**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 EXCHANGEACT
      OF
      1934


For
      the
      period ended **June 30, 2007**





**[ 
      ] 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**
              (State
                or other jurisdictionof
              incorporation
                or organization)
            **33-0965560**
              (I.R.S.
                Employer
              Identification
                  No.)




**IVI
      COMMUNICATIONS, INC.**


**555
      H St., Suite H, Eureka, CA 95501**


(Address
      of principal executive offices) (Zip Code)





**(707)
      444-6617**


(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,
      2007 was
      130,179,554.









**IVI
      COMMUNICATIONS, INC.**


**FORM
      10-QSB**




**Table
      of Contents**




**ITEM NO.**
            **DESCRIPTION**
            **PAGE****PART
                I - FINANCIAL
                INFORMATION**Item 1.
            Financial Statements
            3Condensed Consolidated
              Balance
              Sheet as of June 30, 2007 (Unaudited)
            F-1Condensed
              Consolidated Statements of Operations for the Three
              Months Ended June 30, 2007 and 2006 (Unaudited)
            F-3Condensed Consolidated
              Statements of Cash Flows for the ThreeMonths Ended June 30, 2007 and 2006 (Unaudited)
            F-4Notes to Condensed Consolidated
              Financial Statements (Unaudited)
            F-6Item 2.
            Management's Discussion
              and
              Analysis of Financial Condition and
              Results of Operations
            5Item 3.
            Controls and Procedures
            15**PART
                II - OTHER
                INFORMATION**Item 1.
            Legal Proceedings
            15Item 2.
            Unregistered Sales of
              Equity
              Securities and Use of Proceeds
            15Item 3.
            Defaults Upon Senior
              Securities
            16Item 4.
            Submission of Matters
              to a Vote
              of Security Holders
            16Item 5.
            Other Information
            16Item 6.
            Exhibits
            16Signatures
            
            17




2




**PART
      I - FINANCIAL INFORMATION**




ITEM
      1. FINANCIAL
      STATEMENTS










**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 
 **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
 
 **JUNE
        30, 2007 AND 2006**
 
 **(UNAUDITED)**
    3
  **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **INDEX
          TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
          30, 2007 AND 2006**
 **(UNAUDITED)**
  **Page**Condensed
                    Consolidated Balance Sheet as of June 30, 2007 (Unaudited)
                F-1Condensed
                    Consolidated Statements of Operations for the Three Months
                  Ended
                    June 30, 2007 and 2006 (Unaudited)
                F-3Condensed
                    Consolidated Statements of Cash Flows for the Three Months Ended
                  June
                    30, 2007 and 2006 (Unaudited)
                F-4Notes
                    to Condensed Consolidated Financial Statements (Unaudited)
                F-6
 4


**IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **(UNAUDITED)**


**JUNE
        30, 2007**
  **ASSETS****CURRENT
                    ASSETS**Cash
                    and
                    cash equivalents
                
                $
                3,375Accounts
                    receivable, net of allowance of $55,021
                
                
                176,183Other
                    current assets
                
                
                6,515**Total
                    current
                    asset**
                
                
                186,073Equipment,
                    net of $25,194 accumulated depreciation
                
                
                68,928**OTHER
                    ASSETS**Goodwill
                
                
                674,934**TOTAL
                    ASSETS**
                
                $
                929,935**LIABILITIES
                    AND STOCKHOLDERS'
                    DEFICIT****CURRENT
                    LIABILITIES**Current
                    portion of notes payable
                
                $
                186,489Current
                    portion of obligations under capital lease
                
                
                15,616Accounts
                    payable and accrued liabilities
                
                
                2,336,856Deferred
                    revenue
                
                
                3,855Liability
                    for stock payable
                
                
                333,949Derivative
                    liability
                
                
                231,944Convertible
                    debentures, net of discount $238,890
                
                
                470,110Warrant
                    liability
                
                
                211,272**Total
                    current
                    liabilities**
                
                
                3,790,091**LONG-TERM
                    LIABILITIES**Obligations
                    under capital lease, net of current portion
                
                
                30,680**Total
                    long-term
                    liabilities**
                
                
                30,680**TOTAL
                    LIABILITIES**
                
                
                3,820,771**COMMITMENTS
                    AND
                    CONTINGENCIES**


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


F-1




**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **(UNAUDITED)**
 **JUNE
          30, 2007**
  **TEMPORARY
                      EQUITY**Common
                      stock, $.001 par value; 400,000,000  shares
                      authorized;130,179,554
                      issued and outstanding
                  
                  
                  63,490**STOCKHOLDERS'
                      DEFICIT**Preferred
                      stock, $.001 par value; 5,000,000 shares
                      authorized;4,000,000  issued
                      and outstanding series A
                  
                  
                  4,0001,000,000  issued
                      and outstanding series B
                  
                  
                  1,000Common
                      stock, $.001 par value; 400,000,000  shares
                      authorized;130,179,554
                      issued and outstanding
                  
                  
                  66,688Prepaid
                      Consulting Fees
                  
                  
                  (86,455
                  )Additional
                      paid-in capital
                  
                  
                  25,794,331Stock
                      Receivable
                  
                  
                  (2,574,312
                  )Accumulated
                      deficit
                  
                  
                  (26,159,578
                  )**Total
                      stockholders'
                      deficit**
                  
                  
                  (2,890,836
                  )**TOTAL
                      LIABILITIES AND
                      STOCKHOLDERS' DEFICIT**
                  
                  $
                  929,935


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




F-2


**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**
 **FOR
        THE THREE MONTHS ENDED JUNE 30,**
  **2007**
                
                
                **2006****OPERATING
                    REVENUE**
                
                $
                91,473
                
                
                $
                662,123**COST
                    OF
                    OPERATIONS**
                
                
                63,568
                
                
                
                427,853**GROSS
                    PROFIT**
                
                
                27,905
                
                
                
                234,270**OPERATING
                    EXPENSES**Selling
                
                
                55,363
                
                
                
                2,604General
                    and
                    administrative
                
                
                414,927
                
                
                
                432,631Depreciation
                    and
                    amortization
                
                
                79,372
                
                
                
                28,230**Total
                    operating
                    expenses**
                
                
                549,662
                
                
                
                463,465**LOSS
                    BEFORE OTHER INCOME
                    (EXPENSE)**
                
                
                (521,757
                )
                
                
                (229,195
                )**OTHER
                    INCOME
                    (EXPENSES)**Other
                    income
                
                
                9,631
                
                
                
                29,590Loss
                    on
                    Revaluation of Derivatives
                
                
                (86,378
                )
                
                
                169,043Other
                    expense
                
                
                (85
                )
                
                
                -Interest
                    expense
                
                
                (229,621
                )
                
                
                (80,176
                )Interest
                    income
                
                
                -
                
                
                
                36**Total
                    other income
                    (expense)**
                
                
                (306,453
                )
                
                
                118,493**LOSS
                    BEFORE PROVISION FOR INCOME
                    TAXES**
                
                
                (828,210
                )
                
                
                (110,702
                )Provision
                    for income taxes
                
                
                -
                
                
                
                -**NET
                    LOSS APPLICABLE TO COMMON
                    SHAREHOLDERS**
                
                $
                (828,210
                )
                
                $
                (110,702
                )**BASIC
                    AND DILUTED LOSS PER
                    SHARE**
                
                $
                (0.01
                )
                
                $
                (0.00
                )**WEIGHTED
                    AVERAGE NUMBER OF COMMON
                    SHARES OUTSTANDING**
                
                
                121,129,769
                
                
                
                62,256,813


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


F-3


**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**


**CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
 **FOR
            THE THREE MONTHS ENDED JUNE 30,**
  ****
                    **2007**
                    
                    
                    **2006****CASH
                        FLOW FROM OPERATING
                        ACTIVITIES**Net
                        loss
                    
                    
                    (828,210
                    )
                    
                    
                    (110,702
                    )**Adjustments
                        to
                        reconcile net loss to net cash****provided
                        by (used in) operating activities:**Net
                        beneficial interest on debt conversions
                    
                    
                    198,881
                    
                    
                    
                    -Depreciation
                    
                    
                    6,047
                    
                    
                    
                    28,230Amortization
                        of debt discount
                    
                    
                    73,325
                    
                    
                    
                    -Amortization
                        of prepaid consulting fees
                    
                    
                    246,876
                    
                    
                    
                    -Loss
                        on revaluation of derivatives
                    
                    
                    86,378
                    
                    
                    
                    (169,043
                    )Provision
                        for doubtful accounts
                    
                    
                    55,021
                    
                    
                    
                    -**Changes
                        in assets and
                        liabilities**Decrease
                        in accounts receivable, net
                    
                    
                    13,235
                    
                    
                    
                    46,984Decrease
                        in inventory
                    
                    
                    -
                    
                    
                    
                    39,010(Increase)
                        Decrease in other current assets
                    
                    
                    (66
                    )
                    
                    
                    4,065Decrease
                        in other assets
                    
                    
                    -
                    
                    
                    
                    6,513Increase
                        in accounts payable and accrued liabilities
                    
                    
                    152,402
                    
                    
                    
                    166,268(Decrease)
                        in contingent liability
                    
                    
                    -
                    
                    
                    
                    (646
                    )(Decrease)
                        in acquisition contracts
                    
                    
                    -
                    
                    
                    
                    (65,000
                    )Increase
                        (Decrease) in deferred revenue
                    
                    
                    1,333
                    
                    
                    
                    (3,887
                    )Total
                        adjustments
                    
                    
                    833,432
                    
                    
                    
                    52,494**Net
                        cash provided by (used in) operating activities**
                    
                    
                    5,222
                    
                    
                    
                    (58,208
                    )**CASH
                        FLOWS FROM INVESTING ACTIVITIES**Acquisition
                        of fixed assets
                    
                    
                    (2,970
                    )
                    
                    
                    (5,074
                    )**Net
                        cash (used in) investing activities**
                    
                    
                    (2,970
                    )
                    
                    
                    (5,074
                    )**CASH
                        FLOWS FROM FINANCING
                        ACTIVITIES**Payments
                        for equity financing
                    
                    
                    -
                    
                    
                    
                    (49,999
                    )Proceeds
                        from (reduction in) convertible debentures
                    
                    
                    -
                    
                    
                    
                    200,000Proceeds
                        from notes payable
                    
                    
                    -
                    
                    
                    
                    5,000Payments
                        on capital lease obligations
                    
                    
                    (3,704
                    )
                    
                    
                    (1,116
                    )Payments
                        on officer loans
                    
                    
                    -
                    
                    
                    
                    (60,189
                    )Payments
                        on obligation of capital lease
                    
                    
                    -
                    
                    
                    
                    (6,386
                    )**Net
                        cash provided by (used in) financing activities**
                    
                    
                    (3,704
                    )
                    
                    
                    87,310**NET
                        INCREASE (DECREASE) IN****CASH
                        AND CASH EQUIVALENTS**
                    
                    
                    (1,452
                    )
                    
                    
                    24,028**CASH
                        AND CASH EQUIVALENTS -****BEGINNING
                        OF PERIOD**
                    
                    
                    4,827
                    
                    
                    
                    233,544**CASH
                        AND CASH EQUIVALENTS - END OF PERIOD**
                    
                    $
                    3,375
                    
                    
                    $
                    257,572


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


F-4




**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
 **FOR
              THE THREE MONTHS ENDED JUNE 30,**
  ****
                      **2007**
                      
                      
                      **2006****SUPPLEMENTAL
                          DISCLOSURE OF CASH
                          FLOW INFORMATION:**Cash
                          paid during the period for:Interest
                          paid
                      
                      $
                      1,024
                      
                      
                      $
                      80,176Income
                          taxes paid
                      
                      $
                      150
                      
                      
                      $
                      -**SUPPLEMENTAL
                          DISCLOSURE OF
                          NON-CASH INFORMATION:**Common
                          stock issued for prepaid
                          consulting fees, classified as equity
                      
                      $
                      114,234
                      
                      
                      $
                      -Common
                          stock issued for debt
                          settlements and payables
                      
                      $
                      58,512
                      
                      
                      $
                      -Debt
                          incurred for stock to be
                          issued
                      
                      $
                      195,000
                      
                      
                      $
                      -Fixed
                          assets acquired for
                          debt
                      
                      $
                      51,264
                      
                      
                      $
                      -Additional
                          paid in capital
                          reclassified to warrant liability
                      
                      $
                      211,272
                      
                      
                      $
                      -


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




F-5


**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2007 AND 2006 (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, 2007
          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.
  On
          October 4, 2006, by vote of a majority of the issued and outstanding shares
          of
          IVI Communications common and preferred stock as of the date of record
          for the
          Annual Meeting of the shareholders, the Articles of Incorporation were
          amended
          to increase the Company's authorized shares of common stock to four hundred
          million shares and to approve the Amendment of the Articles of Incorporation
          to
          increase the authorized capital from  100,000,000 to 400,000,000
          common shares.
  F-6
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                        1-**
                    **ORGANIZATION
                        AND BASIS OF PRESENTATION
                        (Continued)**
 On
            October 4, 2006, by vote of a majority of the issued and outstanding
            shares of
            IVI Communications common and preferred stock as of the date of record
            for the
            Annual Meeting of the shareholders, the Articles of Incorporation were
            amended
            to increase the Company's authorized shares of common stock to four hundred
            million shares and to approve the Amendment of the Articles of Incorporation
            to
            increase the authorized capital from  100,000,000 to 400,000,000
            common shares.
 
 **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, 2007 and
          2006
 
 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, 2007, the Company had $0 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.
  F-7
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (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 condensed 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 expenses are included in selling expenses in
          the condensed consolidated statements. Advertising costs for the three
          months
          ended June 30, 2007 and 2006 were $342 and $2,604 respectively.
  **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.
  F-8
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 **NOTE 2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING
                    POLICIES   (CONTINUED)**
  **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.  After review, it
          was determined that an allowance of $55,021 was necessary at June 30,
          2007.
 
 **Earnings
          (Loss) Per Share of Common Stock**
 
 Historical
          net earnings (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 EPS:
 
 **June
                    30**
                ****
                ****
                **June
                    30**
                ********
                ****
                **2007**
                ****
                ****
                **2006**Net
                    income (loss)
                
                $
                (828,210
                )
                
                $
                (110,702
                )Weighted-average
                    common sharesOutstanding
                    (Basic)
                
                
                121,129,769
                
                
                
                62,256,813Weighted-average
                    common storkEquivalentsStock
                    options
                
                
                -0-
                
                
                
                -0-Warrants
                
                
                -0-
                
                
                
                -0-Weighted-average
                    common sharesOutstanding
                    (Diluted)
                
                
                121,129,769
                
                
                
                62,256,813
  Options
            and warrants outstanding to purchase stock were not included in the computation
            of diluted EPS for June 30, 2007 because inclusion would have been
            antidilutive.  At June 30, 2007 and 2006, there were 229,961,609 and
            4,027,705 warrants available respectively, and no options
            available.
  F-9
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
  **Goodwill
          and Other Intangible Assets**
 
 In
          September 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 $674,934 in goodwill in its acquisition of Futura, Inc. on February
          6,
          2006.  Goodwill is tested for impairment annually or more frequently
          if the situation is warranted.
  **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES
                    CONTINUED**
 
 **Stock-Based
          Compensation**
  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 2007.
  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.
 
 **Derivative
          Instruments**
  The
          Company has an outstanding convertible debt instruments that contain embedded
          derivatives.  The Company accounts for these derivatives 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).  As
          of June 30, 2007, the fair value of the derivatives was $231,944.  A
          loss in revaluation of the derivative for the three months ended June 30,
          2007
          was recognized in the amount of $86,378.
  F-10
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES
                    (CONTINUED)**
  **Recent
          Accounting Pronouncements**
 
 In
          November 2004, the FASB issued Financial Accounting Standards No. 151 (FAS
          151),
“*Inventory Costs – an amendment of ARB No. 43, Chapter
          4*”.  FAS151 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.  FAS151 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.
 
 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.
  F-11
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES
                    (CONTINUED)**
 
 **Recent
          Accounting Pronouncements Continued**
  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.”  FAS154 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 implementation of this standard did not have a
          material impact on the financial position, results of operations and cash
          flows.
 
 In
          September 2006, the FASB issued
          SFAS No. 157 “Fair Value Measurements,” which provides a definition of
          fair value, establishes a framework for measuring fair value and requires
          expanded disclosures about fair value measurements. SFAS No. 157 is
          effective for financial statements issued for fiscal years beginning after
          November 15, 2007 and interim periods within those fiscal years. The
          provisions of SFAS No. 157 should be applied prospectively.The
          Company is currently analyzing whether this new standard will have impact
          on its
          financial position and results of operations.
  F-12
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
                    2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES
                    (CONTINUED)**
 
 **Recent
          Accounting Pronouncements Continued**
  In
          September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting
          for Defined Benefit Pension and Other Postretirement Plans”, which amends
          SFAS No. 87 “Employers’ Accounting for Pensions”
(SFAS No. 87), SFAS No. 88 “Employers’ Accounting for
          Settlements and Curtailments of Defined Benefit Pension Plans and for
          Termination Benefits” (SFAS No. 88), SFAS No. 106
“Employers’ Accounting for Postretirement Benefits Other Than Pensions”
(SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures
          about Pensions and Other Postretirement Benefits (revised 2003)”
(SFAS No. 132R). This Statement requires companies to recognize an
          asset or liability for the overfunded or underfunded status of their benefit
          plans in their financial statements. SFAS No. 158 also requires the
          measurement date for plan assets and liabilities to coincide with the sponsor’s
          year end. The standard provides two transition alternatives related to
          the
          change in measurement date provisions. The recognition of an asset and
          liability
          related to the funded status provision is effective for fiscal year ending
          after
          December 15, 2006 and the change in measurement date provisions is
          effective for fiscal years ending after December 15, 2008 The
          implementation of this standard did not have a material impact on its financial
          position, results of operations or cash flows.
 
 **NOTE
                    3-**
                **CAPITAL
                    LEASES**
 
 Capital
          leases consist of one subsidiary equipment lease, which is reflected in
          fixed
          assets.  The minimum lease payments due on the lease total $52,009,
          which includes interest of $5,713.  The liability is $46,296 at June
          30, 2007, of which $15,616 is current and $30,680 is due through fiscal
          2010.
  F-13
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 **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 to 3 years. As of June 30, 2007 and 2006, the note
          payable balance is $186,489 and $767,311, and the accrued interest on those
          notes as of June 30, 2007 and 2006 is $98,284 and $620,907, respectively.
          These
          amounts are reflected as current liabilities in the consolidated balance
          sheet
          at June 30, 2007 and 2006.
 
 In
          November 2005 a note was issued to Nyhl Henson for $80,623 for
          compensation.  The note carries no interest and was due November 30,
          2006 and is convertible at current market price.  The note has not
          been repaid or converted.
 
 In
          May
          2006 the company borrowed $5,000 on a one-year note due May 22,
          2007.  This note carries no interest.
 
 In
          December 2006 the company borrowed $4,000 on a one-year note due December
          22,
          2007.  This note carries no interest.
  **NOTE
                    5-**
                **CONVERTIBLE
                    DEBENTURES**
 
 The
          Company sold a security for $25,000 to one entity in January 2005. This
          debenture, which was for services rendered, 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 been completed as of June
          30,
          2007.
 
 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.  No conversion or repayment of the debenture has as
          of June 30, 2007.
 
 During
          the three months ended June 30, 2007, a debenture holder converted $48,500
          of
          principal for 9,768,519 shares of common stock of which 4,057,157 shares
          were
          restricted.  The conversion price was $.0054, 90% of the lowest
          closing bid price of  $.006 during the prior 30 days, resulting in a
          beneficial interest charge of $5,625.
  F-14
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
  
 **NOTE
                    5-**
                **CONVERTIBLE
                    DEBENTURES (CONTINUED)**
 
 **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 advanced immediately. The second installment of $200,000
          was advanced on April 18, 2006. The last installment of $200,000 was advanced
          on
          August 16, two (2) business days after the date the registration statement
          was
          declared effective.
  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.
 
 In
          January 2007 the Company borrowed $6,756 from Nyhl Henson, the former President,
          on a one-year note due January 19, 2008.   This note carries no
          interest and is convertible at the previous 10-day closing price.
 
 In
          January 2007 the Company borrowed $3,243 from Charles Roodenburg, CFO,
          on a
          one-year note due January 19, 2008.  This note carries no interest and
          is convertible at the previous 10-day closing price.
 
 In
          February 2007 the Company borrowed $45,000 from Nyhl Henson, the former
          President, on a note due on demand.  The note carries no interest and
          is convertible at the previous 10-day closing price.
 
 The
          Company sold a security for $12,500 to one entity in September
          2006.  This debenture carries no interest, is due in October 2007, and
          has a conversion rate of 50% discount to market of the ten-day average
          closing
          bid price.
 
 The
          Company sold a security for $12,500 to one entity in October
          2006.  This debenture carries no interest, is due in November 2007,
          and has a conversion rate of 50% discount to market of the ten-day average
          closing bid price.
  F-15
 
 **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
          30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                    5-**
                **CONVERTIBLE
                    DEBENTURES (CONTINUED)**
 
 **Derivative
          Liability (continued)**
 
 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
          4.99% 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 $593,988 as a liability in the accompanying
          condensed consolidated balance sheet, and it is now measured it at its
          estimated
          fair value of $231,944. 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
                    $0.006Exercise
                        price
                    $0.0054Dividend
                        yield
                    0.00%Risk
                        free interest rate
                    4.00%Expected
                        volatility
                    67.71%Expected
                        life
                    4.0
                        Years
  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.
  F-16
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
                    5-**
                **CONVERTIBLE
                    DEBENTURES (CONTINUED)**
  On
          August 8, 2006 the company issued
          stock at a market price of $.04.  This increased the number of
          warrants from 3,500,000 to 30,000,000 at $.04 exercise
          price.
  On
          December 29, 2006 the company issued
          stock at a market price of $.0242.  This increased the number of
          warrants from 30,000,000 to 49,586,777 at $.0242 exercise
          price.
  On
          January 17, 2007, by Board
          Resolution, the Company reduced the exercise price to $.0085 which increased
          the
          number of warrants from 49,586,777 to 141,176,471.
  On
          February 22, 2007, Cornell exercised 3,500,000 warrants at a price of $.0085
          for
          $29,750.  Beneficial interest of $12,250 was
          recognized.  This reduced the number of warrants from 141,176,471 to
          137,676,471 at $.0085.
  On
          June 30, 2007 the company issued
          stock at a market price of $.0051.  This increased the number of
          warrants from 137,676,471 to 229,460,784 at $.0051 exercise
          price.
  **NOTE
                    5-**
                **CONVERTIBLE
                    DEBENTURES (CONTINUED)**
 
 **Derivative
          Liability (continued)**
 
 The
          fixed
          freestanding warrants issued in connection with the $600,000 convertible
          debenture had been valued at $674,417 based on a Black-Scholes pricing
          model
          using the following assumptions:
 Fair
                          market value of stock
                      $0.20Exercise
                          price
                      $0.30
                          and $0.40Dividend
                          yield
                      0.00%Risk
                          free interest rate
                      4.00%Expected
                          volatility
                      192.95%Expected
                          life
                      5.0
                          Years
 F-17
  **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
          30, 2007 AND 2006 (UNAUDITED)**
 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. The discount on debt is being amortized to interest through
            March 31,
            2009 using the effective interest method.  The current debt discount
            balance is $238,890.
  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.
 
 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.
  Current
            stock price obligates the Company to register 111,517,778 shares for
            the
            convertible debentures and 229,460,784 shares for the warrants.  We
            have been unable to register these shares as of June 30, 2007 and are
            therefore
            in default.
  F-18
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
  
 **NOTE
                    5-**
                **CONVERTIBLE
                    DEBENTURES (CONTINUED)**
 
 **Derivative
          Liability (continued)**
  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, former Chief Executive Officer,
          and
          Charles Roodenburg, Current Chief Executive 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.
  **NOTE
                    6-**
                **STOCKHOLDERS’
                    DEFICIT**
 
 **Preferred
          Stock**
 
 The
          Company has 5,000,000 shares of preferred stock authorized and 4,000,000
          shares
          of preferred series A stock and 1,000,000 shares of preferred series B
          stock
          issued and outstanding as of June 30, 2007.
 
 There
          were no preferred stock transactions for the three months ended June 30,
          2007.
 
 **Common
          Stock**
 
 As
          of
          June 30, 2007, the Company has 400,000,000 shares of common stock authorized,
          130,179,554  are issued and outstanding.
 
 For
          the
          three months ended June 30, 2007, the following common stock was
          issued:
 
 During
          the three months ended June 30, 2007, a debenture holder converted $48,500
          of
          principal for 9,768,519 shares of common stock of which 4,057,157 shares
          were
          restricted.  The conversion price was $.0054, 90% of the lowest
          closing bid price of  $.006 during the prior 30 days, resulting in a
          beneficial interest charge of $5,625.
  F-19
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                    6-**
                **STOCKHOLDERS’
                    DEFICIT (Continued)**
 
 On
          May 3,
          2007, 3,814,510 shares of common stock valued at $19,454 were issued for
          accrued
          compensation at $.0051 to convert debt.
 
 On
          June
          6, 2007, 5,807,848 shares of restricted common stock valued at $9,681 were
          issued at $.007 to convert a contingent liability.  Beneficial
          interest income of $1,750 was recognized.
  **Temporary
          Equity**
 
 The
          Company is authorized to issue 400,000,000 shares of its $.001 par value
          common
          stock.  However, as of June 30, 2007 the Company did not have enough
          authorized stock to satisfy the redemption and conversion features of its
          debentures and warrants.  As such, this has created a temporary equity
          classification within the Company.  The shares and their related
          values have been reclassified to temporary equity.
  **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, 2007, and the
          years
          ended March 31, 2007 and 2006, and has sustained large accumulated deficits
          and
          currently does not have the revenues to sustain its operations. In addition,
          the
          Company sold off its operations in Colorado, Oregon and California, and
          has
          defaulted on the acquisition of Internet Business Consulting/AppState.net,
          LLC.  This raises substantial doubt about the Company’s ability to
          continue as a going concern.
 
 Management
          is in the process of restructuring 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
          that
          might result from the outcome of this uncertainty.
  F-20
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 
 
 **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, 2007, net deferred tax assets approximated the following:
  Deferred
                        tax assets
                    
                    $
                    8,894,000Less:
                        valuation allowance
                    
                    
                    (8,894,000
                    )$
                    -0-
 At
          June
          30, 2007, the Company had accumulated deficits approximating $26,100,000
          available to offset future taxable income through 2026. 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, 2007, the Company has recognized
          the full liability for all amounts that are due.
 
 The
          Company has six default judgments against it for a total amount of
          $146,504.  The amounts are recorded in other liabilities and
          contingencies.
  F-21
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**    **NOTE
                        10-**
                    **CHANGE
                          OF
                          MANAGEMENT**
 
 Effective
          April 24, 2007 Nyhl Henson resigned his position as President and Chairman
          of
          the Board of Directors of IVI Communications, Inc, and Charles Roodenburg
          was
          named as President and Chairman of the Board of Directors of IVI Communications,
          Inc.
  **NOTE
                      11-**
                  **COMMITMENT
                        AND
                        CONTINGENCIES**
 
 We
          had
          been unable to come to mutually acceptable terms to cure the default by
          the
          Company on the terms of the Purchase Agreement (“Agreement”) dated January 1,
          2005 by and between IVI Communications, Inc. (“Buyer”), Internet Business
          Consulting, Inc. (“IBC”) and AppState.Net, LLC (“AppState”), jointly referred to
          as (“Sellers”).  Sellers exercised the remedies for default as
          provided in the Agreement and confirmed that the Remedies, which were that
          foreclosure and repossession occurred December 31, 2006, are in
          effect.
 
 Pursuant
          to those remedies, ownership of Sellers reverts to James Hollis, effective
          December 31, 2006. However, a formal settlement agreement has not been
          negotiated and signed by the parties involved.
 Per
          the
          terms of the Agreement, Sellers will return 2,574,312 shares of IVI common
          stock.  This has been recorded as Stock Receivable.
 **NOTE
                      12-**
                  **SUBSEQUENT
                        EVENTS**
  On
          July
          6, 2007, 2,574,312 shares of common stock, previously carried as stock
          receivable from James Hollis in regard to the default by IVI Communications,
          Inc., on the purchase of Internet Business Consulting and AppState.net,
          had been
          returned to the Company, and, subsequently the shares have been
          cancelled.
  F-22
  **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**
 
 We
            are a
            broadband Internet access company that is currently developing one of
            the first
            nationwide high speed wireless broadband networks.The management of IVI
            believes
            that a tremendous opportunity exists to provide wireless broadband Internet
            access where it is currently unavailable or cost prohibitive.
 
 There
            are
            thousands of independent ISPs providing dialup Internet access to the
            19 million
            U.S. homes, not to mention businesses, schools, and churches that cannot
            get
            broadband Internet access. IVI will contract with selected dialup ISPs
            in rural
            markets to install wireless networks owned by IVI and operated by the
            ISPs to
            market a nationally branded broadband Internet access service.
 
 We
            currently operate one subsidiary, Futura, Inc.
 
 On
            February 6, 2006 we entered into a Purchase Agreement and acquired 100%
            of the
            outstanding stock of Futura, Inc. from Francis and Lois Allen, the shareholders
            of Futura, Inc. Futura, Inc. is an operating subsidiary, and 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.  Futura has contracts in place for low
            cost bandwidth and operates a network operation center (NOC) located
            in Little
            Rock, Arkansas.  Futura has completed the first link of the planned
            wireless broadband network from Little Rock to Cabot, 23 miles to the
            northeast.
            Futura has also completed the installation of three wireless tower sites
            that
            currently provide broadband Internet access to residences and businesses
            in
            Cabot (population 15,000) and Ward (population 2,580).
  5
  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, 2007 Compared With Three Months Ended June 30,
              2006
 
 Effective
              January 1, 2007, IBC and AppState.net were returned to the former owner
              which
              was caused by the default of IVI Communications, Inc. on the original
              acquisition contract.  The Results of Operations for the three months
              ended June 30, 2006 included IBC and AppState.net. Accordingly, comparisons
              from
              2007 to 2006 are not meaningful.
 
 Revenue
              for the three months ended June 30, 2007 was $91,473 compared to $662,123
              for
              the three months ended June 30, 2006, a decrease of $570,650.
 
 Cost
              of
              operations for the three months ended June 30, 2007 were $63,568 compared
              to
              $427,853 for the three months ended June 30, 2006, a decrease of
              $364,285.
 
 General
              and administrative expenses for the three months ended June 30, 2007
              were
              $414,927 compared to $432,631 for the three months ended June 30, 2006,
              a
              decrease of $17,704.
 
 Selling
              expenses for the three months ended June 30, 2007 were $55,363, compared
              to
              selling expenses of $2,604 for the three months ended June 30, 2006,
              an increase
              of $52,759.
 
 Depreciation
              and amortization expense was $79,372 for the three months ended June
              30, 2007,
              compared to depreciation and amortization expense of $28,230 for the
              three
              months ended June 30, 2006, an increase of $51,142.
 Due
                to
                the above facts, Loss before other Income (Loss) was ($521,575) in
                the three
                months ended June 30, 2007 compared to the net operating loss of
                ($229,195) in
                the three months ended June 30, 2006.
 
 The
              Company incurred a loss on the revaluation of derivatives associated
              with the
              convertible debentures of $86,378 for the three months ended June 30,
              2007
              compared to a gain of $169,043 for the three months ended June 30,
              2006. This
              was
              due to the decline in the fair market value of the stock
  The
              Company incurred interest expenses of $229,621 in the three months
              ended June
              30, 2007, compared to $80,176 for the three months ended June 30, 2006.
              This
              increase was due to additional interest on notes, debentures, and capital
              leases. Beneficial interest of $200,624 was realized on the conversion
              of
              convertible debentures and stock to be issued for consulting services
              in the
              three months ended June 30, 2007.
  6
 
 The
              Company had other income of $9,631 in the three months ended June 30,
              2007,
              compared to $29,590 in the three months ended June 30, 2006. Interest
              income was
              $0 in the three months ended June 30, 2007 compared to $36 in the three
              months
              ended June 30, 2006.  Other expense was $85 in the three months ended
              June 30, 2007 compared to $0 in the three months ended June 30,
              2006.
 
 Due
              to
              the above factors, the net loss for the three months ended June 30,
              2007  increased to ($828,210) from a net loss of ($110,702) for the
              three months ended June 30, 2006. Basic and diluted loss per share
              for the three
              months ended June 30, 2007 was ($0.01), compared to ($0.00) for the
              three months
              ended June 30, 2006.
  **LIQUIDITY
              AND CAPITAL RESOURCES**
  In
              the
              three months ended June 30, 2007, we continued to spend cash to fund
              our
              operations. Cash provided by operating activities for three months
              ended June
              30, 2007 equaled $5,222, and consisted of a net loss of $828,210, a
              loss on
              revaluation of derivatives in the amount of $86,378, depreciation of
              $6,047,
              amortization of $320,201, beneficial interest on debt conversions  of
              $198,881, a provision for doubtful accounts of $55,021, an increase
              in accounts
              payable and accrued liabilities of $152,402, a decrease in accounts
              receivable
              of $13,235, an increase in other current assets of $66, and an increase
              in
              deferred revenue of $1,333.  For the comparable period in 2006, cash
              used by operating activities equaled $58,208 and consisted of a net
              loss of
              $110,702, depreciation of $28,230, a gain on revaluation of derivatives
              of
              $169,043, a decrease in accounts receivable of $46,984, a decrease
              in inventory
              of $39,010, a decrease in other current assets of $4,065, a decrease
              in other
              assets of $6,513, an increase in accounts payable and accrued liabilities
              of
              $166,268, a decrease in contingent liability of $646, a decrease in
              acquisition
              contracts of $65,000, and a decrease in deferred revenue of $3,887.
 
 We
              used
              net cash of $2,970 in investing activities for the three months ended
              June 30,
              2007 compared to the use of net cash of $5,074 for the three months
              ended June
              230, 2006. These were acquisition of fixed assets.
 
 Cash
              flow
              from financing activities for the three months ended June 30, 2007
              produced a
              net decrease in cash of $3,704 consisting of payments on capital leases.
              Cash
              flow from financing activities for the three months ended June 30,
              2006 produced
              a net increase in cash of $87,310 which resulted from $200,000 in proceeds
              from
              convertible debentures, $5,000 proceeds from notes payable, offset
              by $49,999
              payments for equity financing, $1,116 payments on capital leases, $60,189
              payments on officer loans, and $6,386 on obligation of capital
              lease.
 
 As
              of
              June 30, 2007, we had cash and cash equivalents amounting to $3,375
              a decrease
              of $1,452 from the balance at March 31, 2007. Our working capital deficit
              increased to $3,604,018 at June 30, 2007 from $2,926,656 at March 31,
              2007.
 7
 As
              of
              June 30, 2007, we had an accumulated operating deficit of ($26,159,578)
              and
              stockholders' deficit of ($2,890,836).
  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 subsidiary.
  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 was received August 16, 2006,
            two
            (2) business days after the date the registration statement was declared
            effective on August 14, 2006.
 
 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
            4.99% of the then issued and outstanding shares of Common Stock, including
            shares issuable upon conversion of, and payment of interest.
 
 During
            the three months ended June 30,
            2007 Cornell has submitted Notices of Conversion to convert $48,500 of
            the
            Debenture for which the Company has issued 5,711,362 of its registered
            common
            shares at a conversion price of $.0054, and 4,057,157 of its unregistered
            common
            shares at a weighted average conversion price per share of
            $.0044.
  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.
  8
  On
            August 8, 2006 the Company issued
            stock at a market price of $.04.  This increased the number of
            warrants from 3,500,000 to 30,000,000 at $.04 exercise
            price.
  On
            December 29, 2006 the Company issued
            stock at a market price of $.0242.  This increased the number of
            warrants from 30,000,000 to 49,586,777 at $.0242 exercise
            price.
  On
            January 17, 2007, by Board
            Resolution, the Company reduced the exercise price to $.0085 which increased
            the
            number of warrants from 49,586,777 to 141,176,471.
  On
            February 22, 2007, Cornell exercised 3,500,000 warrants at a price of
            $.0085 for
            $29,750.  Beneficial interest of $12,250 was
            recognized.  This reduced the number of warrants from 141,176,471 to
            137,676,471 at $.0085.
  On
            June 30, 2007 the Company issued
            stock at a market price of $.0051.  This increased the number of
            warrants from 137,676,471 to 229,460,784 at $.0051 exercise
            price.
  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, which occurred on August
            14,
            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. A total of 18,750,000 registered
            shares
            were issued to Cornell upon receipt of Conversion Notices.  As we have
            been unable to effect a registration of additional shares, 4,057,157
            unregistered shares with a Rule 144 restiction have been issued to Cornell
            upon
            receipt of Conversion Notices.  As of June 30, 2007 we are required to
            register 111,527,778 shares to underly the Cornell 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, Former Chief Executive Officer,
            and
            Charles Roodenburg, Chief Executive 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, Cornell agreed to release the 15,000,000 shares granted as
            a security
            interest and they were returned to the Company and cancelled.
  9
 
 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 the Company has sustained net operating
              losses
              for the three months ended June 30, 2007, and the years ended March
              31, 2007 and
              2006, and has sustained large accumulated deficits and currently does
              not have
              the revenues to sustain its operations. In addition, the Company sold
              off its
              operations in Colorado, Oregon and California, and has defaulted on
              the
              acquisition of Internet Business Consulting/AppState.net, LLC.  This
              raises substantial doubt about the Company’s ability to continue as a going
              concern.
  **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 ADDITIONALFUNDING
  We
            have
            incurred substantial losses from operations, and expect to incur net
            losses for
            the foreseeable future. We incurred a net loss of $828,210 for the three
            months
            ended June 30, 2007.  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, our independent certified public accountants modified their report
            on
            the March 31, 2007 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.
  10
  **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, 2007, we received an aggregate of $390,750 from the issuance
              of common
              stock. During the three months ended June 30, 2007 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
              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 INTERNETSERVICE
              PROVIDER AND WIRELESS COMMUNICATIONS INDUSTRIES WE MAY BE FORCED TOREDUCE
              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
              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.
  11
 
 **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.
 
 **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.
  12
 
 **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.
 
 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. 13
  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. 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.
  14
 
 **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.
 
 The
              management of the Company has evaluated the effectiveness of the issuer’s
              disclosure controls and procedures as of the end of the period of the
              report
              (evaluation date) and have concluded that the disclosure controls internal
              controls and procedures are adequate and effective based upon their
              evaluation
              as of the evaluation date.
 
 There
              were no changes in the small business issuer’s internal controls over financial
              reporting identified in connection with the company evaluation required
              by
              paragraph (3) of Rule 13a-15 or Rule 15d-15 under the Exchange Act
              that occurred
              during the small business issuer’s first fiscal quarter that has materially
              affected or is reasonably likely to materially affect the small business
              issuer’s internal control over financial reporting.
  Our
              Board
              of Directors were advised by Bagell, Josephs, Levine and Company, LLC,
              our
              independent registered public accounting firm, that during their assessment
              of
              our internal controls as part of their audit for the year ended March
              31, 2007,
              they have identified a material weakness as defined in Public Accounting
              Oversight Board Standard No. 2 in our internal control over financial
              reporting.
              Our auditors have identified the following material weaknesses in our
              internal
              controls as of March 31, 2007 and June 30, 2007:
 A
                material weakness in the Company’s internal controls exists in that there is
                limited segregation of duties amongst the Company’s employees with respect to
                the Company’s preparation and review of the Company’s financial statements. This
                material weakness is a result of the Company’s limited number of employees. This
                material weakness may affect management’s ability to effectively review and
                analyze elements of the financial statement closing process and prepare
                financial statements in accordance with U.S. GAAP.
  Subsequent
                to the notification from our independent registered public accounting
                firm, our
                chief executive officer evaluated our internal controls and concurred
                that our
                disclosure controls and procedures have not been effective to ensure
                that
                information required to be included in our periodic SEC filings is
                recorded,
                processed, summarized, and reported within the time periods specified
                in the SEC
                rules and forms. However, at this time, our resources and size prevent
                us from
                being able to employ sufficient resources to enable us to have adequate
                segregation of duties within our internal control system. The Company
                intends to
                remedy the material weakness by hiring additional employees and reallocating
                duties, including responsibilities for financial reporting, among
                the Company’s
                employees as soon as the Company has the financial resources to do
                so.
                Management is required to apply judgment in evaluating the cost-benefit
                relationship of possible changes in our disclosure controls and
                procedures.
  Other
                than the material weakness indicated above, no accounting errors
                or
                misstatements have been identified by our disclosure controls and
                procedures or
                by our independent registered public accounting firm that would have
                a material
                effect on our Financial Statements.
   **PART
              II - OTHER INFORMATION**
 
 **ITEM
              1. LEGAL PROCEEDINGS**
  The
              Company is currently negotiating settlements with vendors and debt
              holders for
              amounts currently outstanding. As of June 30, 2007, the Company has
              recognized
              the full liability for all amounts that are due.
 
 The
              Company has six default judgments against it for a total amount of
              $146,504.  The amounts are recorded in other liabilities and
              contingencies.
  **ITEM
              2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
              PROCEEDS**
  7,407,408
              shares of common stock were issued at a price of $.0054 for conversion
              of
              $40,000 of Cornell Capital Partners debentures.  Of those shares,
              1,696,046 shares were unregistered.
 
 3,814,510
              shares of unregistered common stock were issued at $.0051 to convert
              $19,454 of
              debt.
 
 5,807,848
              shares of unregistered common stock were issued at $.007 to convert
              a contingent
              liability.
 
 2,361,111
              shares of unregistered common stock were issued at a price of $.0036
              for
              conversion of $8,500 of Cornell Capital Partners debentures.
 
 Each
              of
              the above issuances of common stock were exempt from registration pursuant
              to
              Section 4(2) of the Securities Act of 1933.
  15
 
 **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**
 
 None
  **ITEM
                5. OTHER INFORMATION**.
 
 **CHANGE
              OF MANAGEMENT**
 
 Effective
              April 24, 2007,Charles Roodenburg was named President and Chairman  of
              the Board of Directors of IVI Communications, Inc. and Nyhl Henson
              resigned his
              position as President and Chairman of the Board of Directors of IVI
              Communications, Inc.
 
 **TEMPORARY
              EQUITY**
 
 The
              Company is authorized to issue 400,000,000 shares of its $.001 par
              value Common
              stock.  However, as of June 30, 2007 the Company did not have enough
              authorized stock to satisfy the redemption and conversion features
              of its
              debentures and warrants.  As such, this has created a temporary equity
              classification within the Company.  The shares and their related
              values have been reclassified to temporary equity.
 
 **SUBSEQUENT
              EVENTS**
 
 On
              July
              6, 2007, 2,574,312 shares of common stock, carried as stock receivable
              from
              James Hollis in regard to the default by IVI Communications, Inc.,
              on the
              purchase of Internet Business Consulting and AppState.net, have been
              returned to
              the Company and cancelled.
  ITEM
                    6. EXHIBITS
  **Exhibit
                            #**
                          ****
                          **Description**31.1
                          
                          Certification
                            of Principal Executive Officer and Principal Financial
                            Office pursuant to
                            Sarbanes-Oxley Section 30232.1
                          
                          Certification
                            of Chief Executive Officer and Chief Financial
                            Officer pursuant to
                            Sarbanes-Oxley Section 906
 16


**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.
  **IVI
                  COMMUNICATIONS**Date: August 20,
                  2007
                By:
                /s/ Charles
                  RoodenburgCharles Roodenburg
                  Chief
                      Executive Officer,
                    Chief Financial
                      Officer
   17