________________________________________________________________________________


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

                                   FORM 10-Q/A
                                   AMENDMENT 1

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


                  FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                         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 a large accelerated
filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2
of the Exchange Act).

 [_] Large accelerated file   [_] Accelerated filer   [X] Non-accelerated filer

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

                                 Yes [ ] No [X]

      As of November 14, 2006 there were issued and outstanding 109,165,157
shares of the Registrant's Common Stock.

________________________________________________________________________________

<PAGE>

                                 IA GLOBAL, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

     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 ...........................23

     Item 3.   Quantitative and Qualitative Disclosures About Market Risk ....43

     Item 4.   Controls and Procedures .......................................43


PART II. OTHER INFORMATION

     Item 1.   Legal Proceedings .............................................43

     Item 1A.  Risk Factors...................................................44

     Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds....44

     Item 3.   Defaults Upon Senior Securities ...............................44

     Item 4.   Submission of Matters to a Vote of Security Holders ...........44

     Item 5.   Other Information .............................................44

     Item 6.   Exhibits ......................................................45

Signatures ...................................................................45


                                        2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements
<TABLE>
                                     IA GLOBAL, INC. AND SUBSIDIARIES
                                       CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                                          September 30,     December 31,
                                                                              2006              2005
                                                                          ------------      ------------
                                                                           (unaudited)        (audited)
<S>                                                                       <C>               <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents .........................................     $  5,263,423      $  4,460,986
  Accounts receivable, net of allowance for doubtful accounts of $ 0         4,547,414           610,220
  Prepaid expenses ..................................................          497,320           430,334
  Notes receivable ..................................................          759,070         4,129,408
  Other current assets ..............................................          243,866           189,783
  Deferred tax asset ................................................          113,283                 -
  Assets from discontinued operations ...............................                -        12,606,044
                                                                          ------------      ------------
    Total current assets ............................................       11,424,376        22,426,775

EQUIPMENT, NET ......................................................          466,360           521,964

OTHER ASSETS
  Intangible assets, net ............................................        2,715,242         4,449,558
  Other assets ......................................................        1,036,947           735,859
                                                                          ------------      ------------

                                                                          $ 15,642,925      $ 28,134,156
                                                                          ============      ============

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
  Accounts payable - trade ..........................................     $     82,845      $    496,448
  Accrued liabilities ...............................................        5,811,950         2,274,646
  Consumption taxes received ........................................           75,028           294,947
  Income taxes payable- foreign .....................................                -           825,000
  Note payable - current portion of long term debt ..................        4,646,143                 -
  Deferred revenue ..................................................          195,836         3,589,532
  Liabilities of discontinued operations ............................                -        11,929,115
                                                                          ------------      ------------
    Total current liabilities .......................................       10,811,802        19,409,688
                                                                          ------------      ------------

LONG TERM  LIABILITIES:
  Long term debt ....................................................          217,506                 -
  Convertible debentures ............................................        3,020,833         2,708,333
                                                                          ------------      ------------
                                                                             3,238,339         2,708,333
                                                                          ------------      ------------

STOCKHOLDER'S EQUITY:
  Series B Preferred stock, $.01 par value, 5,000 shares authorized
    0 and 1,158 issued and outstanding (liquidation value $1,158,000)                -                12
  Common stock, $.01 par value, 200,000,000 shares authorized,
    109,165,157 and 97,425,181 issued and outstanding, respectively .        1,091,651           974,251
  Additional paid in capital ........................................       32,798,541        32,992,589
  Accumulated deficit ...............................................      (31,647,552)      (27,662,170)
  Treasury stock ....................................................          (50,000)          (50,000)
  Accumulated other comprehensive loss ..............................         (599,856)         (238,547)
                                                                          ------------      ------------
    Total stockholder's equity ......................................        1,592,784         6,016,135
                                                                          ------------      ------------

                                                                          $ 15,642,925      $ 28,134,156
                                                                          ============      ============

                             See notes to consolidated financial statements.

                                                    3
</TABLE>
<PAGE>
<TABLE>
                                                 IA GLOBAL, INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
                                                                          Three Months Ended              Nine Months Ended
                                                                             September 30,                   September 30,
                                                                    -----------------------------   -----------------------------
                                                                         2006            2005            2006            2005
                                                                    -------------   -------------   -------------   -------------
                                                                     (unaudited)     (unaudited)     (unaudited)     (unaudited)
<S>                                                                 <C>             <C>             <C>             <C>
REVENUE ..........................................................  $   4,483,291   $   7,106,092   $  11,397,096   $   7,999,010

COST OF SALES ....................................................        604,571       2,125,678       2,931,029       2,552,639
                                                                    -------------   -------------   -------------   -------------

GROSS PROFIT .....................................................      3,878,720       4,980,414       8,466,067       5,446,371

Selling, general and administrative expenses .....................      5,029,250       4,338,862      13,556,038       5,478,968
                                                                    -------------   -------------   -------------   -------------

OPERATING (LOSS) PROFIT ..........................................     (1,150,530)        641,552      (5,089,971)        (32,597)
                                                                    -------------   -------------   -------------   -------------

OTHER INCOME (EXPENSE):
  Interest income ................................................         20,196          26,836          77,285          27,543
  Interest expense and amortization of beneficial
    conversion feature ...........................................       (229,316)       (191,714)       (620,740)       (192,015)
  Other income ...................................................         51,106          89,192         158,991          89,775
  Foreign currency transaction adjustment ........................              -           5,574        (129,448)        (68,804)
                                                                    -------------   -------------   -------------   -------------
    Total other income (expense) .................................       (158,014)        (70,112)       (513,912)       (143,501)
                                                                    -------------   -------------   -------------   -------------

(LOSS) PROFIT FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .....     (1,308,544)        571,440      (5,603,883)       (176,098)

INCOME TAXES:
  Current benefit ................................................       (129,881)              -      (1,079,071)              -
  Current provision ..............................................              -               -               -               -
                                                                    -------------   -------------   -------------   -------------

NET (LOSS) PROFIT FROM CONTINUING OPERATIONS .....................     (1,178,663)        571,440      (4,524,812)       (176,098)

DISCONTINUED OPERATIONS
  Gain from disposal of discontinued operations ..................              -         209,657         463,375         309,006
  (Loss) gain from discontinued operations .......................              -         (47,213)         76,054        (834,167)
                                                                    -------------   -------------   -------------   -------------

NET (LOSS) PROFIT ................................................  $  (1,178,663)  $     733,884   $  (3,985,383)  $    (701,259)
                                                                    =============   =============   =============   =============

Per share of Common-
  Basic net (loss) profit per share from continuing operations ...  $       (0.01)  $        0.01   $       (0.04)  $       (0.00)
  Basic net (loss) profit per share from discontinued operations .              -           (0.00)           0.01           (0.01)
                                                                    -------------   -------------   -------------   -------------
  Total basic net (loss) profit per share ........................  $       (0.01)  $        0.01   $       (0.04)  $       (0.01)
                                                                    =============   =============   =============   =============

  Diluted net (loss) profit per share from continuing operations .  $       (0.01)  $        0.01   $       (0.04)  $       (0.00)
  Diluted net (loss) profit per share from discontinued operations              -           (0.00)           0.01           (0.01)
                                                                    -------------   -------------   -------------   -------------
  Total diluted net (loss) profit per share ......................  $       (0.01)  $        0.00   $       (0.04)  $       (0.01)
                                                                    =============   =============   =============   =============

  Weighted average shares of common stock outstanding - basic ....    108,415,157      97,404,529     107,231,610      88,178,181
  Weighted average shares of common stock and common
    equivalent shares outstanding - diluted ......................    108,415,157     109,543,458     107,231,610      88,178,181

                                          See notes to consolidated financial statements.

                                                                 4
</TABLE>
<PAGE>
<TABLE>
                                          IA GLOBAL, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                    Nine Months Ended September 30,
                                                                                    -------------------------------
                                                                                        2006               2005
                                                                                    ------------       ------------
                                                                                     (unaudited)        (unaudited)
<S>                                                                                 <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ...................................................................      $ (3,985,383)      $   (701,259)
  Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities:
    Depreciation and amortization ............................................         1,508,194            656,308
    Amortization of beneficial conversion feature ............................           312,500            104,166
    Amortization of financing cost ...........................................                 -             22,222
    Stock based compensation .................................................            84,834                  -
    Common stock issued for services .........................................                 -              6,000
  Changes in operating assets and liabilities:
    Accounts receivable ......................................................        (3,937,194)          (149,258)
    Notes receivable .........................................................          (265,156)           254,700
    Prepaid expenses .........................................................           (66,986)           373,866
    Other current assets .....................................................           (54,083)          (125,408)
    Deferred tax asset .......................................................          (113,283)                 -
    Other assets .............................................................          (301,088)           (58,687)
    Accounts payable - trade .................................................          (413,603)           (14,818)
    Accrued liabilities ......................................................         3,537,305          1,173,125
    Net consumption tax payable ..............................................          (304,929)           195,510
    Income taxes payable - foreign ...........................................          (253,120)                 -
    Deferred revenue .........................................................        (3,393,696)           249,578
                                                                                    ------------       ------------
  Net cash (used in) provided by continuing operations .......................        (7,645,688)         1,986,045
    Loss from discontinued operations ........................................          (539,429)          (525,161)
    Net cash (used in) provided by discontinued operations ...................          (854,895)          (235,892)
    Net decrease (increase) in assets of discontinued operations .............        12,606,044          4,952,701
    Net (decrease) increase in liabilities of discontinued operations ........       (11,929,115)        (3,397,906)
                                                                                    ------------       ------------
NET CASH (USED IN) PROVIDED BY OPERATIONS ....................................        (8,363,083)         2,779,787
                                                                                    ------------       ------------

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
  Purchases of capital expenditures ..........................................          (198,802)          (367,476)
  Repayment of loan receivable from QUIKCAT Australia Pty Ltd ................                 -            150,000
  Proceeds from sale of QUIKCAT business unit and note receivable ............                 -             85,000
  Proceeds from sale of Fan Club Entertainment Co Ltd ........................                 -            185,000
  Repayment of loan receivable from affiliate of controlling shareholder group         3,394,000                  -
  Proceeds from sale of Rex Tokyo Co, Ltd. ...................................         1,300,000                  -
  Loan to affiliate of majority shareholder ..................................                 -         (2,654,632)
  Cash from Global Hotline, Inc. on date of acquisition ......................                 -          1,240,037
                                                                                    ------------       ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ..........................         4,495,198         (1,362,071)
                                                                                    ------------       ------------

CASH PROVIDED BY FINANCING ACTIVITIES:
  Proceeds from long term debt ...............................................         4,999,000                  -
  Proceeds from issuance of convertible debentures ...........................                 -          3,483,000
  Repayment of loan payable - related party ..................................                 -           (593,662)
  Proceeds from exercise of stock options ....................................            80,000             59,500
                                                                                    ------------       ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................................         5,079,000          2,948,838
                                                                                    ------------       ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .........................         1,211,115          4,366,554

EFFECT OF EXCHANGE RATE CHANGES ON CASH ......................................          (408,678)          (343,250)

CASH AND CASH EQUIVALENTS, beginning of period ...............................         4,460,986            359,174
                                                                                    ------------       ------------

CASH AND CASH EQUIVALENTS, end of period .....................................      $  5,263,423       $  4,382,478
                                                                                    ============       ============

Supplemental disclosures of cash flow information:
  Interest paid ..............................................................      $     34,708       $     17,447
  Taxes paid .................................................................      $    234,506       $      2,504

Non-cash investing and financing activities:
  Common stock surrendered to company in payment of note receivable ..........      $    241,494       $          -
  Conversion of Series B Preferred stock into common stock ...................      $    115,800       $          -
  Common stock issued for Global Hotline, Inc. ...............................      $          -       $  3,097,500
  Beneficial conversion feature recognized with issuance of convertible debt .      $          -       $  1,250,000
  Issuance of loan receivable for sale of Fan Club Entertainment Co Ltd ......      $          -       $    571,193
  Issuance of loan receivable for sale of QUIKCAT business unit ..............      $          -       $    200,000
  Adjustment of intangible asset due to recognition of tax asset related
   to NOL carryforward from acquisition of Global Hotline, Inc. ..............      $    486,870       $          -

                                   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. ("IA Global") is a public holding company focused on
acquiring primarily Asian Pacific companies that operate in the
telecommunication and finance markets. IA Global 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 and medical insurance in
Japan. On October 19, 2006, the company acquired a 36% equity interest in
Australian Secured Financial Limited and its affiliates, Australian Secured
Investments Ltd and ADJ Services Pty Ltd. (collectively, "ASFL") which raises
funds through the issuance of debentures in Australia and provides short term
loans for the purpose of business or investment in Australia that are secured by
real property.

         IA Global divested several unprofitable operations in 2005 and 2006,
including Fan Club Entertainment Co Ltd ("Fan Club") on May 12, 2005, IA Global
Acquisition Co ("IA Acquisition") on July 1, 2005, the QuikCAT.Com Inc.
("QuikCAT") North America Internet accelerator business on May 28, 2005, and Rex
Tokyo's 60% interest in Timothy World on August 16, 2005. IA Global divested its
interest in Rex Tokyo on April 4, 2006. IA Global, Rex Tokyo, Global Hotline, IA
Acquisition, and Fan Club are referred to herein collectively as the "company",
unless reference is made to the respective operations of an individual entity
comprising part of the group.

         The accompanying unaudited consolidated financial statements of IA
Global, Inc. and subsidiaries 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
periods ended September 30, 2006 and 2005 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 ("SEC") for the year ended December 31, 2005.

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. In
accordance with SFAS 144, the company accounted for Rex Tokyo, IA Acquisition
and Fan Club as discontinued operations in its consolidated statements 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.

The company maintains cash balances at various financial institutions. Balances
at US banks are insured by the Federal Deposit Insurance Corporation up to
$100,000. Balances in Japanese banks are generally insured by the Deposit
Insurance Corporation of Japan up to 10,000,000 Yen per depositor per bank.

The company has not experienced any losses in such accounts and believes it is
not exposed to any significant risk for cash on deposit.

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>

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, generally 2-3 years. Software
developed or obtained for internal use is depreciated using the straight-line
method over the estimated useful life of the software, generally 2-3 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 was the
time frame that the management of the company was able to project forward for
future revenue, either under agreement or through expected continued business
activities with significant telecommunications companies.

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.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts reported in the
balance sheet for cash and cash equivalents, accounts 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.

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 00-27 requires
recognition of the intrinsic value of the conversion option and is recognized as
a reduction to the carrying amount of the convertible debt and as an addition to
paid-in capital. The intrinsic value of the conversion feature is the difference
between the conversion price and the fair value of the stock into which the
security is convertible into, multiplied by the number of shares. The conversion
price used in calculating the intrinsic value is the most favorable conversion
price up to maturity, assuming there are no changes to the current circumstances
except for the passage of time. Changes to the conversion terms that would be
triggered by future events not controlled by the issuer should be accounted for
as contingent conversion options, and the intrinsic value of such conversion
options would not be recognized until and unless the triggering event occurs.
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.

GLOBAL HOTLINE REVENUE RECOGNITION - Global Hotline revenue is derived from
operating call centers and the reselling of telephone and broadband lines and
medical insurance products in Japan. Revenue is considered realized when the
services have been provided to the customer less an estimated return rate and
collectibility is reasonably assured. Furthermore, if an actual measurement of
revenue cannot be determined, the company defers all revenue recognition until
such time that an actual measurement can be determined. If during the course of
a contract management determines that losses are expected to be incurred, such
costs are charged to operations in the period such losses are determined.

         Revenues are deferred when cash has been received from the customer but
the revenue has not been earned. The company has recorded $195,836 of deferred
revenue as of September 30, 2006.

ADVERTISING COSTS - Advertising costs are expensed as incurred. There were
minimal advertising costs incurred for the three months and nine months ended
September 30, 2006 and 2005.

                                        7
<PAGE>

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 - Effective January 1, 2006, the company began
recording compensation expense associated with stock-based awards and other
forms of equity compensation in accordance with Statement of Financial
Accounting Standards No. 123-R, Share-Based Payment, ("SFAS 123R") as
interpreted by SEC Staff Accounting Bulletin No. 107. The company adopted the
modified prospective transition method provided for under SFAS 123R and
consequently has not retroactively adjusted results from prior periods. Under
this transition method, compensation cost associated with stock-based awards
recognized in 2006 includes 1) quarterly amortization related to the remaining
unvested portion of stock-based awards granted prior to December 15, 2005, based
on the grant date fair value estimated in accordance with the original
provisions of Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation, ("SFAS 123"); and 2) quarterly amortization
related to stock-based awards granted subsequent to January 1, 2006 based on the
grant date fair value estimated in accordance with the provisions of 123-R. In
addition, the company records expense over the vesting period in connection with
stock options granted. The compensation expense for stock-based awards includes
an estimate for forfeitures and is recognized over the expected term of the
award on a straight line basis.

         Prior to January 1, 2006, the company accounted for stock-based awards
using the intrinsic value method of accounting in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Under the intrinsic value method of accounting, no compensation
expense was recognized in the company's consolidated statements of operations
when the exercise price of the company's employee stock option grant equaled the
market price of the underlying common stock on the date of grant and the
measurement date of the option grant is certain. Under SFAS 123R, the company
remeasures the intrinsic value of the options at the end of each reporting
period until the options are exercised, cancelled or expire unexercised. As of
September 30, 2006, 2.3 million options with a weighted average exercise price
of $.20 and a weighted average remaining life of 9.05 years, remain outstanding
and continue to be remeasured at the intrinsic value over their remaining
vesting period ranging from 3 months to 2.75 years. Compensation expense in any
given period is calculated as the difference between total earned compensation
at the end of the period, less total earned compensation at the beginning of the
period. Compensation earned is calculated on a straight line basis over the
requisite service period for any give option award.

         The company has stock options plans (the "Plans") that are described in
the company's Annual Report on Form 10-K for the fiscal year ended December 31,
2005. The company grants stock options for shares of common stock to employees
and directors. In accordance with the Plans, the stock options are granted at
the fair market value of the common stock. The Plans provide that the options
shall have a life of up to ten years from the date of grant. The options granted
under the Plans vest quarterly or annually over a period of three years. Certain
options granted under the Plans vest over shorter periods. Under the Plans, the
company may grant options for the purchase of up to 12 million shares. A total
of 6.3 million shares of common stock are available for future grants under the
Plans as of September 30, 2006. Options for the purchase of 4.2 million shares
are outstanding as of September 30, 2006. A total of 1.5 million shares of
common stock have been purchased, through the exercise of options issued under
the Plans, since the Plans were implemented. Shares underlying options that
expire, or are cancelled without delivery of shares, generally become available
for future re-issuance under the Plans.

         When the stock options are granted, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes valuation model and
the assumptions noted in the following table.

                                        8
<PAGE>

                                 For the Three Months        For the Nine Months
                                  Ended September 30,        Ended September 30,
                                  -------------------        -------------------
                                  2006          2005         2006          2005
                                  ----          ----         ----          ----
Risk free interest rate ....      4.96%         3.75%        4.96%         3.75%
Expected life ..............      8 yrs        10 yrs        8 yrs        10 yrs
Dividend rate ..............      0.00%         0.00%        0.00%         0.00%
Expected volatility ........       107%           65%         107%           65%

         The company recorded $32,320 of compensation expense, net of related
tax effects, relative to stock options for the three months ended September 30,
2006 and $84,834 for the nine months ended September 30, 2006 in accordance with
SFAS 123R. Net loss per share basic and diluted for this expense is
approximately ($0.00) and ($0.00), respectively.

         On July 31, 2006, the compensation committee granted to Mr. Ishii, a
director, stock options to purchase 200,000 shares of common stock. The options
were granted at the fair market price of $0.16 per share based on the adjusted
closing price on July 28, 2006, the last trading day before the Compensation
Committee meeting. In accordance with the 2000 Stock Option Plan, the stock
options vest quarterly over three years and expire on July 30, 2016.

         On August 15, 2006, the compensation committee granted to Mr.
Christinson, Kumamoto and La Cara, Directors, stock options to purchase 150,000
shares of common stock. In addition, the Compensation Committee granted to Mr.
Scott, the company's President, CFO and a Director, stock options to purchase
250,000 shares of common stock. The options were granted at the fair market
price of $0.16 per share based on the adjusted closing price on August 14, 2006,
the last trading day before the compensation committee meeting. In accordance
with the 2000 Stock Option Plan, the stock options vest quarterly over three
years and expire on August 14, 2016.

         On September 7, 2006, Alan Margerison, a former director of the
company, exercised a stock option grant totaling 1,000,000 shares at $.08 per
share. Mr. Margerison forfeited a stock option grant totaling 1,000,000 shares
at $.20 per share.

         As of September 30, 2006, there is approximately $264,627 of total
unrecognized compensation costs related to granted stock options that are
unvested. These costs are expected to be recognized over a weighted average
period of 1.9 years.

         The table below sets out the pro forma amounts of net income and net
income per share (in thousands, except per share data) that would have resulted
for the three months and nine months ended September 30, 2005, if the company
accounted for its employee stock plans under the fair value recognition
provisions of SFAS 123.

                                                 For The Three     For The Nine
                                                 Months Ended      Months Ended
                                                 September 30,     September 30,
                                                     2005              2005
                                                 -------------     -------------
Net loss available to common
    shareholders, as reported .............        $ 733,884         $(701,259)

Deduct: total stock-based employee
    compensation determined under fair
    value based method for all awards, net
    of related tax effects ................          (99,875)         (259,104)
                                                   ---------         ---------
Pro-forma net loss available to common
    Shareholders ..........................        $ 634,009         $(960,363)
                                                   =========         =========
Earnings per share:
    Basic and diluted- as reported ........        $    0.01         $   (0.01)
    Basic and diluted- pro-forma ..........        $    0.01         $   (0.01)

                                        9
<PAGE>

         The company accounts for non-employee stock transactions in accordance
with SFAS No. 123 and EITF 96-18. There are no non-employee stock options
outstanding as of September 30, 2006.

MANAGEMENT SERVICES AGREEMENT - The company and Global Hotline implemented a
Management Services Agreement on 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 $75,000 on a quarterly basis. On April
1, 2006, the Management Services Agreement was amended to require quarterly
payments of approximately .75% of sales, to the extent Global Hotline is
profitable. The March 2006 payment of approximately $25,000 was waived.

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.

LITIGATION COSTS - The company is subject to the possibility of legal actions
arising in the ordinary course of business. The company regularly reviews the
status of pending legal actions to evaluate the amount and likelihood of any
potential loss. The company accrues for these potential losses when it is
probable that a liability has been incurred and the amount of loss, or possible
range of loss, can be reasonably estimated. If actual results differ
significantly from the company's estimates, the company may be required to
adjust its accruals in the future.

NET LOSS PER SHARE - The company has adopted SFAS 128, "Earnings per Share."
Basic net profit (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. Diluted net profit (loss) per common share is
computed by dividing income available to common shareholders by the weighted
average number of common shares and common stock equivalents outstanding during
the period. As of September 30, 2006, there were options outstanding for the
purchase of 4,200,000 common shares and convertible debentures convertible into
12,500,018 common shares which could potentially dilute future earnings per
share. Common stock equivalents during the three months ended September 30, 2005
include stock options and preferred stock.

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.

RECLASSIFICATIONS - For comparability, certain 2005 amounts have been
reclassified, where appropriate, to conform to the financial statement
presentation used in 2006.

                                       10
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

         In February 2006, the FASB issued SFAS No. 155, which is an amendment
of SFAS No. 133 and 140. This statement; a) permits fair value remeasurement for
any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation, b) clarifies which interest- only strip and
principal-only strip are not subject to the requirements of SFAS No. 133, c)
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation,
d) clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives, e) amends SFAS No. 140 to eliminate the prohibition on
a qualifying special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than another derivative
financial instrument. This statement is effective for financial statements for
fiscal years beginning after September 15, 2006. Earlier adoption of this
statement is permitted as of the beginning of an entity's fiscal year, provided
the entity has not yet issued any financial statements for that fiscal year.
SFAS No. 155 is not expected to have a significant impact on the companies
consolidated financial statements.

         In March 2006, the FASB issued SFAS No. 156, which amends SFAS No. 140.
This statement establishes, among other things, the accounting for all
separately recognized servicing assets and servicing liabilities. This statement
amends SFAS No. 140 to require that all separately recognized servicing assets
and servicing liabilities be initially measured at fair value, if practicable.
SFAS No. 156 permits, but does not require, the subsequent measurement of
separately recognized servicing assets and servicing liabilities at fair value.
An entity that uses derivative instruments to mitigate the risks inherent in
servicing assets and servicing liabilities is required to account for those
derivative instruments at fair value. Under SFAS No. 156, an entity can elect
subsequent fair value measurement to account for it's separately recognized
servicing assets and servicing liabilities. By electing that option, an entity
may simplify its accounting because this statement permits income statement
recognition of the potential offsetting changes in fair value of those servicing
assets and servicing liabilities and derivative instruments in the same
accounting period. SFAS No. 156 is effective for financial statements for fiscal
years beginning after September 15, 2006. Earlier adoption of SFAS No. 156 is
permitted as of the beginning of an entity's fiscal year, provided the entity
has not yet issued any financial statements for that fiscal year. SFAS No. 156
is not expected to have a significant impact on the companies consolidated
financial statements.

         In July 2006, the FASB issued FASB Interpretation ("FIN") No. 48,
"Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB
Statement No. 109." FIN No. 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise's financial statements in accordance
with SFAS No. 109, "Accounting for Income Taxes." FIN No. 48 prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. The new standard also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods and
disclosure. The provisions of FIN No. 48 are effective for fiscal years
beginning after December 15, 2006. The company is currently evaluating the
provisions of FIN No. 48 to determine the impact on its consolidated financial
statements.

         In September 2006, the FASB issued SFAS No. 157 ("FAS 157"). This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurements, the FASB has
previously concluded in those accounting pronouncements that fair value is a
relevant measurement attribute. Accordingly, this statement does not require any
new fair value measurements. However, for some entities, the application of this
statement will change current practices. This statement is effective for
financial statements for fiscal years beginning after November 15, 2007. Earlier
application is permitted provided that the reporting entity has not yet issued
financial statements for that fiscal year. The company is currently evaluating
the provisions of SFAS 157 to determine the impact on its consolidated financial
statements.

                                       11
<PAGE>

NOTE 3.  ACQUISITIONS AND DIVESTITURES

GLOBAL HOTLINE, INC.

         The acquisition of Global Hotline, a privately held Japanese company,
closed on June 15, 2005 and was a key component of the company's strategy to
acquire companies based in Japan that operate in the telecommunications and
technology areas. The transaction was structured as a share exchange in which
the company issued 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 acquired because of the two significant contracts
with a Japanese telecommunications company in an industry which is expected to
grow, and the expected continuance of telemarketing services subsequent to these
two contracts. The size of these contracts contributed to a purchase price which
contributed to identifiable intangible assets. Global Hotline results are
included in the financial statements of IA Global for the period June 15, 2005
to December 31, 2005. There were no contingent payments, options or commitments
in the acquisition agreement. There was no purchased research and development
assets acquired or written off with the acquisition.

         Global Hotline was established on 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 four
call centers with 172 full-time employees and 270 part time employees and
utilizes five agents with an additional approximate 180 seats to support the
business.

         Global Hotline had a contract with a significant Japanese
telecommunication company, KDDI Network and Solutions ("KDDI") that initially
covered the period March 16, 2005 through March 31, 2006, and required Global
Hotline to sell subscriber lines based on agreed monthly targets.

         On December 13, 2005, Global Hotline entered into an amendment to the
contract with KDDI. The amendment, among other things, modified (i) the total
payments under the contract from 2,925,000,000 Yen or approximately $25,400,000
at current exchange rates to 2,331,000,000 Yen or approximately $20,300,000 at
current exchange rates (ii) the targets of subscriber lines for the period
October 1, 2005 to March 31, 2006 and (iii) increased the average compensation
rate for periods thru September 30, 2005. As of March 31, 2006, Global Hotline
did not achieve the required target of lines to be sold under this contract, as
modified, and reclassified $3,889,000 from deferred revenue to accrued
liabilities in March 2006. The company believes KDDI implemented certain
contractual changes which reduced sales during the three months ended March 31,
2006. The company expects to finalize negotiations on the final penalty, if any,
by December 2006. There is no guarantee that the company will be successful in
reducing this penalty.

         On April 25, 2006, Global Hotline entered into an additional agreement
with KDDI. Pursuant to this agreement, which is governed by the Business
Outsourcing Basic Agreement entered into in September 2004, Global Hotline has
agreed to sell telephone products on behalf of KDDI, with sales commissions
payable from 30-90 days. In addition, the agreement includes a volume incentive
and additional service commission if certain volume targets are achieved during
the six month agreement. The agreement expired on September 30, 2006, but the
company continues to sell to KDDI.

         On December 22, 2005, IA Partners Co Ltd ("IA Partners"), a wholly
owned subsidiary of Global Hotline, entered into an agreement (the "Partner
Contract") with Internet Service Partners, a Japanese company. Pursuant to this
agreement, IA Partners sells various internet and broadband products on behalf
of Internet Service Partners, with sales commissions payable from 30-120 days.
The Partner Contract expires on December 22, 2006, and is automatically
renewable for an additional year unless it is terminated by either party upon
sixty days notice before the expiration date. During September 2006, the company
significantly increased to the number of personnel assigned to the Internet
Service Partners contract and made a corresponding decrease personnel in for the
KDDI contract. This change was implemented to maximize revenue and profits for
the company. As of November 14, 2006, IA Partners has not received a notice of
termination.

                                       12
<PAGE>

         On April 14, 2006, SG Telecom Inc. ("SG"), a 100% owned subsidiary of
Global Hotline established on April 4, 2006, entered into an Agency Contract
("Agency Contract") with Japan Telecom Invoice Co., Ltd., a Japanese company
("Japan Telecom"). Pursuant to this agreement, SG sells various internet and
broadband products on behalf of Japan Telecom, with sales commission's payable
from 30-90 days. The Agency Contract expires on April 14, 2007, and is
automatically renewable for an additional year unless it is terminated by either
party upon thirty days notice before the expiration date.

         On May 10, 2006, IA Partners entered into an Agency Agreement with
AFLAC Co Ltd ("AFLAC"), a Japanese company. Pursuant to this Agency Agreement,
IA Partners agreed to sell insurance products starting on approximately June 1,
2006 on behalf of AFLAC, with sales commission's payable from 30-120 days and
ongoing commissions for up to ten years, to the extent the customer continues to
maintain the insurance. The Agency Agreement expires on May 2, 2007, and is
automatically renewable for an additional year unless it is terminated by either
party upon thirty days notice before the expiration date. The Agency Agreement
maybe cancelled under certain conditions.

         On October 16, 2006, IA Partners announced an Agency Agreement with
American Home Assurance Ltd ("AHA"), a Japanese company. Pursuant to this Agency
Agreement, IA Partners agreed to sell health and cancer insurance products on
behalf of AHA, with sales commission's payable from 30-120 days and ongoing
commissions to the extent the customer continues to maintain the insurance. The
Agency Agreement maybe cancelled under certain conditions.

         The company advanced 40,000,000 Yen on May 26, 2006 and 100,000,000 Yen
on June 5, 2006 to Global Hotline. The total amount of approximately $1,261,000
at current exchange rates is due on demand and accrues interest at 3.5% per
annum. The advances were used to expand the Global Hotline business. These
advances and any accrued interest expense for Global Hotline and interest income
for the company have been eliminated in consolidation.

         The company acquired its 100% ownership of Global Hotline from Mr.
Hideki Anan (67%), Mr. Kyo Nagae (10%) and Mr. Hiroki Isobe (23%). Mr. Anan is
the Chief Executive Officer of Global Hotline and is an experienced Japanese
telecommunications executive. Mr. Isobe is affiliated with our majority
shareholders.

         The cost to acquire these assets has been allocated to the assets
acquired according to estimated fair values as follows:

Purchase price:
Stock ..............................................................  $3,097,500
                                                                      ----------
Net assets acquired (6/15/05):
Cash ...............................................................   1,240,037
Accounts receivable ................................................   1,782,900
Other assets .......................................................   1,370,153
Net operating loss recovery during the three months
ended September 30, 2006 ...........................................     486,869
                                                                      ----------
                                                                       4,879,959
                                                                      ----------
Net liabilities acquired (6/15/05):
Accrued liabilities ................................................   1,903,246
Deferred revenue ...................................................   4,196,493
Other liabilities ..................................................     628,749
                                                                      ----------
                                                                       6,728,489
                                                                      ----------
Net liabilities acquired (6/15/05) .................................   1,848,530
                                                                      ----------
Identifiable customer contracts and related customer relationships .  $4,946,030
                                                                      ==========

                                       13
<PAGE>

         The pro-forma financial data for the acquisition for the nine months
ended September 30, 2005, was as follows:
<TABLE>
<CAPTION>
                                                             Pre-Acquisition
                                        As Reported,          Operations of          Pro Forma,
                                        Nine Months          Global Hotline         Nine Months
                                           Ended               January 1-              Ended
                                     September 30, 2005       June 15, 2005      September 30, 2005
                                     ------------------      ---------------     ------------------
<S>                                     <C>                   <C>                   <C>
Revenues ......................         $  7,999,010          $  5,109,288          $ 13,108,298
Loss before extraordinary items             (701,259)           (3,693,459)           (4,394,718)
Net loss ......................             (701,259)           (3,693,459)           (4,394,718)
Loss per common share .........                (0.01)                    -                 (0.05)
</TABLE>

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

SUMMARY OF DISCONTINUED OPERATIONS

         On April 4, 2006, the company closed the sale of its 60.5% interest in
Rex Tokyo back to Rex Tokyo. The company received $1,302,159 in payments during
April to June 2006. The company divested Rex Tokyo due to operating losses of
approximately $1,552,000 in 2005 and projected losses in 2006 due to industry
conditions. Sales were $29,335,000 in 2005. The company recorded a gain from
disposal of $463,375 during the nine months ended September 30, 2006. This gain
resulted from the gross proceeds of $1,302,159 less the net investment in Rex
Tokyo after losses of $838,784.

         The following table sets forth the discontinued operations for the
company:
                                                        Nine Months Ended
                                                           September 30,
                                                       2006            2005
                                                   ------------    ------------
Revenue .......................................    $  7,651,125    $ 23,453,215
Cost of sales .................................       6,083,120      19,902,475
                                                   ------------    ------------
Gross profit ..................................       1,568,005       3,550,740
Operating and non-operating expenses ..........       1,427,106       5,137,698
Minority interest .............................          49,655        (428,292)
Income taxes ..................................          15,190        (324,499)
                                                   ------------    ------------
Profit (loss) from discontinued operations ....          76,054        (834,167)
Gain from disposal of discontinued operations .         463,375         309,006
                                                   ------------    ------------
Total gain (loss) from discontinued operations     $    539,429    $   (525,161)
                                                   ============    ============

NOTE 4.  ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION

         Accounts receivable were $4,547,414 and $610,220 as of September 30,
2006 and December 31, 2005, respectively. The company had the following
customers with sales in excess of 10%, these are their respective percentage of
consolidated revenue for the periods:

                                         Three Months Ended September 30,
                                              2006              2005
                                            --------          --------
         KDDI Network Solutions .........       1%               97%
         Internet Service Partners ......      66%                -
         Japan Telecom Invoice Co. ......      14%                -
         AFLAC ..........................      11%                -

                                          Nine Months Ended September 30,
                                              2006              2005
                                            --------          --------
         KDDI Network Solutions .........      28%               97%
         Internet Service Partners ......      48%                -

                                       14
<PAGE>

         KDDI is a Global Hotline customer. Internet Service Partners and AFLAC
are IA Partner's customers. Japan Telecom Invoice Co is a SG Telecom customer.
There were no other customers, other than the above, in excess of 10% in the
respective periods. During September 2006, the company significantly increased
the number of personnel assigned to the Internet Service Partners contract and
made a corresponding decrease personnel in for the KDDI contract. This change
was implemented to maximize revenue and profits for the company.

         KDDI accounted for 5% and 0% of accounts receivable as of September 30,
2006 and December 31, 2005, respectively. Internet Service Partners accounted
for 72% and 0% of total accounts receivable as of September 30, 2006 and
December 31, 2005, respectively. Japan Telecom Invoice Co. accounted for 7% and
0% of total accounts receivable as of September 30, 2006 and December 31, 2005,
respectively. AFLAC accounted for 4% and 0% of total accounts receivable as of
September 30, 2006 and December 31, 2005, respectively.

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

NOTE 5.  PREPAID COSTS

         Prepaid expenses were $497,320 and $430,334 as of September 30, 2006
and December 31, 2005, respectively. Such costs as of September 30, 2006 and
December 31, 2005 consisted of prepaid insurance, prepaid financing costs and
other costs incurred by the company and prepaid expenses incurred by Global
Hotline.

NOTE 6.  NOTES RECEIVABLE

         Notes receivable were $759,070 and $4,129,408 as of September 30, 2006
and December 31, 2005, respectively. Such assets as of September 30, 2006
included notes receivable from Ominira Networks LLC, a Delaware limited
liability company ("Ominira"), to whom the company sold IA Acquisition in July
2005 and notes receivable for Global Hotline. As of December 31, 2005 notes
receivable included (i) TK Partners, formerly Cyber Holdings Co Ltd, from the
divestiture of Fan Club, (ii) Ominira, from the sale of IA Acquisition (iii) GMB
International, Inc., a party affiliated with our majority shareholder, ("GMB")
and (iv) an officer and employees of Global Hotline.

         In December 2005, Global Hotline loaned 360,000,000 Yen to GMB. This
increased the total amounts due from GMB to 400,000,000 Yen or approximately
$3,394,000 at current exchange rates. GMB repaid 200,000,000 Yen on January 13,
2006 and the balance was scheduled for payment by January 31, 2006, but it was
not repaid by that date. The advance was unsecured.

         On April 7, 2006, GMB repaid 80,000,000 Yen, reducing the balance to
120,000,000 Yen, plus interest. On April 11, 2006, the parties entered into
Amendment 3 to the Senior Secured Promissory Note. This Amendment modified the
payments, with the balance of the loan, equal to 120,000,000 Yen or
approximately $1,017,000 at current exchange rates, plus interest, due on April
30, 2006. On April 27, 2006 GMB repaid the remaining 120,000,000 Yen.

         The company received a Senior Secured Promissory Note ("Promissory
Note") for $620,000 from the sale of IA Acquisition to Ominira in July 2005.
This Promissory Note was secured by the assets of IA Acquisition and was due in
installments from September 2005 to June 2006. On November 4, 2005, December 5,
2005 and January 6, 2006, the company entered into amendments to the Promissory
Note which modified the payment schedule to installments from January 2006 to
June 2006. On February 1, 2006, the company declared all principal, interest and
other amounts due immediately. On March 15, 2006, the board of directors
approved a $300,000 impairment of the Promissory Note as of December 31, 2005.
The company considered this impairment appropriate based on the lack of payments
by Ominira to date.

                                       15
<PAGE>

         On March 27, 2006, the company entered into Amendment No. 4 to the
Promissory Note. The Promissory Note is now due in installments from March 2006
to June 2007 and the company received additional collateral of twenty one shares
of Innovative Computing Group, Inc. ("ICG"), a privately-owned company
affiliated with Ominira. The ICG shares are to be released back to ICG as
Ominira makes the required payments under the amended Promissory Note and are
valued at $30,000 per share for such purpose. As of September 30, 2006, the
company had received $10,000 in note payments from this Promissory Note. The
company is negotiating to obtain payment on the $125,000 that is past due. The
continues to monitor the note receivable, but is does not consider it impaired
based on the collateral from ICG.

NOTE 7.  EQUIPMENT

         Equipment, net of accumulated depreciation, was $466,360 and $521,964
as of September 30, 2006 and December 31, 2005, respectively. Accumulated
depreciation was $593,136 and $416,866 as of September 30, 2006 and December 31,
2005, respectively. Total depreciation expense was $260,747 and $125,708 for the
nine months ended September 30, 2006 and 2005, respectively. All equipment is
used for selling, general and administrative purposes and accordingly all
depreciation is classified in selling, general and administrative expenses,
accordingly.

         Property and equipment are comprised of the following:

                                    Estimated      September 30,    December 31,
                                   Useful Lives         2006            2005
                                  --------------    -----------     -----------
Property and equipment .......    24 months         $   873,587     $   751,915
Leasehold Improvements .......    12 - 27 months        185,909         186,915
                                                    -----------     -----------
                                                      1,059,496         938,830
Less: accumulated depreciation
 and amortization ............                         (593,136)       (416,866)
                                                    -----------     -----------
                                                    $   466,360     $   521,964
                                                    ===========     ===========
NOTE 8.  INTANGIBLE ASSETS

         Intangible assets as of September 30, 2006 and December 31, 2005,
respectively, consisted of the following:

                                 September 30,    December 31,
                                      2006            2005        Estimated Life
                                  -----------     -----------     --------------
Customer contracts ...........    $ 4,946,030     $ 5,432,899         3 years
Less: accumulated amortization     (2,230,788)       (983,341)
                                  -----------     -----------
    Intangible assets, net ...    $ 2,715,242     $ 4,449,558
                                  ===========     ===========

         Total amortization expense was $397,352 and $452,742 for the three
months ended September 30, 2006 and 2005, respectively.

         Total amortization expense was $1,247,447 and $530,600 for the nine
months ended September 30, 2006 and 2005, respectively.

         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 agreements with significant Japanese telecommunications
companies, or through expected continued business activities with significant
telecommunications companies. In summary, the estimate was based on a projected
income approach and related discounted cash flows over three years, with
applicable risk factors assigned to assumptions in the forecasted results.

         During the nine months ended September 30, 2006, the company adjusted
the intangible assets by $486,869 based on the utilization of net operating loss
carryforwards that were assumed with the acquisition of Global Hotline.

                                       16
<PAGE>

NOTE 9.  ACCRUED LIABILITIES

         Accrued liabilities were $5,811,950 and $2,274,646 as of September 30,
2006 and December 31, 2005, respectively. Such liabilities as of September 30,
2006 and December 31, 2005 included (i) accrued agent commissions and salaries
of Global Hotline and (ii) accrued penalties of approximately $3,889,000 and
$1,086,000 as of September 30, 2006 and December 31, 2005, respectively, related
to GHI and (iii) accrued interest for convertible debentures and (iv) legal fees
for IA Global.

NOTE 10. NOTES PAYABLE

         On June 30, 2006 Global Hotline received a 200,000,000 Yen, or
approximately $1,742,904 at current exchange rates, working capital loan from
Risona Bank Co. Ltd.

         The loan requires a one time payment of 200,000,000 Yen on November 15,
2006, plus 5 monthly interest payments of 1.5% starting on June 30, 2006. The
loan is guaranteed by the CEO of Global Hotline. There are no covenants or
security requirements related to the loan.

         On July 31, 2006, Global Hotline received a 300,000,000 Yen, or
approximately $2,616,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         The loan requires a one time payment of 300,000,000 Yen on January 31,
2007, plus 6 monthly interest payments of 2.5% starting on July 31, 2006. The
loan is guaranteed by the CEO of Global Hotline. There are no covenants or
security requirements related to the loan.

         On September 11, 2006, IA Partners received a 45,000,000 Yen, or
approximately $385,000 at current exchange rates, working capital loan from
Risona Bank Co. Ltd.

         The loan requires monthly payments of 4,500,000 Yen or approximately
$38,000 at current exchange rates starting on November 11, 2006 with a final
payment due on August 31, 2007. The loan provides for interest at 1.625% and is
guaranteed by the CEO of Global Hotline. There are no covenants or security
requirements related to the loan.

         On September 29, 2006, Global Hotline received a 30,000,000 Yen, or
approximately $255,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         The loan requires monthly payments of 357,000 Yen or approximately
$3,000 at current exchange rates starting on October 31, 2006 with a final
payment of 369,000 Yen or approximately $3,000 due on August 31, 2013. The loan
provides for interest at 2.125% payable monthly starting on September 30, 2006
and is guaranteed by the CEO of Global Hotline. There are no covenants or
security requirements related to the loan.

NOTE 11. CONVERTIBLE DEBENTURES

         On June 28, 2005, the company announced that it had received
commitments totaling $3,750,000 for convertible debentures. The company will use
the proceeds from this financing to continue its merger and acquisition
strategy, and for general corporate purposes. This financing included a
beneficial conversion feature, which increased the stockholders' equity by
$1,250,000. The beneficial conversion will be amortized over the life of the
debentures, or until such time that they are converted. During the nine months
ended September 30, 2006, the company expensed $208,932 of this beneficial
conversion recorded as interest expense. The company closed the sale of
$3,750,000 of convertible debentures on July 29, 2005 and realized net proceeds
of $3,483,000.

                                       17
<PAGE>

         Convertible debentures .......................    $ 3,750,000
         Beneficial conversion ........................     (1,250,000)
                                                           -----------
                                                             2,500,000
         Amortization of beneficial conversion ........        520,833
                                                           -----------
                                                           $ 3,020,883
                                                           ===========

         The company 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
filed a registration statement, which became effective in August 2005, covering
the shares issuable upon conversion. JPB (Switzerland) A.G., a party affiliated
with our majority shareholder, advised the company on the transaction and was
paid a $267,000 fee upon funding.

NOTE 12. RELATED PARTY RELATIONSHIPS WITH OUR CONROLLING SHAREHOLDER GROUP AND
         CERTAIN RELATIONSHIPS

         As of September 30, 2006, IAJ LBO Fund, PBAA, Terra Firma, IAJ, Hiroki
Isobe and Kyo Nagae collectively hold approximately 76.2% of the company's
common stock. These 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
Securities Exchange Act of 1934, as amended ("Exchange Act"). Mr. Hiroki Isobe
or Mr. Kyo Nagae control our Controlling Stockholders.

         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 September 30, 2006, that are relevant for purposes of
understanding the related party transactions that have taken place:

Ownership:

IA Global, Inc. owns:
                                  Global Hotline, Inc.................100.0%

Inter Asset Japan LBO No. 1 Fund owns:
                                  IA Global, Inc.......................27.2%

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........................5.3%

Mr. Hiroki Isobe owns:
                                  IA Global, Inc........................4.1%

Kyo Nagae owns:
                                  IA Global, Inc........................1.4%

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

                                  IA Partners Co Ltd..................100.0%

                                  SG Telecom, Inc.  ..................100.0% (1)
_________
(1) Formed on April 4, 2006.

KYO NAGAE RELATIONSHIP WITH IAJ

         In January 2006, Mr. Kyo Nagae, Chief Financial Officer of Global
Hotline, became President of IAJ and IAJ LBO Fund.

                                       18
<PAGE>

NOTE 13. EQUITY TRANSACTIONS

         During the nine months ended September 30, 2006, the following
stockholder equity events occurred:

         On January 30, 2006, Inter Asset Japan LBO No 1 Fund converted 1,158
shares of Series B Convertible Preferred Stock into 11,580,000 shares of the
company's common stock.

         On March 10, 2006, Mr. Anan, President and Chief Executive Officer of
Global Hotline, agreed to repay a note receivable of 29,679,135 Yen or
approximately $241,000 plus interest, by transferring 840,024 shares of IA
Global common stock to the company. The stock was valued at $.30 per share, the
closing price of the common stock on March 9, 2006.

         On September 7, 2006, Alan Margerison, a former director of the
company, exercised a stock option grant totaling 1,000,000 shares at $.08 per
share. Mr. Margerison forfeited a stock option grant totaling 1,000,000 shares
at $.20 per share.

NOTE 14. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

         On August 18, 2006, the company received an Interim Award of Arbitrator
("Interim Award") from the American Arbitration Association related to the case
of Mr. Badner against the company and Inter Asset Japan ("IAJ"), a shareholder
in the company. The Interim Award denied certain claims made by Mr. Badner, but
awarded him $55,000 plus interest for indemnification of expenses paid by Mr.
Badner in connection with our defense in a prior lawsuit and arbitration
proceeding brought by a third party. The Interim Award also provided for
briefing on the question of whether the company, IAJ, or Mr. Badner are entitled
to recover expenses incurred in the prosecution or defense of the arbitration,
and, if so, the amount to be paid. The expense brief was submitted in October
2006 and this issue is expected to be resolved during the fourth quarter of
2006.

         As previously disclosed, Mr. Badner was seeking damages of $2.5 million
plus interest related to the alleged breach of the September 25, 2002 Agreement
and Assignment between the parties, and $100,000 for damages suffered related to
alleged fraud and misrepresentations and costs and punitive and exemplary
damages in an amount to be determined at the arbitration hearings.

         On August 21, 2006, Mr. Badner refiled a lawsuit in the Supreme Court
of the State of New York, New York County against one of our officers alleging
defamation, libel, slander and intentional interference with a contractual
relationship. The case was previously dismissed on April 10, 2006 for lack of
proper service. On September 21, 2006, the officer filed a motion to dismiss the
case for lack of proper service, lack of personal jurisdiction over the officer,
and for failure to state a claim. A hearing is expected during the fourth
quarter of 2006.

         In April 2006, the company received notice of a suit filed against IAJ,
the company and others in the King County Superior Court of the State of
Washington by Flashpoint Ventures, LLC ("Flashpoint") relating to the
acquisition by Activated Matrix Partners, LLC ("AMP") of shares of Activated
Content Corporation ("ACC") stock from IAJ. In September and October 2006, the
company received notice of claims filed in the King County Superior Court
proceeding by AMP, ACC and an officer of these companies, Dorsey and Whitney,
LLP, attorneys for AMP, and Markwood Capital Alliance. The company filed a
motion to dismiss the claims made by Flashpoint against the company for lack of
personal jurisdiction over the company and for failure to state a claim. A
hearing is expected during the first quarter of 2007. The company believes that
it has been improperly included in this dispute between AMP, ACC, Flashpoint,
Dorsey and Whitney, Markwood Capital Alliance and IAJ, and that there is no
basis for the claims made by the parties against the company. The company will
vigorously defend against these claims.

                                       19
<PAGE>

         The company has not provided for a provision in these litigation
matters. The company believes there are no other pending legal proceedings that
if adversely determined would have a material adverse effect on our business or
financial condition.

         On January 12, 2004, the company entered into an employment agreement
with Mark Scott to serve as Chief Financial Officer, initially for a term of two
years at an annual salary of $150,000. Mr. Scott and the company have entered
into amendments to this original employment agreement on November 19, 2004, May
16, 2005, August 3, 2005, October 12, 2005 and February 14, 2006. Under his
employment agreement, as amended to date, Mr. Scott serves as President and
Chief Financial Officer for a three year term commencing October 12, 2005. Mr.
Scott receives an annual salary of $183,000, and is eligible to receive other
compensation, including options, bonuses and benefits, at the discretion of the
Company's compensation committee. Mr. Scott's 2006 bonus program provides for up
to $50,000 in bonuses based on the achievement of certain specified targets. Mr.
Scott's employment agreement requires him to provide nine months notice prior to
terminating his employment and provides Mr. Scott with nine months severance in
the event that Mr. Scott is terminated by the company without cause. Mr. Scott's
employment agreement contains provisions for confidentiality for the term of the
agreement and thereafter. Mr. Scott works full time for the company.

NOTE 15. 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, and (ii) Global Hotline, a call center operator and reseller
of telephone and broadband lines and medical insurance products in Japan.

                                       20
<PAGE>

         The following table presents revenues, operating income (loss) and
total assets by company for the three and nine months ended September 30, 2006
and 2005:
<TABLE>
(dollars in thousands)
<CAPTION>
                                               Global
                              IA Global,      Hotline,                    Discontinued
Company                          Inc.           Inc.           Total       Operations       Total
-------------------------     ----------      --------       --------     ------------    --------
<S>                            <C>            <C>            <C>            <C>           <C>
Three Months Ended-
  September 30, 2006
  Revenue ...............      $      -       $  4,483       $  4,483       $      -      $  4,483

  Operating income (loss)          (295)          (856)        (1,151)             -        (1,151)

  Total assets ..........         2,467         13,176         15,643              -        15,643

  September 30, 2005
  Revenue ...............      $      -       $  7,106       $  7,106       $      -      $  7,106

  Operating loss ........          (367)         1,009            642              -           642

  Total assets ..........         5,045         11,980         17,025          8,838        25,863

Nine Months Ended-
  September 30, 2006

  Revenue ...............      $      -         11,397       $ 11,397       $      -      $ 11,397

  Operating income (loss)        (1,244)        (3,846)        (5,090)             -        (5,090)

  Total assets ..........         2,467         13,176         15,643              -        15,643

  September 30, 2005
  Revenue ...............      $      -       $  7,999       $  7,999       $      -      $  7,999

  Operating loss ........          (838)           805            (33)             -           (33)

  Total assets ..........         5,045         11,980         17,025          8,838        25,863

<CAPTION>
                                                                          Discontinued
Geographic Region                U.S.          Japan           Total       Operations       Total
-------------------------      --------       --------       --------     ------------    --------
<S>                            <C>            <C>            <C>            <C>           <C>
Three Months Ended-
  September 30, 2006
  Revenue ...............      $      -       $  4,483       $  4,483       $      -      $  4,483

  Operating income (loss)          (295)          (856)        (1,151)             -        (1,151)

  Total assets ..........         2,467         13,176         15,643              -        15,643

  September 30, 2005
  Revenue ...............      $      -       $  7,106       $  7,106       $      -      $  7,106

  Operating loss ........          (367)         1,009            642              -           642

  Total assets ..........         5,045         11,980         17,025          8,838        25,863

Nine Months Ended-
  September 30, 2006
  Revenue ...............      $      -       $ 11,397       $ 11,397       $      -      $ 11,397

  Operating income (loss)        (1,244)        (3,846)        (5,090)             -        (5,090)

  Total assets ..........         2,467         13,176         15,643              -        15,643

  September 30, 2005
  Revenue ...............      $      -       $  7,999       $  7,999       $      -      $  7,999

  Operating loss ........          (838)           805            (33)             -           (33)

  Total assets ..........         5,045         11,980         17,025          8,838        25,863
</TABLE>

                                       21
<PAGE>

The following reconciles operating loss to net loss:
<TABLE>
(dollars in thousands)
<CAPTION>
                                                   Three Months Ended         Six Months Ended
                                                      September 30,             September 30,
                                                  --------------------      --------------------
                                                    2006         2005         2006         2005
                                                  -------      -------      -------      -------
<S>                                               <C>          <C>          <C>          <C>
Operating (loss) profit .....................     $(1,151)     $   642      $(5,090)     $   (33)

Other income (expense) ......................        (158)         (71)        (514)        (143)
                                                  -------      -------      -------      -------

(Loss) profit from continuing operations
  before income taxes .......................      (1,309)         571       (5,604)        (176)

Income tax benefit ..........................        (130)           -       (1,079)           -
                                                  -------      -------      -------      -------

Net (loss) profit from continuing operations       (1,179)         571       (4,525)        (176)

Gain from disposal of discontinued operations           -          210          464          309

(Loss)  profit from discontinued operations .           -          (47)          76         (834)
                                                  -------      -------      -------      -------

Net loss ....................................     $(1,179)     $   734      $(3,985)     $  (701)
                                                  =======      =======      =======      =======
</TABLE>

NOTE 16. SUBSEQUENT EVENTS

         On October 19, 2006, the company closed its 36% equity investment in
Australian Secured Financial Limited and its affiliates Australian Secured
Investments Ltd and ADJ Services Pty Ltd. (collectively, "ASFL"). The
transaction is structured as a share exchange in which the company issued 4,375
of Series A-1 Convertible Preferred Stock ("Series A-1 Preferred Stock") that is
exchangeable into 43,750,000 shares of its common stock upon certain conditions
discussed below in exchange for 36% of ASFL's outstanding common shares. The
parties valued the company's common stock at $.16 per share, which was the
closing market price on October 2, 2006 and the day before the signing of the
initial term sheet on October 3, 2006. In addition, the company paid $250,000 at
closing and agreed to pay $125,000 within ninety days of closing and $125,000
within one hundred and eighty days of closing. The total value of the investment
is $7,500,000. The company increased its stockholder's equity on a pro forma
basis as follows:

Stockholder's equity as of September 30, 2006 ....................    $1,592,784
Equity resulting from AQSFL transaction ..........................     7,000,000
                                                                      ----------
Pro forma stockholder's equity with closed ASFL transaction ......    $8,592,784
                                                                      ==========

         The exchange into the company's common stock is subject to the earlier
of approval of the stockholders of the company or de-listing from AMEX. The
company intends to seek shareholder approval as soon as possible.

         Australian Secured Investments Ltd raises funds through the issuance of
debentures in Australia and provides short term loans for the purpose of
business or investment in Australia that are secured by real property.
Australian Secured Investments Ltd has an Australian Financial Services License
issued by the Australian Securities & Investments Commission.

         The Series A-1 Preferred Stock were issued to the accredited investors
in a transaction that will be exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act"), and/or
Regulation D promulgated under the Securities Act.

                                       22
<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 of $2.1 million, $1.4 million and $3.1
million for the years ended December 31, 2005, 2004 and 2003, respectively. Our
losses have been financed primarily by the sale of equity in our company, by
loans from related and unrelated parties, by the issuance of convertible
debentures and through the issuance of equity for services. We expect our net
loss to continue for the foreseeable future.

         We intend to continue to operate primarily as a holding company. We
intend to grow our Global Hotline business, which is well positioned to take
advantage of recent changes in the Japanese telecommunications and medical
insurance markets. Also, we intend to increase the number of our majority-owned
companies by acquiring primarily Asia Pacific small to midsize companies in the
telecommunication and finance markets.

         On April 4, 2006, we closed the sale of its 60.5% interest in Rex Tokyo
back to Rex Tokyo. We received $1,302,159 in payments during April to June 2006.
We divested Rex Tokyo due to operating losses of approximately $1,552,000 in
2005 and projected losses in 2006 due to industry conditions. Sales were
$29,335,000 in 2005. We recorded a gain of $463,375 during the three months
ended June 30, 2006.

         On June 28, 2005, we announced that we had received commitments
totaling $3,750,000 for convertible debentures. We used the proceeds from this
financing 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 beneficial
conversion will be amortized over the life of the debentures, or until such time
that they September 30, 2006, we expensed $208,000 and $313,000, respectively,
of this beneficial conversion recorded as interest expense. We closed the sale
of $3,750,000 of convertible debentures on July 29, 2005 and realized net
proceeds of $3,483,000.

         On June 30, 2006 Global Hotline received a 200,000,000 Yen, or
approximately $1,743,000 at current exchange rates, working capital loan from
Risona Bank Co. Ltd.

         On July 31, 2006, Global Hotline received a 300,000,000 Yen, or
approximately $2,616,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         On September 11, 2006, IA Partners received a 45,000,000 Yen, or
approximately $385,000 at current exchange rates, working capital loan from
Risona Bank Co. Ltd.

         On September 29, 2006, Global Hotline received a 30,000,000 Yen, or
approximately $255,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         We advanced 40,000,000 Yen on May 26, 2006 and 100,000,000 Yen on June
5, 2006. The total amount of approximately $1,261,000 at current exchange rates
is due on demand and accrues interest at 3.5% per annum. The advances were used
to expand the Global Hotline business.

                                       23
<PAGE>

         We may need to obtain additional financing in order to continue our
current operations, including the cash flow needs of Global Hotline and its
subsidiaries, to acquire businesses and to maintain the AMEX requirements of $6
million in stockholders' equity 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 acquisition of Global Hotline, and with the divestiture
of Rex Tokyo, our key market opportunities include:

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

         o Maximize Global Hotline revenues and profits by allocating personnel
to higher margin contracts.

         o Expanding the Global Hotline business by renewing its contracts with
its primary customers.

         o Maximize the profits of our equity investment in ASFL.

         o Expanding operations by selectively acquiring other quality companies
primarily in the Asia Pacific region.

PRIMARY RISKS AND UNCERTAINTIES

         We are exposed to various risks associated with our AMEX listing, legal
claims, risks related to our Global Hotline business, mergers and acquisitions,
customer concentration, limited insurance and other matters. These risks and
uncertainties are discussed in "Factors That May Effect Future Results." The
following is a discussion that addresses key business risks facing Global
Hotline and the risks associated with a notes receivable from one of our
principal shareholders.

Risks Related to the Global Hotline Business

         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  Its contracts with significant telecommunication and insurance
            companies may not be renewed;

         o  The cost to hire and train staff to startup new contracts is
            significant;

         o  Increased usage of wireless technology for telephone and internet
            usage;

         o  Passing of new or changes in existing legislation;

         o  Impact of privacy laws;

         o  New competitors;

                                       24
<PAGE>

         o  Decreased pricing;

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

         o  Loss of key personnel; and

         o  It has notes payable which requires repayments in November 2006 and
            January 2007.

         In addition, the Global Hotline business has a concentration of
customers with five customers. During the year ended December 31, 2005, one
customer accounted for substantially all of Global Hotline's revenue in 2005,
Global Hotline has diversified its customer base in 2006. Our business is
dependent upon our ability to operate efficiently by maintaining tight control
on cash flows. Any change in these factors could adversely affect our ability to
achieve the contract rates and to operate as a call center and reseller of
telephone and broadband lines and insurance products in Japan. This could result
in a repayment of cash paid under the contracts, which would have a material
adverse effect on our business, prospects, financial condition and results of
operations.

Risks Related to our Controlling Shareholder Group

         We have been reliant on the company's controlling shareholders in
assisting us in raising financing to carry out our acquisitions and to fund our
operations. We may need to obtain additional financing from our controlling
shareholders in order to continue our current operations, including the cash
flow needs of Global Hotline, to acquire businesses and to maintain the AMEX
requirement of $6 million in stockholders' equity for continued listing of our
shares.

         Our controlling shareholders thus far have indicated a willingness to
support our financing efforts. However, entities affiliated with our controlling
shareholder group defaulted on obligations owed to our subsidiaries during 2005
and 2006. While the defaults have been cured, there can be no assurance that our
controlling shareholder group will continue to provide financial support to us.

OUR STRATEGY

         We intend to continue to operate primarily as a holding company. We
intend to grow our Global Hotline business, which is well positioned to take
advantage of recent changes in the Japanese telecommunications and insurance
markets. We intend to maximize our profits in our equity investment in ASFL.
Also, we intend to increase the number of our majority-owned companies by
acquiring primarily Asia Pacific small to midsize companies in the
telecommunication and finance markets.

         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.
This change in market dynamics provides an opportunity for marketing companies,
such as Global Hotline, to provide sales services to telecommunications
companies facing increased competition.

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.

                                       25
<PAGE>
<TABLE>
(dollars in thousands)
<CAPTION>
                                                                   Three Months Ended September 30,
                                                          --------------------------------------------------
                                                            2006          2005      $ Variance    % Variance
                                                          --------------------------------------------------
<S>                                                       <C>           <C>           <C>           <C>
Revenue ...........................................       $  4,483      $  7,106      $ (2,623)       -36.9%

Cost of sales .....................................            605         2,126        (1,521)       -71.5%
                                                          --------      --------      --------      -------

Gross profit ......................................          3,878         4,980        (1,102)       -22.1%
                                                          --------      --------      --------      -------

Selling, general and administrative expenses ......          5,029         4,338           691         15.9%
                                                          --------      --------      --------      -------

Operating (loss) profit ...........................         (1,151)          642        (1,793)       279.3%
                                                          --------      --------      --------      -------

Other Income (Expense):
Interest income ...................................             20            27            (7)       -25.9%
Interest expense and amortization of beneficial
  conversion feature ..............................           (229)         (192)          (37)        19.3%
Other Income ......................................             51            89           (38)       -42.7%
Foreign currency transaction adjustment ...........              -             5            (5)      -100.0%
                                                          --------      --------      --------      -------
Total other income (expense) ......................           (158)          (71)          (87)       122.5%
                                                          --------      --------      --------      -------
(Loss) profit from continuing operations before
  income taxes ....................................         (1,309)          571        (1,880)       329.2%

Income taxes:
Current benefit ...................................           (130)            -          (130)       100.0%
Deferred provision ................................              -             -             -          0.0%
                                                          --------      --------      --------      -------
Net (loss) profit from continuing operations ......         (1,179)          571        (1,750)       306.5%
Gain from disposal of discontinued operations .....              -           210          (210)      -100.0%
(Loss) profit from discontinued operations ........              -           (47)           47        100.0%
                                                          --------      --------      --------      -------
Net loss ..........................................       $ (1,179)     $    734      $ (1,913)       260.6%
                                                          ========      ========      ========      =======
<CAPTION>
(dollars in thousands)
                                                                    Nine Months Ended September 30,
                                                          --------------------------------------------------
                                                            2006          2005      $ Variance    % Variance
                                                          --------------------------------------------------
<S>                                                       <C>           <C>           <C>           <C>
Revenue ...........................................       $ 11,397      $  7,999      $  3,398         42.5%

Cost of sales .....................................          2,931         2,553           378         14.8%
                                                          --------      --------      --------      -------

Gross profit ......................................          8,466         5,446         3,020         55.5%
                                                          --------      --------      --------      -------

Selling, general and administrative expenses ......         13,556         5,479         8,077        147.4%
                                                          --------      --------      --------      -------

Operating loss ....................................         (5,090)          (33)       (5,057)     15324.2%
                                                          --------      --------      --------      -------

Other Income (Expense):
Interest income ...................................             77            28            49        175.0%
Interest expense and amortization of beneficial
  conversion feature ..............................           (621)         (192)         (429)       223.4%
Other Income ......................................            159            89            70        100.0%
Foreign currency transaction adjustment ...........           (129)          (68)          (61)        89.7%
                                                          --------      --------      --------      -------
Total other income (expense) ......................           (514)         (143)         (371)       259.4%
                                                          --------      --------      --------      -------
Loss from continuing operations before income taxes         (5,604)         (176)       (5,428)      3084.1%
Income taxes:
Current benefit ...................................         (1,079)            -        (1,079)       100.0%
Deferred provision ................................              -             -             -          0.0%
                                                          --------      --------      --------      -------
Net loss from continuing operations
                                                            (4,525)         (176)       (4,349)      2471.0%
Gain from disposal of discontinued operations .....            464           309           155         50.2%
Profit (loss) from discontinued operations ........             76          (834)          910        109.1%
                                                          --------      --------      --------      -------
Net loss ..........................................       $ (3,985)     $   (701)     $ (3,284)       468.5%
                                                          ========      ========      ========      =======
</TABLE>
                                       26
<PAGE>

THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2005

NET REVENUE

         Net revenue for the three months ended September 30, 2006 decreased
$2,623,000 to $4,483,000, as compared to the three months ended September 30,
2005. This decrease resulted from reduced KDDI sales.

         During September 2006, we significantly increased the number of
personnel assigned to the Internet Service Partners contract and made a
corresponding decrease in personnel for the KDDI contract. This change was
implemented to significantly increase our revenues and profits starting the
three months ended December 31, 2006.

         Global Hotline continues to renegotiate $3,889,000 in penalties related
to a contract with a significant telecommunication company. We believe that the
penalties resulted from certain contractual changes that were implemented by the
significant telecommunication customer, which reduced sales during the three
months ended March 31, 2006 and in future quarters. We expect to finalize
negotiations on the final penalty, if any, by December 2006 and there is no
guarantee that we will be successful in reducing the penalties.

COST OF SALES

         Cost of sales for the three months ended September 30, 2006 decreased
$1,521,000 to $605,000 as compared to the three months ended September 30, 2005.
The decrease resulted from reduced outsourced call center operations by Global
Hotline to support the KDDI contract.

EXPENSES

         Selling, general and administrative expenses for the three months ended
September 30, 2006 increased $691,000 to $5,029,000, as compared to the three
months ended September 30, 2005. This was due to increased operating expenses,
primarily due to $32,000 related to the implementation of SFAS 123 R and
$764,000 related to Global Hotline, which was acquired on June 15, 2005. During
the three months ended September 30, 2006, Global Hotline increased its expenses
to expand the operations for the contracts with the five significant
telecommunication and insurance companies. In connection with these new
contracts, Global Hotline established two new call centers and incurred startup
and training costs through September 30, 2006 while sales efforts were started.

         For 2006 and 2005, the selling, general and administrative expenses
consisted primarily of employee and independent contractor expenses, rent,
overhead, equipment and depreciation, amortization of identifiable intangible
assets and intellectual property, professional and consulting fees, sales and
marketing costs, investor relations, legal, stock option and other general and
administrative costs. The difference in the current periods compared to the
prior periods is primarily due to the acquisition of Global Hotline on June 15,
2005 and expenses related to the implementation of SFAS 123 R.

OTHER INCOME/EXPENSE

         Other expense for the three months ended September 30, 2006 was
$158,000 as compared to other expense of $71,000 for the three months ended
September 30, 2005. The 2006 other expense was primarily related to interest
expense and amortization of beneficial conversion feature of $229,000, offset by
other income of $51,000.

         The 2005 other expense was primarily related to interest expense and
amortization of beneficial conversion feature of $192,000, offset by other
income of $89,000.

                                       27
<PAGE>

NET LOSS FROM CONTINUING OPERATIONS

         Net loss from continuing operations was $1,179,000 for the three months
ended September 30, 2006 as compared to a net profit of $571,000 for the three
months ended September 30, 2005. The reasons for the increased loss were due to
the increased expenses from implementing new accounting pronouncements and
Global Hotline expenses to expand the operations for the contracts with the five
significant telecommunication and insurance companies, as more fully discussed
above.

NET LOSS

         Net loss was $1,179,000 for the three months ended September 30, 2006
as compared to a net profit of $734,000 for the three months ended September 30,
2005. The reasons for the increased loss were due to the increased operating
expenses as more fully discussed above.

NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2005

NET REVENUE

         Net revenue for the nine months ended September 30, 2006 increased
$3,398,000 to $11,397,000, as compared to the nine months ended September 30,
2005. This increase was to the acquisition of Global Hotline on June 15, 2005.

         During September 2006, we significantly increased the number of
personnel assigned to the Internet Service Partners contract and made a
corresponding decrease in personnel for the KDDI contract. This change was
implemented to significantly increase our revenues and profits starting the
three months ended December 31, 2006.

         Global Hotline continues to renegotiate $3,889,000 in penalties related
to a contract with a significant telecommunication company. We believe that the
penalties resulted from certain contractual changes that were implemented by the
significant telecommunication customer, which reduced sales during the three
months ended March 31, 2006 and in future quarters. We expect to finalize
negotiations on the final penalty, if any, by December 2006 and there is no
guarantee that we will be successful in reducing the penalties.

COST OF SALES

         Cost of sales for the nine months ended September 30, 2006 increased
$378,000 to $2,931,000 as compared to the nine months ended September 30, 2005.
The increase resulted from outsourced call center operations by Global Hotline
to support the KDDI contract.

EXPENSES

         Selling, general and administrative expenses for the nine months ended
September 30, 2006 increased $8,077,000 to $13,556,000, as compared to the nine
months ended September 30, 2005. This was due to increased operating expenses of
$322,000 related to IA Global, $85,000 related to the implementation of SFAS 123
R and $7,671,000 related to Global Hotline, which was acquired on June 15, 2005.
During the nine months ended September 30, 2006, Global Hotline increased its
expenses to expand the operations for the contracts with the five significant
telecommunication and insurance companies. In connection with these new
contracts, Global Hotline established two new call centers and incurred startup
and training costs through September 30, 2006 while sales efforts were started.

         For 2006 and 2005, the selling, general and administrative expenses
consisted primarily of employee and independent contractor expenses, rent,
overhead, equipment and depreciation, amortization of identifiable intangible
assets and intellectual property, professional and consulting fees, sales and
marketing costs, investor relations, legal, stock option and other general and
administrative costs. The difference in the current periods compared to the
prior periods is primarily due to the acquisition Global Hotline on June 15,
2005 and expenses related the implementation of SFAS 123 R.

                                       28
<PAGE>

OTHER INCOME/EXPENSE

         Other expense for the nine months ended September 30, 2006 was $514,000
as compared to other expense of $143,000 for the nine months ended September 30,
2005. The 2006 other expense was primarily related to interest expense and
amortization of beneficial conversion feature of $621,000 and a foreign currency
translation adjustment of $129,000, offset by other income of $159,000.

         The 2005 other expense was primarily related to interest expense and
amortization of beneficial conversion feature of $192,000 and a foreign currency
translation adjustment of $68,000, offset by other income of $89,000.

NET LOSS FROM CONTINUING OPERATIONS

         Net loss from continuing operations was $4,525,000 for the nine months
ended September 30, 2006 as compared to a net loss of $176,000 for the nine
months ended September 30, 2005. The reasons for the increased loss were due to
the increased expenses from implementing new accounting pronouncements and
increased Global Hotline expenses to expand the operations for the contracts
with the five significant telecommunication and insurance companies, as more
fully discussed above.

NET LOSS

         Net loss was $3,985,000 for the nine months ended September 30, 2006 as
compared to a net loss of $701,000 for the nine months ended September 30, 2005.
The reasons for the increased loss were due to the increased operating expenses
as more fully discussed above.

         In accordance with SFAS 144, we accounted for the Rex Tokyo gain from
disposal of discontinued of operations of $464,000 and profit from discontinued
operations of $76,000 for the nine months ended September 30, 2006 as total gain
from discontinued operations in our consolidated statement of operations.

         In accordance with SFAS 144, we accounted for the Rex Tokyo net loss of
$275,000, the Fan Club net loss of $158,000 and the IA Acquisition net loss of
$92,000 for the nine months ended September 30, 2005 as total loss from
discontinued operations in our consolidated statement of operations.

LIQUIDITY AND CAPITAL RESOURCES

         We had cash of approximately $5.3 million and net working capital of
approximately $.6 million as of September 30, 2006. We have incurred net losses
of $2.1 million, $1.4 million and $3.1 million for the years ended December 31,
2005, 2004 and 2003, respectively. Our losses have been financed primarily by
the sale of equity in our company, by loans from related and unrelated parties,
by the issuance of convertible debentures and through the issuance of equity for
services. We expect our net loss to continue for the foreseeable future. There
can be no assurance that we will ever achieve profitability.

         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 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 beneficial
conversion will be amortized over the life of the debentures, or until such time
that they are converted. During the nine months ended September 30, 2006, we
expensed $208,000 and $313,000, respectively, of this beneficial conversion
recorded as interest expense. We closed the sale of $3,750,000 of convertible
debentures on July 29, 2005 and realized net proceeds of $3,483,000.

         Global Hotline continues to renegotiate $3,889,000 in penalties related
to a contract with a significant telecommunication company. We believe that the
penalties resulted from certain contractual changes that were implemented by the
significant telecommunication customer, which reduced sales during the three
months ended March 31, 2006. We expect to finalize negotiations on the final
penalty, if any, by December 2006 and there is no guarantee that we will be
successful in reducing the penalties. Any repayment, if any, is expected to be
made over time.

                                       29
<PAGE>

         On June 30, 2006 Global Hotline received a 200,000,000 Yen, or
approximately $1,743,000 at current exchange rates, working capital loan from
Risona Bank Co. Ltd. We expect this loan to be refinanced during November 2006.

         On July 31, 2006, Global Hotline received a 300,000,000 Yen, or
approximately $2,616,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         On September 11, 2006, IA Partners received a 45,000,000 Yen, or
approximately $385,000 at current exchange rates, working capital loan from
Risona Bank Co. Ltd.

         On September 29, 2006, Global Hotline received a 30,000,000 Yen, or
approximately $255,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         We advanced 40,000,000 Yen on May 26, 2006 and 100,000,000 Yen on June
5, 2006 to Global Hotline. The total amount of approximately $1,261,000 at
current exchange rates is due on demand and accrues interest at 3.5% per annum.
The advances were used to expand the Global Hotline business.

         We may need to obtain additional financing in order to continue our
current operations, including the cash flow needs of Global Hotline and its
subsidiaries, to acquire businesses and to maintain the AMEX requirements of $6
million in stockholders' equity 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.

         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 $20.2
million as of September 30, 2006, 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, $0.1 million raised from a capital
contribution and $.1 million raised from the exercise of stock options. In
addition, we have issued equity for non-cash items totaling $13.6 million,
including $6.9 million issued for services, $3.4 million related to a beneficial
conversion feature, $0.1 million related to the Rex Tokyo acquisition, $3.1
million related to the Global Hotline acquisition. Additional funding was
obtained from notes payable and long term debt of approximately $4.9 million and
convertible debentures with approximately $3.0 million outstanding as of
September 30, 2006.

OPERATING ACTIVITIES

         Net cash used in continuing operations for the nine months ended
September 30, 2006 was $8,363,000. This amount was primarily related to a net
loss of $4,090,000, an increase in accounts receivable of $3,937,000 and a
decrease of in deferred revenue of $3,394,000. This was offset by depreciation
and amortization of $1,508,000 and an increase in accrued and other liabilities
of $3,537,000.

         We expect net cash used in continuing operations to improve as the
Global Hotline results from operations improve. During September 2006, we
significantly increased the number of personnel assigned to the Internet Service
Partners contract and made a corresponding decrease in personnel for the KDDI
contract. This change was implemented to significantly increase our revenues and
profits starting the three months ended December 31, 2006.

                                       30
<PAGE>

INVESTING ACTIVITIES

         Net cash provided by investing activities for the nine months ended
September 30, 2006 was $4,495,000. This amount relates to the sale of Rex Tokyo
on April 4, 2006 and the repayment of a note receivable from an affiliate of our
controlling shareholder group, offset by the purchase of capital expenditures.

         On April 4, 2006, we closed the sale of our 60.5% interest in Rex Tokyo
back to Rex Tokyo. We received $1,302,159 in payments during April to June 2006.
We divested Rex Tokyo due to operating losses of approximately $1,552,000 in
2005 and projected losses in 2006 due to industry conditions. Sales were
$29,335,000 in 2005. We recorded a gain of $463,375 during the three months
ended June 30, 2006.

         In December 2005, Global Hotline loaned 360,000,000 Yen to GMB. This
increased the total amounts due from GMB to 400,000,000 Yen. GMB repaid
200,000,000 Yen on January 13, 2006 and the balance was scheduled for payment by
January 31, 2006, but was not paid by that date. The advance was unsecured.

         On April 7, 2006, GMB repaid 80,000,000 Yen, reducing the balance to
120,000,000 Yen, plus interest. On April 11, 2006, the parties entered into
Amendment 3 to the Senior Secured Promissory Note. This Amendment modified the
payments, with the balance of the loan, equal to 120,000,000 Yen or
approximately $1,017,000 at current exchange rates, plus interest, due on April
30, 2006. On April 27, 2006 GMB repaid the remaining 120,000,000 Yen.

         On October 19, 2006, the company closed its 36% equity investment in
Australian Secured Financial Limited and its affiliates, Australian Secured
Investments Ltd and ADJ Services Pty Ltd. (collectively, "ASFL"). The
transaction is structured as a share exchange in which the company issued 4,375
of Series A-1 Preferred Stock that are exchangeable into 43,750,000 shares of
its common stock upon certain conditions in exchange for 36% of ASFL's
outstanding common shares. The total value of the investment is $7,500,000.

FINANCING ACTIVITIES

         Net cash provided by financing activities for the nine months ended
September 30, 2006 was $5,079,000. This amount related primarily to net proceeds
from issuance of a note payable by Global Hotline.

         On June 30, 2006 Global Hotline received a 200,000,000 Yen, or
approximately $1,743,000 at current exchange rates, working capital loan from
Risona Bank Co. Ltd. We expect this loan to be refinanced during November 2006.

         On July 31, 2006, Global Hotline received a 300,000,000 Yen, or
approximately $2,616,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         On September 11, 2006, IA Partners received a 45,000,000 Yen, or
approximately $385,000 at current exchange rates, working capital loan from
Risona Bank Co. Ltd.

         On September 29, 2006, Global Hotline received a 30,000,000 Yen, or
approximately $255,000 at current exchange rates, working capital loan from
Mitsui Sumitomo Bank Co. Ltd.

         We advanced 40,000,000 Yen on May 26, 2006 and 100,000,000 Yen on June
5, 2006 to Global Hotline. The total amount of approximately $1,261,000 at
current exchange rates is due on demand and accrues interest at 3.5% per annum.
The advances were used to expand the Global Hotline business.

                                       31
<PAGE>

         Other Material Commitments. The company's contractual cash obligations
as of September 30, 2006 are summarized in the table below (1):
<TABLE>
<CAPTION>
Contractual                                    Less Than                                      Greater Than
Cash Obligations                 Total           1 Year        1-3 Years       3-5 Years         5 Years
-------------------------      ----------      ----------      ----------      ----------      ----------
<S>                            <C>             <C>             <C>             <C>             <C>
Operating leases ........      $  876,987      $  537,938      $  288,803      $   50,246      $        0

Note payable ............      $4,863,649      $4,646,143      $   72,502      $   72,502      $   72,502

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

Acquisitions ............      $  250,000      $  250,000      $        0      $        0      $        0
</TABLE>
_________
(1) Based on the end of period exchange rate.

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

         Effective January 1, 2006, the company began recording compensation
expense associated with stock-based awards and other forms of equity
compensation in accordance with Statement of Financial Accounting Standards No.
123-R, Share-Based Payment, ("SFAS 123R") as interpreted by SEC Staff Accounting
Bulletin No. 107. The company adopted the modified prospective transition method
provided for under SFAS 123R and consequently has not retroactively adjusted
results from prior periods. Under this transition method, compensation cost
associated with stock-based awards recognized in 2006 includes 1) quarterly
amortization related to the remaining unvested portion of stock-based awards
granted prior to December 15, 2005, based on the grant date fair value estimated
in accordance with the original provisions of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, ("SFAS 123"); and 2)
quarterly amortization related to stock-based awards granted subsequent to
January 1, 2006, based on the grant date fair value estimated in accordance with
the provisions of 123-R. In addition, we record expense over the vesting period
in connection with stock options granted. The compensation expense for
stock-based awards includes an estimate for forfeitures and is recognized over
the expected term of the award on a straight line basis.

                                       32
<PAGE>

         Prior to January 1, 2006, the company accounted for stock-based awards
using the intrinsic value method of accounting in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Under the intrinsic value method of accounting, no compensation
expense was recognized in the company's consolidated statements of operations
when the exercise price of the company's employee stock option grant equaled the
market price of the underlying common stock on the date of grant and the
measurement date of the option grant is certain. Under SFAS 123R, the company
remeasures the intrinsic value of the options at the end of each reporting
period until the options are exercised, cancelled or expire unexercised. As of
September 30, 2006, 2.3 million options with a weighted average exercise price
of $.20 and a weighted average remaining life of 9.05 years, remain outstanding
and continue to be remeasured at the intrinsic value over their remaining
vesting period ranging from 3 months to 2.75 years. Compensation expense in any
given period is calculated as the difference between total earned compensation
at the end of the period, less total earned compensation at the beginning of the
period. Compensation earned is calculated on a straight line basis over the
requisite service period for any give option award.

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 was the time
frame that the management of the company was able to project forward for future
revenue, either under agreement or through expected continued business
activities with significant telecommunications companies.

REVENUE RECOGNITION

         Global Hotline revenue was derived from operating call centers and the
reselling of telephone and broadband lines and insurance products in Japan.
Revenue is considered realized when the services have been provided to the
customer less an estimated return rate and collectibility is reasonably assured.
Furthermore, if an actual measurement of revenue cannot be determined, the
company defers all revenue recognition until such time that an actual
measurement can be determined. If during the course of a contract management
determines that losses are expected to be incurred, such costs are charged to
operations in the period such losses are determined.

         Revenues are deferred when cash has been received from the customer but
the revenue has not been earned. The company has recorded $196,000 of deferred
revenue as of September 30, 2006.

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.

                                       33
<PAGE>

DEBT AND EQUITY FINANCING OF CAPITAL TRANSACTIONS - BENEFICIAL CONVERSION
FEATURES

         We have 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 00-27 requires
recognition of the intrinsic value of the conversion option and is recognized as
a reduction to the carrying amount of the convertible debt and as an addition to
paid-in capital. The intrinsic value of the conversion feature is the difference
between the conversion price and the fair value of the stock into which the
security is convertible into, multiplied by the number of shares. The conversion
price used in calculating the intrinsic value is the most favorable conversion
price up to maturity, assuming there are no changes to the current circumstances
except for the passage of time. Changes to the conversion terms that would be
triggered by future events not controlled by the issuer should be accounted for
as contingent conversion options, and the intrinsic value of such conversion
options would not be recognized until and unless the triggering event occurs.
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.

LITIGATION COSTS

         We are subject to the possibility of legal actions arising in the
ordinary course of business. We regularly review the status of pending legal
actions to evaluate the amount and likelihood of any potential loss. We accrue
for these potential losses when it is probable that a liability has been
incurred and the amount of loss, or possible range of loss, can be reasonably
estimated. If actual results differ significantly from our estimates, we may be
required to adjust our accruals in the future. We have not provided provisions
for any litigation matters as of September 30, 2006.

RECENT ACCOUNTING PRONOUNCEMENTS

         In February 2006, the FASB issued SFAS No. 155, which is an amendment
of SFAS No. 133 and 140. This statement; a) permits fair value remeasurement for
any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation, b) clarifies which interest- only strip and
principal-only strip are not subject to the requirements of SFAS No. 133, c)
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation,
d) clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives, e) amends SFAS No. 140 to eliminate the prohibition on
a qualifying special-purpose entity from holding a derivative financial
instrument that pertains to a beneficial interest other than another derivative
financial instrument. This statement is effective for financial statements for
fiscal years beginning after September 15, 2006. Earlier adoption of this
statement is permitted as of the beginning of an entity's fiscal year, provided
the entity has not yet issued any financial statements for that fiscal year.
SFAS No. 155 is not expected to have a significant impact on our consolidated
financial statements.

                                       34
<PAGE>

         In March 2006, the FASB issued SFAS No. 156, which amends SFAS No. 140.
This statement establishes, among other things, the accounting for all
separately recognized servicing assets and servicing liabilities. This statement
amends SFAS No. 140 to require that all separately recognized servicing assets
and servicing liabilities be initially measured at fair value, if practicable.
SFAS No. 156 permits, but does not require, the subsequent measurement of
separately recognized servicing assets and servicing liabilities at fair value.
An entity that uses derivative instruments to mitigate the risks inherent in
servicing assets and servicing liabilities is required to account for those
derivative instruments at fair value. Under SFAS No. 156, an entity can elect
subsequent fair value measurement to account for it's separately recognized
servicing assets and servicing liabilities. By electing that option, an entity
may simplify its accounting because this statement permits income statement
recognition of the potential offsetting changes in fair value of those servicing
assets and servicing liabilities and derivative instruments in the same
accounting period. SFAS No. 156 is effective for financial statements for fiscal
years beginning after September 15, 2006. Earlier adoption of SFAS No. 156 is
permitted as of the beginning of an entity's fiscal year, provided the entity
has not yet issued any financial statements for that fiscal year. SFAS No. 156
is not expected to have a significant impact on our consolidated financial
statements.

         In July 2006, the FASB issued FASB Interpretation ("FIN") No. 48,
"Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB
Statement No. 109." FIN No. 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise's financial statements in accordance
with SFAS No. 109, "Accounting for Income Taxes." FIN No. 48 prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. The new standard also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods and
disclosure. The provisions of FIN No. 48 are effective for fiscal years
beginning after December 15, 2006. We are currently evaluating the provisions of
FIN No. 48 to determine the impact on our consolidated financial statements.

         In September 2006, the FASB issued SFAS No. 157 ("SFAS 157"). This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is a
relevant measurement attribute. Accordingly, this statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practices. This Statement is effective for
financial statements for fiscal years beginning after November 15, 2007. Earlier
application is permitted provided that the reporting entity has not yet issued
financial statements for that fiscal year. We are currently evaluating the
provisions of FASB 157 to determine the impact on our consolidated financial
statements.

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.

                                       35
<PAGE>

         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.

WE COULD BE DE-LISTED BY THE AMERICAN STOCK EXCHANGE

         On July 6, 2006, we received notice from the staff of AMEX indicating
that we were not in compliance with Section 1003(a)(iii) of the AMEX Company
Guide, in that our stockholder' equity is less than $6 million and it has
sustained losses from continuing operations and/or net losses in its five most
recent fiscal years.

         In order to maintain listing of the Company's common stock on AMEX, we
submitted a plan by July 17, 2006, advising AMEX of the actions we have taken,
or will take, that would bring it into compliance with the applicable listing
standards. If AMEX accepts the plan, we may be able to continue its listing
during the plan period of up to 6 months or December 16, 2006, during which time
we will be subject to periodic review to determine whether we are making
progress consistent with the plan. If AMEX does not accept our plan, or even if
accepted, and we are not in compliance with the continued listing standards at
the end of the 6 month period or we do not make progress consistent with the
plan during such period, AMEX may initiate delisting proceedings with respect to
the common stock.

         On September 26, 2006, we received notice that the staff of the AMEX
has determined to proceed with an application to the SEC to remove our common
stock from listing and registration on AMEX. This action, which has been
appealed by us is being taken because we are not in compliance with Section
1003(a)(iii) of the AMEX Company Guide, in that its stockholders' equity is less
than $6 million and our it's five most recent fiscal years. In addition, we are
not in compliance with Section 1003(a)(ii) as our stockholders' equity is now
less than $4 million and we have sustained losses from continuing operations
and/or net losses in three of our four most recent fiscal years.

         We submitted a plan on July 16, 2006, which was subsequently amended on
September 15, 2006 and September 21, 2006, advising AMEX of the actions we have
taken, or will take, that would bring us into compliance with the applicable
listing standards. AMEX believes that we have not provided sufficient evidence
to support that the plan will result us regaining compliance by December 16,
2006.

         On September 28, 2006, we appealed the delisting determination by
requesting an oral hearing to present this plan and our progress in achieving
the plan and maintain our AMEX listing. The oral hearing was held in late
October, 2006 and we expect a decision in the fourth quarter of 2006.

         With the closing of the ASFL transaction on October 19, 2006 and the
projected improvement in our Global Hotline business, we are in compliance with
the AMEX continued listing standards. In September 2006 we significantly
increased the number of personnel assigned to the Internet Service Partners
contract and made a corresponding decrease personnel in for the KDDI contract.
This change was implemented to maximize revenue and profits for the company. Our
common stock continues to trade on AMEX.

                                       36
<PAGE>

         There is no guarantee that we will be successful at maintaining our
AMEX listing. If our common stock was to be de-listed by AMEX, we expect that
our shares would continue to be traded as a bulletin board stock. Not
maintaining our AMEX listing would materially affect the ability of our
stockholders to dispose of their shares, reduce the liquidity of their
investment and affect our ability to obtain financing to support future
operations and acquisitions.

THE COMPANY IS EXPOSED TO LEGAL CLAIMS.

         On August 18, 2006, we received an Interim Award of Arbitrator
("Interim Award") from the American Arbitration Association related to the case
of Mr. Badner against the company and Inter Asset Japan ("IAJ"), a shareholder
in the company. The Interim Award denied certain claims made by Mr. Badner, but
awarded him $55,000 plus interest for indemnification of expenses paid by Mr.
Badner in connection with our defense in a prior lawsuit and arbitration
proceeding brought by a third party. The Interim Award also provided for
briefing on the question of whether we, IAJ, or Mr. Badner are entitled to
recover expenses incurred in the prosecution or defense of the arbitration, and,
if so, the amount to be paid. The expense brief was submitted in October 2006
and this issue is expected to be resolved during the fourth quarter of 2006.

         As previously disclosed, Mr. Badner was seeking damages of $2.5 million
plus interest related to the alleged breach of the September 25, 2002 Agreement
and Assignment between the parties, and $100,000 for damages suffered related to
alleged fraud and misrepresentations and costs and punitive and exemplary
damages in an amount to be determined at the arbitration hearings.

         On August 21, 2006, Mr. Badner refiled a lawsuit in the Supreme Court
of the State of New York, New York County against one of our officers alleging
defamation, libel, slander and intentional interference with a contractual
relationship. The case was previously dismissed on April 10, 2006 for lack of
proper service. On September 21, 2006, the officer filed a motion to dismiss the
case for lack of proper service, lack of personal jurisdiction over the officer,
and for failure to state a claim. A hearing is expected during the fourth
quarter of 2006.

         In April 2006, we received notice of a suit filed against IAJ, the
company and others in the King County Superior Court of the State of Washington
by Flashpoint Ventures, LLC ("Flashpoint") relating to the acquisition by
Activated Matrix Partners, LLC ("AMP") of shares of Activated Content
Corporation ("ACC") stock from IAJ. In September and October 2006, we received
notice of claims filed in the King County Superior Court proceeding by AMP, ACC
and an officer of these companies, Dorsey and Whitney, LLP, attorneys for AMP,
and Markwood Capital Alliance. We have filed a motion to dismiss the claims made
by Flashpoint against the company for lack of personal jurisdiction over the
company and for failure to state a claim. A hearing is expected during the first
quarter of 2007. We believe that we have been improperly included in this
dispute between AMP, ACC, Flashpoint, Dorsey and Whitney, Markwood Capital
Alliance and IAJ, and that there is no basis for the claims made by the parties
against the company. We will vigorously defend against these claims.

         We have not provided for a provision in these litigation matters. 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.

                                       37
<PAGE>

WE ARE EXPOSED TO CHANGES IN THE TELECOMMUNICATION AND INSURANCE INDUSTRIES.

         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  Its contracts with significant telecommunication and insurance
            companies may not be renewed;

         o  The cost to hire and train staff to startup new contracts is
            significant;

         o  Increased usage of wireless technology for telephone and internet
            usage;

         o  Passing of new or changes in existing legislation;

         o  Impact of privacy laws;

         o  New competitors;

         o  Decreased pricing;

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

         o  Loss of key personnel; and

         o  It has notes payable which requires repayments in November 2006 and
            January 2007.

         In addition, the Global Hotline business has a concentration of
customers with five customers. During the year ended December 31, 2005, one
customer accounted for substantially all of Global Hotline's revenue in 2005,
Global Hotline has diversified its customer base in 2006. Our business is
dependent upon our ability to operate efficiently by maintaining tight control
on cash flows. Any change in these factors could adversely affect our ability to
achieve the contract rates and to operate as a call center and reseller of
telephone and broadband lines and insurance products in Japan. This could result
in a repayment of cash paid under the contracts, which would have a material
adverse effect on our business, prospects, financial condition and results of
operations.

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 Global Hotline and its
subsidiaries, to acquire businesses and to maintain AMEX requirements of $6
million in stockholders' equity for continued listing our shares. 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 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.

                                       38
<PAGE>

OUR CONTROLLING SHAREHOLDER GROUP HAS SUBSTANTIAL INFLUENCE OVER OUR COMPANY.

         As of September 30, 2006, IAJ LBO Fund, PBAA, Terra Firma, IAJ, Hiroki
Isobe and Kyo Nagae collectively hold approximately 76.2% of our common stock
(collectively, the "Controlling Shareholders"). The share ownership percentages
described in this Form 10-Q 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 issuable upon conversion of the
convertible debentures. These 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 and Kyo Nagae 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.

RISKS RELATED TO OUR CONTROLLING SHAREHOLDER GROUP

         We have been reliant on the company's Controlling Shareholders in
assisting us in raising financing to carry out our acquisitions and to fund our
operations. We may need to obtain additional financing from our Controlling
Shareholders in order to continue our current operations, including the cash
flow needs of Global Hotline, to acquire businesses and to maintain the AMEX
requirement of $6 million in stockholders' equity for continued listing of our
shares.

         Our Controlling Shareholders thus far have indicated a willingness to
support our financing efforts. However, entities affiliated with our controlling
shareholder group defaulted on obligations owing to our subsidiaries during 2005
and 2006. While the defaults have been cured, there can be no assurance that our
controlling shareholder group will continue to provide financial support to us.

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 engage in discussions relating to
possible acquisitions, equity investments, mergers, strategic alliances, joint
ventures and divestitures. As part of our business strategy, we completed
acquisitions during early 2003, August 2003, March 2004, June 2004 and June
2005; we invested in a joint venture in July 2003; made an equity investment in
October 2006; and we sold businesses in December 2003, May 2005, July 2005 and
April 2006; and we divested a joint venture interest in October 2004. Such
transactions are accompanied by a number of risks, including:

         - 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, and

         - 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.

                                       39
<PAGE>

         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.

         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.

OUR CUSTOMER BASE IS CONCENTRATED.

         Global Hotline has contracts with three major Japanese
telecommunications companies and two major United States insurance companies.
The loss of these contracts would have a material adverse impact on Global
Hotline's ability to meet its requirements under its contract with its
significant customers.

                                       40
<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.

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, equity
investments and divestitures, strategic relationships, addition or loss of
significant customers and contracts, capital expenditure commitments, liquidity,
defaults by our majority shareholder 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,

         - Issuance of loans to customers or related or affiliated parties,

         - 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 September 30, 2006, 109.2 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.

                                       41
<PAGE>

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 business from
broadband entertainment channels and revenues derived from advertising to
operating primarily as a holding company. We acquired Rex Tokyo, one of our two
principal subsidiaries, in 2004, and have divested our interest in Rex Tokyo in
April 2006. Accordingly, unless we acquire other businesses, our only
significant revenue in 2006 will come from Global Hotline, which we acquired in
June 2005.

         Our prospects must be considered in light of the risks, difficulties
and uncertainties frequently encountered by companies in an early stage of
development, companies in new and rapidly evolving markets such as the market
for telecommunication 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. Our net loss from
operations may continue for the foreseeable future. There can be no assurance
that we will ever achieve profitability.

WE ARE EXPOSED TO FOREIGN CURRENCY RISKS.

         The majority of our operations are located in Japan and we have an
equity investment on Australia. 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, Australian Dollar and US Dollar would
have a material adverse effect on our business, financial condition and results
of operations.

WE ARE SUBJECT TO COMPETITIVE PRESSURES.

         We face competition from entities that provide competing call center
operations, including entities that resell telephone and broadband lines and
insurance products 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.

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.

                                       42
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY

         We were exposed to foreign currency risks due to the acquisition of
Global Hotline on June 15, 2005 and our equity investment in ASFL on October 19,
2006. These businesses operate in Japan and Australia, respectively.

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

INTEREST RATE RISK

         We are exposed to interest rate risk at Global Hotline. As of September
30, 2006, total short term debt was $4,863,649. This debt provides for variable
interest rates with current interest rates of 1.5% to 2.5%,

         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 September
30, 2006. Based on this evaluation, our principal executive officer and
principal financial officer concluded that, as of September 30, 2006, 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.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On August 18, 2006, we received an Interim Award of Arbitrator
("Interim Award") from the American Arbitration Association related to the case
of Mr. Badner against the company and Inter Asset Japan ("IAJ"), a shareholder
in the company. The Interim Award denied certain claims made by Mr. Badner, but
awarded him $55,000 plus interest for indemnification of expenses paid by Mr.
Badner in connection with our defense in a prior lawsuit and arbitration
proceeding brought by a third party. The Interim Award also provided for
briefing on the question of whether we, IAJ, or Mr. Badner are entitled to
recover expenses incurred in the prosecution or defense of the arbitration, and,
if so, the amount to be paid. The expense brief was submitted in October 2006
and this issue is expected to be resolved during the fourth quarter of 2006.

         As previously disclosed, Mr. Badner was seeking damages of $2.5 million
plus interest related to the alleged breach of the September 25, 2002 Agreement
and Assignment between the parties, and $100,000 for damages suffered related to
alleged fraud and misrepresentations and costs and punitive and exemplary
damages in an amount to be determined at the arbitration hearings.

                                       43
<PAGE>

         On August 21, 2006, Mr. Badner refiled a lawsuit in the Supreme Court
of the State of New York, New York County against one of our officers alleging
defamation, libel, slander and intentional interference with a contractual
relationship. The case was previously dismissed on April 10, 2006 for lack of
proper service. On September 21, 2006, the officer filed a motion to dismiss the
case for lack of proper service, lack of personal jurisdiction over the officer,
and for failure to state a claim. A hearing is expected during the fourth
quarter of 2006.

         In April 2006, we received notice of a suit filed against IAJ, the
company and others in the King County Superior Court of the State of Washington
by Flashpoint Ventures, LLC ("Flashpoint") relating to the acquisition by
Activated Matrix Partners, LLC ("AMP") of shares of Activated Content
Corporation ("ACC") stock from IAJ. In September and October 2006, we received
notice of claims filed in the King County Superior Court proceeding by AMP, ACC
and an officer of these companies, Dorsey and Whitney, LLP, attorneys for AMP,
and Markwood Capital Alliance. We have filed a motion to dismiss the claims made
by Flashpoint against the company for lack of personal jurisdiction over the
company and for failure to state a claim. A hearing is expected during the first
quarter of 2007. We believe that we have been improperly included in this
dispute between AMP, ACC, Flashpoint, Dorsey and Whitney, Markwood Capital
Alliance and IAJ, and that there is no basis for the claims made by the parties
against the company. We will vigorously defend against these claims.

         We have not provided for a provision in these litigation matters. 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 1A. RISK FACTORS.

         For information regarding factors that could affect the company's
results of operations, financial condition and liquidity, see the risk factors
discussion provided under "Factors that May Affect Future Results" included in
Item 2 of this Quarterly Report on Form 10-Q/A.

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

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         Not applicable.

ITEM 5.  OTHER INFORMATION

         There were no disclosures of any information required to be filed on
Form 8-K during the three months ended September 30, 2006 that were not filed.

                                       44
<PAGE>

ITEM 6.  EXHIBITS

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

3.1      Certificate Eliminating Reference to a Series B Convertible Preferred
         Shares of Stock from the Certificate of Incorporation of IA Global,
         Inc. dated October 18, 2006. (1)

3.2      Certificate of Designations, Rights and Preferences of the Series A-1
         Preferred Stock of IA Global, Inc. dated October 18, 2006. (1)

10.1     Standard Bank Transaction Agreement dated July 31, 2006 between Global
         Hotline, Inc. and Mitsui Sumitomo Bank C Ltd. (3)

10.2     Term Sheet dated October 11, 2006 by and between IA Global, Inc. and
         Australian Secured Financial Limited. (2)

10.3     Agency Contract dated July 1, 2006 between IA Partners Co Ltd and
         American Home Assurance Company. (3)

10.4     Share Exchange Agreement dated October 19, 2006 amongst IA Global,
         Inc., Australian Secured Financial Limited ("ASFL") and the selling
         shareholders of ASFL. (1)

10.5     Senior Secured Promissory Note dated September 6, 2006 between IA
         Global, Inc. and Global Hotline, Inc. (3)

10.6     Loan Application form dated September 11, 2006 between IA Partners Co
         Ltd and Risona Bank. (3)

10.7     Contract of Monetary Loan for Consumption dated September 29, 2006
         between Hotline and Mitsui Sumitomo Bank. (3)

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. (3)

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. (3)
__________________

(1)      Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
         October 19, 2006 and filed on October 24, 2006, and incorporated herein
         by reference.

(2)      Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
         October 11, 2006 and filed on October 13, 2006, and incorporated herein
         by reference.

(3)      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: December 21, 2006                 By: /s/ Mark Scott
                                        ------------------
                                        Mark Scott,
                                        President and Chief Financial Officer
                                        (Principal Executive and Financial
                                        and Accounting Officers)


                                       45