

         o  Passing of new or changes in existing legislation;

         o  Impact of privacy laws;

         o  New competitors;

         o  Decreased pricing;

         o  KDDI not renewing its contracts;

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<PAGE>

         o  Default or lack of performance by its supplier or agents;

         o  Changes in the availability of employees or wages paid to employees
            to operate the call centers; and

         o  Loss of key personnel.

         In addition, our business has a concentration of customers and
suppliers with one customer, one outsourced supplier and two agents. Our
business is dependent upon its ability to operate efficiently by maintaining
tight control on its cash flows. Any change in these factors could adversely
affect our ability to achieve the contract rates in the KDDI contracts and to
operate as a call center and reseller of telephone and broadband lines in Japan.
This could result in a repayment of cash paid by KDDI under the contracts, which
would have a material adverse effect on our business, prospects, financial
condition and results of operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY

         We were exposed to foreign currency risks due to the acquisition of Rex
Tokyo on March 18, 2004 and Global Hotline on June 15, 2005. These businesses
operate in Japan.

         We do not trade in hedging instruments or "other than trading"
instruments and we are exposed to foreign currency exchange risks.

INTEREST RATE RISK

         The company is exposed to interest rate risk due to the long term debt
of $3,085,692 as of June 30, 2005. On January 18, 2005, Rex Tokyo refinanced
this loan by entering into a 100,000,000 Yen or approximately $978,761 loan with
Mizuho Bank Co Ltd, unrelated Japanese bank.

         On March 25, 2005, Rex Tokyo received a 100,000,000 Yen or
approximately $940,000 working capital loan from Chiba Bank Ltd, an unrelated
Japanese bank.

         On June 17, 2005, Rex Tokyo received a 100,000,000 Yen or approximately
$917,900 working capital loan from Chiba Bank Ltd,an unrelated Japanese bank.
The loan will be used to fund Rex Tokyo's growth.

         The company does not trade in hedging instruments or "other than
trading" instruments and is exposed to interest rate risks. We believe that the
impact of a 10% increase or decline in interest rates would not be material to
our financial condition and results of operations.

ITEM 4.  CONTROLS AND PROCEDURES

         Our principal executive officer and principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30,
2005. Based on this evaluation, our principal executive officer and principal
financial officer concluded that, as of June 30, 2005, our disclosure controls
and procedures were effective in ensuring that (1) information to be disclosed
in reports we file under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified by the rules and forms promulgated
under the Exchange Act and (2) information required to be disclosed in reports
filed under the Exchange Act is accumulated and communicated to the principal
executive officer and principal financial officer as appropriate to allow timely
decisions regarding required disclosure. There were no changes in the company's
internal control over financial reporting that occurred during the company's
last fiscal quarter that have materially affected or are reasonably likely to
materially affect, the company's internal control over financial reporting.

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<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         As part of the September 25, 2002 Agreement and Assignment (the
"Agreement and Assignment") between the Company, IAJ and David Badner, a major
stockholder and former consultant to us, Mr. Badner has agreed to indemnify and
hold us harmless against certain expenses, including, among other things, any
fees and damages arising from the Krakowski matter. On November 5, 2004, we were
notified that, in connection with the arbitration matter initiated by Mr. Badner
described below, Mr. Badner intends to contest his indemnification obligation.

         On November 5, 2004, we received notice from the American Arbitration
Association in New York City ("Arbitrator") that Mr. Badner has commenced an
arbitration proceeding against us, our major shareholder, IAJ, and certain
officers of the Company and IAJ relating to the Agreement and Assignment. Mr.
Badner alleges (i) unrestricted shares of the Company's stock to which he was
entitled under the agreement were not delivered as per the terms of the
agreement, (ii) unspecified commitments to engage in future business ventures
with Mr. Badner were not made, and (iii) damages resulting from intentional
misrepresentation. Mr. Badner is seeking damages of $6 million plus interest and
costs and punitive and exemplary damages in an amount to be determined.

         On January 7, 2005, we received notice from the Arbitrator that Mr.
Badner had amended his arbitration claim against us and our major shareholder,
IAJ. Mr. Badner alleges (i) unrestricted shares of the Company's stock to which
he was entitled under the Agreement and Assignment were not delivered as per the
terms of the agreement, (ii) unspecified commitments to engage in future
business ventures with Mr. Badner were not made, and (iii) damages resulting
from fraud and misrepresentation. Mr. Badner is seeking damages of $2.5 million
plus interest related to the breach of the Agreement and Assignment, $100,000
for damages suffered related to fraud and misrepresentations and costs and
punitive and exemplary damages in an amount to be determined.

         On February 4, 2005, we filed an answer and counterclaim against Mr.
Badner in response to Mr. Badner's amended arbitration claim filed on January 7,
2005. We are seeking an award of actual damages in the sum according to proof,
plus interest, costs and attorneys' fees, on our counterclaims against David
Badner. Arbitration is scheduled for December 2005.

         We have appropriately responded to Mr. Badner's allegations by way of
our answer and counterclaims and we intend to vigorously defend against his
claims. We do not have insurance to cover this claim and there is no guarantee
that we will be successful in defending these claims.

         We believe there are no other pending legal proceedings that if
adversely determined would have a material adverse effect on our business or
financial condition.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

         Not Applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not Applicable

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<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

         At the 2005 Annual Meeting of Stockholder held on June 3, 2005, the
following nominees were duly elected as Directors of the Company to serve until
the 2006 Annual Meetings of Stockholders or until their successors have been
elected and qualified with a vote of in favor, votes opposed and abstentions as
detailed below:

         Name                              For        Against     Withheld
         ----                              ---        -------     --------
         Mr. Alan C. Margerison        78,480,237,    118,040,        0
         Mr. Mark E. Scott             78,265,637,    332,640,        0
         Mr. Eric La Cara              78,302,177,    296,100,        0
         Dr. Jun Kumamoto              78,303,177,    295,100,        0
         Mr. Raymond J. Christinson    78,480,377,    117,900,        0

         In addition, the proposal to amend our certificate of incorporation to
increase the number of authorized shares from 150,000,000 to 200,000,000, was
carried with 78,294,511 votes in favor, 211,466 votes opposed and 92,300
abstentions.

         The company filed an information statement on Schedule 14C
("Information Statement"), which was sent to the stockholders of record on July
11, 2005. The Information Statement was filed in connection with certain actions
to be taken by the written consent dated June 28, 2005 by the majority
stockholders of the company. The actions to be taken pursuant to the written
consent became effective on August 3, 2005, 20 days after the mailing of the
Information Statement on July 14, 2005. The actions taken by written consent by
the majority stockholders of the company were as follows:

         (1) On March 29, 2005, the Board of Directors of the company proposed
and recommended to the stockholders the acquisition of Global Hotline.

         (2) On June 23, 2005, the Board of Directors of the company proposed
and recommended to the stockholders the issuance of convertible promissory notes
totaling $3,750,000.

         In order to eliminate the costs and management time involved in holding
a special meeting, and in order to effectuate the acquisition of Global Hotline.
and the issuance of convertible promissory notes totaling $3,750,000 as early as
possible to accomplish the purposes of the company, the Board of Directors of
the company decided to utilize the written consent of the majority stockholders
of the Company. On June 28, 2005, our majority stockholders voted in favor of
the foregoing proposals by resolution.

ITEM 5.  OTHER INFORMATION

         There were no disclosures of any information required to be filed on
Form 8-K during the three months ended June 30, 2005 that were not filed.

ITEM 6.  EXHIBITS

Exhibit No.                        Description
-----------                        -----------

   3.1      Certificate of Amendment of Restated Certificate of Incorporation of
            IA Global, Inc. dated June 7, 2005. (8)

   10.1     Share Exchange Agreement dated April 20, 2005 amongst IA Global,
            Inc. Mr. Hideki Anan, Mr. Kyo Nagae and Mr. Hiroki Isobe. (1)

   10.2     Share Purchase Agreement dated May 12, 2005 amongst IA Global, Inc.,
            TK Partners, Inc. and Fan Club Entertainment Co Ltd. (2)


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<PAGE>

   10.3     Certificate of Officers of Fan Club Entertainment Co Ltd. dated May
            2, 2005. (2)

   10.4     Amendment to Employment Agreement dated May 17, 2005 between IA
            Global, Inc. and Mark Scott. (3)

   10.5     Option Exercise, Transition and Consolidation Agreement dated May
            28, 2005 amongst IA Global, Inc., IA Global Acquisition Co., QuikCAT
            Australia Pty Ltd., NanoCAT Technologies Pte Ltd and Marie-Rose
            Pontre'. (4)

   10.6     Confirmation of Close of Share Exchange Agreement dated June 15,
            2005 amongst IA Global, Inc. Mr. Hideki Anan, Mr. Kyo Nagae and Mr.
            Hiroki Isobe. (5)

   10.7     Financial Loan Document dated June 17, 2005 between Rex Tokyo Co Ltd
            and Chiba Bank Ltd. (6)

   10.8     Subscription Agreement dated June 28, 2005 between IA Global, Inc.
            and thirty four Japanese investors. Each investor entered into a
            substantially identical Subscription Agreement except for the
            principal amount of the convertible notes purchased. (7)

   10.9     Convertible Promissory Note dated June 28, 2005 between IA Global,
            Inc. and thirty four Japanese investors. Each investor entered into
            a substantially identical Convertible Promissory Note except for the
            principal amount of the convertible notes purchased. (7)

   10.10    Stock Purchase Agreement signed July 15, 2005 and effective July 1,
            2005 among IA Global, Inc., IA Global Acquisition Co. Ltd. and
            Ominira Networks, LLC. (9)

   10.11    Senior Secured Promissory Note signed July 15, 2005 and effective
            July 1, 2005 by Ominira Networks, LLC. (9)

   10.12    Business Outsourcing Basic Contract signed October 6, 2004 between
            KDDI and Global Hotline. (English Translation) (10)

   10.13    Special Business Outsourcing Contract dated December 1, 2004 between
            KDDI and Global Hotline. (English Translation) (10)

   10.14    Letter from KDDI to Global Hotline. (English Translation) (10)

   10.15    Business Outsourcing Basic Contract between Global Hotline and 3S
            Networks. (English Translation) (10)

   10.16    Individual Contract dated November 1, 2004 between Global Hotline
            and 3S Networks. (English Translation) (10)

   10.17    Letter dated March 29, 2005 between KDDI and Global Hotline.
            (English Translation) (10)

   10.18    Special Business Outsourcing Contract dated April 1, 2005 between
            KDDI and Global Hotline. (English Translation) (10)

   31.1     Certification of the President and Chief Financial Officer pursuant
            to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act
            of 1934, as amended.(10)

   32.1     Certification of the President and Chief Financial Officer, pursuant
            to Rule 13a-14(b) and Rule 15d-14(b) of the Securities Exchange Act
            of 1934, as amended. (10)

                                       54
<PAGE>

   _________

   (1) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
April 20, 2005 and filed on April 25, 2005 and incorporated herein by reference.

   (2) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated May
12, 2005 and filed on May 16, 2005 and incorporated herein by reference.

   (3) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated May
16, 2005 and filed on May 17, 2005 and incorporated herein by reference.

   (4) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated May
28, 2005 and filed on June 3, 2005 and incorporated herein by reference.

   (5) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
June 15, 2005 and filed on June 16, 2005 and incorporated herein by reference.

   (6) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
June 17, 2005 and filed on June 22, 2005 and incorporated herein by reference.

   (7) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
June 28, 2005 and filed on June 29, 2005 and incorporated herein by reference.

   (8) Filed as an exhibit to Registrant's Registration Statement on Form S-3
(File No. 333-127205), dated August 4, 2005, and incorporated herein by
reference.

   (9) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
July 15, 2005 and filed on July 18, 2005 and incorporated herein by reference.

   (10) Filed herewith.





                                   SIGNATURES

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

                                       IA Global, Inc.
                                       (Registrant)

Date: August 15, 2005                  By: /s/ Mark Scott
                                           --------------
                                           Mark Scott,
                                           President and Chief Financial Officer
                                           (Principal Executive and Financial
                                           and Accounting Officers)

                                       55