**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-QSB**







(Mark
      one)


[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGEACT
      OF
      1934:For
      the
      period ended September 30, 2007





[ 
]
      TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIESEXCHANGE
      ACT OF 1934:For
      the
      transition period from _________to_________.




**000
      32797**


Commission
      File Number




**IVI
      COMMUNICATIONS, INC.**


(Exact
      name of registrant as specified in its charter)




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




**IVI
      COMMUNICATIONS, INC.**


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


(Address
      of principal executive offices) (Zip Code)





**(707)
      444-6617**


(Registrant's
      Telephone Number, Including Area Code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
      the preceding 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing requirements
      for the past 90 days. Yes [X] No (  )





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act) Yes [  ] No [X]





The
      number of shares outstanding of the registrant's common stock as
      of September 30, 2007 was
      141,605,242.




1




**IVI
      COMMUNICATIONS, INC.**


**FORM
      10-QSB**




**Table
      of Contents**




**ITEM NO.**
            **DESCRIPTION**
            **PAGE****PART
                I - FINANCIAL
                INFORMATION**Item 1.
            Financial Statements
            3Condensed Consolidated
              Balance
              Sheet as of September 30, 2007.
            F-1Condensed
              Consolidated Statements of Operations for the SixMonths and Three Months Ended September 30, 2007 and
              2006.
            F-2Condensed Consolidated
              Statements of Cash Flows for the Six Months Ended
              September 30, 2007 and 2006.
            F-3Notes to Condensed Consolidated
              Financial Statements (Unaudited)
            F-4Item 2.
            Management's Discussion
              and
              Analysis of Financial Condition and
              Results of Operations
            4Item 3.
            Controls and Procedures
            16**PART
                II - OTHER
                INFORMATION**Item 1.
            Legal Proceedings
            17Item 2.
            Unregistered Sales of
              Equity
              Securities and Use of Proceeds
            17Item 3.
            Defaults Upon Senior
              Securities
            18Item 4.
            Submission of Matters
              to a Vote
              of Security Holders
            18Item 5.
            Other Information
            18Item 6.
            Exhibits
            18Signatures
            
            19




2




**PART
        I - FINANCIAL INFORMATION**
 
 
 **ITEM
        1.   FINANCIAL STATEMENTS**






**IVI
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **INDEX
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2007 AND 2006**
 **(UNAUDITED)**
  Condensed
                  Consolidated Balance Sheet as of September 30, 2007
                  (Unaudited)
              F-1Condensed
                  Consolidated Statements of Operations for the Six Months and Three
                  Months
              F-2Ended  September
                  30, 2007 and 2006 (Unaudited)Condensed
                  Consolidated Statements of Cash Flows for the Six Months Ended
              F-3September
                  30, 2007 and 2006 (Unaudited)Notes
                  to Condensed Consolidated Financial Statements (Unaudited)
              F-4
  3




**IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES****CONDENSED
                  CONSOLIDATED BALANCE
                  SHEET****(UNAUDITED)****SEPTEMBER
                  30,
                  2007****ASSETS****CURRENT
                  ASSETS**Cash
                  and
                  cash equivalents
              
              $
              2,249Accounts
                  receivable, net of allowance of $110,042
              
              
              112,056Other
                  current assets
              
              
              5,854**Total
                  current
                  asset**
              
              
              120,159Fixed
                  assets, net of $33,695 accumulated depreciation
              
              
              60,427**OTHER
                  ASSETS**Goodwill
              
              
              674,934**TOTAL
                  ASSETS**
              
              $
              855,520**LIABILITIES
                  AND STOCKHOLDERS'
                  DEFICIT****CURRENT
                  LIABILITIES**Current
                  portion of notes payable
              
              $
              123,900Current
                  portion of obligations under capital lease
              
              
              15,946Accounts
                  payable and accrued liabilities
              
              
              2,351,405Deferred
                  revenue
              
              
              1,649Liability
                  for stock payable
              
              
              398,949Derivative
                  liability
              
              
              377,852Convertible
                  debentures, net of discount $205,430
              
              
              455,570Warrant
                  liability
              
              
              211,272**Total
                  current
                  liabilities**
              
              
              3,936,543**LONG-TERM
                  LIABILITIES**Obligations
                  under capital lease, net of current portion
              
              
              26,567**TOTAL
                  LIABILITIES**
              
              
              3,963,110**COMMITMENTS
                  AND
                  CONTINGENCIES****STOCKHOLDERS'
                  DEFICIT**Preferred
                  stock, $.001 par value; 5,000,000 shares
                  authorized;4,000,000  issued
                  and outstanding series A
              
              
              4,0001,000,000  issued
                  and outstanding series B
              
              
              1,000Common
                  stock, $.001 par value; 400,000,000  shares
                  authorized;141,605,242
                  issued and outstanding
              
              
              141,604Additional
                  paid-in capital
              
              
              23,289,694Accumulated
                  deficit
              
              
              (26,543,888
              )**Total
                  stockholders'
                  deficit**
              
              
              (3,107,590
              )**TOTAL
                  LIABILITIES AND
                  STOCKHOLDERS' DEFICIT**
              
              $
              855,520




See
        accompanying notes to condensed
        consolidated financial statements.




F-1




**IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES****CONDENSED
                  CONSOLIDATED STATEMENTS
                  OF OPERATIONS****(UNAUDITED)****FOR
                  THE SIX MONTHS AND THREE
                  MONTHS ENDED SEPTEMBER 30, 2007 AND
                  2006****SIX
                      MONTHS
                      ENDED**
                    **SEPTEMBER
                        30**
              
              
              **THREE
                    MONTHS
                    ENDED**
                  **SEPTEMBER
                      30****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006****OPERATING
                  REVENUE**
              
              $
              171,517
              
              
              $
              1,123,226
              
              
              $
              80,044
              
              
              $
              461,103**COST
                  OF
                  OPERATIONS**
              
              
              105,867
              
              
              
              776,635
              
              
              
              42,299
              
              
              
              348,782**GROSS
                  PROFIT**
              
              
              65,650
              
              
              
              346,591
              
              
              
              37,745
              
              
              
              112,321**OPERATING
                  EXPENSES**Selling
              
              
              696
              
              
              
              7,092
              
              
              
              -
              
              
              
              4,488General
                  and
                  administrative
              
              
              756,877
              
              
              
              937,460
              
              
              
              287,283
              
              
              
              504,831Depreciation
                  /
                  Amortization
              
              
              121,331
              
              
              
              58,326
              
              
              
              41,959
              
              
              
              30,096**Total
                  operating
                  expenses**
              
              
              878,904
              
              
              
              1,002,878
              
              
              
              329,242
              
              
              
              539,415**OPERATING
                  (LOSS)**
              
              
              (813,254
              )
              
              
              (656,287
              )
              
              
              (291,497
              )
              
              
              (427,094
              )**OTHER
                  INCOME
                  (EXPENSES)**Other
                  income
              
              
              176,163
              
              
              
              1,032,913
              
              
              
              166,532
              
              
              
              1,003,323Gain
                  (Loss) on Revaluation of Derivatives
              
              
              (232,292
              )
              
              
              164,729
              
              
              
              (145,914
              )
              
              
              (4,314
              )Other
                  expense
              
              
              (78
              )
              
              
              -
              
              
              
              -
              
              
              
              -Interest
                  expense
              
              
              (343,058
              )
              
              
              (176,659
              )
              
              
              (113,430
              )
              
              
              (96,483
              )Interest
                  income
              
              
              -
              
              
              
              211
              
              
              
              -
              
              
              
              175**Total
                  other income
                  (expense)**
              
              
              (399,265
              )
              
              
              1,021,194
              
              
              
              (92,812
              )
              
              
              902,701**NET
                  INCOME (LOSS) BEFORE PROVISION
                  FOR INCOME TAXES**
              
              
              (1,212,519
              )
              
              
              364,907
              
              
              
              (384,309
              )
              
              
              475,607Provision
                  for income taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -**NET
                  INCOME (LOSS) APPLICABLE TO
                  COMMON SHAREHOLDERS**
              
              $
              (1,212,519
              )
              
              $
              364,907
              
              
              $
              (384,309
              )
              
              $
              475,607**BASIC
                  INCOME (LOSS) PER
                  SHARE**
              
              $
              (0.01
              )
              
              $
              0.00
              
              
              $
              (0.00
              )
              
              $
              0.01**DILUTED
                  INCOME (LOSS) PER
                  SHARE**
              
              $
              (0.01
              )
              
              $
              0.00
              
              
              $
              (0.00
              )
              
              $
              0.00**WEIGHTED
                  AVERAGE NUMBER OF COMMON
                  SHARES OUTSTANDING****BASIC**
              
              
              126,431,998
              
              
              
              75,919,983
              
              
              
              134,387,851
              
              
              
              73,876,832**DILUTED**
              
              
              126,431,998
              
              
              
              106,447,688
              
              
              
              134,387,851
              
              
              
              104,404,537




See
        accompanying notes to condensed
        consolidated financial statements.




F-2




**IVI
                  COMMUNICATIONS, INC. AND
                  SUBSIDIARIES****CONDENSED
                  CONSOLIDATED STATEMENTS
                  OF CASH FLOWS****(UNAUDITED)****FOR
                  THE SIX MONTHS ENDED SEPTEMBER
                  30, 2007 AND 2006******
              **2007**
              
              
              **2006****CASH
                  FLOW FROM OPERATING
                  ACTIVITIES**Net
                  Income
                  (Loss)
              
              $
              (1,212,519
              )
              
              $
              364,907**Adjustments
                  to
                  reconcile net income (loss) to net cash****used
                  in operating
                  activities:**Depreciation
              
              
              14,548
              
              
              
              24,993Amortization
                  of debt discount
              
              
              106,785
              
              
              
              33,333Amortization
                  of prepaid consulting fees
              
              
              333,331
              
              
              
              -Gain
                  on forgiveness of debt
              
              
              (163,676
              )
              
              
              -Net
                  beneficial interest on debt conversions
              
              
              287,875
              
              
              
              8,502Stock
                  issued for services
              
              
              9,100
              
              
              
              160,417Loss
                  (gain)  on revaluation of derivatives
              
              
              232,292
              
              
              
              (164,729
              )Provision
                  for doubtful accounts
              
              
              110,042
              
              
              
              -**Changes
                  in assets and
                  liabilities**Decrease
                  in accounts receivable, net
              
              
              22,341
              
              
              
              88,752Decrease
                  in inventory
              
              
              -
              
              
              
              58,600(Increase)
                  Decrease in other current assets
              
              
              595
              
              
              
              (25,953
              )Decrease
                  in other assets
              
              
              -
              
              
              
              6,513(Decrease)
                  Increase in accounts payable and accrued
                  liabilities
              
              
              716,712
              
              
              
              (473,566
              )(Decrease)
                  in acquisition contracts
              
              
              -
              
              
              
              (150,000
              )Decrease
                  in litigation settlement
              
              
              (448,675
              )
              
              
              -Decrease
                  in deferred revenue
              
              
              (873
              )
              
              
              (6,837
              )Total
                  adjustments
              
              
              1,220,397
              
              
              
              (439,975
              )**Net
                  cash used in operating activities**
              
              
              7,878
              
              
              
              (75,068
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES**Acquisition
                  of fixed assets
              
              
              (2,970
              )
              
              
              (29,690
              )**Net
                  cash used in investing activities**
              
              
              (2,970
              )
              
              
              (29,690
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES**Proceeds
                  from convertible debentures
              
              
              -
              
              
              
              397,500Payments
                  on installment note payable
              
              
              -
              
              
              
              (28,789
              )Payments
                  on notes payable
              
              
              -
              
              
              
              (300,000
              )Payments
                  on capital lease obligations
              
              
              (7,486
              )
              
              
              -Payments
                  on officer loans
              
              
              -
              
              
              
              (45,286
              )**Net
                  cash provided by (used in) financing activities**
              
              
              (7,486
              )
              
              
              23,425**NET
                  DECREASE IN****CASH
                  AND CASH EQUIVALENTS**
              
              
              (2,578
              )
              
              
              (81,333
              )**CASH
                  AND CASH EQUIVALENTS -****BEGINNING
                  OF PERIOD**
              
              
              4,827
              
              
              
              233,544**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              2,249
              
              
              $
              152,211**SUPPLEMENTAL
                  DISCLOSURE OF CASH
                  FLOW INFORMATION:**Cash
                  paid during the period for:Interest
                  paid
              
              $
              -
              
              
              $
              3,682Income
                  taxes
              
              $
              -
              
              
              $
              -**SUPPLEMENTAL
                  DISCLOSURE OF
                  NON-CASH INFORMATION:**Common
                  stock issued for prepaid
                  consulting fees, classified as equity
              
              $
              333,331
              
              
              $
              987,500Common
                  stock issued for debt
                  settlements and payables
              
              $
              58,512
              
              
              $
              -Common
                  stock issued for
                  services
              
              $
              6,100Debt
                  incurred for stock to be
                  issued
              
              $
              260,000
              
              
              $
              218,700Fixed
                  assets acquired for
                  debt
              
              $
              51,264
              
              
              $
              -Additional
                  paid-in capital
                  reclassified to warrant liability
              
              $
              211,272
              
              
              $
              -




See
        accompanying notes to condensed
        consolidated financial statements.




F-3




**IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                    1-**
                **ORGANIZATION
                    AND BASIS OF
                    PRESENTATION**
 The
        condensed consolidated unaudited interim financial statements included herein
        have been prepared, without audit, pursuant to the rules and regulations
        of the
        Securities and Exchange Commission (“SEC”).  The condensed
        consolidated financial statements and notes are presented as permitted on
        Form
        10-QSB and do not contain information included in the Company’s annual
        consolidated statements and notes. Certain information and footnote disclosures
        normally included in financial statements prepared in accordance with accounting
        principles generally accepted in the United States of America have been
        condensed or omitted pursuant to such rules and regulations, although the
        Company believes that the disclosures are adequate to make the information
        presented not misleading.  It is suggested that these condensed
        consolidated financial statements be read in conjunction with the March 31,
        2007
        audited financial statements and the accompanying notes
        thereto.  While management believes the procedures followed in
        preparing these condensed consolidated financial statements are reasonable,
        the
        accuracy of the amounts are in some respects dependent upon the facts that
        will
        exist, and procedures that will be accomplished by the Company later in the
        year.
 
 These
        condensed consolidated unaudited financial statements reflect all adjustments,
        including normal recurring adjustments which, in the opinion of management,
        are
        necessary to present fairly the consolidated operations and cash flows for
        the
        periods presented.
 
 The
        Company was formed in California in September 1995 to acquire traditional
        local
        and regional Internet access Service Providers (ISP’s) in the Western States to
        achieve economies of operation and accelerated growth through centralized
        management.
 
 Effective
        May 23, 2002, Internet Ventures, Inc. agreed to recapitalize with Turer
        Corporation by becoming a wholly owned subsidiary of Turer. To accommodate
        this
        recapitalization, the 11,930,746 shares then outstanding of Internet Ventures,
        Inc. were exchanged for 11,930,746 shares of Turer. In August 2002, Turer
        changed its name to IVI Communications, Inc.
 
 For
        accounting purposes, the transaction has been accounted for as a reverse
        acquisition under the purchase method of accounting. Accordingly, IVI
        Communications, Inc. will be treated as the continuing entity for accounting
        purposes, and the financial statements presented herein are those of IVI
        Communications, Inc.
  F-4
 **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                  1-**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION
                  (CONTINUED)**
 
 On
        October 4, 2006, by vote of a majority of the issued and outstanding shares
        of
        IVI Communications common and preferred stock as of the date of record for
        the
        Annual Meeting of the shareholders, the Articles of Incorporation were amended
        to increase the Company's authorized shares of common stock to four hundred
        million shares and to approve the Amendment of the Articles of Incorporation
        to
        increase the authorized capital from  100,000,000 to 400,000,000
        common shares.
 
 **NOTE
        2-**                **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Principles
        of Consolidation**
 
 The
        condensed consolidated financial statements include the accounts of the Company,
        and its wholly owned subsidiaries.  All significant inter-company
        accounts and transactions have been eliminated in consolidation.
 
 **Use
        of
        Estimates**
 
 The
        preparation of condensed consolidated financial statements in conformity
        with
        accounting principles generally accepted in the United States of America
        requires management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenues and expenses during the reporting period.  Actual results
        could differ from those estimates.
 
 **Cash
        and Cash Equivalents**
 
 The
        Company considers all highly liquid debt instruments and other short-term
        investments with an initial maturity of three months or less to be cash or
        cash
        equivalents. There were no cash equivalents as of September 30, 2007 and
        2006
 
 The
        Company maintains cash and cash equivalent balances at several financial
        institutions that are insured by the Federal Deposit Insurance Corporation
        up to
        $100,000.  At September 30, 2007, the Company had no funds in excess
        of the insured limit.
  F-5
 **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES   (CONTINUED)**
 
 **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.
 
 **Income
        Taxes**
 
 The
        Company has adopted the provisions of Statement of Financial Accounting
        Standards No. 109 (the Statement), Accounting for Income Taxes.  The
        Statement requires an asset and liability approach for financial accounting
        and
        reporting for income taxes, and the recognition of deferred tax assets and
        liabilities for the temporary differences between the financial reporting
        bases
        and tax bases of the Company’s assets and liabilities at enacted tax rates
        expected to be in effect when such amounts are realized or settled.
 
 **Fair
        Value of Financial Instruments**
 
 The
                  carrying amounts reported in the condensed consolidated balance
                  sheet for
                  cash and cash equivalents, accounts receivable, accounts payable,
                  accrued
                  expenses and notes payable approximate fair value because of the
                  immediate
                  or short-term maturity of these financial
                  instruments.
 
 **Advertising
                  Costs**
 
 The
                  Company expenses the costs associated with advertising as
                  incurred.  Advertising expenses are included in selling expenses
                  in the condensed consolidated statements. Advertising costs for
                  the six
                  months ended September 30, 2007 and 2006 were $696 and $7,092
                  respectively.
  **Equipment**
 
 Equipment
                  is stated at cost.  Depreciation is computed using the
                  straight-line method over the estimated useful lives of the
                  assets.  When the assets are retired or otherwise disposed of,
                  the costs and related accumulated depreciation are removed from
                  the
                  accounts, and any resulting gain or loss is recognized in income
                  for the
                  period.  The cost of maintenance and repairs is charged to
                  expense as
  F-6
  **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES   (CONTINUED)**
 
 **Equipment
        (continued)**
 
 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.  After review, it
        was determined that an allowance of $110,042 was necessary at September 30,
        2007.
 
 **Earnings
        (Loss) Per Share of Common Stock**
 
 Historical
        net earnings (loss) per common share is computed using the weighted average
        number of common shares outstanding.  Diluted earnings per share (EPS)
        include additional dilution from common stock equivalents, such as stock
        issuable pursuant to the exercise of stock options and
        warrants.  Common stock equivalents were not included in the
        computation of diluted earnings per share when the Company reported a loss
        because to do so would be antidilutive for periods presented.
 
 The
        following is a reconciliation of the computation for basic and diluted
        EPS:
 
 September
                  30
              
              
              September
                  302007
              
              
              2006Net
                  income (loss)
              
              $
              (1,212,519
              )
              
              $
              364,907Weighted-average
                  common sharesOutstanding
                  (Basic)
              
              
              126,431,998
              
              
              
              75,919,983Weighted-average
                  common stockEquivalentsStock
                  options
              
              
              -0-
              
              
              
              -0-Warrants
              
              
              -0-
              
              
              
              30,527,705Weighted-average
                  common sharesOutstanding
                  (Diluted)
              
              
              126,431,998
              
              
              
              106,447,688
  F-7
  **IVI
          COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2007 AND 2006 (UNAUDITED)**
   **NOTE
                      2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING
                      POLICIES   (CONTINUED)**
 **Earnings
            (Loss) Per Share of Common Stock (continued)**
 
 Options
            and warrants outstanding to purchase stock were not included in the computation
            of diluted EPS for September 30, 2007 because inclusion would have been
            antidilutive.  At September 30, 2007 and 2006, there were 378,000,825
            and 30,527,705 warrants available respectively, and no options
            available.
 
 **Goodwill
            and Other Intangible Assets**
 
 In
            September 2001, the FASB issued Statement No. 142 “Goodwill and Other
            Intangible    Assets”. This statement addresses financial
            accounting and reporting for acquired goodwill and other intangible assets
            and
            supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible
            assets that are acquired individually or with a group of other assets
            (but not
            those acquired in a business combination) should be accounted for in
            financial
            statements upon their acquisition. This Statement also addresses how
            goodwill
            and other intangible assets should be accounted for after they have been
            initially recognized in the financial statements.  The Company
            recorded $674,934 in goodwill in its acquisition of Futura, Inc. on February
            6,
            2006.  Goodwill is tested for impairment annually or more frequently
            if the situation is warranted.
 
 **Stock-Based
            Compensation**
 
 On
            December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
            Statement of Financial Accounting Standards No. 123 (Revised 2004),
“*Share-Based Payment*” (“SFAS 123R”).  SFAS 123R requires that
            compensation cost related to share-based payment transactions be recognized
            in
            the financial statements. Share-based payment transactions within the
            scope of
            SFAS 123R include stock options, restricted stock plans, performance-based
            awards, stock appreciation rights, and employee share purchase
            plans.  The provisions of SFAS 123R, as amended, are effective for
            small business issuers beginning as of the next fiscal year after December
            15,
            2005.  Accordingly, the Company has implemented the revised standard
            in the first quarter of fiscal year 2007.
  The
            Company measures compensation expense for its non-employee stock-based
            compensation under the Financial Accounting Standards Board (FASB) Emerging
            Issues Task Force (EITF) Issue No. 96-18, “*Accounting for Equity Instruments
            that are Issued to Other Than Employees for Acquiring, or in Conjunction
            with********Selling, Goods or
            Services*”.  The fair value of the option issued is used to
            measure the transaction, as this is more reliable than the fair value
            of the
            services received.  The fair value is measured at the value of the
            Company’s common stock on the date that the commitment for performance by the
            counterparty has been reached or the
  F-8
  **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING
                      POLICIES   (CONTINUED)**
  **Stock-Based
            Compensation (continued)**
 
 counterparty’s
            performance is complete. The fair value of the equity instrument is charged
            directly to compensation expense and additional paid-in capital.
 
 **Derivative
            Instruments**
  The
            Company has outstanding convertible debt instruments that contain embedded
            derivatives.  The Company accounts for these derivatives in accordance
            with FAS No. 133, “*Accounting for Derivative Instruments and Hedging
            Activities*”, and EITF Issue No. 00-19, “*Accounting for Derivative
            Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
            Stock*.”  In accordance with the provisions of FAS No. 133 and
            EITF Issue No. 00-19, the embedded derivative is required to be bifurcated
            from
            the debt instrument and recorded as a liability at fair value on the
            consolidated balance sheet.  Changes in the fair value of the
            derivative is recorded at each reporting period and recorded in net gain
            (loss)
            on derivative, a separate component of the other income (expense).  As
            of September 30, 2007, the fair value of the derivatives was
            $377,852.  A loss in revaluation of the derivative for the six months
            ended September 30, 2007 was recognized in the amount of $232,292.
 
 **Recent
            Accounting Pronouncements**
 
 In
            November 2004, the FASB issued Financial Accounting Standards No. 151
            (FAS 151),
“*Inventory Costs – an amendment of ARB No. 43, Chapter
            4*”.  FAS151 clarifies the accounting for abnormal amounts of idle
            facility expense, freight, handling costs and spoilage.  In addition,
            FAS 151 requires companies to base the allocation of fixed production
            overhead
            to the costs of conversion on the normal capacity of production
            facilities.  FAS151 is effective for the Company in
            2006.  FAS 151 did not have a material impact on its results or
            financial statements.
 
 On
            December 16, 2004, FASB issued Financial Accounting Standards No. 153,
            Exchanges
            of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting
            for
            Non-monetary Transactions ("FAS 153").  This statement amends APB
            Opinion 29 to eliminate the exception for non-monetary exchanges of similar
            productive assets and replaces it with a general exception for exchanges
            of
            non-monetary assets that do not have commercial substance.  Under FAS
            153, if a non-monetary exchange of similar productive assets meets a
            commercial-substance criterion and fair value is determinable, the transaction
            must be accounted for at fair value resulting in recognition of any gain
            or
            loss.  FAS153 is effective for non-monetary transactions in fiscal
            periods that begin after June 15, 2005.  The implementation of this
            standard did not have a material impact on its financial position, results
            of
            operations or cash flows.
  F-9
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING
                      POLICIES   (CONTINUED)**
 
 **Recent
            Accounting Pronouncements (continued)**
 
 In
            March 2005, the FASB issued Statement
            of Financial Accounting Standards Interpretation Number 47 (“FIN 47”),
“Accounting for Conditional Asset Retirement Obligations.”  FIN 47
            provides clarification regarding the meaning of the term “conditional asset
            retirement obligation” as used in FAS 143, “Accounting for Asset Retirement
            Obligations.”  FIN 47 is effective for the year ended December 31,
            2005.  The implementation of this standard did not have a
            material impact on its financial position, results of operations or cash
            flows.
 
 In
            May
            2005, the FASB issued SFAS 154, “Accounting for Changes and Error Corrections—a
            replacement of APB Opinion No. 20 and FASB Statement
            No. 3.”  FAS154 changes the requirements, with regard to the
            accounting for and reporting a change in an accounting principal.  The
            provisions of FAS 154 require, unless impracticable, retrospective application
            to prior periods presented in financial statements for all voluntary
            changes in
            an accounting principle and changes required by the adoption of a new
            accounting
            pronouncement in the unusual instance that the new pronouncement does
            not
            indicate a specific transition method.  FAS 154 also requires that a
            change in depreciation, amortization or depletion method for long-lived,
            non-financial assets be accounted for as a change in an accounting estimate,
            which requires prospective application of the new method.  FAS 154 is
            effective for all changes in an accounting principle made in fiscal years
            beginning after December 15, 2005.  The Company adopted FAS 154
            beginning January 1, 2006.  Because SAS 154 is directly dependent upon
            future events, the Company cannot determine what effect, if any, the
            adoption of
            FAS 154 will have on its financial condition, results of operations or
            cash
            flows.
 
 In
            February 2006, the Financial Accounting Standards Board (FASB) issued
            Statement
            of Financial Accounting Standards (FAS) No. 155, Accounting for Certain
            Hybrid Financial Instruments.  FAS No. 155 replaces FAS
            No. 133 Accounting for Derivative Instruments and Hedging Activities, and
            FAS No. 140 Accounting for Transfers and Servicing of Financial Assets and
            Extinguishments of Liabilities.  FAS No. 155 resolves issues
            addressed in Statement 133 Implementation Issue No. D1, “Application of
            Statement 133 to Beneficial Interests in Securitized Financial Assets.” This
            statement will be effective for all financial instruments acquired or
            issued
            after the beginning of an entity’s fiscal year that begins after
            September 15, 2006. The implementation of this standard did not have a
            material impact on the financial position, results of operations and
            cash
            flows.
 
 In
            September 2006, the FASB issued
            SFAS No. 157 “Fair Value Measurements,” which provides a definition of
            fair value, establishes a framework for measuring fair value and requires
            expanded disclosures about fair value measurements. SFAS No. 157 is
            effective for financial statements issued for fiscal years
  F-10
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING POLICIES
                      (CONTINUED)**
 
 **Recent
            Accounting Pronouncements Continued**
 
 beginning
            after November 15, 2007
            and interim periods within those fiscal years. The provisions of
            SFAS No. 157 should be applied prospectively.The Company is
            currently analyzing whether this new standard will have impact on its
            financial
            position and results of operations.
 
 In
            September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting
            for Defined Benefit Pension and Other Postretirement Plans”, which amends
            SFAS No. 87 “Employers’ Accounting for Pensions”
(SFAS No. 87), SFAS No. 88 “Employers’ Accounting for
            Settlements and Curtailments of Defined Benefit Pension Plans and for
            Termination Benefits” (SFAS No. 88), SFAS No. 106
“Employers’ Accounting for Postretirement Benefits Other Than Pensions”
(SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures
            about Pensions and Other Postretirement Benefits (revised 2003)”
(SFAS No. 132R). This Statement requires companies to recognize an
            asset or liability for the overfunded or underfunded status of their
            benefit
            plans in their financial statements. SFAS No. 158 also requires the
            measurement date for plan assets and liabilities to coincide with the
            sponsor’s
            year end. The standard provides two transition alternatives related to
            the
            change in measurement date provisions. The recognition of an asset and
            liability
            related to the funded status provision is effective for fiscal year ending
            after
            December 15, 2006 and the change in measurement date provisions is
            effective for fiscal years ending after December 15, 2008.  The
            implementation of this standard did not have a material impact on its
            financial
            position, results of operations or cash flows.
 
 **NOTE
                      3-**
                  **CAPITAL
                      LEASES**
 
 Capital
            leases consist of one subsidiary equipment lease, which is reflected
            in fixed
            assets.  The minimum lease payments due on the lease total $47,280,
            which includes interest of $4,767.  The liability is $42,513 at
            September 30, 2007, of which $15,946 is current and $26,567 is due through
            fiscal 2010.
 
 **NOTE
                      4-**
                  **NOTES
                      PAYABLE**
 
 The
            Company borrowed a total of $1,077,955 from 22 different individuals
            during 1999
            through the present, at interest rates ranging from 7-12%, with no collateral
            and payment terms of 2 to 3 years. As of September 30, 2007 the notes
            payable
            balance is $34,277, and the accrued interest on those notes is $23,928.
            These
            amounts are reflected as current liabilities in the condensed consolidated
            balance sheet at September 30, 2007.
  F-11
 
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      4-**
                  **NOTES
                      PAYABLE (CONTINUED)**
 
 In
            November 2005 a note was issued to Nyhl Henson for $80,623 for
            compensation.  The note carries no interest and was due November 30,
            2006 and is convertible at current market price.  The note has not
            been repaid or converted.
 
 In
            May
            2006 the Company borrowed $5,000 on a one-year note due May 22,
            2007.  This note carries no interest.  At September 30, 2007
            the note remains unpaid.
 
 In
            December 2006 the Company borrowed $4,000 on a one-year note due December
            22,
            2007.  This note carries no interest.
  **NOTE
                      5-**
                  **CONVERTIBLE
                      DEBENTURES**
 
 The
            Company sold a security for $25,000 to one entity in January 2005. This
            debenture, which was for services rendered, accrues interest at 10% per
            annum
            and was due January 31, 2006. The conversion price is $.10 per common
            share. No
            conversion or repayment of the debenture has been completed as of September
            30,
            2007.
 
 The
            Company sold a security for $257,500 to one entity in March
            2006.  This debenture, which was for services rendered, accrues
            interest at 9% per annum and is due May 15, 2007.    In the
            event the Company receives funding in the amount of at least Six Hundred
            Thousand Dollars ($600,000), Forty Five Thousand Dollars ($45,000) immediately
            becomes due and payable to the holder.  The conversion price is the
            lower of $.05 or the lowest bid price in the preceding 5 trading
            days.  On August 17, 2007, $48,000 of principal was converted for
            12,000,000 shares of which 10,713,948 shares were restricted.  The
            conversion price was $.004, the lowest bid price in the preceding 5 trading
            days, resulting in a beneficial interest charge of $24,000.
  On
            March
            27, 2006, the Company entered into a securities purchase agreement with
            Cornell
            Capital Partners L.P. providing for the sale by the Company to Cornell
            of our
            12% secured convertible debentures in the aggregate principal amount
            of $600,000
            of which $200,000 was advanced immediately. The second installment of
            $200,000
            was advanced on April 18, 2006. The last installment of $200,000 was
            advanced
            August 14, 2006, two (2) business days after the registration statement
            was
            declared effective.
  The
            Convertible Debentures mature on the third anniversary of the date of
            issuance
            and the Company is not required to make any payments until the maturity
            date.
            Holders of the Debentures may convert at any time amounts outstanding
            under the
            debentures into shares of our common stock at a conversion price per
            share equal
            to the lower of (i) $0.20 or
            (ii)
            ninety percent (90%) of the
  F-12
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      5-**
                  **CONVERTIBLE
                      DEBENTURES (continued)**
 
 lowest
            closing Bid Price of the Common
            Stock during the thirty (30) trading days
 immediately
            preceding the conversion
            date as quoted by Bloomberg, LP.Cornell has agreed not to short any of
            the shares of Common Stock. The Company has the right to redeem a portion
            or all
            amounts outstanding under the debenture prior to the maturity date at
            a 20%
            redemption premium provided that the closing bid price of our common
            stock is
            less than $0.20.
 
 During
            the six months ended September 30, 2007, Cornell Capital
            Partners  converted $48,500 of principal for 9,768,519 shares of
            common stock of which 4,057,157 shares were restricted.  The
            conversion price was $.0054, 90% of the lowest closing bid price
            of  $.006 during the prior 30 days, resulting in a beneficial interest
            charge of $5,625.
 
 **Derivative
            Liability**
  On
            March
            27, 2006, the Company entered into a securities purchase agreement with
            Cornell
            Capital Partners L.P. providing for the sale by the Company to Cornell
            of our
            12% secured convertible debentures in the aggregate principal amount
            of $600,000
            of which $200,000 was advanced immediately. The second installment of
            $200,000
            was advanced on April 18, 2006. The last installment of $200,000 was
            advanced on
            August 16, two (2) business days after the date the registration statement
            was
            declared effective.
  The
            Convertible Debentures mature on the third anniversary of the date of
            issuance
            and the Company is not required to make any payments until the maturity
            date.
            Holders of the Debentures may convert at any time amounts outstanding
            under the
            debentures into shares of our common stock at a conversion price per
            share equal
            to the lower of (i) $0.20 or
            (ii)
            ninety percent (90%) of the lowest closing Bid Price of the Common Stock
            during
            the thirty (30) trading days immediately preceding the conversion date
            as quoted
            by Bloomberg, LP.Cornell has agreed not to short any of the shares of
            Common Stock. The Company has the right to redeem a portion or all amounts
            outstanding under the debenture prior to the maturity date at a 20% redemption
            premium provided that the closing bid price of our common stock is less
            than
            $0.20.
 
 In
            January 2007 the Company borrowed $6,756 from Nyhl Henson, the former
            President,
            on a one-year note due January 19, 2008.   This note carries no
            interest and is convertible at the previous 10-day closing price.
  F-13
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      5-**
                  **CONVERTIBLE
                      DEBENTURES (CONTINUED)**
 
 **Derivative
            Liability (continued)**
 
 In
            January 2007 the Company borrowed $3,243 from Charles Roodenburg, CEO,
            on a
            one-year note due January 19, 2008.  This note carries no interest and
            is convertible at the previous 10-day closing price.
 
 In
            February 2007 the Company borrowed $45,000 from Nyhl Henson, the former
            President, on a note due on demand.  The note carries no interest and
            is convertible at the previous 10-day closing price.
 
 The
            Company sold a security for $12,500 to one entity in September
            2006.  This debenture carries no interest, is due in October 2007, and
            has a conversion rate of 50% discount to market of the ten-day average
            closing
            bid price.
 
 The
            Company sold a security for $12,500 to one entity in October
            2006.  This debenture carries no interest, is due in November 2007,
            and has a conversion rate of 50% discount to market of the ten-day average
            closing bid price.
 
 A
            holder of the Convertible Debenture
            may not convert or receive shares as payment of interest to the extent
            such
            conversion or receipt of such interest payment would result in the holder,
            together with any affiliate of the holder, beneficially owning in excess
            of
            4.99% of the then issued and outstanding shares of Common Stock, including
            shares issuable upon conversion of, and payment of interest.
 
 In
            accordance with SFAS 133, *“Accounting for Derivative Instruments and Hedging
            Activities”* and EITF 00-19, *“Accounting for Derivative Financial
            Instruments Indexed to, and Potentially Settled in, a Company's Own Stock”*,
            the conversion feature associated with the $600,000 convertible debenture
            represents an embedded derivative. The Company had recognized the embedded
            derivative in the amount of $593,988 as a liability in the accompanying
            condensed consolidated balance sheet, and it is now measured it at its
            estimated
            fair value of $319,891. The estimated fair value of the embedded derivative
            has
            been calculated based on a Black-Scholes pricing model using the following
            assumptions:
 
 Fair market value of
                      stock                  $0.0047
                    Exercise
                      price                                     $0.00423
                    Dividend
                      yield                                     
                       0.00%
                    Risk free interest
                      rate                          
                       4.00%
                    Expected
                      volatility                                
                       166%
                    Expected
                      life                                      4.0
                      Years
  F-14
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      5-**
                  **CONVERTIBLE
                      DEBENTURES (CONTINUED)**
 
 **Derivative
            Liability (continued)**
 
 The
            Company also issued to Cornell five-year warrants to purchase 2,000,000
            and
            1,500,000 shares of Common Stock at prices of $0.30, and $0.40,
            respectively.If at
            the time of exercise of the Warrants,
            the shares of Common Stock underlying the Warrant are not subject to
            an
            effective registration statement under the Securities Act of 1933, as
            amended
            (the "Act") or if an event of default under the Convertible Debentures
            has
            occurred, which is not cured in any applicable cure period, the holder
            of the
            Warrant, in lieu of making payment of the Exercise Price in cash, may
            elect a
            cashless exercise in accordance with the formula set forth in the
            Warrant. If, subject to the exceptions set forth in the warrants, during
            the
            time that the Warrants are outstanding, the Company issues or sells,
            or is
            deemed to have issued or sold, any shares of Common Stock for a consideration
            per share less than a price equal to the then exercise price, then the
            exercise
            price will be reduced to an amount equal to such consideration per share.
            Upon
            each such adjustment, the number of shares of Common Stock issuable upon
            exercise of the Warrants will be adjusted to the number of shares determined
            by
            multiplying the exercise price in effect immediately prior to such adjustment
            by
            the number of shares issuable upon exercise of the warrants immediately
            prior to
            such adjustment and dividing the product by the exercise price resulting
            from
            such adjustment. Similar adjustments will be made upon any issuance or
            sale by
            us of options to purchase Common Stock or convertible securities.
  On
            August 8, 2006 the Company issued
            stock at a market price of $.04.  This increased the number of
            warrants from 3,500,000 to 30,000,000 at $.04 exercise
            price.
  On
            December 29, 2006 the Company issued
            stock at a market price of $.0242.  This increased the number of
            warrants from 30,000,000 to 49,586,777 at $.0242 exercise
            price.
  On
            January 17, 2007, by Board
            Resolution, the Company reduced the exercise price to $.0085 which increased
            the
            number of warrants from 49,586,777 to 141,176,471.
  On
            February 22, 2007, Cornell exercised 3,500,000 warrants at a price of
            $.0085 for
            $29,750.  Beneficial interest of $12,250 was
            recognized.  This reduced the number of warrants from 141,176,471 to
            137,676,471 at $.0085.
  On
            June 30, 2007 the Company issued
            stock at a market price of $.0051.  This increased the number of
            warrants from 137,676,471 to 229,460,784 at $.0051 exercise
            price.
  On
            September 30, 2007 the Company issued
            stock at a market price of $.0031.  This increased the number of
            warrants from 229,460,784 to 337,500,000 at $.0031 exercise
            price.
  F-15
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      5-**
                  **CONVERTIBLE
                      DEBENTURES (CONTINUED)**
 
 **Derivative
            Liability (continued)**
 
 The
            fixed
            freestanding warrants issued in connection with the $600,000 convertible
            debenture had been valued at $211,272 based on a Black-Scholes pricing
            model
            using the following assumptions:
 
 Fair
                      market value of
                      stock                          $0.20
                    Exercise
                      price                              $0.30
                      and $0.40
                    Dividend
                      yield                                          
                       0.00%
                    Risk
                      free interest
                      rate                              
                        4.00%
                    Expected
                      volatility                                 
                      192.95%
                    Expected
                      life                                         
                       5.0 Years
 
 The
            allocation of the proceeds of the convertible debenture to the warrants
            and the
            recognition of the embedded derivative resulted in discounts to the convertible
            debenture. The discount on debt is being amortized to interest through
            March 31,
            2009 using the effective interest method.  The current debt discount
            balance is $205,430.
 
 In
            connection with the Purchase Agreement, the Company also entered into
            a
            registration rights agreement with Cornell providing for the registration
            of the
            shares of common stock issuable upon conversion of the debentures and
            exercise
            of the warrants. The Company is obligated to use its best efforts to
            cause the
            registration statement to be declared effective no later than July 25,
            2006 and
            to insure that the registration statement remains in effect until all
            of the
            shares of common stock issuable upon conversion of the debentures and
            exercise
            of the warrants have been sold. In the event of a default of the Company’s
            obligations under the registration rights agreement, including its agreement
            to
            file the registration statement no later than May 11, 2006, or if the
            registration statement is not declared effective by July 25, 2006, the
            Company
            is required to pay to Cornell, as liquidated damages, for each month
            that the
            registration statement has not been filed or declared effective, as the
            case may
            be, either a cash amount or shares of its common stock equal to 2% of
            the
            liquidated value of the Debentures.
 
 On
            August
            14, 2006, the registration statement for 22,500,000 shares of common
            stock for
            Cornell Capital Partners L.P. was declared effective.  The Company was
            liable for liquidated damages up to 2% per month for failure to have
            an
            effective registration statement by July 25, 2006.  Cornell Capital
            Partners has verbally agreed to waive said damages.
  F-16
 **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      5-**
                  **CONVERTIBLE
                      DEBENTURES (CONTINUED)**
 
 **Derivative
            Liability (continued)**
 
 Current
            stock price obligates the Company to register 143,906,810 shares for
            the
            convertible debentures and 377,500,000 shares for the warrants.  We
            have been unable to register these shares as of September 30, 2007 and
            are
            therefore in default.
 
 The
            Company’s obligations under the purchase agreement are secured by substantially
            all of its assets and the assets of its subsidiaries. As further security
            for
            its obligations thereunder, Nyhl Henson, former Chief Executive Officer,
            and
            Charles Roodenburg, Current Chief Executive Officer, have granted a security
            interest in an aggregate of 925,000 shares of their common stock and
            3,300,000
            shares of their Series A Preferred Stock. The Company also granted a
            security
            interest in 15,000,000 shares of its stock, issued from treasury.  On
            July 14, 2006, the Company entered into an agreement with Cornell Capital
            Partners to cancel the security interest in the 15,000,000 shares. These
            shares
            were subsequently returned and cancelled.
  **NOTE
                      6-**
                  **STOCKHOLDERS’
                      DEFICIT**
 
 **Preferred
            Stock**
 
 The
            Company has 5,000,000 shares of preferred stock authorized, and 4,000,000
            shares
            of preferred series A stock and 1,000,000 shares of preferred series
            B stock
            issued and outstanding as of September 30, 2007.
 
 There
            were no preferred stock transactions for the six months ended September
            30,
            2007.
 
 **Common
            Stock**
 
 As
            of
            September 30, 2007, the Company has 400,000,000 shares of common stock
            authorized, 141,605,242  are issued and outstanding.
 
 For
            the
            six months ended September 30, 2007, the following common stock was
            issued:
 
 During
            the six months ended September 30, 2007, a debenture holder converted
            $48,500 of
            principal for 9,768,519 shares of common stock of which 4,057,157 shares
            were
            restricted.  The conversion price was $.0054, 90% of the lowest
            closing bid price of  $.006 during the prior 30 days, resulting in a
            beneficial interest charge of $5,625.
  F-17
  **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      6-**
                  **STOCKHOLDERS’
                      DEFICIT (Continued)**
 
 **Common
            Stock (continued)**
 
 On
            May 3,
            2007, 3,814,510 shares of common stock valued at $19,454 were issued
            at $.0051
            to convert accrued compensation.
 
 On
            June
            6, 2007, 5,807,848 shares of restricted common stock valued at $42,405
            were
            issued at $.0073 to convert a previously recorded contingent
            liability.  Beneficial interest income of $1,750 was
            recognized.
 
 On
            July
            6, 2007, 2,574,312 shares of common stock, previously carried as stock
            receivable from James Hollis in regard to the default by IVI Communications,
            Inc., on the purchase of Internet Business Consulting and AppState.net,
            were
            returned to the Company and have been cancelled.
 
 On
            August
            10, 2007 1,000,000 shares of restricted common stock valued at $6,000
            were
            issued at the market price of $.006 for a consulting/marketing
            contract.
 
 On
            August
            17, 2007, $48,000 of principal on a $257,500 convertible debenture was
            converted
            for 12,000,000 shares of which 10,713,948 shares were restricted.  The
            conversion price was $.004, the lowest bid price in the preceding 5 trading
            days, resulting in a beneficial interest charge of $24,000.
 
 On
            August
            30, 2007 1,000,000 shares of restricted common stock valued at $3,100
            were
            issued at $.0031 market price for a consulting/marketing
            contract.
 
 **NOTE
                      7-**
                  **GOING
                      CONCERN**
 
 As
            shown
            in the accompanying condensed consolidated financial statements the Company
            has
            sustained net operating losses for the six months ended September 30,
            2007, and
            the years ended March 31, 2007 and 2006, and has sustained large accumulated
            deficits and currently does not have the revenues to sustain its operations.
            In
            addition, the Company sold off its operations in Colorado, Oregon and
            California, and has defaulted on the acquisition of Internet Business
            Consulting/AppState.net, LLC.  This raises substantial doubt about the
            Company’s ability to continue as a going concern.
 
 Management
            is in the process of restructuring the Company and is continuing to search
            for
            more profitable internet and communications related service companies
            to
            acquire. The Company’s future success is dependent upon its ability to achieve
            profitable operations and generate cash from operating activities, and
            upon
            additional financing. There is no guarantee that the Company will be
            able to
            raise enough capital or generate revenues to sustain its
            operations.
  F-18
  **IVI
            COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      7-**
                  **GOING
                      CONCERN (CONTINUED)**
 
 The
            condensed consolidated financial statements do not include any adjustments
            that
            might result from the outcome of this uncertainty.
  **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
            September 30, 2007, net deferred tax assets approximated the
            following:
  Deferred
                        tax assets
                    
                    $
                    8,894,000Less:  valuation
                        allowance
                    
                    
                    (8,894,000
                    )$
                    -0-
 
 At
            September 30, 2007, the Company had accumulated deficits approximating
            $26,500,000 available to offset future taxable income through 2026. The
            Company
            established valuation allowances equal to the full amount of the deferred
            tax
            assets due to the uncertainty of the utilization of the operating losses
            in
            future periods.
 
 **NOTE
                      9-**
                  **LITIGATION/
                      ARBITRATION**
 
 The
            Company is currently negotiating settlements with vendors and debt holders
            for
            amounts currently outstanding. As of September 30, 2007, the Company
            has
            recognized the full liability for all amounts that are due.
 
 The
            Company has six default judgments against it for a total amount of
            $146,504.  The amounts are recorded in other liabilities and
            contingencies.
 
 **NOTE
                      10-**
                  **CHANGE
                      OF MANAGEMENT**
 
 Effective
            April 24, 2007 Nyhl Henson resigned his position as President and Chairman
            of
            the Board of Directors of IVI Communications, Inc, and Charles
  F-19
  **IVI
              COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
              30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                      10-**
                  **CHANGE
                      OF
                      MANAGEMENT(CONTINUED)**
  Roodenburg
            was named as President and Chairman of the Board of Directors of IVI
            Communications, Inc.
  **NOTE
                      11-**
                  **COMMITMENT
                      AND CONTINGENCIES**
 
 We
            had
            been unable to come to mutually acceptable terms to cure the default
            by the
            Company on the terms of the Purchase Agreement (“Agreement”) dated January 1,
            2005 by and between IVI Communications, Inc. (“Buyer”), Internet Business
            Consulting, Inc. (“IBC”) and AppState.Net, LLC (“AppState”), jointly referred to
            as (“Sellers”).  Sellers exercised the remedies for default as
            provided in the Agreement and confirmed that the Remedies, which were
            that
            foreclosure and repossession occurred December 31, 2006, are in
            effect.
 
 Pursuant
            to those remedies, ownership of Sellers reverts to James Hollis, effective
            December 31, 2006.
 
 Per
            the
            terms of the Agreement, Sellers returned 2,574,312 shares of IVI common
            stock
            which have been cancelled.
 
 **NOTE
                      12-**
                  **RECLASSIFICATION**
 
 The
            financial statements for the six months ended September 30, 2006 have
            been
            reclassed to conform to presentation for the six months ended September
            30,
            2007.  The reclassification has no effect on the operations for the
            six months ended September 30, 2006.
  F-20
  **ITEM
              2.   MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF
              OPERATION:**
  THIS
              QUARTERLY REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
              OF
              SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT
              LIMITATION, STATEMENTS REGARDING OUR EXPECTATIONS, BELIEFS, INTENTIONS
              OR FUTURE
              STRATEGIES THAT ARE SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES",
              "INTENDS",
              "BELIEVES", OR SIMILAR LANGUAGE. THESE FORWARD-LOOKING STATEMENTS INVOLVE
              RISKS,
              UNCERTAINTIES AND OTHER FACTORS. ALL FORWARD-LOOKING STATEMENTS INCLUDED
              IN THIS
              DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE HEREOF
              AND SPEAK
              ONLY AS OF THE DATE HEREOF. THE FACTORS DISCUSSED BELOW UNDER "RISK
              FACTORS" AND
              ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-QSB ARE AMONG THOSE FACTORS
              THAT
              IN SOME CASES HAVE AFFECTED OUR RESULTS AND COULD CAUSE THE ACTUAL
              RESULTS TO
              DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
              STATEMENTS.
 
 The
              following discussion should be read in conjunction with the Condensed
              Consolidated Financial Statements and Notes thereto.
 
 
 **OVERVIEW**
 
 We
              are a
              broadband Internet access company that is currently developing one
              of the first
              nationwide high speed wireless broadband networks. The
              management of IVI believes that a tremendous opportunity exists to
              provide
              wireless broadband Internet access where it is currently unavailable
              or cost
              prohibitive.
 
 There
              are
              thousands of independent ISPs providing dialup Internet access to the
              19 million
              U.S. homes, not to mention businesses, schools, and churches that cannot
              get
              broadband Internet access. IVI will contract with selected dialup ISPs
              in rural
              markets to install wireless networks owned by IVI and operated by the
              ISPs to
              market a nationally branded broadband Internet access service.
 
 We
              currently operate one subsidiary, Futura, Inc.
 
 On
              February 6, 2006 we entered into a Purchase Agreement and acquired
              100% of the
              outstanding stock of Futura, Inc. from Francis and Lois Allen, the
              shareholders
              of Futura, Inc. Futura, Inc. is an operating subsidiary, and is an
              Internet
              Service Provider  founded in 1995 in Cabot, Arkansas, that provides
              dialup and DSL broadband Internet access, and associated services such
              as Email
              spam and virus filtering, VoIP telephony, "Kid Safe" surfing (Parental
              Control),
              and web accelerator services, to communities surrounding Little Rock
              Arkansas
              including Cabot, Carlisle, Clarendon, DeValls Bluff, DeWitt, England,
              Hazen,
              Jacksonville, and Stuttgart.  Futura has contracts in place for low
              cost bandwidth and operates a network operation center (NOC) located
              in Little
              Rock, Arkansas.  Futura has completed the first link of the planned
              wireless broadband network from Little Rock to Cabot, 23 miles to the
              northeast.  Futura has also completed the installation of three
              wireless tower sites that currently provide broadband Internet access
              to
              residences and businesses in Cabot (population 15,000) and Ward (population
              2,580).
  4
 
 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 September 30, 2007 Compared With Three Months Ended September
              30,
              2006
  Effective
              January 1, 2007, IBC and AppState.net were returned to the former owner
              which
              was caused by the default of IVI Communications, Inc. on the original
              acquisition contract.  The Results of Operations for the three months
              ended September 30, 2006 included IBC and AppState.net. Accordingly,
              comparisons
              from 2007 to 2006 are not meaningful.  The numbers below compare the
              consolidated results of operations, and also compare the results of
              existing
              operations which are corporate and the Futura subsidiary.
  Revenue
              for the three months ended September 30, 2007 was $80,044 compared
              to $461,103
              for the three months ended September 30, 2006, a decrease of
              $381,059.  Revenue for existing operations for the three months ended
              September 30, 2006 was $118,574, a decrease of $38,530 from September
              30, 2006
              to September 30, 2007.  The corporate consulting services decreased
              $21,600, and services provided by Futura decreased $16,930.
  Cost
              of
              operations for the three months ended September 30, 2007 were $42,299
              compared
              to $348,782 for the three months ended September 30, 2006, a decrease
              of
              $306,482.  Cost of operations for existing operations for the three
              months ended September 30, 2006 were $87,158, a decrease of $44,858
              from
              September 30, 2006 to September 30, 2007.  The decrease in cost of
              operations resulted from the reduction of circuit costs as a result
              of the loss
              of dial-up customers.
  General
              and administrative expenses for the three months ended September 30,
              2007 were
              $287,283 compared to $504,831 for the three months ended September
              30, 2006, a
              decrease of $217,547.  General and administrative for existing
              operations for the three months ended September 30, 2006 were $369,149,
              a
              decrease of $81,865 from September 30, 2006 to September 30,
              2007.  There was a decrease in compensation of $62,716, an increase in
              consulting fees of $46,995, a decrease in rents of $1,906, a decrease
              in taxes
              of $9,572, and a decrease of $54,666 for a reclassification.
  Selling
              expenses for the three months ended September 30, 2007 were $0, compared
              to
              selling expenses of $4,488 for the three months ended September 30,
              2006, a
              decrease of $4,488. Selling expenses of existing operations for the
              three months
              ended September 30, 2006 were $1,204, a decrease of $1,204 from September
              30,
              2006 to September 30, 2007.  This was advertising
              expense.
  5
  Depreciation
              and amortization expense was $41,959 for the three months ended September
              30,
              2007, compared to depreciation and amortization expense of $30,096
              for the three
              months ended September 30, 2006, an increase of $11,863.  Depreciation
              and amortization expense of existing operations for the three months
              ended
              September 30, 2006 was $22,122, an increase of $19,837 from September
              30, 2006
              to September 30, 2007.  There was an increase of $3,137 in
              depreciation and an increase of $16,700 in amortization of debt.
  Due
              to
              the above facts, Loss before other Income (Expenses) was ($291,497)
              in the three
              months ended September 30, 2007 compared to the net operating loss
              of ($427,094)
              in the three months ended September 30, 2006.  Loss before other
              Income (Expenses) for existing operations for the three months ended
              September
              30, 2006 was ($361,059), a decrease in loss of $69,690 from September
              30, 2006
              to September 30, 2007.
  The
              Company incurred a loss on the revaluation of derivatives associated
              with the
              convertible debentures of $145,914 for the three months ended September
              30, 2007
              compared to a loss of $4,314 for the three months ended September 30,
              2006. This
              was due to the decline in the fair market value of the stock.
  The
              Company incurred interest expenses of $113,430 in the three months
              ended
              September 30, 2007, compared to $96,483 for the three months ended
              September 30,
              2006. This increase was due to additional interest on notes, debentures,
              and
              capital leases, and beneficial interest expense of $89,000 was realized
              on the
              conversion of convertible debentures and stock to be issued for consulting
              services in the three months ended September 30, 2007.
  The
              Company had other income of $166,532 in the three months ended September
              30,
              2007, compared to $1,003,323 in the three months ended September 30,
              2006.  In the three months ended September 30, 2007, $163,676 in other
              income was the result of debt forgiveness. Interest income was $0 in
              the three
              months ended September 30, 2007 compared to $175 the three months ended
              September 30, 2006.
  Due
              to
              the above factors, the there was a net loss for the three months ended
              September
              30, 2007 of ($384,309) compared to a net profit of $475,607 for the
              three months
              ended September 30, 2006. Basic income (loss) per share for the three
              months
              ended September 30, 2007 was ($0.00), compared to $0.01 for the three
              months
              ended September 30, 2006.  Diluted income per share for the three
              months ended September 30, 2006 was $0.00
  Six
              Months Ended September 30, 2007 Compared With Six Months Ended September
              30,
              2006
  Effective
              January 1, 2007, IBC and AppState.net were returned to the former owner
              which
              was caused by the default of IVI Communications, Inc. on the original
              acquisition contract.  The Results of Operations for the six months
              ended September 30, 2006 included IBC and AppState.net. Accordingly,
              comparisons
              from 2007 to 2006 are not meaningful.  The numbers below compare the
              consolidated results of operations, and also compare the results of
              existing
              operations which are corporate and the Futura subsidiary.
  Revenue
              for the six months ended September 30, 2007 was $171,517 compared to
              $1,123,226
              for the six months ended September 30, 2006, a decrease of
              $951,709.  Revenue for existing operations for the six months ended
              September 30, 2006 was $304,374, a decrease of $132,857 from September
              30, 2006
              to September 30, 2007.  The corporate consulting services decreased
              $43,200, and services provided by Futura decreased $89,657.
  6
  Cost
              of
              operations for the six months ended September 30, 2007 were $105,867
              compared to
              $776,635 for the six months ended September 30, 2006, a decrease of
              $670,768.  Cost of operations for existing operations for the six
              months ended September 30, 2006 were $149,798, a decrease of $43,931
from
              September 30, 2006 to September 30, 2007.  The decrease in cost of
              operations resulted from the reduction of circuit costs as a result
              of the loss
              of dial-up customers.
  General
              and administrative expenses for the six months ended September 30,
              2007 were
              $756,877 compared to $937,460 for the six months ended September 30,
              2006, a
              decrease of $180,583. General and administrative for existing operations
              for the
              six months ended September 30, 2006 were $650,371, a increase of $106,506
from
              September 30, 2006 to September 30, 2007.  There was a decrease in
              compensation of $101,272, an increase in consulting fees of $179,768,
              an
              increase in bad debt expense of $110,041, a decrease in professional
              fees of
              $39,806, a decrease in travel costs of $14,018, a decrease in rents
              of $3,746,
              and a decrease in taxes of $9,572, and a decrease in general operating
              costs of
              $20,123.
  Selling
              expenses for the six months ended September 30, 2007 were $696, compared
              to
              selling expenses of $7,092 for the six months ended September 30, 2006,
              a
              decrease of $6,396. Selling expenses of existing operations for the
              six months
              ended September 30, 2006 were $1,432, a decrease of $736 from
              September 30, 2006 to September 30, 2007.
  Depreciation
              and amortization expense was $121,331 for the six months ended September
              30,
              2007, compared to depreciation and amortization expense of $58,326
              for the six
              months ended September 30, 2006, an increase of $63,005.  Depreciation
              and amortization expense of existing operations for the six months
              ended
              September 30, 2006 was $42,852, an increase of $78,479 from
              September 30, 2006 to September 30, 2007.  There was an increase of
              $5,212 in depreciation and an increase of $73,267 in amortization of
              debt.
  Due
              to
              the above facts, Loss before other Income (Expenses) was ($813,254)
              in the six
              months ended September 30, 2007 compared to the net operating loss
              of ($656,287)
              in the six months ended September 30, 2006.  Loss before other Income
              (Expenses) for existing operations for the six months ended September
              30, 2006
              was ($540,079), an increase in loss of $273,175 from
              September 30, 2006 to September 30, 2007.
  The
              Company incurred a loss on the revaluation of derivatives associated
              with the
              convertible debentures of $232,292 for the six months ended September
              30, 2007
              compared to a gain of $164,729 for the six months ended September 30,
              2006. This
              was due to the decline in the fair market value of the stock.
  The
              Company incurred interest expenses of $343,058 in the six months ended
              September
              30, 2007, compared to $176,659 for the six months ended September 30,
              2006. This
              increase was due to additional interest on notes, debentures, and capital
              leases, and beneficial interest expense of $287,875 was realized on
              the
              conversion of convertible debentures and stock to be issued for consulting
              services in the six months ended September 30, 2007.
  7
  The
              Company had other income of $176,163 in the six months ended September
              30, 2007,
              compared to $1,032,913 in the six months ended September 30, 2006.  In
              the six months ended September 30, 2007, $163,676 in other income was
              the result
              of debt forgiveness. Interest income was $0 in the six months ended
              September
              30, 2007 compared to $211 the three months ended September 30,
              2006.
  Due
              to
              the above factors, the there was a net loss for the six months ended
              September
              30, 2007 of ($1,212,519) compared to a net profit of $364,907 for the
              six months
              ended September 30, 2006. Basic income (loss) per share for the six
              months ended
              September 30, 2007 was ($0.01), compared to $0.00 for the six months
              ended
              September 30, 2006.  Diluted income per share for the three months
              ended September 30, 2006 was $0.00
 
  **LIQUIDITY
              AND CAPITAL RESOURCES**
  In
              the
              six months ended September 30, 2007, we continued to spend cash to
              fund our
              operations. Cash provided by operating activities for six months ended
              September
              30, 2007 equaled $7,878, and consisted of a net loss of $1,212,519,
              a loss on
              revaluation of derivatives in the amount of $232,292, depreciation
              of $14,548,
              amortization of debt discount of $106,785, amortization of prepaid
              consulting
              fees of $333,331, beneficial interest on debt conversions  of
              $287,875, stock issued for services of $9,100, a provision for doubtful
              accounts
              of $110,042, an increase in accounts payable and accrued liabilities
              of
              $716,712, a decrease in accounts receivable of $22,341, an decrease
              in other
              current assets of $595, a decrease in deferred revenue of $873, and
              a decrease
              in litigation settlement of $448,675.  For the comparable period in
              2006, cash used by operating activities equaled $75,068 and consisted
              of a net
              profit of $364,907, depreciation of $24,993, amortization of debt discount
              of
              $33,333, beneficial interest on debt conversion of $8,502, a gain on
              revaluation
              of derivatives of $164,729, stock issued for services of $160,417,
              a decrease in
              accounts receivable of $88,752, a decrease in inventory of $58,600,
              an increase
              in other current assets of $25,953, a decrease in other assets of $6,513,
              a
              decrease in accounts payable and accrued liabilities of $473,566, a
              decrease in
              acquisition contracts of $150,000, and a decrease in deferred revenue
              of
              $6,837.
  We
              used
              net cash of $2,970 in investing activities for the six months ended
              September
              30, 2007 compared to the use of net cash of $29,690 for the six months
              ended
              September 30, 2006. These were acquisition of fixed assets.
  Cash
              flow
              from financing activities for the six months ended September 30, 2007
              used cash
              of $7,486 consisting of payments on capital leases. Cash flow from
              financing
              activities for the six months ended September 30, 2006 produced a net
              increase
              in cash of $23,425 which resulted from $397,500 in proceeds from convertible
              debentures, offset by $300,000 payments on notes payable and $28,789
              on
              installment notes, and $45,286 payments on officer loans.
  As
              of
              September 30, 2007, we had cash and cash equivalents amounting to $2,249
              a
              decrease of $2,578 from the balance at March 31, 2007. Our working
              capital
              deficit increased to $3,816,384 at September 30, 2007 from $2,926,656
              at March
              31, 2007.
  8
  As
              of
              September 30, 2007, we had an accumulated operating deficit of ($26,543,888)
              and
              stockholders' deficit of ($3,107,590).
  The
              Company’s principal source of operating capital has been provided by the sale
              of
              its stock and securities, corporate consulting services, and operations
              of its
              wholly owned subsidiary.
  On
              March
              27, 2006, the Company entered into a securities purchase agreement
              with Cornell
              Capital Partners L.P. providing for the sale by the Company to Cornell
              of our
              12% secured convertible debentures in the aggregate principal amount
              of $600,000
              of which $200,000 was advanced immediately. The second installment
              of $200,000
              was advanced on April 18, 2006 upon the filing of the SB2 Registration
              Statement. The last installment of $200,000 was received August 16,
              2006, two
              (2) business days after the date the registration statement was declared
              effective on August 14, 2006.
  The
              Convertible Debentures mature on the third anniversary of the date
              of issuance
              and the Company is not required to make any payments until the maturity
              date.
              Holders of the Debentures may convert at any time amounts outstanding
              under the
              debentures into shares of our common stock at a conversion price per
              share equal
              to the lower of (i) $0.20 or
              (ii)
              ninety percent (90%) of the lowest closing Bid Price of the Common
              Stock during
              the thirty (30) trading days immediately preceding the conversion date
              as quoted
              by Bloomberg, LP.Cornell has agreed not to short any of the shares of
              Common Stock. The Company has the right to redeem a portion or all
              amounts
              outstanding under the debenture prior to the maturity date at a 20%
              redemption
              premium provided that the closing bid price of our common stock is
              less than
              $0.20.
  A
              holder of the Convertible Debenture
              may not convert or receive shares as payment of interest to the extent
              such
              conversion or receipt of such interest payment would result in the
              holder,
              together with any affiliate of the holder, beneficially owning in excess
              of
              4.99% of the then issued and outstanding shares of Common Stock, including
              shares issuable upon conversion of, and payment of interest.
  During
              the six months ended September
              30, 2007 Cornell has submitted Notices of Conversion to convert $48,500
              of the
              Debenture for which the Company has issued 5,711,362 of its registered
              common
              shares at a conversion price of $.0054, and 4,057,157 of its unregistered
              common
              shares at a weighted average conversion price per share of
              $.0044.
  The
              Company also issued to Cornell five-year warrants to purchase 2,000,000
              and
              1,500,000 shares of Common Stock at prices of $0.30, and $0.40,
              respectively.If at the time of
              exercise of the Warrants, the shares of Common Stock underlying the
              Warrant are
              not subject to an effective registration statement under the Securities
              Act of
              1933, as amended (the "Act") or if an event of default under the Convertible
              Debentures has occurred, which is not cured in any applicable cure
              period, the
              holder of the Warrant, in lieu of making payment of the Exercise Price
              in cash,
              may elect a cashless exercise in accordance with the formula set forth
              in the
              Warrant. If, subject to the exceptions set forth in the warrants, during
              the
              time that the Warrants are outstanding, the Company issues or sells,
              or is
              deemed to have issued or sold, any shares of Common Stock for a consideration
              per share less than a price equal to the then exercise price, then
              the exercise
              price will be reduced to an amount equal to such consideration per
              share. Upon
              each such adjustment, the number of shares of Common Stock issuable
              upon
              exercise of the Warrants will be adjusted to the number of shares determined
              by
              multiplying the exercise price in effect immediately prior to such
              adjustment by
              the number of shares issuable upon exercise of the warrants immediately
              prior to
              such adjustment and dividing the product by the exercise price resulting
              from
              such adjustment. Similar adjustments will be made upon any issuance
              or sale by
              us of options to purchase Common Stock or convertible
              securities.
  9
  On
              August 8, 2006 the Company issued
              stock at a market price of $.04.  This increased the number of
              warrants from 3,500,000 to 30,000,000 at $.04 exercise
              price.
  On
              December 29, 2006 the Company issued
              stock at a market price of $.0242.  This increased the number of
              warrants from 30,000,000 to 49,586,777 at $.0242 exercise
              price.
  On
              January 17, 2007, by Board
              Resolution, the Company reduced the exercise price to $.0085 which
              increased the
              number of warrants from 49,586,777 to 141,176,471.
  On
              February 22, 2007, Cornell exercised 3,500,000 warrants at a price
              of $.0085 for
              $29,750.  Beneficial interest of $12,250 was
              recognized.  This reduced the number of warrants from 141,176,471 to
              137,676,471 at $.0085.
  On
              May 3, 2007 the Company issued stock
              at a market price of $.0051.  This increased the number of warrants
              from 137,676,471 to 229,460,784 at $.0051 exercise price.
  On
              August 30, 2007 the Company issued
              stock at a market price of $.0031.  This increased the number of
              warrants from 229,460,784 to 377,500,000 at $.0031 exercise
              price.
  In
              connection with the Purchase Agreement, the Company also entered into
              a
              registration rights agreement with Cornell providing for the registration
              of the
              shares of common stock issuable upon conversion of the debentures and
              exercise
              of the warrants. The Company is obligated to use its best efforts to
              cause the
              registration statement to be declared effective, which occurred on
              August 14,
              2006, and to insure that the registration statement remains in effect
              until all
              of the shares of common stock issuable upon conversion of the debentures
              and
              exercise of the warrants have been sold. A total of 18,750,000 registered
              shares
              were issued to Cornell upon receipt of Conversion Notices.  As we have
              been unable to effect a registration of additional shares, 4,057,157
              unregistered shares with a Rule 144 restriction have been issued to
              Cornell upon
              receipt of Conversion Notices.  As of September 30, 2007 we are
              required to register 143,906,810 shares to underly the Cornell
              debentures.
  The
              Company’s obligations under the purchase agreement are secured by substantially
              all of its assets and the assets of its subsidiaries. As further security
              for
              its obligations thereunder, Nyhl Henson, Former Chief Executive Officer,
              and
              Charles Roodenburg, Chief Executive Officer, have granted a security
              interest in
              an aggregate of 925,000 shares of their common stock and 3,300,000
              shares of
              their Series A Preferred Stock. The Company also granted a security
              interest in
              15,000,000 shares of its stock, issued from treasury.
  On
              July
              14, 2006, Cornell agreed to release the 15,000,000 shares granted as
              a security
              interest and they were returned to the Company and cancelled.
  10
  We
              anticipate incurring expenditures for acquisitions in excess of $1,000,000
              to
              expand our operations during the next twelve months, and believe that
              the
              current cash flows generated from revenues will not be sufficient to
              fund this
              anticipated expansion. We will require additional funding to finance
              our
              operations through private and public debt or equity offerings. However,
              there
              is no assurance that we can obtain such financing. We also anticipate
              receiving
              recurring revenues from ISP management services but no management service
              contracts have been executed at this time. There can be no assurance
              that we
              will secure these contracts.  As shown in the accompanying
              consolidated financial statements the Company has sustained net operating
              losses
              for the six months ended September 30, 2007, and the years ended March
              31, 2007
              and 2006, and has sustained large accumulated deficits and currently
              does not
              have the revenues to sustain its operations. In addition, the Company
              sold off
              its operations in Colorado, Oregon and California, and has defaulted
              on the
              acquisition of Internet Business Consulting/AppState.net, LLC.  This
              raises substantial doubt about the Company’s ability to continue as a going
              concern.
 
 **Risk
              Factors and Cautionary Statements**
  WE
              HAVE
              HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE, WHICH
              MEANS THAT
              WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING
  We
              have
              incurred substantial losses from operations, and expect to incur net
              losses for
              the foreseeable future. We incurred a net loss of $1,212,519 for the
              six months
              ended September 30, 2007.  If our growth is slower than anticipated or
              operating expenses exceed expectations, losses will be significantly
              greater. We
              may never achieve profitability. Primarily as a result of these recurring
              losses, our independent certified public accountants modified their
              report on
              the March 31, 2007 financial statements to include an uncertainty paragraph
              wherein they expressed substantial doubt about our ability to continue
              as a
              going concern.
 
 Our
              business plan requires the acquisition of additional ISPs. We anticipate
              that
              the funds spent on these acquisitions will need to increase significantly. Additionally,
              we may not be able to secure funding in the future necessary to complete
              these acquisitions.
  These
                conditions give rise to substantial doubt about our ability to continue
                as a
                going concern. Our financial statements do not include adjustments
                relating to
                the recoverability and classification of reported asset amounts or
                the amount
                and classification of liabilities that might be necessary should
                we be unable to
                continue as a going concern. Our continuation as a going concern
                is dependent
                upon our ability to obtain additional financing from the sale of
                our securities,
                as may be required, and ultimately to attain profitability.
  11
  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, 2007, we received an aggregate of $390,750 from the issuance
                of common
                stock. During the six months ended September 30, 2007 we received
                nothing from
                the issuance of common stock. We are actively seeking additional
                funding. There
                can be no assurance that the required additional financing will be
                available on
                terms favorable to us or at all.
  Obtaining
                capital will be challenging in a difficult environment, due to the
                downturn in
                the United States economy and current world instability. We currently
                have no
                commitments for any funding, and there can be no assurance that we
                will be able
                to obtain additional funding in the future from either debt or equity
                financings, bank loans, collaborative arrangements or other sources
                on terms
                acceptable to us, or at all.
  If
                adequate funds are not available or are not available on acceptable
                terms when
                required, we may be required to significantly curtail our operations
                or may not
                be able to fund expansion, take advantage of acquisition opportunities,
                develop
                or enhance services or products or respond to competitive
                pressures.  Such inability could have a material adverse effect on our
                business, results of operations and financial condition. If additional
                funds are
                raised through the issuance of equity or convertible debt securities,
                the
                percentage ownership of our shareholders will be reduced, shareholders
                may
                experience additional dilution, and such securities may have rights,
                preferences
                and privileges senior to those of our common stock.
 
 **WE
                ARE AN EARLY STAGE COMPANY AND OUR STRATEGY IS UNPROVEN.**
  We
                intend
                to pursue additional acquisitions to further the development of our
                internet
                services business. Our strategy is unproven and the revenue and income
                potential
                from our strategy is unproven. We will encounter risks and difficulties
                frequently encountered by early-stage companies in new and rapidly
                changing
                markets, including the risks described elsewhere in this section.
                Our business
                strategy may not be successful and we may not be able to successfully
                address
                these risks. In addition, because of our limited operating history,
                we have
                limited insights into trends that may emerge and affect our
                business.
  **IF
                WE ARE NOT ABLE TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE
                INTERNET
                SERVICE PROVIDER AND WIRELESS COMMUNICATIONS INDUSTRIES WE MAY BE
                FORCED TO
                REDUCE OR CEASE OPERATIONS.**
  12
  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.**
  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.
  13
  **OUR
                BUSINESS DEPENDS ON THE GROWTH AND MAINTENANCE OF THE INTERNET
                INFRASTRUCTURE.**
  Our
                success will depend on the continued growth and maintenance of the
                internet
                infrastructure. This includes maintenance of a reliable network backbone
                with
                the necessary speed, data capacity and security for providing reliable
                internet
                services. Internet infrastructure may be unable to support the demands
                placed on
                it if the number of internet users continues to increase, or if existing
                or
                future internet users access the internet more often or increase
                their bandwidth
                requirements. In addition, viruses, worms and similar programs may
                harm the
                performance of the internet. The internet has experienced a variety
                of outages
                and other delays as a result of damage to portions of its infrastructure,
                and it
                could face outages and delays in the future. These outages and delays
                could
                reduce the level of internet usage as well as our ability to provide
                our
                solutions. Additionally, for many of our customers we rely upon ILECs
                to assist
                in provisioning T-1 and dial-up lines. In the event that these ILECs
                are unable
                or unwilling to provide service, our ability to service existing
                customers or
                add new customers could be impaired.
  **WE
                MAY NOT BE ABLE TO ATTRACT OR RETAIN QUALIFIED PERSONNEL.**
  Our
                future success also depends on our ability to identify, attract,
                hire, retain
                and motivate well-qualified managerial, technical, sales and marketing
                personnel. There can be no assurance that these professionals will
                be available
                in the market or that we will be able to meet their compensation
                requirements.
  **WE
                MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC
                RELATIONSHIPS.**
  We
                believe that the establishment of strategic partnerships will greatly
                benefit
                the growth of our business, and we intend to seek out and enter into
                strategic
                alliances. We may not be able to enter into these strategic partnerships
                on
                commercially reasonable terms or at all. Even if we enter into strategic
                alliances, our partners may not attract significant numbers of customers
                or
                otherwise prove advantageous to our business. Our inability to enter
                into new
                distribution relationships or strategic alliances could have a material
                and
                adverse effect on our business.
  **SHARES
                ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY
                AFFECT OUR
                STOCK PRICE.**
  To
                date,
                we have had a very limited trading volume in our common stock. As
                long as this
                condition continues, the sale of a significant number of shares of
                common stock
                at any particular time could be difficult to achieve at the market
                prices
                prevailing immediately before such shares are offered. In addition,
                sales of
                substantial amounts of common stock, including shares issued upon
                the exercise
                of outstanding options and warrants, under Securities and Exchange
                Commission
                Rule 144 or otherwise could adversely affect the prevailing market
                price of our
                common stock and could impair our ability to raise capital at that
                time through
                the sale of our securities.
  **OUR
                COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE; OUR COMMON STOCK
                IS “PENNY
                STOCK”.**
  The
                market price of our common stock is likely to be highly volatile
                as the stock
                market in general, and the market for technology companies in particular,
                has
                been highly volatile. The trading prices of many technology companies’ stocks
                have recently been highly volatile and have recorded lows well below
                historical
                highs.
  14
  Factors
                that could cause such volatility in our common stock may include,
                among other
                things:
  -  actual  or  anticipated
                fluctuations in our quarterly operating results;
 -  announcements
                of  technological  innovations;
 -  changes  in  financial  estimates  by  securities  analysts;
 -  conditions  or  trends  in
                our industry;  and
 -  changes  in  the  market  valuations  of  other
                comparable companies.
 
 In
                addition, our stock is currently traded on the NASD O-T-C Bulletin
                Board and it
                is uncertain that we will be able to successfully apply for listing
                on the AMEX,
                the NASDAQ National Market, or the Nasdaq SmallCap Market in the
                foreseeable
                future due to the trading price of our common stock, our working
                capital and
                revenue history. Failure to list our shares on the AMEX, the Nasdaq
                National
                Market, or the Nasdaq SmallCap Market will impair the liquidity of
                our common
                stock.
  The
                Securities and Exchange Commission has adopted regulations which
                generally
                define a “penny stock” to be any security that 1) is priced under five dollars,
                2) is not traded on a national stock exchange or on NASDAQ, 3) may
                be listed in
                the “pink sheets” or the NASD OTC Bulletin Board, 4) is issued by a company that
                has less than $5 million in net tangible assets and has been in business
                less
                than three years, or by a company that has under $2 million in net
                tangible
                assets and has been in business for at least three years, or by a
                company that
                has revenues of less than $6 million for three years.
  Penny
                stocks can be very risky: penny stocks are low-priced shares of small
                companies
                not traded on an exchange or quoted on NASDAQ. Prices often are not
                available.
                Investors in penny stocks are often unable to sell stock back to
                the dealer that
                sold them the stock. Thus an investor may lose his/her
                investment.  Our common stock is a “penny stock” and thus is subject
                to rules that impose additional sales practice requirements on broker/dealers
                who sell such securities to persons other than established customers
                and
                accredited investors, unless the common stock is listed on The Nasdaq
                SmallCap
                Market. Consequently, the “penny stock” rules may restrict the ability of
                broker/dealers to sell our securities, and may adversely affect the
                ability of
                holders of our common stock to resell their shares in the secondary
                market.
  **SOME
                OF THE INFORMATION IN THIS QUARTERLY REPORT CONTAINS FORWARD-LOOKING
                STATEMENTS.**
  Some
                of
                the information in this Quarterly Report contains forward-looking
                statements
                that involve substantial risks and uncertainties. You can identify
                these
                statements by forward-looking words such as “may”, “will”, “expect”, “intend”,
“anticipate”, “believe”, “estimate” and “continue” or similar
                words.
  You
                should read statements that contain these words carefully because
                they:
  -  discuss
                our expectations about our future performance;
 -  contain  projections
                of our future operating results or of our future financial condition;
                or
 -  state
                other “forward-looking” information.
  15
 
 We
                believe it is important to communicate our expectations to our
                shareholders.  There may be events in the future, however, that we are
                not able to predict accurately or over which we have no control.
                The risk
                factors listed in this section, as well as any cautionary language
                in this
                Report, provide examples of risks, uncertainties and events that
                may cause our
                actual results to differ materially from the expectations we describe
                in our
                forward- looking statements.  Before you invest in our common stock,
                you should be aware that the occurrence of any of the events described
                in these
                risk factors and elsewhere in this Report could have a material and
                adverse
                effect on our business, results of operations and financial condition
                and that
                upon the occurrence of any of these events, the trading price of
                our common
                stock could decline and you could lose all or part of your
                investment.
 **ITEM
              3. CONTROLS AND PROCEDURES**
  The
              Company maintains controls and procedures designed to ensure that information
              required to be disclosed in this report is recorded, processed, accumulated
              and
              communicated to our management, including our chief executive officer
              and our
              chief financial officer, to allow timely decisions regarding the required
              disclosure.
  The
              management of the Company has evaluated the effectiveness of the issuer’s
              disclosure controls and procedures as of the end of the period of the
              report
              (evaluation date) and have concluded that the disclosure controls internal
              controls and procedures are adequate and effective based upon their
              evaluation
              as of the evaluation date.
  There
              were no changes in the small business issuer’s internal controls over financial
              reporting identified in connection with the company evaluation required
              by
              paragraph (3) of Rule 13a-15 or Rule 15d-15 under the Exchange Act
              that occurred
              during the small business issuer’s first fiscal quarter that has materially
              affected or is reasonably likely to materially affect the small business
              issuer’s internal control over financial reporting.
  Our
              Board
              of Directors were advised by Bagell, Josephs, Levine and Company, LLC,
              our
              independent registered public accounting firm, that during their assessment
              of
              our internal controls as part of their audit for the year ended March
              31, 2007,
              they have identified a material weakness as defined in Public Accounting
              Oversight Board Standard No. 2 in our internal control over financial
              reporting.
              Our auditors have identified the following material weaknesses in our
              internal
              controls as of March 31, 2007 and September 30, 2007:
  A
              material weakness in the Company’s internal controls exists in that there is
              limited segregation of duties amongst the Company’s employees with respect to
              the Company’s preparation and review of the Company’s financial statements. This
              material weakness is a result of the Company’s limited number of employees. This
              material weakness may affect management’s ability to effectively review and
              analyze elements of the financial statement closing process and prepare
              financial statements in accordance with U.S. GAAP.
  16
  Subsequent
              to the notification from our independent registered public accounting
              firm, our
              chief executive officer evaluated our internal controls and concurred
              that our
              disclosure controls and procedures have not been effective to ensure
              that
              information required to be included in our periodic SEC filings is
              recorded,
              processed, summarized, and reported within the time periods specified
              in the SEC
              rules and forms. However, at this time, our resources and size prevent
              us from
              being able to employ sufficient resources to enable us to have adequate
              segregation of duties within our internal control system. The Company
              intends to
              remedy the material weakness by hiring additional employees and reallocating
              duties, including responsibilities for financial reporting, among the
              Company’s
              employees as soon as the Company has the financial resources to do
              so.
              Management is required to apply judgment in evaluating the cost-benefit
              relationship of possible changes in our disclosure controls and
              procedures.
  Other
              than the material weakness indicated above, no accounting errors or
              misstatements have been identified by our disclosure controls and procedures
              or
              by our independent registered public accounting firm that would have
              a material
              effect on our Financial Statements.
   **PART
              II - OTHER INFORMATION**
 
 **ITEM
              1. LEGAL PROCEEDINGS**
  The
              Company is currently negotiating settlements with vendors and debt
              holders for
              amounts currently outstanding. As of September 30, 2007, the Company
              has
              recognized the full liability for all amounts that are due.
 
 The
              Company has six default judgments against it for a total amount of
              $146,504.  The amounts are recorded in other liabilities and
              contingencies.
 
 
 **ITEM
              2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
              PROCEEDS**
  7,407,408
              shares of common stock were issued at a price of $.0054 for conversion
              of
              $40,000 of Cornell Capital Partners debentures.  Of those shares,
              1,696,046 shares were unregistered.
 
 3,814,510
              shares of unregistered common stock were issued at $.0051 to convert
              $19,454 of
              debt.
 
 5,807,848
              shares of unregistered common stock were issued at $.007 to convert
              a contingent
              liability.
 
 2,361,111
              shares of unregistered common stock were issued at a price of $.0036
              for
              conversion of $8,500 of Cornell Capital Partners debentures.
  17
 
 2,574,312
              shares of unregistered common stock were returned to the company and
              cancelled
              for the default in the purchase agreement of IBC and AppState.net.  We
              had been unable to come to mutually acceptable terms to cure the default
              by the
              Company on the terms of the Purchase Agreement (“Agreement”) dated January 1,
              2005 by and between IVI Communications, Inc. (“Buyer”), Internet Business
              Consulting, Inc. (“IBC”) and AppState.Net, LLC (“AppState”), jointly referred to
              as (“Sellers”).  Sellers exercised the remedies for default as
              provided in the Agreement and confirmed that the Remedies, which were
              that
              foreclosure and repossession occurred December 31, 2006, are in effect.
              Pursuant
              to those remedies, ownership of Sellers reverts to James Hollis, effective
              December 31, 2006.
 
 1,000,000
              shares of unregistered common stock were issued at $.006 for consulting
              services
              valued at $6,000.
 
 12,000,000
              shares of common stock were issued at $.004 for conversion of $48,000
              on a
              convertible note.  Of those shares, 10,713,948 were
              unregistered.
 
 1,000,000
              shares of unregistered common stock were issued at $.0031 for consulting
              services valued at $3,100.
 
 Each
              of
              the above issuances of common stock were exempt from registration pursuant
              to
              Section 4(2) of the Securities Act of 1933.
  
 **ITEM
              3. DEFAULTS UPON SENIOR SECURITIES**
  There
              were no defaults in the payment of any undisputed indebtedness during
              the
 period
              of
              this report.
 
 **ITEM
              4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER**
  None
 
 
 **ITEM
                5. OTHER INFORMATION.**
 
 **CHANGE
              OF MANAGEMENT**
 
 Effective
              April 24, 2007,Charles Roodenburg was named President and Chairman  of
              the Board of Directors of IVI Communications, Inc. and Nyhl Henson
              resigned his
              position as President and Chairman of the Board of Directors of IVI
              Communications, Inc.
 
 
 **ITEM
              6. EXHIBITS**
  **Exhibit
                      #**
                    **Description**  31.1
                    Certification
                        of Principal Executive Officer and Principal Financial Office
                        pursuant to
                        Sarbanes-Oxley Section 302
 32.1
                    Certification
                        of Chief Executive Officer and Chief Financial Officer pursuant
                        to
                        Sarbanes-Oxley Section 906
  18
 
 **SIGNATURES**
 
 
 In
              accordance with the requirements of the Exchange Act, the registrant
              caused this
              report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 **IVI
                        Communications, Inc.**
                      **a Nevada Corporation**Date:
                        November
                        19, 2007
                    By:
                    /s/ Charles
                      RoodenburgCharles
                      RoodenburgChief
                      Executive OfficerChief
                      Financial Officer