________________________________________________________________________________


                                  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 MARCH 31, 2006

                         COMMISSION FILE NUMBER: 1-15863

                           ___________________________


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

                           ___________________________


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


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


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

                           ___________________________


         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

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

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

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

                                 Yes [ ] No [X]

         As of May 10, 2006 there were issued and outstanding 108,165,157 shares
of the Registrant's Common Stock.

________________________________________________________________________________

<PAGE>

                                 IA GLOBAL, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

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

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

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

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

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

     Item 1A.  Risk Factors...................................................23

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations ...........................23

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

     Item 4.   Controls and Procedures .......................................40


PART II. OTHER INFORMATION

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

     Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds....41

     Item 3.   Defaults Upon Senior Securities ...............................41

     Item 4.   Submission of Matters to a Vote of Security Holders ...........41

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

     Item 6.   Exhibits ......................................................42

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


                                        2
<PAGE>

                         PART I - FINANCIAL INFORMATION

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

CURRENT ASSETS:
  Cash and cash equivalents .........................................     $  8,554,249      $  8,378,700
  Accounts receivable, net of allowance for doubtful accounts of
    $106,403 and $110,610, respectively .............................        5,630,905         5,459,425
  Notes receivable-trade ............................................        1,234,378           613,726
  Inventories .......................................................          454,388           664,746
  Prepaid expenses ..................................................          460,063           434,020
  Consumption and deferred tax receivable ...........................          613,513           497,518
  Notes receivable ..................................................        2,251,121         4,129,408
  Other current assets ..............................................        1,314,022           742,584
                                                                          ------------      ------------
    Total current assets ............................................       20,512,639        20,920,127

EQUIPMENT, NET ......................................................          673,814           717,853

OTHER ASSETS
  Intangible assets, net ............................................        3,996,815         4,449,558
  Deferred tax asset ................................................          138,706           152,851
  Other assets ......................................................        3,643,334         2,391,285
                                                                          ------------      ------------

                                                                          $ 28,965,308      $ 28,631,674
                                                                          ============      ============

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
  Accounts payable - trade ..........................................     $  3,490,589      $  3,695,225
  Notes payable- trade ..............................................        1,059,632           934,298
  Accrued liabilities ...............................................        5,903,124         3,187,565
  Consumption taxes received ........................................          957,063           761,299
  Income taxes payable- foreign .....................................          469,275           825,445
  Current portion of long term debt .................................        3,137,803         2,621,305
  Deferred revenue ..................................................                -         3,589,532
                                                                          ------------      ------------
    Total current liabilities .......................................       15,017,486        15,614,669
                                                                          ------------      ------------

LONG TERM  LIABILITIES:
  Long term debt ....................................................        5,584,090         3,981,624
  Convertible debentures ............................................        2,812,500         2,708,333
  Long term deferred costs ..........................................          781,454                 -
  Retirement benefits ...............................................           38,519            36,767
                                                                          ------------      ------------
                                                                             9,216,563         6,726,724
                                                                          ------------      ------------

MINORITY INTERESTS ..................................................          323,801           274,146
                                                                          ------------      ------------

STOCKHOLDER'S EQUITY:
  Series B Preferred stock, $.01 par value, 5,000 shares authorized
    0 and 1,158 issued and outstanding (liquidation value $1,158,000)                -                12
  Common stock, $.01 par value, 200,000,000 shares authorized,
    108,165,157 and 97,425,181 issued and outstanding, respectively .        1,081,651           974,251
  Additional paid in capital ........................................       32,669,964        32,992,589
  Accumulated deficit ...............................................      (29,049,619)      (27,662,170)
  Treasury stock ....................................................          (50,000)          (50,000)
  Accumulated other comprehensive loss ..............................         (244,538)         (238,547)
                                                                          ------------      ------------
    Total stockholder's equity ......................................        4,407,458         6,016,135
                                                                          ------------      ------------

                                                                          $ 28,965,308      $ 28,631,674
                                                                          ============      ============

                             See notes to consolidated financial statements.

                                                    3
</TABLE>
<PAGE>
<TABLE>
                                     IA GLOBAL, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
                                                                           Three Months Ended March 31,
                                                                         -------------------------------
                                                                              2006              2005
                                                                         -------------     -------------
                                                                          (unaudited)       (unaudited)
<S>                                                                      <C>                 <C>
REVENUE:
  Pachinko and slot machine gaming services .........................    $   7,651,125     $   5,824,574
  Call center services ..............................................        3,671,305                 -
                                                                         -------------     -------------
    Total revenue ...................................................       11,322,430         5,824,574
                                                                         -------------     -------------

COST OF SALES:
  Pachinko and slot machine gaming services .........................        6,083,120         4,522,719
  Call center services ..............................................        1,518,937                 -
                                                                         -------------     -------------
    Total cost of sales .............................................        7,602,057         4,522,719
                                                                         -------------     -------------

GROSS PROFIT ........................................................        3,720,373         1,301,855

Selling, general and administrative expenses ........................        5,047,919         1,926,735
                                                                         -------------     -------------

OPERATING LOSS ......................................................       (1,327,546)         (624,880)
                                                                         -------------     -------------

OTHER INCOME (EXPENSE):
  Interest income ...................................................           31,129             6,305
  Interest expense and amortization of beneficial conversion
    feature .........................................................         (221,476)          (22,899)
  Other income ......................................................         (161,163)           30,660
  Foreign currency transaction adjustment ...........................              132            17,413
                                                                         -------------     -------------
    Total other income (expense) ....................................         (351,378)           31,479
                                                                         -------------     -------------

LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY
  INTERESTS AND INCOME TAXES ........................................       (1,678,924)         (593,401)

MINORITY INTERESTS ..................................................           49,655          (103,064)
                                                                         -------------     -------------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES .................       (1,728,579)         (490,337)
                                                                         -------------     -------------

INCOME TAXES:
  Current benefit ...................................................         (355,721)         (191,982)
  Deferred provision ................................................           14,591                 -
                                                                         -------------     -------------

NET LOSS FROM CONTINUING OPERATIONS .................................       (1,387,449)         (298,355)

DISCONTINUED OPERATIONS
  Loss from discontinued operations .................................                -          (246,038)
                                                                         -------------     -------------

NET LOSS ............................................................    $  (1,387,449)    $    (544,393)
                                                                         =============     =============

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

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

  Weighted average shares of common stock outstanding - Basic .......      105,077,842        82,400,181
  Weighted average shares of common stock and common equivalent
    shares outstanding - diluted ....................................      105,077,842        82,400,181


                             See notes to consolidated financial statements.

                                                    4
</TABLE>
<PAGE>
<TABLE>
                                     IA GLOBAL, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                            Three Months Ended March 31,
                                                                           -----------------------------
                                                                               2006              2005
                                                                           -----------       -----------
                                                                           (unaudited)       (unaudited)
<S>                                                                        <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ..........................................................      $(1,387,449)      $  (544,393)
  Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities:
    Depreciation and amortization ...................................          572,197            36,368
    Minority interests ..............................................           49,655          (103,114)
    Amortization of beneficial conversion feature ...................          104,167                 -
    Non-cash expense related to stock based compensation ............           26,257                 -
  Changes in operating assets and liabilities:
    Accounts receivable .............................................         (171,480)        2,515,969
    Notes receivable - trade ........................................         (620,652)          423,370
    Notes receivable ................................................        1,636,793                 -
    Inventories .....................................................          210,358          (486,340)
    Prepaid expenses ................................................          (26,043)          549,098
    Other current assets ............................................         (571,438)         (279,848)
    Deferred tax assets .............................................           14,145            16,140
    Other assets ....................................................       (1,252,049)         (790,410)
    Accounts payable ................................................         (204,636)       (3,394,313)
    Notes payable - trade ...........................................          125,334          (654,316)
    Accrued and other liabilities ...................................        2,715,559            38,959
    Net consumption tax payable .....................................           79,769           (33,526)
    Other liabilities- retirement benefits ..........................            1,752            (3,635)
    Income taxes payable - foreign ..................................         (356,170)         (196,388)
    Deferred revenue ................................................       (3,589,532)                -
    Long term deferred costs ........................................          781,454                 -
                                                                           -----------       -----------
Net cash used in continuing operations ..............................       (1,862,009)       (2,906,379)
    Loss from discontinued operations ...............................                -           246,034
    Net cash used in discontinued operations ........................                -          (376,716)
    Net decrease in assets of discontinued operations ...............                -           730,843
    Net decrease in liabilities of discontinued operations ..........                -          (431,594)
                                                                           -----------       -----------
NET CASH USED IN OPERATIONS .........................................       (1,862,009)       (2,737,812)
                                                                           -----------       -----------

CASH FLOWS USED IN INVESTING ACTIVITIES:
    Purchases of capital expenditures ...............................          (75,415)          (17,540)
    Proceeds from sale of QuikCAT Australia Pty Ltd. ................                -           100,000
                                                                           -----------       -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES .................          (75,415)           82,460
                                                                           -----------       -----------

CASH PROVIDED BY FINANCING ACTIVITIES:
    Proceeds from long term debt ....................................        2,567,000         1,918,761
    Repayment of long term debt .....................................         (433,946)         (727,429)
                                                                           -----------       -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ...........................        2,133,054         1,191,332
                                                                           -----------       -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................          195,630        (1,464,020)

EFFECT OF EXCHANGE RATE CHANGES ON CASH .............................          (20,081)         (179,960)

CASH AND CASH EQUIVALENTS, beginning of the year ....................        8,378,700         3,780,165
                                                                           -----------       -----------

CASH AND CASH EQUIVALENTS, end of the year ..........................      $ 8,554,249       $ 2,136,185
                                                                           ===========       ===========

Supplemental disclosures of cash flow information:
    Interest paid ...................................................      $    33,846       $    22,899
    Taxes paid ......................................................      $         -       $         -
    Non-cash investing and financing activities:
    Conversion of Series B Preferred stock to Common stock ..........      $         -       $         -
    Common stock surrendered to Company in payment of note receivable      $   241,494       $         -

                             See notes to consolidated financial statements.

                                                    5
</TABLE>
<PAGE>

                        IA GLOBAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  BASIS OF PRESENTATION:

         IA Global, Inc. ("IA Global") is a public holding company focused on
acquiring primarily Japanese companies that operate in the telecommunication and
technology areas. IA Global also owns a 100% equity interest in Global Hotline,
Inc. ("Global Hotline"), which operates call centers and is a reseller of
telephone and broadband lines in Japan. As of March 31, 2006, the company owned
a 60.5% equity interest in Rex Tokyo Co Ltd ("Rex Tokyo"), which is a supplier
and installer of parts to the Pachinko and slot machine gaming industry in
Japan. The company divested its interest in Rex Tokyo on April 4, 2006. Rex
Tokyo supplied items such as automatic medal dispensing machines, automatic
cigarette butt disposal systems, Pachinko balls and other Pachinko accessory
products as well as numerous new Pachinko and slot machines.

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

         The accompanying unaudited consolidated financial statements of IA
Global, Inc. and subsidiaries have been prepared in accordance with generally
accepted accounting principles ("GAAP") for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by U.S. GAAP for complete financial statements. The financial statements for the
period ended March 31, 2006 and 2005 are unaudited and include all adjustments
necessary to a fair statement of the results of operations for the periods then
ended. All such adjustments are of a normal recurring nature. The results of the
company's operations for any interim period are not necessarily indicative of
the results of the company's operations for a full fiscal year. For further
information, refer to the financial statements and footnotes thereto included in
the company's annual report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 2005.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the company and its wholly owned and majority-owned subsidiaries. In
accordance with SFAS 144, the company accounted for IA Global Acquisition Co and
Fan Club as discontinued operations in its consolidated statements of
operations. Inter-company items and transactions have been eliminated in
consolidation.

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

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

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

                                        6
<PAGE>

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.

NOTES RECEIVABLE - The company's Japanese subsidiaries, on occasion, accept
notes receivable in payment of accounts receivable with certain customers. These
notes are usually of a short term nature, approximately three to nine months in
length. They do not bear interest and are paid by, and secured by, the
customer's bank. Total notes receivable as of March 31, 2006 and December 31,
2005 were $1,234,378 and $613,726, respectively.

INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out)
or market. The company records a provision for excess and obsolete inventory
whenever an impairment has been identified. There is no provision for impaired
inventory as of March 31, 2006 and December 31, 2005.

EQUIPMENT - Equipment represents machinery, equipment and software, which are
stated at cost less accumulated depreciation. Depreciation of machinery and
equipment is computed by the accelerated or straight-line methods over the
estimated useful lives of the related assets, generally 2-10 years. Software
developed or obtained for internal use is depreciated using the straight-line
method over the estimated useful life of the software, generally 2-5 years.

INTANGIBLE ASSETS / INTELLECTUAL PROPERTY - The company amortizes the intangible
assets and intellectual property acquired in connection with the acquisition of
Global Hotline, over thirty six months on a straight - line basis, which was the
time frame that the management of the company was able to project forward for
future revenue, either under agreement or through expected continued business
activities with significant telecommunications companies.

LONG - LIVED ASSETS - The company reviews its long-lived assets for impairment
when changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Long-lived assets under certain circumstances are reported
at the lower of carrying amount or fair value. Assets to be disposed of and
assets not expected to provide any future service potential to the company are
recorded at the lower of carrying amount or fair value less cost to sell. To the
extent carrying values exceed fair values, an impairment loss is recognized in
operating results.

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

NOTES PAYABLE - The company's Japanese subsidiaries, on occasion, satisfy the
payment of their accounts payable, through the issuance of notes payable with
certain vendors. These notes are usually of a short term nature, approximately
three to nine months in length. They do not bear interest and are paid by the
company's bank to the vendors upon presentation to the company's bank on the
date of maturity. In the event of insufficient funds to repay these notes, the
company's bank can proceed with bankruptcy proceedings in Japan. Total notes
payable as of March 31, 2006 and December 31, 2005 were $1,059,632 and $934,298,
respectively.

DEBT AND EQUITY FINANCING OF CAPITAL TRANSACTIONS - BENEFICIAL CONVERSION
FEATURES - The company has adopted EITF issues 98-5, ACCOUNTING FOR CONVERTIBLES
SECURITIES WITH BENEFICIAL CONVERSION FEATURES OR CONTINGENTLY ADJUSTABLE
CONVERSION RATIOS, and 00-27, APPLICATION OF ISSUE NO. 98-5 TO CERTAIN
CONVERTIBLE SECURITIES in accounting for convertible debt. EITF 00-27 requires
recognition of the intrinsic value of the conversion option and is recognized as
a reduction to the carrying amount of the convertible debt and as an addition to
paid-in capital. The intrinsic value of the conversion feature is the difference
between the conversion price and the fair value of the stock into which the

                                        7
<PAGE>

security is convertible into, multiplied by the number of shares. The conversion
price used in calculating the intrinsic value is the most favorable conversion
price up to maturity, assuming there are no changes to the current circumstances
except for the passage of time. Changes to the conversion terms that would be
triggered by future events not controlled by the issuer should be accounted for
as contingent conversion options, and the intrinsic value of such conversion
options would not be recognized until and unless the triggering event occurs.
According to EITF 00-27, the issuance proceeds should not be reduced by issuance
costs when calculating the intrinsic value of the conversion feature. The
beneficial conversion feature of debt or equity instruments, depending on the
specific facts and circumstances, will determine whether such beneficial
conversion feature is to be recorded as an expense to be amortized over a period
of time, expensed immediately or recorded as a deemed dividend.

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

         o  Sale of equipment to major stores.

         o  Installation of machines and fittings to major stores.

         o  Maintenance of machines and other equipment in major stores.

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

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

         Revenues are deferred when cash has been received from the customer but
the revenue has not been earned. The company has recorded $0 of deferred revenue
as of March 31, 2006.

ADVERTISING COSTS - Advertising costs are expensed as incurred. There were
minimal advertising costs incurred for the three months ended March 31, 2006 and
2005.

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

STOCK BASED COMPENSATION - Effective January 1, 2006, the company began
recording compensation expense associated with stock-based awards and other
forms of equity compensation in accordance with Statement of Financial
Accounting Standards No. 123-R, Share-Based Payment, ("SFAS 123R") as
interpreted by SEC Staff Accounting Bulletin No. 107. The company adopted the
modified prospective transition method provided for under SFAS 123R and
consequently has not retroactively adjusted results from prior periods. Under
this transition method, compensation cost associated with stock-based awards
recognized in the first quarter of fiscal year 2006 includes 1) quarterly
amortization related to the remaining unvested portion of stock-based awards

                                        8
<PAGE>

granted prior to December 15, 2005, based on the grant date fair value estimated
in accordance with the original provisions of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, ("SFAS 123"); and 2)
would include quarterly amortization related to stock-based awards granted
subsequent to January 1, 2006, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123R. No options were granted subsequent
to January 1, 2006. In addition, the company records expense over the vesting
period in connection with stock options granted. The compensation expense for
stock-based awards includes an estimate for forfeitures and is recognized over
the expected term of the award on a straight line basis.

         Prior to January 1, 2006, the company accounted for stock-based awards
using the intrinsic value method of accounting in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Under the intrinsic value method of accounting, no compensation
expense was recognized in the company's consolidated statements of operations
when the exercise price of the company's employee stock option grant equaled the
market price of the underlying common stock on the date of grant and the
measurement date of the option grant is certain. Under SFAS 123R, the company
remeasures the intrinsic value of the options at the end of each reporting
period until the options are exercised, cancelled or expire unexercised. As of
January 1, 2006, 4.2 million options with a weighted average exercise price of
$.245 and a weighted average remaining life of 8.7 years, remain outstanding and
continue to be remeasured at the intrinsic value over their remaining vesting
period ranging from 3 months to 2.5 years. Compensation expense in any given
period is calculated as the difference between total earned compensation at the
end of the period, less total earned compensation at the beginning of the
period. Compensation earned is calculated on a straight line basis over the
requisite service period for any give option award.

         The company has stock options plans (the "Plans") that are described in
the company's Annual Report on Form 10-K for the fiscal year ended December 31,
2005. The company grants stock options for shares of common stock to employees
and directors. In accordance with the Plans, the stock options are granted at
the fair market value of the common stock. The Plans provide that the options
shall have a life of up to ten years from the date of grant. The options granted
under the Plans vest quarterly or annually over a period of three years. Certain
options granted under the Plans vest over shorter periods. Under the Plans, the
company may grant options for the purchase of up to 12 million shares. A total
of 3.9 million shares of common stock are available for future grants under the
Plans as of March 31, 2006. Options for the purchase of 7.6 million shares are
outstanding as of March 31, 2006. A total of .5 million shares of common stock
have been purchased, through the exercise of options issued under the Plans,
since the Plans were implemented. Shares underlying options that expire, or are
cancelled without delivery of shares, generally become available for future
re-issuance under the Plans.

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

                                           For the Three Months Ended
                                                    March 31,
                                              -------------------
                                              2006          2005
                                              ----          ----
         Risk free interest rate ..........     *           3.75%
         Expected life ....................     *          10 yrs
         Dividend rate ....................     *           0.00%
         Expected volatility ..............     *             65%
         _________

         * The company did not grant any option during the three months ended
         March 31, 2006.

         The company recorded $26,257 of compensation expense, net of related
tax effects, relative to stock options for the quarter ended March 31, 2006 in
accordance with SFAS 123R. Net loss per share basic and diluted for this expense
is approximately ($0.00) and ($0.00), respectively.

                                        9
<PAGE>

         No stock options were granted or exercised during the three months
ended March 31, 2006 and 2005, respectively. As of March 31, 2006, there is
approximately $197,000 of total unrecognized compensation costs related to
granted stock options that are unvested. These costs are expected to be
recognized over a weighted average period of 1.71 years.

         The table below sets out the pro forma amounts of net income and net
income per share (in thousands, except per share data) that would have resulted
for the three months ended March 31, 2005, if the company accounted for its
employee stock plans under the fair value recognition provisions of SFAS 123.

                                                                  For the Three
                                                                   Months Ended
                                                                  March 31, 2005
                                                                  --------------
Net loss available to common shareholders, as reported ...........  $(544,393)
Deduct: total stock-based employee compensation determined
    under fair value based method for all awards, net of
    related tax effects ..........................................    (80,342)
                                                                    ---------
Pro-forma net loss available to common shareholders ..............  $(624,735)
                                                                    =========

Earnings per share:
    Basic and diluted- as reported ...............................  $    (.01)
                                                                    =========
    Basic and diluted- pro-forma .................................  $    (.01)
                                                                    =========

         The company accounts for non-employee stock transactions in accordance
with SFAS No. 123 and EITF 96-18. There are no non-employee stock options
outstanding as of March 31, 2006.

MANAGEMENT SERVICES AGREEMENT - The company and Rex Tokyo implemented a
Management Services Agreement in September 2004 that provided for automatic one
year renewals starting on October 1st in the absence of written notice of
termination by either party delivered no less than three months prior to the
date on which this agreement would otherwise terminate. Rex Tokyo was required
to pay the company approximately $150,000 in April 2005 and October 2005. The
October 2005 payment was waived by the company and, in connection with the
divestiture of Rex Tokyo in April 2006, the agreement was terminated.

         The company and Global Hotline implemented a Management Services
Agreement on June 1, 2005 that will be renewed for successive one year periods
starting on June 1st in the absence of written notice of termination by either
party delivered no less than three months prior to the date on which this
agreement would otherwise terminate. Global Hotline is required to pay the
company approximately $75,000 on a quarterly basis. On April 1, 2006, the
Management Services Agreement was amended to require quarterly payments of
approximately .75% of sales, to the extent Global Hotline is profitable. The
March 2006 payment of approximately $25,000 was waived.

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

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

                                       10
<PAGE>

NET LOSS PER SHARE - The company has adopted SFAS 128, "Earnings per Share."
Loss per common share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding during
the period. The common stock equivalents have not been included as they are
anti-dilutive. As of March 31, 2006, there were options outstanding for the
purchase of 7,600,000 common shares and convertible debentures convertible into
12,500,018 common shares which could potentially dilute future earnings per
share.

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

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

                                       11
<PAGE>

in the same expense lines as cash compensation is reported for the same
employees. The company has implemented SAB 107 in the first quarter of fiscal
2006, in conjunction with SFAS 123R. The company expects that SAB 107 will have
a significant impact on our consolidated financial statements.

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

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

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

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

                                       12
<PAGE>

NOTE 3.  ACQUISITIONS AND DIVESTITURES

GLOBAL HOTLINE, INC.

         The acquisition of Global Hotline, a privately held Japanese company,
closed on June 15, 2005 and was a key component of the company's strategy to
acquire companies based in Japan that operate in the telecommunications and
technology areas. The transaction was structured as a share exchange in which
the company issued 15,000,000 shares of its common stock in exchange for 100% of
Global Hotline's equity. The common stock of the company had a value of $.207
per share, which was the average close price during the twenty days prior to the
signing of the April 20, 2005 Share Exchange Agreement, or an aggregate value of
$3,097,500.

         Global Hotline was established September 7, 2004 as a call center
operator and reseller of telephone and broadband lines in Japan. The Japanese
telecommunications market is experiencing significant growth in alternative
carriers due to recent regulatory changes that now permit individuals and
companies to choose their telephone service provider. The company operates two
call centers with 207 seats and 445 employees and utilizes 4 agents with an
additional approximate 165 seats to support the business.

         Global Hotline had a contract with a significant telecommunication
company, KDDI Network and Solutions ("KDDI") that initially covered the period
March 16, 2005 through March 31, 2006, and required Global Hotline to sell
subscriber lines based on agreed monthly targets. If the original targets had
been achieved, Global Hotline would have been paid 2,925,000,000 Yen or
approximately $25,400,000, under this contract.

         On December 13, 2005, Global Hotline entered into an amendment to this
contract. The amendment, among other things, modified (i) the total payments
under the contract from 2,925,000,000 Yen or approximately $25,400,000 at
current exchange rates to 2,331,000,000 Yen or approximately $20,300,000 at
current exchange rates and (ii) the targets of subscriber lines from quarterly
targets to one target at the end of the contract. As a result of this amendment,
Global Hotline recognized $2,980,000 of deferred revenue in the fourth quarter
of 2005. As of December 31, 2005, Global Hotline did not achieve the required
target of lines to be sold under the second contract and accrued $1,087,000 in
penalties in December 2005. As of March 31, 2006, Global Hotline did not achieve
the required target of lines to be sold under the second contract, as modified,
and accrued $3,889,000 in penalties in March 2006. The company believes KDDI
implemented certain contractual changes which reduced sales during the three
months ended March 31, 2006. The company expects to finalize negotiations on the
final penalty by July 2006. There is no guarantee that the company will be
successful in reducing this penalty.

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

         On December 22, 2005, IA Partners Co Ltd ("IA Partners"), a wholly
owned subsidiary of Global Hotline, entered into an agreement (the "Partner
Contract") with Internet Service Partners, a Japanese company. Pursuant to this
agreement, IA Partners sells various internet and broadband products on behalf
of Internet Service Partners, with sales commissions payable from 30-120 days.
The Partner Contract expires on December 22, 2006, and is automatically
renewable for an additional year unless it is terminated by either party upon
sixty days notice before the expiration date.

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

                                       13
<PAGE>

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

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

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

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

Purchase price:
Stock ............................................................  $ 3,097,500
Net liabilities acquired (6/15/05)................................    2,335,399
                                                                    -----------
Identifiable intangible assets....................................  $ 5,432,899
                                                                    ===========

            The pro-forma financial data for the acquisition for the three
months March 31, 2005, was as follows:

                                               Pre-Acquisition
                              As Reported,      Operations of       Pro Forma,
                                 Quarter       Global Hotline        Quarter
                                  Ended          January 1-           Ended
                             March 31, 2005    March 31, 2005     March 31, 2005
                             --------------    ---------------    --------------

Revenues ..................   $ 5,824,574       $  2,119,714       $  7,944,288

Loss before extraordinary
 items ....................      (544,393)        (1,320,065)        (1,864,458)

Net loss ..................      (544,393)        (1,320,065)        (1,864,458)

Loss per common share .....   $     (0.01)                         $      (0.02)


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

REX TOKYO CO LTD

         On February 16, 2006, Rex Tokyo was notified by a leasing company that
a lease guaranteed by Rex Tokyo was in default for approximately $136,000, net
of equipment recovery. This loss was recorded in the first quarter of 2006.

         On April 7, 2006, the company announced that it has sold its 60.5%
interest in Rex Tokyo Co back to Rex Tokyo. The closing occurred on April 4,
2006. The total purchase price was approximately $1,273,000 at current exchange
rates. The company received approximately $193,000 on April 4, 2006 and $800,000
on April 28, 2006 for its common ownership interest. Finally, the company will
receive $280,000 on May 31, 2006 as repayment for its preferred shares and
reimbursement of certain expenses incurred by the company on Rex Tokyo's behalf.
The remaining payments are guaranteed by Hiroyuki Ejima, the CEO of Rex Tokyo.

                                       14
<PAGE>

         On February 28, 2006, Rex Tokyo advanced 42,000,000 Yen or
approximately $357,000 at current exchange rates to Ruck Tokyo for the
acquisition of a Pachinko hall. This advance was unsecured and is expected to be
repaid by July 2006.

         In March, 2006, Collaboration Co Ltd, a 100% owned subsidiary of Rex
Tokyo, sold certain equipment to Mikayo Skokai Corporation and Sankei Building
Corporation and provided vendor financing to the purchasers. These transactions
resulted in deferred sales totaling 91,890,000 Yen or approximately $781,000 at
current exchange rates. The deferred sales and cost of deferred sales related to
these transactions were recorded as other current and long term assets and long
term deferred costs, they are to be amortized over the life of the agreements
established with Rex's vendor and their customer. The agreements are not
secured.

SUMMARY OF DISCONTINUED OPERATIONS

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

                                                    Three Months Ended March 31,
                                                    ----------------------------
                                                        2006            2005
                                                      ---------      ---------

Revenues ...........................................  $       -      $ 178,614
Cost of sales ......................................          -        341,495
                                                      ---------      ---------
Gross Profit .......................................          -       (162,881)
Operating and other non-operating expenses .........          -        184,258
Minority interest ..................................          -       (101,101)
                                                      ---------      ---------
Loss from discontinued operations ..................          -       (246,038)
(Loss) gain from disposal of discontinued operations          -              -
                                                      ---------      ---------
Total loss from discontinued operations ............  $       -      $(246,038)
                                                      =========      =========

NOTE 4.  ACCOUNTS RECEIVABLE/CUSTOMER CONCENTRATION

         Accounts receivable were $5,630,905 and $5,459,425 as of March 31, 2006
and December 31, 2005, respectively. The company had the following customers
with sales in excess of 10%, these are their respective percentage of
consolidated revenue for the periods:

                                            March 31,         March 31,
                                              2006              2005
                                            ---------         ---------
         Dynam Co Ltd .................       26.5%            59.1%
         KDDI Network Solutions .......       20.1%              -
         Internet Service Partners ....       10.6%              -

         Dynam Co Ltd is a Rex Tokyo customer. KDDI Network Solutions is a
Global Hotline customer. Internet Service Partners is a IA Partners customer.
There were no other customers in excess of 10% in the respective periods. Dynam
Co Ltd accounted for 43% and 50% of total accounts receivable as of March 31,
2006 and December 31, 2005, respectively. KDDI Network Solutions did not account
for any accounts receivable as of March 31, 2006 and December 31, 2005. Internet
Service Partners accounted for 17% and 0% of total accounts receivable as of
March 31, 2006 and December 31, 2005, respectively.

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

NOTE 5.  INVENTORIES

         Inventories were $454,388 and $664,746 as of March 31, 2006 and
December 31, 2005, respectively. Inventory primarily consisted of raw materials
and work in process for Rex Tokyo. There is no provision for impaired inventory
as of March 31, 2006 and December 31, 2005.

                                       15
<PAGE>

NOTE 6.  PREPAID COSTS

         Prepaid expenses were $460,063 and $434,020 as of March 31, 2006 and
December 31, 2005, respectively. Such costs as of March 31, 2006 and December
31, 2005 consisted of prepaid insurance, prepaid financing costs and other costs
incurred by the company and prepaid expenses incurred by Global Hotline.

NOTE 7.  NOTES RECEIVABLE

         Notes receivable were $2,251,121 and $4,129,408 as of March 31, 2006
and December 31, 2005, respectively. Such assets as of March 31, 2006 included
notes receivable from GMB International, Inc., a party affiliated with our
majority shareholder, and Ominira Networks LLC ("Ominira"), a Delaware Limited
Liability corporation, to whom the company sold IA Global Acquisition Co. Ltd.
("IA Acquisition") in July 2005. As of December 31, 2005 notes receivable
included (i) TK Partners, formerly Cyber Holdings Co Ltd, from the divestiture
of Fan Club, (ii) Ominira Networks, from the sale of IA Global Acquisition Co
(iii) GMB International, Inc., a party affiliated with our majority shareholder,
and (iv) an officer and employees of Global Hotline.

         On September 30, 2005, Global Hotline entered into a Senior Secured
Promissory Note of 300,000,000 Yen or approximately $2,698,000 with GMB
International, Inc. ("GMB"), a party affiliated with our majority shareholder.

         The loan includes a repayment of 150,000,000 Yen or approximately
$1,349,000 on October 7, 2005 and the remaining 150,000,000 Yen plus interest at
3.5% on October 30, 2005. The loan also provides for an earlier payment on
certain events of default. On October 7, 2005, 150,000,000 Yen was repaid. On
November 4, 2005, Global Hotline entered into an Amendment to the Senior Secured
Promissory Note which modified the payment schedule. The remaining 150,000,000
Yen and interest was due to be paid on November 15, 2005. On December 11, 2005,
Global Hotline entered into an Amendment 2 to the Senior Secured Promissory Note
which modified the payment schedule. The remaining 40,000,000 Yen and interest
was due to be paid on December 31, 2005.

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

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

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

         On March 27, 2006, the company entered into Amendment No. 4 to the
Promissory Note. The Promissory Note is now due in installments from March 2006
to June 2007 and the company received as additional collateral twenty one shares
of Innovative Computing Group, Inc. ("ICG"), a privately -owned company
affiliated with Ominira. The ICG shares are to be released to ICG as Ominira
makes the required payments under the amended Promissory Note and are valued at
$30,000 per share for such purpose. As of April 30, 2006, the company had
received $10,000 in note payments from this Promissory Note.

                                       16
<PAGE>

NOTE 8.  OTHER CURRENT ASSETS

         Other current assets were $1,314,022 and $742,584 as of March 31, 2006
and December 31, 2005, respectively. Such costs as of March 31, 2006 primarily
consisted of a deposit by Rex Tokyo for the acquisition of a Pachinko hall and
the current portion certain of certain equipment sold by Rex Tokyo utilizing
vendor financing. Such expenses as of December 31, 2005 consisted of the current
portion of certain equipment sold by Rex Tokyo utilizing vendor financing. Rex
Tokyo was sold on April 4, 2006.

NOTE 9.  EQUIPMENT

         Equipment, net of accumulated depreciation, was $673,814 and $717,853
as of March 31, 2006 and December 31, 2005, respectively. Accumulated
depreciation was $750,026 and $633,211 as of March 31, 2006 and December 31,
2005, respectively. Total depreciation expense was $119,854 and $36,368 for the
three months ended March 31, 2006 and 2005, respectively.

         Property and equipment are comprised of the following:

                                     Estimated         March 31,    December 31,
                                    Useful Lives         2006           2005
                                  ---------------    -----------    -----------
Equipment and vehicles .......    24 - 96 months     $ 1,119,932    $ 1,046,042
Leasehold Improvements .......    36 - 120 months        303,908        305,022
                                                     -----------    -----------
                                                       1,423,840      1,351,064
Less: accumulated depreciation
 and amortization ............                          (750,026)      (633,211)
                                                     -----------    -----------
                                                     $   673,814    $   717,853
                                                     ===========    ===========
NOTE 10. INTANGIBLE ASSETS

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

                                    March 31,     December 31,
                                      2006            2005        Estimated Life
                                  -----------     -----------     --------------
Customer contracts ...........    $ 5,432,899     $ 5,432,899         3 years
Less: accumulated amortization     (1,436,084)       (983,341)
                                  -----------     -----------
    Intangible Assets, net ...    $ 3,996,815     $ 4,449,558
                                  ===========     ===========

         Total amortization expense was $452,742 and $0 for the three months
ended March 31, 2006 and 2005, respectively.

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

NOTE 11. OTHER ASSETS

         Other assets were $3,643,334 and $2,391,285 as of March 31, 2006 and
December 31, 2005, respectively. Such assets as of March 31, 2006 included loans
Receivable from Timothy World to Rex Tokyo and the long term portion certain of
certain equipment sold by Rex Tokyo utilizing vendor financing and bonds related
to Global Hotline's leased offices. Such assets as of December 31, 2005 included
loans receivable from Timothy World related and bonds related to Global
Hotline's leased offices.

                                       17
<PAGE>

         On August 16, 2005, Rex Tokyo entered into a Sale of Shares Agreement
with Inter Asset Japan Co Ltd ("IAJ"), a party affiliated with our majority
shareholder. Under the agreement, Rex Tokyo sold its 60% interest in Timothy
World to IAJ in exchange for 6,000,000 Yen or approximately $55,000 in cash at
closing. In addition, an inter-company loan owed by Timothy World to Rex Tokyo,
in the amount of 97,867,000 Yen or approximately $866,000 will be paid in
installments starting September 2005 and ending December 2007. To date, the
payments have not been made and the asset was sold to Rex Tokyo when, on April
7, 2006, the company announced that it has sold its 60.5% interest in Rex Tokyo
Co Ltd back to Rex Tokyo. The closing occurred on April 4, 2006. The company has
no obligation to Rex Tokyo relating to the default by IAJ and Timothy World and
has not provided for a reserve on this loan as of December 31, 2005.

NOTE 12. ACCRUED LIABILITIES

         Accrued liabilities were $5,903,124 and $3,187,556 as of March 31, 2006
and December 31, 2005, respectively. Such liabilities as of March 31, 2006 and
December 31, 2005 included (i) accrued audit fees and employee expenses of Rex
Tokyo,(ii) accrued agent commissions and salary of Global Hotline and (iii)
accrued penalties of approximately $3,889,000 and $1,086,000 as of March 31,
2006 and December 31, 2005, respectively, related to GHI and (iv) accrued
interest for convertible debentures and legal fees for IA Global.

NOTE 13. LONG TERM DEBT

         On March 29, 2006, Rex Tokyo received a 300,000,000 Yen, or
approximately $2,567,000 at current exchange rates, working capital loan from
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

         The loan requires monthly payments of 5,000,000 Yen, or approximately
$43,000 at current exchange rates, plus interest paid starting April 30, 2006
with a final payment due March 29, 2011. The loan accrues interest at TIBOR plus
..75% for three months and is fixed at 2.3% thereafter and is guaranteed by the
CEO of Rex Tokyo Co Ltd. There are no covenants or security requirements related
to the loan. As of March 31, 2006 a total of 200,000,000 Yen, or approximately
$2,567,000 was outstanding under this loan.

NOTE 14. CONVERTIBLE DEBENTURES

         On June 28, 2005, the company announced that it had received
commitments totaling $3,750,000 for convertible debentures. The company will use
the proceeds from this financing to continue their merger and acquisition
strategy, and for general corporate purposes. This financing included a
beneficial conversion feature, which increased the stockholders' equity by
$1,250,000. The beneficial conversion will be amortized over the life of the
debentures, or until such time that they are converted. During the three months
ended March 31, 2006, the company expensed $104,000 of this beneficial
conversion recorded as interest expense. The company closed the sale of
$3,750,000 of convertible debentures on July 29, 2005 and realized net proceeds
of $3,483,000.

         Convertible debentures .......................    $ 3,750,000
         Beneficial conversion ........................     (1,250,000)
                                                           -----------
                                                             2,500,000
         Amortization of beneficial conversion ........        312,500
                                                           -----------
                                                           $ 2,812,500
                                                           ===========

         The company received subscription agreements from thirty four private
Japanese investors. The terms of the convertible notes provide for a conversion
price of $.30 per share, or 12,500,018 shares, until June 28, 2008, with an
automatic conversion on June 28, 2008 at a 25% discount based on the trailing
five day price prior to June 28, 2008. The coupon rate is 7.5% per annum payable
in cash at the earlier of the conversion date or June 28, 2008. The company has
filed a registration statement covering the shares issuable upon conversion. JPB
(Switzerland) A.G., a party affiliated with our majority shareholder, advised
the company on the transaction and was paid a $267,000 fee upon funding.

                                       18
<PAGE>

NOTE 15. RETIREMENT BENEFITS

         Retirement benefits were $38,519 and $36,767 as of March 31, 2006 and
December 31, 2005, respectively. This liability relates to a Rex Tokyo defined
contribution retirement plan for its full time employees. Benefits accrue after
three years of service and are based on the annual salary times a table rate.
Payments begin at retirement except for resignations, where the net vested
amount is paid within thirty days. Rex Tokyo expensed $1,674 and $(2,042) during
the three months ended March 31, 2006 and 2005, respectively.

NOTE 16. RELATED PARTY RELATIONSHIPS WITH INTER ASSET JAPAN AND CERTAIN
         RELATIONSHIPS

         As of March 31, 2006, IAJ LBO Fund, PBAA, Terra Firma, IAJ, Hiroki
Isobe and Kyo Nagae collectively hold approximately 76.9% of the company's
common stock. Such entities stated in a Schedule 13D that they may be deemed to
constitute a "group" for the purposes of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended ("Exchange Act"). Mr. Hiroki Isobe or Mr. Kyo
Nagae control our Controlling Stockholders.

         The following table provides details on the affiliated parties owned or
controlled by each of the company's controlling stockholders and certain other
entities, as of March 31, 2006, that are relevant for purposes of understanding
the related party transactions that have taken place:

Inter Asset Japan LBO No. 1 Fund owns:

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

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

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

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

IA Global, Inc. owns:
                                  Rex Tokyo Co. Ltd....................60.5% (1)

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

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

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

Rex Tokyo Co Ltd.                 Colloboration Co Ltd................100.0% (1)

                                  Double R, Inc.......................100.0% (1)

Global Hotline, Inc.              Inforidge Co Ltd...................100.00%

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

                                  SG Telecom, Inc.....................100.0% (2)
_________

(1) Sold April 4, 2006.

(2) Formed April 4, 2006.


KYO NAGAE RELATIONSHIP WITH IAJ

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

                                       19
<PAGE>

REX TOKYO DISTRIBUTION AGREEMENT WITH HIROYUKI EJIMA

         During 1998, Rex Tokyo agreed to pay monthly 5,000,000 Yen or
Approximately $45,450 at current exchange rates to a majority-owned company of
the CEO of Rex Tokyo for assigning the distribution rights for certain lock
products for Tokyo, Japan to Rex Tokyo. This distribution agreement assignment
is ongoing and resulted in 2005 sales of approximately $2,950,000 at current
exchange rates. On April 7, 2006, the company announced that it has sold its
60.5% interest in Rex Tokyo Co back to Rex Tokyo.

NOTE 17. EQUITY TRANSACTIONS

         During the three months ended March 31, 2006, the following stockholder
equity events occurred:

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

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

NOTE 18. COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS

         On November 5, 2004, the company received notice from the American
Arbitration Association in New York City that Mr. Badner, a former majority
shareholder, commenced an arbitration proceeding against the company, IAJ, and
certain officers of the company and IAJ relating to the September 25, 2002
Agreement and Assignment between the company, Mr. Badner and IAJ. Mr. Badner
alleges (i) unrestricted shares of the company's stock to which he was entitled
under the agreement were not delivered as per the terms of the agreement, (ii)
unspecified commitments to engage in future business ventures with Mr. Badner
were not made, and (iii) damages resulting from intentional misrepresentation.
On January 7, 2005, we received notice that Mr. Badner had amended his
arbitration claim. Mr. Badner is seeking damages of $2.5 million plus interest
related to the breach of the Agreement and Assignment, $100,000 for damages
suffered related to fraud and misrepresentations and costs and punitive and
exemplary damages in an amount to be determined.

         On February 4, 2005, the company filed an answer and counterclaim
against Mr. Badner in response to Mr. Badner's amended arbitration claim.
Arbitration was held in December 2005 and January 2006. The company does not
expect a decision until the second quarter of 2006. Mr. Badner has also filed a
lawsuit in the Supreme Court of the State of New York, New York County against
one of the company's officers alleging defamation. The officer has filed a
motion to dismiss the case for lack of proper service and personal jurisdiction
and for failure to state a claim. Mr. Badner has cross moved for discovery and
for leave to amend his complaint. A hearing was held in February 2006 on the
motions and the case was dismissed April 10, 2006 for lack of proper service.
The cross motion was denied. The company believes that Mr. Badner will reassert
this case.

         In April, 2006, the company received notice of a suit filed in the King
County Superior Court of the State of Washington by Flashpoint Ventures, LLC
("Flashpoint") relating to the acquisition by Activated Matrix Partners, LLC
("AMP") of shares of Activated Content Corporation ("ACC") stock from IAJ, one
of our stockholders. Flashpoint claims to have provided acquisition financing to
AMP and AMP is alleged to have defaulted on its loan to Flashpoint. The
Flashpoint suit claims intentional and negligent misrepresentation, unjust
enrichment, breach of covenant of good faith and fair dealing, civil conspiracy,
negligence and violation of the Washington Criminal Profiteering Act. The
company believes that AMP will reassert claims it previously filed and dismissed
in Nevada state court in the King County, Washington case. The company believes
there is no basis for it having been sued by Flashpoint and AMP and the company
will vigorously defend against the Flashpoint claims and, if they are re-filed
as expected, the AMP claims.

                                       20
<PAGE>

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

         During 1998, prior to the acquisition of Rex Tokyo by the company, Rex
Tokyo agreed to pay monthly 5,000,000 Yen or approximately $45,450 at current
exchange rates to a majority-owned company of the CEO of Rex Tokyo for
assigning the distribution rights for certain lock products for Tokyo, Japan to
Rex Tokyo. This distribution agreement assignment is ongoing and resulted in
2005 sales of approximately $2,950,000 at current exchange rates. On April 4,
2006, we sold our 60.5% interest in Rex Tokyo back to Rex Tokyo.

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

NOTE 19. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

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

         The following subsidiaries are the only reportable segments under the
criteria of SFAS 131 (i) IA Global, Inc., the parent company, which operates as
a holding company, (ii) Rex Tokyo, a supplier and installer of parts to the
Pachinko and slot machine gaming industry, which on April 4, 2006, the company
sold its interest to Rex Tokyo (iii) Global Hotline, a call center operator and
reseller of telephone and broadband lines in Japan.

         The following table presents revenues, operating income (loss) and
total assets by company for the three months ended March 31, 2006 and 2005:

                                       21
<PAGE>
<TABLE>
(dollars in thousands)
<CAPTION>
                                                              Global
                              IA Global,      Rex Tokyo      Hotline,                   Discontinued
Company                          Inc.          Co Ltd          Inc.         Total        Operations      Total
-------------------------     ----------      ---------      --------      --------     ------------    --------
<S>                            <C>             <C>           <C>           <C>             <C>          <C>
Quarter Ended
  March 31, 2006
  Revenue                      $     -         $ 7,651       $  3,671      $ 11,322        $     -      $ 11,322

  Operating income (loss)         (501)            380         (1,207)       (1,328)             -        (1,328)

  Total assets                   3,483          15,447         10,036        28,965              -        28,965

  March 31, 2005
  Revenue                      $     -         $ 5,825       $      -      $  5,825        $     -      $  5,825

  Operating loss                  (302)           (323)             -          (625)             -          (625)

  Total assets                     231           8,449              -         8,680          2,092        10,772


<CAPTION>
                                                                           Discontinued
Geographic Region                U.S.          Japan          Total         Operations       Total
-------------------------      --------       --------       --------      ------------     --------
<S>                            <C>            <C>            <C>             <C>            <C>
Quarter Ended
  March 31, 2006
  Revenue                      $     -        $ 11,322       $ 11,322        $     -        $ 11,322

  Operating income (loss)         (501)           (827)        (1,328)             -          (1,328)

  Total assets                   3,483          25,482         28,965              -          28,965

  March 31, 2005
  Revenue                      $     -        $  5,825       $  5,825        $     -        $  5,825

  Operating loss                  (302)           (323)          (625)             -            (625)

  Total assets                     231           8,449          8,680          2,092          10,772

</TABLE>

         The following reconciles operating loss to net loss:

(dollars in thousands)
                                                             Quarters Ended
                                                                March 31,
                                                         ----------------------
                                                           2006           2005
                                                         -------        -------
Operating loss ...................................       $(1,328)       $  (625)

Other income (expense) ...........................          (351)            32
                                                         -------        -------

Loss  from continuing operations
  before minority interests and income taxes .....        (1,679)          (593)

Minority interests ...............................            50           (103)
                                                         -------        -------

Loss from continuing operations
  before income taxes ............................        (1,729)          (490)

Income tax benefit ...............................          (342)          (192)
                                                         -------        -------

Net loss from continuing operations ..............        (1,387)          (298)

Loss from discontinued operations ................             -           (246)
                                                         -------        -------

Net loss .........................................       $(1,387)       $  (544)
                                                         =======        =======

                                       22
<PAGE>

ITEM 1A. RISK FACTORS.

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

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

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

INTRODUCTION

         We have incurred net losses from continuing operations of $1.5 million,
$.9 million and $1.3 million for the years ended December 31, 2005, 2004 and
2003, respectively. We had revenues of $45.1 million, $28.0 million and $0.0
million for the years ended December 31, 2005, 2004 and 2003, respectively. Our
losses have been financed primarily by the sale of equity in our company, by
loans from related and unrelated parties, by the issuance of convertible
debentures and through the issuance of equity for services. We expect our net
loss to continue for the foreseeable future.

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

         On April 4, 2006, we sold our 60.5% interest in Rex Tokyo back to Rex
Tokyo. The total purchase price was approximately $1,273,000 at current exchange
rates. We received approximately $193,000 on April 4, 2006 and $800,000 on April
28, 2006 for our common ownership interest. Finally, the company will receive
$280,000 on May 31, 2006 as repayment for its preferred shares and reimbursement
of certain expenses incurred by the company on Rex Tokyo's behalf. The remaining
payments are guaranteed by Hiroyuki Ejima, the CEO of Rex Tokyo.

         We divested Rex Tokyo due to operating losses of $1,552,000 in 2005 and
projected losses in 2006 due to industry conditions. Sales were $29,335,000 in
2005. We expect to breakeven on the sale.

         In order to fund its operations during 2005, Rex Tokyo and its
subsidiary, Collaboration, incurred approximately 850,000,000 Yen in bank
indebtedness and working capital lines to fund operations. Rex Tokyo's total
indebtedness at December 31, 2005, was 778,214,000 Yen. On March 29,2006, Rex
Tokyo received a 300,000,000 Yen, or approximately $2,567,000 at current
exchange rates, working capital loan from The Bank of Tokyo-Mitsubishi UFJ, Ltd.
We are not a co-obligor or guarantor of any Rex Tokyo indebtedness.

                                       23
<PAGE>

         On June 28, 2005, we announced that we had received commitments
totaling $3,750,000 for convertible debentures. We will use the proceeds from
this financing to continue our merger and acquisition strategy, and for general
corporate purposes. This financing included a beneficial conversion feature,
which increased our stockholders' equity by $1,250,000. The beneficial
conversion will be amortized over the life of the debentures, or until such time
that they are converted. During the year ended December 31, 2005, we expensed
$208,000 of this beneficial conversion recorded as interest expense. We closed
the sale of $3,750,000 of convertible debentures on July 29, 2005 and realized
net proceeds of $3,483,000.

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

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

KEY MARKET OPPORTUNITIES

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

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

         o Expanding the Global Hotline business by renewing its contract with
its primary customer.

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

PRIMARY RISKS AND UNCERTAINTIES

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

Risks Related to the Global Hotline Business

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

         o  Its contracts with a significant telecommunications companies may
            not be renewed;

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

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

         o  Passing of new or changes in existing legislation;

         o  Impact of privacy laws;

                                       24
<PAGE>

         o  New competitors;

         o  Decreased pricing;

         o  Default or lack of performance by its agents;

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

         o  Loss of key personnel.

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

Risks Related to our Majority Shareholder

         We have expanded our operations by acquiring companies, primarily in
Japan. We have relied on the company's majority shareholder to assist us in
raising financing to carry out these acquisitions. We may need to obtain
additional financing from our majority shareholder or third parties in order to
continue our current operations, including the cash flow needs of Global
Hotline, to acquire businesses and to maintain the AMEX requirement of $6
million in stockholders' equity for continued listing of our shares.

         Our major shareholders thus far have indicated a willingness to support
our financing efforts. However, entities affiliated with our controlling
shareholder group have recently defaulted on obligations owing to our
subsidiaries.

         A subsidiary of IAJ, a 5.4% shareholder and part of the group that
controls 76.9% of our outstanding shares, has defaulted in its obligation to pay
approximately 97,867,000 Yen to Rex Tokyo. In April 2006, we divested our
ownership interest in Rex Tokyo and we have no obligation relating to the IAJ
default to Rex Tokyo.

         In addition, in September and December 2005, Global Hotline made loans
to GMB International Inc., an entity affiliated with our controlling
shareholders, totaling 400,000,000 Yen or approximately $3,394,000 at current
exchange rates. GMB repaid 200,000,000 Yen on January 13, 2006. The balance was
scheduled for repayment by January 31, 2006 but was not paid as of that date. On
April 7, 2006, GMB repaid 80,000,000 Yen, reducing the balance to 120,000,000
Yen, plus interest. On April 27, 2006 GMB repaid the remaining 120,000,000 Yen.

         In light of these defaults, there can be no assurance that our major
shareholder group will continue to provide financial support to the company.

OUR STRATEGY

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

         One of the key trends in the Japanese telecommunications market is the
significant growth in alternative carriers due to recent regulatory changes that
now permit individuals and companies to choose their telephone service provider.
This change in market dynamics provides an opportunity for marketing companies,
such as Global Hotline, to provide sales services to telecommunications
companies facing increased competition.

                                       25
<PAGE>

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.
<TABLE>
(dollars in thousands)
<CAPTION>
                                                                Three Months Ended March 31,
                                                   ------------------------------------------------------
                                                     2006           2005        $ Variance     % Variance
                                                   ------------------------------------------------------
<S>                                                <C>            <C>            <C>            <C>
Revenue:
Pachinko and slot machine gaming services .....    $  7,651       $  5,825       $  1,826          31.3%
Call center services ..........................       3,671              -          3,671         100.0%
                                                   --------       --------       --------       -------
Total revenue .................................      11,322          5,825          5,497          94.4%
                                                   --------       --------       --------       -------

Cost of sales:
Pachinko and slot machine gaming services .....       6,083          4,523          1,560          34.5%
Call center services ..........................       1,519              -          1,519         100.0%
                                                   --------       --------       --------       -------
Total cost of sales ...........................       7,602          4,523          3,079          68.1%
                                                   --------       --------       --------       -------

Gross profit ..................................       3,720          1,302          2,418         185.7%
                                                   --------       --------       --------       -------

Selling, general and administrative expenses ..       5,048          1,927          3,121         162.0%
                                                   --------       --------       --------       -------

Operating loss ................................      (1,328)          (625)          (703)       -112.5%
                                                   --------       --------       --------       -------

Other Income (Expense):
Interest income ...............................          31              6             25         416.7%
Interest expense and amortization of beneficial
  conversion feature ..........................        (221)           (23)          (198)       -860.9%
Other Income ..................................        (161)            31           (192)       -619.4%
Foreign currency transaction adjustment .......           -             18            (18)       -100.0%
                                                   --------       --------       --------       -------
Total other income (expense) ..................        (351)            32           (383)      -1196.9%
                                                   --------       --------       --------       -------
Loss from continuing operations before minority
  interests and income taxes ..................      (1,679)          (593)        (1,086)       -183.1%
Minority interests ............................          50           (103)           153         148.5%
                                                   --------       --------       --------       -------

Loss from continuing operations before income
  taxes .......................................      (1,729)          (490)        (1,239)       -252.9%
Income taxes:
Current benefit ...............................        (356)          (192)          (164)        -85.4%
Deferred provision ............................          14              -             14         100.0%
                                                   --------       --------       --------       -------
Net loss from continuing operations ...........      (1,387)          (298)        (1,089)       -365.4%
Loss from discontinued operations .............           -           (246)           246         100.0%
                                                   --------       --------       --------       -------
Net loss ......................................    $ (1,387)      $   (544)      $   (843)       -155.0%
                                                   ========       ========       ========       =======
</TABLE>

THREE MONTHS ENDED MARCH 31, 2006 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2005

NET REVENUE

         Net revenue for the three months ended March 31, 2006 increased
$5,497,000 to $11,322,000, as compared to the three months ended March 31, 2005.
Rex Tokyo recorded revenue of $7,651,000 and Global Hotline recorded revenue of
$3,671,000 Global Hotline was acquired June 15, 2005. Global Hotline sales were
negatively impacted by the accrual of $3,889,000 in penalties related to a
contract with a significant telecommunication company. We believe that the
penalty resulted from certain contractual changes that were implemented by the
significant telecommunications customer which reduced sales during the three
months ended March 31, 2006. We expect to finalize negotiations on the final
penalty by July 2006 and there is no guarantee that we will be successful in
reducing the penalty.

                                       26
<PAGE>

         In the prior year, Rex Tokyo, which was acquired March 18, 2004,
recorded revenue of $5,825,000.

COST OF SALES

         Cost of sales for the three months ended March 31, 2006 increased
$3,079,000 to $7,602,000 as compared to the three months ended March 31, 2005.
This increase was due to Rex Tokyo cost of sales of $6,083,000 consisting
primarily of inventory purchases used in sales and outsourced expenses. Rex
Tokyo outsources the majority of its installation and maintenance work. Global
Hotline cost of sales was $1,519,000 and this primarily related to outsourced
call center operations to support the contracts with the significant Japanese
telecommunications company.

EXPENSES

         Selling, general and administrative expenses for the three months ended
March 31, 2006 increased $3,121,000 to $5,048,000, as compared to the year ended
March 31, 2005. This was due to increased operating expenses of $200,000 related
to IA Global, primarily due to $164,000 in expenses related to legal claims and
$26,000 related to the implementation of 123-R and $3,360,000 related to Global
Hotline, which was acquired June 15, 2005 and a reduction in operating expenses
of $438,000 for Rex Tokyo.

         For 2006 and 2005, the selling, general and administrative expenses
consisted primarily of employee and independent contractor expense, rent,
overhead, equipment and depreciation, amortization of identifiable intangible
assets and intellectual property, professional and consulting fees, sales and
marketing costs, investor relations, legal, stock option and other general and
administrative costs. The difference in the current periods compared to the
prior periods is primarily due to the acquisition of Rex Tokyo on March 18, 2004
and Global Hotline on June 15, 2005 and expenses related to legal claims.

OTHER INCOME/EXPENSE

         Other expense for the three months ended March 31, 2006 was $351,000 as
compared to other income of $32,000 for the three months ended March 31, 2005.
The 2006 other expense was primarily related to interest expense and
amortization of beneficial conversion feature of $221,000 and other expense of
$161,000. On February 16, 2006, Rex Tokyo was notified by a leasing company that
a lease guaranteed by Rex Tokyo was in default for approximately $136,000, net
of equipment recovery. This loss was recorded in the first quarter of 2006.

         The 2005 other income was primarily due to miscellaneous income from
Rex Tokyo.

NET LOSS FROM CONTINUING OPERATIONS

         Net loss from continuing operations was $1,387,000 for the three months
ended March 31, 2006 as compared to a net loss of $298,000 for the three months
ended March 31, 2005. The reasons for the increased loss were discussed above.

NET LOSS

         Net loss was $1,387,000 for the three months ended March 31, 2006 as
compared to a net loss of $544,000 for the three months ended March 31, 2005.
The reasons for the decreased loss were discussed above.

         In accordance with SFAS 144, we accounted for the Fan Club loss of
$205,000 and the IA Global Acquisition loss of $41,000 for the three months
ended March 31, 2005 as total loss from discontinued operations in our
consolidated s statement of operations.

                                       27
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         We had cash of approximately $8,554,000 and net working capital of
approximately $5,495,000 as of March 31, 2006. We had a net loss from continuing
operations of approximately $1,520,000 for the year ended December 31, 2005 and
$942,000 for the year ended December 31, 2004. We expect our net loss from
continuing operations to continue for the foreseeable future. There can be no
assurance that we will ever achieve profitability.

         In order to fund its operations, Rex Tokyo and its subsidiary entered
into several commercial bank loans during 2005. On January 18, 2005, Rex Tokyo
received a 100,000,000 Yen loan from Mizuho, an unrelated Japanese bank. On
March 25, 2005, Rex Tokyo received a 100,000,000 Yen working capital loan from
Chiba Bank Ltd, an unrelated Japanese bank. On June 17, 2005, Rex Tokyo received
a 100,000,000 Yen working capital loan from Chiba Bank Ltd, an unrelated
Japanese bank. On August 31, 2005, Rex Tokyo received a 100,000,000 Yen working
capital loan from Mizuho Bank, an unrelated Japanese bank. On October 31, 2005,
Collaboration, a subsidiary of Rex Tokyo, received a 50,000,000 Yen working
capital loan from Gunma Bank Ltd, an unrelated Japanese bank. On December 27,
2005, Rex Tokyo received a 200,000,000 Yen working capital loan from Mizuho Bank
Co. Ltd. On December 30, 2005, Rex Tokyo received a 200,000,000 Yen working
capital loan from UFJ Bank Co. Ltd. On March 29, 2006, Rex Tokyo received a
300,000,000 Yen, or approximately $2,567,000 at current exchange rates, working
capital loan from The Bank of Tokyo-Mitsubishi UFJ, Ltd.

         On June 28, 2005, we announced that we had received commitments
totaling $3,750,000 for convertible debentures. We will use the proceeds from
this financing to continue our merger and acquisition strategy, and for general
corporate purposes. This financing included a beneficial conversion feature,
which increased our stockholders' equity by $1,250,000. The beneficial
conversion will be amortized over the life of the debentures, or until such time
that they are converted. During the year ended December 31, 2005, we expensed
$208,000 of this beneficial conversion recorded as interest expense. We closed
the sale of $3,750,000 of convertible debentures on July 29, 2005 and realized
net proceeds of $3,483,000.

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

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

         Since inception, we have financed our operations primarily through
sales of our equity securities in our initial public offering and from several
private placements, loans and capital contributions, primarily from related
parties. Net cash proceeds from these items have totaled approximately $20.1
million as of December 31, 2005, with approximately $8.8 million raised in the
initial public offering, $7.6 million raised in private placements, $3.6 million
raised in the conversion of debt and $0.1 million raised from a capital
contribution. In addition, we have issued equity for non-cash items totaling
$13.6 million, including $6.9 million issued for services, $3.4 million related
to a beneficial conversion feature, $0.1 million related to the Rex Tokyo
acquisition and $3.1 million related to the Global Hotline acquisition.
Additional funding was obtained from short-term and long-term debt with
approximately $8.7 million and convertible debentures with approximately $2.8
million outstanding as of March 31, 2006.

                                       28
<PAGE>

OPERATING ACTIVITIES

         Net cash used in operations for the three months ended March 31, 2006
was $1,862,000. This amount was primarily related to a net loss of $1,387,000,
an increase in other assets of $1,252,000 and a decrease deferred revenue of
$3,590,000. This was offset by depreciation and amortization of $572,000, a
decrease in notes receivable of $1,637,000 and an increase in accrued and other
liabilities of $2,716,000.

         On September 30, 2005, Global Hotline entered into a Senior Secured
Promissory Note Receivable of 300,000,000 Yen or approximately $2,698,000 with
GMB International, Inc. ("GMB"), a party affiliated with our majority
shareholder.

         The note receivable includes a repayment of 150,000,000 Yen or
approximately $1,349,000 on October 7, 2005 and the remaining 150,000,000 Yen
plus interest at 3.5% on October 30, 2005. The loan also provides for an earlier
payment on certain events of default. On October 7, 2005, 150,000,000 Yen was
repaid. On November 4, 2005, we entered into an Amendment to the Senior Secured
Promissory Note which modified the payment schedule. The remaining 150,000,000
Yen and interest was due to be paid on November 15, 2005. On December 11, 2005,
we entered into an Amendment 2 to the Senior Secured Promissory Note which
modified the payment schedule. The remaining 40,000,000 Yen and interest was due
to be paid on December 31, 2005.

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

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

INVESTING ACTIVITIES

         Net cash used in investing activities for the three months ended March
31, 2006 was $75,000. This amount related to purchase of capital expenditures.

FINANCING ACTIVITIES

         Net cash provided by financing activities for the three months ended
March 31, 2006 was $2,133,000. This amount related primarily to net proceeds
from issuance of long term debt of $2,567,000, offset by repayment of long term
debt of $434,000.

         On March 29, 2006, Rex Tokyo received a 300,000,000 Yen, or
approximately $2,567,000 at current exchange rates, working capital loan from
The Bank of Tokyo-Mitsubishi UFJ, Ltd. We are not a co-obligor or guarantor of
any Rex Tokyo indebtedness.

         Other Material Commitments. The company's contractual cash obligations
as of March 31, 2006 are summarized in the table below (1):
<TABLE>
<CAPTION>
Contractual                                    Less Than                                      Greater Than
Cash Obligations                 Total           1 Year        1-3 Years       3-5 Years         5 Years
-------------------------      ----------      ----------      ----------      ----------      ----------
<S>                            <C>             <C>             <C>             <C>             <C>
Operating leases               $  604,574      $  604,574      $        0      $        0      $        0

Capital lease obligations      $   68,349      $   23,684      $   22,332      $   22,332      $        0

Long term debt repayment       $8,721,893      $3,137,803      $4,563,578      $1,020,512      $        0

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

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

                                       29
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

INCOME TAXES

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

STOCK-BASED COMPENSATION

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

         Prior to January 1, 2006, we accounted for stock-based awards using the
intrinsic value method of accounting in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
Under the intrinsic value method of accounting, no compensation expense was
recognized in our consolidated statements of operations when the exercise price
of our employee stock option grant equals the market price of the underlying
common stock on the date of grant and the measurement date of the option grant
is certain. Under SFAS 123R, we remeasures the intrinsic value of the options at
the end of each reporting period until the options are exercised, cancelled or
expire unexercised. As of January 1, 2006, 4.2 million options with a weighted
average exercise price of $.245 and a weighted average remaining life of 8.7
years, remain outstanding and continue to be remeasured at the intrinsic value
over their remaining vesting period ranging from 3 months to 2.5 years.
Compensation expense in any given period is calculated as the difference between
total earned compensation at the end of the period, less total earned
compensation at the beginning of the period. Compensation earned is calculated
on a straight line basis over the requisite service period for any give option
award.

INTANGIBLE ASSETS

         Other intangible assets primarily relate to the intangible assets and
intellectual property acquired in connection with the acquisition of Global
Hotline over thirty six months on a straight - line basis, which was the time
frame that the management of the company was able to project forward for future
revenue, either under agreement or through expected continued business
activities with significant telecommunications companies.

                                       30
<PAGE>

REVENUE RECOGNITION

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

         Global Hotline revenue was derived from operating call centers and the
reselling of telephone and broadband lines in Japan. Revenue for one contract
has been recognized and recorded over the life of the contract. Revenue for
other contracts are considered realized when the services have been provided to
the customer, the work has been accepted by the customer and collectibility is
reasonably assured. Furthermore, if an actual measurement of revenue cannot be
determined, the company defers all revenue recognition until such time that an
actual measurement can be determined. If during the course of a contract
management determines that losses are expected to be incurred, such costs are
charged to operations in the period such losses are determined.

         Revenues are deferred when cash has been received from the customer but
the revenue has not been earned. The company has recorded $0 of deferred revenue
as of March 31, 2006.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

DEBT AND EQUITY FINANCING OF CAPITAL TRANSACTIONS - BENEFICIAL CONVERSION
FEATURES

         We have adopted EITF issues 98-5, ACCOUNTING FOR CONVERTIBLES
SECURITIES WITH BENEFICIAL CONVERSION FEATURES OR CONTINGENTLY ADJUSTABLE
CONVERSION RATIOS, and 00-27, APPLICATION OF ISSUE NO. 98-5 TO CERTAIN
CONVERTIBLE SECURITIES in accounting for convertible debt. EITF 00-27 requires
recognition of the intrinsic value of the conversion option and is recognized as
a reduction to the carrying amount of the convertible debt and as an addition to
paid-in capital. The intrinsic value of the conversion feature is the difference
between the conversion price and the fair value of the stock into which the
security is convertible into, multiplied by the number of shares. The conversion
price used in calculating the intrinsic value is the most favorable conversion
price up to maturity, assuming there are no changes to the current circumstances
except for the passage of time. Changes to the conversion terms that would be
triggered by future events not controlled by the issuer should be accounted for
as contingent conversion options, and the intrinsic value of such conversion
options would not be recognized until and unless the triggering event occurs.
According to EITF 00-27, the issuance proceeds should not be reduced by issuance
costs when calculating the intrinsic value of the conversion feature. The
beneficial conversion feature of debt or equity instruments, depending on the
specific facts and circumstances, will determine whether such beneficial
conversion feature is to be recorded as an expense to be amortized over a period
of time, expensed immediately or recorded as a deemed dividend.

LITIGATION COSTS

         We are subject to the possibility of legal actions arising in the
ordinary course of business. We regularly review the status of pending legal
actions to evaluate the amount and likelihood of any potential loss. We accrue
for these potential losses when it is probable that a liability has been
incurred and the amount of loss, or possible range of loss, can be reasonably
estimated. If actual results differ significantly from our estimates, we may be
required to adjust our accruals in the future. We have not provided provisions
for any litigation matters as of March 31, 2006.

                                       31
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

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

                                       32
<PAGE>

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

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

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

FACTORS THAT MAY AFFECT FUTURE RESULTS

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

                                       33
<PAGE>

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

WE COULD BE DE-LISTED BY THE AMERICAN STOCK EXCHANGE ("AMEX")

         Our stockholder's equity is $4,407,000 as of March 31, 2006. In
accordance with Section 1003(a)(iii) of the AMEX Company Guide, we are below the
$6,000,000 required minimum shareholders' equity for companies that have
sustained losses from continuing operations and/or net losses in its five most
recent fiscal years. We have debentures that are convertible into $3,750,000 of
equity. We are reviewing other alternatives to increase our stockholder's
equity.

         Not maintaining stockholders' equity above $6,000,000 may cause AMEX to
delist our shares, which would materially affect the ability of our stockholders
to dispose of their shares, reduce the liquidity of their investment and affect
our ability to obtain financing to support future operations and acquisitions.

THE COMPANY IS EXPOSED TO LEGAL CLAIMS.

         On November 5, 2004, we received notice from the American Arbitration
Association in New York City that Mr. Badner, a former majority shareholder,
commenced an arbitration proceeding against us, IAJ, and certain of our officers
and IAJ relating to the September 25, 2002 Agreement and Assignment between the
company, Mr. Badner and IAJ. Mr. Badner alleges (i) unrestricted shares of our
stock to which he was entitled under the agreement were not delivered as per the
terms of the agreement, (ii) unspecified commitments to engage in future
business ventures with Mr. Badner were not made, and (iii) damages resulting
from intentional misrepresentation. On January 7, 2005, we received notice that
Mr. Badner had amended his arbitration claim. Mr. Badner is seeking damages of
$2.5 million plus interest related to the breach of the Agreement and
Assignment, $100,000 for damages suffered related to fraud and
misrepresentations and costs and punitive and exemplary damages in an amount to
be determined.

         On February 4, 2005, we filed an answer and counterclaim against Mr.
Badner in response to Mr. Badner's amended arbitration claim. Arbitration was
held in December 2005 and January 2006. We do not expect a decision until the
second quarter of 2006. Mr. Badner has also filed a lawsuit in the Supreme Court
of the State of New York, New York County against one of our officers alleging
defamation. The officer has filed a motion to dismiss the case for lack of
proper service and personal jurisdiction and for failure to state a claim. Mr.
Badner has cross moved for discovery and for leave to amend his complaint. A
hearing was held in February 2006 on the motions and the case was dismissed
April 10, 2006 for lack of proper service. The cross motion was denied. We
believe that Mr. Badner will reassert this case.

         In April, 2006, we received notice of a suit filed in the King County
Superior Court of the State of Washington by Flashpoint Ventures, LLC
("Flashpoint") relating to the acquisition by Activated Matrix Partners, LLC
("AMP") of shares of Activated Content Corporation ("ACC") stock from IAJ, one
of our stockholders. Flashpoint claims to have provided acquisition financing to
AMP and AMP is alleged to have defaulted on its loan to Flashpoint. The
Flashpoint suit claims intentional and negligent misrepresentation, unjust
enrichment, breach of covenant of good faith and fair dealing, civil conspiracy,
negligence and violation of the Washington Criminal Profiteering Act. We believe
that AMP will reassert claims it previously filed and dismissed in Nevada state
court in the King County, Washington case. We believe there is no basis for it
having been sued by Flashpoint and AMP and we will vigorously defend against the
Flashpoint claims and, if they are re-filed as expected, the AMP claims.

                                       34
<PAGE>

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

WE ARE EXPOSED TO CHANGES IN THE TELECOMMUNICATION INDUSTRY.

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

         o  Its contracts with a significant telecommunications companies may
            not be renewed;

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

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

         o  Passing of new or changes in existing legislation;

         o  Impact of privacy laws;

         o  New competitors;

         o  Decreased pricing;

         o  Default or lack of performance by its agents;

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

         o  Loss of key personnel.

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

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

         We may need to obtain additional financing in order to continue our
current operations, including the cash flow needs of Global Hotline and its
subsidiaries, to acquire businesses and to maintain the American Stock Exchange
("AMEX") requirements of $6 million in stockholders' equity for continued
listing our shares. There can be no assurance that we will be able to secure
additional funding, or that if such funding is available, whether the terms or
conditions would be acceptable to us, from our major shareholders or otherwise.

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

                                       35
<PAGE>

OUR PRINCIPAL STOCKHOLDERS HAVE SUBSTANTIAL INFLUENCE OVER OUR COMPANY.

         As of March 31, 2006, IAJ LBO Fund, PBAA, Terra Firma, IAJ, Hiroki
Isobe and Kyo Nagae collectively hold approximately 76.9% of our common stock
(collectively, the "Controlling Shareholders"). The share ownership percentages
described in this Form 10-K excludes 811,285 shares held by GMB Holdings Ltd,
and other shareholders for which Mr. Isobe has personal signing authority and
12,500,018 shares of our common stock issuable upon conversion of the
convertible debentures. Such entities have stated in a Schedule 13D that they
may be deemed to constitute a "group" for the purposes of Rule 13d-3 under the
Exchange Act. Hiroki Isobe and Kyo Nagae controls each of our Controlling
Stockholders.

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

OUR CONTROLLING SHAREHOLDERS HAVE RECENTLY DEFAULTED ON OBLIGATIONS OWING TO REX
TOKYO AND GLOBAL HOTLINE

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

         Our Controlling Shareholders thus far have indicated a willingness to
support our financing efforts. However, entities affiliated with our controlling
shareholder group have recently defaulted on obligations owing to our
subsidiaries.

         A subsidiary of Inter Asset Japan, a 5.4% shareholder and part of the
group that controls 76.9% of our outstanding shares, has defaulted in its
obligation to pay approximately 97,867,000 Yen to Rex Tokyo. In April 2006, we
divested our 60.5% interest in Rex Tokyo back to Rex Tokyo and we have no
obligation related to the default by Inter Asset Japan.

         In addition, in September and December 2005, Global Hotline made loans
to GMB International Inc., an entity affiliated with our controlling
shareholders, totaling 400,000,000 Yen or approximately $3,394,000 at current
exchange rates. GMB repaid 200,000,000 Yen on January 13, 2006. The balance was
scheduled for repayment by January 31, 2006 but was not paid by that date. On
April 7, 2006, GMB repaid 80,000,000 Yen, reducing the balance to 120,000,000
Yen, plus interest. On April 27, 2006, GMB repaid the remaining 120,000,000 Yen.
In light of these defaults, there can be no assurance that our major shareholder
group will continue to provide financial support to the company.

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

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

                                       36
<PAGE>

         - Use of significant amounts of cash,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

         - Collect the proceeds from the divestitures.

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

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

                                       37
<PAGE>

OUR CUSTOMER BASE IS CONCENTRATED.

         Global Hotline has contracts with three major Japanese
telecommunications and entered into contracts with 3S Networks, Cubic Co Ltd and
other agents to outsource call center operations. The loss of these contracts
would have a material adverse impact on Global Hotline's ability to meet its
requirements under its contract with it's principal customer.

WE HAVE LIMITED INSURANCE.

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

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

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

         - Quarterly variations in our operating results,

         - Announcements of technological innovations,

         - New product introductions by us or our competitors,

         - Competitive activities,

         - Announcements by us regarding significant acquisitions and
divestitures, strategic relationships, addition or loss of significant customers
and contracts, capital expenditure commitments, liquidity, defaults by our
majority shareholder and our AMEX listing,

         - Additions or departures of key personnel,

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

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

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

         - General market and economic conditions,

         - Investor relation activities,

         - Defending significant litigation, and

         - Foreign exchange gains and losses.

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

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

         Sales or issuances of a large number of shares of common stock in the
public market or the perception that sales may occur could cause the market
price of our common stock to decline. As of March 31, 2006, 108.2 million shares
of common stock were outstanding. Significant shares were held by our principal
stockholders and other Company insiders. As "affiliates" (as defined under Rule
144 of the Securities Act ("Rule 144")) of the company, our principal
stockholders and other Company insiders may only sell their shares of common
stock in the public market in compliance with Rule 144, including the volume
limitations therein.

                                       38
<PAGE>

WE HAVE A LIMITED OPERATING HISTORY.

         We have a limited operating history on which to base an evaluation of
our business and prospects, having only commenced our initial business
operations in April 1999. In addition, we have shifted our business from
broadband entertainment channels and revenues derived from advertising to
operating primarily as a holding company. We acquired Rex Tokyo, one of our two
principal subsidiaries, in 2004, and have divested our interest in Rex Tokyo in
April 2006. Accordingly, unless we acquire other businesses, our only
significant revenue in 2006 will come from Global Hotline, which we acquired in
June 2005.

         Our prospects must be considered in light of the risks, difficulties
and uncertainties frequently encountered by companies in an early stage of
development, companies in new and rapidly evolving markets such as the market
for telecommunication and technology products and services.

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

WE EXPECT TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.

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

WE ARE EXPOSED TO FOREIGN CURRENCY RISKS.

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

WE ARE SUBJECT TO COMPETITIVE PRESSURES.

         We face competition from entities that provide competing call center
operations, including entities that resell telephone and broadband lines in
Japan. Certain of our competitors may be able to devote greater resources to
marketing, adopt more aggressive pricing policies and devote substantially more
resources to developing their services and products. We may be unable to compete
successfully against current and future competitors, and competitive pressures
may have a material adverse effect on our business. Further, as a strategic
response to changes in the competitive environment, we may from time to time
make certain pricing, service or marketing decisions or acquisitions that could
have a material adverse effect on our business, prospects, financial condition
and results of operations.

WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS.

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

                                       39
<PAGE>

WE ARE DEPENDENT ON KEY PERSONNEL.

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

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY

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

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

INTEREST RATE RISK

         After giving effect to the disposition of Rex Tokyo, which we sold on
April 4, 2006, the company is not exposed to interest rate risk.

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

ITEM 4.  CONTROLS AND PROCEDURES

         Our principal executive officer and principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31,
2006. Based on this evaluation, our principal executive officer and principal
financial officer concluded that, as of March 31, 2006, except that our Rex
Tokyo subsidiary, which we sold April 4, 2006, entered into certain financial
transactions without first seeking required approvals at the parent company
board level, 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.

                                       40
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On November 5, 2004, we received notice from the American Arbitration
Association in New York City that Mr. Badner, a former majority shareholder,
commenced an arbitration proceeding against us, IAJ, and certain of our officers
and IAJ relating to the September 25, 2002 Agreement and Assignment between the
company, Mr. Badner and IAJ. Mr. Badner alleges (i) unrestricted shares of our
stock to which he was entitled under the agreement were not delivered as per the
terms of the agreement, (ii) unspecified commitments to engage in future
business ventures with Mr. Badner were not made, and (iii) damages resulting
from intentional misrepresentation. On January 7, 2005, we received notice that
Mr. Badner had amended his arbitration claim. Mr. Badner is seeking damages of
$2.5 million plus interest related to the breach of the Agreement and
Assignment, $100,000 for damages suffered related to fraud and
misrepresentations and costs and punitive and exemplary damages in an amount to
be determined.

         On February 4, 2005, we filed an answer and counterclaim against Mr.
Badner in response to Mr. Badner's amended arbitration claim. Arbitration was
held in December 2005 and January 2006. We do not expect a decision until the
second quarter of 2006. Mr. Badner has also filed a lawsuit in the Supreme Court
of the State of New York, New York County against one of our officers alleging
defamation. The officer has filed a motion to dismiss the case for lack of
proper service and personal jurisdiction and for failure to state a claim. Mr.
Badner has cross moved for discovery and for leave to amend his complaint. A
hearing was held in February 2006 on the motions and the case was dismissed
April 10, 2006 for lack of proper service. The cross motion was denied. We
believe that Mr. Badner will reassert this case.

         In April, 2006, we received notice of a suit filed in the King County
Superior Court of the State of Washington by Flashpoint Ventures, LLC
("Flashpoint") relating to the acquisition by Activated Matrix Partners, LLC
("AMP") of shares of Activated Content Corporation ("ACC") stock from IAJ, one
of our stockholders. Flashpoint claims to have provided acquisition financing to
AMP and AMP is alleged to have defaulted on its loan to Flashpoint. The
Flashpoint suit claims intentional and negligent misrepresentation, unjust
enrichment, breach of covenant of good faith and fair dealing, civil conspiracy,
negligence and violation of the Washington Criminal Profiteering Act. We believe
that AMP will reassert claims it previously filed and dismissed in Nevada state
court in the King County, Washington case. We believe there is no basis for it
having been sued by Flashpoint and AMP and we will vigorously defend against the
Flashpoint claims and, if they are re-filed as expected, the AMP claims.

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

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

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

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

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

                                       41
<PAGE>

ITEM 5.  OTHER INFORMATION

         There were no disclosures of any information required to be filed on
Form 8-K during the three months ended March 31, 2006 that were not filed.

ITEM 6.  EXHIBITS

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

3.1      Certificate of Designation of Preferences and Rights of the
         Registrant's Series B Convertible Preferred Stock (10)

10.1     Amendment 3 to Senior Secured Promissory Note dated January 6, 2006
         between IA Global, Inc., IA Global Acquisition Co. and Ominira
         Networks, LLC (1)

10.2     Code of Conduct and Ethics dated January 24, 2006. (2)

10.3     Notice of Conversion of Series B Convertible Preferred Stock between IA
         Global, Inc. and Inter Asset Japan LBO No 1 Fund dated January 30,
         2006. (2)

10.4     Letter dated February 1, 2006 between IA Global, Inc and Ominira
         Networks LLC. (3)

10.5     Partner Contract dated December 22, 2005 between IA Partners Co Ltd and
         Internet Service Partners. (English translation) (4)

10.6     Amendment to Employment Agreement dated February 14, 2006 between IA
         Global, Inc. and Mark Scott. (5)

10.7     Agreement For Repayment of Hideki Anan Note Receivable dated March 10,
         2006 amongst Hideki Anan, Global Hotline, Inc. and IA Global, Inc. (6)

10.8     Compensation Committee Charter dated March 14, 2006. (6)

10.9     Amendment 4 to Senior Secured Promissory Note dated March 27, 2006
         between IA Global, Inc., IA Global Acquisition Co. and Ominira Networks
         LLC. (7)

10.10    Share Sale Agreement dated April 4, 2006 among IA Global, Inc., Rex
         Tokyo Co Ltd and Hiroyuki Ejima. (8)

10.11    Amendment 3 to Senior Secured Promissory Note dated April 11, 2006
         between Global Hotline, Inc. and GMB International Inc. (9)

10.12    Financial Loan Agreement dated March 29, 2006 between Rex Tokyo Co Ltd
         and The Bank of Tokyo-Mitsuibishi UFJ, Ltd. (English translation)(10)

10.13    Agency Contract dated April 14, 2006 between Japan Telecom Invoicing,
         Inc. and Global Hotline, Inc. (English translation)(10)

10.14    Agreement dated April 25, 2006 between Global Hotline, Inc. and KDDI
         Networks and Solutions. (English translation)(10) IA Global applied for
         confidential treatment with respect to certain portions of this
         agreement, which have been omitted, pursuant to Rule 24b-2 of the
         Securities Exchange Act of 1934, as amended.

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

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

                                       42
<PAGE>

__________________

(1)      Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
         January 6, 2006 and filed January 6, 2006, and incorporated herein by
         reference.

(2)      Filed as an exhibit to Registrant's Current Report on Form 8-K/A, dated
         January 24, 2006 and filed on January 31, 2006 and incorporated herein
         by reference.

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

(4)      Filed as an exhibit to Registrant's Annual Report on Form 10-K, dated
         April 17, 2006 and filed April 17, 2006, and incorporated herein by
         reference.

(5)      Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
         February 14, 2006 and filed February 17, 2006, and incorporated herein
         by reference.

(6)      Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
         March 10, 2006 and filed March 15, 2006, and incorporated herein by
         reference.

(7)      Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
         March 27, 2006 and filed March 31, 2006, and incorporated herein by
         reference.

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

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

(10)     Filed herewith.

                                       43
<PAGE>

                                   SIGNATURES

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

                                        IA Global, Inc.
                                        (Registrant)

Date: May 15, 2006                      By: /s/ Mark Scott
                                            --------------
                                        Mark Scott,
                                        President and Chief Financial Officer
                                        (Principal Executive and Financial
                                        and Accounting Officers)

                                       44