________________________________________________________________________________


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

                                    FORM 10-Q

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


                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 August 11, 2006 there were issued and outstanding 108,165,157
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 ...........................22

     Item 3.   Quantitative and Qualitative Disclosures About Market Risk ....40

     Item 4.   Controls and Procedures .......................................41


PART II. OTHER INFORMATION

     Item 1.   Legal Proceedings .............................................41

     Item 1A.  Risk Factors...................................................42

     Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds....42

     Item 3.   Defaults Upon Senior Securities ...............................42

     Item 4.   Submission of Matters to a Vote of Security Holders ...........42

     Item 5.   Other Information .............................................42

     Item 6.   Exhibits ......................................................43

Signatures ...................................................................44


                                        2
<PAGE>

                         PART I - FINANCIAL INFORMATION

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

CURRENT ASSETS:
  Cash and cash equivalents .........................................     $  3,941,630      $  4,460,986
  Accounts receivable, net of allowance for doubtful accounts of $0 .        3,666,585           610,220
  Prepaid expenses ..................................................          528,455           430,334
  Notes receivable ..................................................          661,133         4,129,408
  Other current assets ..............................................          269,902           189,783
  Deferred tax asset ................................................          417,785                 -
  Assets from discontinued operations ...............................                -        12,606,044
                                                                          ------------      ------------
    Total current assets ............................................        9,485,490        22,426,775

EQUIPMENT, NET ......................................................          551,531           521,964

OTHER ASSETS
  Intangible assets, net ............................................        3,112,594         4,449,558
  Other assets ......................................................        1,134,509           735,859
                                                                          ------------      ------------

                                                                          $ 14,284,124      $ 28,134,156
                                                                          ============      ============

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
  Accounts payable - trade ..........................................     $    233,957      $    496,448
  Accrued liabilities ...............................................        5,584,569         2,274,646
  Consumption taxes received ........................................          546,243           294,947
  Income taxes payable- foreign .....................................                -           825,000
  Note payable ......................................................        1,742,904                 -
  Deferred revenue ..................................................                -         3,589,532
  Liabilities of discontinued operations ............................                -        11,929,115
                                                                          ------------      ------------
    Total current liabilities .......................................        8,107,673        19,409,688
                                                                          ------------      ------------

LONG TERM  LIABILITIES:
  Convertible debentures ............................................        2,916,667         2,708,333
                                                                          ------------      ------------
                                                                             2,916,667         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,
    108,165,157 and 97,425,181 issued and outstanding, respectively .        1,081,651           974,251
  Additional paid in capital ........................................       32,696,221        32,992,589
  Accumulated deficit ...............................................      (30,468,890)      (27,662,170)
  Treasury stock ....................................................          (50,000)          (50,000)
  Accumulated other comprehensive gain (loss) .......................              802          (238,547)
                                                                          ------------      ------------
    Total stockholder's equity ......................................        3,259,784         6,016,135
                                                                          ------------      ------------

                                                                          $ 14,284,124      $ 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 June 30,      Six Months Ended June 30,
                                                               -----------------------------   -----------------------------
                                                                    2006           2005            2006            2005
                                                               -------------   -------------   -------------   -------------
                                                                (unaudited)     (unaudited)     (unaudited)     (unaudited)
<S>                                                            <C>             <C>             <C>             <C>
REVENUE .....................................................  $   3,242,500   $     892,918   $   6,913,805   $     892,918

COST OF SALES ...............................................        807,521         426,961       2,326,458         426,961
                                                               -------------   -------------   -------------   -------------

GROSS PROFIT ................................................      2,434,979         465,957       4,587,347         465,957

Selling, general and administrative expenses ................      4,665,782         838,000       8,526,788       1,140,106
                                                               -------------   -------------   -------------   -------------

OPERATING LOSS ..............................................     (2,230,803)       (372,043)     (3,939,441)       (674,149)
                                                               -------------   -------------   -------------   -------------

OTHER INCOME (EXPENSE):
  Interest income ...........................................         27,084              96          57,089             707
  Interest expense and amortization of beneficial
    conversion feature ......................................       (196,509)           (301)       (391,424)           (301)
  Other income ..............................................         54,292             583         107,885             583
  Foreign currency transaction adjustment ...................       (129,580)        (91,791)       (129,448)        (74,378)
                                                               -------------   -------------   -------------   -------------
    Total other income (expense) ............................       (244,713)        (91,413)       (355,898)        (73,389)
                                                               -------------   -------------   -------------   -------------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .........     (2,475,516)       (463,456)     (4,295,339)       (747,538)

INCOME TAXES:
  Deferred benefit ..........................................       (592,870)              -        (949,190)              -
  Current provision .........................................              -               -               -               -
                                                               -------------   -------------   -------------   -------------

NET LOSS FROM CONTINUING OPERATIONS .........................     (1,882,646)       (463,456)     (3,346,149)       (747,538)

DISCONTINUED OPERATIONS
  Gain from disposal of discontinued operations .............        463,375          99,349         463,375          99,349
  (Loss) profit from discontinued operations ................              -        (526,642)         76,054        (786,954)
                                                               -------------   -------------   -------------   -------------

NET LOSS ....................................................  $  (1,419,271)  $    (890,749)  $  (2,806,720)  $  (1,435,143)
                                                               =============   =============   =============   =============

Per share of Common-
  Basic net loss per share from continuing operations .......  $       (0.02)  $       (0.01)  $       (0.03)  $       (0.01)
  Basic net loss per share from discontinued operations .....              -               -               -           (0.01)
                                                               -------------   -------------   -------------   -------------
  Total basic net loss per share ............................  $       (0.02)  $       (0.01)  $       (0.03)  $       (0.02)
                                                               =============   =============   =============   =============

  Diluted net loss per share from continuing operations .....  $       (0.02)  $       (0.01)  $       (0.03)  $       (0.01)
  Diluted net loss per share from discontinued operations ...              -               -               -           (0.01)
                                                               -------------   -------------   -------------   -------------
  Total diluted net loss per share ..........................  $       (0.02)  $       (0.01)  $       (0.03)  $       (0.02)
                                                               =============   =============   =============   =============

  Weighted average shares of common stock outstanding - Basic    108,165,157      84,691,939     106,630,028      83,539,798
  Weighted average shares of common stock and common
   equivalent shares outstanding - diluted ..................    108,165,157      84,691,939     106,630,028      83,539,798


                                       See notes to consolidated financial statements.

                                                              4
</TABLE>
<PAGE>
<TABLE>
                                               IA GLOBAL, INC. AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                                                 Six Months Ended June 30,
                                                                                              ------------------------------
                                                                                                  2006              2005
                                                                                              ------------      ------------
                                                                                               (unaudited)       (unaudited)
<S>                                                                                           <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ..............................................................................     $ (2,806,720)     $ (1,435,143)
  Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities:
    Depreciation and amortization .......................................................        1,013,599            90,510
    Amortization of beneficial conversion feature .......................................          208,334                 -
    Stock based compensation ............................................................           52,514                 -
  Changes in operating assets and liabilities:
    Accounts receivable .................................................................       (3,056,365)          (76,942)
    Notes receivable ....................................................................         (167,219)                -
    Prepaid expenses ....................................................................          (98,121)         (211,209)
    Other current assets ................................................................          (80,119)          203,772
    Income taxes receivable- foreign ....................................................         (417,785)                -
    Other assets ........................................................................         (398,650)            4,504
    Accounts payable ....................................................................         (262,491)           82,356
    Accrued and other liabilities .......................................................        3,309,923           852,726
    Net consumption tax payable .........................................................          166,286            52,968
    Income taxes payable - foreign ......................................................         (253,120)                -
    Deferred revenue ....................................................................       (3,589,532)         (558,250)
                                                                                              ------------      ------------
Net cash used in continuing operations ..................................................       (6,379,466)         (994,708)
  (Gain) loss from discontinued operations ..............................................         (539,429)          687,605
  Net cash used in discontinued operations ..............................................         (854,895)       (1,014,166)
  Net decrease in assets of discontinued operations .....................................       12,606,044         4,653,713
  Net (decrease) in liabilities of discontinued operations ..............................      (11,929,115)       (3,624,791)
                                                                                              ------------      ------------
NET CASH USED IN OPERATIONS .............................................................       (7,096,861)         (292,347)
                                                                                              ------------      ------------

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
  Purchases of capital expenditures .....................................................          (98,844)                -
  Repayment of loan receivable from QUIKCAT Australia Pty Ltd ...........................                -           150,000
  Proceeds from sale of QUIKCAT business unit and note receivable .......................                -            30,000
  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                 -
  Cash from Global Hotline, Inc. on date of acquisition .................................                -         1,240,037
                                                                                              ------------      ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES ...............................................        4,595,156         1,605,037
                                                                                              ------------      ------------

CASH PROVIDED BY FINANCING ACTIVITIES:
  Proceeds from long term debt ..........................................................        1,743,000                 -
  Repayment of long term debt ...........................................................                -               500
                                                                                              ------------      ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...............................................        1,743,000               500
                                                                                              ------------      ------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ....................................         (758,705)        1,313,190

EFFECT OF EXCHANGE RATE CHANGES ON CASH .................................................          239,349          (246,051)

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

CASH AND CASH EQUIVALENTS, end of period ................................................     $  3,941,630      $  1,426,313
                                                                                              ============      ============

Supplemental disclosures of cash flow information:
  Interest paid .........................................................................     $      2,292      $          -
  Taxes paid ............................................................................     $     79,030      $         93

Non-cash investing and financing activities:
  Common stock surrendered to company in payment of note receivable .....................     $    241,494      $          -
  Subscription receivable from convertible debentures ...................................     $          -      $  3,750,000
  Common stock issued for Global Hotline, Inc. ..........................................     $          -      $  3,097,500
  Issuance of loan receivable for sale of Fan Club Entertainment Co Ltd .................     $          -      $    755,000
  Issuance of loan receivable for sale of QUIKCAT business unit .........................     $          -      $    200,000
  Subscription receivable from sale of common stock .....................................     $          -      $     59,500
  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 Japanese companies that operate in the telecommunication and
technology areas. 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 in Japan.

         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 June 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 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
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 $0 of deferred revenue
as of June 30, 2006.

ADVERTISING COSTS - Advertising costs are expensed as incurred. There were
minimal advertising costs incurred for the three months and six months ended
June 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 the first quarter of fiscal year 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)
would include 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 SFAS 123R. No options were granted subsequent
to January 1, 2006. 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
January 1, 2006, 4.2 million options with a weighted average exercise price of
$.245 and a weighted average remaining life of 8.7 years, remain outstanding and
continue to be remeasured at the intrinsic value over their remaining vesting
period ranging from 3 months to 2.5 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 3.9 million shares of common stock are available for future grants under the
Plans as of June 30, 2006. Options for the purchase of 7.6 million shares are
outstanding as of June 30, 2006. A total of .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 and Six Months Ended
                                                    June 30,
                                              -------------------
                                              2006          2005
                                              ----          ----
         Risk free interest rate ..........     *           3.75%
         Expected life ....................     *          10 yrs
         Dividend rate ....................     *           0.00%
         Expected volatility ..............     *             65%
         _________

         * The company did not grant any option during the three and six months
         ended June 30, 2006.

         The company recorded $26,257 of compensation expense, net of related
tax effects, relative to stock options for the three months ended June 30, 2006
and $52,514 for the six months ended June 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.

         No stock options were granted or exercised during the three months and
six months ended June 30, 2006 and 2005, respectively. As of June 30, 2006,
there is approximately $171,000 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 1.46 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 six months ended June 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 Six
                                                    Months Ended    Months Ended
                                                   June 30, 2005   June 30, 2005
                                                   -------------   -------------
Net loss available to common
    shareholders, as reported ..................    $  (890,749)    $(1,435,143)

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

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

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


         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 June 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.

                                        9
<PAGE>

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."
Loss per common share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding during
the period. The common stock equivalents have not been included as they are
anti-dilutive. As of June 30, 2006, there were options outstanding for the
purchase of 7,600,000 common shares and convertible debentures convertible into
12,500,018 common shares which could potentially dilute future earnings per
share.

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.

RECENT ACCOUNTING PRONOUNCEMENTS

         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, "an
amendment of ARB No. 43, Chapter 4," "SFAS 151") which clarifies the types of
costs that should be expensed rather than capitalized as inventory. SFAS 151
also clarifies the circumstances under which fixed overhead costs associated
with operating facilities involved in inventory processing should be
capitalized. The provisions of SFAS 151 are effective for fiscal years beginning
after June 15, 2005 and the company adopted this standard in the three months
ending March 31, 2006. SFAS 151 did not have a significant impact on the
companies consolidated financial statements.

         In December 2004, the FASB issued SFAS No. 123 (Revised 2004),
"Share-Based Payment," "SFAS 123R" a revision to FASB Statement 123, "Accounting
for Stock-Based Compensation" and this statement supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and its related implementation
guidance. SFAS 123R focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS No.
123R requires a public entity to measure the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be recognized over
the period during which an employee is required to provide service in exchange
for the award. SFAS 123R is effective as of the beginning of the first interim
or annual reporting period that begins after June 15, 2005 and the company
implemented SFAS 123R in the first quarter of fiscal 2006. The company expects
that SFAS 123R will have a significant impact on its consolidated financial
statements.

                                       10
<PAGE>

         In March 2005, the SEC released SAB 107, "Share-Based Payments" ("SAB
107"). The interpretations in SAB 107 express views of the SEC staff regarding
the interaction between SFAS 123R and certain SEC rules and regulations, and
provide the staff's views regarding the valuation of share-based payment
arrangements for public companies. In particular, SAB 107 provides guidance
related to share-based payment transactions with non-employees, the transition
form nonpublic to public entity status, valuation methods (including assumptions
such as expected volatility and expected term), the accounting for certain
redeemable financial instruments issued under share-based payment arrangements,
the classification of compensation expense, non-GAAP financial measures,
first-time adoption of SFAS 123R in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting
for income tax effects of share-based arrangements upon adoption of SFAS 123R,
the modification of employee share options prior to the adoption of SFAS 123R
and disclosures in Management's Discussion and Analysis subsequent to the
adoption of SFAS 123R. SAB 107 requires stock-based compensation be classified
in the same expense lines as cash compensation is reported for the same
employees. The company implemented SAB 107 in the first quarter of fiscal 2006,
in conjunction with SFAS 123R. The company expects that SAB 107 will have a
significant impact on our consolidated financial statements.

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets--An Amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from
fair value measurement for nonmonetary exchanges of similar productive assets in
paragraph 21(b) of APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," and replaces it with an exception for exchanges that do not have
commercial substance. SFAS 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is effective for the
fiscal periods beginning after December 15, 2005 and the company adopted this
standard in the three months ending March 31, 2006. SFAS 153 did not have a
significant impact on the companies consolidated financial statements.

         In June 2005, the FASB issued SFAS No. 154 "Accounting Changes and
Error Corrections," ("SFAS 154"), a replacement of APB Opinion No. 20,
"Accounting Changes", and SFAS No. 3 "Reporting Accounting Changes in Interim
Financial Statements." SFAS 154 applies to voluntary changes in accounting
principle and changes the requirements for accounting for and reporting of a
change in accounting principle. SFAS 154 requires retrospective application to
prior periods' financial statement of a voluntary change in accounting principle
unless it is impracticable. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
Earlier application is permitted for accounting changes and corrections of
errors made occurring in fiscal years beginning after June 1, 2005. The company
adopted SFAS 154 effective December 15, 2005. SFAS 154 did not have a
significant impact on the companies consolidated financial statements.

         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.

                                       11
<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 its 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.

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 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 two
call centers with 430 seats and 465 employees and utilizes 4 agents with an
additional approximate 165 seats to support the business.

         Global Hotline had a contract with a significant 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. If the original targets had
been achieved, Global Hotline would have been paid 2,925,000,000 Yen or
approximately $25,400,000, under this contract.

         On December 13, 2005, Global Hotline entered into an amendment to this
contract. 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 and (ii) the targets of subscriber lines from quarterly
targets to one target at the end of the contract. As a result of this amendment,
Global Hotline recognized $2,980,000 of deferred revenue in the fourth quarter
of 2005. As of December 31, 2005, Global Hotline did not achieve the required
target of lines to be sold under the second contract and accrued $1,087,000 in
penalties in December 2005. As of March 31, 2006, Global Hotline did not achieve
the required target of lines to be sold under the second contract, as modified,
and accrued $3,889,000 in penalties 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 by September 2006. There is no guarantee that the company will be
successful in reducing this penalty.

                                       12
<PAGE>

         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 expires on September 30, 2006.

         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.

         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 commissions 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 approximately June 1,
2006 on behalf of AFLAC, with sales commissions 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.

         In connection with this Agency Agreement, Global Hotline has
established a third call center with 230 seats to sell these insurance products.
The company expects to incur startup and training costs through September 30,
2006 until sales efforts are started and to incur losses into the December 2006
quarter on this and other new contracts.

         The company 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.

         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 preliminarily allocated to
the assets acquired according to estimated fair values and is subject to
adjustment when additional information concerning asset valuations is finalized,
but no later than June 15, 2006. The final allocation is as follows:

Purchase price:
Stock .....................................................         $ 3,097,500
Net operating loss recovery during the
 three months ended June 30, 2006 .........................            (486,869)
Net liabilities acquired (6/15/05) ........................           2,335,399
                                                                    -----------
Identifiable intangible assets ............................         $ 4,946,030
                                                                    ===========

                                       13
<PAGE>

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

                                                 Pre-Acquisition
                                  As Reported,    Operations of      Pro Forma,
                                   Six Months    Global Hotline      Six Months
                                     Ended          January 1-         Ended
                                 June 30, 2005    June 15, 2005    June 30, 2005
                                 -------------   ---------------   -------------
Revenues ......................   $   892,918      $ 5,109,288      $ 6,002,206

Loss before extraordinary items    (1,435,143)      (3,693,459)      (5,128,602)

Net loss ......................    (1,435,143)      (3,693,459)      (5,128,602)

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


         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 of
$463,375 during the three months ended June 30, 2006.

         The following table sets forth for the discontinued operations for the
company:

                                                       Six Months Ended June 30,
                                                       ------------------------
                                                          2006         2005
                                                       ----------  ------------

Revenues ............................................  $7,651,125  $ 13,744,054
Cost of sales .......................................   6,083,120    12,109,275
                                                       ----------  ------------
Gross Profit ........................................   1,568,005     1,634,779
Operating and other non-operating expenses ..........   1,427,106     3,576,775
Minority interest ...................................      49,655      (503,615)
Income taxes ........................................      15,190      (651,427)
                                                       ----------  ------------
Loss from discontinued operations ...................      76,054      (786,954)
(Loss) gain from disposal of discontinued operations      463,375        99,349
                                                       ----------  ------------
Total gain (loss) from discontinued operations ......  $  539,429  $   (687,605)
                                                       ==========  ============

NOTE 4.  ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION

         Accounts receivable were $3,666,585 and $610,220 as of June 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:

                                            June 30,          June 30,
                                              2006              2005
                                            --------          --------
         KDDI Network Solutions .......        45%               98%
         Internet Service Partners ....        36%                -


                                       14
<PAGE>

         KDDI is a Global Hotline customer. Internet Service Partners is an IA
Partners customer. There were no other customers in excess of 10% in the
respective periods.

         KDDI accounted for 19% and 0% of accounts receivable as of June 30,
2006 and December 31, 2006, respectively. Internet Service Partners accounted
for 43% and 0% of total accounts receivable as of June 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 $528,455 and $430,334 as of June 30, 2006 and
December 31, 2005, respectively. Such costs as of June 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 $661,133 and $4,129,408 as of June 30, 2006 and
December 31, 2005, respectively. Such assets as of June 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.

         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 June 30, 2006, the company
had received $10,000 in note payments from this Promissory Note. The company is
negotiating to obtain payment on the $35,000 that is past due.

                                       15
<PAGE>

NOTE 7.  EQUIPMENT

         Equipment, net of accumulated depreciation, was $551,531 and $521,964
as of June 30, 2006 and December 31, 2005, respectively. Accumulated
depreciation was $435,061 and $416,866 as of June 30, 2006 and December 31,
2005, respectively. Total depreciation expense was $163,505 and $12,652 for the
six months ended June 30, 2006 and 2005, respectively.

         Property and equipment are comprised of the following:

                                    Estimated         June 30,     December 31,
                                   Useful Lives         2006           2005
                                  --------------    -----------    -----------
Property and equipment .......    24 months         $   795,052    $   751,915
Leasehold Improvements .......    12 - 27 months        191,540        186,915
                                                    -----------    -----------
                                                        986,592        938,830
Less: accumulated depreciation
 and amortization ............                         (435,061)      (416,866)
                                                    -----------    -----------
                                                    $   551,531    $   521,964
                                                    ===========    ===========
NOTE 8. INTANGIBLE ASSETS

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

                                    June 30,      December 31,
                                      2006            2005        Estimated Life
                                  -----------     -----------     --------------
Customer contracts ...........    $ 4,946,030     $ 5,432,899         3 years
Less: accumulated amortization     (1,833,436)       (983,341)
                                  -----------     -----------
    Intangible Assets, net ...    $ 3,112,594     $ 4,449,558
                                  ===========     ===========

         Total amortization expense was $850,095 and $0 for the six months ended
June 30, 2006 and 2005, respectively.

         The fair value of the Global Hotline intellectual property acquired was
estimated using a discounted cash flow approach, as performed by an independent
appraisal expert, based on future economic benefits associated with agreements
with significant Japanese telecommunications companies, or through expected
continued business activities with significant telecommunications companies.

         During the three months ended June 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.

NOTE 9.  ACCRUED LIABILITIES

         Accrued liabilities were $5,584,569 and $2,274,646 as of June 30, 2006
and December 31, 2005, respectively. Such liabilities as of June 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 June 30, 2006 and December 31, 2005, respectively, related to GHI and (iii)
accrued interest for convertible debentures and legal fees for IA Global.

NOTE 10. NOTE 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.

                                       16
<PAGE>

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 six months
ended June 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.

         Convertible debentures .......................    $ 3,750,000
         Beneficial conversion ........................     (1,250,000)
                                                           -----------
                                                             2,500,000
         Amortization of beneficial conversion ........        416,667
                                                           -----------
                                                           $ 2,916,667
                                                           ===========

         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 has
filed a registration statement 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 June 30, 2006, IAJ LBO Fund, PBAA, Terra Firma, IAJ, Hiroki Isobe
and Kyo Nagae collectively hold approximately 76.9% of the company's common
stock. Such entities stated in a Schedule 13D that they may be deemed to
constitute a "group" for the purposes of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended ("Exchange Act"). Mr. 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 June 30, 2006, that are relevant for purposes of understanding
the related party transactions that have taken place:

                                       17
<PAGE>

Ownership:

IA Global, Inc. owns:
                                  Rex Tokyo Co. Ltd.....................0.0% (1)

                                  Global Hotline, Inc.................100.0%

Inter Asset Japan LBO No. 1 Fund owns:

                                  IA Global, Inc.......................27.5%

PBAA Fund Ltd. owns:
                                  IA Global, Inc.......................26.4%

Terra Firma Fund Ltd. owns:
                                  IA Global, Inc.......................12.1%

Inter Asset Japan Co., Ltd. owns:
                                  IA Global, Inc........................5.4%

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% (2)
_________

(1) Sold on April 4, 2006.

(2) 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.

NOTE 13. EQUITY TRANSACTIONS

         During the six months ended June 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.

                                       18
<PAGE>

NOTE 14. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

         On November 5, 2004, the company received notice from the American
Arbitration Association in New York City that Mr. Badner, a former majority
shareholder, commenced an arbitration proceeding against the company, IAJ, and
certain of its officers relating to the September 25, 2002 Agreement and
Assignment among the company, Mr. Badner and IAJ. Mr. Badner alleges (i)
unrestricted shares of the companies stock to which he was entitled under the
agreement were not delivered as per the terms of the agreement, (ii) unspecified
commitments to engage in future business ventures with Mr. Badner were not made,
and (iii) damages resulting from intentional misrepresentation. Mr. Badner is
seeking damages of $2.5 million plus interest related to the alleged breach of
the Agreement and Assignment, $100,000 for damages suffered related to alleged
fraud and misrepresentations and costs and punitive and exemplary damages in an
amount to be determined. Arbitration of Mr. Badner's claim was held in December
2005 and January 2006. The company does not expect a decision until the third
quarter of 2006.

         In April 2006, the company received notice of a suit filed 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, one
of the company's stockholders. AMP filed similar claims in Nevada state court
but voluntarily dismissed the claims without prejudice and may refile in
Washington. The company believes that it has been improperly included in this
dispute between AMP, Flashpoint and IAJ, and that there is no basis for the
claims made by Flashpoint and AMP. The company will vigorously defend against
these claims.

         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 its 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 insurance products in Japan.

                                       19
<PAGE>

         The following table presents revenues, operating income (loss) and
total assets by company for the three and six months ended June 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-
  June 30, 2006
  Revenue ...............      $      -       $  3,243       $  3,243       $      -      $  3,243

  Operating income (loss)          (448)        (1,783)        (2,231)             -        (2,231)

  Total assets ..........         2,788         11,496         14,284              -        14,284

  June 30, 2005
  Revenue ...............      $      -       $    893       $    893       $      -      $    893

  Operating loss ........          (167)          (205)          (372)             -          (372)

  Total assets ..........         5,031         10,160         15,191          9,186        24,377

Six Months Ended-
  June 30, 2006
  Revenue ...............      $      -       $  6,914       $  6,914       $      -      $  6,914

  Operating income (loss)          (949)        (2,990)        (3,939)             -        (3,939)

  Total assets ..........         2,788         11,496         14,284              -        14,284

  June 30, 2005
  Revenue ...............      $      -       $    893       $    893       $      -      $    893

  Operating loss ........          (469)          (205)          (674)             -          (674)

  Total assets ..........         5,031         10,160         15,191          9,186        24,377


<CAPTION>
                                                                          Discontinued
Geographic Region                U.S.          Japan           Total       Operations       Total
-------------------------      --------       --------       --------     ------------    --------
<S>                            <C>            <C>            <C>            <C>           <C>
Three Months Ended-
  June 30, 2006
  Revenue ...............      $      -       $  3,243       $  3,243       $      -      $  3,243

  Operating income (loss)          (448)        (1,783)        (2,231)             -        (2,231)

  Total assets ..........         2,788         11,496         14,284              -        14,284

  June 30, 2005
  Revenue ...............      $      -       $    893       $    893       $      -      $    893

  Operating loss ........          (167)          (205)          (372)             -          (372)

  Total assets ..........         5,031         10,160         15,191          9,186        24,377

Six Months Ended-
  June 30, 2006
  Revenue ...............      $      -       $  6,914       $  6,914       $      -      $  6,914

  Operating income (loss)          (949)        (2,990)        (3,939)             -        (3,939)

  Total assets ..........         2,788         11,496         14,284              -        14,284

  June 30, 2005
  Revenue ...............      $      -       $    893       $    893       $      -      $    893

  Operating loss ........          (469)          (205)          (674)             -          (674)

  Total assets ..........         5,031         10,160         15,191          9,186        24,377

</TABLE>

                                       20
<PAGE>

The following reconciles operating loss to net loss:
<TABLE>
(dollars in thousands)
<CAPTION>
                                                   Three Months Ended         Six Months Ended
                                                        June 30,                  June 30,
                                                  ----------------------------------------------
                                                    2006         2005         2006         2005
                                                  -------      -------      -------      -------
<S>                                               <C>          <C>          <C>          <C>
Operating loss ..............................     $(2,231)     $  (372)     $(3,939)     $  (674)

Other income (expense) ......................        (245)         (91)        (356)         (74)
                                                  -------      -------      -------      -------

Loss  from continuing operations
  before income taxes .......................      (2,476)        (463)      (4,295)        (748)

Income tax benefit ..........................        (593)           -         (949)           -
                                                  -------      -------      -------      -------

Net loss from continuing operations .........      (1,883)        (463)      (3,346)        (748)

Gain from disposal of discontinued operations         464           99          463           99
(Loss)  profit from discontinued operations .           -         (527)          76         (786)
                                                  -------      -------      -------      -------

Net loss ....................................     $(1,419)     $  (891)     $(2,807)     $(1,435)
                                                  =======      =======      =======      =======
</TABLE>

NOTE 16. SUBSEQUENT EVENTS

         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 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.

                                       21
<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 insurance
markets. Also, we intend to increase the number of our majority-owned companies
by acquiring primarily Japanese small to midsize companies in the
telecommunication and technology 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 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 year ended December 31, 2005 and six months
ended June 30, 2006, we expensed $208,000 and $208,000, 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.

         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.

         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.

                                       22
<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 American Stock Exchange
("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 Expanding the Global Hotline business by renewing its contracts with
its primary customers.

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

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 addresses key business risks facing Global Hotline and
the risks associated with a recent default in payments by 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;

                                       23
<PAGE>

         o  Decreased pricing;

         o  Default or lack of performance by its agents;

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

         o  Loss of key personnel.

         o  It has notes payable which require repayment in November 2006 and
            January 2007.

         In addition, the Global Hotline business has a concentration of
customers and suppliers with four significant customers and four agents,
respectively. During the year ended December 31, 2005, one customer accounted
for substantially all of Global Hotline's revenue in 2005, although Global
Hotline expects to diversify its customer base in 2006. The Global Hotline
business is dependent upon its ability to operate efficiently by maintaining
tight control on its cash flows. Any change in these factors could adversely
affect Global Hotline's ability to achieve the rates in the contracts and to
operate as a call center and reseller of telephone and broadband lines in Japan.
This could result in a repayment of cash paid 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. Also, we intend to increase the number of our majority-owned companies
by acquiring primarily Japanese small to midsize companies in the
telecommunication and technology 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.

                                       24
<PAGE>
<TABLE>
(dollars in thousands)
<CAPTION>
                                                                      Three Months Ended June 30,
                                                          --------------------------------------------------
                                                            2006          2005      $ Variance    % Variance
                                                          --------------------------------------------------
<S>                                                       <C>           <C>           <C>           <C>
Revenue ............................................      $ 3,243       $   893       $ 2,350        263.2%

Cost of sales ......................................          808           427           381         89.2%
                                                          -------       -------       -------       ------

Gross profit .......................................        2,435           466         1,969        422.5%
                                                          -------       -------       -------       ------

Selling, general and administrative expenses .......        4,666           838         3,828        456.8%
                                                          -------       -------       -------       ------

Operating loss .....................................       (2,231)         (372)       (1,859)      -499.7%
                                                          -------       -------       -------       ------

Other Income (Expense):
Interest income ....................................           27             -            27        100.0%
Interest expense and amortization of beneficial
    conversion feature .............................         (196)            -          (196)      -100.0%
Other Income .......................................           54             1            53       5300.0%
Foreign currency transaction adjustment ............         (130)          (92)          (38)        41.3%
                                                          -------       -------       -------       ------
Total other income (expense) .......................         (245)          (91)         (154)       169.2%
                                                          -------       -------       -------       ------
Loss from continuing operations before income  taxes       (2,476)         (463)       (2,013)      -434.8%
Income taxes:
Current benefit ....................................         (593)            -          (593)      -100.0%
Deferred provision .................................            -             -             -          0.0%
                                                          -------       -------       -------       ------
Net loss from continuing operations ................       (1,883)         (463)       (1,420)      -306.7%
Gain from disposal of discontinued operations ......          464            99           365        368.7%
(Loss) profit from discontinued operations .........            -          (527)          527        100.0%
                                                          -------       -------       -------       ------
Net loss ...........................................      $(1,419)      $  (891)      $  (528)       -59.3%
                                                          =======       =======       =======       ======
<CAPTION>
(dollars in thousands)
                                                                       Six Months Ended June 30,
                                                          --------------------------------------------------
                                                            2006          2005      $ Variance    % Variance
                                                          --------------------------------------------------
<S>                                                       <C>           <C>           <C>           <C>
Revenue ............................................      $ 6,914       $   893       $ 6,021        674.2%

Cost of sales ......................................        2,326           427         1,899        444.7%
                                                          -------       -------       -------       ------

Gross profit .......................................        4,588           466         4,122        884.5%
                                                          -------       -------       -------       ------

Selling, general and administrative expenses .......        8,527         1,140         7,387        648.0%
                                                          -------       -------       -------       ------

Operating loss .....................................       (3,939)         (674)       (3,265)      -484.4%
                                                          -------       -------       -------       ------

Other Income (Expense):
Interest income ....................................           57             1            56       5600.0%
Interest expense and amortization of beneficial
    conversion feature .............................         (391)            -          (391)      -100.0%
Other Income .......................................          108             -           108        100.0%
Foreign currency transaction adjustment ............         (130)          (75)          (55)        73.3%
                                                          -------       -------       -------       ------
Total other income (expense) .......................         (356)          (74)         (282)       381.1%
                                                          -------       -------       -------       ------
Loss from continuing operations before income taxes        (4,295)         (748)       (3,547)      -474.2%
Income taxes:
Current benefit ....................................         (949)            -          (949)      -100.0%
Deferred provision .................................            -             -             -          0.0%
                                                          -------       -------       -------       ------
Net loss from continuing operations ................       (3,346)         (748)       (2,598)      -347.3%
Gain from disposal of discontinued operations ......          463            99           364        367.7%
(Loss) profit from discontinued operations .........           76          (786)          862        109.7%
                                                          -------       -------       -------       ------
Net loss ...........................................      $(2,807)      $(1,435)      $(1,372)       -95.6%
                                                          =======       =======       =======       ======
</TABLE>
                                       25
<PAGE>

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

NET REVENUE

         Net revenue for the three months ended June 30, 2006 increased
$2,350,000 to $3,243,000, as compared to the three months ended June 30, 2005.
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 by September 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 June 30, 2006 increased
$381,000 to $808,000 as compared to the three months ended June 30, 2005. Global
Hotline's cost of sales primarily related to outsourced call center operations
to support the contracts with a significant Japanese telecommunication company.

EXPENSES

         Selling, general and administrative expenses for the three months ended
June 30, 2006 increased $3,828,000 to $4,666,000, as compared to the year ended
June 30, 2005. This was due to increased operating expenses, primarily due to
$26,000 in expenses related to legal claims, $26,000 related to the
implementation of SFAS 123 R and $4,218,000 related to Global Hotline, which was
acquired on June 15, 2005. During the three months ended June 30, 2006, Global
Hotline increased its expenses to expand the operations for the contracts with
the four significant telecommunication and insurance companies.

         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 to legal claims.

OTHER INCOME/EXPENSE

         Other expense for the three months ended June 30, 2006 was $245,000 as
compared to other expense of $91,000 for the three months ended June 30, 2005.
The 2006 other expense was primarily related to interest expense and
amortization of beneficial conversion feature of $196,000 and a foreign currency
transaction adjustment of $130,000.

         The 2005 other expense was primarily due to foreign currency
translation adjustment.

NET LOSS FROM CONTINUING OPERATIONS

         Net loss from continuing operations was $1,883,000 for the three months
ended June 30, 2006 as compared to a net loss of $463,000 for the three months
ended June 30, 2005. The reasons for the increased loss were due to the
increased expenses from legal claims, implementing new accounting pronouncements
and Global Hotline expenses to expand the operations for the contracts with the
four significant telecommunication and insurance companies, as more fully
discussed above.

                                       26
<PAGE>

NET LOSS

         Net loss was $1,419,000 for the three months ended June 30, 2006 as
compared to a net loss of $891,000 for the three months ended June 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 for the three months ended
June 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 loss of
$361,000, the Fan Club net gain of $47,000 and the IA Acquisition loss of
$114,000 for the three months ended June 30, 2005 as total loss from
discontinued operations in our consolidated statement of operations.

SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2005

NET REVENUE

         Net revenue for the six months ended June 30, 2006 increased $6,021,000
to $6,914,000, as compared to the six months ended June 30, 2005. 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
telecommunications customer, which reduced sales during the three months ended
March 31, 2006. We expect to finalize negotiations on the final penalty by
September 2006 and there is no guarantee that we will be successful in reducing
the penalties.

COST OF SALES

         Cost of sales for the six months ended June 30, 2006 increased
$1,899,000 to $2,326,000 as compared to the six months ended June 30, 2005.
Global Hotline's cost of sales primarily related to outsourced call center
operations to support the contracts with the significant Japanese
telecommunication company.

EXPENSES

         Selling, general and administrative expenses for the six months ended
June 30, 2006 increased $7,387,000 to $8,527,000, as compared to the six months
ended June 30, 2005. This was due to increased operating expenses of $200,000
related to IA Global, primarily due to $190,000 in expenses related to legal
claims, $26,000 related to the implementation of SFAS 123 R and $7,578,000
related to Global Hotline, which was acquired on June 15, 2005. During the three
months ended June 30, 2006, Global Hotline increased its expenses to expand the
operations for the contracts with the four significant telecommunication and
insurance companies.

         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 to legal claims.

OTHER INCOME/EXPENSE

         Other expense for the six months ended June 30, 2006 was $356,000 as
compared to other expense of $74,000 for the three months ended June 30, 2005.
The 2006 other expense was primarily related to interest expense and
amortization of beneficial conversion feature of $391,000 and a foreign currency
translation adjustment of $130,000, offset by other income of $108,000.

                                       27
<PAGE>

         The 2005 other expense was primarily due to foreign currency
translation adjustment.

NET LOSS FROM CONTINUING OPERATIONS

         Net loss from continuing operations was $3,346,000 for the six months
ended June 30, 2006 as compared to a net loss of $748,000 for the six months
ended June 30, 2005. The reasons for the increased loss were due to the
increased expenses from legal claims, implementing new accounting pronouncements
and increased Global Hotline expenses to expand the operations for the contracts
with the four significant telecommunication and insurance companies, as more
fully discussed above.

NET LOSS

         Net loss was $2,807,000 for the six months ended June 30, 2006 as
compared to a net loss of $1,435,000 for the six months ended June 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 six months ended June 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 loss of
$375,000, the Fan Club net loss of $158,000 and the IA Acquisition loss of
$155,000 for the six months ended June 30, 2005 as total loss from discontinued
operations in our consolidated statement of operations.

LIQUIDITY AND CAPITAL RESOURCES

         We had cash of approximately $3,942,000 and net working capital of
approximately $1,378,000 as of June 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 year ended December 31, 2005 and six months
ended June 30, 2006, we expensed $208,000 and $208,000, respectively, of this
beneficial conversion, which was 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.

         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 15, 2006 and accrues interest at 3.5% per annum. The advances
were used to expand the Global Hotline business.

                                       28
<PAGE>

         We may need to obtain additional financing in order to continue our
current operations, including the cash flow needs of Global Hotline and
subsidiaries, to acquire businesses and to maintain the AMEX requirement 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 $20.1
million as of June 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 and $0.1 million raised from a capital
contribution. 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 and $3.1 million related to the Global Hotline acquisition.
Additional funding was obtained from notes payable with approximately $1.7
million and convertible debentures with approximately $2.9 million outstanding
as of June 30, 2006.

OPERATING ACTIVITIES

         Net cash used in continuing operations for the six months ended June
30, 2006 was $6,379,000. This amount was primarily related to a net loss of
$2,807,000, an increase in accounts receivable of $3,056,000 a decrease of in
deferred revenue of $3,590,000. This was offset by depreciation and amortization
of $1,014,000 and an increase in accrued and other liabilities of $3,310,000.

INVESTING ACTIVITIES

         Net cash provided by investing activities for the six months ended June
30, 2006 was $4,595,000. This amount relates to the purchase of capital
expenditures, sale of Rex Tokyo on April 4, 2006 and the repayment of a note
receivable from an affiliate of our controlling shareholder group.

         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.

                                       29
<PAGE>

FINANCING ACTIVITIES

         Net cash provided by financing activities for the six months ended June
30, 2006 was $1,743,000. 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 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.

         Other Material Commitments. The company's contractual cash obligations
as of June 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 ........      $1,057,247      $  679,699      $  309,662      $   67,886      $        0

Note payable ............      $1,742,904      $1,742,904      $        0      $        0      $        0

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

                                       30
<PAGE>

STOCK-BASED COMPENSATION

         Effective January 1, 2006 we 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. We adopted the modified prospective transition method provided
for under SFAS 123R and consequently have not retroactively adjusted results
from prior periods. Under this transition method, compensation cost associated
with stock-based awards recognized in the first quarter of fiscal year 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) would include 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 SFAS 123R. No options were
granted subsequent to January 1, 2006. 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.

         Prior to January 1, 2006, we 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 our consolidated statements of operations when the exercise price
of our employee stock option grant equals 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, we 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 January 1, 2006, 4.2 million options with a weighted
average exercise price of $.245 and a weighted average remaining life of 8.7
years, remain outstanding and continue to be remeasured at the intrinsic value
over their remaining vesting period ranging from 3 months to 2.5 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

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

         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.

                                       31
<PAGE>

         Revenues are deferred when cash has been received from the customer but
the revenue has not been earned. The company has recorded $0 of deferred revenue
as of June 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.

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 June 30, 2006.

RECENT ACCOUNTING PRONOUNCEMENTS

         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, "an
amendment of ARB No. 43, Chapter 4," "SFAS 151")which clarifies the types of
costs that should be expensed rather than capitalized as inventory. SFAS 151
also clarifies the circumstances under which fixed overhead costs associated
with operating facilities involved in inventory processing should be
capitalized. The provisions of SFAS 151 are effective for fiscal years beginning
after June 15, 2005 and we adopted this standard in the three months ending
March 31, 2006. SFAS 151 did not have a significant impact on our consolidated
financial statements.

                                       32
<PAGE>

         In December 2004, the FASB issued SFAS No. 123 (Revised 2004),
"Share-Based Payment," "SFAS 123R" a revision to FASB Statement 123, "Accounting
for Stock-Based Compensation" and this statement supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and its related implementation
guidance. SFAS 123R focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. SFAS No.
123R requires a public entity to measure the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair
value of the award (with limited exceptions). That cost will be recognized over
the period during which an employee is required to provide service in exchange
for the award. SFAS 123R is effective as of the beginning of the first interim
or annual reporting period that begins after June 15, 2005 and the company
implemented SFAS 123R in the first quarter of fiscal 2006. We expect that SFAS
123R will have a significant impact on our consolidated financial statements.

         In March 2005, the SEC released SAB 107, "Share-Based Payments" ("SAB
107"). The interpretations in SAB 107 express views of the SEC staff regarding
the interaction between SFAS 123R and certain SEC rules and regulations, and
provide the staff's views regarding the valuation of share-based payment
arrangements for public companies. In particular, SAB 107 provides guidance
related to share-based payment transactions with non-employees, the transition
form nonpublic to public entity status, valuation methods (including assumptions
such as expected volatility and expected term), the accounting for certain
redeemable financial instruments issued under share-based payment arrangements,
the classification of compensation expense, non-GAAP financial measures,
first-time adoption of SFAS 123R in an interim period, capitalization of
compensation cost related to share-based payment arrangements, the accounting
for income tax effects of share-based arrangements upon adoption of SFAS 123R,
the modification of employee share options prior to the adoption of SFAS 123R
and disclosures in Management's Discussion and Analysis subsequent to the
adoption of SFAS 123R. SAB 107 requires stock-based compensation be classified
in the same expense lines as cash compensation is reported for the same
employees. We implemented SAB 107 in the first quarter of fiscal 2006, in
conjunction with SFAS 123R. We expect that SAB 107 will have a significant
impact on our consolidated financial statements.

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets--An Amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from
fair value measurement for nonmonetary exchanges of similar productive assets in
paragraph 21(b) of APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," and replaces it with an exception for exchanges that do not have
commercial substance. SFAS 153 specifies that a nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS 153 is effective for the
fiscal periods beginning after December 15, 2005 and we adopted this standard in
the three months ending March 31, 2006. SFAS 153 did not have a significant
impact on our consolidated financial statements.

         In June 2005, the FASB issued SFAS No. 154 "Accounting Changes and
Error Corrections," ("SFAS 154"), a replacement of APB Opinion No. 20,
"Accounting Changes", and SFAS No. 3 "Reporting Accounting Changes in Interim
Financial Statements." SFAS 154 applies to voluntary changes in accounting
principle and changes the requirements for accounting for and reporting of a
change in accounting principle. SFAS 154 requires retrospective application to
prior periods' financial statement of a voluntary change in accounting principle
unless it is impracticable. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
Earlier application is permitted for accounting changes and corrections of
errors made occurring in fiscal years beginning after June 1, 2005. We adopted
SFAS 154 effective December 15, 2005. SFAS 154 did not have a significant impact
on our consolidated financial statements.

                                       33
<PAGE>

         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.

         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 its 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.

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 of 1933, as amended (the
"Securities Act")and Section 21E of the Exchange Act) regarding us and our
business, financial condition, results of operations and prospects. Words such
as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions or variations of such words are intended to
identify forward-looking statements, but are not the exclusive means of
identifying forward-looking statements in this report. Additionally, statements
concerning future matters such as the development of new products, enhancements
or technologies, possible changes in legislation and other statements regarding
matters that are not historical are forward-looking statements.

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

                                       34
<PAGE>

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. 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 stockholders' equity above $6,000,000 may cause AMEX to
delist our shares, which 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 November 5, 2004, we received notice from the American Arbitration
Association in New York City that Mr. Badner, a former majority shareholder,
commenced an arbitration proceeding against us, IAJ, and certain of our officers
relating to the September 25, 2002 Agreement and Assignment among the company,
Mr. Badner and IAJ. Mr. Badner alleges (i) unrestricted shares of our stock to
which he was entitled under the agreement were not delivered as per the terms of
the agreement, (ii) unspecified commitments to engage in future business
ventures with Mr. Badner were not made, and (iii) damages resulting from
intentional misrepresentation. Mr. Badner is seeking damages of $2.5 million
plus interest related to the alleged breach of the Agreement and Assignment,
$100,000 for damages suffered related to alleged fraud and misrepresentations
and costs and punitive and exemplary damages in an amount to be determined.
Arbitration of Mr. Badner's claim was held in December 2005 and January 2006. We
do not expect a decision until the third quarter of 2006.

         In April 2006, we received notice of a suit filed 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, one
of our stockholders. AMP filed similar claims in Nevada state court but
voluntarily dismissed the claims without prejudice and may refile in Washington.
We believe that we have been improperly included in this dispute between AMP,
Flashpoint and IAJ, and that there is no basis for the claims made by Flashpoint
and AMP. 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.

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.

                                       35
<PAGE>

         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  Default or lack of performance by its agents;

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

         o  Loss of key personnel.

         o  It has notes payable which require repayment in November 2006 and
            January 2007.

         In addition, the Global Hotline business has a concentration of
customers and suppliers with four customers and four agents, respectively.
During the year ended December 31, 2005, one customer accounted for
substantially all of Global Hotline's revenue in 2005, although Global Hotline
expects to diversify 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 do raise more equity capital in the future,
it is likely that it will result in substantial dilution to our current
stockholders. Any inability to obtain additional financing may materially affect
our business, financial condition and results of operations.

OUR CONTROLLING SHAREHOLDER GROUP HAS SUBSTANTIAL INFLUENCE OVER OUR COMPANY.

         As of June 30, 2006, IAJ LBO Fund, PBAA, Terra Firma, IAJ, Hiroki Isobe
and Kyo Nagae collectively hold approximately 76.9% 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. Such entities have stated in a Schedule 13D that they
may be deemed to constitute a "group" for the purposes of Rule 13d-3 under the
Exchange Act. Hiroki Isobe and Kyo Nagae controls each of our Controlling
Stockholders.

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<PAGE>

         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, mergers, strategic alliances, joint ventures and
divestitures. As part of our business strategy, we completed one acquisition
during early 2003, one acquisition in August 2003, one acquisition in March
2004, one acquisition in June 2004 and one acquisition in June 2005; we invested
in a joint venture in July 2003; 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.

         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,

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<PAGE>

         - 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 a major United States insurance company and
entered into contracts with agents to outsource call center operations. 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 principal customer.

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,

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<PAGE>

         - Announcements by us regarding significant acquisitions 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 June 30, 2006, 108.2 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.

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.

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<PAGE>

WE EXPECT TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.

         We have experienced net losses since inception. We expect our net loss
from operations to 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. We do not trade in
hedging instruments or "other than trading" instruments and a significant change
in the foreign currency exchange rate between the Japanese Yen and US Dollar
would have a material adverse effect on our business, financial condition and
results of operations.

WE ARE 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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY

         We were exposed to foreign currency risks due to the sale of Rex Tokyo
on April 4, 2006 and the acquisition of Global Hotline on June 15, 2005. These
businesses operate in Japan.

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

INTEREST RATE RISK

         After giving effect to the disposition of Rex Tokyo, which we sold on
April 4, 2006, the company is exposed to interest rate risk at 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.

         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.

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<PAGE>

         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.

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

ITEM 4.  CONTROLS AND PROCEDURES

         Our principal executive officer and principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30,
2006. Based on this evaluation, our principal executive officer and principal
financial officer concluded that, as of June 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.

         During the quarter, our subsidiary Global Hotline entered into a
financial transaction on June 30, 2006 and the Form 8-K was not filed until July
11, 2006. We have reviewed this deficiency and the company has taken remedial
steps to address this issue.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On November 5, 2004, we received notice from the American Arbitration
Association in New York City that Mr. Badner, a former majority shareholder,
commenced an arbitration proceeding against us, IAJ, and certain of our officers
relating to the September 25, 2002 Agreement and Assignment among the company,
Mr. Badner and IAJ. Mr. Badner alleges (i) unrestricted shares of our stock to
which he was entitled under the agreement were not delivered as per the terms of
the agreement, (ii) unspecified commitments to engage in future business
ventures with Mr. Badner were not made, and (iii) damages resulting from
intentional misrepresentation. Mr. Badner is seeking damages of $2.5 million
plus interest related to the alleged breach of the Agreement and Assignment,
$100,000 for damages suffered related to alleged fraud and misrepresentations
and costs and punitive and exemplary damages in an amount to be determined.
Arbitration of Mr. Badner's claim was held in December 2005 and January 2006. We
do not expect a decision until the third quarter of 2006.

         In April 2006, we received notice of a suit filed 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, one
of our stockholders. AMP filed similar claims in Nevada state court but
voluntarily dismissed the claims without prejudice and may refile in Washington.
We believe that we have been improperly included in this dispute between AMP,
Flashpoint and IAJ, and that there is no basis for the claims made by Flashpoint
and AMP. 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.

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<PAGE>

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.

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

         On June 9, 2006, the Company held its 2006 Annual Meeting of
Stockholders. Of the 108,165,157 shares of common stock outstanding as of record
date of May 5, 2006, 102,890,389 shares, or 95.1 percent of the Company's common
stock, were present or represented by proxy at the meeting, constituting a
quorum. The results of the matters submitted to the stockholders were as
follows:

         Elect four directors to the Company's board of directors, each to serve
for a term of one year or until a successor has been elected and qualified:

Name                        Votes For       Votes Withheld      Broker Non-Votes
----                        ---------       --------------      ----------------

Raymond J. Christinson     102,669,630         220,759                N/A
Eric La Cara               102,669,630         220,759                N/A
Mark E. Scott              102,669,630         220,759                N/A
Dr. Jun Kumamoto           102,851,540          38,849                N/A

ITEM 5.  OTHER INFORMATION

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

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<PAGE>

ITEM 6.  EXHIBITS

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

10.1     Share Sale Agreement dated April 4, 2006 among IA Global, Inc., Rex
         Tokyo Co Ltd and Hiroyuki Ejima. (1)

10.2     Amendment 3 to Senior Secured Promissory Note dated April 11, 2006
         between Global Hotline, Inc. and GMB International Inc. (2)

10.3     Agency Contract dated April 14, 2006 between Japan Telecom Invoicing,
         Inc. and Global Hotline, Inc. (English translation)(3)

10.5     Agreement dated April 25, 2006 between Global Hotline, Inc. and KDDI
         Networks and Solutions. (English translation)(3)

10.6     Agency Ordering Agreement dated May 10, 2006 between IA Partners Co Ltd
         and AFLAC Co Ltd. (English translation) (4)

10.7     Business Agency Contract dated May 10, 2006 between IA Partners Co Ltd
         and AFLAC Co Ltd. (English translation)(4)

10.8     Working Capital Loan dated June 30, 2006 between Global Hotline Inc.
         and Risona Bank Co Ltd. (English translation)(4)

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

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

(1)      Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
         April 4, 2006 and filed April 7, 2006, and incorporated herein by
         reference.

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

(3)      Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q,
         dated May 15, 2006 and filed May 15, 2006, and incorporated herein by
         reference.

(4)      Filed herewith.


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<PAGE>

                                   SIGNATURES

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

                                        IA Global, Inc.
                                        (Registrant)

Date: August 11, 2006                   By: /s/ Mark Scott
                                        ------------------
                                        Mark Scott,
                                        President and Chief Financial Officer
                                        (Principal Executive and Financial
                                        and Accounting Officers)



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