----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D.C. 20549**

**FORM      10-QSB **

**x QUARTERLY      REPORT      PURSUANT TO SECTION 13 OR 15(D) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**OR**

**o TRANSITION      REPORT PURSUANT TO      SECTION 13 OR 15(D) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

**Commission      File Number: 333-116255**

**VIVID      LEARNING SYSTEMS, INC.**

| **Delaware**(State                or other jurisdiction ofincorporation                or organization) | **42-1623500**(I.R.S.                Employer Identification No.) |
|---------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|

**5728      Bedford Street**

**Pasco,      WA 99301**

**(509)      545-1800**

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**VIVID      LEARNING SYSTEMS, INC.**

**MARCH      31, 2007**
**      QUARTERLY REPORT ON FORM 10-QSB**

**TABLE      OF CONTENTS**

|                                 |                                                                                                                      |   | **PAGE** |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                                 | Special                Note Regarding Forward Looking Statements                                                          |   | 3        |
|                                 |                                                                                                                      |   |     |
| PART                I                |
| FINANCIAL                INFORMATION |
|                                 |                                                                                                                      |   |     |
| Item                1.               | Financial                Statements                                                                                       |   | 4        |
| Item                2.               | Management’s                Discussion And Analysis Of Financial Condition And Results Of                Operations |   | 19       |
| Item                3                | Controls                and Procedures                                                                                    |   | 25       |
|                                 |                                                                                                                      |   |     |
| PART                II               |
| OTHER                INFORMATION     |
|                                 |                                                                                                                      |   |     |
| Item                6.               | Exhibits                                                                                                                  |   | 26       |

----

**SPECIAL      NOTE REGARDING FORWARD-LOOKING STATEMENTS**

----

**PART      I - FINANCIAL INFORMATION**

**ITEM      1. **
**FINANCIAL      STATEMENTS**

|                                                 |   | **PAGE** |   |
|------------------------------------------------------|--------|----------|--------|
|                                                 |   |     |   |
| Consolidated                Balance Sheets           |   |     | 5      |   |
|                                                 |   |     |   |   |
| Consolidated                Statements of Income     |   |     | 6      |   |
|                                                 |   |     |   |   |
| Consolidated                Statements of Cash Flows |   |     | 7      |   |
|                                                 |   |     |   |   |
| Notes                to Financial Statements         |   |     | 8-18   |   |

----

**VIVID        LEARNING SYSTEMS - CONSOLIDATED BALANCE SHEETS**

|                                                                           |   | March                    31, 2007 (Unaudited) |      | September                    30, 2006 |   |
|--------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|---------------------------------------|--------|
| ASSETS                                                                         |   |                                          |      |                                  |   |
|                                                                           |   |                                          |      |                                  |   |
| CURRENT                  ASSETS                                                |   |                                          |      |                                  |   |
| Cash                                                                           |   | $                                             | 46,056    |                                  | $      | 166,645 |   |
| Accounts                  and contracts receivable                             |   |                                          | 932,449   |                                  |   | 700,115 |   |
| Accounts                  and contracts receivable, Fluor Hanford              |   |                                          | 27,909    |                                  |   | 27,077 |   |
| Accounts                  receivable, related party                            |   |                                          | 127,778   |                                  |   | - |   |
| Prepaid                  expenses                                              |   |                                          | 143,924   |                                  |   | 119,110 |   |
| Other                  current assets                                          |   |                                          | 107,949   |                                  |   | 219,795 |   |
|  TOTAL                  CURRENT ASSETS                                    |   |                                          | 1,386,065 |                                  |   | 1,232,742 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| PROPERTY,                  PLANT AND EQUIPMENT                                 |   |                                          |      |                                  |   |   |   |
| Property                  and equipment                                        |   |                                          | 1,405,528 |                                  |   | 1,318,651 |   |
| Less:                  Accumulated depreciation and amortization               |   |                                          | (927,292  | )                                     |   | (862,828 | ) |
|  TOTAL                  PROPERTY, PLANT AND EQUIPMENT                     |   |                                          | 478,236   |                                  |   | 455,823 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| OTHER                  ASSETS                                                  |   |                                          |      |                                  |   |   |   |
| Software,                  net of amortization                                 |   |                                          | 1,428,131 |                                  |   | 1,485,038 |   |
| Intangibles,                  net of amortization                              |   |                                          | 386,943   |                                  |   | 436,943 |   |
| Goodwill                                                                       |   |                                          | 375,000   |                                  |   | 375,000 |   |
| Long-term                  contracts receivable                                |   |                                          | 165,514   |                                  |   | 244,375 |   |
| Deferred                  tax asset                                            |   |                                          | 597,948   |                                  |   | 505,867 |   |
|  TOTAL                  OTHER ASSETS                                      |   |                                          | 2,953,536 |                                  |   | 3,047,223 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| TOTAL                  ASSETS                                                  |   | $                                             | 4,817,837 |                                  | $      | 4,735,788 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS' EQUITY                          |   |                                          |      |                                  |   |   |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| CURRENT                  LIABILITIES                                           |   |                                          |      |                                  |   |   |   |
| Accounts                  payable                                              |   | $                                             | 233,353   |                                  | $      | 94,049 |   |
| Payable                  to related party                                      |   |                                          | -         |                                  |   | 670,702 |   |
| Accrued                  contract labor                                        |   |                                          | 265,122   |                                  |   | 160,300 |   |
| Other                  current liabilities                                     |   |                                          | 102,705   |                                  |   | 63,136 |   |
| Unearned                  revenue                                              |   |                                          | 63,338    |                                  |   | 20,355 |   |
| Notes                  payable, related parties                                |   |                                          | 75,000    |                                  |   | 111,853 |   |
| Current                  portion of long-term liabilities                      |   |                                          | 78,246    |                                  |   | 25,795 |   |
|  TOTAL                  CURRENT LIABILITIES                               |   |                                          | 817,764   |                                  |   | 1,146,190 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| LONG-TERM                  LIABILITIES                                         |   |                                          |      |                                  |   |   |   |
| Long-term                  debt                                                |   |                                          | 209,205   |                                  |   | 162,579 |   |
| Related                  party payable                                         |   |                                          | 275,000   |                                  |   | 422,325 |   |
| Other                  long-term liabilities                                   |   |                                          | 133,313   |                                  |   | 122,096 |   |
|  TOTAL                  LONG-TERM LIABILITIES                             |   |                                          | 617,518   |                                  |   | 707,000 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
|  TOTAL                  LIABILITIES                                       |   |                                          | 1,435,282 |                                  |   | 1,853,190 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES                                 |   |                                          | -         |                                  |   | - |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| STOCKHOLDERS'                  EQUITY                                          |   |                                          |      |                                  |   |   |   |
| Preferred                  stock, $0.0001 par value;                           |   |                                          |      |                                  |   |   |   |
| 5,000,000                  shares authorized, no shares issued and outstanding |   |                                          | -         |                                  |   | - |   |
| Common                  stock, $0.0001 par value;                              |   |                                          |      |                                  |   |   |   |
| 200,000,000                  shares authorized, 13,372,203 and 12,030,674      |   |                                          |      |                                  |   |   |   |
| shares                  issued and outstanding, respectively                   |   |                                          | 1,337     |                                  |   | 1,203 |   |
| Additional                  paid-in capital                                    |   |                                          | 4,351,880 |                                  |   | 3,673,311 |   |
| Accumulated                  deficit                                           |   |                                          | (970,662  | )                                     |   | (791,916 | ) |
|  TOTAL                  STOCKHOLDERS' EQUITY                              |   |                                          | 3,382,555 |                                  |   | 2,882,598 |   |
|                                                                           |   |                                          |      |                                  |   |   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS' EQUITY                    |   | $                                             | 4,817,837 |                                  | $      | 4,735,788 |   |

----

**VIVID            LEARNING SYSTEMS **

**CONSOLIDATED              STATEMENTS OF OPERATIONS**

|                                                               |   | Three                    Months Ended   |       |  Six                    Months Ended   |   |
|--------------------------------------------------------------------|--------|---------------------------------------------------|------------|-------------------------------------------------------|--------|
|                                                               |   | March                    31, 2007                 |       |  March                    31, 2006               |   |  March                    31, 2007 |   |  March                    31, 2006 |   |
|                                                               |   | (Unaudited)                                       |       |  (Unaudited)                                     |   |  (Unaudited) |   |  (Unaudited) |   |
|                                                               |   |                                              |       |                                             |   |    |   |    |   |
| REVENUES                                                           |   |                                              |       |                                             |   |    |   |    |   |
| Training                    subscriptions                          |   | $                                                 | 680,784    |                                                  | $      | 428,298 |   | $ | 1,380,989 |   | $ | 1,038,905 |   |
| Training                    subscriptions, Fluor Hanford           |   |                                              | 142,224    |                                                  |   | 140,504 |   |   | 280,540 |   |   | 283,993 |   |
| Custom                    products and services                    |   |                                              | 467,346    |                                                  |   | 249,066 |   |   | 965,148 |   |   | 505,289 |   |
| Custom                    products and services, Fluor Hanford     |   |                                              | 133,041    |                                                  |   | 69,049 |   |   | 281,971 |   |   | 110,548 |   |
|                                                               |   |                                              | 1,423,395  |                                                  |   | 886,917 |   |   | 2,908,648 |   |   | 1,938,735 |   |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| COST                    OF REVENUES                                |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| Training                    subscriptions                          |   |                                              | 143,962    |                                                  |   | 162,468 |   |   | 322,505 |   |   | 338,345 |   |
| Custom                    products and services                    |   |                                              | 407,057    |                                                  |   | 163,348 |   |   | 794,589 |   |   | 296,233 |   |
|                                                               |   |                                              | 551,019    |                                                  |   | 325,816 |   |   | 1,117,094 |   |   | 634,578 |   |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| GROSS                    PROFIT                                    |   |                                              | 872,376    |                                                  |   | 561,101 |   |   | 1,791,554 |   |   | 1,304,157 |   |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                           |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| Marketing                    and related labor expenses            |   |                                              | 395,149    |                                                  |   | 282,193 |   |   | 744,906 |   |   | 532,602 |   |
| Bad                    debt expense                                |   |                                              | 9,137      |                                                  |   | 3,715 |   |   | 10,677 |   |   | 4,278 |   |
| Reseller                    commissions                            |   |                                              | 93,003     |                                                  |   | 118,428 |   |   | 190,254 |   |   | 154,937 |   |
| Depreciation                    and amortization                   |   |                                              | 53,096     |                                                  |   | 14,766 |   |   | 107,901 |   |   | 29,066 |   |
| Wages                    and contract labor                        |   |                                              | 236,862    |                                                  |   | 180,970 |   |   | 433,198 |   |   | 330,530 |   |
| Other                    operating expenses                        |   |                                              | 270,091    |                                                  |   | 183,536 |   |   | 548,816 |   |   | 421,314 |   |
|  TOTAL                    OPERATING EXPENSES                  |   |                                              | 1,057,338  |                                                  |   | 783,608 |   |   | 2,035,752 |   |   | 1,472,727 |   |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| LOSS                    FROM OPERATIONS                            |   |                                              | (184,962   | )                                                     |   | (222,507 | ) |   | (244,198 | ) |   | (168,570 | ) |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| OTHER                    INCOME (EXPENSE)                          |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| Gain                    on sale of equipment and intangible assets |   |                                              | -          |                                                  |   | - |   |   | 901 |   |   | 30,276 |   |
| Interest                    income                                 |   |                                              | 385        |                                                  |   | 1,171 |   |   | 666 |   |   | 1,171 |   |
| Interest                    expense                                |   |                                              | (14,681    | )                                                     |   | (20,643 | ) |   | (28,196 | ) |   | (38,254 | ) |
|  TOTAL                    OTHER INCOME (EXPENSE)              |   |                                              | (14,296    | )                                                     |   | (19,472 | ) |   | (26,629 | ) |   | (6,807 | ) |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| LOSS                    BEFORE INCOME TAXES                        |   |                                              | (199,258   | )                                                     |   | (241,979 | ) |   | (270,827 | ) |   | (175,377 | ) |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| INCOME                    TAX BENEFIT                              |   |                                              | 68,919     |                                                  |   | 82,273 |   |   | 92,081 |   |   | 59,628 |   |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| NET                    LOSS                                        |   | $                                                 | (130,339   | )                                                     | $      | (159,706 | ) | $ | (178,746 | ) | $ | (115,749 | ) |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| BASIC                    AND DILUTED NET LOSS PER SHARE            |   | $                                                 | (0.01      | )                                                     | $      | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) |
|                                                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| BASIC                    AND DILUTED                               |   |                                              |       |                                                  |   |   |   |   |   |   |   |   |   |
| WEIGHTED                    AVERAGE NUMBER OF SHARES               |   |                                              | 13,372,203 |                                                  |   | 11,997,299 |   |   | 13,151,068 |   |   | 11,280,521 |   |

----

**VIVID        LEARNING SYSTEMS, INC.**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

|                                                                        |   | Six                Months Ended |     |
|-----------------------------------------------------------------------------|--------|---------------------------------|----------|
|                                                                        |   | March                31,        |     | March                31, |   |
|                                                                        |   | 2007                            |     | 2006 |   |
|                                                                        |   | (Unaudited)                     |     | (Unaudited) |   |
| CASH                FLOWS FROM OPERATING ACTIVITIES:                        |   |                            |     |   |   |
| Net                loss                                                     |   | $                               | (178,746 | ) | $ | (115,749 | ) |
| Adjustments                to reconcile net income (loss)                   |   |                            |     |   |   |   |   |
| to                net cash provided by operating activities:                |   |                            |     |   |   |   |   |
| Depreciation                and amortization                           |   |                            | 107,901  |   |   | 29,066 |   |
| Amortization                of capitalized software                    |   |                            | 123,366  |   |   | 138,631 |   |
| Bad                debt expenses                                       |   |                            | 10,677   |   |   | 4,278 |   |
| Gain                on sale of assets                                  |   |                            | -        |   |   | (30,276 | ) |
| Changes                in deferred tax assets and liabilities          |   |                            | (92,081  | ) |   | (59,413 | ) |
| Common                stock and options issued for services            |   |                            | 7,970    |   |   | - |   |
| Changes                in assets and liabilities:                           |   |                            |     |   |   |   |   |
| Accounts                and contracts receivable                       |   |                            | (21,611  | ) |   | 410,152 |   |
| Prepaid                expenses                                        |   |                            | 775      |   |   | (13,746 | ) |
| Other                current assets                                    |   |                            | 116,427  |   |   | 245,252 |   |
| Accounts                payable                                        |   |                            | 112,114  |   |   | 3,742 |   |
| Accrued                payroll and related expenses                    |   |                            | (62,595  | ) |   | (126,849 | ) |
| Long-term                receivable contracts                          |   |                            | 78,861   |   |   | 58,586 |   |
| Other                current liabilities                               |   |                            | 35,802   |   |   | (153,667 | ) |
| Unearned                revenue                                        |   |                            | 42,983   |   |   | - |   |
|  Net                cash provided by operating activities              |   |                            | 238,860  |   |   | 390,007 |   |
|                                                                        |   |                            |     |   |   |   |   |
| CASH                FLOWS FROM INVESTING ACTIVITIES:                        |   |                            |     |   |   |   |   |
| Acquisition                of property, equipment and intangible assets     |   |                            | (34,923  | ) |   | (10,890 | ) |
| Acquisition                of software                                      |   |                            | (66,458  | ) |   | (38,328 | ) |
|  Net                cash used by investing activities                  |   |                            | (101,381 | ) |   | (49,218 | ) |
|                                                                        |   |                            |     |   |   |   |   |
| CASH                FLOWS FROM FINANCING ACTIVITIES:                        |   |                            |     |   |   |   |   |
| Proceeds                from stock issuances                                |   |                            | -        |   |   | 531 |   |
| Stock                options exercised for common stock                     |   |                            | 31       |   |   | - |   |
| Payments                on notes payable, related party                     |   |                            | (222,621 | ) |   | (219,745 | ) |
| Payments                on line of credit                                   |   |                            | -        |   |   | (83,921 | ) |
| Payments                on long-term debt                                   |   |                            | (24,494  | ) |   | - |   |
| Payments                on other long-term liabilities                      |   |                            | (10,984  | ) |   | - |   |
|  Net                cash provided (used) by financing activities       |   |                            | (258,068 | ) |   | (303,135 | ) |
|                                                                        |   |                            |     |   |   |   |   |
|  Net                increase (decrease) in cash                        |   |                            | (120,589 | ) |   | 37,654 |   |
|                                                                        |   |                            |     |   |   |   |   |
|  Cash                at beginning of period                            |   |                            | 166,645  |   |   | 16,622 |   |
|                                                                        |   |                            |     |   |   |   |   |
|  Cash                at end of period                                  |   | $                               | 46,056   |   | $ | 54,276 |   |
|                                                                        |   |                            |     |   |   |   |   |
| SUPPLEMENTAL                CASH FLOW INFORMATION:                          |   |                            |     |   |   |   |   |
| Interest                paid                                                |   | $                               | 28,196   |   | $ | 38,254 |   |
| Income                taxes paid                                            |   | $                               | -        |   | $ | - |   |
|                                                                        |   |                            |     |   |   |   |   |
|                                                                        |   |                            |     |   |   |   |   |
| NON-CASH                TRANSACTIONS:                                       |   |                            |     |   |   |   |   |
| Common                stock issued for related party debt                   |   | $                               | 670,702  |   | $ | 1,092,448 |   |
| Note                receivable from sale of equipment and intangible assets |   | $                               | -        |   | $ | 45,000 |   |
| Acquisition                of fixed assets via capital leases               |   | $                               | 45,014   |   | $ | 46,483 |   |
| Leasehold                improvements financed                              |   | $                               | -        |   | $ | 100,000 |   |

----

**VIVID      LEARNING SYSTEMS, INC.**

**CONDENSED      NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH      31, 2007**

**NOTE      1 **
**BUSINESS      ORGANIZATION**

**NOTE      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

----

**VIVID      LEARNING SYSTEMS, INC.**

**CONDENSED      NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH      31, 2007**

----

**VIVID      LEARNING SYSTEMS, INC.**

**CONDENSED      NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH      31, 2007**

** **

----

**VIVID      LEARNING SYSTEMS, INC.**

**CONDENSED      NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH      31, 2007**

|                                      |   | March                31, 2007 |       | September                30,2006 |   |
|-------------------------------------------|--------|-------------------------------|------------|----------------------------------|--------|
| Software                development costs |   | $                             | 3,533,915  |                             | $      | 3,467,456 |   |
| Accumulated                amortization   |   |                          | (2,105,784 | )                                |   | (1,982,418 | ) |
|                                      |   | $                             | 1,428,131  |                             | $      | 1,485,038 |   |

----

**VIVID      LEARNING SYSTEMS, INC.**

**CONDENSED      NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH      31, 2007**

**NOTE      3 - RELATED PARTY TRANSACTIONS**

----

**VIVID      LEARNING SYSTEMS, INC.**

**CONDENSED      NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH      31, 2007**

**NOTE      4 - STOCKHOLDERS’ EQUITY**

**NOTE      5 - STOCK-BASED COMPENSATION**

| Equity                compensation plans approved by shareholders |   | Number                of shares to be issued upon exercise of outstanding                options |    | Weighted-average                exercise price of outstanding options |   | Number                of shares remaining available for future issuance under equity                compensation plans |   |
|-------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|---------|-----------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|--------|
| 2003                Stock Option Plan                             |   |                                                                                             | 570,940 |                                                                  | $      | 0.33                                                                                                                   |   |   | 1,745,685 |   |
| Total                                                             |   |                                                                                             | 570,940 |                                                                  |   |                                                                                                                   |   |   | 1,745,685 |   |

----

**VIVID        LEARNING SYSTEMS, INC.**

**CONDENSED        NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH        31, 2007**

|                                                     |   | Number                of Shares |    | Weighted                Average Exercise Price |   |
|----------------------------------------------------------|--------|---------------------------------|---------|------------------------------------------------|--------|
|                                                     |   |                            |    |                                           |   |
| Outstanding                at October 1, 2005            |   |                            | 504,334 |                                           | $      | 0.25 |   |
| Granted                                                  |   |                            | 153,606 |                                           |   | 0.54 |   |
| Exercised                                                |   |                            | (33,375 | )                                              |   | 0.25 |   |
| Expired                or terminated                     |   |                            | (53,625 | )                                              |   | 0.25 |   |
| Outstanding                at September 30, 2006         |   |                            | 570,940 |                                           | $      | 0.33 |   |
| Options                exercisable at September 30, 2006 |   |                            | 365,189 |                                           | $      | 0.31 |   |
|                                                     |   |                            |    |                                           |   |   |   |
| Outstanding                at October 1, 2006            |   |                            | 570,940 |                                           | $      | 0.33 |   |
| Granted                                                  |   |                            | -       |                                           |   | - |   |
| Exercised                                                |   |                            | 125     |                                           |   | 0.25 |   |
| Expired                or terminated                     |   |                            | -       |                                           |   | - |   |
| Outstanding                at March 31, 2007             |   |                            | 570,815 |                                           | $      | 0.33 |   |
| Options                exercisable at March 31, 2007     |   |                            | 365,064 |                                           | $      | 0.31 |   |

**NOTE      6 - ECONOMIC DEPENDENCY**

** **

|                                                                |   | Six                  Months EndingMarch                  31, |    |
|---------------------------------------------------------------------|--------|--------------------------------------------------------------|---------|
|                                                                |   | 2007                                                         |    | 2006 |   |
| Revenues—Fluor                  Hanford                       |   | $                                                            | 562,510 |   | $ | 394,541 |   |
| Accounts                  Receivable Fluor                  Hanford |   |                                                         | 27,908  |   |   | 29,192 |   |

----

**VIVID        LEARNING SYSTEMS, INC.**

**CONDENSED        NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH        31, 2007**

**NOTE      7 - COMMITMENTS AND CONTINGENCIES**

**NOTE      8 - **
**SEGMENT      INFORMATION**

|                                                   |   | March                  31, |       | March                  31, |   |
|--------------------------------------------------------|--------|----------------------------|------------|----------------------------|--------|
|                                                   |   | 2007                       |       | 2006                       |   |
| Revenues:                                              |   |                       |       |                       |   |
| Training                  subscriptions                |   | $                          | 1,661,529  |                       | $      | 1,322,898 |   |
| Custom                  products and services          |   |                       | 1,247,119  |                       |   | 615,837 |   |
| **Total                  Revenues**                    |   | $                          | 2,908,648  |                       | $      | 1,938,735 |   |
|                                                   |   |                       |       |                       |   |   |   |
| Income                  (loss) before income taxes:    |   |                       |       |                       |   |   |   |
| Training                  subscriptions                |   |                       | 1,339,024  |                       |   | 984,553 |   |
| Custom                  products and services          |   |                       | 452,530    |                       |   | 319,604 |   |
| Corporate                                              |   |                       | (2,062,381 | )                          |   | (1,479,534 | ) |
| **Income                  (loss) before income taxes** |   | $                          | (270,827   | )                          | $      | (175,377 | ) |

|                                                                             |   | March                    31, |      | March                    31, |   |
|----------------------------------------------------------------------------------|--------|------------------------------|-----------|------------------------------|--------|
|                                                                             |   | 2007                         |      | 2006                         |   |
| Identifiable                    assets:                                          |   |                         |      |                         |   |
| Training                    subscriptions                                        |   | $                            | 1,428,131 |                         | $      | 1,554,003 |   |
| Custom                    products and services                                  |   |                         | 220,159   |                         |   | 211,630 |   |
| Corporate                                                                        |   |                         | 3,169,547 |                         |   | 2,997,469 |   |
| **Total                    Identifiable Assets**                                 |   | $                            | 4,817,837 |                         | $      | 4,763,102 |   |
|                                                                             |   |                         |      |                         |   |   |   |
| Depreciation                    and amortization:                                |   |                         |      |                         |   |   |   |
| Training                    subscriptions                                        |   | $                            | 123,366   |                         | $      | 138,631 |   |
| Custom                    products and services                                  |   |                         | 6,776     |                         |   | 6,105 |   |
| Corporate                                                                        |   |                         | 101,125   |                         |   | 22,961 |   |
| **Total                    Depreciation****and                    Amortization** |   | $                            | 231,267   |                         | $      | 167,697 |   |

----

**VIVID        LEARNING SYSTEMS, INC.**

**CONDENSED        NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS**

**MARCH        31, 2007**

**NOTE      9 - INCOME TAXES**

**NOTE      10 - ACQUISTION AND PROFORMA**

| Accounts                Receivable                          |   | $      | 211,555  |   |
|-------------------------------------------------------------|--------|--------|----------|--------|
| Other                Current Assets                         |   |   | 30,170   |   |
| Net                Property and Equipment                   |   |   | 42,619   |   |
| Total                Assets Acquired                        |   |   | 284,344  |   |
| Accounts                Payable                             |   |   | (27,190  | )      |
| Other                Current Liabilities                    |   |   | (171,184 | )      |
| Total                Liabilities Assumed                    |   |   | (198,374 | )      |
| Net                assets acquired in excess of liabilities |   | $      | 85,970   |   |

----

| **VIVID                  LEARNING SYSTEMS, INC.**                                      |
|----------------------------------------------------------------------------------------|
| **MARCH                  31, 2006**                                                    |
| **CONSOLIDATED                  STATEMENTS OF OPERATIONS -                  PROFORMA** |

|                                                                   |   |                                             | Vivid                  Learning                  Systems,                  Inc.  |                                             |   | ETS                |   |                                             |         |   |   | PROFORMACONSOLIDATED |   |
|------------------------------------------------------------------------|--------|--------------------------------------------------|---------------------------------------------------------------------------------------|--------------------------------------------------|--------|--------------------|--------|--------------------------------------------------|--------------|--------|--------|----------------------|--------|
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|                                                                   |   | For                  the Three Months Ended      |                                                                                  |
|                                                                   |   |  March                  31, 2006(unaudited) |                                                                                  |  March                  31, 2006(unaudited) |   |  Eliminations |   |  March                  31, 2006(unaudited) |         |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **REVENUES**                                                           |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|  Training                  subscriptions                          |   | $                                                | 428,298                                                                               |                                             | $      | -                  |   | $                                           |         |   | $      | 428,298              |   |
|  Training                  subscriptions, Fluor Hanford           |   |                                             | 140,504                                                                               |                                             |   | -                  |   |                                             |         |   |   | 140,504              |   |
|  Custom                  products and services                    |   |                                             | 249,066                                                                               |                                             |   | 468,741            |   |                                             |         |   |   | 717,807              |   |
|  Custom                  products and services, Fluor Hanford     |   |                                             | 69,049                                                                                |                                             |   | 213,104            |   |                                             |    |   |   | 282,153              |   |
|                                                                   |   |                                             | 886,917                                                                               |                                             |   | 681,845            |   |                                             | -            |   |   | 1,568,762            |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **COST                  OF REVENUES**                                  |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|  Training                  subscriptions                          |   |                                             | 162,468                                                                               |                                             |   | -                  |   |                                             |         |   |   | 162,468              |   |
|  Custom                  products and services                    |   |                                             | 163,348                                                                               |                                             |   | 529,163            |   |                                             |    |   |   | 692,511              |   |
|                                                                   |   |                                             | 325,816                                                                               |                                             |   | 529,163            |   |                                             | -            |   |   | 854,979              |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **GROSS                  PROFIT**                                      |   |                                             | 561,101                                                                               |                                             |   | 152,682            |   |                                             | -            |   |   | 713,783              |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **EXPENSES**                                                           |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|  Marketing                  and related labor expenses            |   |                                             | 282,193                                                                               |                                             |   | 61,051             |   |                                             |         |   |   | 343,244              |   |
|  Bad                  debt expense                                |   |                                             | 3,715                                                                                 |                                             |   | 99                 |   |                                             |         |   |   | 3,814                |   |
|  Reseller                  commissions                            |   |                                             | 118,428                                                                               |                                             |   | -                  |   |                                             |         |   |   | 118,428              |   |
|  Depreciation                  and amortization                   |   |                                             | 14,766                                                                                |                                             |   | 3,021              |   |                                             |         |   |   | 17,787               |   |
|  Wages                  and contract labor                        |   |                                             | 180,970                                                                               |                                             |   | 66,473             |   |                                             |         |   |   | 247,443              |   |
|  Other                  operating expenses                        |   |                                             | 183,536                                                                               |                                             |   | 44,244             |   |                                             |    |   |   | 227,780              |   |
|                                                                   |   |                                             | 783,608                                                                               |                                             |   | 174,888            |   |                                             |  -      |   |   | 958,496              |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **LOSS                  FROM OPERATIONS**                              |   |                                             | (222,507                                                                              | )                                                |   | (22,206            | )      |                                             | -            |   |   | (244,713             | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **OTHER                  INCOME (EXPENSE)**                            |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|  Gain                  on sale of equipment and intangible assets |   |                                             | -                                                                                     |                                             |   | -                  |   |                                             |         |   |   | -                    |   |
|  Interest                  income                                 |   |                                             | 1,171                                                                                 |                                             |   | -                  |   |                                             |         |   |   | 1,171                |   |
|  Interest                  expense                                |   |                                             | (20,643                                                                               | )                                                |   | (3,216             | )      |                                             |    |   |   | (23,859              | )      |
|                                                                   |   |                                             | (19,472                                                                               | )                                                |   | (3,216             | )      |                                             | -            |   |   | (22,688              | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **LOSS                  BEFORE INCOME TAXES**                          |   |                                             | (241,979                                                                              | )                                                |   | (25,422            | )      |                                             | -            |   |   | (267,401             | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **INCOME                  TAX BENEFIT**                                |   |                                             | 82,273                                                                                |                                             |   | 8,643              |   |                                             |    |   |   | 90,916               |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| **NET                  LOSS**                                          |   | $                                                | (159,706                                                                              | )                                                | $      | (16,779            | )      | $                                                | -            |   | $      | (176,485             | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| NET                  LOSS PER COMMON SHARE,                       |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|  BASIC                  AND DILUTED                               |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   | $      | (0.01                | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
| WEIGHTED                  AVERAGE NUMBER OF                       |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|  COMMON                  STOCK SHARES                             |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   |                 |   |
|  OUTSTANDING,                  BASIC AND DILUTED                  |   |                                             |                                                                                  |                                             |   |               |   |                                             |         |   |   | 11,997,299           |   |

----

| **VIVID                  LEARNING SYSTEMS, INC**                                       |
|----------------------------------------------------------------------------------------|
| **MARCH                  31, 2006**                                                    |
| **CONSOLIDATED                  STATEMENTS OF OPERATIONS -                  PROFORMA** |

|                                                                   |   |                                             | Vivid                  Learning                  Systems,                  Inc.  |                                             |   | ETS                |   |                                             |   |   |   | PROFORMACONSOLIDATED |   |
|------------------------------------------------------------------------|--------|--------------------------------------------------|---------------------------------------------------------------------------------------|--------------------------------------------------|--------|--------------------|--------|--------------------------------------------------|--------|--------|--------|----------------------|--------|
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|                                                                   |   |  For                  the Six Months Ended  |                                                                                  |
|                                                                   |   |  March                  31, 2006(unaudited) |                                                                                  |  March                  31, 2006(unaudited) |   |  Eliminations |   |  March                  31, 2006(unaudited) |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **REVENUES**                                                           |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|  Training                  subscriptions                          |   | $                                                | 1,038,905                                                                             |                                             | $      | -                  |   |                                             |   |   | $      | $1,038,905           |   |
|  Training                  subscriptions, Fluor Hanford           |   |                                             | 283,993                                                                               |                                             |   | -                  |   |                                             |   |   |   | 283,993              |   |
|  Custom                  products and services                    |   |                                             | 505,289                                                                               |                                             |   | 643,688            |   |                                             |   |   |   | 1,148,977            |   |
|  Custom                  products and services, Fluor Hanford     |   |                                             | 110,548                                                                               |                                             |   | 775,992            |   |                                             |   |   |   | 886,540              |   |
|                                                                   |   |                                             | 1,938,735                                                                             |                                             |   | 1,419,680          |   |                                             | -      |   |   | 3,358,415            |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **COST                  OF REVENUES**                                  |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|  Training                  subscriptions                          |   |                                             | 338,345                                                                               |                                             |   | -                  |   |                                             |   |   |   | 338,345              |   |
|  Custom                  products and services                    |   |                                             | 296,233                                                                               |                                             |   | 1,046,291          |   |                                             |   |   |   | 1,342,524            |   |
|                                                                   |   |                                             | 634,578                                                                               |                                             |   | 1,046,291          |   |                                             | -      |   |   | 1,680,869            |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **GROSS                  PROFIT**                                      |   |                                             | 1,304,157                                                                             |                                             |   | 373,389            |   |                                             | -      |   |   | 1,677,546            |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **EXPENSES**                                                           |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|  Marketing                  and related labor expenses            |   |                                             | 532,602                                                                               |                                             |   | 142,600            |   |                                             |   |   |   | 675,202              |   |
|  Bad                  debt expense                                |   |                                             | 4,278                                                                                 |                                             |   | 99                 |   |                                             |   |   |   | 4,377                |   |
|  Reseller                  commissions                            |   |                                             | 154,937                                                                               |                                             |   | -                  |   |                                             |   |   |   | 154,937              |   |
|  Depreciation                  and amortization                   |   |                                             | 29,066                                                                                |                                             |   | 6,017              |   |                                             |   |   |   | 35,083               |   |
|  Wages                  and contract labor                        |   |                                             | 330,530                                                                               |                                             |   | 97,002             |   |                                             |   |   |   | 427,532              |   |
|  Other                  operating expenses                        |   |                                             | 421,314                                                                               |                                             |   | 131,167            |   |                                             |   |   |   | 552,481              |   |
|                                                                   |   |                                             | 1,472,727                                                                             |                                             |   | 376,885            |   |                                             | -      |   |   | 1,849,612            |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **LOSS                  FROM OPERATIONS**                              |   |                                             | (168,570                                                                              | )                                                |   | (3,496             | )      |                                             | -      |   |   | (172,066             | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **OTHER                  INCOME (EXPENSE)**                            |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|  Gain                  on sale of equipment and intangible assets |   |                                             | 30,276                                                                                |                                             |   | 1,157              |   |                                             |   |   |   | 31,433               |   |
|  Interest                  income                                 |   |                                             | 1,171                                                                                 |                                             |   | -                  |   |                                             |   |   |   | 1,171                |   |
|  Interest                  expense                                |   |                                             | (38,254                                                                               | )                                                |   | (6,720             | )      |                                             |   |   |   | (44,974              | )      |
|                                                                   |   |                                             | (6,807                                                                                | )                                                |   | (5,563             | )      |                                             | -      |   |   | (12,370              | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **LOSS                  BEFORE INCOME TAXES**                          |   |                                             | (175,377                                                                              | )                                                |   | (9,059             | )      |                                             | -      |   |   | (184,436             | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **INCOME                  TAX BENEFIT**                                |   |                                             | 59,628                                                                                |                                             |   | 3,080              |   |                                             |   |   |   | 62,708               |   |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| **NET                  LOSS**                                          |   | $                                                | (115,749                                                                              | )                                                | $      | (5,979             | )      | $                                                | -      |   | $      | (121,728             | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| NET                  LOSS PER COMMON SHARE,                       |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|  BASIC                  AND DILUTED                               |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   | $      | (0.01                | )      |
|                                                                   |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
| WEIGHTED                  AVERAGE NUMBER OF                       |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|  COMMON                  STOCK SHARES                             |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   |                 |   |
|  OUTSTANDING,                  BASIC AND DILUTED                  |   |                                             |                                                                                  |                                             |   |               |   |                                             |   |   |   | 11,280,521           |   |

----

**ITEM      2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS**

**Results      of Operations:**

**RESULTS      OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2007 COMPARED WITH THREE MONTHS      ENDED MARCH 31, 2006**

**Revenues:**

**Operating      Expenses**

**Cost      of Revenues:**

----

**Marketing      and Related Labor Expenses:**

**Reseller      Commissions:**

**Depreciation      and Amortization:**

**General      and Administrative Expenses:**

**Loss      from Operations:**

----

**Other      Income (Expense):**

**Net      Loss**

**Seasonality      and Other Factors Affecting Quarterly Results**

**Liquidity      and Capital Resources**

----

**RESULTS      OF OPERATIONS - SIX MONTHS ENDED MARCH 31, 2007 COMPARED WITH SIX MONTHS ENDED      MARCH 31, 2006**

**Revenues:**

**Operating      Expenses**

**Cost      of Revenues:**

----

**Marketing      and Related Labor Expenses:**

**Reseller      Commissions:**

**Depreciation      and Amortization:**

**General      and Administrative Expenses:**

----

**Loss      from Operations:**

**Other      Income (Expense):**

**Net      Loss:**

**Liquidity      and Capital Resources**

----

**ITEM      3. CONTROLS AND PROCEDURES**

----

**PART      II - OTHER INFORMATION**

**ITEM      6.** **EXHIBITS.** 

| **Exhibit                No.** |   | **Description**                                                                                     |
|--------------------------------|--------|-----------------------------------------------------------------------------------------------------|
|                           |   |                                                                                                |
| 31.1                           |   | Rule                13(a)-14(a)/15(d)-14(a) Certification of Chief Executive                Officer |
|                           |   |                                                                                                |
| 31.2                           |   | Rule                13(a)-14(a)/15(d)-14(a) Certification of Chief Financial                Officer |
|                           |   |                                                                                                |
| 32.1                           |   | Rule                1350 Certification of Chief Executive Officer                                   |
|                           |   |                                                                                                |
| 32.2                           |   | Rule                1350 Certification of Chief Financial                Officer                    |

----

**SIGNATURES**

| Dated:                May 14, 2007 | Vivid                Learning Systems, Inc.         |
|------------------------------------|-----------------------------------------------------|
|                               |                                                |
|                               | By:                 /s/ Christopher L. Britton |
|                               | Christopher                L. Britton               |
|                               | Chief                Executive Officer              |

----