UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  
 FORM
10-QSB
 
 
 Mark
one
 [X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the period ended December 31, 2007
 
 [  
] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from ______to______.
  Commission File Number: 000 32797
  IVI
COMMUNICATIONS, INC.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                (State
      or other jurisdiction of
                Incorporation
      or organization)
              33-0965560
                I.R.S.
      Employer
                Identification
      Number
 
 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 December 31,
2007 was 153,658,057.
  
  
 IVI
COMMUNICATIONS, INC.
 FORM
10-QSB
 
 TABLE OF CONTENTS
 
 ITEM
      NO. DESCRIPTION
              PAGEPART
      I - FINANCIAL INFORMATIONItem
      1.
              Financial
      Statements
              1Condensed
      Consolidated Balance Sheet as of December 31, 2007 (unaudited)
              3Condensed
      Consolidated Statements of Operations for the Nine Months and Three Months
      Ended December 31, 2007and
      2006 (unaudited)
              4Condensed
      Consolidated Statements of Cash Flows for the Nine Months Ended December
      31, 2007 and 2006 (unaudited)
              5Notes
      to Condensed Consolidated Financial Statements (unaudited)
              6Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              23Item
      3.
              Controls
      and Procedures
              35PART
      II - OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              36Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              36Item
      3.
              Defaults
      Upon Senior Securities
              37Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              37Item
      5.
              Other
      Information
              37Item
      6.
              Exhibits
              37Signatures
              
              38
 
  
  PART
I - FINANCIAL INFORMATION
 
 ITEM
1.   FINANCIAL STATEMENTS
 
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
 
 DECEMBER
31, 2007 AND 2006
 
 (UNAUDITED)
 
 1
 
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 INDEX
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006
 (UNAUDITED)
   PageCondensed
      Consolidated Balance Sheet as of December 31, 2007
    (Unaudited)
              3Condensed
      Consolidated Statements of Operations for the Nine Months and Three
      MonthsEnded  December
      31, 2007 and 2006 (Unaudited)
              4Condensed
      Consolidated Statements of Cash Flows for the Nine Months
      EndedDecember
      31, 2007 and 2006 (Unaudited)
              5Notes
      to Condensed Consolidated Financial Statements (Unaudited)
              6
  2
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEET
 (UNAUDITED)
 DECEMBER
31, 2007
   ASSETSCURRENT
      ASSETSCash
      and cash equivalents
              
              $
              8,706Accounts
      receivable
              
              
              24,322Other
      current assets
              
              
              5,196Total
      current asset
              
              
              38,224Fixed
      Assets, net of $41,519 accumulated depreciation
              
              
              52,603OTHER
      ASSETSGoodwill
              
              
              674,934TOTAL
      ASSETS
              
              $
              765,761LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESCurrent
      portion of notes payable
              
              $
              77,682Current
      portion of obligations under capital lease
              
              
              16,283Accounts
      payable and accrued liabilities
              
              
              2,417,038Deferred
      revenue
              
              
              1,252Liability
      for stock payable
              
              
              398,949Derivative
      liability
              
              
              342,737Convertible
      debentures, net of discount $171,971
              
              
              489,029Warrant
      liability
              
              
              211,272Total
      current liabilities
              
              
              3,954,242LONG-TERM
      LIABILITIESObligations
      under capital lease, net of current portion
              
              
              22,367TOTAL
      LIABILITIES
              
              
              3,976,609COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      DEFICITPreferred
      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;153,658,057 issued and outstanding
              
              
              153,656Additional
      paid-in capital
              
              
              23,308,883Accumulated
      deficit
              
              
              (26,678,387
              )Total stockholders' deficit
              
              
              (3,210,848
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              765,761






See
accompanying notes to condensed consolidated financial statements.




3
  IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 FOR
THE NINE MONTHS AND THREE MONTHS ENDED DECEMBER 31, 2007 AND 2006
  
 NINE
      MONTHS ENDED
              
              
              THREE
      MONTHS ENDEDDECEMBER
      31
              
              
              DECEMBER
      312007
              
              
              2006
              
              
              2007
              
              
              2006OPERATING
      REVENUE
              
              $
              248,614
              
              
              $
              1,703,296
              
              
              $
              77,097
              
              
              $
              584,586COST
      OF OPERATIONS
              
              
              144,723
              
              
              
              1,123,591
              
              
              
              38,856
              
              
              
              351,409GROSS
      PROFIT
              
              
              103,891
              
              
              
              579,705
              
              
              
              38,241
              
              
              
              233,177OPERATING
      EXPENSESSelling
              
              
              827
              
              
              
              12,362
              
              
              
              131
              
              
              
              5,270General and administrative
              
              
              935,245
              
              
              
              1,566,374
              
              
              
              178,368
              
              
              
              628,977Depreciation / Amortization
              
              
              162,615
              
              
              
              87,841
              
              
              
              41,284
              
              
              
              29,515Total operating expenses
              
              
              1,098,687
              
              
              
              1,666,577
              
              
              
              219,783
              
              
              
              663,762OPERATING
      LOSS
              
              
              (994,796
              )
              
              
              (1,086,872
              )
              
              
              (181,542
              )
              
              
              (430,585
              )OTHER
      INCOME (EXPENSES)Other
      income
              
              
              220,113
              
              
              
              1,032,913
              
              
              
              43,950
              
              
              
              -Gain
      (Loss) on Revaluation of Derivatives
              
              
              (197,177
              )
              
              
              202,158
              
              
              
              35,115
              
              
              
              37,429Other
      expense
              
              
              (101
              )
              
              
              (500
              )
              
              
              (23
              )
              
              
              (500
              )Interest
      expense
              
              
              (375,058
              )
              
              
              (276,445
              )
              
              
              (32,000
              )
              
              
              (99,786
              )Interest
      income
              
              
              -
              
              
              
              274
              
              
              
              -
              
              
              
              63Total other income (expense)
              
              
              (352,223
              )
              
              
              958,400
              
              
              
              47,042
              
              
              
              (62,794
              )NET
      LOSS BEFORE PROVISION FOR INCOME TAXES
              
              
              (1,347,019
              )
              
              
              (128,472
              )
              
              
              (134,500
              )
              
              
              (493,379
              )Provision
      for income taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      LOSS APPLICABLE TO COMMON SHAREHOLDERS
              
              $
              (1,347,019
              )
              
              $
              (128,472
              )
              
              $
              (134,500
              )
              
              $
              (493,379
              )BASIC
      AND DILUTED LOSS PER SHARE
              
              $
              (0.01
              )
              
              $
              (0.00
              )
              
              $
              (0.00
              )
              
              $
              (0.01
              )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
              
              
              132,705,598
              
              
              
              77,444,502
              
              
              
              145,171,854
              
              
              
              80,476,970






See
accompanying notes to condensed consolidated financial
statements.


4
  IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 FOR
THE NINE MONTHS ENDED DECEMBER 31, 2007 AND 2006


2007
                
                
                2006CASH
      FLOW FROM OPERATING ACTIVITIESNet Loss
                
                $
                (1,347,019
                )
                
                $
                (128,472
                )Adjustments to reconcile net loss to net cashprovided by (used in) operating activities:Depreciation
                
                
                22,371
                
                
                
                37,841Amortization of debt discount
                
                
                140,244
                
                
                
                50,000Amortization of prepaid consulting fees
                
                
                333,331
                
                
                
                -Gain on conversion of debt
                
                
                (4,558
                )
                
                
                -Net beneficial interest on debt conversions
                
                
                297,475
                
                
                
                31,094Stock issued for services
                
                
                9,100
                
                
                
                390,996Loss (gain)  on revaluation of derivatives
                
                
                197,177
                
                
                
                (202,158
                )Changes in assets and liabilitiesDecrease in accounts receivable, net
                
                
                48,421
                
                
                
                82,200Accounts receivable settlement
                
                
                171,695
                
                
                
                -Decrease in inventory
                
                
                -
                
                
                
                50,090(Increase) Decrease in other current assets
                
                
                1,254
                
                
                
                (6,281
                )Decrease in other assets
                
                
                -
                
                
                
                6,513Increase in accounts payable and accrued liabilities
                
                
                598,652
                
                
                
                314,595Decrease in acquisition contracts
                
                
                -
                
                
                
                (170,000
                )Decrease in litigation settlement
                
                
                (448,675
                )
                
                
                -Decrease in contingent liability
                
                
                -
                
                
                
                (484,761
                )Decrease in deferred revenue
                
                
                (1,270
                )
                
                
                (5,701
                )Total adjustments
                
                
                1,365,217
                
                
                
                94,428Net cash provided by (used in) operating activities
                
                
                18,198
                
                
                
                (34,044
                )CASH
      FLOWS FROM INVESTING ACTIVITIESAcquisition of fixed assets
                
                
                (2,970
                )
                
                
                (34,907
                )Net cash (used in) investing activities
                
                
                (2,970
                )
                
                
                (34,907
                )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds from convertible debentures
                
                
                -
                
                
                
                401,000Payments on installment note payable
                
                
                -
                
                
                
                14,608Payments on notes payable
                
                
                -
                
                
                
                (296,000
                )Payments on capital lease obligations
                
                
                (11,349
                )
                
                
                -Payments on officer loans
                
                
                -
                
                
                
                (40,770
                )Net cash provided by (used in) financing activities
                
                
                (11,349
                )
                
                
                78,838NET
      INCREASE INCASH AND CASH
      EQUIVALENTS
                
                
                3,879
                
                
                
                9,887CASH
      AND CASH EQUIVALENTS-BEGINNING OF
      PERIOD
                
                
                4,827
                
                
                
                233,544CASH
      AND CASH EQUIVALENTS - END OF PERIOD
                
                $
                8,706
                
                
                $
                243,431SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for:Interest paid
                
                $
                -
                
                
                $
                6,582Income taxes
                
                $
                -
                
                
                $
                10,314SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INFORMATION:Common
      stock issued for prepaid consulting fees, classified as
    equity
                
                $
                333,331
                
                
                $
                580,207Common
      stock issued for debt settlements and payables
                
                $
                91,350
                
                
                $
                -Common
      stock issued for services
                
                $
                9,100
                
                
                $
                390,996Debt
      incurred for stock to be issued
                
                $
                260,000
                
                
                $
                157,500Fixed
      assets acquired for debt
                
                $
                51,264
                
                
                $
                -Additional
      paid-in capital reclassified to warrant liability
                
                $
                211,272
                
                
                $
                -
   See
accompanying notes to condensed consolidated financial
statements.
 5
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 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.


6
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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 December 31, 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 December 31, 2007, the Company had no funds in excess of
the insured limit.
  7
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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 nine months
ended December 31, 2007 and 2006 were $827 and $12,362
respectively.
  Equipment
 
 Equipment
is stated at cost.  Depreciation is computed using the straight-line
method over the estimated useful lives of the assets.  When the assets
are retired or otherwise disposed of, the costs and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
recognized in income for the period.  The cost of maintenance and
repairs is charged to expense as incurred; significant renewals and betterments
are capitalized.  Deduction is made for retirements resulting from
renewals or betterments.
  8
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006 (UNAUDITED)
  NOTE
      2-
              SUMMARY OF SIGNIFICANT
      ACCOUNTING
  POLICIES   (CONTINUED)
  Accounts
Receivable
 
 The
Company conducts business and extends credit based on an evaluation of the
customers’ financial condition, generally without requiring
collateral.  Exposure to losses on receivables is expected to vary by
customer due to the financial condition of each customer.  The Company
monitors exposure to credit losses and maintains allowances for anticipated
losses considered necessary under the circumstances.  After review, it
was determined that an no allowance was necessary at December 31,
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:
 
 December
      31
              
              
              December
      312007
              
              
              2006Net
      income (loss)
              
              $
              (1,347,019
              )
              
              $
              (128,472
              )Weighted-average
      common sharesOutstanding
      (Basic)
              
              
              132,705,598
              
              
              
              77,444,502Weighted-average
      common stockEquivalentsStock
      options
              
              
              -0-
              
              
              
              -0-Warrants
              
              
              -0-
              
              
              
              -0-Weighted-average
      common sharesOutstanding
      (Diluted)
              
              
              132,705,598
              
              
              
              77,444,502
  9
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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 December 31, 2007 because inclusion would have been
antidilutive.  At December 31, 2007 and 2006, there were 616,421,053
and 50,087,602 warrants available, respectively.  There were no
options available for December 31, 2007 or December 31, 2006.
 
 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
withSelling, Goods or
Services”.  The fair value of the option issued is used to
measure the transaction, as this is more reliable than the fair value of the
services received.  The fair value is measured at the value of the
Company’s common stock on the date that the commitment for performance by the
counterparty has been reached or the counterparty’s
performance is complete. The fair value of the equity instrument is charged
directly to compensation expense and additional paid-in
capital.
  10
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006 (UNAUDITED)
  NOTE
      2-
              SUMMARY OF SIGNIFICANT
      ACCOUNTING
  POLICIES   (CONTINUED)
  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 December 31, 2007, the fair value of the derivatives was
$342,737.  A loss in revaluation of the derivative for the nine months
ended December 31, 2007 was recognized in the amount of
$197,177.
 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.
  11
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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 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.
  12
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006
(UNAUDITED)
  NOTE
      2-
              SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES
(CONTINUED)
  In
September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans”, which amends
SFAS No. 87 “Employers’ Accounting for Pensions”
(SFAS No. 87), SFAS No. 88 “Employers’ Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits” (SFAS No. 88), SFAS No. 106
“Employers’ Accounting for Postretirement Benefits Other Than Pensions”
(SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures
about Pensions and Other Postretirement Benefits (revised 2003)”
(SFAS No. 132R). This Statement requires companies to recognize an
asset or liability for the overfunded or underfunded status of their benefit
plans in their financial statements. SFAS No. 158 also requires the
measurement date for plan assets and liabilities to coincide with the sponsor’s
year end. The standard provides two transition alternatives related to the
change in measurement date provisions. The recognition of an asset and liability
related to the funded status provision is effective for fiscal year ending after
December 15, 2006 and the change in measurement date provisions is
effective for fiscal years ending after December 15, 2008.  The
implementation of this standard did not have a material impact on its financial
position, results of operations or cash flows.
 
 NOTE
      3-
              CAPITAL
      LEASES
 
 Capital
leases consist of one subsidiary equipment lease, which is reflected in fixed
assets.  The minimum lease payments due on the lease total $42,552,
which includes interest of $3,901.  The liability is $38,650at December 31, 2007, of which $16,283 is current and $22,367 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 December 31, 2007 the notes payable
balance is $14,259,
and the accrued interest on those notes is $4,904. These amounts are reflected
as current liabilities in the condensed consolidated balance sheet at December
31, 2007.
  13
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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 the average closing price during the 10 preceding
trading days.  During the quarter ending December 31, 2007, $26,200
wasconverted at a weighted average price of $.0022, for a total of
12,052,815 shares of common stock.  A beneficial interest charge of
$7,850 was recorded.
 
 In May
2006 the Company borrowed $5,000 on a one-year note due May 22,
2007.  This note carries no interest.  At December 31, 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 December 31,
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 was 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.
  14
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006
(UNAUDITED)
  NOTE
      5-
              CONVERTIBLE DEBENTURES
      (continued)
 
 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.
  During
the year ending March 31, 2007, Cornell Capital Partners converted $150,000 of
the principal for 13,038,640 shares of common stock.
  During
the nine months ended December 31, 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.
 
 The
Company sold a security on September 25, 2006 for $12,500 which converts at 50%
discount to market.
 
 The
Company sold a security on October 23, 2006 for $12,500 which converts at 50%
discount to market.
  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 average closing price during the 10 preceding
trading days.
  15
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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 average closing price during the 10 preceding trading
days.
 
 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 average closing price during the 10 preceding trading
days.
 
 The
Company sold a security for $12,500 to one entity in September
2006.  This debenture carries no interest, was 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, was 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 $342,737. 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
              $0.0012Exercise
      price
              $0.00108Dividend
      yield
              0.00%Risk
      free interest rate
              4.00%Expected
      volatility
              170%Expected
      life
              4.0
      Years
  16
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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 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 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 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 price of
$.0031.  This increased the number of warrants from 229,460,784 to
337,500,000 at $.0031 exercise price.
  17
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006
(UNAUDITED)
  NOTE
      5-
              CONVERTIBLE DEBENTURES
      (CONTINUED)
  Derivative
Liability   (continued)
  On
December 3, 2007 the Company issued stock at a price of $.0019.  This
increased the number of warrants from 337,500,000 to 615,921,053 at $.0019
exercise price.
  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
              $0.20Exercise
      price
              $0.30
      and $0.40Dividend
      yield
              0.00%Risk
      free interest rate
              4.00%Expected
      volatility
              192.95%Expected
      life
              5.0
      Years
 
 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 $171,971.
 
 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.
 18
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006
(UNAUDITED)
 NOTE
      5-
              CONVERTIBLE DEBENTURES
      (CONTINUED)
 
 Derivative
Liability (continued)
 
 Current
stock price obligates the Company to register 401,500,000 shares for the
convertible debentures and 615,921,053 shares for the warrants.  We
have been unable to register these shares as of December 31, 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, of which 4,000,000
shares of preferred series A stock and 1,000,000 shares of preferred series B
stock are issued and outstanding as of December 31, 2007.
 
 There
were no preferred stock transactions for the nine months ended December 31,
2007.
 
 Common
Stock
 
 As of
December 31, 2007, the Company has 400,000,000 shares of common stock
authorized, 153,658,057  are issued and outstanding.
 
 For the
nine months ended December 31, 2007, the following common stock was
issued:
 
 During
the nine months ended December 31, 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.
 
 19
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 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.
 
 On
November 5, 2007, $3,540 of principal on an $80,623 short term loan was
converted for 1,416,052 shares of  common stock.  The
conversion price was $.0025, the lowest bid price in the preceding 10 trading
days, resulting in  beneficial interest income of $708.
 
 On
December 3, 2007, $13,559 of principal on an $80,623 short term loan was
converted for 7,136,763 shares of  common stock.  The
conversion price was $.0019 the lowest bid price in the preceding 10 trading
days, resulting in  beneficial interest charge of $7,850.
 
 On
December 17, 2007, $9,100 of principal on an $80,623 short term loan was
converted for 3,500,000 shares of  common stock.  The
conversion price was $.0026, the lowest bid price in the preceding 10 trading
days, resulting in  beneficial interest income of $2,100.
  20
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006
(UNAUDITED)
  NOTE
      7-
              GOING
      CONCERN
 
 As shown
in the accompanying condensed consolidated financial statements, the Company has
sustained net operating losses for the nine months ended December 31, 2007, and
the years ended March 31, 2007 and 2006, and has sustained large accumulated
deficits and currently does not have the revenues to sustain its operations. In
addition, the Company sold off its operations in Colorado, Oregon and
California, and has defaulted on the acquisition of Internet Business
Consulting/AppState.net, LLC.  This raises substantial doubt about the
Company’s ability to continue as a going concern.
 
 Management
is in the process of restructuring the Company and is continuing to search for
more profitable internet and communications related service companies to
acquire. The Company’s future success is dependent upon its ability to achieve
profitable operations and generate cash from operating activities, and upon
additional financing. There is no guarantee that the Company will be able to
raise enough capital or generate revenues to sustain its
operations.
 
 The
condensed consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
 
 NOTE
      8-
              PROVISION FOR INCOME
      TAXES
 
 Deferred
income taxes will be determined using the liability method for the temporary
differences between the financial reporting basis and income tax basis of the
Company’s assets and liabilities.  Deferred income taxes will be
measured based on the tax rates expected to be in effect when the temporary
differences are included in the Company’s consolidated tax
return.  Deferred tax assets and liabilities are recognized based on
anticipated future tax consequences attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases.
 
 At
December 31, 2007, net deferred tax assets approximated the
following:
 
 Deferred
      tax assets
              
              $
              9,345,000Less:  valuation
      allowance
              
              
              (9,345,000
              )Net
      deferred tax assets
              
              $
              -0-
 
 At
December 31, 2007, the Company had accumulated deficits approximating
$26,700,000 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.
 21
 IVI
COMMUNICATIONS, INC. AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 DECEMBER
31, 2007 AND 2006
(UNAUDITED)
 NOTE
      9-
              LITIGATION/
      ARBITRATION
 
 The
Company is currently negotiating settlements with vendors and debt holders for
amounts currently outstanding. As of December 31, 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
 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 subsequently cancelled.
 
 NOTE
      12-
              RECLASSIFICATION
 
 The
financial statements for the nine months ended December 31, 2006 have been reclassified
toconform to presentation for the nine months ended December 31,
2007.  The reclassification had no effect on the operations for the
nine months ended December 31, 2006.
 
 22
  ITEM
2.   MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION:
 
 THIS
QUARTERLY REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING,
WITHOUT LIMITATION, STATEMENTS REGARDING OUR EXPECTATIONS, BELIEFS,
INTENTIONS OR FUTURE STRATEGIES THAT ARE SIGNIFIED BY THE WORDS “EXPECTS”,
“ANTICIPATES”, “INTENDS”, “BELIEVES”, OR SIMILAR LANGUAGE. THESE
FORWARD-LOOKING STATEMENTS INVOLVE RISKS, UNCERTAINTIES AND OTHER FACTORS.
ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON
INFORMATION AVAILABLE TO US ON THE DATE HEREOF AND SPEAK ONLY AS OF THE
DATE HEREOF. THE FACTORS DISCUSSED BELOW UNDER “RISK FACTORS” AND ELSEWHERE
IN THIS QUARTERLY REPORT ON FORM 10-QSB ARE AMONG THOSE FACTORS THAT IN
SOME CASES HAVE AFFECTED OUR RESULTS AND COULD CAUSE THE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS.
 
 The
following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto.
 
 OVERVIEW
 
 We are a
broadband Internet access company that is currently developing one of the first
nationwide high speed wireless broadband networks.
 
 The
management of IVI believes that a tremendous opportunity exists to provide
wireless broadband Internet access where it is currently unavailable or cost
prohibitive.
 
 There are
thousands of independent ISPs providing dialup Internet access to the 19 million
U.S. homes, not to mention businesses, schools, and churches that cannot get
broadband Internet access. IVI will contract with selected dialup ISPs in rural
markets to install wireless networks owned by IVI and operated by the ISPs to
market a nationally branded broadband Internet access service.
 
 We
currently operate one subsidiary, Futura, Inc.
 
 On
February 6, 2006 we entered into a Purchase Agreement and acquired 100% of the
outstanding stock of Futura, Inc. from Francis and Lois Allen, the shareholders
of Futura, Inc. Futura, Inc. is an operating subsidiary, and is an Internet
Service Provider  founded in 1995 in Cabot, Arkansas, that provides
dialup and DSL broadband Internet access, and associated services such as Email
spam and virus filtering, VoIP telephony, “Kid Safe” surfing (Parental Control),
and web accelerator services, to communities surrounding Little Rock Arkansas
including Cabot, Carlisle, Clarendon, DeValls Bluff, DeWitt, England, Hazen,
Jacksonville, and Stuttgart.  Futura has contracts in place for low
cost bandwidth and operates a network operation center (NOC) located in Little
Rock, Arkansas.  Futura has completed the first link of the planned
wireless broadband network from Little Rock to Cabot, 23 miles to the
northeast.  Futura has also completed the installation of three
wireless tower sites that currently provide broadband Internet access to
residences and businesses in Cabot (population 15,000) and Ward (population
2,580).
  23
  We expect
operating losses and negative operating cash flows to continue for at least the
next twelve months, because of expected additional costs and expenses related to
brand development, marketing and other promotional activities, strategic
relationship development and potential acquisitions of related complementary
businesses.
 
 RESULTS
OF OPERATIONS
 
 Three Months Ended December
31, 2007 Compared With Three Months Ended December 31, 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 December 31, 2006 included IBC
and AppState.net. Accordingly, comparisons from 2007 to 2006 are not
meaningful.  The numbers below compare the consolidated results of
operations for the three months ended December 31, 2007 and December 31, 2006;
and also compare the results of existing operations, which are corporate and the
Futura subsidiary, for the three months ended December 31, 2007 and December 31,
2006.
  Revenue for the
three months ended December 31, 2007 was $77,097 compared to $584,586 for the
three months ended December 31, 2006, a decrease of $507,489.  Revenue
for existing operations for the three months ended December 31, 2006 was
$140,650, a decrease of $63,553 from December 31, 2006 to December 31,
2007.  The corporate consulting services decreased $21,600, and
services provided by Futura decreased $41,953.
 
 Cost of
operations for the three months ended December 31, 2007 were $38,856 compared to
$351,409 for the three months ended December 31, 2006, a decrease of
$312,553.  Cost of operations for existing operations for the three
months ended December 31, 2006 were $80,517, a decrease of $41,661 from December
31, 2006 to December 31, 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 December 31, 2007 were
$178,368 compared to $628,977 for the three months ended December 31, 2006, a
decrease of $450,609.  General and administrative for existing
operations for the three months ended December 31, 2006 were $475,010, a
decrease of $296,642 from December 31, 2006 to December 31,
2007.  There was a decrease in compensation of $65,117 with a
reduction of personnel, a decrease in consulting fees of $257,876, a decrease in
travel expense of $6,690, a decrease in facility rents and associated costs of
$8,018, a reduction of $7,531 in professional, off set by an increase in bad
debt of $61,653, and a decrease in general operating costs of
$13,063.
  24
  Selling
expenses for the three months ended December 31, 2007 were $131, compared to
selling expenses of $5,270 for the three months ended December 31, 2006, a
decrease of $5,139. Selling expenses of existing operations for the three months
ended December 31, 2006 were $1,767, a decrease of $1,636 from December 31, 2006
to December 31, 2007.  This was reduction in advertising
expense.
 
 Depreciation
and amortization expense was $41,284 for the three months ended December 31,
2007, compared to depreciation and amortization expense of $29,515 for the three
months ended December 31, 2006, an increase of $11,769.  Depreciation
and amortization expense of existing operations for the three months ended
December 31, 2006 was $20,333, an increase of $20,951 from December 31, 2006 to
December 31, 2007.  There was an increase of $4,159 in depreciation
and an increase of $16,792 in amortization of debt.
 
 Due to
the above facts, Loss before other Income (Expenses) was ($181,542) in the three
months ended December 31, 2007 compared to the net operating loss of ($430,585)
in the three months ended December 31, 2006.  Loss before other Income
(Expenses) for existing operations for the three months ended December 31, 2006
was ($436,977), a decrease in loss of $255,435 from December 31, 2006 to
December 31, 2007.
 
 The
Company incurred a gain on the revaluation of derivatives associated with the
convertible debentures of $35,115 for the three months ended December 31, 2007
compared to a gain of $37,429 for the three months ended December 31, 2006. This
was due to the decline in the fair market value of the
stock.
 The
Company incurred interest expenses of $32,000 in the three months ended December
31, 2007, compared to $99,786 for the three months ended December 31, 2006. This
was a reduction of $14,742 in beneficial interest and a reduction in interest on
notes of $53,044 in the three months ended December 31, 2007.
 
 The
Company had other income of $43,950 in the three months ended December 31, 2007,
compared to $0 in the three months ended December 31, 2006.  In the
three months ended December 31, 2007, $43,950 in other income was the result of
debt forgiveness. Interest income was $0 in the three months ended December 31,
2007 compared to $63 the three months ended December 31, 2006.
 
 Due to
the above factors, there was a net loss for the three months ended December 31,
2007 of ($134,500) compared to a net loss of ($493,379) for the three months
ended December 31, 2006. Basic and diluted (loss) per share for the three months
ended December 31, 2007 was ($0.00), compared to ($0.01) for the three months
ended December 31, 2006.
 Nine Months Ended December
31, 2007 Compared With Nine Months Ended December 31, 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 nine months ended
December 31, 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.
  25
  Revenue
for the nine months ended December 31, 2007 was $248,614 compared to $1,703,296
for the nine months ended December 31, 2006, a decrease of
$1,454,682.  Revenue for existing operations for the nine months ended
December 31, 2006 was $445,024, a decrease of $196,410 from December 31, 2006 to
December 31, 2007.  The corporate consulting services decreased
$64,800, and services provided by Futura decreased $131,610.
 
 Cost of
operations for the nine months ended December 31, 2007 were $144,723 compared to
$1,123,591 for the nine months ended December 31, 2006, a decrease of
$978,868.  Cost of operations for existing operations for the nine
months ended December 31, 2006 were $230,315, a decrease of $85,592 from
December 31, 2006 to December 31, 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 nine months ended December 31, 2007 were
$935,245 compared to $1,566,374 for the nine months ended December 31, 2006, a
decrease of $631,129.  General and administrative for existing
operations for the nine months ended December 31, 2006 were $1,115,658, a
decrease of $180,413 from December 31, 2006 to December 31,
2007.  There was a decrease in compensation of $166,388, a decrease in
consulting fees of $78,107, an increase in bad debt expense of $171,695, a
decrease in professional fees of $47,337, a decrease in travel costs of $20,707,
a decrease in rents of $9,351, and a decrease in taxes of $9,572, and a decrease
in general operating costs of $20,646.
 
 Selling
expenses for the nine months ended December 31, 2007 were $827, compared to
selling expenses of $12,362 for the nine months ended December 31, 2006, a
decrease of $11,535. Selling expenses of existing operations for the nine months
ended December 31, 2006 were $3,199, a decrease of $2,372 from December 31, 2006
to December 31, 2007.
 
 Depreciation
and amortization expense was $162,615 for the nine months ended December 31,
2007, compared to depreciation and amortization expense of $87,841 for the nine
months ended December 31, 2006, an increase of $74,774.  Depreciation
and amortization expense of existing operations for the nine months ended
December 31, 2006 was $62,852, an increase of $99,763 from December 31, 2006 to
December 31, 2007.  There was an increase of $9,520 in depreciation
and an increase of $90,243 in amortization of debt.
 
 Due to
the above facts, Loss before other Income (Expenses) was ($994,796) in the nine
months ended December 31, 2007 compared to the net operating loss of
($1,086,872) in the nine months ended December 31, 2006.  Loss before
other Income (Expenses) for existing operations for the nine months ended
December 31, 2006 was ($967,000), a decrease in loss of $27,796 from December
31, 2006 to December 31, 2007.
 
 The
Company incurred a loss on the revaluation of derivatives associated with the
convertible debentures of $197,177 for the nine months ended December 31, 2007
compared to a gain of $202,158 for the nine months ended December 31, 2006. This
was due to the decline in the fair market value of the
stock.
 The
Company incurred interest expenses of $375,058 in the nine months ended December
31, 2007, compared to $276,445 for the nine months ended December 31, 2006.
There was a decrease in interest on notes, debentures, and capital leases of
$167,766, offset by an increase in beneficial interest expense of $266,379
realized on the conversion of convertible debentures and stock to be issued for
consulting services in the nine months ended December 31, 2007.
  26
  The
Company had other income of $220,113 in the nine months ended December 31, 2007,
compared to $1,032,913 in the nine months ended December 31, 2006.  In
the nine months ended December 31, 2007, other income was the result of debt
forgiveness. Interest income was $0 in the nine months ended December 31, 2007
compared to $274 in the nine months ended December 31, 2006.
 
 Due to
the above factors, the there was a net (loss) for the nine months ended December
31, 2007 of ($1,347,019) compared to a net (loss) of ($128,472) for the nine
months ended December 31, 2006. Basic and diluted (loss) per share for the nine
months ended December 31, 2007 was ($0.01), compared to ($0.00) for the nine
months ended December 31, 2006.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 In the
nine months ended December 31, 2007, we continued to spend cash to fund our
operations. Cash provided by operating activities for nine months ended December
31, 2007 equaled $18,198, and consisted of a net loss of $1,347,019, a loss on
revaluation of derivatives in the amount of $197,177, depreciation of $22,371,
amortization of debt discount of $140,244, amortization of prepaid consulting
fees of $333,331, beneficial interest on debt conversions  of
$297,475, stock issued for services of $9,100, a gain on conversion of debt of
$4,558, an increase in accounts payable and accrued liabilities of $598,652, a
decrease in accounts receivable of $220,116 of which $171,695 was a settlement,
a decrease in other current assets of $1,254, a decrease in deferred revenue of
$1,270, and a decrease in litigation settlement of $448,675.  For the
comparable period in 2006, cash used by operating activities equaled $34,044 and
consisted of a net loss of $128,472, depreciation of $37,841, amortization of
debt discount of $50,000, beneficial interest on debt conversion of $31,094, a
gain on revaluation of derivatives of $202,158, stock issued for services of
$390,996, a decrease in accounts receivable of $82,200, a decrease in inventory
of $50,090, an increase in other current assets of $6,281, a decrease in other
assets of $6,513, an increase in accounts payable and accrued liabilities of
$314,595, a decrease in acquisition contracts of $170,000, a decrease in
contingent liability of $484,761, and a decrease in deferred revenue of
$5,701.
 We used
net cash of $2,970 in investing activities for the nine months ended December
31, 2007 compared to the use of net cash of $34,907 for the nine months ended
December 31, 2006. These were acquisition of fixed assets.
 
 Cash flow
from financing activities for the nine months ended December 31, 2007 used cash
of $11,349 consisting of payments on capital leases. Cash flow from financing
activities for the nine months ended December 31, 2006 produced a net increase
in cash of $78,838 which resulted from $401,000 in proceeds from convertible
debentures, offset by $281,392 payments on notes payable, and $40,770 payments
on officer loans.
  As of
December 31, 2007, we had cash and cash equivalents amounting to $8,706 an
increase of $3,879 from the balance at March 31, 2007. Our working capital
deficit increased to $3,916,018 at December 31, 2007 from $2,926,656 at March
31, 2007.
  As of
December 31, 2007, we had an accumulated operating deficit of ($26,678,387) and
stockholders' deficit of ($3,210,848).
 27
 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 nine months ended December 31, 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.
  28
  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 19, 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.
 
 On
December 3, 2007 the Company issued stock at a market price of
$.0019.  This increased the number of warrants from 377,500,000 to
615,921,053 at $.0019 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 December 31, 2007 we are required to
register 401,500,000 shares to underlie 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.
  29
  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.
 
 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 nine months ended December 31, 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 $1,347,019 for the nine months
ended December 31, 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.
  30
  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 nine months ended December 31, 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.
  31
  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.
  32
  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.
  33
  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.
  34
  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 December 31, 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.
  35
  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 December 31, 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.
 36
  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
      #
              Description31.1
              Certification
      of Principal Executive Officer and Principal Financial Office pursuant to
      Sarbanes-Oxley Section 30232.1
              Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to
      Sarbanes-Oxley Section 906
 
  37
  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.Date:
      February 14, 2008
              By:
              /s/ Charles
      RoodenburgCharles
      RoodenburgChief
      Executive OfficerChief
      Financial Officer






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