<PAGE>

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

                                   FORM 10-QSB

Mark one

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
                       For the period ended June 30, 2006


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
 EXCHANGE ACT OF 1934 For the transition period from __________ to __________

                                    000 32797
                             ---------------------
                             Commission File Number


                            IVI COMMUNICATIONS, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Nevada                                                  33-0965560
          ------                                                  ----------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


                            IVI COMMUNICATIONS, INC.
       5959 W. Century Boulevard, Suite 566, Los Angeles, California 90045
 -------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (310) 216-7740
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

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 shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [ ] No [X]


The number of shares outstanding of the registrant's common stock as of June 30,
2006 was 77,985,587.


<PAGE>

                            IVI COMMUNICATIONS, INC.
                                   FORM 10-QSB



                                Table of Contents
                                -----------------



ITEM NO. DESCRIPTION                                                       PAGE
----------------------                                                     ----


                         PART I - FINANCIAL INFORMATION


Item 1. Financial Statements                                                   3

        Condensed Consolidated Balance Sheet as of June 30, 2006               4

        Condensed Consolidated Statements of Operations for the
        Three Months Ended June 30, 2006 and 2005                              5

        Condensed Consolidated Statements of Cash Flows for the
        Three Months Ended June 30, 2006 and 2005                              6

        Notes to Condensed Consolidated Financial Statements                   7


      Item 2. Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                       22

Item 3. Controls and Procedures                                               32


                           PART II - OTHER INFORMATION


Item 1. Legal Proceedings                                                     32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds           33

Item 3. Defaults Upon Senior Securities                                       33

Item 4. Submission of Matters to a Vote of Security Holders                   33

Item 5. Other Information                                                     33

Item 6. Exhibits                                                              34

Signatures                                                                    37


                                       2

<PAGE>
















                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2006 AND 2005

                                   (UNAUDITED)







                                       3

<PAGE>
<TABLE>
<S>     <C>

                                   PART I - FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS
-------------------------------

                              IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
                                CONDENSED CONSOLIDATED BALANCE SHEET
                                             (UNAUDITED)
                                            JUNE 30, 2006

                                               ASSETS


CURRENT ASSET
    Cash and cash equivalents                                                             $    257,572
    Accounts receivable, net of allowance of $32,182                                           275,822
    Inventory                                                                                  106,385
    Other current assets                                                                        14,559
                                                                                          ------------

              TOTAL CURRENT ASSET                                                              654,338


Equipment, net of accumulated depreciation of $37,507                                           84,830


OTHER ASSET
   Goodwill                                                                                  4,112,482
                                                                                          ------------


TOTAL ASSETS                                                                              $  4,851,650
                                                                                          ============

                               LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
    Current portion of notes payable                                                           772,311
    Obligations under capital lease, current portion                                            32,001
    Accounts payable and accrued liabilities                                                 2,837,801
    Acquisition contracts                                                                      230,000
    Contingent liability                                                                       934,136
    Deferred revenue                                                                            11,405
    Derivative liability                                                                        47,274
    Convertible debentures, net of discount of $183,333                                        835,917
                                                                                          ------------
              TOTAL CURRENT LIABILITIES                                                      5,700,845
                                                                                          ------------

LONG-TERM LIABILITIES
    Obligations under capital lease, net of current portion                                     27,300
    Loan payable officer                                                                       358,604
                                                                                          ------------
              TOTAL LONG-TERM LIABILITIES                                                      385,904
                                                                                          ------------

TOTAL LIABILITIES                                                                            6,086,749
                                                                                          ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' (DEFICIT)
    Preferred stock, $.001 par value; 5,000,000 shares authorized;
        4,000,000 shares issued and outstanding                                                  4,000
    Common stock, $.001 par value; 100,000,000 shares authorized
       77,985,587 shares issued and 62,985,587outstanding, 15,000,000 held in escrow            77,986
    Additional paid-in capital                                                              27,284,018
    Additional paid-in capital - warrants                                                      154,255
    Shares issued and held as collateral                                                    (3,000,000)
    Accumulated deficit                                                                    (25,755,358)
                                                                                          ------------
              TOTAL STOCKHOLDERS' (DEFICIT)                                                 (1,235,099)
                                                                                          ------------

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                                             $  4,851,650
                                                                                          ============

                   The accompanying notes are an integral part of these condensed
                                 consolidated financial statements.

                                                 4

<PAGE>

                         IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (UNAUDITED)
                     FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005



                                                           2006               2005
                                                           ----               ----

OPERATING REVENUE                                     $    662,123       $    777,836

COST OF OPERATIONS                                         427,853            488,622
                                                      ------------       ------------

GROSS PROFIT                                               234,270            289,214
                                                      ------------       ------------

OPERATING EXPENSES
   Selling expenses                                          2,604              4,123
   General and administrative                              432,631            335,062
   Depreciation and amortization                            28,230              4,259
                                                      ------------       ------------

              TOTAL OPERATING EXPENSES                     463,465            343,444
                                                      ------------       ------------

OPERATING (LOSS)                                          (229,195)           (54,230)
                                                      ------------       ------------

OTHER INCOME (EXPENSE)
   Other income                                             29,590             50,105
   Gain on revaluation of derivatives                      169,043                 --
   Litigation damages and settlement                            --           (934,136)
   Interest expenses                                       (80,176)              (646)
   Interest income                                              36            (62,336)
                                                      ------------       ------------
              TOTAL OTHER (EXPENSE)                        118,493           (947,013)
                                                      ------------       ------------

LOSS BEFORE PROVISION FOR INCOME TAXES                    (110,702)        (1,001,243)
    Provision for income taxes                                  --              6,978
                                                      ------------       ------------


NET (LOSS)                                            $   (110,702)      $ (1,008,221)
                                                      ============       ============


BASIC AND DILUTED (LOSS) PER SHARE
    Basic and diluted from continuing operations      $      (0.00)      $      (0.01)
                                                      ============       ============

WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED
 COMMON SHARES OUTSTANDING                              62,985,587         68,519,925
                                                      ============       ============


              The accompanying notes are an integral part of these condensed
                            consolidated financial statements.

                                            5

<PAGE>

                              IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (UNAUDITED)
                          FOR THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005


                                                                    2006             2005
                                                                -----------       -----------

CASH FLOW FROM OPERATING ACTIVITIES
   Net (loss)                                                   $  (110,702)      $(1,008,221)
                                                                -----------       -----------
   ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH
     PROVIDED BY (USED IN) OPERATING ACTIVITIES:
     Depreciation                                                    28,230             4,259
     Gain on revaluation of derivatives                            (169,043)               --
  CHANGES IN ASSETS AND LIABILITIES
     (Increase) decrease in accounts receivable, net                 46,984            (6,723)
     Decrease in inventory                                           39,010           (37,501)
     Decrease in other current assets                                 4,065             2,000
     Decrease in other assets                                         6,513                --
     Increase in accounts payable and accrued liabilities           166,268         1,159,160
     (Decrease) in contingent liability                                (646)               --
     (Decrease) in acquisition contracts                            (65,000)               --
     (Decrease) in deferred revenue                                  (3,887)               --
                                                                -----------       -----------
     Total adjustments                                               52,494         1,121,195
                                                                -----------       -----------

     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES            (58,208)          112,974
                                                                -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Acquisition of fixed assets                                     (5,074)          (10,773)
                                                                -----------       -----------
       NET CASH (USED IN) INVESTING ACTIVITIES                       (5,074)          (10,773)
                                                                -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from convertible debentures                           200,000           162,866
     Proceeds from note payable                                       5,000                --
     Payments on installment note payable                            (1,116)           (3,871)
     Payments on note payable                                            --          (378,482)
     Payments on officer loans                                      (60,189)               --
     Payments for equity financing                                  (49,999)               --
     Payments on obligation of capital lease                         (6,386)               --
                                                                -----------       -----------
       NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES           87,310          (219,487)
                                                                -----------       -----------

NET INCREASE (DECREASE) IN
    CASH AND CASH EQUIVALENTS                                        24,028          (117,286)

CASH AND CASH EQUIVALENTS -
    BEGINNING OF PERIOD                                             233,544           124,071
                                                                -----------       -----------

CASH AND CASH EQUIVALENTS - END OF PERIOD                       $   257,572       $     6,785
                                                                ===========       ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:
         Interest paid                                          $    80,176       $    58,047
                                                                ===========       ===========
         Income taxes paid                                               --                --
                                                                ===========       ===========


                   The accompanying notes are an integral part of these condensed
                                 consolidated financial statements.
</TABLE>
                                                 6

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 1-           ORGANIZATION AND BASIS OF PRESENTATION
                  --------------------------------------

                  The condensed consolidated unaudited interim financial
                  statements included herein have been prepared, without audit,
                  pursuant to the rules and regulations of the Securities and
                  Exchange Commission ("SEC"). The condensed consolidated
                  financial statements and notes are presented as permitted on
                  Form 10-QSB and do not contain information included in the
                  Company's annual consolidated statements and notes. Certain
                  information and footnote disclosures normally included in
                  financial statements prepared in accordance with accounting
                  principles generally accepted in the United States of America
                  have been condensed or omitted pursuant to such rules and
                  regulations, although the Company believes that the
                  disclosures are adequate to make the information presented not
                  misleading. It is suggested that these condensed consolidated
                  financial statements be read in conjunction with the March 31,
                  2006 audited financial statements and the accompanying notes
                  thereto. While management believes the procedures followed in
                  preparing these condensed consolidated financial statements
                  are reasonable, the accuracy of the amounts are in some
                  respects dependent upon the facts that will exist, and
                  procedures that will be accomplished by the Company later in
                  the year.

                  These condensed consolidated unaudited financial statements
                  reflect all adjustments, including normal recurring
                  adjustments which, in the opinion of management, are necessary
                  to present fairly the consolidated operations and cash flows
                  for the periods presented.

                  The Company was formed in California in September 1995 to
                  acquire traditional local and regional Internet access Service
                  Providers (ISP's) in the Western States to achieve economies
                  of operation and accelerated growth through centralized
                  management.

                  Effective May 23, 2002, Internet Ventures, Inc. agreed to
                  recapitalize with Turer Corporation by becoming a wholly owned
                  subsidiary of Turer. To accommodate this recapitalization, the
                  11,930,746 shares then outstanding of Internet Ventures, Inc.
                  were exchanged for 11,930,746 shares of Turer. In August 2002,
                  Turer changed its name to IVI Communications, Inc.

                  For accounting purposes, the transaction has been accounted
                  for as a reverse acquisition under the purchase method of
                  accounting. Accordingly, IVI Communications, Inc. will be
                  treated as the continuing entity for accounting purposes, and
                  the financial statements presented herein are those of IVI
                  Communications, Inc.

                  On July 1, 2004, the Company issued 4,500,000 shares of common
                  stock to consultants as an S-8 stock issuance filed June 29,
                  2004. On July 1, 2004, the Company amended its Articles of
                  Incorporation and pursuant to a board resolution, increased
                  the authorized level of common stock from 50,000,000 to
                  100,000,000. In addition, the Company's board of directors'
                  authorized a 2:1 stock split on July 2, 2004.

                                       7

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)


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

                  PRINCIPLES OF CONSOLIDATION
                  ---------------------------

                  The condensed consolidated financial statements include the
                  accounts of the Company and its wholly owned subsidiaries. All
                  significant inter-company accounts and transactions have been
                  eliminated in consolidation.

                  USE OF ESTIMATES
                  ----------------

                  The preparation of condensed consolidated financial statements
                  in conformity with accounting principles generally accepted in
                  the United States of America 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.

                  CASH AND CASH EQUIVALENTS
                  -------------------------

                  The Company considers all highly liquid debt instruments and
                  other short-term investments with an initial maturity of three
                  months or less to be cash or cash equivalents. There were no
                  cash equivalents as of June 30, 2006 and 2005.

                  The Company maintains cash and cash equivalent balances at
                  several financial institutions that are insured by the Federal
                  Deposit Insurance Corporation up to $100,000. At June 30,
                  2006, the Company had $124,633 deposited in excess of the
                  insured limit.

                  REVENUE RECOGNITION
                  -------------------

                  Internet service subscription revenues are recognized over the
                  period that services are provided. The Company generally bills
                  for Internet access service on the terms that range from one
                  month to one year in advance. Monthly access fees are not
                  prorated, and refunds are not given for partial months.
                  Therefore, revenues for the first month of service paid in
                  advance are recognized at the inception of the service month.
                  Revenues for terms of service greater than one month that are
                  paid in advance are deferred and amortized over the period in
                  which the services are provided. Consulting revenues are
                  recognized upon the service being provided. All equipment
                  sales are final upon delivery of the merchandise.

                                       8

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 2-           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                  ------------------------------------------------------

                  INCOME TAXES
                  ------------

                  The Company has adopted the provisions of Statement of
                  Financial Accounting Standards No. 109 (the Statement),
                  Accounting for Income Taxes. The Statement requires an asset
                  and liability approach for financial accounting and reporting
                  for income taxes, and the recognition of deferred tax assets
                  and liabilities for the temporary differences between the
                  financial reporting bases and tax bases of the Company's
                  assets and liabilities at enacted tax rates expected to be in
                  effect when such amounts are realized or settled.

                  FAIR VALUE OF FINANCIAL INSTRUMENTS
                  -----------------------------------

                  The carrying amounts reported in the consolidated balance
                  sheets for cash and cash equivalents, accounts receivable,
                  accounts payable, accrued expenses and notes payable
                  approximate fair value because of the immediate or short-term
                  maturity of these financial instruments.

                  ADVERTISING COSTS
                  -----------------

                  The Company expenses the costs associated with advertising as
                  incurred. Advertising and expenses are included in selling
                  expenses in the condensed consolidated statements of
                  operations for the three months ended June 30, 2006 and 2005.

                  EQUIPMENT
                  ---------

                  Equipment is stated at cost. Depreciation is computed using
                  the straight-line method over the estimated useful lives of
                  the assets.

                  When the assets are retired or otherwise disposed of, the
                  costs and related accumulated depreciation are removed from
                  the accounts, and any resulting gain or loss is recognized in
                  income for the period. The cost of maintenance and repairs is
                  charged to expense as incurred; significant renewals and
                  betterments are capitalized. Deduction is made for retirements
                  resulting from renewals or betterments.

                  ACCOUNTS RECEIVABLE
                  -------------------

                  The Company conducts business and extends credit based on an
                  evaluation of the customers' financial condition, generally
                  without requiring collateral. Exposure to losses on
                  receivables is expected to vary by customer due to the
                  financial condition of each customer. The Company monitors
                  exposure to credit losses and maintains allowances for
                  anticipated losses considered necessary under the
                  circumstances. The allowance for doubtful accounts at June 30,
                  2006 is $32,182.

                                       9

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 2-           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                  ------------------------------------------------------

                  (LOSS) PER SHARE OF COMMON STOCK
                  --------------------------------

                  Historical net (loss) per common share is computed using the
                  weighted average number of common shares outstanding. Diluted
                  earnings per share (EPS) include additional dilution from
                  common stock equivalents, such as stock issuable pursuant to
                  the exercise of stock options and warrants. Common stock
                  equivalents were not included in the computation of diluted
                  earnings per share when the Company reported a loss because to
                  do so would be antidilutive for periods presented.

                  The following is a reconciliation of the computation for basic
                  and diluted EPS:

                                                June 30           June 30
                                                 2006               2005
                                             ------------       ------------
         Net (loss)                          $   (110,702)      $ (1,008,221)
                                             ------------       ------------

         Weighted-average common shares
         Outstanding (Basic)                   62,985,587         68,519,925

         Weighted-average common stork
         Equivalents
           Stock options                              -0-                -0-
           Warrants                                   -0-                -0-
                                             ------------       ------------

         Weighted-average common shares
         Outstanding (Diluted)                 62,985,587         68,519,925
                                             ------------       ------------

                  Options and warrants outstanding to purchase stock were not
                  included in the computation of diluted EPS for June 30, 2006
                  because inclusion would have been antidilutive. At June 30,
                  2006 and 2005, there were 4,027,705 and 527,705 warrants, and
                  0 and 264,000 options available, respectively.

                                       10

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 2-           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                  ------------------------------------------------------

                  GOODWILL AND OTHER INTANGIBLE ASSETS
                  ------------------------------------

                  In June 2001, the FASB issued Statement No. 142 "Goodwill and
                  Other Intangible Assets". This statement addresses financial
                  accounting and reporting for acquired goodwill and other
                  intangible assets and supersedes APB Opinion No. 17,
                  Intangible Assets. It addresses how intangible assets that are
                  acquired individually or with a group of other assets (but not
                  those acquired in a business combination) should be accounted
                  for in financial statements upon their acquisition. This
                  Statement also addresses how goodwill and other intangible
                  assets should be accounted for after they have been initially
                  recognized in the financial statements. The Company recorded
                  $3,437,548 in goodwill in its acquisition of Internet Business
                  Consulting and AppState.Net, LLC. The Company recorded
                  $674,934 in goodwill in its acquisition of Futura, Inc. on
                  February 6, 2006. Management has determined that there has
                  been no impairment of any goodwill as of June 30, 2006.

         STOCK-BASED COMPENSATION
         ------------------------

                  Employee stock awards under the Company's compensation plans
                  are accounted for in accordance with Accounting Principles
                  Board Opinion No. 25 ("APB 25"), "ACCOUNTING FOR STOCK ISSUED
                  TO EMPLOYEES", and related interpretations. The Company
                  provides the disclosure requirements of Statement of Financial
                  Accounting Standards No. 123, "ACCOUNTING FOR STOCK-BASED
                  COMPENSATION" ("SFAS 123"), and related interpretations.
                  Stock-based awards to non-employees are accounted for under
                  the provisions of SFAS 123 and the Company has adopted the
                  enhanced disclosure provisions of SFAS No. 148 "Accounting for
                  Stock-Based Compensation- Transition and Disclosure, an
                  amendment of SFAS No. 123".

                  The Company measures compensation expense for its employee
                  stock-based compensation using the intrinsic-value method.
                  Under the intrinsic-value method of accounting for stock-based
                  compensation, when the exercise price of options granted to
                  employees is less than the estimated fair value of the
                  underlying stock on the date of grant, deferred compensation
                  is recognized and is amortized to compensation expense over
                  the applicable vesting period. In each of the periods
                  presented, the vesting period was the period in which the
                  options were granted. All options were expensed to
                  compensation in the period granted rather than the exercise
                  date.

                  The Company measures compensation expense for its non-employee
                  stock-based compensation under the Financial Accounting
                  Standards Board (FASB) Emerging Issues Task Force (EITF) Issue
                  No. 96-18, "ACCOUNTING FOR EQUITY INSTRUMENTS THAT ARE ISSUED
                  TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN CONJUNCTION WITH
                  SELLING, GOODS OR SERVICES". The fair value of the option
                  issued is used to measure the transaction, as this is more
                  reliable than the fair value of the services received. The
                  fair value is measured at the value of the Company's common
                  stock on the date that the commitment for performance by the
                  counterparty has been reached or the counterparty's
                  performance is complete. The fair value of the equity
                  instrument is charged directly to compensation expense and
                  additional paid-in capital.

                                       11

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 2-           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                  ------------------------------------------------------

                  DERIVATIVE INSTRUMENTS
                  ----------------------

                  The Company has an outstanding convertible debt instrument
                  that contains an embedded derivative. The Company accounts for
                  this derivative in accordance with FAS No. 133, "ACCOUNTING
                  FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES", and EITF
                  Issue No. 00-19, "ACCOUNTING FOR DERIVATIVE FINANCIAL
                  INSTRUMENTS INDEXED TO, AND POTENTIALLY SETTLED IN, A
                  COMPANY'S OWN STOCK." In accordance with the provisions of FAS
                  No. 133 and EITF Issue No. 00-19, the embedded derivative is
                  required to be bifurcated from the debt instrument and
                  recorded as a liability at fair value on the consolidated
                  balance sheet. Changes in the fair value of the derivative is
                  recorded at each reporting period and recorded in net gain
                  (loss) on derivative, a separate component of the other income
                  (expense). The balance at June 30, 2006, after an allowance of
                  $32,182 is $275,822.

                  RECENT ACCOUNTING PRONOUNCEMENTS
                  --------------------------------

                  On December 16, 2004, the Financial Accounting Standards Board
                  ("FASB") published Statement of Financial Accounting Standards
                  No. 123 (Revised 2004), "SHARE-BASED PAYMENT" ("SFAS 123R").
                  SFAS 123R requires that compensation cost related to
                  share-based payment transactions be recognized in the
                  financial statements. Share-based payment transactions within
                  the scope of SFAS 123R include stock options, restricted stock
                  plans, performance-based awards, stock appreciation rights,
                  and employee share purchase plans. The provisions of SFAS
                  123R, as amended, are effective for small business issuers
                  beginning as of the next fiscal year after December 15, 2005.
                  Accordingly, the Company has implement the revised standard in
                  the first quarter of fiscal year 2006.

                  In November 2004, the FASB issued Financial Accounting
                  Standards No. 151 (FAS 151), "INVENTORY COSTS - AN AMENDMENT
                  OF ARB NO. 43, CHAPTER 4". FAS 151 clarifies the accounting
                  for abnormal amounts of idle facility expense, freight,
                  handling costs and spoilage. In addition, FAS 151 requires
                  companies to base the allocation of fixed production overhead
                  to the costs of conversion on the normal capacity of
                  production facilities. FAS 151 is effective for the Company in
                  2006. FAS 151 did not have a material impact on its results or
                  financial statements.

                  On December 16, 2004, FASB issued Financial Accounting
                  Standards No. 153, Exchanges of Non-monetary Assets, an
                  amendment of APB Opinion No. 29, Accounting for Non-monetary
                  Transactions ("FAS 153"). This statement amends APB Opinion 29
                  to eliminate the exception for non-monetary exchanges of
                  similar productive assets and replaces it with a general
                  exception for exchanges of non-monetary assets that do not
                  have commercial substance. Under FAS 153, if a non-monetary
                  exchange of similar productive assets meets a
                  commercial-substance criterion and fair value is determinable,
                  the transaction must be accounted for at fair value resulting
                  in recognition of any gain or loss. FAS153 is effective for
                  non-monetary transactions in fiscal periods that begin after
                  June 15, 2005. The implementation of this standard did not
                  have a material impact on its financial position, results of
                  operations or cash flows.

                                       12

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 2-           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
                  ------------------------------------------------------

                  RECENT ACCOUNTING PRONOUNCEMENTS CONTINUED
                  ------------------------------------------

                  In March 2005, the FASB issued Statement of Financial
                  Accounting Standards Interpretation Number 47 ("FIN 47"),
                  "Accounting for Conditional Asset Retirement Obligations." FIN
                  47 provides clarification regarding the meaning of the term
                  "conditional asset retirement obligation" as used in FAS 143,
                  "Accounting for Asset Retirement Obligations." FIN 47 is
                  effective for the year ended December 31, 2005. The
                  implementation of this standard did not have a material impact
                  on its financial position, results of operations or cash
                  flows.

                  In May 2005, the FASB issued SFAS 154, "Accounting for Changes
                  and Error Corrections--a replacement of APB Opinion No. 20 and
                  FASB Statement No. 3." FAS 154 changes the requirements, with
                  regard to the accounting for and reporting a change in an
                  accounting principal. The provisions of FAS 154 require,
                  unless impracticable, retrospective application to prior
                  periods presented in financial statements for all voluntary
                  changes in an accounting principle and changes required by the
                  adoption of a new accounting pronouncement in the unusual
                  instance that the new pronouncement does not indicate a
                  specific transition method. FAS 154 also requires that a
                  change in depreciation, amortization or depletion method for
                  long-lived, non-financial assets be accounted for as a change
                  in an accounting estimate, which requires prospective
                  application of the new method. FAS 154 is effective for all
                  changes in an accounting principle made in fiscal years
                  beginning after December 15, 2005. The Company adopted FAS 154
                  beginning January 1, 2006. Because SAS 154 is directly
                  dependent upon future events, the Company cannot determine
                  what effect, if any, the adoption of FAS 154 will have on its
                  financial condition, results of operations or cash flows.

                  In February 2006, the Financial Accounting Standards Board
                  (FASB) issued Statement of Financial Accounting Standards
                  (FAS) No. 155, Accounting for Certain Hybrid Financial
                  Instruments. FAS No. 155 replaces FAS No. 133 Accounting for
                  Derivative Instruments and Hedging Activities, and FAS No. 140
                  Accounting for Transfers and Servicing of Financial Assets and
                  Extinguishments of Liabilities. FAS No. 155 resolves issues
                  addressed in Statement 133 Implementation Issue No. D1,
                  "Application of Statement 133 to Beneficial Interests in
                  Securitized Financial Assets." This statement will be
                  effective for all financial instruments acquired or issued
                  after the beginning of an entity's fiscal year that begins
                  after September 15, 2006. The Company is currently analyzing
                  whether this new standard will have impact on its financial
                  position and results of operations.

                                       13

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 3-           INSTALLMENT DEBT
                  ----------------

                  Installment debt consists of approximately 11 notes for
                  various pieces of equipment. The Company has not reflected the
                  asset value on the books because the assets are considered to
                  have no value remaining.


                  These assets are however collateral for the debt. The Company
                  has reflected these balances in the condensed consolidated
                  balance sheet as installment debt and in accounts payable. The
                  portion in accounts payable represents the amounts overdue,
                  and the portion in installment debt represents the amounts
                  still due under the agreements. The installment debt liability
                  at June 30, 2006 is $0, as all amounts have been reclassified
                  as accounts payable.

                  Installment debt also consists of two subsidiary equipment
                  leases, which are reflected in fixed assets. The liability is
                  $59,301 at June 30, 2006, of which $32,001 is current and
                  $27,300 is due through fiscal 2009.


NOTE 4-           NOTES PAYABLE
                  -------------
                  The Company borrowed a total of $1,077,955 from 22 different
                  individuals during 1999 through the present, at interest rates
                  ranging from 7-12%, with no collateral and payment terms of 2
                  or 3 years. As of June 30, 2006, all amounts unpaid are
                  overdue. As of June 30, 2006 the balance of the note payable
                  was $772,311 and the accrued interest totaled $620,908. These
                  amounts are reflected as current liabilities in the condensed
                  consolidated balance sheet.

                  In accordance with the purchase agreement between the Company
                  and Internet Business Consulting and AppState.net, LLC, the
                  Company entered into two separate note agreements.

                  The Company agrees to make 12 monthly payments of $8,334 with
                  the first payment due with the signing of the agreement. The
                  Company completed those payments in March 2006. The Company
                  also entered into an agreement to make 24 payments of $20,000
                  all due no later than the 1st day of the month following
                  completion of IBC's and AppState's audits (April 2005) and
                  then on the 1st day of each subsequent month thereafter until
                  paid in full. IBC and AppState may, at their option up and
                  until all payments have been made, have any or all of this
                  paid as part of an employment contract with James Hollis, the
                  owner of IBC, as compensation. The Company has made 15 of
                  these payments and has a remaining balance of $180,000
                  classified as a current liability under the caption,
                  Acquisition Contracts.

                  In association with the acquisition of Futura, Inc., the
                  Company agreed to make 3 installment payments in $25,000
                  increments on June 1, 2006, September 1, 2006 and December 1,
                  2006. The June 1 payment has been made and the balance of
                  $50,000 is classified as a current liability under the
                  caption, Acquisition Contracts.

                                       14

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 5-           CONVERTIBLE DEBENTURES
                  ----------------------

                  The Company sold units of securities for $984,428 to
                  approximately 100 individuals during 1998 and 1999. Each unit
                  consisted of one share of common stock and one debenture with
                  interest at 12%, no collateral, and an original due date of
                  December 2001. The debentures are convertible at any time at
                  $7.50 per share. In late 1999 to early 2000, the Company
                  converted $373,128 in debentures into common stock. In
                  mid-2002, the Company offered conversions at $.40 per share
                  and 32 individuals with a face amount of $274,550 plus accrued
                  interest of $101,254 accepted this conversion to 939,511
                  shares of common stock.

                  The Company sold units of securities for $215,000 to 14
                  individuals/entities in December 2004. The debentures accrue
                  interest at 10% per annum and are due December 31, 2005. The
                  conversion price is $.10 per common share. In January 2006,
                  the debentures were converted to 2,365,00 shares of common
                  stock. A beneficial interest expense of $249,150 was realized
                  on the conversion.

                  The Company sold a security for $25,000 to one entity in
                  January 2005. This debenture, which was for services rendered,
                  also accrues interest at 10% per annum and was due January 31,
                  2006. The conversion price is $.10 per common share. No
                  conversion or repayment of the debenture has occurred at June
                  30, 2006.

                  The Company sold a security for $5,000 to one entity in
                  January 2006. This debenture, which was for services rendered,
                  accrues interest at 9% per annum and is due January 1, 2007.
                  The conversion price is $.05 per common share. This debenture
                  has been converted to 100,000 shares of common stock. A
                  beneficial interest expense of $16,000 was realized on the
                  conversion.

                  The Company sold a security for $20,000 to one entity in March
                  2006. This debenture, which was for services rendered, accrues
                  interest at 9% per annum and is due April 1, 2007. The
                  conversion price is $.05 per common share. This debenture was
                  converted to 400,000 shares of common stock. A beneficial
                  interest expense of $40,000 was realized on the conversion.

                  The Company sold a security for $257,500 to one entity in
                  March 2006. This debenture, which was for services rendered,
                  accrues interest at 9% per annum and is due May 15, 2007. In
                  the event the Company receives funding in the amount of at
                  least Six Hundred Thousand Dollars ($600,000), Forty Five
                  Thousand Dollars ($45,000) immediately becomes due and payable
                  to the holder. The conversion price is $.05 per common share.

                  DERIVATIVE LIABILITY
                  --------------------

                  On March 27, 2006, the Company entered into a securities
                  purchase agreement with Cornell Capital Partners L.P.
                  providing for the sale by the Company to Cornell of our 12%
                  secured convertible debentures in the aggregate principal
                  amount of $600,000 of which $200,000 was

                                       15

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 5-           CONVERTIBLE DEBENTURES CONTINUED
                  --------------------------------

                  DERIVATIVE LIABILITY CONTINUED
                  ------------------------------

                  advanced immediately. The second installment of $200,000 was
                  advanced on April 18, 2006. The last installment of $200,000
                  will be advanced two (2) business days after the date the
                  registration statement is declared effective. On August 14,
                  2006, the registration statement for 22,500,000 shares of
                  common stock for Cornell Capital Partners L.P. was declared
                  effective. The Company was liable for liquidated damages up to
                  2% per month for failure to have an effective registration
                  statement by July 25, 2006. Cornell Capital Partners has
                  verbally agreed to waive said damages. The Company received
                  the 3rd installment of $200,000 August 17, 2006, part of which
                  was used to pay down outstanding debts, and the remainder is
                  being held in an escrow account until the 10QSB is filed.

                  The Convertible Debentures mature on the third anniversary of
                  the date of issuance and the Company is not required to make
                  any payments until the maturity date. Holders of the
                  Debentures may convert at any time amounts outstanding under
                  the debentures into shares of our common stock at a conversion
                  price per share equal to the lower of (i) $0.20 or (ii) ninety
                  percent (90%) of the lowest closing Bid Price of the Common
                  Stock during the thirty (30) trading days immediately
                  preceding the conversion date as quoted by Bloomberg, LP.
                  Cornell has agreed not to short any of the shares of Common
                  Stock. The Company has the right to redeem a portion or all
                  amounts outstanding under the debenture prior to the maturity
                  date at a 20% redemption premium provided that the closing bid
                  price of our common stock is less than $0.20.

                  A holder of the Convertible Debenture may not convert or
                  receive shares as payment of interest to the extent such
                  conversion or receipt of such interest payment would result in
                  the holder, together with any affiliate of the holder,
                  beneficially owning in excess of 4.9% of the then issued and
                  outstanding shares of Common Stock, including shares issuable
                  upon conversion of, and payment of interest.

                  In accordance with SFAS 133, "ACCOUNTING FOR DERIVATIVE
                  INSTRUMENTS AND HEDGING ACTIVITIES" and EITF 00-19,
                  "ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO,
                  AND POTENTIALLY SETTLED IN, A COMPANY'S OWN STOCK", the
                  conversion feature associated with the $600,000 convertible
                  debenture represents an embedded derivative. The Company had
                  recognized the embedded derivative in the amount of $216,317
                  as a liability in the accompanying consolidated balance sheet,
                  and it is now measured it at its estimated fair value of
                  $47,274. The estimated fair value of the embedded derivative
                  has been calculated based on a Black-Scholes pricing model
                  using the following assumptions:


                  Fair market value of stock                  $0.20
                  Exercise price                              $0.18
                  Dividend yield                              0.00%
                  Risk free interest rate                     4.00%
                  Expected volatility                       192.95%
                  Expected life                           5.0 Years

                                       16

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)


NOTE 5-           CONVERTIBLE DEBENTURES CONTINUED
                  --------------------------------

                  DERIVATIVE LIABILITY CONTINUED
                  ------------------------------

                  The Company also issued to Cornell five-year warrants to
                  purchase 2,000,000 and 1,500,000 shares of Common Stock at
                  prices of $0.30, and $0.40, respectively. If at the time of
                  exercise of the Warrants, the shares of Common Stock
                  underlying the Warrant are not subject to an effective
                  registration statement under the Securities Act of 1933, as
                  amended (the "Act") or if an event of default under the
                  Convertible Debentures has occurred, which is not cured in any
                  applicable cure period, the holder of the Warrant, in lieu of
                  making payment of the Exercise Price in cash, may elect a
                  cashless exercise in accordance with the formula set forth in
                  the Warrant. If, subject to the exceptions set forth in the
                  warrants, during the time that the Warrants are outstanding,
                  the Company issues or sells, or is deemed to have issued or
                  sold, any shares of Common Stock for a consideration per share
                  less than a price equal to the then exercise price, then the
                  exercise price will be reduced to an amount equal to such
                  consideration per share. Upon each such adjustment, the number
                  of shares of Common Stock issuable upon exercise of the
                  Warrants will be adjusted to the number of shares determined
                  by multiplying the exercise price in effect immediately prior
                  to such adjustment by the number of shares issuable upon
                  exercise of the warrants immediately prior to such adjustment
                  and dividing the product by the exercise price resulting from
                  such adjustment. Similar adjustments will be made upon any
                  issuance or sale by us of options to purchase Common Stock or
                  convertible securities.
                  As of March 31, 2006, the fixed freestanding warrants issued
                  in connection with the $600,000 convertible debenture has been
                  valued at $674,417 based on a Black-Scholes pricing model
                  using the following assumptions:


                  Fair market value of stock                  $0.20
                  Exercise price                         $0.30 and $0.40
                  Dividend yield                              0.00%
                  Risk free interest rate                     4.00%
                  Expected volatility                        192.95%
                  Expected life                             5.0 Years

                  The allocation of the proceeds of the convertible debenture to
                  the warrants and the recognition of the embedded derivative
                  resulted in discounts to the convertible debenture of $154,255
                  and $45,745, respectively. The discount on debt of $200,000 is
                  being amortized to interest through March 31, 2009 using the
                  effective interest method. The current debt discount balance
                  is $183,333.

                  In connection with the Purchase Agreement, the Company also
                  entered into a registration rights agreement with Cornell
                  providing for the registration of the shares of common stock
                  issuable upon conversion of the debentures and exercise of the
                  warrants. The Company is obligated to use its best efforts to
                  cause the registration statement to be declared effective no
                  later than July 25, 2006 and to insure that the registration
                  statement remains in effect until all of the shares of

                                       17

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)

NOTE 5-           CONVERTIBLE DEBENTURES CONTINUED
                  --------------------------------

                  DERIVATIVE LIABILITY CONTINUED
                  ------------------------------

                  common stock issuable upon conversion of the debentures and
                  exercise of the warrants have been sold. In the event of a
                  default of the Company's obligations under the registration
                  rights agreement, including its agreement to file the
                  registration statement no later than May 11, 2006, or if the
                  registration statement is not declared effective by July 25,
                  2006, the Company is required to pay to Cornell, as liquidated
                  damages, for each month that the registration statement has
                  not been filed or declared effective, as the case may be,
                  either a cash amount or shares of its common stock equal to 2%
                  of the liquidated value of the Debentures.

                  The Company's obligations under the purchase agreement are
                  secured by substantially all of its assets and the assets of
                  its subsidiaries. As further security for its obligations
                  thereunder, Nyhl Henson, Chief Executive Officer, and Charles
                  Roodenburg, Chief Operating Officer, have granted a security
                  interest in an aggregate of 925,000 shares of their common
                  stock and 3,300,000 shares of their Series A Preferred Stock.
                  The Company also granted a security interest in 15,000,000
                  shares of its stock, issued from treasury.


NOTE 6-           STOCKHOLDERS' DEFICIT
                  ---------------------

                  COMMON STOCK
                  ------------

                  As of June 30, 2006, the Company has 100,000,000 shares of
                  common stock authorized, 77,985,587 issued and 62,985,587
                  outstanding and 15,000,000 shares held in escrow as
                  collateral.

                  There were no common stock transactions for the three months
                  ended June 30, 2006.


                  PREFERRED STOCK
                  ---------------

                  The Company has 5,000,000 shares of preferred stock authorized
                  and 4,000,000 shares of preferred stock issued and outstanding
                  as of June 30, 2006.

                  There were no preferred stock transactions for the three
                  months ended June 30, 2006.

                                       18

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)


NOTE 7-           GOING CONCERN
                  -------------

                  As shown in the accompanying consolidated financial statements
                  the Company has sustained net operating losses for the three
                  months ended June 30, 2006 and the years ended March 31, 2006
                  and 2005, and has sustained large accumulated deficits. In
                  addition, the Company has sold off its operations in Colorado,
                  Oregon and California, and was operating essentially as a
                  shell company up until January 2005, when it acquired Internet
                  Business Consulting/AppState.net, LLC. This raises substantial
                  doubt about the Company's ability to continue as a going
                  concern.

                  Management has restructured the Company and is continuing to
                  search for more profitable internet and communications related
                  service companies to acquire.

                  The Company's future success is dependent upon its ability to
                  achieve profitable operations and generate cash from operating
                  activities, and upon additional financing. There is no
                  guarantee that the Company will be able to raise enough
                  capital or generate revenues to sustain its operations.

                  The condensed consolidated financial statements do not include
                  any adjustments relating to the recoverability or
                  classification of recorded assets and liabilities that might
                  result should the Company be unable to continue as a going
                  concern.


NOTE 8-           PROVISION FOR INCOME TAXES
                  --------------------------

                  Deferred income taxes will be determined using the liability
                  method for the temporary differences between the financial
                  reporting basis and income tax basis of the Company's assets
                  and liabilities. Deferred income taxes will be measured based
                  on the tax rates expected to be in effect when the temporary
                  differences are included in the Company's consolidated tax
                  return. Deferred tax assets and liabilities are recognized
                  based on anticipated future tax consequences attributable to
                  differences between financial statement carrying amounts of
                  assets and liabilities and their respective tax bases.

                  At June 30, 2006, net deferred tax assets approximated the
                  following:

                  Deferred tax assets               $8,809,000
                  Less:  valuation allowance        (8,809,000)
                                                    -----------
                                                    $      -0-
                                                    ===========

                                       19

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)


NOTE 8-           PROVISION FOR INCOME TAXES (CONTINUED)
                  --------------------------------------

                  At June 30, 2006, the Company had accumulated deficits
                  approximating $26,000,000 available to offset future taxable
                  income through 2022. The Company established valuation
                  allowances equal to the full amount of the deferred tax assets
                  due to the uncertainty of the utilization of the operating
                  losses in future periods.


NOTE 9-           LITIGATION/ ARBITRATION
                  -----------------------

                  The Company is currently negotiating settlements with vendors
                  and debt holders for amounts currently outstanding. As of June
                  30, 2006, the Company has recognized the full liability for
                  all amounts that are due.

                  On December 1, 2004, a judgment was entered against Internet
                  Ventures, Inc., the predecessor Company, in favor of Catherine
                  and Joe Santistevan in the amount of $1,367,500. After
                  discussions with legal counsel, the Company believed the
                  amount of the judgment would be mitigated in a full hearing on
                  the matter, which the company intended to vigorously pursue.
                  The Company currently has $487,754 recorded in notes and
                  interest payable. The judgment was under submission to be set
                  aside by the Judge of the Superior Court of San Joaquin
                  County, Stockton, CA. On July 14, 2005, the Company received
                  notice from the Superior Court of San Joaquin that the
                  judgment was upheld. The Company has appealed this decision,
                  and in addition, Company legal counsel is currently in
                  negotiations with plaintiff's counsel to settle the matter
                  amicably. A contingent liability in the amount of $934,136 has
                  been established.

                  The Company has seven default judgments against it for a total
                  amount of $163,367. Five of these judgments have settlements
                  in place with total balances of $85,778. The amounts are
                  recorded in accounts payable.

                  One judgment in the amount of $62,328 is in favor of an
                  equipment leasing company and is against a wholly owned
                  subsidiary of Internet Ventures, Inc. This is recorded under
                  accounts payable and installment debt.

                  One judgment in the amount of $15,261 is in favor of a
                  debenture holder against Internet Ventures, Inc. The amount is
                  recorded in debentures payable, debenture interest payable,
                  and accounts payable.

                                       20

<PAGE>

                    IVI COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)
                       JUNE 30, 2006 AND 2005 (UNAUDITED)


NOTE 9-           LITIGATION/ ARBITRATION (CONTINUED)
                  -----------------------------------

                  On October 7, 2005, a Complaint for Damages was filed in
                  Superior Court of the State of California, County of San
                  Joaquin, Case No. CV027700, by Annette S. Paoletti as
                  Successor Trustee of the Clare P. Evelyn B. McEnerney Family
                  Trust. No dollar amount was stated. A note payable and accrued
                  interest in the amount of $248,282 is recorded in notes
                  payable and interest on notes payable. Company's counsel has
                  answered the complaint and is currently in negotiations with
                  plaintiff's counsel to settle the matter amicably.

                  On June 14, 2006, the Company was notified of a Demand for
                  Arbitration to obtain judgment on a settlement default of
                  $28,000. This amount is recorded in accounts payable.


NOTE 10-          SUBSEQUENT EVENTS
                  -----------------

                  The Company's obligations under the purchase agreement with
                  Cornell Capital Partners are secured by substantially all of
                  its assets and the assets of its subsidiaries. As further
                  security for its obligations thereunder, Nyhl Henson, Chief
                  Executive Officer, and Charles Roodenburg, Chief Operating
                  Officer, have granted a security interest in an aggregate of
                  925,000 shares of their common stock and 3,300,000 shares of
                  their Series A Preferred Stock. The Company also granted a
                  security interest in 15,000,000 shares of its stock, issued
                  from treasury. On July 14, 2006, the Company entered into an
                  agreement with Cornell Capital Partners to cancel the security
                  interest in the 15,000,000 shares. These shares were
                  subsequently returned and cancelled.

                  On August 14, 2006, the registration statement for 22,500,000
                  shares of common stock for Cornell Capital Partners L.P. was
                  declared effective. The Company was liable for liquidated
                  damages up to 2% per month for failure to have an effective
                  registration statement by July 25, 2006. Cornell Capital
                  Partners has verbally agreed to waive said damages.

                  The Company received the 3rd installment of $200,000 August
                  17, 2006, part of which was used to pay down outstanding
                  debts, and the remainder is being held in an escrow account
                  until the 10QSB is filed.

                                       21

<PAGE>

ITEM 2.   MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
-------------------------------------------------------------------
THIS QUARTERLY REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT
LIMITATION, STATEMENTS REGARDING OUR EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE
STRATEGIES THAT ARE SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES", "INTENDS",
"BELIEVES", OR SIMILAR LANGUAGE. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS,
UNCERTAINTIES AND OTHER FACTORS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE HEREOF AND SPEAK
ONLY AS OF THE DATE HEREOF. THE FACTORS DISCUSSED BELOW UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-QSB ARE AMONG THOSE FACTORS THAT
IN SOME CASES HAVE AFFECTED OUR RESULTS AND COULD CAUSE THE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.

The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto.


OVERVIEW

Internet Ventures, Inc., a wholly owned subsidiary of IVI Communications, Inc.
was incorporated in September 1995. Its mission was to acquire and operate ISPs
in small rural markets and to rollout a hybrid broadband product that would be
delivered to the customer in partnership with local cable companies.

Effective May 23, 2002, Internet Ventures, Inc. agreed to recapitalize with
Turer Corporation ("Turer") by becoming a wholly owned subsidiary of Turer. To
accommodate this recapitalization, the 12,350,000 shares of common stock then
outstanding of Internet Ventures, Inc. were exchanged for 12,350,000 shares of
common stock of Turer. In August 2002, Turer changed its name to IVI
Communications, Inc. Because the original Turer shareholders retained only five
percent of the capital stock of the combined entity, the purchase was accounted
for as a reverse merger.

On January 31, 2005, we completed the purchase of Internet Business
Consulting, Inc. ("IBC") and AppState.Net, LLC ("AppState") from James R. Hollis
by acquiring 100% of the stock of IBC and AppState. In consideration for the IBC
and AppState stock, we issued an aggregate of 2,674,312 shares of common stock
and agreed to pay an aggregate of $580,000 over two years. IBC is a leading
provider of turnkey wireless networks that has the expertise required to
engineer, install, and support wireless applications and solutions.
AppState is an Internet Service Provider ("ISP") founded in July 1999. In
February 2005, we launched the Company's nationally branded fixed wireless
broadband service, Lickity-SplitSM, at AppState.

                                       22

<PAGE>

On February 6, 2006 we entered into a Purchase Agreement to acquire 100% of the
outstanding stock of Futura, Inc. from Francis and Lois Allen, the shareholders
of Futura, Inc. In consideration for the Futura stock, we paid to the Allens
$150,000 in cash (to be paid over a 10-month period) and $550,000 in shares of
the Company's restricted common stock (an aggregate of 2,813,299 shares
calculated as of the close of the transaction). Futura is an Internet Service
Provider founded in 1995 in Cabot, Arkansas, that provides dialup and DSL
broadband Internet access, and associated services such as Email spam and virus
filtering, VoIP telephony, "Kid Safe" surfing (Parental Control), and web
accelerator services, to communities surrounding Little Rock Arkansas including
Cabot, Carlisle, Clarendon, DeValls Bluff, DeWitt, England, Hazen, Jacksonville,
and Stuttgart.

We expect operating losses and negative operating cash flows to continue for at
least the next twelve months, because of expected additional costs and expenses
related to brand development, marketing and other promotional activities,
strategic relationship development and potential acquisitions of related
complementary businesses.


RESULTS OF OPERATIONS

Three Months Ended June 30, 2006 Compared With Three Months Ended June 30, 2005
-------------------------------------------------------------------------------

Revenue for the three months ended June 30, 2006 was $662,123 compared to
$777,836 for the three months ended June 30, 2005. There was a decrease of
$120,100 in corporate consulting fees and a decrease in IBC equipment sales of
$192,077, offset by an increase in internet services provided by AppState.net of
$33,764 and sales of internet services for the newly acquired Futura, Inc. of
$162,700.

IBC's revenue for the three months ended June 30, 2006 consisted of equipment
sales of $398,662, consulting services of $3,072, and other miscellaneous
services of $500. AppState posted revenue for internet services of $68,398 and
$5,691 in equipment sales for the three months ended June 30, 2006. Futura, Inc.
posted sales for internet services of $162,700 for the three months ended June
30, 2006. The Company also received $23,100 as management and consulting fees.

Cost of operations for the three months ended June 30, 2006 were $427,853
compared to $488,622 for the three months ended June 30, 2005. This decrease was
due to a reduction in costs for IBC of $124,082, offset by an increase in costs
at AppState.net of $673 and an increase of $62,640 for the costs at newly
acquired Futura, Inc. Cost of operations includes the cost of wireless equipment
and services sold by IBC and the cost of wireless equipment and internet data
services sold by AppState.net and Futura.

General and administrative expenses for the three months ended June 30, 2006
were $432,631 compared to $335,062 for the three months ended June 30, 2005. The
largest component of expense for the three months ended June 30, 2006 consisted
of employee compensation of $244,051, and an increase of $87,284 were expenses
for the newly acquired Futura, Inc.

                                       23

<PAGE>

Selling expenses for the three months ended June 30, 2006 were $2,604, compared
to selling expenses of $4,123 for the three months ended June 30, 2005. The
decrease was a general reduction in advertising.

Depreciation and amortization expense was $28,230 for the three months ended
June 30, 2006, compared to depreciation expense of $4,259 for the three months
ended June 30, 2005. There was an increase of $7,304 in depreciation of
equipment acquired at AppState.net and equipment of the newly acquired Futura,
Inc. There was $16,667 in amortization for the discount on debt associated with
the Cornell Capital LP debentures.

The Company incurred interest expenses of $80,176 in the three months ended June
30, 2006, compared to $62,336 for the three months ended June 30, 2005. This
increase was due to interest on additional notes and debentures.

The Company had other income of $29,590 in the three months ended June 30, 2006,
compared to $50,105 in the three months ended June 30, 2005. In the three months
ended June 30, 2006, management evaluated the allowance for bad debt and
determined that it should be reduced from the prior year end.

The Company also had other income of $169,043 in the three months ended June 30,
2006 resulting from the gain on the revaluation of the derivative liability
associated with the Cornell Capital LP debentures.

The Company incurred no litigation damages in the three months ended June 30,
2006, compared to $934,136 incurred in the three months ended June 30, 2005,
which was a contingency on a judgment that is still under appeal and being
negotiated (see Part II, Item I, Legal Proceedings).

Due to the above factors, our net loss for the three months ended June 30, 2006
decreased to $110,702 from a net loss of $1,008,221 for the three months ended
June 30, 2005. Basic and diluted loss per share for the three months ended June
30, 2006 was $0.00, compared to a loss of $0.01 for the three months ended June
30, 2005.



LIQUIDITY AND CAPITAL RESOURCES

In the three months ended June 30, 2006, we continued to spend cash to fund our
operations. Cash used by operating activities for three months ended June 30,
2006 equaled $58,208, and consisted of a net loss of $110,702, a gain on
revaluation of derivatives and an increase in depreciation of $140,813, an
increase in accounts payable and liabilities of $96,735 and a decrease in
inventory, accounts receivable and other assets of of $96,572. For the
comparable period in 2005, cash provided by operating activities equaled
$112,974 and consisted of a net loss of $1,008,221, an increase in depreciation
of $4,259, an increase in other current assets of $42,224, and an increase in
accounts payable of $1,159,160.

We used net cash of $5,074 in investing activities for the three months ended
June 30, 2006, due to the purchase of fixed assets at Futura. For the comparable
period in 2005, net cash of $10,773 was used for the purchase of fixed assets.

                                       24

<PAGE>

Cash flow from financing activities for the three months ended June 30, 2006
produced a net increase in cash of $87,310 consisting principally of $200,000 in
proceeds from a convertible debenture and $5,000 in proceeds from a note
payable, offset by an increase of $1,116 in payments on installment notes,
$6,386 in payments on capital lease obligations, $60,189 payment on officer
loans and $49,999 in payments for equity financing. Cash flow from financing
activities for the three months ended June 30, 2005 produced a net decrease in
cash of $219,487 which resulted from $162,866 in proceeds from a convertible
debentures, offset by $3,871 payments on installment debt and $378,482 in
payments on notes payable.

As of June 30, 2006, we had cash and cash equivalents amounting to $257,572 an
increase of $24,028 from the balance at March 31, 2006. Our working capital
deficit increased to $5,046,507 at June 30, 2006 from $4,832,575 at March 31,
2006; and decreased to $4,757,796 at June 30, 2005, from $6,435,549 at March 31,
2005.

As of June 30, 2006, we had an accumulated operating deficit of $25,755,358 and
negative stockholders' equity of $1,235,099.

The Company's principal source of operating capital has been provided by the
sale of its stock and securities, corporate consulting services, and operations
of its wholly owned subsidiaries.

On March 27, 2006, the Company entered into a securities purchase agreement with
Cornell Capital Partners L.P. providing for the sale by the Company to Cornell
of our 12% secured convertible debentures in the aggregate principal amount of
$600,000 of which $200,000 was advanced immediately. The second installment of
$200,000 was advanced on April 18, 2006 upon the filing of the SB2 Registration
Statement. The last installment of $200,000 will be advanced two (2) business
days after the date the registration statement is declared effective. On August
14, 2006, the registration statement for 22,500,000 shares of common stock for
Cornell Capital Partners L.P. was declared effective. The Company was liable for
liquidated damages up to 2% per month for failure to have an effective
registration statement by July 25, 2006. Cornell Capital Partners has verbally
agreed to waive said damages. The Company received the 3rd installment of
$200,000 August 17, 2006, part of which was used to pay down outstanding debts,
and the remainder is being held in an escrow account until the 10QSB is filed.

The Convertible Debentures mature on the third anniversary of the date of
issuance and the Company is not required to make any payments until the maturity
date. Holders of the Debentures may convert at any time amounts outstanding
under the debentures into shares of our common stock at a conversion price per
share equal to the lower of (i) $0.20 or (ii) ninety percent (90%) of the lowest
closing Bid Price of the Common Stock during the thirty (30) trading days
immediately preceding the conversion date as quoted by Bloomberg, LP. Cornell
has agreed not to short any of the shares of Common Stock. The Company has the
right to redeem a portion or all amounts outstanding under the debenture prior
to the maturity date at a 20% redemption premium provided that the closing bid
price of our common stock is less than $0.20.

A holder of the Convertible Debenture may not convert or receive shares as
payment of interest to the extent such conversion or receipt of such interest
payment would result in the holder, together with any affiliate of the holder,
beneficially owning in excess of 4.9% of the then issued and outstanding shares
of Common Stock, including shares issuable upon conversion of, and payment of
interest.

The Company also issued to Cornell five-year warrants to purchase 2,000,000 and
1,500,000 shares of Common Stock at prices of $0.30, and $0.40, respectively. If
at the time of exercise of the Warrants, the shares of Common Stock underlying
the Warrant are not subject to an effective registration statement under the
Securities Act of 1933, as amended (the "Act") or if an event of default under
the Convertible Debentures has occurred, which is not cured in any applicable
cure period, the holder of the Warrant, in lieu of making payment of the
Exercise Price in cash, may elect a cashless exercise in accordance with the


                                       25

<PAGE>

formula set forth in the Warrant. If, subject to the exceptions set forth in the
warrants, during the time that the Warrants are outstanding, the Company issues
or sells, or is deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than a price equal to the then exercise price, then
the exercise price will be reduced to an amount equal to such consideration per
share. Upon each such adjustment, the number of shares of Common Stock issuable
upon exercise of the Warrants will be adjusted to the number of shares
determined by multiplying the exercise price in effect immediately prior to such
adjustment by the number of shares issuable upon exercise of the warrants
immediately prior to such adjustment and dividing the product by the exercise
price resulting from such adjustment. Similar adjustments will be made upon any
issuance or sale by us of options to purchase Common Stock or convertible
securities.

In connection with the Purchase Agreement, the Company also entered into a
registration rights agreement with Cornell providing for the registration of the
shares of common stock issuable upon conversion of the debentures and exercise
of the warrants. The Company is obligated to use its best efforts to cause the
registration statement to be declared effective no later than July 25, 2006 and
to insure that the registration statement remains in effect until all of the
shares of common stock issuable upon conversion of the debentures and exercise
of the warrants have been sold. In the event of a default of the Company's
obligations under the registration rights agreement, including its agreement to
file the registration statement no later than May 11, 2006, or if the
registration statement is not declared effective by July 25, 2006, the Company
is required to pay to Cornell, as liquidated damages, for each month that the
registration statement has not been filed or declared effective, as the case may
be, either a cash amount or shares of its common stock equal to 2% of the
liquidated value of the Debentures.

The Company's obligations under the purchase agreement are secured by
substantially all of its assets and the assets of its subsidiaries. As further
security for its obligations thereunder, Nyhl Henson, Chief Executive Officer,
and Charles Roodenburg, Chief Operating Officer, have granted a security
interest in an aggregate of 925,000 shares of their common stock and 3,300,000
shares of their Series A Preferred Stock. The Company also granted a security
interest in 15,000,000 shares of its stock, issued from treasury.

On May 22, 2006, the Company borrowed $5,000 on a Promissory Note with a
maturity date of May 22, 2007. The note carries no interest.

We anticipate incurring expenditures for acquisitions in excess of $1,000,000 to
expand our operations during the next twelve months, and believe that the
current cash flows generated from revenues will not be sufficient to fund this
anticipated expansion. We will require additional funding to finance our
operations through private and public debt or equity offerings. However, there
is no assurance that we can obtain such financing. We also anticipate receiving
recurring revenues from ISP management services but no management service
contracts have been executed at this time. There can be no assurance that we
will secure these contracts. As shown in the accompanying consolidated financial
statements, we have sustained net operating losses for the three months ended
June 30, 2006 and the years ended March 31, 2006 and 2005, and have a large
accumulated stockholders' deficit. In addition, we sold our operations in
Colorado, Oregon and California, and were operating as a shell company up until
January 2005, when we acquired IBC and AppState. This raises substantial doubt
about the our ability to continue as a going concern

                                       26

<PAGE>

Risk Factors and Cautionary Statements
--------------------------------------

WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE, WHICH
MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL
FUNDING Prior to the acquisitions of IBC and AppState, we operated as a shell
company with no significant operations. Since then, we have incurred substantial
losses from operations, and expect to incur net losses for the foreseeable
future. We incurred a net loss of $263,590 for the three months ended June 30,
2006. If our growth is slower than anticipated or operating expenses exceed
expectations, losses will be significantly greater. We may never achieve
profitability. Primarily as a result of these recurring losses, and because we
operated as a shell company prior to the acquisition of IBC and AppState, our
independent certified public accountants modified their report on the March 31,
2006 financial statements to include an uncertainty paragraph wherein they
expressed substantial doubt about our ability to continue as a going concern.

Our business plan requires the acquisition of additional ISPs. We anticipate
that the funds spent on these acquisitions will need to increase significantly.
Additionally, we may not be able to secure funding in the future necessary to
complete these acquisitions.

These conditions give rise to substantial doubt about our ability to continue as
a going concern. Our financial statements do not include adjustments relating to
the recoverability and classification of reported asset amounts or the amount
and classification of liabilities that might be necessary should we be unable to
continue as a going concern. Our continuation as a going concern is dependent
upon our ability to obtain additional financing from the sale of our securities,
as may be required, and ultimately to attain profitability.

We have relied almost entirely on external financing to fund our operations and
acquisitions to date. Such financing has historically come from a combination of
borrowings from and sale of common stock to third parties. Over the next twelve
months we anticipate that we will need to raise additional capital to fund
acquisitions. We anticipate that these additional funds will be in the range of
$2,000,000 to $5,000,000, depending on the pace and size of our acquisitions. We
cannot assure you that financing, whether from external sources or related
parties, will be available if needed or on favorable terms. The sale of our
common stock to raise capital may cause dilution to our existing shareholders.
If additional financing is not available when required or is not available on
acceptable terms, we may be unable to fund our operations and expansion,
successfully promote our brand name, products or services, take advantage of
business opportunities or respond to competitive market pressures, any of which
could make it more difficult for us to continue operations.

                                       27

<PAGE>

WE REQUIRE IMMEDIATE ADDITIONAL CAPITAL.

Our operating plan for the following twelve months is focused on the acquisition
of ISPs. It is our estimate that a cash requirement of $2,000,000 to $5,000,000
is required to support this plan for the next twelve months. During the year
ended March 31, 2006, we received an aggregate of $800,000 from the issuance of
common stock. During the three months ended June 30, 2006 we received nothing
from the issuance of common stock. We are actively seeking additional funding.
There can be no assurance that the required additional financing will be
available on terms favorable to us or at all.

Obtaining capital will be challenging in a difficult environment, due to the
downturn in the United States economy and current world instability. We
currently have no commitments for any funding, and there can be no assurance
that we will be able to obtain additional funding in the future from either debt
or equity financings, bank loans, collaborative arrangements or other sources on
terms acceptable to us, or at all.

If adequate funds are not available or are not available on acceptable terms
when required, we may be required to significantly curtail our operations or may
not be able to fund expansion, take advantage of acquisition opportunities,
develop or enhance services or products or respond to competitive pressures.
Such inability could have a material adverse effect on our business, results of
operations and financial condition. If additional funds are raised through the
issuance of equity or convertible debt securities, the percentage ownership of
our shareholders will be reduced, shareholders may experience additional
dilution, and such securities may have rights, preferences and privileges senior
to those of our common stock.

WE MAY NOT BE SUCCESSFUL IN INTEGRATING THE MANAGEMENT TEAMS OF IBC WIRELESS,
APPSTATE AND FUTURA, WHICH COULD ADVERSELY AFFECT THE LEADERSHIP OF OUR COMPANY,
DIVERT MANAGEMENT TIME AND ADVERSELY AFFECT THE BUSINESS AND RESULTS OF
OPERATIONS.

Failure to successfully integrate the management teams of the three companies
could divert management time and resources, which would adversely affect our
operations.

WE ARE AN EARLY STAGE COMPANY AND OUR STRATEGY IS UNPROVEN.

We intend to pursue additional acquisitions to further the development of our
internet services business. Our strategy is unproven and the revenue and income
potential from our strategy is unproven. We will encounter risks and
difficulties frequently encountered by early-stage companies in new and rapidly
changing markets, including the risks described elsewhere in this section. Our
business strategy may not be successful and we may not be able to successfully
address these risks. In addition, because of our limited operating history, we
have limited insights into trends that may emerge and affect our business.

IF WE ARE NOT ABLE TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE INTERNET
SERVICE PROVIDER AND WIRELESS COMMUNICATIONS INDUSTRIES WE MAY BE FORCED TO
REDUCE OR CEASE OPERATIONS.

The wireless communications industry has experienced consolidation of
participants, and this trend may continue. If wireless carriers consolidate with
companies that utilize technologies that are similar to or compete with our
wireless technology, our proportionate share of the emerging market for wireless
technologies may be reduced or eliminated. This reduction or elimination of our
market share could reduce our ability to obtain profitable operations and could
even cause us to reduce or cease operations. We believe that our ability to


                                       28

<PAGE>

compete successfully in the Internet services market depends on a number of
factors, including market presence; the adequacy our member and technical
support services; the capacity, reliability and security of our network
infrastructure; the ease of access to and navigation of the Internet provided by
our services; our pricing policies, our competitors and suppliers; the timing of
introductions of new services; our ability to support existing and emerging
industry standards; and industry and general economic trends. There can be no
assurance that we will have the financial resources, technical expertise or
marketing and support capabilities to compete successfully.

WE MAY NOT BE ABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES, WHICH COULD
RENDER OUR PRODUCTS AND PROCESSES OBSOLETE.

The wireless communications industry is characterized by rapid technological
change, changes in customer requirements and preferences, frequent introduction
of products and services embodying new technologies and the emergence of new
industry standards and practices that could render our existing technology and
systems obsolete. Our future success will depend on our ability to enhance and
improve the responsiveness, functionality, accessibility and features of our
products. We expect that our marketplace will require extensive technological
upgrades and enhancements to accommodate many of the new products and services
that we anticipate will be added to our marketplace. We cannot assure you that
we will be able to expand and upgrade our technology and systems, or
successfully integrate new technologies or systems we develop in the future, to
accommodate such increases in a timely manner.

OUR BUSINESS REVENUE GENERATION MODEL IS UNPROVEN AND COULD FAIL.

Our revenue model is new and evolving, and we cannot be certain that it will be
successful. Our ability to generate revenue depends, among other things, on our
ability to provide quality internet connectivity and services to our customers.
Our success is largely dependent upon our ability to successfully integrate and
manage our acquisitions. Accordingly, we cannot assure you that our business
model will be successful or that we can sustain revenue growth or achieve or
sustain profitability.

WE MAY NOT EFFECTIVELY MANAGE THE GROWTH NECESSARY TO EXECUTE OUR BUSINESS PLAN,
WHICH COULD ADVERSELY AFFECT THE QUALITY OF OUR OPERATIONS AND OUR COSTS.

In order to achieve the critical mass of business activity necessary to
successfully execute our business plan, we must significantly increase the
number of strategic partners and customers that use our technology. This growth
will place significant strain on our personnel, systems and resources. We also
expect that we will continue to hire employees, including technical,
management-level employees, and sales staff for the foreseeable future. This
growth will require us to improve management, technical, information and
accounting systems, controls and procedures. We may not be able to maintain the
quality of our operations, control our costs, continue complying with all
applicable regulations and expand our internal management, technical information
and accounting systems in order to support our desired growth. We cannot be sure
that we will manage our growth effectively, and our failure to do so could cause
us to reduce or cease operations.

                                       29

<PAGE>

OUR BUSINESS DEPENDS ON THE GROWTH AND MAINTENANCE OF THE INTERNET
INFRASTRUCTURE.

Our success will depend on the continued growth and maintenance of the internet
infrastructure. This includes maintenance of a reliable network backbone with
the necessary speed, data capacity and security for providing reliable internet
services. Internet infrastructure may be unable to support the demands placed on
it if the number of internet users continues to increase, or if existing or
future internet users access the internet more often or increase their bandwidth
requirements. In addition, viruses, worms and similar programs may harm the
performance of the internet. The internet has experienced a variety of outages
and other delays as a result of damage to portions of its infrastructure, and it
could face outages and delays in the future. These outages and delays could
reduce the level of internet usage as well as our ability to provide our
solutions. Additionally, for many of our customers we rely upon ILECs to assist
in provisioning T-1 and dial-up lines. In the event that these ILECs are unable
or unwilling to provide service, our ability to service existing customers or
add new customers could be impaired.

WE MAY NOT BE ABLE TO ATTRACT OR RETAIN QUALIFIED PERSONNEL.

Our future success also depends on our ability to identify, attract, hire,
retain and motivate well-qualified managerial, technical, sales and marketing
personnel. There can be no assurance that these professionals will be available
in the market or that we will be able to meet their compensation requirements.

WE MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS.

We believe that the establishment of strategic partnerships will greatly benefit
the growth of our business, and we intend to seek out and enter into strategic
alliances. We may not be able to enter into these strategic partnerships on
commercially reasonable terms or at all. Even if we enter into strategic
alliances, our partners may not attract significant numbers of customers or
otherwise prove advantageous to our business. Our inability to enter into new
distribution relationships or strategic alliances could have a material and
adverse effect on our business.

SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT
OUR STOCK PRICE.

To date, we have had a very limited trading volume in our common stock. As long
as this condition continues, the sale of a significant number of shares of
common stock at any particular time could be difficult to achieve at the market
prices prevailing immediately before such shares are offered. In addition, sales
of substantial amounts of common stock, including shares issued upon the
exercise of outstanding options and warrants, under Securities and Exchange
Commission Rule 144 or otherwise could adversely affect the prevailing market
price of our common stock and could impair our ability to raise capital at that
time through the sale of our securities.

OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE; OUR COMMON STOCK IS
"PENNY STOCK".

The market price of our common stock is likely to be highly volatile as the
stock market in general, and the market for technology companies in particular,
has been highly volatile. The trading prices of many technology companies'
stocks have recently been highly volatile and have recorded lows well below
historical highs.

                                       30

<PAGE>

Factors that could cause such volatility in our common stock may include, among
other things:

         -        actual or anticipated fluctuations in our quarterly operating
                  results;

         -        announcements of technological innovations;

         -        changes in financial estimates by securities analysts;

         -        conditions or trends in our industry; and

         -        changes in the market valuations of other comparable
                  companies.

In addition, our stock is currently traded on the NASD O-T-C Bulletin Board and
it is uncertain that we will be able to successfully apply for listing on the
AMEX, the NASDAQ National Market, or the Nasdaq SmallCap Market in the
foreseeable future due to the trading price of our common stock, our working
capital and revenue history. Failure to list our shares on the AMEX, the Nasdaq
National Market, or the Nasdaq SmallCap Market will impair the liquidity of our
common stock.

The Securities and Exchange Commission has adopted regulations which generally
define a "penny stock" to be any security that 1) is priced under five dollars,
2) is not traded on a national stock exchange or on NASDAQ, 3) may be listed in
the "pink sheets" or the NASD OTC Bulletin Board, 4) is issued by a company that
has less than $5 million in net tangible assets and has been in business less
than three years, or by a company that has under $2 million in net tangible
assets and has been in business for at least three years, or by a company that
has revenues of less than $6 million for three years.

Penny stocks can be very risky: penny stocks are low-priced shares of small
companies not traded on an exchange or quoted on NASDAQ. Prices often are not
available. Investors in penny stocks are often unable to sell stock back to the
dealer that sold them the stock. Thus an investor may lose his/her investment.
Our common stock is a "penny stock" and thus is subject to rules that impose
additional sales practice requirements on broker/dealers who sell such
securities to persons other than established customers and accredited investors,
unless the common stock is listed on The Nasdaq SmallCap Market. Consequently,
the "penny stock" rules may restrict the ability of broker/dealers to sell our
securities, and may adversely affect the ability of holders of our common stock
to resell their shares in the secondary market.

SOME OF THE INFORMATION IN THIS QUARTERLY REPORT CONTAINS FORWARD-LOOKING
STATEMENTS.

Some of the information in this Quarterly Report contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may", "will", "expect",
"intend", "anticipate", "believe", "estimate" and "continue" or similar words.
You should read statements that contain these words carefully because they:

         -        discuss our expectations about our future performance;

         -        contain projections of our future operating results or of our
                  future financial condition; or

         -        state other "forward-looking" information.

                                       31

<PAGE>

We believe it is important to communicate our expectations to our shareholders.
There may be events in the future, however, that we are not able to predict
accurately or over which we have no control. The risk factors listed in this
section, as well as any cautionary language in this Report, provide examples of
risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward- looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of any of the events described in these risk factors and elsewhere in this
Report could have a material and adverse effect on our business, results of
operations and financial condition and that upon the occurrence of any of these
events, the trading price of our common stock could decline and you could lose
all or part of your investment.


ITEM 3. CONTROLS AND PROCEDURES
---------------------------------

The Company maintains controls and procedures designed to ensure that
information required to be disclosed in this report is recorded, processed,
accumulated and communicated to our management, including our chief executive
officer and our chief financial officer, to allow timely decisions regarding the
required disclosure.

Based on an evaluation conducted within 90 days prior to the filing date of this
Quarterly Report on Form 10-QSB, our Chief Executive Officer and Chief Financial
Officer concluded that we maintain effective disclosure controls and procedures
that ensure information required to be disclosed in our reports under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.
Specifically, the disclosure controls and procedures assure that information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. There have been no significant changes in our
internal controls or in other factors that could significantly effect these
controls subsequent to the date of management's evaluation.





                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
--------------------------


On December 1, 2004, a judgment was entered against Internet Ventures, Inc., our
predecessor company, in favor of Catherine and Joe Santistevan in the amount of
$1,367,500 (Case No. CV022344). The Santistevans filed the suit against Internet
Ventures, Inc. to enforce obligations under a promissory note issued by Internet
Ventures, Inc. in August 2000. After discussions with legal counsel, we believed
the amount of the judgment would be mitigated in a full hearing on the matter,
which we intended to vigorously pursue. We currently have $459,755 recorded in
notes and notes interest payable, and a contingent liability in the amount of
$934,136 has been established. On July 14, 2005, we received notice from the
Superior Court of San Joaquin County, Stockton, California that the motion to
set aside the default judgment was denied. That decision was appealed. In
addition, our legal counsel is currently in negotiations with plaintiff's
counsel to settle the matter amicably.

                                       32

<PAGE>

We have seven default judgments against us for a total amount of $163,367. Five
of these judgments have settlements in place with total aggregate balances of
$85,778. The amounts are recorded in accounts payable. We are currently not
performing under the terms of the settlements.

On October 19, 2005, a complaint was erroneously served on IVI Communications,
Inc., fka Internet Ventures, Inc. by Annette S. Paoletti, as Successor Trustee
of the Clare P. and Evelyn B. McEnerney Family Trust, for unspecified damages
resulting from the delinquent payment of principal and interest on a note
payable from Internet Ventures, Inc. IVI Communications, Inc. has contested this
complaint. A note payable and accrued interest in the amount of $234,029 is
recorded in notes payable and interest on notes payable. Our counsel has
answered the complaint and in addition is currently in negotiations with
plaintiff's counsel to settle the matter amicably.

On June 14, 2006, the Company was notified of a Demand for Arbitration to obtain
judgment on a settlement default of $28,000. This amount is recorded in accounts
payable.


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

The Company issued no unregistered equity securities during the three months
ended June 30, 2006.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-----------------------------------------

There were no defaults in the payment of any undisputed indebtedness during the
period of this report.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
------------------------------------------------------------

No matters were submitted to a vote of security holders during the period of
this report.


ITEM 5. OTHER INFORMATION.
--------------------------

SUBSEQUENT EVENTS

The Company's obligations under the purchase agreement with Cornell Capital
Partners are secured by substantially all of its assets and the assets of its
subsidiaries. As further security for its obligations thereunder, Nyhl Henson,
Chief Executive Officer, and Charles Roodenburg, Chief Operating Officer, have
granted a security interest in an aggregate of 925,000 shares of their common
stock and 3,300,000 shares of their Series A Preferred Stock. The Company also
granted a security interest in 15,000,000 shares of its stock, issued from
treasury. On July 14, 2006, the Company entered into an agreement with Cornell
Capital Partners to cancel the security interest in the 15,000,000 shares. These
shares were subsequently returned and cancelled.

                                       33

<PAGE>

On August 14, 2006, the registration statement for 22,500,000 shares of common
stock for Cornell Capital Partners L.P. was declared effective. The Company was
liable for liquidated damages up to 2% per month for failure to have an
effective registration statement by July 25, 2006. Cornell Capital Partners has
verbally agreed to waive said damages.

The Company received the 3rd installment of $200,000 August 17, 2006, part of
which was used to pay down outstanding debts, and the remainder is being held in
an escrow account until the 10QSB is filed.


ITEM 6. EXHIBITS
----------------

Exhibit Number             Title Of Exhibit
--------------             ----------------

2.1                Agreement and Plan of Reorganization(2)

2.2                Certificate of Amendment to Articles of Incorporation(2)

2.3                Certificate of Amendment to Articles of Incorporation
                   increasing authorized shares of common stock (6)

2.4                Business Purchase Agreement Between IVI Communications, Inc.,
                   Internet Business Consulting, Inc. and AppState.Net, LLC.(9)

2.5                Purchase Agreement between IVI Communications, Inc. and
                   Francis and Lois Allen (11)

3.1                Articles of Incorporation(2)

3.2                Bylaws (2)

3.3                Certificate of Designation, Powers, Preferences and Rights of
                   Series A Preferred Stock, filed with the State of Nevada on
                   March 20, 2006.(12)

4.1                2005 Employee Stock Compensation Plan (3)

4.2                Amended 2005 Employee Stock Compensation Plan (7)

4.3                Convertible Debenture dated March 27, 2006 (13)

4.4                Warrant CCP-001 dated March 27, 2006 (13)

4.5                Warrant CCP-002 dated March 27, 2006 (13)

5.1                Opinion of Sichenzia Ross Friedman Ference LLP (14)

9                  Voting Trust Agreement(2)

10.1               Employment Agreement for Nyhl Henson dated May 1, 2001(2)

10.2 A & B         Sale Agreements for California ISPs(2)

                                       34

<PAGE>

10.3               Sale Agreement for Oregon ISPs (2)

10.4               Purchase Agreement for Quik Communications (2)

10.5               Sale Agreement for Colorado ISPs(2)

10.6 A B & C       Settlement Agreements with Quik Communications (1)

10.7               Stock Exchange Agreement IVIC and Broadspot World Wide
                   Wireless (5)

10.8               Consulting Contract with Keith Jablon dated July 1, 2004 (6)

10.9               Consulting Contract with Big Apple Consulting USA, Inc. dated
                   July 6, 2004 (6)

10.10              Advisory Agreement with Hunter Wise, LLC dated August 17,
                   2004

10.11              Agreement with The Research Works dated August 31, 2004

10.12              Stock Purchase Agreement between IVIC and Seaside Investments
                   PLC dated August 16, 2004 (8)

10.13              Consulting Contract between IVIC and James Farinella dated
                   August 15, 2005 (10)

10.14              Consulting Contract between IVIC and 729759 Alberta Ltd.
                   dated September 19, 2005 (10)

10.15              Channel Partner Agreement between IVIC and TeleMedium
                   Corporation dated October 11, 2005 (10)

10.16              Letter of Intent between IVIC and Larry W. Barnes dated
                   October 12, 2005 (10)

10.17              Letter of Intent between IVIC and Larry W. Barnes dated
                   October 12, 2005 (10)

10.18              Securities Purchase Agreement, dated March 27, 2006 (13)

10.19              Investor Registration Rights Agreement dated March 27, 2006
                   (13)

10.20              Pledge and Escrow Agreement (Issuer) dated March 27, 2006(13)

10.21              Pledge and Escrow Agreement (Insider) dated March 27, 2006
                   (13)

10.22              Pledge and Escrow Agreement (Insider) dated March 27,
                   2006(13)

10.23              Security Agreement dated March 27, 2006 (13)

10.24              Subsidiary Security Agreement dated March 27, 2006 (13)

10.25              Subsidiary Security Agreement dated March 27, 2006 (13)

10.26              Subsidiary Security Agreement dated March 27, 2006 (13)

10.27              Irrevocable Transfer Agent Instructions (13)

                                       35

<PAGE>

10.28              Amendment to Pledge Agreement with Cornell Partners dated
                   July 13, 2006) (15)

14                 Code of Ethics (2)

16.1               Malone & Bailey, PLLC letter on change in accountants(4)

21                 Subsidiaries of IVI Communications, Inc. (14)

23.1               Consent of Sichenzia Ross Friedman Ference LLP (15)

23.2               Consent of Bagel, Josephs & Company, LLC (15)

31.1               Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive
                   Officer of the Registrant

31.2               Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial
                   Officer of the Registrant

32.1               Section 906 Certification by Chief Executive Officer

32.2               Section 906 Certification by Chief Financial Officer

___________

(1)      Incorporated by reference to the exhibits filed in the Company's Form
         10QSB/A filed on March 8, 2004, File No 000-32797
(2)      Incorporated by reference to the exhibits filed in the Company's Form
         10KSB/A filed on March 8, 2004, File No 000-32797
(3)      Incorporated by reference to the exhibits filed in the Company's Form
         S-8 on June 29, 2004, File No 333-116954
(4)      Incorporated by reference to the exhibits filed in the Company's Form
         8-K filed on July 7, 2004, File No 000-32797
(5)      Incorporated by reference to the exhibits filed in the Company's Form
         10KSB filed on July 14, 2004, File No 000-32797
(6)      Incorporated by reference to the exhibits filed in the Company's Form
         10QSB filed on August 16, 2004, File No 000-32797
(7)      Incorporated by reference to the exhibits filed in the Company's Form
         S-8 on November 11, 2004, File No 333-120231
(8)      Incorporated by reference to the exhibits filed in the Company's Form
         10QSB filed on November 15, 2004, File No 000-32797
(9)      Incorporated by reference to the exhibits filed in the Company's Form
         8-K filed on February 4, 2005,File No 000-32797
(10)     Incorporated by reference to the exhibits filed in the Company's Form
         10QSB filed on November 21, 2005, File No 000-32797
(11)     Incorporated by reference to the exhibits filed in the Company's Form
         8-K filed on February 21, 2006, File No 000-32797
(12)     Incorporated by reference to the exhibits filed in the Company's Form
         8-K filed on March 24, 2006, File No 000-32797
(13)     Incorporated by reference to the exhibits filed in the Company's Form
         8-K filed on March 31, 2006, File No 000-32797
(14)     Incorporated by reference to the exhibits filed in the Company's Form
         SB-2 filed on April 19, 2006, File No 333-133409
(15)     Incorporated by reference to the exhibits filed in the Company's Form
         SB-2 filed on July 25, 2006, File No 333-136034

                                       36

<PAGE>

                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



Date:      August 21, 2006             By:    /s/ Nyhl Henson
                                              ------------------------
                                              Nyhl Henson
                                              Chief Executive Officer




Date:      August 21, 2006            By:      /s/ Charles Roodenburg
                                               ----------------------
                                               Charles Roodenburg
                                               Chief Financial Officer







                                       37



<PAGE>

Exhibit 31.1
                                 CERTIFICATIONS

         I, Nyhl Henson, certify that:

         1.       I have reviewed this Quarterly Report on Form 10-QSB of IVI
                  Communications, Inc.;

         2.       Based on my knowledge, this Quarterly Report does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  Quarterly Report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this Quarterly Report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  registrant as of, and for, the periods presented in this
                  Quarterly Report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this
                           Quarterly report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           Quarterly report (the "Evaluation Date"); and

                  c)       presented in this Quarterly report our conclusions
                           about the effectiveness of the disclosure controls
                           and procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  functions):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this Quarterly report whether there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


Date: August 21, 2006                   /s/ Nyhl Henson
                                        -------------------------
                                        Nyhl Henson, Chief Executive Officer