_______________________________________________________________________________  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 September 30, 2009  Commission File Number: 1-15863 __________________________  IA GLOBAL, INC. (Exact name of registrant as specified in its charter) ___________________________  DELAWARE
        13-4037641(State or other jurisdiction ofincorporation or organization)
        (IRS Employer Identification No.)
  101 CALIFORNIA STREET, SUITE 2450, SAN FRANCISCO, CA 94111 (Address of principal executive offices) (Zip Code)  (Registrants telephone number, including area code)  (415)-946-8828 ___________________________  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 o  Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files).
Yes o    No o  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):  Large accelerated filer
        o
        Accelerated filer
        oNon-accelerated filer
        o
        Smaller reporting company
        x(Do not check if a smaller reporting company)
  Indicated by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x  As of January 5, 2010 there were issued and outstanding 299,792,972 shares of the registrants common stock. ________________________________________________________________________________    IA GLOBAL, INC.

FORM 10-Q

TABLE OF CONTENTS




PagePART I  FINANCIAL INFORMATIONItem 1.
        Financial Statements
        3Consolidated Balance Sheets
        3Consolidated Statements of Operations
        4Consolidated Statement of Cash Flows
        5Notes to Consolidated Financial Statements
        6Item 2.
        Managements Discussion and Analysis of Financial Condition and Results of Operations
        30Item 3.
        Quantitative and Qualitative Disclosures About Market Risk
        45Item 4.
        Controls and Procedures
        46PART II  OTHER INFORMATIONItem 1.
        Legal Proceedings
        46Item 1A.
        Risk Factors
        46Item 2.
        Unregistered Sales of Equity Securities and Use of Proceeds
        47Item 3.
        Defaults Upon Senior Securities
        50Item 4.
        Submission of Matters to a Vote of Security Holders
        50Item 5.
        Other Information
        50Item 6.
        Exhibits
        51Signatures
        52Exhibit 31.1Exhibit 31.2Exhibit 32



2

PART I - FINANCIAL INFORMATION



Item 1. Financial Statements



IA GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




September 30, 2009
        
        March 31,2009 (1)ASSETS
        
        (unaudited)
        
        (audited)CURRENT ASSETS:Cash and cash equivalents
        
        $
        
        
        $
        19,174Accounts receivable, net of allowance of $1,188 and $1,182, respectively
        
        
        16,640
        
        
        33,993Prepaid expenses
        
        
        53,271
        
        
        40,512Notes receivable
        
        
        
        
        
        8,084Other current assets
        
        
        122,440
        
        
        10,205Net assets- discontinued operations
        
        
        
        
        
        20,140,122Total current assets
        
        
        192,351
        
        
        20,252,090EQUIPMENT, NET
        
        
        83,761
        
        
        111,731OTHER ASSETSIntangible assets, net
        
        
        488,331
        
        
        555,870Investment in Taicom Securities Co Ltd
        
        
        
        
        
        2,861,365Equity investment in Slate Consulting Co Ltd
        
        
        
        
        
        1,386,054Other assets
        
        
        17,491
        
        
        17,603$
        781,934
        
        $
        25,184,713LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIES:Cash overdraft
        
        $
        39,976
        
        $
        Accounts payable - trade
        
        
        1,111,412
        
        
        599,624Accrued liabilities
        
        
        1,028,715
        
        
        890,102Note payable - current portion of long term debt
        
        
        387,812
        
        
        355,641Net liabilities- discontinued operations
        
        
        
        
        
        29,424,802Deferred gain on forfeit of Global Hotline operations
        
        
        10,062,614
        
        
        Total current liabilities
        
        
        12,630,529
        
        
        31,270,169LONG TERM LIABILITIES:Long term debt
        
        
        199,500
        
        
        199,500STOCKHOLDERS DEFICIT:Preferred stock, $.01 par value, 5,000 authorized, none outstanding
        
        
        
        
        
        LLC Series Preferred stock, $.01 par value, 317 shares authorized and 317and 0, issued and outstanding, respectively (liquidation value $317,000)
        
        
        317,000
        
        
        Common stock, $.01 par value, 450,000,000 shares authorized, 228,331,389and 219,113,889, issued and outstanding, respectively
        
        
        2,283,315
        
        
        2,191,140Additional paid in capital
        
        
        53,898,234
        
        
        53,056,216Accumulated deficit
        
        
        (68,112,101
        )
        
        (59,572,442
        )Accumulated other comprehensive loss
        
        
        (181,636
        )
        
        (1,706,963
        )(11,795,188
        )
        
        (6,032,049
        )Less common stock in treasury, at cost
        
        
        (252,907
        )
        
        (252,907
        )Total stockholders deficit
        
        
        (12,048,095
        )
        
        (6,284,956
        )$
        781,934
        
        $
        25,184,713



(1) Reflects deconsolidation of Global Hotline, Inc. as
of December 8, 2009, retroactive to July 1, 2009, as described in Note 3.



See notes to consolidated financial statements.



3

IA GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS




Three Months EndedSeptember 30,
        
        Six Months EndedSeptember 30,2009
        
        2008 (1)
        
        2009
        
        2008 (1)(unaudited)
        
        (unaudited)
        
        (unaudited)
        
        (unaudited)REVENUE
        
        $
        20,924
        
        $
        176,649
        
        $
        68,371
        
        $
        323,428COST OF SALES
        
        
        30,397
        
        
        122,342
        
        
        73,757
        
        
        216,984GROSS PROFIT
        
        
        (9,473
        )
        
        54,307
        
        
        (5,386
        )
        
        106,444SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
        
        
        761,027
        
        
        829,134
        
        
        1,881,572
        
        
        1,703,706OPERATING LOSS
        
        
        (770,500
        )
        
        (774,827
        )
        
        (1,886,958
        )
        
        (1,597,262
        )OTHER INCOME (EXPENSE):Interest income
        
        
        
        
        
        
        
        
        8
        
        
        13,998Interest expense and amortization of beneficial conversion feature
        
        
        (20,690
        )
        
        (87,925
        )
        
        (42,200
        )
        
        (290,182
        )Other income
        
        
        80,237
        
        
        (259
        )
        
        80,237
        
        
        179,202Gain on equity investment in Australia Secured Financial Limited
        
        
        
        
        
        18,492
        
        
        
        
        
        274,611Gain on equity investment in GPlus Media Co Ltd
        
        
        
        
        
        20,783
        
        
        
        
        
        53,418(Loss) gain on equity investment in Slate Consulting Co Ltd
        
        
        (28,004
        )
        
        460
        
        
        (16,298
        )
        
        23,565Loss on forfeiture of Taicom Securities Co Ltd
        
        
        (2,861,365
        )
        
        
        
        
        (2,861,365
        )
        
        Loss on investment in Taicom Securities Co Ltd
        
        
        
        
        
        (113,708
        )
        
        
        
        
        (220,244
        )Loss on sale of Slate Consulting co Ltd
        
        
        (1,284,756
        )
        
        
        
        
        (1,284,756
        )
        
        Loss on foreign currency transaction adjustment
        
        
        (13
        )
        
        (62,819
        )
        
        (215
        )
        
        (65,760
        )Total other expense
        
        
        (4,114,591
        )
        
        (224,976
        )
        
        (4,124,589
        )
        
        (31,392
        )LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
        
        
        (4,885,091
        )
        
        (999,803
        )
        
        (6,011,547
        )
        
        (1,628,654
        )Income taxes - current (benefit) provision
        
        
        
        
        
        (10,629
        )
        
        380
        
        
        (9,076
        )NET LOSS FROM CONTINUING OPERATIONS
        
        
        (4,885,091
        )
        
        (989,174
        )
        
        (6,011,927
        )
        
        (1,619,578
        )(Loss) gain from discontinued operations
        
        
        
        
        
        (709,312
        )
        
        (2,335,732
        )
        
        648,730NET LOSS BEFORE DEEMED PREFERRED STOCK DIVIDEND
        
        
        (4,885,091
        )
        
        (1,698,486
        )
        
        (8,347,659
        )
        
        (970,848
        )Deemed Preferred Stock Dividend
        
        
        
        
        
        
        
        
        (192,000
        )
        
        NET LOSS
        
        $
        (4,885,091
        )
        $
        (1,698,486
        )
        $
        (8,539,659
        )
        $
        (970,848
        )Basic and diluted loss per share of common-Basic loss per share from continuing operations
        
        $
        (0.02
        )
        $
        (0.00
        )
        $
        (0.03
        )
        $
        (0.01
        )Basic loss per share from discontinued operations
        
        
        
        
        
        
        
        
        (0.01
        )
        
        Total basic loss per share
        
        $
        (0.02
        )
        $
        0.00
        
        $
        (0.04
        )
        $
        (0.01
        )Diluted profit (loss) per share from continuing operations
        
        $
        *
        
        $
        *
        
        $
        *
        
        $
        *Diluted profit (loss) per share from discontinued operations
        
        
        *
        
        
        *
        
        
        *
        
        
        *Total diluted profit (loss) per share
        
        $
        *
        
        $
        *
        
        $
        *
        
        $
        *Weighted average shares of common stock outstanding- basic
        
        
        223,919,250
        
        
        209,727,516
        
        
        221,386,590
        
        
        193,172,522Weighted average shares of common stock outstanding- diluted
        
        
        *
        
        
        *
        
        
        *
        
        
        *



* Diluted calculation is not presented as it is anti-dilutive.



(1) Reflects deconsolidation of Global Hotline, Inc. as
of December 8, 2009, retroactive to July 1, 2009, as described in Note 3.



See notes to consolidated financial statements.



4

IA GLOBAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS




Six Months EndedSeptember 30,2009
        
        2008 (1)(unaudited)
        
        (unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income from operations
        
        $
        (8,347,659
        )
        $
        (970,848
        )Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activitiesDepreciation and amortization
        
        
        95,509
        
        
        53,552Amortization of beneficial conversion feature
        
        
        
        
        
        104,167Amortization of prepaid financing
        
        
        4,106
        
        
        47,684Stock based compensation
        
        
        362,143
        
        
        250,811Stock issued for services
        
        
        
        
        
        172,584Loss on equity investments
        
        
        16,298
        
        
        (133,653
        )Loss on sale of equity investment
        
        
        1,284,756
        
        
        Loss on forfeiture of investment
        
        
        2,861,365
        
        
        Changes in operating assets and liabilities:Accounts receivable
        
        
        17,353
        
        
        (57,894
        )Prepaid expenses
        
        
        (16,865
        )
        
        (101,744
        )Notes receivable
        
        
        8,084
        
        
        (8,185
        )Other current assets
        
        
        (112,235
        )
        
        (1,008
        )Refundable taxes - foreign
        
        
        
        
        
        (9,076
        )Other assets
        
        
        112
        
        
        (25,576
        )Accounts payable - trade
        
        
        511,788
        
        
        381,316Accrued liabilities and payroll taxes
        
        
        138,613
        
        
        (48,926
        )Consumption taxes received
        
        
        
        
        
        (5,618
        )Net cash provided by continuing operations
        
        
        (3,176,632
        )
        
        (352,414
        )Net cash provided by (used for) discontinued operations
        
        
        777,934
        
        
        (460,799
        )CASH FROM OPERATING ACTIVITIES
        
        
        (2,398,698
        )
        
        (813,213
        )CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
        
        
        
        
        
        (9,075
        )Acquisition of subsidiary Shift Resources, Inc.
        
        
        
        
        
        (35,000
        )Cash from acquisition of Shift Resources, Inc. and Asia Premier Executive Suites, Inc.
        
        
        
        
        
        12,158Receivable from the sale of Slate Consulting Co., Ltd.
        
        
        85,000
        
        
        NET CASH USED IN INVESTING ACTIVITIES:
        
        
        85,000
        
        
        (31,917
        )CASH FROM FINANCING ACTIVITIES:Cash deficit
        
        
        39,976
        
        
        Proceeds from debt
        
        
        120,000
        
        
        530,078Repayments of debt
        
        
        (18,000
        )
        
        (610,000
        )Proceeds from exercise of options
        
        
        
        
        
        10,800Proceeds from sale of common stock
        
        
        380,050
        
        
        562,086Proceeds from sale of preferred shares
        
        
        317,000
        
        
        NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
        
        
        839,026
        
        
        492,964NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
        
        
        (1,474,672
        )
        
        (352,166
        )EFFECT OF EXCHANGE RATE CHANGES ON CASH
        
        
        1,455,498
        
        
        178,241CASH AND CASH EQUIVALENTS, beginning of period
        
        
        19,174
        
        
        207,403CASH AND CASH EQUIVALENTS, end of period
        
        $
        
        
        $
        33,478Supplemental disclosures of cash flow information:Interest paid
        
        $
        3,491
        
        $
        44,791Taxes paid
        
        $
        
        
        $
        1,610Non-cash investing and financing activities:Deemed dividend on issuance of LLC Series Preferred Stock
        
        $
        192,000
        
        $
        Conversion of debentures into Common Stock
        
        $
        
        
        $
        2,300,000Conversion of interest payable on debentures into Common Stock
        
        $
        
        
        $
        78,822Issuance of Common Stock for acquisition of Subsidiary - Asia Premier Executive Suites, Inc.
        
        $
        
        
        $
        300,000Issuance of Common Stock for acquisition of Subsidiary - Shift Resources, Inc.
        
        $
        
        
        $
        190,000Issuance of Common Stock for acquisition of Investment - Taicom Securities Co., Ltd.
        
        $
        
        
        $
        5,200,000Issuance of Note Payable for acquisition of Subsidiary - Asia Premier Executive Suites, Inc.
        
        $
        
        
        $
        268,000



(1) Reflects deconsolidation of Global Hotline, Inc. as
of December 8, 2009, retroactive to July 1, 2009, as described in Note 3.



See notes to consolidated financial statements.



5

IA GLOBAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. BUSINESS



THE COMPANY AND OUR BUSINESS



IA Global, Inc. (IA Global or the Company) is a services company focused on growing its existing businesses and expanding through mergers and acquisitions in the Pacific Rim region. Our mission is to identify and invest in business opportunities, apply our skills and resources to nurture and enhance the performance of those businesses across key business metrics, and to deliver accelerating shareholder value.



The Company plans to utilize its business partnerships to acquire or invest in growth businesses in certain target sectors and markets at discounted prices. The Company expects to focus on growth opportunities with distressed businesses that require improvements in management, financial processes and liquidity to be successful. Our targets for acquisition or investment include growth and commodity businesses in the energy sector (including oil and gas, solar, biofuels, and other energy markets). The Company also expects to focus on other sectors in which businesses would benefit from our infrastructure and business process expertise, including financial services and technology. The Company expects to leverage its existing presence in Asia in partnerships with US-based companies seeking to expand their Asian business.



In the Philippines, IA Global is the 100% owner of Asia Premier Executive Suites Inc. and Shift Resources Inc., companies that have now been merged into a single company named Global Hotline Philippines Inc.



On December 18, 2009, the Company
received an investment of 200 million Yen, or approximately $2.2 million at current exchange rates, from the Inter Asset Japan LBO
No. 1 Fund. The Company has tentatively allocated $2.0 million of the investment to establish a venture capital fund in South Korea,
and it expects to use the remaining $0.2 million for working capital purposes. The Companys $2.0 million will be part of a larger,
Korean government-backed venture fund that is expected to raise approximately $30 million in its first round of financing by early
2010. TOZAI Holdings Inc. (TOZAI), a company traded on the Korean Kosdaq stock market under the symbol 037700 with successful
experience in investing in high-technology ventures in Korea, is facilitating the Korean government licensing and
funding.



The venture fund is expected to facilitate high-tech manufacturing of solar, LCD, and touch panels in Korea. This is the Companys first step toward strengthening its position in global technical, financial, energy, and commodity markets. TOZAI and the Company intend to partner to build a solid foundation that utilizes the low-cost, highly skilled technology base in Korea to capture emerging business opportunities worldwide.



Until recently, the Company also
operated in Japan through its wholly-owned subsidiary, Global Hotline, Inc. (GHI or Global Hotline). In May
2009, a dispute arose between GHI and one of its lenders, H Capital, Inc. The dispute resulted in H Capital claiming ownership of IA
Globals shares in GHI, which had been pledged as collateral for certain loans borrowed by the subsidiary. Although the Company
continues to assert its ownership of GHI, on December 8, 2009, the Company reached the decision to deconsolidate the operations of
Global Hotline, effective as of July 1, 2009. As a result, the Company accounted for Global Hotline as a discontinued operation for
periods ending after July 1, 2009. As a result, the Company accounted for Global Hotline as a discontinued operation for periods
ending after July 1, 2009. Our net profit and stockholders equity will increase by $10.1 million during the three months ended
December 31, 2009 as a result of recording the deferred gain of from the forfeiture of Global Hotline operations that was recorded
during the three months ended September, 2009. These events and their impact on our financial statements are discussed in more
detail in other portions of this report, including Note 3.



CORPORATE INFORMATION



The Company was incorporated in Delaware on November 12, 1998. The Companys executive offices are located at 101 California Street, Suite 2450, San Francisco, CA 94111, with its operating units being located primarily in the Pacific Rim region. The Companys telephone number is (415) 946-8828 and its primary website is located at www.iaglobalinc.com. The information on our website is not a part of this Form 10-Q.



6

THE COMPANYS COMMON STOCK



Our common stock currently trades on the NYSE AMEX stock market (NYSE AMEX) under the symbol IAO.



UNAUDITED FINANCIAL STATEMENTS



The accompanying unaudited consolidated financial statements of IA Global and our subsidiaries have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The financial statements for the periods ended September 30, 2009 and 2008 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 for the fiscal year ended March 31, 2009 as filed with the Securities and Exchange Commission (the SEC) on September 3, 2009.



In this Form 10-Q, the phrase at current exchange rates refers to the exchange rate in effect as of the date of the applicable event or transaction.



GOING CONCERN



These consolidated unaudited financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States on a going concern basis, which presumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.



The Company has incurred operating
losses for the six months ended September 30, 2009 and 2008, the year ended March 31, 2009, the transition period for the three
months ended March 31, 2008, and for the years ended December 31, 2007 and 2006, as well having an accumulated deficit of
approximately $58,000,000 and $59,600,000, and a working capital deficit of approximately $12,439,000 and $11,018,000, each as of
September 30, 2009 and March 31, 2009, respectively. The working capital deficit includes a deferred gain of $10,063,000 related to
the forfeiture of Global Hotline operations that will be recorded as income from discontinued operations during the three months
ended December 31, 2009.



The Companys ability to continue as a going concern is dependent upon the continued development of our business and investments, obtaining additional financing to develop such business, and the success of the Companys business plan. The outcome of these matters cannot be predicted at this time. These consolidated unaudited financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue its business.



Although the Company continues to
assert its ownership of GHI, on December 8, 2009, the Company deconsolidated the operations of Global Hotline, effective as of July
1, 2009. As a result, the Company accounted for Global Hotline as a discontinued operation for periods ending after July 1, 2009.
Our stockholders equity will increase by $10.1 million during the three months ended December 31, 2009. These events and their
impact on our financial statements are discussed in more detail in other portions of this report, including Note 3.



RECLASSIFICATIONS



Certain reclassifications have been made to the Companys financial statements for prior periods to conform to the current presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.



Included in such reclassification is the presentation
of Global Hotline as a discontinued operation as of March 31, 2009 and for the three and six months ended September 30, 2008.



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. Inter-company items and transactions have been eliminated in consolidation.



7

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 US$250,000. Balances in Japanese banks are generally insured by the Deposit Insurance Corporation of Japan up to 10,000,000 Yen per depositor per bank or approximately US$104,000 of September 30, 2009. During the three months ended September 30, 2009, the Companys cash in bank deposit accounts did not exceed federally insured limits with regards to certain accounts in the United States. During the three months ended September 30, 2009 the Companys cash in bank deposit accounts did not exceed Japanese statutory limits with regards to certain accounts in Japan. 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.



EQUIPMENT - Equipment consists of machinery, equipment and software, which are stated at cost less accumulated depreciation and amortization. Depreciation of machinery and equipment is computed by the accelerated or straight-line methods over the estimated useful lives of the relevant asset, generally 2-5 years. Software developed or obtained for internal use is amortized using the straight-line method over the estimated useful life of the software, generally

2-3 years.



INTANGIBLE ASSETS / INTELLECTUAL PROPERTY - The Company is amortizing the intellectual property and other intangible assets acquired in connection with its acquisition of Global Hotline Philippines, Inc. over 60 months on a straight-line basis, which corresponds with the period of time for which management was able to project future revenues, either under the parties agreement or through ongoing business activities following the closing of the transaction.



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 the projected cost associated with selling the asset). To the extent carrying values exceed fair values, an impairment loss is recognized in operating results.



INVESTMENTS - The Company accounts for its investments using the equity method unless the value of an investment has been determined to be other than temporarily impaired, in which case we write the investment down to its impaired value. The Company reviews these investments periodically for impairment and makes appropriate reductions in carrying values when an other-than-temporary decline is evident; however, for non-marketable equity securities, the impairment analysis requires significant judgment. During its review, the Company evaluates the financial condition of the issuer, market conditions, and other factors providing an indication of the fair value of the investments. Adverse changes in market conditions or operating results of the issuer that differ from expectation, could result in additional other-than-temporary losses in future periods.



FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company has adopted FASB Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements, for assets and liabilities measured at fair value on a recurring basis. Topic 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, Topic 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:



Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities



Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data



Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entitys own assumptions.



8

All cash and cash equivalents include money market securities and commercial paper that are considered to be highly liquid and easily tradable as of September 30, 2009. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy.



The carrying amounts of the Companys financial assets and liabilities, such as cash, accounts receivable, prepayments and other current assets, accounts payable, taxes payable, accrued expenses and other current liabilities, approximate their fair values because of the short maturity of these instruments. The Companys loan payable approximates the fair value of such instrument based upon managements best estimate of interest rates that would be available to the Company for similar financial arrangement at September 30, 2009 and March 31, 2009.



In addition to Topic 820 as noted above, SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, was effective for the fiscal year ended March 31, 2009 and the three months ended March 31, 2009 and 2008. SFAS 159 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.



REVENUE RECOGNITION - Global Hotline Philippines revenue is derived from other products and services. Revenue is considered realized when the services have been provided to the customer, the work has been accepted by the customer and collectability is reasonably assured. Furthermore, if an actual measurement of revenue cannot be determined, we defer 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 recorded deferred revenue of US$0 as of September 30, 2009 and March 31, 2009, respectively.



ADVERTISING COSTS - Advertising costs are expensed as incurred. There were minimal advertising costs incurred for the three months ended September 30, 2009 and 2008.



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 periods ended. 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 - We account for the grant of stock options and restricted stock awards in accordance with ASC 718, Compensation-Stock Compensation.   ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation.



When 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 weighted assumptions noted in the following table.




For the Six Months EndedSeptember 30,2009
        2008Risk-free interest rate
        3.96%
        3.96%Expected life
        8.00 years
        8.02 yearsDividend rate
        0.00%
        0.00%Expected volatility
        112%
        112%



The Company recorded $362,143 and
$250,811 of compensation expense, net of related tax effects, relative to stock options for the six months ended September 30, 2009
and 2008 in accordance with SFAS 123R. Net loss per share (basic and diluted) associated with this expense was approximately
($0.00).



As of September 30, 2009, there is
approximately $300,000 of total unrecognized costs related to employee granted stock options that are not vested. These costs are
expected to be recognized over a period of approximately three years.



9

In addition to options granted to
employees, the Company grants options and warrants to non-employees for services. The Company did not issue any shares of common
stock to non-employees during the six months ended September 30, 2009. The Company issued 21,429 shares of common stock to
non-employees at an average exercise price of $.280 per share in the six months ended September 30, 2008. There are 273,929 stock
options outstanding that are held by non-employees as of September 30, 2009, which carry an average exercise price of $.342 per
share.



On June 17, 2009, certain key executives, employees, and directors of the Company voluntarily cancelled stock option grants to purchase an aggregate of 5,439,583 shares of common stock. The grants were previously issued on various dates and prices above $.13 per share.



On June 17, 2009, the Company awarded stock option grants totaling 5,439,583 shares to certain key executives, employees, and directors. The grants were priced at $.05 per share, the closing price of the Companys common stock on June 16, 2009, the date before the scheduled compensation committee meeting at which such grants were approved. In accordance with the 2007 Stock Incentive Plan, the grants are vested immediately and expire on June 16, 2019. The stock options were granted to provide a proper incentive for employees, officers and directors and to reduce the cost of the stock option grants over the subsequent three years. The Company expensed $345,846 during the six months ended September 30, 2009 related to this transaction.



On August 24, 2009, the Company awarded Mr. Scott, our Chief Financial Officer, an option to purchase 300,000 shares of the Companys common stock. The award was granted at the fair market price of $0.05 per share based on the adjusted closing price of the Companys common stock on August 20, 2009, the last trading day before the board of directors approved the grant. In accordance with the 2007 Stock Incentive Plan, the stock option vests quarterly over three years and expires on August 23, 2019.



On September 4, 2009, the Company awarded to each of Messrs. Hoekstra, Senda, Henry, Garnreiter and LeClaire (all directors of the Company) an option to purchase 400,000 shares of the Companys common stock. The awards were granted at the fair market price of $0.04 per share based on the adjusted closing price of the Companys common stock on the date of the award. In accordance with the 2007 Stock Incentive Plan, the stock options vest quarterly over three years and expire on September 3, 2019.



On November 5, 2009, the compensation committee awarded Mr. Hoekstra an option to purchase 1,200,000 shares of the Companys common stock. The award was granted at the fair market price of $0.04 per share based on the adjusted closing price of the Companys common stock on November 4, 2009, the last trading day before the compensation committee approved the award. The stock option vests quarterly over three years beginning on September 4, 2009 and expires on September 3, 2019.



COMPREHENSIVE INCOME - The Company has adopted ASC 220, 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 Stockholders Equity.



INCOME TAXES - Income tax provision (benefit) is based on reported income (loss) before income taxes. Deferred income taxes reflect the effect of temporary differences between asset and liability amounts that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws in the countries and locations where the Company (or its applicable subsidiary) operates. The Company recognizes refundable and deferred assets to the extent that management has determined their realization.



NET LOSS PER SHARE - Under the provisions of ASC 260, Earnings Per Share, basic income (loss) per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. The common stock equivalents have not been included as they are anti-dilutive. As of September 30, 2009, there were options outstanding for the purchase of 13,574,012 common shares, warrants for the purchase of 11,482,064 common shares, 3,554,546 shares of common stock issued as collateral for loans, 400,000 shares
of common stock issued in connection with services and 4,000,000 shares reserved for potential issuance in connection with certain ArqueMax Ventures transactions, which could potentially dilute future earnings per share. As of September 30, 2008, there were options outstanding for the purchase of 12,000,512 common shares, warrants for the purchase of 4,462,243 common shares and shares issued as collateral for loans of 9,000,000 shares of common stock, which could potentially dilute future earnings per share.



10

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.



RECENT ACCOUNTING PRONOUNCEMENTS





        EITF Issue No. 07-5 (ASC 815), Determining Whether an Instrument (or embedded Feature) is Indexed to an Entitys Own Stock (EITF 07-5) was issued in June 2008 to clarify how to determine whether certain instruments or features were indexed to an entitys own stock under EITF Issue No. 01-6 (ASC 815), The Meaning of Indexed to a Companys Own Stock (EITF 01-6) (ASC 815),. EITF 07-5(ASC 815), applies to any freestanding financial instrument (or embedded feature) that has all of the characteristics of a derivative as defined in FAS 133, for purposes of determining whether that instrument (or embedded feature) qualifies for the first part of the paragraph 11(a) scope exception. It is also applicable to any freestanding financial instrument (e.g., gross physically settled warrants) that is potentially settled in an
entitys own stock, regardless of whether it has all of the characteristics of a derivative as defined in FAS 133 (ASC 815), for purposes of determining whether to apply EITF 00-19 (ASC 815). EITF 07-5(ASC 815) does not apply to share-based payment awards within the scope of FAS 123(R), Share-Based Payment (FAS 123(R) (ASC 718)). However, an equity-linked financial instrument issued to investors to establish a market-based measure of the fair value of employee stock options is not within the scope of FAS 123(R) and therefore is subject to EITF 07-5(ASC 815).






        In January 2009, the FASB issued FSP EITF 99-20-1 (ASC 325), to amend the impairment guidance in EITF Issue No. 99-20 (ASC 325) in order to achieve more consistent determination of whether an other-than-temporary impairment (OTTI) has occurred. This FSP amended EITF 99-20 (ASC 325) to more closely align the OTTI guidance therein to the guidance in Statement No. 115 (ASC 320, 10-35-31). Retrospective application to a prior interim or annual period is prohibited. The guidance in this FSP was considered in the assessment of OTTI for various securities at December 31, 2008.






        On June 5, 2003, the United States Securities and Exchange Commission (SEC) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), as amended by SEC Release No. 33-9072 on October 13, 2009. Commencing with its annual report for the year ending March 31, 2011, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:





◦
        managements responsibility for establishing and maintaining adequate internal control over its financial reporting;



◦
        managements assessment of the effectiveness of its internal control over financial reporting as of year end; and



◦
        the framework used by management to evaluate the effectiveness of the Companys internal control over financial reporting.




Furthermore, it is required to file the auditors attestation report separately on the Companys internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.





        In June 2009, the FASB approved the FASB Accounting Standards Codification (the Codification) as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009.






        In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-04Accounting for Redeemable Equity Instruments - Amendment to Section 480-10-S99which represents an update to section 480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98,Classification and Measurement of Redeemable Securities. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.




11


        In August 2009, the FASB issued the FASB Accounting Standards Update No. 2009-05Fair Value Measurement and Disclosures Topic 820  Measuring Liabilities at Fair Value, which provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures  Overall, for the fair value measurement of liabilities. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques: 1. A valuation technique that uses: a. The quoted price of the identical liability when traded as an asset b. Quoted prices for similar liabilities or similar liabilities when traded as assets. 2. Another valuation technique that is
consistent with the principles of topic 820; two examples would be an income approach, such as a present value technique, or a market approach, such as a technique that is based on the amount at the measurement date that the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. The amendments in this update also clarify that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. The amendments in this update also clarify that both a quoted price in an active market for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The Company does not expect the adoption of this update to have a material impact on its consolidated financial
position, results of operations or cash flows.






        In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-08Earnings Per Share  Amendments to Section 260-10-S99,which represents technical corrections to topic 260-10-S99, Earnings per share, based on EITF Topic D-53,Computation of Earnings Per Share for a Period that includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stockand EITF Topic D-42,The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The Company does not expect the adoption of this update to have a material impact on its consolidated financial position, results of operations or cash flows.






        In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-09Accounting for Investments-Equity Method and Joint Ventures and Accounting for Equity-Based Payments to Non-Employees. This update represents a correction to Section 323-10-S99-4,Accounting by an Investor for Stock-Based Compensation Granted to Employees of an Equity Method Investee. Additionally, it adds observer commentAccounting Recognition for Certain Transactions Involving Equity Instruments Granted to Other Than Employeesto the Codification. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.






        In September 2009, the FASB issued the FASB Accounting Standards Update No. 2009-12Fair Value Measurements and Disclosures Topic 820  Investment in Certain Entities That Calculate Net Assets Value Per Share (or Its Equivalent), which provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this update permit, as a practical expedient, a reporting entity to measure the fair value of an investment that is within the scope of the amendments in this update on the basis of the net asset value per share of the investment (or its equivalent) if the net asset value of the investment (or its equivalent) is calculated in a manner
consistent with the measurement principles of Topic 946 as of the reporting entitys measurement date, including measurement of all or substantially all of the underlying investments of the investee in accordance with Topic 820. The amendments in this update also require disclosures by major category of investment about the attributes of investments within the scope of the amendments in this update, such as the nature of any restrictions on the investors ability to redeem its investments at the measurement date, any unfunded commitments (for example, a contractual commitment by the investor to invest a specified amount of additional capital at a future date to fund investments that will be make by the investee), and the investment strategies of the investees. The major category of investment is required to be determined on the basis of the nature and risks of the investment in a manner consistent with the guidance for major security types in U.S. GAAP on investments in debt
and equity securities in paragraph 320-10-50-1B. The disclosures are required for all investments within the scope of the amendments in this update regardless of whether the fair value of the investment is measured using the practical expedient. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.




A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.



12

NOTE 3. DECONSOLIDATED AND RETURNED ASSETS, ACQUISITIONS, INVESTMENTS



Business Process Outsourcing (BPO)



DECONSOLIDATION OF GLOBAL HOTLINE, INC.

As has been previously disclosed, the Company pledged its shares of Global Hotline as collateral for certain loans borrowed from H Capital, an unlicensed Japanese lender, by such subsidiary. On May 26, 2009, Global Hotline and IA Global received notices from H Capital demanding repayment of the loans. On May 27, 2009, Global Hotline and SG Telecom did not repay the loans as requested by H Capital. On June 9, 2009, H Capital submitted documents claiming ownership of the Companys 600 shares of Global Hotline. Global Hotlines management previously provided the Companys stock certificates to H Capital in March 2009.

Although the Company has engaged Japanese corporate counsel to challenge the validity of the loans and H Capitals claims with respect to the Companys ownership of Global Hotline, these events have resulted in IA Global losing control over the day-to-day management and operations of Global Hotline. In addition, we no longer have access to the financial records of Global Hotline that are necessary to periodically report our financial position and results of operations as a consolidated subsidiary of IA Global.

On December 8, 2009, the Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company accounted for Global Hotline
as a discontinued operation for periods ending after July 1, 2009. Our net profit and stockholders equity will increase by $10.1
million during the three months ended December 31, 2009 as a result of recording the deferred gain of from the forfeiture of Global
Hotline operations that was recorded during the three months ended September, 2009.

Set forth below are unaudited pro forma financial statements reflecting managements decision to deconsolidate the operations of Global Hotline. These pro forma financial statements may not be indicative of how future financial statements will appear, regardless of the outcome of the Companys dispute with H Capital. The Company will continue to pursue its civil claim against H Capital, and we are also exploring alternative structures through which we can pursue IA Globals interest in the Japanese BPO business.



13

IA GLOBAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED PROFORMA BALANCE SHEETS

MARCH 31, 2009




ASSETS
        
        UnadjustedBalanceSheet as ofMarch 31, 2009
        
        Pro FormaAdjustment
        
        AdjustedPro FormaBalanceSheet as ofMarch 31, 2009CURRENT ASSETS:Cash and cash equivalents
        
        $
        3,614,731
        
        $
        (3,595,557
        )
        $
        19,174Accounts receivable, net of allowance of $909,984 and $1,182, respectively
        
        
        5,994,117
        
        
        (5,960,124
        )
        
        33,993Prepaid expenses
        
        
        1,184,572
        
        
        (1,144,060
        )
        
        40,512Notes receivable
        
        
        2,353,153
        
        
        (2,345,069
        )
        
        8,084Other current assets
        
        
        124,308
        
        
        (114,103
        )
        
        10,205Refundable taxes - foreign
        
        
        1,419,418
        
        
        (1,419,418
        )
        
        Net assets - discontinued operations
        
        
        
        
        
        20,140,122
        
        
        20,140,122Total current assets
        
        
        14,690,299
        
        
        5,561,791
        
        
        20,252,090EQUIPMENT, NET
        
        
        2,207,849
        
        
        (2,096,118
        )
        
        111,731OTHER ASSETSIntangible assets, net
        
        
        555,870
        
        
        
        
        
        555,870Investment in Taicom Securities Co Ltd
        
        
        2,861,365
        
        
        
        
        
        2,861,365Equity investment in Australia Secured Financial Limited
        
        
        
        
        
        
        
        
        Equity investment in GPlus Media Co Ltd
        
        
        
        
        
        
        
        
        Equity investment in Slate Consulting Co Ltd
        
        
        1,386,054
        
        
        
        
        
        1,386,054Other assets
        
        
        3,164,127
        
        
        (3,146,524
        )
        
        17,603$
        24,865,564
        
        $
        319,149
        
        $
        25,184,713LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable - trade
        
        $
        1,578,029
        
        $
        (978,405
        )
        $
        599,624Accrued payroll taxes and social insurance taxes
        
        
        4,850,887
        
        
        (4,850,887
        )
        
        Accrued liabilitie - other
        
        
        4,657,363
        
        
        (3,767,261
        )
        
        890,102Consumption taxes received
        
        
        1,307,455
        
        
        (1,307,455
        )
        
        Note payable - current portion of long term debt
        
        
        13,391,371
        
        
        (13,035,730
        )
        
        355,641Deferred revenue
        
        
        3,454,692
        
        
        (3,454,692
        )
        
        Net liabilities - discontinued operations
        
        
        
        
        
        29,424,802
        
        
        29,424,802Total current liabilities
        
        
        29,239,797
        
        
        2,030,372
        
        
        31,270,169LONG TERM LIABILITIES:Long term debt
        
        
        1,898,231
        
        
        (1,698,731
        )
        
        199,500Convertible debentures
        
        
        
        
        
        
        
        
        1,898,231
        
        
        (1,698,731
        )
        
        199,500STOCKHOLDERS (DEFICIT) EQUITY:Preferred stock, $.01 par value, 5,000 authorized, none outstanding
        
        
        
        
        
        
        
        
        Common stock, $.01 par value, 300,000,000 shares authorized,219,113,889 and 165,303,543, issued and outstanding, respectively
        
        
        2,191,140
        
        
        
        
        
        2,191,140Additional paid in capital
        
        
        53,056,216
        
        
        
        
        
        53,056,216Accumulated deficit
        
        
        (59,572,442
        )
        
        
        
        
        (59,572,442
        )Accumulated other comprehensive loss
        
        
        (1,694,471
        )
        
        (12,492
        )
        
        (1,706,963
        )(6,019,557
        )
        
        (12,492
        )
        
        (6,032,049
        )Less common stock in treasury, at cost
        
        
        (252,907
        )
        
        
        
        
        (252,907
        )Total stockholders (deficit) equity
        
        
        (6,272,464
        )
        
        (12,492
        )
        
        (6,284,956
        )$
        24,865,564
        
        $
        319,149
        
        $
        25,184,713



14

IA GLOBAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS




Year EndedMarch 31, 2009
        
        Pro FormaAdjustment
        
        UnauditedAdjustedPro FormaYear EndedMarch 31, 2009REVENUE
        
        $
        57,107,050
        
        $
        (56,555,040
        )
        $
        552,010COST OF SALES
        
        
        13,217,643
        
        
        (12,777,570
        )
        
        440,073GROSS PROFIT
        
        
        43,889,407
        
        
        (43,777,470
        )
        
        111,937SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
        
        
        53,444,034
        
        
        (50,493,043
        )
        
        2,950,991OPERATING LOSS
        
        
        (9,554,627
        )
        
        6,715,573
        
        
        (2,839,054
        )OTHER INCOME (EXPENSE):Interest income
        
        
        19,065
        
        
        (4,984
        )
        
        14,081Interest expense and amortization of beneficial conversion feature
        
        
        (757,478
        )
        
        425,782
        
        
        (331,696
        )Other income
        
        
        294,483
        
        
        (25,292
        )
        
        269,191Gain (loss) on equity investment in Australia Secured Financial Limited
        
        
        265,039
        
        
        
        
        
        265,039Gain on equity investment in GPlus Media Co Ltd
        
        
        12,510
        
        
        
        
        
        12,510Loss on equity investment in Slate Consulting Co Ltd
        
        
        (10,427
        )
        
        
        
        
        (10,427
        )Loss on equity investment in Taicom Securities Co Ltd
        
        
        (421,702
        )
        
        
        
        
        (421,702
        )Loss on retirement of debt
        
        
        (60,395
        )
        
        
        
        
        (60,395
        )Loss on sale of Taicom Securities Co Ltd
        
        
        (1,736,934
        )
        
        
        
        
        (1,736,934
        )Loss on sale of GPlus Media Co Ltd
        
        
        (1,286,500
        )
        
        
        
        
        (1,286,500
        )Impairment of equity investment in Australia Secured Financial Limited
        
        
        (7,195,394
        )
        
        
        
        
        (7,195,394
        )Loss (Gain) on Foreign currency transaction adjustment
        
        
        (66,025
        )
        
        
        
        
        (66,025
        )Total other expense
        
        
        (10,943,758
        )
        
        395,506
        
        
        (10,548,252
        )LOSS (INCOME) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
        
        
        (20,498,385
        )
        
        7,111,079
        
        
        (13,387,306
        )Income taxes - current (benefit) provision
        
        
        (256,455
        )
        
        217,690
        
        
        (38,765
        )NET LOSS FROM CONTINUING OPERATIONS
        
        
        (20,241,930
        )
        
        6,893,389
        
        
        (13,348,541
        )Gain (loss) from discontinued operations
        
        
        
        
        
        (6,893,389
        )
        
        (6,893,389
        )NET (LOSS) PROFIT
        
        $
        (20,241,930
        )
        $
        
        
        $
        (20,241,930
        )Basic and diluted loss per share of common-Basic loss per share from continuing operations
        
        $
        (0.10
        )
        $
        0.03
        
        $
        (0.06
        )Basic loss per share from discontinued operations
        
        
        
        
        
        (0.03
        )
        
        (0.03
        )Total basic loss per share
        
        $
        (0.10
        )
        $
        
        
        $
        (0.09
        )Diluted profit (loss) per share from continuing operations
        
        $
        *
        
        $
        *
        
        $
        *Diluted profit (loss) per share from discontinued operations
        
        
        *
        
        
        *
        
        
        *Total diluted profit (loss) per share
        
        $
        *
        
        $
        *
        
        $
        *Weighted average shares of common stock outstanding- basic
        
        
        205,833,118
        
        
        205,833,120
        
        
        205,833,122Weighted average shares of common stock outstanding- diluted
        
        
        *
        
        
        *
        
        
        *



* Diluted calculation is not presented as it is anti-dilutive.



15

IA GLOBAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS




Year EndedMarch 31, 2008
        
        Pro FormaAdjustment
        
        UnauditedAdjustedPro FormaYear EndedMarch 31, 2008REVENUE
        
        $
        38,692,616
        
        $
        (38,692,616
        )
        $
        COST OF SALES
        
        
        9,977,798
        
        
        (9,977,798
        )
        
        GROSS PROFIT
        
        
        28,714,818
        
        
        (28,714,818
        )
        
        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
        
        
        35,844,189
        
        
        (33,774,021
        )
        
        2,070,168OPERATING LOSS
        
        
        (7,129,371
        )
        
        5,059,203
        
        
        (2,070,168
        )OTHER INCOME (EXPENSE):Interest income
        
        
        56,094
        
        
        (42,255
        )
        
        13,839Interest expense and amortization of beneficial conversion feature
        
        
        (1,116,966
        )
        
        349,777
        
        
        (767,189
        )Other income
        
        
        690,820
        
        
        (662,976
        )
        
        27,844Gain (loss) on equity investment in Australia Secured Financial Limited
        
        
        (227,412
        )
        
        
        
        
        (227,412
        )Gain on equity investment in GPlus Media Co Ltd
        
        
        20,386
        
        
        
        
        
        20,386Loss on equity investment in Slate Consulting Co Ltd
        
        
        (43,519
        )
        
        
        
        
        (43,519
        )Conversion of debenture expense
        
        
        (120,046
        )
        
        
        
        
        (120,046
        )Loss (Gain) on Foreign currency transaction adjustment
        
        
        9,520
        
        
        
        
        
        (1,861
        )Total other expense
        
        
        (731,123
        )
        
        (355,454
        )
        
        (1,086,577
        )LOSS (INCOME) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
        
        
        (7,860,494
        )
        
        4,703,749
        
        
        (3,156,745
        )Income taxes - current (benefit) provision
        
        
        (916,046
        )
        
        916,046
        
        
        NET LOSS FROM CONTINUING OPERATIONS
        
        
        (6,944,448
        )
        
        3,787,703
        
        
        (3,156,745
        )Loss (gain) from disposal of discontinued operations
        
        
        (110,000
        )
        
        
        
        
        (110,000
        )Gain from discontinued operations
        
        
        
        
        
        (3,787,703
        )
        
        (3,787,703
        )Total (loss) / gain from discontinued operations
        
        
        (110,000
        )
        
        (3,787,703
        )
        
        (3,897,703
        )NET (LOSS) PROFIT
        
        $
        (7,054,448
        )
        $
        
        
        $
        (7,054,448
        )Basic and diluted loss per share of common-Basic loss per share from continuing operations
        
        $
        (0.04
        )
        $
        0.02
        
        $
        (0.02
        )Basic loss per share from discontinued operations
        
        
        
        
        
        (0.02
        )
        
        (0.02
        )Total basic loss per share
        
        $
        (0.04
        )
        $
        (
        )
        $
        (0.04
        )Diluted profit (loss) per share from continuing operations
        
        $
        *
        
        $
        *
        
        $
        *Diluted profit (loss) per share from discontinued operations
        
        
        *
        
        
        *
        
        
        *Total diluted profit (loss) per share
        
        $
        *
        
        $
        *
        
        $
        *Weighted average shares of common stock outstanding- basic
        
        
        158,696,823
        
        
        158,696,825
        
        
        158,696,825Weighted average shares of common stock outstanding- diluted
        
        
        *
        
        
        *
        
        
        *



* Diluted calculation is not presented as it is anti-dilutive.



16

GLOBAL HOTLINES PHILIPPINES INC. (Unaudited)



In the Philippines, IA Global is the 100% owner of Asia Premier Executive Suites Inc. (Asia Premier) and Shift Resources Inc. (Shift), companies that have been merged into a single organization and operate as Global Hotline Philippines Inc (Global Hotline Philippines).



On May 27, 2008, the Company acquired 100% of Asia Premier. Asia Premier provides flexible in-bound and out-bound call center, lead generation, and co-location service solutions to international companies. Asia Premier facilities are equipped with fully redundant, world-class Internet and network facilities, are capable of handling 300 or more seats, have a 24-hour back-up to ensure clients have seamless service, consistent high-quality bandwidth and technical support 365 days a year.



The transaction was structured as a share exchange in which IA Global issued 1,250,000 shares of its common stock at $.24 per share, the average closing price during the negotiations, totaling $300,000; plus three notes payable totaling $268,000, of which $262,000 was paid as of June 30, 2009. The transaction was valued at $618,000.



On April 10, 2008, the Company acquired 100% of Shift. Shift provides a range of in-bound and out-bound call centers, lead generation and customer service solutions for international companies across multiple time zones.



The transaction was structured as a share exchange in which the Company issued 826,086 shares of its common stock at $.23 per share, the average closing price during the negotiations, totaling $190,000 plus a payment of $35,000 at closing. The transaction was valued at $225,000.



Asia Premier and Shift were acquired because they have contracts that we expected to be renewed in an industry sector that was expected to grow. The purchase price resulted in identifiable intangible assets. Their results are included in the financial statements of IA Global for all periods since acquisition. There were no contingent payments earned, options or commitments in the acquisition agreement. There was no purchased research and development assets acquired or written off with the acquisition.



As of September 30, 2009, Global Hotline Philippines operates one call center in the Philippines and employs 15 full-time and part-time employees and has 12 additional revenue generating seats related to co-location services. In addition, it signed a long term Business Processing and Marketing Services Agreement with HTMT Global Solutions Limited (HTMT) on January 9, 2009. Global Hotline Philippines will also use HTMTs infrastructure, certifications, and extensive call center facilities to deliver services to Global Hotline Philippines growing client base.



PROPOSED INVESTMENT IN KOREAN VENTURE FUND



On December 18, 2009, the Company
received an investment of 200 million Yen, or approximately $2.2 million at current exchange rates, from the Inter Asset Japan LBO
No. 1 Fund. The Company has tentatively allocated $2.0 million of the investment to establish a venture capital fund in South Korea,
and it expects to use the remaining $0.2 million for working capital purposes. The Companys $2.0 million will be part of a larger,
Korean government-backed venture fund that is expected to raise approximately $30 million in its first round of financing by early
2010. TOZAI Holdings Inc. (TOZAI), a company traded on the Korean Kosdaq stock market under the symbol 037700 with successful
experience in investing in high-technology ventures in Korea, is facilitating the Korean government licensing and
funding.



The $2.0 million was paid into an escrow account until the venture capital fund is formed in early 2010. The Company has agreed to issue to Inter Asset Japan LBO No. 1 Fund 55,556,976 shares of its common stock at $.04 per share in exchange for the investment described above.



The venture fund is expected to facilitate high-tech manufacturing of solar, LCD, and touch panels in Korea. This is the Companys first step toward strengthening its position in global technical, financial, energy, and commodity markets. TOZAI and the Company intend to partner to build a solid foundation that utilizes the low-cost, highly skilled technology base in Korea to capture emerging business opportunities worldwide.



SOLD EQUITY INVESTMENT IN SLATE CONSULTING CO. LTD.



In Japan, the Company had an equity investment in Slate Consulting Co Ltd (Slate), a Japanese executive search firm with operations in Tokyo and a call center in Manila, Philippines.



17

For the six months ended September 30, 2009 and 2008, the Company recorded a loss and gain on our investment in Slate of $16,298 and $23,565, respectively, that decreased and increased our investment in Slate, respectively.



On December 18, 2009, the Company announced that it sold its 20.25% interest in Slate to Ray Pedersen, Chief Executive Officer of Slate. The Company, in return for this equity investment, received the return of 1 million shares of IA Global shares valued at $.03 per share, the closing price on December 18, 2009, and a commitment for approximately $55,000 in cash to be paid installments by July 2010. The Company reported a loss on sale of approximately $1,285,000 during the three months ended September 30, 2009. The $85,000 due from Slate was recorded as other current assets as of September 30, 2009.



FORFEITEDINVESTMENT IN TAICOM SECURITIES CO. LTD.



In Japan, the Company had an investment in Taicom Securities Co Ltd (Taicom), a Japanese securities firm. Taicom provided a broad range of value-added financial services and competitive products. These services currently included the brokerage of Japanese commodities, options derivatives trading, foreign currency, equities and margin as well as offering wealth management and investment consulting services to diversified clients. In addition to offering a broad news and information gathering network, Taicom offers creative solutions that meet the sophisticated trading needs of its clients. Taicom is a member of the Osaka Stock Exchange. Taicom is headquartered in Tokyo and Osaka and has three branch offices in Japan.



The Company accounted for Taicom under the cost method.



APRIL 1, 2009 FORM OF PERFORMANCE WARRANT



On April 1, 2009, the Company amended the Form of Performance Warrant that it previously issued to Mr. Ning on December 12, 2008 (as amended, the Amended Warrant). The Amended Warrant reduced the number of shares of common stock that Taicom could receive upon the closing of certain financings to 3,591,250 from 32,500,000 common shares. The Company agreed to register the common stock issuable upon the exercise of the Amended Warrant with NYSE AMEX and file a registration statement on Form S-3 within 60 days of approval by NYSE AMEX. The Amended Warrant was issued to an accredited investor in a transaction that was exempt from registration pursuant to Section 4(2) of the Securities Act, and/or Regulation D promulgated under the Securities Act.



JUNE 2, 2009 FORM OF PERFORMANCE WARRANT



On June 2, 2009, the Company entered into a Form of Performance Warrant (the Warrant) with AMV. The Warrant provides that AMV is entitled to purchase up to 5,213,105 shares of the Companys common stock for $.05 per share. The Warrant is exercisable for a sixty month period and requires the payment of $300,000 in funding that is reflected in the June 8, 2009 Services Agreement. The Company agreed to register the common stock issuable upon the exercise of the Warrant with NYSE AMEX and file a registration statement on Form S-3 within sixty days of approval by NYSE AMEX. The Performance Warrant was issued to an accredited investor in a transaction that will be exempt from registration pursuant to Section 4(2) of the Securities Act, and/or Regulation D promulgated under the Securities Act.



The parties are negotiating over the Form of Performance Warrant.



APRIL 1, 2009 AMENDMENT TO SHARE EXCHANGE AGREEMENT



On April 1, 2009, the Company agreed to issue preferred stock (IAO Preferred Stock), at $1,000 per share, to ArqueMax Ventures LLC (AMV) for $317,000 in the Amendment to Share Exchange Agreement.



At AMVs sole discretion, AMV may either (1) convert some or all of its IAO Preferred Stock into 12,800,000 shares of the Companys common stock pro rata at $0.025 per share; or (2) exchange IAO Preferred Stock for 971,458 Taicom Stock owned by the Company pro rata. The conversion of IAO Preferred Stock into Taicom Stock is automatically triggered in the case of certain events, including delisting from NYSE AMEX, bankruptcy or insolvency.



The parties are negotiating over the Agreement.



18

JUNE 8, 2009 SERVICES AGREEMENT



On June 8, 2009, the Company entered into a Services Agreement with AMV. Pursuant to this agreement, AMV agreed to provide aggregate funds in cash of $300,000 in exchange for IA Global Convertible Senior Debentures (Debentures) that carry a 12% interest rate and were due December 8, 2009. The Debentures were convertible into 10,000,000 shares of IAO Common Stock at $0.030 per share immediately upon issuance. In the event Company was not able to repay the principal amount plus accrued interest by December 8, 2009, AMV had the right to convert such Debentures into (1) the proportionate number of shares of the Companys common stock, or (2) exchange 940,121 shares of Taicom Preferred Class B stock owned by the Company on a pro rata basis. The $300,000 in funding was to be paid in five independent tranches.



On July 17, 2009 and September 28, 2009, AMV notified us that we were in default under the June 8, 2009 Services Agreement and as a result did not fund the $60,000 due on each of June 30, 2009, July 15, 2009 and July 31, 2009. However, the Company asserted that AMV was late in providing funding as required under the agreement.



On October 30, 2009, the Company agreed to issue 4,000,000 shares of its common stock to AMV based on the $120,000 in aggregate funds provided by AMV under the agreement.



On November 16, 2009, but effective August 4, 2009, AMV claimed ownership of our shares in Taicom. This resulted in a loss on investment of approximately $2,861,000. The parties continue to negotiate over the April 1, 2009 and June 8, 2009 Amendment to Share Exchange and June 8, 2009 Services Agreements.



PRO-FORMA FINANCIAL INFORMATION



The unaudited pro-forma financial information for the equity investments for six months ended September 30, 2008 were as follows:



Six Months Ended September 30, 2008 (Unaudited)




As ReportedSix MonthsSeptember 30, 2008
        
        Pre-AcquisitionOperations of GlobalHotline PhilippinesApril 1 - May 27, 2008 *
        
        Pro FormaSix Months EndedSeptember 30, 2008Revenue
        
        $
        323,428
        
        $
        37,525
        
        $
        360,953Income (loss) before extraordinary items
        
        
        (970,848
        )
        
        (679
        )
        
        (971,527
        )Net income (loss)
        
        
        (970,848
        )
        
        (679
        )
        
        (971,527
        )Net profit per common share
        
        
        (0.01
        )
        
        
        
        
        (0.01
        )



* - The GHP acquisitions closed on April 10, 2008 (Shift Resources) and on May 24, 2008 (Asia Premier).



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



NOTE 4. ACCOUNTS RECEIVABLE



Accounts receivable were $16,640 and $33,993 as of September 30, 2009 and March 31, 2009, respectively.



NOTE 5. PREPAID EXPENSES



Prepaid expenses were $53,271 and $40,512 as of September 30, 2009 and March 31, 2009, respectively. These assets included prepaid insurance, prepaid financing costs and other costs incurred by the Company.



19

NOTE 6. EQUIPMENT



Equipment, net of accumulated depreciation, was $83,761 and $111,731 as of September 30, 2009 and March 31, 2009, respectively. Accumulated depreciation was $210,528 and $178,339 as of September 30, 2009 and March 31, 2009, respectively. Total depreciation expense was $27,970 and $24,030 for the six months ended September 30, 2009 and 2008, respectively. All equipment is used for selling, general and administrative purposes and accordingly all depreciation is classified in selling, general and administrative expenses.



Property and equipment is comprised of the following:




EstimatedUseful Lives
        
        September 30. 2009
        
        March 31, 2009(unaudited)
        
        
        (audited)Equipment and vehicles
        
        24-60 months
        
        $
        271,481
        
        $
        267,380Leasehold improvements
        
        24-60 months
        
        
        22,808
        
        
        22,690294,289
        
        
        290,070Less: accumulated depreciation
        
        
        
        
        (210,528
        )
        
        (178,339
        )$
        83,761
        
        $
        111,731



NOTE 7. INTANGIBLE ASSETS



Intangible assets as of September 30, 2009 and March 31, 2009 consisted of the following:




EstimatedUseful Lives
        
        September 30, 2009
        
        March 31, 2009(unaudited)
        
        (audited)Customer contracts
        
        3-5 years
        
        $
        675,390
        
        $
        675,390Less: accumulated amortization
        
        
        
        
        (187,059
        )
        
        (119,520
        )Intangible assets, net
        
        
        
        $
        488,331
        
        $
        555,870



Total amortization expense was $67,539 and $51,979 for the six months ended September 30, 2009 and 2008, respectively.



The fair value of the Global Hotline Philippines intellectual property acquired was $675,370, estimated by using a discounted cash flow approach based on future economic benefits associated with agreements with significant Japanese telecommunications companies, or through expected continued business activities with its customers. In summary, the estimate was based on a projected income approach and related discounted cash flows over five years, with applicable risk factors assigned to assumptions in the forecasted results.



NOTE 8. ACCRUED LIABILITIES



Accrued liabilities were $1,028,715 and $890,102 as of September 30, 2009 and March 31, 2009, respectively. Such liabilities consisted of the following:




September 30, 2009
        
        March 31, 2009(unaudited)
        
        (audited)Accrued salaries
        
        $
        321,988
        
        $
        236,911Trade debt not in accounts payable
        
        
        40,508
        
        
        89,016Accrued interest
        
        
        514,274
        
        
        487,960Other accrued expenses
        
        
        151,945
        
        
        76,215$
        1,028,715
        
        $
        890,102



20

NOTE 9. NOTES PAYABLE/ LONG-TERM DEBT



Notes payable and long term debt were $587,312 and $555,141 as of September 30, 2009 and March 31, 2009 consisted of the following:




1.
        On June 8, 2009, the
Company agreed to issue Convertible Senior Debentures (Debentures) under a Services Agreement entered into on June 8,
2009 with AMV. The Debentures provide for interest at 12% and were due December 8, 2009 and remain unpaid. The Debentures are convertible into
10,000,000 shares of IAO Common Stock at $0.030 per share immediately upon issuance. In the event Company was not able to repay the
principal amount plus accrued interest by December 8, 2009, AMV had the right to convert such Debentures into (1) the proportionate
number of shares of the Companys common stock, or (2) exchange 940,121 shares of Taicom Preferred Class B stock owned by the
Company on a pro rata basis. On October 30, 2009, the Company agreed to issue 4,000,000 shares of its common stock to AMV based on
the $120,000 in aggregate funds provided by AMV under the agreement through September 30, 2009.





2.
        On April 22, 2009, the
Company entered into an unsecured Loan Agreement for approximately $261,812. The Loan Agreement provides for interest at 6% and is
due on demand.





3.
        On July 14, 2008 and August 11, 2008, the Company entered into three-year loan agreements with Artemis Capital Group LLC, pursuant to which the Company received loans in the principal amount totaling approximately $199,500 at an interest rate of 7.0% per annum. The interest was payable quarterly beginning in October 2008. The Company issued 3,000,000 shares of common stock as of September 30, 2008 and 554,546 shares of common stock on November 19, 2008, which serve as collateral for the loans. In addition, the Company paid $34,613 in fees, which are being amortized over the life of the loan. At the termination of the loans, the Company may repay the loans, forfeit the shares to the lender or renew the loans on a year by year basis based on mutually agreeable terms. The loan cannot be terminated within the first eighteen months of the loan and after this period, it
can be repaid with a 10% penalty. Total interest expense for these loans for the six months ended September 30, 2009 and 2008 was $3,491 and $2,000, respectively.




4.
        In connection with the acquisition of Global Hotline Philipines,
the Company entered a note payable totaling $268,000. As of September 30, 2009, a total of $6,000 remains unpaid from this note payable.



The loans were used for working capital.



NOTE 10. RELATED PARTY RELATIONSHIPS WITH OUR CONTROLLING SHAREHOLDER GROUP AND

CERTAIN RELATIONSHIPS



As of September 30, 2009, IAJ LBO Fund, PBAA Fund Limited, Terra Firma, Inter Asset Japan Co Ltd (IAJ), IA Turkey and Hiroki Isobe, (collectively, the Controlling Shareholders) collectively hold approximately 37.4% of our common stock. These Controlling Shareholders have stated in a Schedule 13D that they may be deemed to constitute a group for the purposes of Rule 13d-3 under the Exchange Act. Hiroki Isobe controls each of our Controlling Shareholders.



The following unaudited table provides details on the affiliated parties owned or controlled by the Companys Controlling Stockholders and certain other entities, as of September 30, 2009, that are relevant for purposes of understanding the related party transactions that have taken place:



21

Ownership:




IA Global, Inc. owns:Global Hotline, Inc.
        100.0%
        (4)Global Hotline Philippines, Inc.
        100.0%
        (1)IA Global Japan Co Ltd
        100.0%Slate Consulting Co Ltd
        20.25%
        (6)Australian Secured Financial Limited.
        36.0%
        (5)Taicom Securities Co Ltd
        0.0%
        (2)Inter Asset Japan LBO No. 1 Fund owns:IA Global, Inc
        16.7%
        (3)PBAA Fund Ltd. owns:IA Global, Inc
        10.6%
        (3)Terra Firma Fund Ltd. owns:IA Global, Inc
        5.8%
        (3)Inter Asset Japan Co., Ltd. owns:IA Global, Inc
        1.0%
        (3)IA Turkey Equity Portfolio Ltd owns:IA Global, Inc
        1.1%
        (3)Mr. Hiroki Isobe owns:IA Global, Inc
        2.2%
        (3)




(1)
        Established on July 4, 2008. Asia Premier and Shift Resources operate as Global Hotline Philippines, Inc.





(2)
        Investment of 20% closed June 3, 2008 and was reduced to 16% on December 12, 2008, 14% on February 2, 2009 and 12.6% on April 1, 2009 and was returned to Taicom on November 16, 2009, but effective August 4, 2009.





(3)
        Based on a Schedule 13D (Amendment No. 22) filed with the SEC on February 24, 2009.





(4)
        De-consolidated effective December 9, 2009, but effective July 1, 2009.





(5)
        Investment was impaired and written-off as of March 31, 2009.





(6)
        Equity investment was sold December 18, 2009.




22

NOTE 11. EQUITY TRANSACTIONS/ TREASURY STOCK



During the six months ended September 30, 2009, the following stockholder equity events occurred:



On April 20, 2009, the Company agreed to issue 317 shares of ArqueMax Ventures, LLC Series Preferred Stock (IAO Preferred Stock) of the Company. The IAO Preferred Stock, $.01 par value, was sold at $1,000 per share, has a liquidation value of $317,000 and has no voting rights.



At AMVs sole discretion, AMV may either (1) convert some or all of its IAO Preferred Stock into 12,800,000 shares of the Companys common stock pro rata at $0.025 per share; or (2) exchange IAO Preferred Stock for 971,458 Taicom Stock owned by the Company pro rata. The conversion of IAO Preferred Stock into Taicom Stock is automatically triggered in the case of certain events, including delisting from NYSE AMEX, bankruptcy or insolvency.



The Company recorded a deemed dividend of $192,000, upon the issuance of the Preferred Stock, due to the conversion price per share being below market on the date of issuance.



On May 12, 2009, the Company sold 600,000 shares of common stock to A to B Capital Special Situations Fund LP for $30,000 or $0.05 per share, the closing price on May 12, 2009, the date the subscription agreement was signed.



On May 12, 2009, the Company issued warrants for a total of 428,571 shares of common stock to A to B Capital Special Situations Fund LP related to the common stock they purchased on May 12, 2009. The warrants are exercisable at $.07 per share, above the market price on May 12, 2009, and expire on May 14, 2012.



On May 21, 2009, the Company issued
750,000 performance warrants to acquire shares of common stock to the Sterling Group, Inc. in connection with the sale of the
Companys common stock. The warrants are exercisable at $.10 per share and expire on May 20, 2012. If registered, the warrants
may be called by the Company if the share price closes above $.20 for five days.



On May 21, 2009, the Company issued
250,000 performance warrants to acquire shares of common stock to Marc Page in connection with the sale of the Companys common
stock. The warrants are exercisable at $.10 per share and expire on May 20, 2012.



On June 10, 2009, the Company sold 167,500 shares of common stock to Derek Schneideman, its Chief Executive Officer, for $10,050 or $0.06 per share, the closing price on June 10, 2009, the date the subscription agreement was signed.



The common stock was issued to the accredited investors in a transaction that will be exempt from registration pursuant to Section 4(2) of the Securities Act, and/or Regulation D promulgated under the Securities Act.



PRIVATE PLACEMENTS WITH INTER ASSET JAPAN LBO NO. 1 FUND



On August 2, 2009, the Company entered into a Stock Purchase Agreement (Agreement 1) with Inter Asset Japan LBO No 1 Fund, an existing shareholder of the Company (the Shareholder). Under the terms of the Agreement 1, the Company agreed to issue and sell to the Shareholder 1,500,000 shares (the Shares) of the Companys common stock, par value $0.01 per share, for an aggregate purchase price of $60,000, or $0.04 per share (the Purchase Price). The Company issued and sold the Shares to the Shareholder in reliance on the exemption from the registration requirements set forth in the Securities Act provided under Section 4(2) of the Securities Act and Regulation D promulgated by the SEC under the Securities Act.



Agreement 1 contains certain representations and warranties of the Shareholder and the Company, including customary investment-related representations provided by the Shareholder, as well as acknowledgements by the Shareholder that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the Shares has not been registered with the SEC or qualified under any state securities laws. The Company provided customary representations regarding, among other things, its organization, capital structure, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations.



23

Agreement 1 also grants the Shareholder registration rights that it may exercise at its option and provides the Shareholder with a right of first offer if the Company proposes to issue securities in the future (subject to certain customary exceptions). Finally, the Shareholder has the right to demand that the Company redeem all or any portion of the Shares at any time on or after October 31, 2009, for a redemption price equal to the greater of the Purchase Price or the listed market price for the Companys common stock as of the redemption date.



On August 17, 2009, the Company entered into a Stock Purchase Agreement (Agreement 2) with the Shareholder. Under the terms of Agreement 2, the Company agreed to issue and sell to the Shareholder 5,000,000 shares of our common stock for an aggregate purchase price of $200,000, or $0.04 per share.



Also under the terms of the Agreement, the Shareholder has committed to purchase, and the Company agreed to issue and sell to the Shareholder, additional shares of the Companys common stock in accordance with the following schedule:





        2,500,000 shares at a purchase price of US$.04 per share, or an aggregate price of US$100,000 on or before September 4, 2009.






        1,250,000 shares at a purchase price of US$.04 per share, or an aggregate price of US$50,000 on or before September 18, 2009.






        50,000,000 shares at a purchase price of US$.04 per share, or an aggregate price of US$2,000,000 on or before November 10, 2009.




The Shareholders obligation to purchase the foregoing shares by the date specified is conditioned upon the representations and warranties of the Company contained in Agreement 2 being accurate as of the date of such closing.



Finally, the Shareholder has the option, but not the obligation, to purchase, on or before December 31, 2009, an additional 50,000,000 shares of Common Stock at a purchase price of US$.04 per share, or an aggregate price of $2,000,000. The Company expects to extend this date.



Under the terms of the Agreement, as
of September 30, 2009 the Company has agreed to issue and sell to the Investor, 8,250,000 shares at a purchase price of $.04 per
share, or an aggregate price of $330,000.



Under the terms of the Agreement, as
of January 5, 2010 the Company has agreed to issue and sell to the Investor, 71,719,633 shares at a purchase price of $.04 per
share, or an aggregate price of $2,861,000. Further, we expect that a total of $861,000 of the funds can be used for working capital
and the remaining $2,000,000 can be used for investments.



The Company issued and sold the shares of common stock to the Shareholder in reliance on the exemption from the registration requirements set forth in the Securities Act provided under Section 4(2) of the Securities Act and Regulation D promulgated by the SEC under the Securities Act.



Agreement 2 contains certain representations and warranties of the Shareholder and the Company, including customary investment-related representations provided by the Shareholder, as well as acknowledgements by the Shareholder that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the shares has not been registered with the SEC or qualified under any state securities laws. The Company provided customary representations regarding, among other things, its organization, capital structure, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations.



Agreement 2 also grants the Shareholder registration rights that it may exercise at its option and provides the Shareholder with a right of first offer if the Company proposes to issue securities in the future (subject to certain customary exceptions).



24

EQUITY LINE OF CREDIT TRANSACTION WITH ASCENDIANT CAPITAL GROUP, LLC



On September 29, 2009, the Company entered into a Securities Purchase Agreement with Ascendiant Capital Group, LLC (Ascendiant), pursuant to which Ascendiant agreed to purchase up to $5,000,000 worth of shares of the Companys common stock from time to time over a 24-month period, provided that certain conditions are met. The financing arrangement entered into by IA Global and Ascendiant is commonly referred to as an equity line of credit or an equity drawdown facility.



Under the terms of the Securities
Purchase Agreement, Ascendiant will not be obligated to purchase shares of IA Globals common stock unless and until certain
conditions are met, including but not limited to (i) approval of the transaction by the NYSE AMEX, which has not been received as of
January 5, 2010, and (ii) the Company files by November 13, 2009 and the SEC declares effective by January 27, 2010 a Registration
Statement on Form S-1 (the Registration Statement) registering Ascendiants resale of any shares purchased by it
under the equity drawdown facility. The customary terms and conditions associated with Ascendiants registration rights are set
forth in a Registration Rights Agreement that was also entered into by the parties on September 29, 2009.



If and when the SEC declares the Registration Statement effective, IA Global will have the right to sell and issue to Ascendiant, and Ascendiant will be obligated to purchase from IA Global, up to $5,000,000 worth of shares of the Companys common stock over a 24-month period beginning on such date (the Commitment Period). IA Global will be entitled to sell such shares from time to time during the Commitment Period by delivering a draw down notice to Ascendiant. In such draw down notices, IA Global will be required to specify the dollar amount of shares that it intends to sell to Ascendiant, which will be spread over a nine-trading-day pricing period. For each draw, IA Global will be required to deliver the shares sold to Ascendiant in three installments (following the third, sixth and ninth trading days in the pricing period, respectively). Ascendiant is entitled to
liquidated damages in connection with certain delays in the delivery of its shares.



The Securities Purchase Agreement also provides for the following terms and conditions:





        Purchase Price - 90% of IA Globals volume-weighted average price (VWAP).






        Threshold Price - IA Global may specify a price below which it will not sell shares during the applicable nine-trading-day pricing period. If the purchase price falls below the threshold price on any day(s) during the pricing period, such day(s) will be removed from the pricing period (and Ascendiants investment amount will be reduced by 1/9 for each such day).






        Maximum Draw - 15% of IA Globals total trading volume for the 10-trading-day period immediately preceding the applicable draw down, times the average VWAP during such period (but in no event more than $250,000).






        Minimum Draw - None.






        Minimum Time Between Draw Down Pricing Periods - Two trading days.






        Minimum Use of Facility - IA Global is obligated to sell at least $1,000,000 worth of shares of its common stock to Ascendiant during the Commitment Period.






        Commitment Fees - Upon NYSE AMEX approval, IA Global will be obligated to issue 2,371,917 shares of its common stock to Ascendiant ($125,000 worth of shares based on the Companys closing bid price on the trading day immediately prior to the date of the Securities Purchase Agreement). If and when the SEC declares the Registration Statement effective, IA Global will be obligated to issue another $125,000 worth of shares of its common stock in four installments over a period of 90 days following the effectiveness date.




25


        Other Fees and Expenses  On October 21, 2009, the Company issued 400,000  shares of common stock valued at $10,000 under the 2007 Stock Incentive Plan as compensation  to Ascendiants legal counsel for the legal fees and expenses it incurred in connection with negotiating and documenting the equity line of credit. Pursuant to separate agreements, IA Global has also agreed to pay an aggregate of 3.0% in finders fees (to be paid in connection with each draw down).






        Indemnification - Ascendiant is entitled to customary indemnification from IA Global for any losses or liabilities it suffers as a result of any breach by IA Global of any provisions of the Securities Purchase Agreement, or as a result of any lawsuit brought by any stockholder of IA Global (except stockholders who are officers, directors or principal stockholders of IA Global).






        Conditions to Ascendiants Obligation to Purchase Shares - Trading in IA Globals common stock must not be suspended by the SEC or the NYSE AMEX (or other applicable trading market); IA Global must not have experienced a material adverse effect; all liquidated damages and other amounts owing to Ascendiant must be paid in full; the Registration Statement must be effective with respect to Ascendiants resale of all shares purchased under the equity drawdown facility; there must be a sufficient number of authorized but unissued shares of IA Global common stock; and the issuance must not cause Ascendiant to own more than 9.99% of the then outstanding shares of IA Global common stock, or more than 19.9% of the number of shares of common stock outstanding on September 29, 2009 to have been issued under the equity drawdown facility (without shareholder
approval).






        Termination - The Securities Purchase Agreement will terminate if IA Globals common stock is not listed on one of several specified trading markets (which include the NYSE AMEX, OTC Bulletin Board and Pink Sheets, among others); if IA Global files for protection from its creditors; or if the Registration Statement is not declared effective by the SEC by June 29, 2010. IA Global may terminate the Securities Purchase Agreement if Ascendiant fails to fund a draw down within 10 trading days after the end of the applicable settlement period, or if the SEC provides comments on the Registration Statement requiring certain changes in the transaction structure and/or documents.




The Securities Purchase Agreement also contains certain representations and warranties of IA Global and Ascendiant, including customary investment-related representations provided by Ascendiant, as well as acknowledgements by Ascendiant that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the shares has not been registered with the SEC or qualified under any state securities laws. IA Global provided customary representations regarding, among other things, its organization, capital structure, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations. IA Globals representations and warranties are qualified in
their entirety (to the extent applicable) by the Companys disclosures in the reports it files with the SEC. IA Global also delivered confidential disclosure schedules qualifying certain of its representations and warranties in connection with executing and delivering the Securities Purchase Agreement.



The shares to be issued by IA Global to Ascendiant under the Securities Purchase Agreement will be issued in private placements in reliance upon the exemption from the registration requirements set forth in the Securities Act provided for in Section 4(2) of the Securities Act, and the rules promulgated by the SEC thereunder.



In addition to IAJ LBO and share issuances discussed elsewhere in this Form 10-Q, during the three months subsequent to September 30, 2009, the following stockholder equity event occurred:



On November 4, 2009, the Company agreed to issue 600,000 shares of common stock to AIM Capital Corporation in a private placement for $24,000 or $0.04 per share, the closing price on December 28, 2009, the date agreement was reached. The Company agreed to register the shares.



On December 30, 2009, the Company agreed to issue 2,569,850 shares of common stock to former directors of the Company in a private placement for $106,794 or $0.04 per share, the closing price on December 28, 2009, the date agreement was reached. The shares do not have registration rights.



26

NOTE 12. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS



LEGAL PROCEEDING  GLOBAL HOTLINE



As has been previously disclosed, the Company pledged its shares of Global Hotline as collateral for certain loans borrowed from H Capital, an unlicensed Japanese lender, for such subsidiary. On May 26, 2009, Global Hotline and IA Global received notices from H Capital demanding repayment of the loans. On May 27, 2009, Global Hotline and SG Telecom did not repay the loans as requested by H Capital. On June 2, 2009, H Capital submitted documents claiming ownership of the Companys 600 shares of Global Hotline. Global Hotlines management previously provided the Companys stock certificates to H Capital in March 2009.



Although the Company has engaged Japanese corporate counsel to challenge the validity of the loans and H Capitals claims with respect to the Companys ownership of Global Hotline, these events have resulted in IA Global losing control over the day-to-day management and operations of Global Hotline. In addition, we no longer have access to the financial records of Global Hotline that are necessary to periodically report our financial position and results of operations as a consolidated subsidiary of IA Global.



On December 8, 2009, the Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company intends to account for
Global Hotline as a discontinued operation for periods ending after July 1, 2009. Our net profit and stockholders equity will
increase by $10.1 million during the three months ended December 31, 2009 as a result of recording the deferred gain of from the
forfeiture of Global Hotline operations that was recorded during the three months ended September, 2009.



The Companys decision to deconsolidate Global Hotline is not a relinquishment of their claim of ownership of Global Hotline. The Company has engaged Japanese legal counsel and intends to vigorously pursue their legal right with regards to ownership. Management, based on their consultation with Japanese legal counsel, is unable to determine the outcome of this dispute H Capital.



Concurrent with Companys deconsolidation of Global Hotline, management has determined that any obligations that may arise from Global Hotline, that existed prior, or subsequent, to their decision to deconsolidate, is not an obligation of the Company.



Prior to December 8, 2009 Global
Hotline had significant liabilities to Japanese banks in excess of approximately $12,000,000. These loans were unsecured and
personally guaranteed by either the CEO or the CFO of Global Hotline. In addition to theses bank loans, Global Hotline had payroll,
social insurance and other tax liabilities at of approximately 800,000,000 Yen, or approximately $9.0 million at current exchange
rates, as of September 30, 2009.



The status of Global Hotlines bank
loans and tax liabilities is unknown subsequent to December 8, 2009. In addition, the status of trade debt, or any debt or
obligation of Global Hotline is unknown subsequent to December 8, 2009. In addition to debt, Global Hotline has obligation under
various operating leases, the status of which is unknown subsequent to December 8, 2009.



Global Hotline has revenue contracts requiring performance for their various vendors. The status of performance, or any liability for non-performance, is unknown subsequent to December 8, 2009.



With regards to the above referenced liabilities, or potential liabilities of Global Hotline, management of the Company along with their Japanese legal counsel, has determined that the Company has no legal obligation for these liabilities or potential liabilities. Assertions against the Company for Global Hotline liabilities, or potential liabilities, might be sustained. The Company intends to defend themselves against any assertions related to liabilities, or potential liabilities, resulting from Global Hotline prior to, or subsequent to, December 8, 2009. The Company has not accrued for any liabilities related to Global Hotline as of September 30, 2009.



AMV



On April 1, 2009, the Company agreed to issue preferred stock (IAO Preferred Stock), at $1,000 per share, to AMV for $317,000 in the Amendment to Share Exchange Agreement.



27

At AMVs sole discretion, AMV may either (1) convert some or all of its IAO Preferred Stock into 12,800,000 shares of the Companys common stock pro rata at $0.025 per share; or (2) exchange IAO Preferred Stock for 971,458 Taicom Stock owned by the Company pro rata. The conversion of IAO Preferred Stock intoTaicom Stock is automatically triggered in the case of certain events, including delisting from NYSE AMEX, bankruptcy or insolvency. On July 17, 2009 and September 28, 2009, AMV notified us that we were in default under the June 8, 2009 Services Agreement (Agreement) and as a result did not fund the $60,000 due June 30, 2009, July 15, 2009 and July 31, 2009. However, AMV was late in funding as required by the Agreement. On October 30, 2009, the Company agreed to issue 4,000,000 shares based on the $120,000 in funded under this Agreement.



On November 16, 2009, but effective August 4, 2009, AMV claimed ownership of our shares in Taicom. This resulted in a loss on investment of approximately $2,861,000. The parties continue to negotiate over the April 1, 2009 and June 8, 2009 Amendment to Share Exchange and June 8, 2009 Services Agreements.



EMPLOYMENT AGREEMENTS



Agreement with Brian Hoekstra



On November 5, 2009, the Company entered into an Employment Agreement with Brian Hoekstra, the Companys Chief Executive Officer, which is effective as of September 4, 2009.



The Employment Agreement provides for a one-year term and is renewable on a mutually agreeable basis. The Company will pay Mr. Hoekstra an annual base salary of $98,000, and will provide for participation in the Companys benefit programs available to other senior executives (including group insurance arrangements). Mr. Hoekstra is also eligible for discretionary performance bonuses based upon performance criteria to be determined by the Companys Compensation Committee. If Mr. Hoekstras employment is terminated without Cause (as defined in the Employment Agreement), Mr. Hoekstra will be entitled to a payment equal to three months base salary paid at the Companys discretion in a lump sum or over the subsequent year.



The Compensation Committee also awarded Mr. Hoekstra 800,000 shares of restricted stock and an option to purchase 1,200,000 shares of the Companys common stock. The awards were granted at the fair market price of $0.04 per share based on the adjusted closing price of the Companys common stock on November 4, 2009, the last trading day before the Compensation Committee meeting. In accordance with the Companys 2007 Stock Incentive Plan, the restricted stock and the stock option vest in quarterly installments over three years beginning on September 4, 2009. The stock options expire on September 3, 2019.



Agreement with Derek Schneideman



On August 2, 2009, Derek Schneideman resigned as the Companys Chief Executive Officer and as a member of the Board, effective immediately upon the Companys filing of its Annual Report on Form 10-K for the fiscal year ended March 31, 2009, which occurred on September 3, 2009. Mr. Schneideman did not resign from the Board due to any disagreement with the Company relating to the Companys operations, policies or practices.



In connection with Mr. Schneidemans resignation, he and the Company entered into a Separation Agreement and Full Release of Claims (the Separation Agreement), which was effective as of August 2, 2009. Pursuant to the Separation Agreement, the Company made or agreed to make the following severance payments to Mr. Schneideman:





        $100,000 was paid upon the Companys filing of its 2009 Form 10-K on September 3, 2009.






        $100,000 was payable as of November 3, 2009 and remains payable as of January 5, 2010, provided that (i) the Companys filings with the SEC are not determined to contain materially inaccurate information, material representations or material omissions, (ii) evidence of fraud or illegal acts on the part of Mr. Schneideman is not discovered, and (iii) Mr. Schneideman has not made any misrepresentations in connection with its purchase of the Shares, as described above.




28

Mr. Schneideman did not exercise his limited right to revoke the Separation Agreement and was paid $42,409 and is owed $10,417 as of January 5, 2010 for accrued but unpaid salary, benefits and business expense reimbursements as of the date of the Separation Agreement.



The Separation Agreement provides that Mr. Schneideman will continue to provide services to the Company as a consultant for a period of 12 months following the effective date of his resignation as Chief Executive Officer. In exchange for such services, the Company will pay Mr. Schneideman $2,000 per month. The Company is entitled to terminate the consulting relationship upon 30 days advance notice and payment of the consulting fee to which Mr. Schneideman would be entitled in the 30 days following such notice.



In consideration of and for the severance payments and consulting arrangement described above, Mr. Schneideman provided a broad release in favor of the Company with respect to any and all rights, claims, demands, causes of actions and liabilities of any nature relating to his employment with the Company, the termination of such employment, and/or his entry into the Separation Agreement.



Finally, the Separation Agreement also contains customary provisions with respect to confidentiality, non-disclosure, non-solicitation, non-disparagement and Mr. Schneidemans return of any property of the Company in his possession.



Agreement with Mark Scott



On August 24, 2009, the Company entered into a new Employment Agreement with Mark Scott, which replaces his Employment Agreement dated September 5, 2007.



Mark Scotts Employment Agreement (Scott Agreement) has a one-year term beginning on August 24, 2009, and is renewable on a mutually agreeable basis. The Company will pay Mr. Scott an annual base salary of $96,000, and will provide for participation in the Companys benefit programs available to other senior executives (including group insurance arrangements). Also under the Scott Agreement, Mr. Scott is eligible for discretionary performance bonuses based upon performance criteria to be determined by the Companys Compensation Committee based on criteria under development. If Mr. Scotts employment is terminated without Cause (as defined in the Scott Agreement), Mr. Scott will be entitled to a payment equal to one years annual base salary paid at the Companys discretion in a lump sum or over the next year.



On August 24, 2009, the board of directors awarded Mr. Scott 200,000 shares of restricted common stock. The award was granted at the fair market price of $0.05 per share based on the adjusted closing price on August 20, 2009, the last trading day before the board of directors approved the grant. In accordance with the 2007 Stock Incentive Plan, the restrictions on such shares lapsed on November 23, 2009.



LEASES



The Company is obligated under various non-cancelable operating leases for their various facilities and certain equipment.



The aggregate unaudited future minimum lease payments, to the extent the leases have early cancellation options and excluding escalation charges, are as follows:




Years Ended September 30,2010
        
        $
        126,0282011
        
        
        15,4362012
        
        
        02013
        
        
        02014
        
        
        0Total
        
        $
        141,465



29

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 as well as those discussed elsewhere in this report (including in Part II, Item 1A (Risk Factors)). Readers are urged not to place undue reliance on these forward-looking statements because they 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 this report.



INTRODUCTION



During the six months ended September
30, 2009 and 2008, we had approximately in $.1 million and $.3 million in revenues, respectively. During the years ended March 31,
2009 and 2008, we had approximately $.6 million and $0 million in revenues, respectively. During the six months ended September 30,
2009, we had an approximate $8.5 million net loss as compared to a $1.0 million net loss for the six months ended September 30,
2008. During the years ended March 31, 2009 and 2008, we had approximately $20.2 million and $7.1 million in net losses,
respectively.



On December 8, 2009, the Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company accounted for Global Hotline
as a discontinued operation for periods ending after July 1, 2009. Our net profit and stockholders equity will increase by $10.1
million during the three months ended December 31, 2009 as a result of recording the deferred gain of from the forfeiture of Global
Hotline operations that was recorded during the three months ended September, 2009.



Certain recent developments relating to our recent efforts to generate additional liquidity, including through sales of our common stock, are described in more detail in the notes to the financial statements included in this report.



DECONSOLIDATION OF GLOBAL HOTLINE, INC.



As has been previously disclosed, the Company pledged its shares of Global Hotline as collateral for certain loans borrowed from H Capital, an unlicensed Japanese lender, by such subsidiary. On May 26, 2009, Global Hotline and IA Global received notices from H Capital demanding repayment of the loans. On May 27, 2009, Global Hotline and SG Telecom did not repay the loans as requested by H Capital. On June 9, 2009, H Capital submitted documents claiming ownership of the Companys 600 shares of Global Hotline. Global Hotlines management previously provided the Companys stock certificates to H Capital in March 2009.



Although the Company has engaged Japanese corporate counsel to challenge the validity of the loans and H Capitals claims with respect to the Companys ownership of Global Hotline, these events have resulted in IA Global losing control over the day-to-day management and operations of Global Hotline. In addition, we no longer have access to the financial records of Global Hotline that are necessary to periodically report our financial position and results of operations as a consolidated subsidiary of IA Global.



On December 8, 2009, the Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company accounted for Global Hotline
as a discontinued operation for periods ending after July 1, 2009. Our net profit and stockholders equity will increase by $10.1
million during the three months ended December 31, 2009 as a result of recording the deferred gain of from the forfeiture of Global
Hotline operations that was recorded during the three months ended September, 2009.



Set forth below are unaudited pro forma financial statements reflecting managements decision to deconsolidate the operations of Global Hotline. These pro forma financial statements may not be indicative of how future financial statements will appear, regardless of the outcome of the Companys dispute with H Capital. The Company will continue to pursue its civil claim against H Capital, and we are also exploring alternative structures through which we can pursue IA Globals interest in the Japanese BPO business.



30

IA GLOBAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED PROFORMA BALANCE SHEETS

MARCH 31, 2009




ASSETS
        
        UnadjustedBalanceSheet as ofMarch 31, 2009
        
        Pro FormaAdjustment
        
        AdjustedPro FormaBalanceSheet as ofMarch 31, 2009CURRENT ASSETS:Cash and cash equivalents
        
        $
        3,614,731
        
        $
        (3,595,557
        )
        $
        19,174Accounts receivable, net of allowance of $909,984 and $1,182, respectively
        
        
        5,994,117
        
        
        (5,960,124
        )
        
        33,993Prepaid expenses
        
        
        1,184,572
        
        
        (1,144,060
        )
        
        40,512Notes receivable
        
        
        2,353,153
        
        
        (2,345,069
        )
        
        8,084Other current assets
        
        
        124,308
        
        
        (114,103
        )
        
        10,205Refundable taxes - foreign
        
        
        1,419,418
        
        
        (1,419,418
        )
        
        Net assets - discontinued operations
        
        
        
        
        
        20,140,122
        
        
        20,140,122Total current assets
        
        
        14,690,299
        
        
        5,561,791
        
        
        20,252,090EQUIPMENT, NET
        
        
        2,207,849
        
        
        (2,096,118
        )
        
        111,731OTHER ASSETSIntangible assets, net
        
        
        555,870
        
        
        
        
        
        555,870Investment in Taicom Securities Co Ltd
        
        
        2,861,365
        
        
        
        
        
        2,861,365Equity investment in Australia Secured Financial Limited
        
        
        
        
        
        
        
        
        Equity investment in GPlus Media Co Ltd
        
        
        
        
        
        
        
        
        Equity investment in Slate Consulting Co Ltd
        
        
        1,386,054
        
        
        
        
        
        1,386,054Other assets
        
        
        3,164,127
        
        
        (3,146,524
        )
        
        17,603$
        24,865,564
        
        $
        319,149
        
        $
        25,184,713LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable - trade
        
        $
        1,578,029
        
        $
        (978,405
        )
        $
        599,624Accrued payroll taxes and social insurance taxes
        
        
        4,850,887
        
        
        (4,850,887
        )
        
        Accrued liabilitie - other
        
        
        4,657,363
        
        
        (3,767,261
        )
        
        890,102Consumption taxes received
        
        
        1,307,455
        
        
        (1,307,455
        )
        
        Note payable - current portion of long term debt
        
        
        13,391,371
        
        
        (13,035,730
        )
        
        355,641Deferred revenue
        
        
        3,454,692
        
        
        (3,454,692
        )
        
        Net liabilities - discontinued operations
        
        
        
        
        
        29,424,802
        
        
        29,424,802Total current liabilities
        
        
        29,239,797
        
        
        2,030,372
        
        
        31,270,169LONG TERM LIABILITIES:Long term debt
        
        
        1,898,231
        
        
        (1,698,731
        )
        
        199,500Convertible debentures
        
        
        
        
        
        
        
        
        1,898,231
        
        
        (1,698,731
        )
        
        199,500STOCKHOLDERS (DEFICIT) EQUITY:Preferred stock, $.01 par value, 5,000 authorized, none outstanding
        
        
        
        
        
        
        
        
        Common stock, $.01 par value, 300,000,000 shares authorized,219,113,889 and 165,303,543, issued and outstanding, respectively
        
        
        2,191,140
        
        
        
        
        
        2,191,140Additional paid in capital
        
        
        53,056,216
        
        
        
        
        
        53,056,216Accumulated deficit
        
        
        (59,572,442
        )
        
        
        
        
        (59,572,442
        )Accumulated other comprehensive loss
        
        
        (1,694,471
        )
        
        (12,492
        )
        
        (1,706,963
        )(6,019,557
        )
        
        (12,492
        )
        
        (6,032,049
        )Less common stock in treasury, at cost
        
        
        (252,907
        )
        
        
        
        
        (252,907
        )Total stockholders (deficit) equity
        
        
        (6,272,464
        )
        
        (12,492
        )
        
        (6,284,956
        )$
        24,865,564
        
        $
        319,149
        
        $
        25,184,713



31

IA GLOBAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS




Year EndedMarch 31, 2009
        
        Pro FormaAdjustment
        
        UnauditedAdjustedPro FormaYear EndedMarch 31, 2009REVENUE
        
        $
        57,107,050
        
        $
        (56,555,040
        )
        $
        552,010COST OF SALES
        
        
        13,217,643
        
        
        (12,777,570
        )
        
        440,073GROSS PROFIT
        
        
        43,889,407
        
        
        (43,777,470
        )
        
        111,937SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
        
        
        53,444,034
        
        
        (50,493,043
        )
        
        2,950,991OPERATING LOSS
        
        
        (9,554,627
        )
        
        6,715,573
        
        
        (2,839,054
        )OTHER INCOME (EXPENSE):Interest income
        
        
        19,065
        
        
        (4,984
        )
        
        14,081Interest expense and amortization of beneficial conversion feature
        
        
        (757,478
        )
        
        425,782
        
        
        (331,696
        )Other income
        
        
        294,483
        
        
        (25,292
        )
        
        269,191Gain (loss) on equity investment in Australia Secured Financial Limited
        
        
        265,039
        
        
        
        
        
        265,039Gain on equity investment in GPlus Media Co Ltd
        
        
        12,510
        
        
        
        
        
        12,510Loss on equity investment in Slate Consulting Co Ltd
        
        
        (10,427
        )
        
        
        
        
        (10,427
        )Loss on equity investment in Taicom Securities Co Ltd
        
        
        (421,702
        )
        
        
        
        
        (421,702
        )Loss on retirement of debt
        
        
        (60,395
        )
        
        
        
        
        (60,395
        )Loss on sale of Taicom Securities Co Ltd
        
        
        (1,736,934
        )
        
        
        
        
        (1,736,934
        )Loss on sale of GPlus Media Co Ltd
        
        
        (1,286,500
        )
        
        
        
        
        (1,286,500
        )Impairment of equity investment in Australia Secured Financial Limited
        
        
        (7,195,394
        )
        
        
        
        
        (7,195,394
        )Loss (Gain) on Foreign currency transaction adjustment
        
        
        (66,025
        )
        
        
        
        
        (66,025
        )Total other expense
        
        
        (10,943,758
        )
        
        395,506
        
        
        (10,548,252
        )LOSS (INCOME) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
        
        
        (20,498,385
        )
        
        7,111,079
        
        
        (13,387,306
        )Income taxes - current (benefit) provision
        
        
        (256,455
        )
        
        217,690
        
        
        (38,765
        )NET LOSS FROM CONTINUING OPERATIONS
        
        
        (20,241,930
        )
        
        6,893,389
        
        
        (13,348,541
        )Gain (loss) from discontinued operations
        
        
        
        
        
        (6,893,389
        )
        
        (6,893,389
        )NET (LOSS) PROFIT
        
        $
        (20,241,930
        )
        $
        
        
        $
        (20,241,930
        )Basic and diluted loss per share of common-Basic loss per share from continuing operations
        
        $
        (0.10
        )
        $
        0.03
        
        $
        (0.06
        )Basic loss per share from discontinued operations
        
        
        
        
        
        (0.03
        )
        
        (0.03
        )Total basic loss per share
        
        $
        (0.10
        )
        $
        
        
        $
        (0.09
        )Diluted profit (loss) per share from continuing operations
        
        $
        *
        
        $
        *
        
        $
        *Diluted profit (loss) per share from discontinued operations
        
        
        *
        
        
        *
        
        
        *Total diluted profit (loss) per share
        
        $
        *
        
        $
        *
        
        $
        *Weighted average shares of common stock outstanding- basic
        
        
        205,833,118
        
        
        205,833,120
        
        
        205,833,122Weighted average shares of common stock outstanding- diluted
        
        
        *
        
        
        *
        
        
        *



* Diluted calculation is not presented as it is anti-dilutive.



32

IA GLOBAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED PROFORMA STATEMENTS OF OPERATIONS




Year EndedMarch 31, 2008
        
        Pro FormaAdjustment
        
        UnauditedAdjustedPro FormaYear EndedMarch 31, 2008REVENUE
        
        $
        38,692,616
        
        $
        (38,692,616
        )
        $
        COST OF SALES
        
        
        9,977,798
        
        
        (9,977,798
        )
        
        GROSS PROFIT
        
        
        28,714,818
        
        
        (28,714,818
        )
        
        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
        
        
        35,844,189
        
        
        (33,774,021
        )
        
        2,070,168OPERATING LOSS
        
        
        (7,129,371
        )
        
        5,059,203
        
        
        (2,070,168
        )OTHER INCOME (EXPENSE):Interest income
        
        
        56,094
        
        
        (42,255
        )
        
        13,839Interest expense and amortization of beneficial conversion feature
        
        
        (1,116,966
        )
        
        349,777
        
        
        (767,189
        )Other income
        
        
        690,820
        
        
        (662,976
        )
        
        27,844Gain (loss) on equity investment in Australia Secured Financial Limited
        
        
        (227,412
        )
        
        
        
        
        (227,412
        )Gain on equity investment in GPlus Media Co Ltd
        
        
        20,386
        
        
        
        
        
        20,386Loss on equity investment in Slate Consulting Co Ltd
        
        
        (43,519
        )
        
        
        
        
        (43,519
        )Conversion of debenture expense
        
        
        (120,046
        )
        
        
        
        
        (120,046
        )Loss (Gain) on Foreign currency transaction adjustment
        
        
        9,520
        
        
        
        
        
        (1,861
        )Total other expense
        
        
        (731,123
        )
        
        (355,454
        )
        
        (1,086,577
        )LOSS (INCOME) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
        
        
        (7,860,494
        )
        
        4,703,749
        
        
        (3,156,745
        )Income taxes - current (benefit) provision
        
        
        (916,046
        )
        
        916,046
        
        
        NET LOSS FROM CONTINUING OPERATIONS
        
        
        (6,944,448
        )
        
        3,787,703
        
        
        (3,156,745
        )Loss (gain) from disposal of discontinued operations
        
        
        (110,000
        )
        
        
        
        
        (110,000
        )Gain from discontinued operations
        
        
        
        
        
        (3,787,703
        )
        
        (3,787,703
        )Total (loss) / gain from discontinued operations
        
        
        (110,000
        )
        
        (3,787,703
        )
        
        (3,897,703
        )NET (LOSS) PROFIT
        
        $
        (7,054,448
        )
        $
        
        
        $
        (7,054,448
        )Basic and diluted loss per share of common-Basic loss per share from continuing operations
        
        $
        (0.04
        )
        $
        0.02
        
        $
        (0.02
        )Basic loss per share from discontinued operations
        
        
        
        
        
        (0.02
        )
        
        (0.02
        )Total basic loss per share
        
        $
        (0.04
        )
        $
        (
        )
        $
        (0.04
        )Diluted profit (loss) per share from continuing operations
        
        $
        *
        
        $
        *
        
        $
        *Diluted profit (loss) per share from discontinued operations
        
        
        *
        
        
        *
        
        
        *Total diluted profit (loss) per share
        
        $
        *
        
        $
        *
        
        $
        *Weighted average shares of common stock outstanding- basic
        
        
        158,696,823
        
        
        158,696,825
        
        
        158,696,825Weighted average shares of common stock outstanding- diluted
        
        
        *
        
        
        *
        
        
        *



* Diluted calculation is not presented as it is anti-dilutive.



33

THE COMPANY AND OUR BUSINESS



We are a services company focused on growing our existing businesses and expanding through mergers and acquisitions in the Pacific Rim region. Our mission is to identify and invest in business opportunities, apply our skills and resources to nurture and enhance the performance of those businesses across key business metrics, and to deliver accelerating shareholder value.



The Company plans to utilize its business partnerships to acquire or invest in growth businesses in certain target sectors and markets at discounted prices. The Company expects to focus on growth opportunities with distressed businesses that require improvements in management, financial processes and liquidity to be successful. Our targets for acquisition or investment include growth and commodity businesses in the energy sector (including oil and gas, solar, biofuels, and other energy markets). The Company also expects to focus on other sectors in which businesses would benefit from our infrastructure and business process expertise, including financial services and technology. The Company expects to leverage its existing presence in Asia in partnerships with US-based companies seeking to expand their Asian business.



BUSINESS PROCESS OUTSOURCING (BPO)



In the Philippines, we acquired 100% of Shift on April 10, 2008 and Asia Premier on May 27, 2008, multi-service call center operations that have now been merged into a single company operating as Global Hotline Philippines.



CORPORATE INFORMATION



We were incorporated in Delaware on November 12, 1998. The Companys executive offices are located at 101 California Street, Suite 2450, San Francisco, CA 94111, with its operating units being located primarily in the Pacific Rim region. The Companys telephone number is (415) 946-8828 and its primary website is located at www.iaglobalinc.com. The information on our website is not a part of this Form 10-Q.



THE COMPANYS COMMON STOCK



Our common stock currently trades on NYSE AMEX under the symbol IAO.



KEY MARKET PRIORITIES



Currently, our key market priorities are, among other things, to:





        Provide an opportunity for U.S. investors to acquire an interest in B2B, B2C and infrastructure companies in Asia, particularly in Japan, Philippines and China.






        Capitalize on our funding from IAJ LBO and Ascendiant.






        Develop a Japan business process outsourcing business.






        Improve profitability at the Philippines BPO business by improving liquidity, closing significant orders servicing the financial sector in the U.S, installing new management, shifting the corporate culture to better service the U.S. financial markets, and improving our reputation through better execution.






        Acquire growth businesses at discounted prices in our target sectors and markets in conjunction with business partners. We expect to focus on growth opportunities with distressed businesses that require improvements in management, financial processes and liquidity to be successful.






        Acquire growth and commodity businesses in the real estate and energy sectors, including oil & gas, solar, biofuels, and other energy markets. Our sector is expected to benefit from the infrastructure and business processes of IA Global.




34


        Leverage our presence in Asia with U.S.-based companies seeking to expand their Asian businesses.






        Enhance our investor relations services.




PRIMARY RISKS AND UNCERTAINTIES



We are exposed to various risks related to legal claims, our need for additional financing, our level of indebtedness, our NYSE AMEX listing, declining economic conditions, our controlling shareholder groups, the sale of significant numbers of our shares and a volatile market price for our common stock. These risks and uncertainties are discussed in more detail below in this item.



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.



(dollars in thousands)

Three Months Ended September 30,2009
        
        2008
        
        $ Variance
        
        % Variance(unaudited)
        
        (unaudited)Revenue
        
        $
        21
        
        $
        177
        
        $
        (156
        )
        -88.1
        %Cost of sales
        
        
        30
        
        
        122
        
        
        (92
        )
        -75.4
        %Gross profit
        
        
        (9
        )
        
        55
        
        
        (64
        )
        -116.4
        %Selling, general and administrative expenses
        
        
        762
        
        
        830
        
        
        (68
        )
        -8.2
        %Operating loss
        
        
        (771
        )
        
        (775
        )
        
        4
        
        -0.5
        %Other income (expense):Interest expense and amortization of beneficial conversion feature
        
        
        (20
        )
        
        (88
        )
        
        68
        
        -77.3
        %Other income
        
        
        80
        
        
        
        
        
        80
        
        100.0
        %Gain on equity investment in Australia Secured Financial Limited
        
        
        
        
        
        18
        
        
        (18
        )
        -100.0
        %Gain on equity investment in GPlus Media Co Ltd
        
        
        
        
        
        21
        
        
        (21
        )
        -100.0
        %(Loss) gain on equity investment in Slate Consulting Co Ltd
        
        
        (28
        )
        
        1
        
        
        (29
        )
        -2900.0
        %Loss on forfeiture of Taicom Securities Co Ltd
        
        
        (2,861
        )
        
        
        
        
        (2,861
        )
        -100.0
        %Loss on investment in Taicom Securities Co Ltd
        
        
        
        
        
        (114
        )
        
        114
        
        100.0
        %Loss on sale in Slate Consulting Co Ltd
        
        
        (1,285
        )
        
        
        
        
        (1,285
        )
        -100.0
        %Loss on foreign currency translation adjustment
        
        
        
        
        
        (63
        )
        
        63
        
        100.0
        %Total other expense
        
        
        (4,114
        )
        
        (225
        )
        
        (3,889
        )
        -1728.4
        %Loss from continuing operations before income taxes
        
        
        (4,885
        )
        
        (1,000
        )
        
        (3,885
        )
        -388.5
        %Income taxes- benefit provision
        
        
        
        
        
        (11
        )
        
        11
        
        100.0
        %Net loss from continuing operations
        
        
        (4,885
        )
        
        (989
        )
        
        (3,896
        )
        -393.9
        %Loss from discontinued operations
        
        
        
        
        
        (709
        )
        
        709
        
        100.0
        %Net loss
        
        $
        (4,885
        )
        $
        (1,698
        )
        $
        (3,187
        )
        -187.7
        %



35

THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2008



Net revenue for the three months ended September 30, 2009 decreased $156,000 to $21,000 as compared to $177,000 for the three months ended September 30, 2008.



The decrease was due to cancelled contracts at GHI Philippines.



COST OF SALES



Cost of sales for the three months ended September 30, 2009 decreased $92,000 to $30,000 as compared to $122,000 for the three months ended September 30, 2008.



The decrease resulted from reduced agent and other costs at GHI Philippines.



EXPENSES



Selling, general and administrative expenses for the three months ended September 30, 2009 decreased $68,000 to $762,000 as compared $830,000 for the three months ended September 30, 2008. This was due to reduced operating expenses GHI Philippines. Headcount was reduced during the three months ended September 30, 2009.



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.



OTHER INCOME/EXPENSE



Other expense for the three months
ended September 30, 2009 was $4,114,000 as compared to other expense of $225,000 for the three months ended September 30, 2008. The
other expense increase was primarily related to the loss on sale of Taicom Securities Co Ltd of $2,861,000 and the loss on sale of
Slate Consulting Co Ltd of $1,285,000.



The 2008 other expense was primarily
related to interest expense and amortization of beneficial conversion feature of $88,000 and a net loss on equity investments of
$74,000 and a foreign currency translation adjustment of $63,000.




NET LOSS



Net loss for the three months ended
September 30, 2009 was $4,885,000 as compared to a net loss of $1,698,000 for the three months ended September 30, 2008.



36

(dollars in thousands)

Six Months Ended September 30,2009
        
        2008
        
        $ Variance
        
        % Variance(unaudited)
        
        (unaudited)Revenue
        
        $
        68
        
        $
        323
        
        $
        (255
        )
        -78.9
        %Cost of sales
        
        
        73
        
        
        217
        
        
        (144
        )
        -66.4
        %Gross profit
        
        
        (5
        )
        
        106
        
        
        (111
        )
        -104.7
        %Selling, general and administrative expenses
        
        
        1,882
        
        
        1,703
        
        
        179
        
        10.5
        %Operating loss
        
        
        (1,887
        )
        
        (1,597
        )
        
        (290
        )
        -18.2
        %Other income (expense):Interest income
        
        
        
        
        
        14
        
        
        (14
        )
        -100.0
        %Interest expense and amortization of beneficial conversion feature
        
        
        (43
        )
        
        (290
        )
        
        247
        
        85.2
        %Other income
        
        
        80
        
        
        179
        
        
        (99
        )
        -55.3
        %Gain on equity investment in Australia Secured Financial Limited
        
        
        
        
        
        274
        
        
        (274
        )
        -100.0
        %Gain on equity investment in GPlus Media Co Ltd
        
        
        
        
        
        53
        
        
        (53
        )
        -100.0
        %(Loss) gain on equity investment in Slate Consulting Co Ltd
        
        
        (16
        )
        
        23
        
        
        (39
        )
        -169.6
        %Loss on forfeiture of Taicom Securities Co Ltd
        
        
        (2,861
        )
        
        
        
        
        (2,861
        )
        -100.0
        %Loss on investment in Taicom Securities Co Ltd
        
        
        
        
        
        (220
        )
        
        220
        
        100.0
        %Loss on sale in Slate Consulting Co Ltd
        
        
        (1,285
        )
        
        
        
        
        (1,285
        )
        -100.0
        %Loss on foreign currency translation adjustment
        
        
        
        
        
        (65
        )
        
        65
        
        100.0
        %Total other expense
        
        
        (4,125
        )
        
        (32
        )
        
        (4,093
        )
        -12790.6
        %Loss from continuing operations before income taxes
        
        
        (6,012
        )
        
        (1,629
        )
        
        (4,383
        )
        -269.1
        %Income taxes- current benefit
        
        
        
        
        
        (9
        )
        
        9
        
        100.0
        %Net loss from continuing operations
        
        
        (6,012
        )
        
        (1,620
        )
        
        (4,392
        )
        -271.1
        %(Loss) gain from discontinued operations
        
        
        (2,336
        )
        
        649
        
        
        (2,985
        )
        -459.9
        %Net loss from discontinued operations before deemed preferred stock dividend
        
        
        (8,348
        )
        
        (971
        )
        
        (7,377
        )
        -759.7
        %Deemed preferred stock dividend
        
        
        (192
        )
        
        
        
        
        (192
        )
        -100.0
        %Net loss
        
        $
        (8,540
        )
        $
        (971
        )
        $
        (7,569
        )
        -779.5
        %



SIX MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2008



Net revenue for the six months ended September 30, 2009 decreased $255,000 to $68,000 as compared to $323,000 for the six months ended September 30, 2008.



The decrease was due to cancelled contracts at GHI Philippines.



COST OF SALES



Cost of sales for the six months ended September 30, 2009 decreased $144,000 to $73,000 as compared to $217,000 for the six months ended September 30, 2008.



The decrease resulted from reduced agent and other costs at GHI Philippines.



EXPENSES



Selling, general and administrative
expenses for the six months ended September 30, 2009 increased $179,000 to $1,882,000 as compared $1,703,000 for the six months
ended September 30, 2008. This was due to $410,000 of forensic audit expenses.



37

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.



OTHER INCOME/EXPENSE



Other expense for the six months ended September 30, 2009 was $4,125,000 as compared to other expense of $32,000 for the six months ended September 30, 2008. The other expense increase was primarily related to the loss on sale of Taicom Securities Co Ltd of $2,861,000 and the loss on sale of Slate Consulting Co Ltd.



The 2008 other expense was primarily related to interest expense and amortization of beneficial conversion feature of $290,000 and a foreign currency translation adjustment of $63,000, offset by a net gain on equity investments of $130,000 and other income of $179,000.



NET LOSS FROM CONTINUING OPERATIONS



Net loss from continuing operations for the six months ended September 30, 2009 was $6,012,000 as compared to a net loss of $1,620,000 for the six months ended September 30, 2008 for the reasons discussed above.



NET LOSS



Net loss for the six months ended
September 30, 2009 was $8,540,000 as compared to a net loss of $971,000 for the six months ended September 30, 2008. The Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company accounted for Global Hotline
as a discontinued operation for periods ending after July 1, 2009 and recorded a loss from discontinued operations of $2,336,000
during the six months ended September 30, 2009.



LIQUIDITY AND CAPITAL RESOURCES



We had cash of approximately $0 million, a net working capital deficit of approximately $2.4 million and total indebtedness of $.6 million as of September 30, 2009.



IA Global and each subsidiary manage their cash flow independently. IA Global funds its operations from loans, convertible debentures, inter-company borrowings, loans collateralized by stock, management service fees and dividends from its equity investments. Global Hotline Philippines funds its operations from inter-company borrowings.



Each entity will need to obtain additional financing in order to continue our current operations, service our debt repayments and acquire businesses. There can be no assurance that we will be able to secure funding, or that if such funding is available, whether the terms or conditions would be acceptable to us.



Volatility and disruption of financial markets could affect our access to credit. The current difficult economic market environment is causing contraction in the availability of credit in the marketplace. This could potentially reduce or eliminate the sources of liquidity for the Company.



If the Company is unable to obtain additional financing, we may need to restructure our operations, divest all or a portion of our business or file for bankruptcy.



Since our 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 $21.3 million as of September 30, 2009, with approximately $8.8 million raised in the initial public offering, $9.0 million raised in private placements and $4.0 million raised in the conversion of debt, offset by $0.7 million used for the share repurchase program. In addition, we have issued equity for non-cash items totaling $32.1 million, including $7.0 million from the ASFL equity investment, $4.1 million from the Taicom equity investment, $1.4 million each from the GPlus and Slate equity investments, $.3 and $.2 million related to the Asia Premier and Shift acquisition, respectively, $7.1
million issued for services, $3.6 million related to a beneficial conversion feature, $3.9 million from debenture conversions, and $3.1 million related to the GHI acquisition. Additional funding was obtained from notes payable and long term debt of approximately $.6 million.



38

OPERATING ACTIVITIES



Net cash used in operating activities
for the six months ended September 30, 2009 was $2.4 million. This amount was primarily related to a net loss of $8.3 million,
offset by depreciation and amortization and other non-cash expenses of $ 4.6 million, and an increase in accounts payable of $.5
million.



INVESTING ACTIVITIES



Net cash provided by investing
activities for the six months ended September 30, 2009 was $.1 million. This amount was related to the sale of Slate Consulting.



FINANCING ACTIVITIES



Net cash provided by financing
activities for the six months ended September 30, 2009 was $.8 million. This amount was primarily related to the sale of common
stock of $.4 million and $.3 million from the sale of preferred stock.



The Companys unaudited contractual cash obligations as of September 30, 2009 are summarized in the table below (1):




Contractual Cash Obligations
        
        Total
        
        Less Than1 Year
        
        1-3 Years
        
        3-5 Years
        
        Greater Than5 YearsOperating leases
        
        $
        141,465
        
        $
        126,028
        
        $
        15,436
        
        $
        0
        
        $
        0Note payable
        
        
        587,312
        
        
        387,812
        
        
        199,500
        
        
        0
        
        
        0Capital expenditures
        
        
        0
        
        
        0
        
        
        0
        
        
        0
        
        
        0Acquisitions
        
        
        0
        
        
        0
        
        
        0
        
        
        0
        
        
        0$
        728,777
        
        $
        513,840
        
        $
        214,936
        
        $
        0
        
        $
        0



(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 to the financial statements set forth in this report), 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 and Philippines) 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 in the US due to IA Global, Inc. 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 the recorded valuation.



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 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 has not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with stock-based awards recognized in 2006 includes 1) quarterly amortization related to the remaining unvested portion of stock-based awards granted prior to December 15, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123; and 2) quarterly amortization related to stock-based awards granted subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with the provisions of
SFAS 123R. 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.



39

INVESTMENTS



We account for our investments using the equity method unless its value has been determined to be other than temporarily impaired, in which case we write the investment down to its impaired value. We review these investments periodically for impairment and make appropriate reductions in carrying value when an other-than-temporary decline is evident; however, for non-marketable equity securities, the impairment analysis requires significant judgment. During our review, we evaluate the financial condition of the issuer, market conditions, and other factors providing an indication of the fair value of the investments. Adverse changes in market conditions or operating results of the issuer that differ from expectation, could result in additional other-than-temporary losses in future periods.



FACTORS THAT MAY AFFECT FUTURE RESULTS



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



THE COMPANY COULD BE EXPOSED TO LEGAL CLAIMS, AND THE OUTCOME OF ANY DISPUTES RESULTING FROM SUCH CLAIMS COULD ADVERSED AFFECT THE COMPANYS FINANCIAL CONDITION OR RESULTS OF OPERATIONS



LEGAL PROCEEDING  GLOBAL HOTLINE



As has been previously disclosed, the Company pledged its shares of Global Hotline as collateral for certain loans borrowed from H Capital, an unlicensed Japanese lender, for such subsidiary. On May 26, 2009, Global Hotline and IA Global received notices from H Capital demanding repayment of the loans. On May 27, 2009, Global Hotline and SG Telecom did not repay the loans as requested by H Capital. On June 2, 2009, H Capital submitted documents claiming ownership of the Companys 600 shares of Global Hotline. Global Hotlines management previously provided the Companys stock certificates to H Capital in March 2009.

Although the Company has engaged Japanese corporate counsel to challenge the validity of the loans and H Capitals claims with respect to the Companys ownership of Global Hotline, these events have resulted in IA Global losing control over the day-to-day management and operations of Global Hotline. In addition, we no longer have access to the financial records of Global Hotline that are necessary to periodically report our financial position and results of operations as a consolidated subsidiary of IA Global.

On December 8, 2009, the Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company accounted for Global Hotline
as a discontinued operation for periods ending after July 1, 2009. Our net profit and stockholders equity will increase by $10.1
million during the three months ended December 31, 2009 as a result of recording the deferred gain of from the forfeiture of Global
Hotline operations that was recorded during the three months ended September, 2009.



The Companys decision to deconsolidate Global Hotline is not a relinquishment of their claim of ownership of Global Hotline. The Company has engaged Japanese legal counsel and intends to vigorously pursue their legal right with regards to ownership. Management, based on their consultation with Japanese legal counsel, is unable to determine the outcome of this dispute H Capital.



Concurrent with Companys deconsolidation of Global Hotline, management has determined that any obligations that may arise from Global Hotline, that existed prior, or subsequent, to their decision to deconsolidate, is not an obligation of the Company.



40

Prior to December 8, 2009 Global
Hotline had significant liabilities to Japanese banks in excess of approximately $12,000,000. These loans were unsecured and
personally guaranteed by either the CEO or CFO of Global Hotline. In addition to theses bank loans, Global Hotline had payroll,
social insurance and other tax liabilities at of approximately 800,000,000 Yen, or approximately $9.0 million at current exchange
rates, as of September 30, 2009.



The status of Global Hotlines bank loans and tax liabilities is unknown subsequent to December 8, 2009. In addition, the status of other trade debt, or any debt or obligation of Global Hotline is unknown subsequent to December 8, 2009. In addition to debt, Global Hotline has obligation under various operating leases, the status of which is unknown subsequent to December 8, 2009.



Global Hotline has revenue contracts requiring performance for their various vendors. The status of performance, or any liability for non-performance, is unknown subsequent to December 8, 2009.



With regards to the above referenced liabilities, or potential liabilities of Global Hotline, management of the Company along with their Japanese legal counsel, has determined that the Company has no legal obligation for these liabilities or potential liabilities. Assertions against the Company for Global Hotline liabilities, or potential liabilities, might be sustained. The Company intends to defend themselves against any assertions related to liabilities, or potential liabilities, resulting from Global Hotline prior to, or subsequent to, December 8, 2009. The Company has not accrued for any liabilities related to Global Hotline as of September 30, 2009.



LEGAL PROCEEDING  AMV



On April 1, 2009, the Company agreed to issue preferred stock (IAO Preferred Stock), at $1,000 per share, to AMV for $317,000 in the Amendment to Share Exchange Agreement.



At AMVs sole discretion, AMV may either (1) convert some or all of its IAO Preferred Stock into 12,800,000 shares of the Companys common stock pro rata at $0.025 per share; or (2) exchange IAO Preferred Stock for 971,458 Taicom Stock owned by the Company pro rata. The conversion of IAO Preferred Stock intoTaicom Stock is automatically triggered in the case of certain events, including delisting from NYSE AMEX, bankruptcy or insolvency. On July 17, 2009 and September 28, 2009, AMV notified us that we were in default under the June 8, 2009 Services Agreement (Agreement) and as a result did not fund the $60,000 due June 30, 2009, July 15, 2009 and July 31, 2009. However, AMV was late in funding as required by the Agreement. On October 30, 2009, the Company agreed to issue 4,000,000 shares based on the $120,000 in funded under this Agreement.



On November 16, 2009, but effective August 4, 2009, AMV claimed ownership of our shares in Taicom. This resulted in a loss on investment of approximately $2,861,000. The parties continue to negotiate over the April 1, 2009 and June 8, 2009 Amendment to Share Exchange and June 8, 2009 Services Agreements.



WE WILL NEED ADDITIONAL FINANCING TO SUPPORT OUR BUSINESS STRATEGY (WHICH INCLUDES ACQUIRING OR INVESTING IN NEW BUSINESSES) AND ONGOING OPERATIONS



Each entity within our business will need to obtain additional financing in order to continue our current operations, service our debt repayments and acquire businesses. There can be no assurance that we will be able to secure funding, or that if such funding is available, the terms or conditions would be acceptable to us. If the Company is unable to obtain additional financing, we may need to restructure our operations, divest all or a portion of our business or file for bankruptcy by GHI and/or IA Global.



Our recent efforts to generate additional liquidity, including through sales of our common stock, are described in more detail in the financial statement notes set forth in this report.



If we raise additional capital through borrowing or other debt financing, we will 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. When we raise more equity capital in the future, it will result in substantial dilution to our current stockholders.



41

OUR LEVEL OF INDEBTEDNESS AND THE TERMS OF OUR FINANCING ARRANGEMENTS MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Our level of indebtedness and the terms of our financing arrangements could result in or contribute to:





        a bankruptcy filing by GHI and/ or IA Global;
        a default under the loan agreements;
        a collateral call by a lender, including the loss of our Global Hotline subsidiary;
        lawsuits with lenders;
        our inability to obtain additional financing to support capital expansion plans and for working capital and other purposes on acceptable terms or at all;
        a diversion of substantial cash flow from our operations and expansion plans in order to service our debt obligations; and/or
        a competitive disadvantage compared to less leveraged competitors and competitors that have better access to capital resources.

Our ability to make scheduled payments on our debt and other fixed obligations will depend on our future operating performance and cash flows, which in turn will depend on prevailing economic and political conditions and financial, competitive, regulatory, business and other factors, many of which are beyond our control.



Our ability to renegotiate the terms of our loans will depend on our negotiations with our Japanese banks and H Capital.



We are principally dependent upon our operating cash flows to fund our operations and to make scheduled payments on debt and other fixed obligations. We cannot assure you that we will be able to generate sufficient cash flows from our operations to pay our debt and other fixed obligations as they become due, and if we fail to do so our business could be harmed. If the Company is unable to obtain additional financing or renegotiate the terms of our loans, we may need to restructure our operations, divest all or a portion of our business, provide the Global Hotline business in a collateral call or file for bankruptcy.



WE ARE NOT IN COMPLIANCE WITH CERTAIN NYSE AMEX REQUIREMENTS FOR CONTINUED LISTING



On December 23, 2009, the Company received notice that the NYSE AMEX Stock Exchange (NYSE AMEX) has determined to proceed with an application to the Securities and Exchange Commission to remove the Companys common stock from listing and registration on NYSE AMEX. This determination, which the Company has appealed, was made in light of the Companys failure to comply with certain standards for continued listing on NYSE AMEX set forth in Part 10 of the NYSE AMEX Company Guide. Specifically, the Company is not in compliance with (i) Section 1003(a)(i) of the Company Guide, since its total shareholders equity is less than $2 million and the Company has reported losses from continuing operations and net losses in two out of the three most recent fiscal years; (ii) Section 1003(a)(ii) of the Company Guide, since its total shareholders equity is less than $4
million and the Company has reported losses from continuing operations and net losses in three out of the four most recent fiscal years; (iii) Section 1003(a)(iii) of the Company Guide, since its total shareholders equity is less than $6 million and the Company has reported losses from continuing operations and net losses in the five most recent fiscal years; and (iv) Section 1003(a)(iv) of the Company Guide, since the Company sustained losses so substantial in relation to its overall operations or its existing financial resources or its financial condition has become so impaired that is appears questionable, in the opinion of the NYSE AMEX, that the Company will be able to continue operations and/or meet its obligations as they mature.



In order to maintain its listing on NYSE AMEX, the Company submitted a plan on October 26, 2009, which was subsequently amended on November 5, 2009, that addressed how it intended to regain compliance with Section 1003(a)(iv) of the Company Guide by March 25, 2010 and Section 1003(a)(i), (ii) and (iii) of the Company Guide by March 25, 2011. The Company would be subject to periodic review by NYSE AMEX staff during the extension period.



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In the notice received by the Company on December 23, 2009, NYSE AMEX indicated that it believes that the Companys financial condition, low selling price and lack of definitive documentation do not support the Companys plan to regain compliance by March 25, 2011. On December 30, 2009, the Company appealed the NYSE AMEX staffs determination and requested an oral hearing to present its plan and discuss the Companys progress towards achieving the goals set forth in the plan, including the Companys intent to regain compliance with NYSE AMEX rules by March 25, 2011. The Companys common stock will continue to trade on NYSE AMEX while the Companys appeal is pending.



The Company has not filed its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009. The timely filing of such report is a condition of the Companys continuing listing on NYSE AMEX, as required by Sections 134 and 1101 of the Company Guide. In addition, the Companys failure to file this report is a violation of its listing agreement with NYSE AMEX. Pursuant to 1003(d) of the Company Guide, NYSE AMEX is authorized to suspend, and unless prompt corrective action is taken, remove the Companys security from listing on the exchange. The Company submitted a plan to NYSE AMEX on December 7, 2009 and expects to be in compliance with Sections 134 and 1101 of the Company Guide by February 22, 2010.



The Company also received a deficiency letter from NYSE AMEX on July 10, 2009. In this letter, NYSE AMEX staff determined that the Companys securities had been selling for a low price per share for a substantial period of time and, pursuant to Section 1003(f)(v) of the Company Guide, the Companys continued listing was predicated on it effecting a reverse stock split of its common stock by January 11, 2010. In response to the deficiency letter and in accordance with guidance provided by NYSE AMEXs staff, the Company asked its stockholders to give the board of directors discretion to effect a reverse stock split within a prescribed range of ratios. Such proposal was approved by the Companys stockholders at the Companys 2009 Annual Meeting on December 18, 2009. This reverse stock split is expected to be considered after the completion of the appeal process.



Pursuant to Section 1003(c)(i) of the Company Guide, NYSE AMEX will consider delisting a security where an issuer has disposed of its principal operating assets. On December 8, 2009, the Company deconsolidated the operations of Global Hotline, Inc., its wholly-owned subsidiary engaged in business process outsourcing activities in Japan, effective as of July 1, 2009. As a result, the Company intends to account for Global Hotline, Inc. as a discontinued operation for periods ending after July 1, 2009. The Companys stockholders equity is expected to increase by approximately $12.0 million during the three months ended September 30, 2009 in part as a consequence of this determination.



There is no guarantee that the Company will be successful at maintaining its NYSE AMEX listing. If our securities are delisted from NYSE AMEX, we believe they will be quoted for trading on the Over-The-Counter Bulletin Board (the OTCBB), which may depress demand for our shares and limit market liquidity due to the reluctance or inability of certain investors to buy stocks on the OTCBB. Consequently, an investor may find it more difficult to trade our securities, which may adversely affect the ability to resell securities purchased from the selling stockholders.



WE ARE IN DEFAULT UNDER THE JUNE 8, 2009 SERVICES AGREEMENT WITH ARQUEMAX VENTURES, LLC



On April 1, 2009, the Company agreed to issue preferred stock (IAO Preferred Stock), at $1,000 per share, to ArqueMax Ventures LLC (AMV) for $317,000 in the Amendment to Share Exchange Agreement.



At AMVs sole discretion, AMV may either (1) convert some or all of its IAO Preferred Stock into 12,800,000 shares of the Companys common stock pro rata at $0.025 per share; or (2) exchange IAO Preferred Stock for 971,458 Taicom Stock owned by the Company pro rata. The conversion of IAO Preferred Stock intoTaicom Stock is automatically triggered in the case of certain events, including delisting from NYSE AMEX, bankruptcy or insolvency.



On July 17, 2009 and September 28, 2009, AMV notified us that we were in default under the June 8, 2009 Services Agreement (Agreement) and as a result did not fund the $60,000 due on each of June 30, 2009, July 15, 2009 and July 31, 2009. However, AMV was late in funding as required by the Agreement. On October 30, 2009, the Company agreed to issue 4,000,000 shares based on the $120,000 funded under this Agreement.



On November 16, 2009, but effective August 4, 2009, AMV claimed ownership of our Taicom shares. This resulted in a loss on investment of approximately $2,861,000. The parties continue to negotiate over the agreements.



43

DECLINING GENERAL ECONOMIC, BUSINESS, OR INDUSTRY CONDITIONS MAY CAUSE REDUCED REVENUES AND PROFITABILITY



Recently, concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. have contributed to increased volatility and diminished expectations for the global economy and expectations of slower global economic growth going forward. These factors, combined with volatile oil prices, declining business and consumer confidence and increased unemployment, have precipitated an a recession. If the economic climate in the U.S. or abroad does not improve from its current condition or continues to deteriorate, our customers or potential customers could reduce or delay their purchases of our products, which would adversely impact our revenues and our ability to manage inventory levels, collect customer receivables and ultimately our profitability.



Volatility and disruption of financial markets could affect our access to credit. The current difficult economic market environment has caused contraction in the availability of credit in the marketplace. This could potentially reduce or eliminate sources of liquidity for the Company.



OUR CONTROLLING SHAREHOLDER GROUP HAS SUBSTANTIAL INFLUENCE OVER OUR COMPANY



As of January 5, 2010, IAJ LBO Fund,
PBAA Fund Limited, Terra Firma, Inter Asset Japan Co Ltd (IAJ), IA Turkey and Hiroki Isobe, (collectively, the
Controlling Shareholders) collectively hold approximately 49.6% of our common stock. These Controlling Shareholders have
stated in a Schedule 13D that they may be deemed to constitute a group for the purposes of Rule 13d-3 under the Exchange
Act. Hiroki Isobe controls each of our Controlling Shareholders.



IAJ could cause a change of control of our board of directors if in combination with another large shareholder elects candidates of their choice to the board at a shareholder meeting, and approve or disapprove any matter requiring stockholder approval, regardless of how our other shareholders may vote. Further, under Delaware law, IAJ could have a significant influence over our affairs, if in combination with another large shareholder, 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.



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



Sales or issuances of a large number of shares of common stock (including pursuant to the equity line of credit transaction that we recently entered into with Ascendiant Capital Group, LLC, which is described in more detail elsewhere in this prospectus) in the public market or the perception that sales may occur could cause the market price of our common stock to decline. As of January 7, 2010, there were 299,792,972 shares of common stock issued and outstanding. Significant shares of common stock are held by our principal shareholders, other Company insiders and other large shareholders. As affiliates (as defined under Rule 144 of the Securities Act (Rule 144)) of the Company, our principal shareholders, other Company insiders and other large shareholders may only sell their shares of common stock in the public market pursuant to an effective registration statement
or in compliance with Rule 144.



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 volatile. Our common stock price may fluctuate in response to factors such as:





        A bankruptcy filing by GHI and/or IA Global,
        Announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, strategic relationships, addition or loss of significant customers and contracts, capital expenditure commitments, loan, note payable and agreement defaults, loss of our subsidiaries and impairment of assets and our NYSE AMEX listing,
        Issuance of convertible or equity securities for general or merger and acquisition purposes,
        Issuance or repayment of debt, accounts payable or convertible debt for general or merger and acquisition purposes,



44


        Alleged manipulation of our stock price,
        Sale of a significant number of our common stock by shareholders,
        General market and economic conditions,
        Quarterly variations in our operating results,
        Defending significant litigation,
        Investor relation activities,
        Announcements of technological innovations,
        New product introductions by us or our competitors,
        Competitive activities,
        Additions or departures of key personnel,
        Issuance of loans to customers or related or affiliated parties, and
        Foreign exchange gains and losses.

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. These factors could have a material adverse effect on our business, financial condition and results of operations.



RISKS ASSOCIATED WITH EQUITY LINE OF CREDIT WITH ASCENDIANT CAPITAL GROUP, LLC



If the price or the trading volume of our common stock does not reach certain levels, we will be unable to draw down all or substantially all of our $5,000,000 equity line of credit with Ascendiant Capital Group, LLC, which may force us to significantly curtail the scope of our operations or alter our business plan.



The maximum draw down amount every 11 trading days under our equity line of credit facility is the lesser of $250,000 or 15% of the total trading volume of our common stock for the 10-trading-day period prior to the draw down multiplied by the volume-weighted average price of our common stock for such period. If our stock price and trading volume remain at current levels, we will not be able to draw down all $5,000,000 available under the equity line of credit and we may be forced to curtail the scope of our operations or alter our business plan if other financing is not available to us.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



FOREIGN CURRENCY RISK



We were exposed to foreign currency risks due to our operations in Japan and the Philippines and our proposed investment in Korea. We do not trade in hedging instruments or other than trading instruments and we are exposed to foreign currency exchange risks.



INTEREST RATE RISK



We are not exposed to interest rate risks. 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.



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ITEM 4. CONTROLS AND PROCEDURES



Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2009. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2009, our disclosure controls and procedures were effective in ensuring that (1) information to be disclosed in reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms promulgated under the Exchange Act and (2) information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to the principal executive officer and principal financial officer as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Companys internal control over financial reporting that occurred during the Companys last fiscal quarter that have materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.



PART II - OTHER INFORMATION



ITEM 1A. RISK FACTORS



For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed under the heading Factors That May Affect Future Results included in Part I, Item 2 (Managements Discussion and Analysis of Financial Condition and Results of Operations) of this Quarterly Report on Form 10-Q. In addition, the following represent material changes to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009.



LOSS OF OPERATIONAL CONTROL OF GLOBAL HOTLINE, INC. AND RELATED DECONSOLIDATION



As has been previously disclosed, the Company pledged its shares of Global Hotline as collateral for certain loans borrowed from H Capital, an unlicensed Japanese lender, by such subsidiary. On May 26, 2009, Global Hotline and IA Global received notices from H Capital demanding repayment of the loans. On May 27, 2009, Global Hotline and SG Telecom did not repay the loans as requested by H Capital. On June 9, 2009, H Capital submitted documents claiming ownership of the Companys 600 shares of Global Hotline. Global Hotlines management previously provided the Companys stock certificates to H Capital in March 2009.



Although the Company has engaged Japanese corporate counsel to challenge the validity of the loans and H Capitals claims with respect to the Companys ownership of Global Hotline, these events have resulted in IA Global losing control over the day-to-day management and operations of Global Hotline. In addition, we no longer have access to the financial records of Global Hotline that are necessary to periodically report our financial position and results of operations as a consolidated subsidiary of IA Global.



On December 8, 2009, the Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company intends to account for
Global Hotline as a discontinued operation for periods ending after July 1, 2009. Our net profit and stockholders equity will
increase by $10.1 million during the three months ended December 31, 2009 as a result of recording the deferred gain of from the
forfeiture of Global Hotline operations that was recorded during the three months ended September, 2009.



The Company will continue to pursue its civil claim against H Capital, and we are also exploring alternative structures through which we can pursue IA Globals interest in the Japanese BPO business. If the Company is unsuccessful in such efforts, however, it could result in the ultimate loss of the Companys primary operating subsidiary and a majority of its total assets, and have a material adverse effect on the Companys overall financial condition and results of operations.



POTENTIAL REGULATION UNDER THE INVESTMENT COMPANY ACT OF 1940



Under the Investment Company Act of 1940 (the Investment Company Act), companies that engage primarily in investing or trading in investment securities  or primarily engage in some other business but nevertheless hold investment securities that account for a certain percentage (generally, 40-45%) of their total assets  are considered investment companies required to register as such an comply with various regulatory obligations under the Investment Company Act. Shares of majority-owned subsidiaries are not considered investment securities for purposes of the Investment Company Act.



46

The Company has structured its business and operations in the past, and intends to continue to structure its business and operations in the future, in a manner that makes it exempt from registration and regulation under the Investment Company Act. If, however, the Company is unsuccessful in maintaining or regaining control over Global Hotline (its primary operating subsidiary), there is a risk that its asset portfolio and nature of operations could at least temporarily be consistent with that of an investment company. According, the Company could be subject to regulation under the Investment Company Act in the future. In such event, the Company would be required to register as an investment company and could be expected to incur significant registration and compliance costs. The Company has obtained no formal determination from the SEC as to the status of the Company under the Investment
Company Act and, consequently, any violation of the Investment Company Act could subject the Company to material adverse consequences.



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



During the three months ended September 30, 2009, the Company made the following sales (or agreed to make future sales) of equity securities pursuant to the exemption from registration provided under Section 4(2) of the Securities Act:



PRIVATE PLACEMENTS WITH INTER ASSET JAPAN LBO NO. 1 FUND



On August 2, 2009, the Company entered into a Stock Purchase Agreement (Agreement 1) with Inter Asset Japan LBO No 1 Fund, an existing shareholder of the Company (the Shareholder). Under the terms of the Agreement 1, the Company agreed to issue and sell to the Shareholder 1,500,000 shares (the Shares) of the Companys common stock, par value $0.01 per share, for an aggregate purchase price of $60,000, or $0.04 per share (the Purchase Price). The Company issued and sold the Shares to the Shareholder in reliance on the exemption from the registration requirements set forth in the Securities Act provided under Section 4(2) of the Securities Act and Regulation D promulgated by the SEC under the Securities Act.



Agreement 1 contains certain representations and warranties of the Shareholder and the Company, including customary investment-related representations provided by the Shareholder, as well as acknowledgements by the Shareholder that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the Shares has not been registered with the SEC or qualified under any state securities laws. The Company provided customary representations regarding, among other things, its organization, capital structure, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations.



Agreement 1 also grants the Shareholder registration rights that it may exercise at its option and provides the Shareholder with a right of first offer if the Company proposes to issue securities in the future (subject to certain customary exceptions). Finally, the Shareholder has the right to demand that the Company redeem all or any portion of the Shares at any time on or after October 31, 2009, for a redemption price equal to the greater of the Purchase Price or the listed market price for the Companys common stock as of the redemption date.



On August 17, 2009, the Company entered into a Stock Purchase Agreement (Agreement 2) with the Shareholder. Under the terms of Agreement 2, the Company agreed to issue and sell to the Shareholder 5,000,000 shares of our common stock for an aggregate purchase price of $200,000, or $0.04 per share.



Also under the terms of the Agreement, the Shareholder has committed to purchase, and the Company agreed to issue and sell to the Shareholder, additional shares of the Companys common stock in accordance with the following schedule:





        2,500,000 shares at a purchase price of US$.04 per share, or an aggregate price of US$100,000 on or before September 4, 2009.






        1,250,000 shares at a purchase price of US$.04 per share, or an aggregate price of US$50,000 on or before September 18, 2009.






        50,000,000 shares at a purchase price of US$.04 per share, or an aggregate price of US$2,000,000 on or before November 10, 2009.




The Shareholders obligation to purchase the foregoing shares by the date specified is conditioned upon the representations and warranties of the Company contained in Agreement 2 being accurate as of the date of such closing.




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Finally, the Shareholder has the option, but not the obligation, to purchase, on or before December 31, 2009, an additional 50,000,000 shares of Common Stock at a purchase price of US$.04 per share, or an aggregate price of US$2,000,000.



Under the terms of the Agreement, as
of September 30, 2009 the Company has agreed to issue and sell to the Investor, 8,250,000 shares at a purchase price of $.04 per
share, or an aggregate price of $330,000.



Under the terms of the Agreement, as
of January 5, 2010 the Company has agreed to issue and sell to the Investor, 71,719,633 shares at a purchase price of $.04 per
share, or an aggregate price of $2,861,000. Further, we expect that a total of $861,000 of the funds can be used for working capital
and the remaining $2,000,000 can be used for investments.



The Company issued and sold the shares of common stock to the Shareholder in reliance on the exemption from the registration requirements set forth in the Securities Act provided under Section 4(2) of the Securities Act and Regulation D promulgated by the SEC under the Securities Act.



Agreement 2 contains certain representations and warranties of the Shareholder and the Company, including customary investment-related representations provided by the Shareholder, as well as acknowledgements by the Shareholder that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the shares has not been registered with the SEC or qualified under any state securities laws. The Company provided customary representations regarding, among other things, its organization, capital structure, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations.



Agreement 2 also grants the Shareholder registration rights that it may exercise at its option and provides the Shareholder with a right of first offer if the Company proposes to issue securities in the future (subject to certain customary exceptions).



EQUITY LINE OF CREDIT TRANSACTION WITH ASCENDIANT CAPITAL GROUP, LLC



On September 29, 2009, the Company entered into a Securities Purchase Agreement with Ascendiant Capital Group, LLC (Ascendiant), pursuant to which Ascendiant agreed to purchase up to $5,000,000 worth of shares of the Companys common stock from time to time over a 24-month period, provided that certain conditions are met. The financing arrangement entered into by IA Global and Ascendiant is commonly referred to as an equity line of credit or an equity drawdown facility.



Under the terms of the Securities
Purchase Agreement, Ascendiant will not be obligated to purchase shares of IA Globals common stock unless and until certain
conditions are met, including but not limited to (i) approval of the transaction by the NYSE AMEX, which has not been received by
January 5, 2010, and (ii) the Company files by November 13, 2009 and the SEC declares effective by January 27, 2010 a Registration
Statement on Form S-1 (the Registration Statement) registering Ascendiants resale of any shares purchased by it
under the equity drawdown facility. The customary terms and conditions associated with Ascendiants registration rights are set
forth in a Registration Rights Agreement that was also entered into by the parties on September 29, 2009.



If and when the SEC declares the Registration Statement effective, IA Global will have the right to sell and issue to Ascendiant, and Ascendiant will be obligated to purchase from IA Global, up to $5,000,000 worth of shares of the Companys common stock over a 24-month period beginning on such date (the Commitment Period). IA Global will be entitled to sell such shares from time to time during the Commitment Period by delivering a draw down notice to Ascendiant. In such draw down notices, IA Global will be required to specify the dollar amount of shares that it intends to sell to Ascendiant, which will be spread over a nine-trading-day pricing period. For each draw, IA Global will be required to deliver the shares sold to Ascendiant in three installments (following the third, sixth and ninth trading days in the pricing period, respectively). Ascendiant is entitled to
liquidated damages in connection with certain delays in the delivery of its shares.



The Securities Purchase Agreement also provides for the following terms and conditions:





        Purchase Price - 90% of IA Globals volume-weighted average price (VWAP).






        Threshold Price - IA Global may specify a price below which it will not sell shares during the applicable nine-trading-day pricing period. If the purchase price falls below the threshold price on any day(s) during the pricing period, such day(s) will be removed from the pricing period (and Ascendiants investment amount will be reduced by 1/9 for each such day).




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
        Maximum Draw - 15% of IA Globals total trading volume for the 10-trading-day period immediately preceding the applicable draw down, times the average VWAP during such period (but in no event more than $250,000).






        Minimum Draw - None.






        Minimum Time Between Draw Down Pricing Periods - Two trading days.






        Minimum Use of Facility - IA Global is obligated to sell at least $1,000,000 worth of shares of its common stock to Ascendiant during the Commitment Period.






        Commitment Fees - Upon NYSE AMEX approval, IA Global will be obligated to issue 2,371,917 shares of its common stock to Ascendiant ($125,000 worth of shares based on the Companys closing bid price on the trading day immediately prior to the date of the Securities Purchase Agreement). If and when the SEC declares the Registration Statement effective, IA Global will be obligated to issue another $125,000 worth of shares of its common stock in four installments over a period of 90 days following the effectiveness date.






        Other Fees and Expenses  On October 21, 2009, we issued 400,000 shares of common stock valued at $10,000 under the 2007 Stock Incentive Plan as compensation to Ascendiants legal counsel for the legal fees and expenses it incurred in connection with negotiating and documenting the equity line of credit. Pursuant to separate agreements, IA Global has also agreed to pay an aggregate of 3.0% in finders fees (to be paid in connection with each draw down).






        Indemnification - Ascendiant is entitled to customary indemnification from IA Global for any losses or liabilities it suffers as a result of any breach by IA Global of any provisions of the Securities Purchase Agreement, or as a result of any lawsuit brought by any stockholder of IA Global (except stockholders who are officers, directors or principal stockholders of IA Global).






        Conditions to Ascendiants Obligation to Purchase Shares - Trading in IA Globals common stock must not be suspended by the SEC or the NYSE AMEX (or other applicable trading market); IA Global must not have experienced a material adverse effect; all liquidated damages and other amounts owing to Ascendiant must be paid in full; the Registration Statement must be effective with respect to Ascendiants resale of all shares purchased under the equity drawdown facility; there must be a sufficient number of authorized but unissued shares of IA Global common stock; and the issuance must not cause Ascendiant to own more than 9.99% of the then outstanding shares of IA Global common stock, or more than 19.9% of the number of shares of common stock outstanding on September 29, 2009 to have been issued under the equity drawdown facility (without shareholder
approval).






        Termination - The Securities Purchase Agreement will terminate if IA Globals common stock is not listed on one of several specified trading markets (which include the NYSE AMEX, OTC Bulletin Board and Pink Sheets, among others); if IA Global files for protection from its creditors; or if the Registration Statement is not declared effective by the SEC by June 29, 2010. IA Global may terminate the Securities Purchase Agreement if Ascendiant fails to fund a draw down within 10 trading days after the end of the applicable settlement period, or if the SEC provides comments on the Registration Statement requiring certain changes in the transaction structure and/or documents.




The Securities Purchase Agreement also contains certain representations and warranties of IA Global and Ascendiant, including customary investment-related representations provided by Ascendiant, as well as acknowledgements by Ascendiant that it has reviewed certain disclosures of the Company (including the periodic reports that the Company has filed with the SEC) and that the Companys issuance of the shares has not been registered with the SEC or qualified under any state securities laws. IA Global provided customary representations regarding, among other things, its organization, capital structure, subsidiaries, disclosure reports, absence of certain legal or governmental proceedings, financial statements, tax matters, insurance matters, real property and other assets, and compliance with applicable laws and regulations. IA Globals representations and warranties are qualified in
their entirety (to the extent applicable) by the Companys disclosures in the reports it files with the SEC. IA Global also delivered confidential disclosure schedules qualifying certain of its representations and warranties in connection with executing and delivering the Securities Purchase Agreement.



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The shares to be issued by IA Global to Ascendiant under the Securities Purchase Agreement will be issued in private placements in reliance upon the exemption from the registration requirements set forth in the Securities Act provided for in Section 4(2) of the Securities Act, and the rules promulgated by the SEC thereunder.



EQUITY ISSUANCES TO CERTAIN EXECUTIVE OFFICERS



On August 24, 2009, the board of directors awarded Mr. Scott 200,000 shares of restricted common stock. The award was granted at the fair market price of $0.05 per share based on the adjusted closing price on August 20, 2009, the last trading day before the board of directors approved the grant. In accordance with the 2007 Stock Incentive Plan, the restrictions on such shares lapsed on November 23, 2009.



On November 5, 2009, the Compensation Committee awarded Mr. Hoekstra 800,000 shares of restricted stock and an option to purchase 1,200,000 shares of the Companys common stock. The awards were granted at the fair market price of $0.04 per share based on the adjusted closing price of the Companys common stock on November 4, 2009, the last trading day before the Compensation Committee meeting. In accordance with the Companys 2007 Stock Incentive Plan, the restricted stock and the stock option vest in quarterly installments over three years beginning on September 4, 2009. The stock options expire on September 3, 2019.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



The indebtedness of IA Global and our subsidiaries, including GHI, is described in detail in Note 11 of the notes to the financial statements set forth in this report (see Part I, Item 1 (Financial Statements)). As disclosed therein, IA Global and its subsidiaries had $15.5 million of total indebtedness as of June 30, 2009, and we are currently in default with respect to $15.5 million of that amount due to late payments of principal and/or interest under certain loan agreements. Reference is also made to our dispute with H Capital regarding IA Globals and GHIs obligations to such entity under certain loan agreements.



On December 8, 2009, the Company deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company intends to account for Global Hotline as a discontinued operation for periods ending after July 1, 2009.



ITEM 5. OTHER INFORMATION



As has been previously disclosed, the Company pledged its shares of Global Hotline as collateral for certain loans borrowed from H Capital, an unlicensed Japanese lender, by such subsidiary. On May 26, 2009, Global Hotline and IA Global received notices from H Capital demanding repayment of the loans. On May 27, 2009, Global Hotline and SG Telecom did not repay the loans as requested by H Capital. On June 9, 2009, H Capital submitted documents claiming ownership of the Companys 600 shares of Global Hotline. Global Hotlines management previously provided the Companys stock certificates to H Capital in March 2009.



Although the Company has engaged Japanese corporate counsel to challenge the validity of the loans and H Capitals claims with respect to the Companys ownership of Global Hotline, these events have resulted in IA Global losing control over the day-to-day management and operations of Global Hotline. In addition, we no longer have access to the financial records of Global Hotline that are necessary to periodically report our financial position and results of operations as a consolidated subsidiary of IA Global.



On December 8, 2009, the Company
deconsolidated the operations of Global Hotline, effective as of July 1, 2009. As a result, the Company accounted for Global Hotline
as a discontinued operation for periods ending after July 1, 2009. Our net profit and stockholders equity will increase by $10.1
million during the three months ended December 31, 2009 as a result of recording the deferred gain of from the forfeiture of Global
Hotline operations that will be recorded during the three months ended September, 2009.



On August 17, 2009, the Company signed a Stock Purchase Agreement (Agreement) with Inter Asset Japan LBO No 1 Fund (Investor), an existing shareholder of the Company. Under the terms of the Agreement, the Company has agreed to issue and sell to the Investor, 71,719,633 shares at a purchase price of $.04 per share, or an aggregate price of $2,861,000. Further, we expect that a total of $861,000 of the funds can be used for working capital and the remaining $2,000,000 can be used for investments.



On April 1, 2009, the Company agreed to issue preferred stock (IAO Preferred Stock), at $1,000 per share, to ArqueMax Ventures LLC (AMV) for $317,000 in the Amendment to Share Exchange Agreement.



50

At AMVs sole discretion, AMV may either (1) convert some or all of its IAO Preferred Stock into 12,800,000 shares of the Companys common stock pro rata at $0.025 per share; or (2) exchange IAO Preferred Stock for 971,458 Taicom Stock owned by the Company pro rata. The conversion of IAO Preferred Stock into Taicom Stock is automatically triggered in the case of certain events, including delisting from NYSE AMEX, bankruptcy or insolvency.



On July 17, 2009 and September 28, 2009, AMV notified us that we were in default under the June 8, 2009 Services Agreement (Agreement) and as a result did not fund the $60,000 due June 30, 2009, July 15, 2009 and July 31, 2009. However, AMV was late in funding as required by the Agreement. On October 30, 2009, the Company agreed to issue 4,000,000 shares based on the $120,000 in funded under this Agreement.



On November 16, 2009, but effective August 4, 2009, AMV claimed ownership of our shares in Taicom. This resulted in a loss on investment of approximately $2,861,000. The parties continue to negotiate over the April 1, 2009 and June 8, 2009 Amendment to Share Exchange and June 8, 2009 Services Agreements.



ITEM 6. EXHIBITS




Exhibit No.
        Description





10.1
        Separation Agreement and Full Release of Claims dated August 2, 2009 by and between IA Global, Inc. and Derek Schneideman (filed herewith)





10.2
        Amended and Restated Employment Agreement dated August 24, 2009 by and between IA Global, Inc. and Mark Scott (filed herewith)





10.3
        Employment Agreement dated November 5, 2009 but effective September 4, 2009 by and between IA Global, Inc. and Brian Hoekstra (filed herewith)





10.4
        Loan Agreement dated May 29, 2009 by and between Inforidge, Inc. and Neutral, Inc. (Translated from Japanese) (filed herewith)





10.5
        Stock Purchase Agreement dated August 17, 2009 by and between IA Global, Inc. and Inter Asset Japan LBO No. 1 Fund (1)





10.6
        Securities Purchase Agreement dated September 29, 2009 by and between IA Global, Inc. and Ascendiant Capital Group, LLC (1)





10.7
        Registration Rights Agreement dated September 29, 2009 by and between IA Global, Inc. and Ascendiant Capital Group, LLC (1)





31.1
        Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer





31.2
        Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer





32
        Section 906 Certifications


__________________




(1)
        Filed as an exhibit to Companys Registration Statement on Form S-1 (File No. 333-163612), filed with the SEC on December 9, 2009, and incorporated herein by reference.




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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.




Date: January 8, 2010
        IA GLOBAL, INC.


(Registrant)




By:
        /s/ Brian HoekstraBrian HoekstraChief Executive Officer(Principal Executive Officer)



By:
        /s/ Mark ScottMark ScottChief Financial Officer(Principal Financial and Accounting Officer)



52

EXHIBIT INDEX




Exhibit No.
        Description





10.1
        Separation Agreement and Full Release of Claims dated August 2, 2009 by and between IA Global, Inc. and Derek Schneideman





10.2
        Amended and Restated Employment Agreement dated August 24, 2009 by and between IA Global, Inc. and Mark Scott





10.3
        Employment Agreement dated November 5, 2009 but effective September 4, 2009 by and between IA Global, Inc. and Brian Hoekstra





10.4
        Loan Agreement dated May 29, 2009 by and between Inforidge, Inc. and Neutral, Inc. (Translated from Japanese)





10.5
        Stock Purchase Agreement dated August 17, 2009 by and between IA Global, Inc. and Inter Asset Japan LBO No. 1 Fund (1)





10.6
        Securities Purchase Agreement dated September 29, 2009 by and between IA Global, Inc. and Ascendiant Capital Group, LLC (1)





10.7
        Registration Rights Agreement dated September 29, 2009 by and between IA Global, Inc. and Ascendiant Capital Group, LLC (1)





31.1
        Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer





31.2
        Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer





32
        Section 906 Certifications


__________________




(1)
        Filed as an exhibit to Companys Registration Statement on Form S-1 (File No. 333-163612), filed with the SEC on December 9, 2009, and incorporated herein by reference.




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