UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-QSB


Mark
      one





[X]    
      QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
      OF
      1934


For
      the
      period ended December 31, 2005





[ 
      ]     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 jurisdiction of incorporation or organization)
            33-0965560
              
              (I.R.S.
                Employer Identification
                No.)








IVI
      COMMUNICATIONS, INC.


5959
      W.
      Century Boulevard, Suite 573, Los Angeles, California 90045





(Address
      of principal executive offices) (Zip Code)






(310)
      216-7740





(Registrant's
      Telephone Number, Including Area Code)







Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
      the preceding 12 month (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 December
      31, 2005 was 56,568,974.




1


IVI
      COMMUNICATIONS, INC.


FORM
      10-QSB





Table
      of Contents




ITEM
                NO.
            DESCRIPTION
            PAGEPART
                I - FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements
            3Condensed
                Consolidated Balance Sheet as of December 31, 2005
            4Condensed
                Consolidated Statements of Operations for the Nine and Three Months
                Ended
                December 31, 2005 and 2004
            5Condensed
                Consolidated Statements of Cash Flows for the Nine Months Ended December
                31, 2005 and 2004
            6Notes
                to Condensed Consolidated Financial Statements
            7Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of Operations
            19Item
                3.
            Controls
                and Procedures
            29PART
                II - OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            29Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            30Item
                3.
            Defaults
                Upon Senior Securities
            30Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            30Item
                5.
            Other
                Information
            30Item
                6.
            Exhibits
            31Signatures
            
            31




2


**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 
 **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
 
 **DECEMBER
        31, 2005**
 
 **(UNAUDITED)**








3






PART
      I -
      FINANCIAL INFORMATION




ITEM
      1. FINANCIAL STATEMENTS




**IVI
                  COMMUNICATIONS, INC. AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATED BALANCE SHEET (UNAUDITED)****DECEMBER
                  31, 2005****ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              34,993Accounts
                  receivable, net of allowance of $93,996
              
              
              282,323Inventory
              
              
              181,258Other
                  current assets
              
              
              3,845**Total
                  current assets**
              
              
              502,419**FIXED
                  ASSETS,**net
                  of accumulated depreciation of $22,059
              
              
              57,231**OTHER
                  ASSET**Security
                  deposits
              
              
              15,149Goodwill
              
              
              3,437,548**TOTAL
                  ASSETS**
              
              $
              4,012,347**LIABILITIES
                  AND STOCKHOLDERS' (DEFICIT)****CURRENT
                  LIABILITIES**Current
                  portion of installment debt
              
              $
              5,732Current
                  portion of notes payable
              
              
              1,209,630Obligations
                  under capital lease, current portion
              
              
              24,343Accounts
                  payable and accrued expenses
              
              
              2,579,970Liability
                  for stock to be issued
              
              
              390,000Deferred
                  revenue
              
              
              5,508Contingent
                  liability
              
              
              934,136Convertible
                  debentures
              
              
              361,750**Total
                  current liabilities**
              
              
              5,511,069**LONG-TERM
                  LIABILITIES**Installment
                  debt, net of current portion
              
              
              -Notes
                  payable, net of current portion
              
              
              40,000Obligations
                  under capital lease, net of current portion
              
              
              49,045Loan
                  payable - officer
              
              
              186,064**Total
                  long-term liabilities**
              
              
              275,109**TOTAL
                  LIABILITIES**
              
              
              5,786,178**COMMITMENTS
                  AND CONTINGENCIES**
              
              
              -**STOCKHOLDERS'
                  (DEFICIT)**Preferred
                  stock, $.001 par value; 5,000,000 shares authorized;0
                  shares issued and outstanding
              
              
              -Common
                  stock, $.001 par value; 100,000,000 shares authorized;56,568,974
                  shares issued and outstanding
              
              
              56,568Additional
                  paid-in capital
              
              
              23,140,379Accumulated
                  deficit
              
              
              (24,970,778
              )**Total
                  stockholders' (deficit)**
              
              
              (1,773,831
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' (DEFICIT)**
              
              $
              4,012,347The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.
  4




**IVI
                  COMMUNICATIONS, INC. AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS****FOR
                  THE NINE AND THREE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                  (UNAUDITED)****NINE
                  MONTHS ENDED**
              
              **THREE
                  MONTHS ENDED****DECEMBER
                  31,**
              
              **DECEMBER
                  31,****2005**
              
              **2004**
              
              **2005**
              
              **2004****OPERATING
                  REVENUE**
              
              $
              2,075,450
              
              $
              25,250
              
              $
              633,350
              
              $
              750**COST
                  OF OPERATIONS**
              
              
              1,395,810
              
              
              -
              
              
              432,639
              
              
              -**GROSS
                  PROFIT**
              
              
              679,640
              
              
              25,250
              
              
              200,711
              
              
              750**OPERATING
                  EXPENSES**General
                  and administrative
              
              
              2,822,899
              
              
              1,225,077
              
              
              1,736,636
              
              
              372,982Selling
                  expenses
              
              
              322,624
              
              
              -
              
              
              309,068
              
              
              -Depreciation
              
              
              17,740
              
              
              61
              
              
              3,870
              
              
              61**Total
                  operating expenses**
              
              
              3,163,263
              
              
              1,225,138
              
              
              2,049,574
              
              
              373,043**LOSS
                  BEFORE OTHER INCOME (EXPENSE)**
              
              
              (2,483,623
              )
              
              (1,199,888
              )
              
              (1,848,863
              )
              
              (372,293
              )**OTHER
                  INCOME (EXPENSE)**Other
                  income
              
              
              166,411
              
              
              -
              
              
              3
              
              
              -Litigation
                  damages and settlement
              
              
              (934,782
              )
              
              -
              
              
              -
              
              
              -Interest
                  expense
              
              
              (221,900
              )
              
              (172,902
              )
              
              (93,978
              )
              
              (55,659
              )**Total
                  other income (expense)**
              
              
              (990,271
              )
              
              (172,902
              )
              
              (93,975
              )
              
              (55,659
              )**NET
                  LOSS BEFORE PROVISION FOR INCOME TAXES**
              
              
              (3,473,894
              )
              
              (1,372,790
              )
              
              (1,942,838
              )
              
              (427,952
              )Provision
                  for income taxes
              
              
              (10,332
              )
              
              -
              
              
              (10,332
              )
              
              -**NET
                  LOSS APPLICABLE TO COMMON SHARES**
              
              $
              (3,484,226
              )
              $
              (1,372,790
              )
              $
              (1,953,170
              )
              $
              (427,952
              )**NET
                  LOSS PER BASIC AND DILUTED SHARES**Basic
                  and diluted from continuing operations
              
              $
              (0.06
              )
              $
              (0.02
              )
              $
              (0.03
              )
              $
              (0.01
              )**WEIGHTED
                  AVERAGE NUMBER OF****COMMON
                  SHARES OUTSTANDING**
              
              
              62,229,731
              
              
              60,042,530
              
              
              60,823,582
              
              
              64,956,692The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.
 5


**IVI
                  COMMUNICATIONS, INC. AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOW****FOR
                  THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004
                  (UNAUDITED)****2005**
              
              **2004****CASH
                  FLOW FROM OPERATING ACTIVITIES**Net
                  (loss)
              
              $
              (3,484,226
              )
              $
              (1,372,790
              )**Adjustments
                  to reconcile net (loss) to net cash****(used
                  in) operating activities:**Common
                  stock issued for services and compensation
              
              
              2,143,824
              
              
              745,859Depreciation
              
              
              17,740
              
              
              61**Changes
                  in assets and liabilities**Decrease
                  in accounts receivable
              
              
              64,098
              
              
              -(Increase)
                  in inventory
              
              
              (118,958
              )
              
              -Decrease
                  decrease in other current assets
              
              
              (10,757
              )
              
              -(Increase)
                  in other assets
              
              
              (13,859
              )
              
              (36,500
              )Increase
                  in accounts payable and accrued liabilities
              
              
              908,411
              
              
              280,050Total
                  adjustments
              
              
              2,990,499
              
              
              989,470**Net
                  cash (used in) operating activities**
              
              
              (493,727
              )
              
              (383,320
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Acquisistion
                  of fixed assets
              
              
              (27,450
              )
              
              (1,840
              )**Net
                  cash (used in) investing activities**
              
              
              (27,450
              )
              
              (1,840
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Proceeds
                  from officer loans
              
              
              170,844
              
              
              -Proceeds
                  from convertible debentures
              
              
              552,311
              
              
              215,000Net
                  payments on installment note payable
              
              
              (35,948
              )
              
              (19,842
              )Net
                  payments on note payable
              
              
              (1,023,855
              )
              
              (30,523
              )Proceeds
                  from issuance of common stock
              
              
              768,747
              
              
              305,000**Net
                  cash provided by financing activities**
              
              
              432,099
              
              
              469,635**NET
                  INCREASE (DECREASE) IN****CASH
                  AND CASH EQUIVALENTS**
              
              
              (89,078
              )
              
              84,475**CASH
                  AND CASH EQUIVALENTS -****BEGINNING
                  OF PERIOD**
              
              
              124,071
              
              
              105**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              34,993
              
              $
              84,580**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                  paid during the period for:Interest
                  paid
              
              $
              2,345
              
              $
              35,323Income
                  taxes paid
              
              $
              7,715
              
              $
              -t**SUPPLEMENTAL
                  DISCLOSURE OF NONCASH INFORMATION:**Common
                  stock issued for services and compensation
              
              $
              2,143,824
              
              $
              745,859Common
                  stock issued for notes payable
              
              $
              -
              
              $
              123,612Common
                  stock issued for accounts payable and accrued expenses
              
              $
              -
              
              $
              371,590Conversions
                  of payables to equity
              
              $
              -
              
              $
              1,074,328Common
                  stock issued for subscription receivable
              
              $
              -
              
              $
              2,023,173Common
                  stock (cancelled) for subscription receivable
              
              $
              (2,023,173
              )
              $
              -Common
                  stock issued for asset acquisition
              
              $
              2,574,312
              
              $
              -The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.






6


**IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
            31, 2005 AND 2004 (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, 2005 audited financial statements and
            the
            accompanying notes thereto. While management believes the procedures
            followed in
            preparing these condensed consolidated financial statements are reasonable,
            the
            accuracy of the amounts are in some respects dependent upon the facts
            that will
            exist, and procedures that will be accomplished by the Company later
            in the
            year.
 
 These
            condensed consolidated unaudited financial statements reflect all adjustments,
            including normal recurring adjustments which, in the opinion of management,
            are
            necessary to present fairly the consolidated operations and cash flows
            for the
            periods presented.
 
 The
            Company was formed in California in September 1995 to acquire traditional
            local
            and regional Internet access Service Providers (ISP’s) in the Western States to
            achieve economies of operation and accelerated growth through centralized
            management.
 
 Effective
            May 23, 2002, Internet Ventures, Inc. agreed to recapitalize with Turer
            Corporation by becoming a wholly owned subsidiary of Turer. To accommodate
            this
            recapitalization, the 11,930,746 shares then outstanding of Internet
            Ventures,
            Inc. were exchanged for 11,930,746 shares of Turer. In August 2002, Turer
            changed its name to IVI Communications, Inc.
 
 For
            accounting purposes, the transaction has been accounted for as a reverse
            acquisition under the purchase method of accounting. Accordingly, IVI
            Communications, Inc. will be treated as the continuing entity for accounting
            purposes, and the financial statements presented herein are those of
            IVI
            Communications, Inc.
 
 On
            July
            1, 2004, the Company issued 4,500,000 shares of common stock to consultants
            as
            an S-8 stock issuance filed June 29, 2004. On July 1, 2004, the Company
            amended
            its Articles of Incorporation and pursuant to a board resolution, increased
            the
            authorized level of common stock from 50,000,000 to 100,000,000. In addition,
            the Company’s board of directors’ authorized a 2:1 stock split on July 2, 2004.
  7
 **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
          31, 2005 AND 2004 (UNAUDITED)**
 
 
 **NOTE
          2-**  **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Principles
          of Consolidation**
 
 The
          condensed consolidated financial statements include the accounts of the
          Company
          and its wholly owned subsidiaries. All significant inter-company accounts
          and
          transactions have been eliminated in consolidation.
 
 **Use
          of Estimates**
 
 The
          preparation of condensed consolidated financial statements in conformity
          with
          accounting principles generally accepted in the United States of America
          requires management to make estimates and assumptions that affect the reported
          amounts of assets and liabilities and disclosure of contingent assets and
          liabilities at the date of the financial statements and the reported amounts
          of
          revenues and expenses during the reporting period. Actual results could
          differ
          from those estimates.
 
 **Cash
          and Cash Equivalents**
 
 The
          Company considers all highly liquid debt instruments and other short-term
          investments with an initial maturity of three months or less to be cash
          or cash
          equivalents. There were no cash equivalents as of December 31, 2005 and
          2004.
 
 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 December 31, 2005, the Company had no deposits in excess of
          the
          insured limit.
 
 **Revenue
          Recognition**
 
 Internet
          service subscription revenues are recognized over the period that services
          are
          provided. The Company generally bills for Internet access service on the
          terms
          that range from one month to one year in advance. Monthly access fees are
          not
          prorated, and refunds are not given for partial months. Therefore, revenues
          for
          the first month of service paid in advance are recognized at the inception
          of
          the service month. Revenues for terms of service greater than one month
          that are
          paid in advance are deferred and amortized over the period in which the
          services
          are provided. Consulting revenues are recognized upon the service being
          provided. All equipment sales are final upon delivery of the
          merchandise.
 8
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Income
        Taxes**
 
 The
        Company has adopted the provisions of Statement of Financial Accounting
        Standards No. 109 (the Statement), Accounting for Income Taxes. The Statement
        requires an asset and liability approach for financial accounting and reporting
        for income taxes, and the recognition of deferred tax assets and liabilities
        for
        the temporary differences between the financial reporting bases and tax bases
        of
        the Company’s assets and liabilities at enacted tax rates expected to be in
        effect when such amounts are realized or settled.
 
 **Fair
        Value of Financial Instruments**
 
 The
        carrying amounts reported in the consolidated balance sheets for cash and
        cash
        equivalents, accounts receivable, accounts payable, accrued expenses and
        notes
        payable approximate fair value because of the immediate or short-term maturity
        of these financial instruments.
 
 **Advertising
        Costs**
 
 The
        Company expenses the costs associated with advertising as incurred. Advertising
        and expenses are included in general and administrative expenses in the
        condensed consolidated statements of operations for the nine months ended
        December 31, 2005 and 2004.
 
 **Equipment**
 
 Equipment
        is stated at cost. Depreciation is computed using the straight-line method
        over
        the estimated useful lives of the assets.
 
 When
        the
        assets are retired or otherwise disposed of, the costs and related accumulated
        depreciation are removed from the accounts, and any resulting gain or loss
        is
        recognized in income for the period. The cost of maintenance and repairs
        is
        charged to expense as incurred; significant renewals and betterments are
        capitalized. Deduction is made for retirements resulting from renewals or
        betterments.
 
 **Accounts
        Receivable**
 
 The
        Company conducts business and extends credit based on an evaluation of the
        customers’ financial condition, generally without requiring collateral. Exposure
        to losses on receivables is expected to vary by customer due to the financial
        condition of each customer. The Company monitors exposure to credit losses
        and maintains
        allowances for anticipated losses considered necessary under the circumstances.
        The allowance for doubtful accounts at December 31, 2005 is
        $93,996.
  9
 
 **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
            31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
            2-**  **SUMMARY
            OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Reclassifications**
 
 Certain
            amounts for the nine months ended December 31, 2004 have been reclassified
            to
            conform to the presentation of the December 31, 2005 amounts. The
            reclassifications have no effect on net income for the nine months ended
            December 31, 2004.
 
 **(Loss)
            Per Share of Common Stock**
 
 Historical
            net (loss) per common share is computed using the weighted average number
            of
            common shares outstanding. Diluted earnings per share (EPS) include additional
            dilution from common stock equivalents, such as stock issuable pursuant
            to the
            exercise of stock options and warrants. Common stock equivalents were
            not
            included in the computation of diluted earnings per share when the Company
            reported a loss because to do so would be antidilutive for periods
            presented.
 
 The
            following is a reconciliation of the computation for basic and diluted
            EPS:
  **December
                        31**
                    
                    **December
                        31****2005**
                    
                    **2004**Net
                        (loss)
                    $
                    (3,484,226
                    )
                    $
                    (1,372,790
                    )Weighted-average
                        common sharesOutstanding
                        (Basic)
                    
                    62,229,731
                    
                    
                    60,042,530Weighted-average
                        common stockEquivalentsStock
                        options
                    
                    -
                    
                    
                    -Warrants
                    
                    -
                    
                    
                    -Weighted-average
                        common sharesOutstanding
                        (Diluted)
                    
                    62,229,731
                    
                    
                    60,042,530
  Options
            and warrants outstanding to purchase stock were not included in the computation
            of diluted EPS for December 31, 2005 because inclusion would have been
            antidilutive. At December 31, 2005 and 2004, there were 527,705 and 527,705
            warrants, and 84,000 and 264,000 options available, respectively.
  10
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Goodwill
        and Other Intangible Assets**
 
 In
        June
        2001, the FASB issued Statement No. 142 “Goodwill and Other Intangible Assets”.
        This statement addresses financial accounting and reporting for acquired
        goodwill and other intangible assets and supersedes APB Opinion No. 17,
        Intangible Assets. It addresses how intangible assets that are acquired
        individually or with a group of other assets (but not those acquired in a
        business combination) should be accounted for in financial statements upon
        their
        acquisition. This Statement also addresses how goodwill and other intangible
        assets should be accounted for after they have been initially recognized
        in the
        financial statements. Management has determined that there has been no
        impairment of Goodwill as of December 31, 2005.
 
 **Stock-Based
        Compensation**
 
 Employee
        stock awards under the Company's compensation plans are accounted for in
        accordance with Accounting Principles Board Opinion No. 25 (“APB 25”),
“ *Accounting
        for Stock Issued to Employees* ”,
        and
        related interpretations. The Company provides the disclosure requirements
        of
        Statement of Financial Accounting Standards No. 123, “ *Accounting
        for Stock-Based Compensation* ”
(“SFAS
        123”), and related interpretations. Stock-based awards to non-employees are
        accounted for under the provisions of SFAS 123 and the Company has adopted
        the
        enhanced disclosure provisions of SFAS No. 148 “Accounting for Stock-Based
        Compensation- Transition and Disclosure, an amendment of SFAS No.
        123”.
 
 The
        Company measures compensation expense for its employee stock-based compensation
        using the intrinsic-value method. Under the intrinsic-value method of accounting
        for stock-based compensation, when the exercise price of options granted
        to
        employees is less than the estimated fair value of the underlying stock on
        the
        date of grant, deferred compensation is recognized and is amortized to
        compensation expense over the applicable vesting period. In each of the periods
        presented, the vesting period was the period in which the options were granted.
        All options were expensed to compensation in the period granted rather than
        the
        exercise date.
 
 The
        Company measures compensation expense for its non-employee stock-based
        compensation under the Financial Accounting Standards Board (FASB) Emerging
        Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
        for Equity Instruments that are Issued to Other Than Employees for Acquiring,
        or
        in Conjunction with Selling, Goods or Services* ”.
  11
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Stock-Based
        Compensation** **(Continued)**
 
 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.
 
 **Recent
        Accounting Pronouncements**
 
 On
        December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
        Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
        Payment* ”
(“SFAS
        123R”). SFAS 123R requires that compensation cost related to share-based payment
        transactions be recognized in the financial statements. Share-based payment
        transactions within the scope of SFAS 123R include stock options, restricted
        stock plans, performance-based awards, stock appreciation rights, and employee
        share purchase plans. The provisions of SFAS 123R, as amended, are effective
        for
        small business issuers beginning as of the next fiscal year after December
        15,
        2005. Accordingly, the Company will implement the revised standard in the
        first
        quarter of fiscal year 2006. Currently, the Company accounts for its share-based
        payment transactions under the provisions of APB 25, which does not necessarily
        require the recognition of compensation cost in the financial statements
        (note
        3(e)). Management is assessing the implications of this revised standard,
        which
        may materially impact the Company’s results of operations in the first quarter
        of fiscal year 2006 and thereafter.
  On
        December 16, 2004, FASB issued Statement of Financial Accounting Standards
        No.
        153, “ *Exchanges
        of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for
        Non-monetary Transactions* ”
("SFAS
        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.
  12
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Recent
        Accounting Pronouncements** **(Continued)**
 
 Under
        SFAS 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. SFAS 153 is effective for non-monetary transactions in fiscal periods
        that
        begin after June 15, 2005. The Company does not anticipate that the
        implementation of this standard will have a material impact on its financial
        position, results of operations or cash flows.
 
 **NOTE
        3-**  **INSTALLMENT
        DEBT**
 
 Installment
        debt consists of approximately 11 notes for various pieces of equipment.
        The
        Company has not reflected the asset value on the books because the assets
        are
        considered to have no value remaining.
 
 These
        assets are however collateral for the debt. The Company has reflected these
        balances in the condensed consolidated balance sheet as installment debt
        and in
        accounts payable. The portion in accounts payable represents the amounts
        overdue, and the portion in installment debt represents the amounts still
        due
        under the agreements.
 
 The
        installment debt liability at December 31, 2005 is $5,732, all of which is
        current.
 
 Installment
        debt also consists of two subsidiary equipment leases, which are reflected
        in
        fixed assets. The liability is $73,388 at December 31, 2005, of which $24,343
        is
        current and $49,045 is due through fiscal 2009.
 
 **NOTE
        4-**  **NOTES
        PAYABLE**
 
 The
        Company borrowed a total of $1,077,955 from 22 different individuals during
        1999
        through the present, at interest rates ranging from 7-12%, with no collateral
        and payment terms of 2 or 3 years. As of December 31, 2005, all amounts unpaid
        are overdue. As of December 31, 2005 the balance of the note payable was
        $767,311 and the accrued interest totaled $542,777. These amounts are reflected
        as current liabilities in the condensed consolidated balance sheet.
  13
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 
 **NOTE
        4-**  **NOTES
        PAYABLE (continued)**
 
 In
        accordance with the purchase agreement between the Company and Internet Business
        Consulting and AppState.net, LLC, the Company entered into two separate note
        agreements.
 
 The
        Company agrees to make 12 monthly payments of $8,334 with the first payment
        due
        with the signing of the agreement. The Company has made 9 payments in fiscal
        2006 and has a remaining balance of $16,668. The Company also entered into
        an
        agreement to make 24 payments of $20,000 all due no later than the 1st day
        of
        the month following completion of IBC’s and AppState’s audits (April 2005) and
        then on the 1st day of each subsequent month thereafter until paid in full.
        IBC
        and AppState may, at their option up and until all payments have been made,
        have
        any or all of this paid as part of an employment contract with James Hollis,
        the
        owner of IBC, as compensation. The Company has made 9 payments in fiscal
        2006
        and has a remaining balance of $280,000 with $40,000 reflected as a long-term
        liability and $240,000 as current.
 
 **NOTE
        5-**  **CONVERTIBLE
        DEBENTURES**
 
 The
        Company sold units of securities for $984,428 to approximately 100 individuals
        during 1998 and 1999. Each unit consisted of one share of common stock and
        one
        debenture with interest at 12%, no collateral, and an original due date of
        December 2001. The debentures are convertible at any time at $7.50 per share.
        In
        late 1999 to early 2000, the Company converted $373,128 in debentures into
        common stock. In mid-2002, the Company offered conversions at $.40 per share
        and
        32 individuals with a face amount of $274,550 plus accrued interest of $101,254
        accepted this conversion to 939,511 shares of common stock.
 
 The
        Company sold units of securities for $215,000 to 14 individuals/entities
        in
        December 2004. The debentures accrue interest at 10% per annum and are due
        December 31, 2005. The conversion price is $.10 per common share. All 14
        debentures were converted December 31, 2005, and $215,000 is shown as “Liability
        for stock to be Issued” as a current liability. The interest has been recorded
        each quarter. Additionally, the Company sold a $25,000 debenture to 1 entity
        in
        January 2005. This debenture, which was for services rendered, also accrues
        interest at 10% per annum and is due January 31, 2006. The conversion price
        is
        $.10 per common share. This debenture has not been converted as of
        January31,2006
  14
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
        6-**  **STOCKHOLDERS’
        DEFICIT**
 
 **Common
        Stock**
 
 As
        of
        December 31, 2005, the Company has 100,000,000 shares of common stock
        authorized, and 56,568,974 issued and outstanding.
 
 The
        following details the stock transactions for the nine months ended December
        31,
        2005:
 
 On
        April
        22, 2005 after the contractual obligation had been fulfilled, the Company
        issued
        2,574,312 shares of common stock in connection with the acquisition of assets
        from James Hollis. The original agreement called for a cash payout of $580,000
        with the issuance of two (2) separate financing agreements (See Note 5) and
        the
        issuance of said shares on a dollar for dollar basis.
 
 During
        the nine months ended September 30, 2005, 2,500,000 shares were issued for
        exercise of options, 350,000 shares were issued for services, 6,130,827 shares
        were cancelled for shares issued in 2004 when the London Investment Firm
        did not
        receive trading approval and all shares were returned, and 308,541 shares
        were
        cancelled for services provided in conjunction with the London Investment
        Firm
        stock exchange. The shares have been retroactively cancelled to the date
        of
        original issuance.
 
 During
        the nine months ended December 31, 2005, 1,500,000 shares were issued for
        exercise of options, 3,249,534 shares were issued for services, and 13,705,189
        shares were returned and cancelled as part of the sale of the Company’s interest
        in Broadspot World Wide Wireless.
 
 **Preferred
        Stock**
 
 The
        Company has 5,000,000 shares of preferred stock authorized and 0 shares of
        preferred stock issued and outstanding as of December 31, 2005 and 2004,
        respectively.
 
 **NOTE
        7-**  **GOING
        CONCERN**
 
 As
        shown
        in the accompanying consolidated financial statements the Company has sustained
        net operating losses for the nine months ended December 31, 2005 and the
        years
        ended March 31, 2005 and 2004, and has sustained large accumulated deficits.
        In
        addition, the Company has sold off its operations in Colorado, Oregon and
        California, and was operating essentially as a shell company up until January
        2005, when it acquired Internet Business Consulting/AppState.net, LLC. This
        raises substantial doubt about the Company’s ability to continue as a going
        concern.
  15
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
        7-**  **GOING
        CONCERN (Continued)**
 
 Management
        has restructured the Company and is continuing to search for more profitable
        internet and communications related service companies to acquire.
 
 The
        Company’s future success is dependent upon its ability to achieve profitable
        operations and generate cash from operating activities, and upon additional
        financing. There is no guarantee that the Company will be able to raise enough
        capital or generate revenues to sustain its operations.
 
 The
        condensed consolidated financial statements do not include any adjustments
        relating to the recoverability or classification of recorded assets and
        liabilities that might result should the Company be unable to continue as
        a
        going concern.
 
 **NOTE
        8-**  **PROVISION
        FOR INCOME TAXES**
 
 Deferred
        income taxes will be determined using the liability method for the temporary
        differences between the financial reporting basis and income tax basis of
        the
        Company’s assets and liabilities. Deferred income taxes will be measured based
        on the tax rates expected to be in effect when the temporary differences
        are
        included in the Company’s consolidated tax return. Deferred tax assets and
        liabilities are recognized based on anticipated future tax consequences
        attributable to differences between financial statement carrying amounts
        of
        assets and liabilities and their respective tax bases.
 
 At
        December 31, 2005, net deferred tax assets approximated the
        following:
 
 Deferred
                  tax assets
              
              $
              8,490,000Less:
                  valuation allowance
              
              
              (
                  8,490,000
              )$
              -0-
              )
 
 At
        December 31, 2005, the Company had accumulated deficits approximating
        $25,000,000 available to offset future taxable income through 2023. 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**
 
 As
        of
        June 30, 2004, the Company was party to one lawsuit that is an appeal of
        a
        previous lawsuit the Company had won. This trial was set for April 4, 2004,
        but
        was subsequently rescheduled. On January 10, 2005, a confidential settlement
        was
        reached in this lawsuit, and all parties have dismissed their
        complaint.
  16
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 **NOTE
        9-**  **LITIGATION/ARBITRATION** **(CONTINUED)**
 
 The
        Company is also involved in arbitration with one of their major vendors that
        had
        been set for November 15, 2004. The major vendor has claimed the Company
        owes
        them in excess of $900,000, and the Company had previously filed a complaint
        against this vendor for breaches of contract, fraud, misrepresentation, unfair
        business practices, injunction and accounting. Pursuant to mutual agreement
        of
        the parties, their respective disputes and claims are now pending resolution
        through binding arbitration. On December 1, 2004, the Company reached a
        confidential settlement and all parties have dismissed their
        complaint.
 
 The
        Company had another arbitration hearing set for November 15, 2004 with another
        vendor over charges the Company was billed for improper termination fees.
        The
        Company has not paid these fees due to these allegations. On February 23,
        2005,
        the Company reached a confidential settlement, and all parties have dismissed
        their claims
 
 The
        Company is currently negotiating settlements with vendors and debt holders
        for
        amounts currently outstanding. As of December 31, 2005, the Company has
        recognized the full liability for all amounts that are due.
 
 On
        December 1, 2004, a judgment was entered against Internet Ventures, Inc.,
        the
        predecessor Company, in favor of Catherine and Joe Santistevan in the amount
        of
        $1,367,500. After discussions with legal counsel, the Company believed the
        amount of the judgment would be mitigated in a full hearing on the matter,
        which
        the company intended to vigorously pursue. The Company currently has $408,487
        recorded in notes and notes interest payable. The judgment was under submission
        to be set aside by the Judge of the Superior Court of San Joaquin County,
        Stockton, CA. On July 14, 2005, the Company received notice from the Superior
        Court of San Joaquin that the judgment was upheld. The Company has appealed
        this
        decision, and in addition, Company legal counsel is currently in negotiations
        with plaintiff’s counsel to settle the matter amicably. A contingent liability
        in the amount of $934,136 has been established.
 
 The
        Company has seven default judgments against it for a total amount of $163,367.
        Five of these judgments have settlements in place with total balances of
        $85,778. The amounts are recorded in accounts payable.
 
 One
        judgment in the amount of $62,328 is in favor of an equipment leasing company
        and is against a wholly owned subsidiary of Internet Ventures, Inc. This
        is
        recorded under accounts payable and installment debt.
 
 One
        judgment in the amount of $15,261 is in favor of a debenture holder against
        Internet Ventures, Inc. The amount is recorded in debentures payable, debenture
        interest payable, and accounts payable.
  17
  **IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(CONTINUED)**
 **DECEMBER
        31, 2005 AND 2004 (UNAUDITED)**
 
 
 **NOTE
        9-**  **LITIGATION/ARBITRATION** **(CONTINUED)**
 
 On
        October 7, 2005, a Complaint for Damages was filed in Superior Court of the
        State of California, County of San Joaquin, Case No. CV027700, by Annette
        S.
        Paoletti as Successor Trustee of the Clare P. Evelyn B. McEnerney Family
        Trust.
        No dollar amount was stated. A note payable and accrued interest in the amount
        of $234,029 is recorded in notes payable and interest on notes payable.
        Company’s counsel has answered the complaint and is currently in negotiations
        with plaintiff’s counsel to settle the matter amicably.
  18


ITEM
      2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:




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





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




OVERVIEW





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





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





On
      January 31, 2005, we completed the purchase of Internet Business Consulting,
      Inc. ("IBC") and AppState.Net, LLC ("AppState") from James R. Hollis by
      acquiring 100% of the stock of IBC and AppState. In consideration for the IBC
      and AppState stock, we issued an aggregate of 2,674,312 shares of common stock
      and agreed to pay an aggregate of $580,000 over two years. IBC is a leading
      provider of turnkey wireless networks that has the expertise required to
      engineer, install, and support wireless applications and solutions. AppState
      is an Internet Service Provider ("ISP") founded in July 1999. The combined
      audited gross revenues in 2004 for IBC and AppState equaled
      $2,574,312.




19





In
      February 2005, we launched its nationally branded fixed wireless broadband
      service, Lickity-SplitSM, at AppState.





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 December 31, 2005 Compared With Three Months Ended December 31,
      2004.





Revenue
      for the quarter ended December 31, 2005 was $633,350 compared to $750 for the
      quarter ended December 31, 2004. This increase was due primarily to revenues
      of
      $590,250 from the operations of IBC and AppState which were acquired in the
      fourth quarter of the year ended March 31, 2005.





IBC's
      revenue for the quarter ended December 31, 2005 consisted of equipment sales
      of
      $499,342, consulting services of $23,500, and other miscellaneous services
      of $7,390. AppState posted revenue for internet services of $60,018 for
      the
      quarter ended December 31, 2005. We also received revenue of $43,100 as
      management and consulting fees Cost of operations for the quarter ended December
      31, 2005 were $432,639 compared to $0 for the quarter ended December 31, 2004.
      This increase was due to the operations of IBC and AppState which were acquired
      in the fourth quarter of the year ended March 31, 2005. Cost of operations
      includes the cost of wireless equipment and services sold by IBC and the cost
      of
      wireless equipment and internet data services for AppState.





General
      and administrative expenses for the quarter ended December 31, 2005 were
      $1,736,636 compared to $372,982 for the quarter ended December 31, 2004. The
      largest components of expense for the quarter ended December 31, 2005 consisted
      of employee compensation of $202,488, legal fees of $43,288, and consulting
      expenses of $1,420,199, of which $1,392,950 was paid in stock. These consultants
      were engaged to assist us to obtain new business, provide introductions to
      suitable merger and acquisition candidates, and facilitate introductions to
      various Investment Bankers, Broker Dealer Organizations, Exchanges’ and
      Registered Associations’ market participants, Brokerage Firms, Financial
      institutions, and Money Managers.





Selling
      expenses for the quarter ended December 31, 2005 were $309,068, compared to
      selling expenses of $0 for the quarter ended December 31, 2004. The 2005 selling
      expenses consisted of public relations expenses of $318,668, offset by a
      reclassification of advertising and marketing expenses for IBC.





Depreciation
      expense was $3,870 for the quarter ended December 31, 2005, compared
      to depreciation expense of $61 for the quarter ended December 31, 2004. This
      increase was due to depreciation of equipment at AppState.





We
      incurred interest expenses of $93,978 in the quarter ended December 31,
      2005,
      compared to $55,659 for the quarter ended December 31, 2004. This increase
      was due to interest on additional notes payable and debentures.




20





Due
      to
      the above factors, our net loss for the quarter ended December 31, 2005
      increased to $1,953,170 from a net loss of $427,952 for the quarter ended
      December 31, 2004. Basic and diluted loss per share for the quarter ended
      December 31, 2005 was $0.03, compared to a loss of $0.01 for the quarter ended
      December 31, 2004.




Nine
      Months Ended December 31, 2005 Compared With Nine Months Ended December 31, 2004.





Revenue
      for the nine months ended December 31, 2005 was $2,075,450, compared to $25,250
      for the nine months ended December 31, 2004. Revenue of $1,863,500 was a result
      of
      the operations of IBC and AppState which were acquired in the fourth quarter
      of the year ended March 31, 2005.





IBC
      posted revenue for equipment sales of $1,603,875, consulting services of $50,640,
      and other miscellaneous services of $46,769 for the nine months ended December
      31, 2005. AppState posted revenue for internet services of $160,378 and other
      miscellaneous services of $1,838 during the same period. We received revenue
      of
      $32,250 for consulting fees, and management fees of $179,700 for services
      provided to Broadspot World Wide Wireless, Inc. ($112,450 were booked in arrears
      for 2004, and $67,250 for the current fiscal year).





Cost
      of
      operations for the nine months ended December 31, 2005 were $1,395,810, compared
      to $0 for the nine months ended December 31, 2004. This increase was due
      to
      the operations of IBC and AppState which were acquired in the fourth quarter
      of the year ended March 31, 2005. Cost of operations includes the cost of
      wireless equipment and services sold by IBC and the cost of wireless equipment
      and internet data services for AppState.




General
      and administrative expenses for the nine months ended December 31, 2005 were
      $2,822,899, compared to $1,225,077 for the nine months ended December 31, 2004.
      The
      largest components of expense for the nine months ended December 31, 2005
      were
      employee compensation of $605,966, legal fees of $83,010, and consulting
      expenses of $1,801,848, of which $1,730,450 was paid in stock and stock options.
      These consultants were engaged to assist us to obtain new business, provide
      introductions to suitable merger and acquisition candidates, and facilitate
      introductions to various Investment Bankers, Broker Dealer Organizations,
      Exchanges’ and Registered Associations’ market participants, Brokerage Firms,
      Financial institutions, and Money Managers.





Selling
      expenses for the nine months ended December 31, 2005 were $322,624 compared
      to selling expenses of $0 for the nine months ended December 31, 2004. This
      increase was due to IBC and AppState advertising, marketing, and public
      relations expenses of $318,667.





Depreciation
      expense for the nine months ended December 31, 2005 was $17,740, compared
      to depreciation expense of $61 for the nine months ended December 31, 2004.
      This increase was due to depreciation of equipment at AppState.





We
      received other income of $166,411 in the nine months ended December 31,
      2005,
      compared to $0 for the nine months ended December 31, 2004. This increase
      was due to the payment of $80,000 for our interest in Broadspot World Wide
      Wireless, and, after management’s evaluation, an $86,304 reduction in the
      allowance for bad debt set up for IBC in the fiscal year ended March 31,
      2005.




21





We
      incurred expense of $934,136 for litigation damages and settlement costs in
      the
      nine months ended December 31, 2005, compared to $0 for the nine months ended
      December 31, 2004. This increase was due to a contingent liability set up for
      a
      default judgment (see Part II, Item I, Legal Proceedings).




We
        incurred interest expense of $221,900 in the nine months ended December
        31, 2005, compared to $172,902 for the nine months ended December 31, 2004.
        This increase was due to interest on additional notes payable and
        debentures.





Due
      to
      the above factors, we had a net loss for the nine months ended December 31,
      2005
      of $3,484,226, compared to a net loss of $1,372,790 for the nine months ended
      December 31, 2004.





Basic
      and
      diluted loss per share for the nine months ended December 31, 2005 was $0.06,
      compared to a loss of $0.02 for the nine months ended December 31,
      2004.





LIQUIDITY
      AND CAPITAL RESOURCES





In
      the
      nine months ended December 31, 2005, we continued to spend cash to fund our
      operations. Cash used by operating activities for the nine months ended December
      31, 2005 equaled $ 493,727, and consisted principally of a net loss of
      $3,484,226 and a decrease in inventory of $118,958, offset primarily by $2,143,824
      provided by stock issued for services and compensation, an increase of $64,098
      in accounts receivable, and an increase in accounts payable and accrued
      liabilities of $908,411. For the comparable period in 2004, cash used by operating
      activities equaled $383,320 and consisted of a net loss of $1,372,790 and an
      increase in other current assets of $36,500, offset primarily by $745,859 in
      stock issued for services and an increase in accounts payable and accrued
      liabilities of $280,050.





We
      used
      net cash of $27,450 in investing activities for the nine months ended December
      31, 2005, due to the purchase of fixed assets at AppState. For the comparable
      period in 2004, net cash of $1,840 was used for the purchase of fixed
      assets.





Cash
      flow
      from financing activities for the nine months ended December 31, 2005 produced
      a net increase in cash of $ 432,099 consisting principally of $ 768,747 from
      the
      issuance of common stock, $552,311 in proceeds from convertible debentures,
      and
      $170,844 in proceeds from loans by officers, offset by an increase of $1,023,855
      in payments on notes payable and $35,948 in payments on installment note
      payable. Cash flow from financing activities for the nine months ended December
      31, 2004 produced a net increase in cash of $469,635 which resulted from
      $305,000 in proceeds from the issuance of common stock, $215,000 in proceeds
      from convertible debentures, offset by $19,842 in payments on an installment
      note payable and $30,523 in payments on notes payable.





As
      of
      December 31, 2005, we had cash and cash equivalents amounting to $ 34,993,
      a
      decrease of $ 89,078 from the balance at March 31, 2005. Our working capital
      deficit increased to $ 5,008,650 at December 31, 2005 from $4,618,372 at
      September 30, 2005 and from $4,757,796 at June 30, 2005, and decreased from
      $6,435,549 at March 31, 2005.




22





As
      of
      December 31, we had an accumulated operating deficit of $24,970,778 and negative
      stockholders' equity of $1,773,831.





Our
      principal source of operating capital has been provided by the sale of its
      stock
      and securities, and since January 31, 2005, from the revenue from operations
      of
      IBC and AppState. In August 2004, we initiated a private offering of common
      stock. Twenty-two accredited investors purchased an aggregate of 2,178,558
      restricted shares for $305,000 and one accredited investor purchased 300,000
      restricted shares for $30,000. In December 2004, we sold 10% Convertible
      Debentures to 14 accredited investors for aggregate proceeds of $215,000. The
      Convertible Debentures accrue interest at 10% and are convertible into an
      aggregate of 2,365,000 shares of common stock, at a conversion price of $0.10
      per share, in December 2005. All of these debentures were converted in December
      2005, although the stock was not issued until January 2006.





We
      anticipate incurring expenditures for acquisitions in excess of $1,000,000
      to
      expand our operations during the next twelve months, and believe that the
      current cash flows generated from revenues will not be sufficient to fund this
      anticipated expansion. We will require additional funding to finance our
      operations through private and public debt or equity offerings. However, there
      is no assurance that we can obtain such financing. We also anticipate receiving
      recurring revenues from ISP management services but no management service
      contracts have been executed at this time. There can be no assurance that we
      will secure these contracts. As shown in the accompanying consolidated financial
      statements, we have sustained net operating losses for the nine months ended
      December 31, 2005 and the years ended March 31, 2005 and 2004, and have a large
      accumulated stockholders' deficit. In addition, we sold our operations in
      Colorado, Oregon and California, and were operating as a shell company up until
      January 2005, when we acquired IBC and AppState. This raises substantial doubt
      about the our ability to continue as a going





On
      March
      31, 2004, we entered into a stock exchange agreement with Broadspot World Wide
      Wireless, Inc. ("BWWW"). We exchanged 9,000,000 shares of our common stock
      for
      23,000,000 shares of BWWW common stock, resulting in 76% ownership of BWWW.
      A
      2:1 split increased the number of IVI common shares held by BWWW to 18,000,000.
      In March of 2005, we entered into an agreement with a Nevada investment group
      providing for the purchase of the shares of BWWW for an aggregate purchase
      price
      of $200,000. Under the terms of that agreement, 13,734,669 shares of IVI common
      stock held by BWWW have been returned to the Company and cancelled.





In
      the
      second quarter of fiscal 2005, we received $400,000 on the exercise of 3,250,000
      options with exercise prices ranging from $.075 to $.25 per share.





In
      the
      third quarter of fiscal 2005, we received $375,000 on the exercise of 1,250,000
      options with exercise prices ranging from $.25 to $.35 per share. We also
      received $112,500 in a short term loan.




23





Risk
      Factors and Cautionary Statements




WE
      HAVE
      HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE, WHICH MEANS
      THAT
      WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING




Prior
      to
      the acquisitions of IBC and AppState, we operated as a shell company with no
      significant operations. Since then, we have incurred substantial losses from
      operations, and expect to incur net losses for the foreseeable future. We
      incurred a net loss of $3,484,226 for the nine months ended December 31, 2005.
      If our growth is slower than anticipated or operating expenses exceed
      expectations, losses will be significantly greater. We may never achieve
      profitability. Primarily as a result of these recurring losses, and because
      we
      operated as a shell company prior to the acquisition of IBC and AppState, our
      independent certified public accountants modified their report on the March
      31,
      2005 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.




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, 2005, we received an aggregate of $335,000 from the issuance of common
      stock. During the nine months ended December 31, 2005, we received an aggregate
      of $600,000 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.




24





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





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





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





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





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





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





The
      wireless communications industry has experienced consolidation of participants,
      and this trend may continue. If wireless carriers consolidate with companies
      that utilize technologies that are similar to or compete with our wireless
      technology, our proportionate share of the emerging market for wireless technologies
      may be reduced or eliminated. This reduction or elimination of our market
      share could reduce our ability to obtain profitable operations and could even
      cause us to reduce or cease operations. We believe that our ability to compete
      successfully in the Internet services market depends on a number of factors,
      including market presence; the adequacy our member and technical support
      services; the capacity, reliability and security of our network infrastructure;
      the ease of access to and navigation of the Internet provided
      by our services; our pricing policies, our competitors and suppliers; the timing
      of introductions of new services; our ability to support existing and emerging
      industry standards; and industry and general economic trends. There can be
      no
      assurance that we will have the financial resources, technical expertise or
      marketing and support capabilities to compete successfully.





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




25





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 bandwidthB 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.




26





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.





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.




27





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.




28




ITEM
      3. CONTROLS AND PROCEDURES




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





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








PART
      II -
      OTHER INFORMATION





ITEM
      1. LEGAL PROCEEDINGS





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





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





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




29




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




In
      the
      three months ended December 31, 2005, we issued 1,500,000 shares of our common
      stock to a consultant as compensation for the performance of services valued
      at
      $779,250. The issuance was made in reliance on Section 4(2) of the Securities
      Act, and was made without general solicitation or advertising. The Recipient
      was a sophisticated investor with access to all relevant information necessary
      to evaluate the investments, and represented to us that the shares were
      being acquired for investment purposes.




ITEM
      3. DEFAULTS UPON SENIOR SECURITIES




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





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




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





ITEM
      5. OTHER INFORMATION.




On
      September 8, 2005, IVI Communications, Inc. received approval from the NASD and
      began
      trading on the OTCBB (IVCM.OB).




30




ITEM
      6. EXHIBITS




EXHIBITNUMBER
              
              TITLE
                OF
                EXHIBIT31.1
              
              Rule
                  13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer of
                  the
                  Registrant31.2
              
              Rule
                  13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer of
                  the
                  Registrant32.1
              
              Section
                  906 Certification by Chief Executive Officer32.2
              
              Section
                  906 Certification by Chief Financial
                  Officer


SIGNATURES








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








Date:
                February 21, 2006
              By:
              /s/ Nyhl
                HensonNyhl
                Henson
                Chief
                  Executive Officer


Date:
                February 21, 2006
              By:
              /s/ Charles
                RoodenburgCharles
                Roodenburg
                Chief
                  Financial Officer
  31