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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008
|- | -----------------------------------------------------------------------------------------------------------------------------------------

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 000-29587





IBSG INTERNATIONAL, INC.

(Name of small business issuer in its charter)







|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Florida                                        |  | 65-0705328                          
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)

1132 Celebration Blvd., Celebration, FL 34747

(Address and Zip Code of Principal Executive Offices)

Registrants Telephone Number: (321) 939-6321

Securities registered under
Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value
per share

(Title of Class)





Indicate by check mark whether the Registrant
(1) has filed all reports required 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 large accelerated filer, an accelerated filer, or a nonaccelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer      ̈    Accelerated filer     ̈    NonAccelerated filer     ̈    Small Business Issuer    x

Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act).    Yes   ̈    No  x

Transitional Small Business Disclosure Format (check one):    Yes   ̈    No  x

Indicate the number of shares outstanding of each
of the issuers classes of common stock, as of the latest practicable date.



|                               |  |                                 
|------------------------------ |  | --------------------------------
|Class                          |  | Outstanding at November 10, 2008
|Common stock, $0.001 par value |  | 12,476,538                      









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IBSG INTERNATIONAL, INC.



|                                                                                                                       |  |   
|---------------------------------------------------------------------------------------------------------------------- |  | --
|Part I. Financial Information                                                                                          |  | 2 
|                                                                                                                       | 
|Item 1. Condensed Consolidated Financial Statements and Notes to Consolidated Financial Statements                     |  |   
|                                                                                                                       | 
|(a) Consolidated Balance Sheets as of September 
30, 2008 (unaudited), and December 31, 2007 (Audited)                 |  | 2 
|(b) 
Consolidated Statements of Operations for the Three and nine Months Ended September 30, 2008 and 2007 (Unaudited) |  | 3 
|(c) 
Consolidated Statements of Cash Flow for the Nine Months Ended September 30, 2008 and 2007 (Unaudited)            |  | 4 
|(d) Notes to Consolidated Financial Statements (Unaudited)                                                             |  | 5 
|                                                                                                                       | 
|Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations                          |  | 9 
|                                                                                                                       | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                                     |  | 17
|                                                                                                                       | 
|Item 4. Controls and Procedures                                                                                        |  | 17
|                                                                                                                       | 
|Part II. Other Information                                                                                             |  |   
|                                                                                                                       | 
|Item 1. Legal Proceedings                                                                                              |  | 18
|                                                                                                                       | 
|Item 1A Risk Factors                                                                                                   |  | 19
|                                                                                                                       | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                    |  | 19
|                                                                                                                       | 
|Item 3. Defaults upon Senior Securities                                                                                |  | 19
|                                                                                                                       | 
|Item 4. Submission of Matters to a Vote of Security Holders                                                            |  | 19
|                                                                                                                       | 
|Item 5. Other Information                                                                                              |  | 19
|                                                                                                                       | 
|Item 6. Exhibits                                                                                                       |  | 19
|                                                                                                                       | 
|Signatures                                                                                                             |  | 20



1



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##### Table of Contents

PART I FINANCIAL INFORMATION

IBSG INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated
Balance Sheets



|                                                                                                                                                                                    |  |                   |            |                  |   |           
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ---------------- | - | ----------
|                                                                                                                                                                                    |  | September 30,2008 |            | December 31,2007
|                                                                                                                                                                                    |  | (Unaudited)       |            | (Audited)       
|ASSETS                                                                                                                                                                              |  |                   |            |                  |   |           
|CURRENT ASSETS                                                                                                                                                                      |  |                   |            |                  |   |           
|Cash                                                                                                                                                                                |  | $                 | 8,952,415  |                  | $ | 2,138,496 
|Accounts receivable, net                                                                                                                                                            |  |                   | 24,471,255 |                  |   | 20,673,831
|Prepaid expenses                                                                                                                                                                    |  |                   | 1,367,979  |                  |   | 1,402,274 
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|Total Current Assets                                                                                                                                                                |  |                   | 34,791,649 |                  |   | 24,214,601
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|FURNITURE, FIXTURES AND SOFTWARE, NET                                                                                                                                               |  |                   | 425,182    |                  |   | 703,024   
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|OTHER ASSETS                                                                                                                                                                        |  |                   |            |                  |   |           
|Accounts receivable, net of current portion                                                                                                                                         |  |                   | 4,995,000  |                  |   | 6,195,000 
|Note receivable                                                                                                                                                                     |  |                   | 1,868,215  |                  |   | 1,802,324 
|Other assets                                                                                                                                                                        |  |                   | 141,385    |                  |   | 141,665   
|Deferred consulting services                                                                                                                                                        |  |                   | 1,457,398  |                  |   | 2,350,375 
|Deferred tax asset, net                                                                                                                                                             |  |                   | 1,717,127  |                  |   | 350,000   
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|Total Other Assets                                                                                                                                                                  |  |                   | 10,179,125 |                  |   | 10,839,364
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|TOTAL ASSETS                                                                                                                                                                        |  | $                 | 45,395,956 |                  | $ | 35,756,989
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                |  |                   |            |                  |   |           
|                                                                                                                                                                                    |  |                  
|CURRENT LIABILITIES                                                                                                                                                                 |  |                   |            |                  |   |           
|Accounts payable and accrued expenses                                                                                                                                               |  | $                 | 1,183,588  |                  | $ | 878,770   
|Income tax payable                                                                                                                                                                  |  |                   | 3,810,441  |                  |   | 1,026,350 
|Deferred revenue                                                                                                                                                                    |  |                   | 3,253,192  |                  |   | 3,711,347 
|Deferred tax liability, net                                                                                                                                                         |  |                   | 1,342,176  |                  |   | 914,137   
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|Total Current Liabilities                                                                                                                                                           |  |                   | 9,589,397  |                  |   | 6,530,604 
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|                                                                                                                                                                                    |  |                  
|Deferred revenue, net of current portion                                                                                                                                            |  |                   | 4,995,000  |                  |   | 4,995,000 
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|TOTAL LIABILITIES                                                                                                                                                                   |  |                   | 14,584,397 |                  |   | 11,525,604
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                       |  |                   |            |                  |   |           
|STOCKHOLDERS EQUITY                                                                                                                                                                |  |                   |            |                  |   |           
|Common stock authorized 100,000,000 shares at $0.001 par value; 12,436,621 and 9,685,052 shares issued and outstanding as of
September 30, 2008 and December 31, 2007, respectively |  |                   | 12,438     |                  |   | 9,686     
|Additional paid-in capital                                                                                                                                                          |  |                   | 23,629,185 |                  |   | 20,160,045
|Retained earnings                                                                                                                                                                   |  |                   | 7,169,936  |                  |   | 4,061,654 
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|Total Stockholders Equity                                                                                                                                                          |  |                   | 30,811,559 |                  |   | 24,231,385
|                                                                                                                                                                                    |  |                   |            |                  |   |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                          |  | $                 | 45,395,956 |                  | $ | 35,756,989
|                                                                                                                                                                                    |  |                   |            |                  |   |           

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



2



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IBSG International, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                |  | Three Months EndedSeptember 30, |            |   | Nine Months EndedSeptember 30, |  
|                                                                                |  | 2008                            |            |   | 2007                           |   |           | 2008 |  |   | 2007       |  
|Sales                                                                           |  | $                               | 3,728,152  |   |                                | $ | 3,989,135 |      |  | $ | 12,932,704 |   |  | $ | 10,144,286 |  
|Cost of Sales                                                                   |  |                                 | 89,093     |   |                                |   | 89,093    |      |  |   | 267,279    |   |  |   | 267,279    |  
|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Gross Profit                                                                    |  |                                 | 3,639,059  |   |                                |   | 3,900,042 |      |  |   | 12,665,425 |   |  |   | 9,877,007  |  
|General and Administrative                                                      |  |                                 | 2,471,094  |   |                                |   | 2,390,465 |      |  |   | 7,712,386  |   |  |   | 4,455,414  |  
|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Income from Operations                                                          |  |                                 | 1,167,965  |   |                                |   | 1,509,577 |      |  |   | 4,953,039  |   |  |   | 5,421,593  |  
|Interest Income                                                                 |  |                                 |           |   |                                |   | 32,947    |      |  |   |           |   |  |   | 98,838     |  
|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Net Income Before Provision of Income Taxes                                     |  |                                 | 1,167,965  |   |                                |   | 1,542,524 |      |  |   | 4,953,039  |   |  |   | 5,520,431  |  
|Provision for Income Taxes                                                      |  |                                 | (455,941   | ) |                                |   | (722,195  | )    |  |   | (1,844,757 | ) |  |   | (2,166,585 | )
|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Net Income                                                                      |  | $                               | 712,024    |   |                                | $ | 820,329   |      |  | $ | 3,108,282  |   |  | $ | 3,353,846  |  
|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Net Income Per Share  Basic/Diluted                                            |  | $                               | 0.06       |   |                                | $ | 0.10      |      |  | $ | 0.29       |   |  | $ | 0.43       |  
|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  
|Weighted Average Number of Shares Outstanding During the Period  Basic/Diluted |  |                                 | 11,314,750 |   |                                |   | 7,845,131 |      |  |   | 10,694,051 |   |  |   | 7,740,306  |  
|                                                                                |  |                                 |            |   |                                |   |           |      |  |   |            |   |  |   |            |  

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



3



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IBSG INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                              |  |                                        |            |   |      |   |            |  
|----------------------------------------------------------------------------- |  | -------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                              |  | For the Nine Months EndedSeptember 30, |           
|                                                                              |  | 2008                                   |            |   | 2007 |  
|CASH FLOW FROM OPERATING ACTIVITIES:                                          |  |                                        |            |   |      |   |            |  
|Net Income                                                                    |  | $                                      | 3,108,282  |   |      | $ | 3,353,846  |  
|Adjustments to reconcile net income to net cash used by operating activities: |  |                                        |            |   |      |   |            |  
|Deferred consulting fee                                                       |  |                                        | 892,977    |   |      |   | 892,996    |  
|Bad debt expense                                                              |  |                                        |           |   |      |   | 286,000    |  
|Amortization and depreciation expense                                         |  |                                        | 282,402    |   |      |   | 288,890    |  
|Amortization and deferred interest                                            |  |                                        |           |   |      |   | (98,838    | )
|Stock issued for services                                                     |  |                                        | 2,948,618  |   |      |   | 775,596    |  
|Changes in operating assets and liabilities:                                  |  |                                        |            |   |      |   |            |  
|Accounts receivable                                                           |  |                                        | (2,597,424 | ) |      |   | (7,613,004 | )
|Prepaids                                                                      |  |                                        | 34,295     |   |      |   | (112,306   | )
|Note receivable                                                               |  |                                        | (65,891    | ) |      |   |           |  
|Other assets                                                                  |  |                                        | 280        |   |      |   | (301,180   | )
|Deferred tax, asset, net                                                      |  |                                        | (1,367,127 | ) |      |   | 2,113,800  |  
|Accounts payable and accrued expenses                                         |  |                                        | 238,927    |   |      |   | (188,398   | )
|Accrued interest payable                                                      |  |                                        | 65,891     |   |      |   |           |  
|Income tax payable                                                            |  |                                        | 2,784,091  |   |      |   | 1,769,912  |  
|Deferred revenue                                                              |  |                                        | (458,155   | ) |      |   | (467,900   | )
|Deferred tax liability, net                                                   |  |                                        | 428,039    |   |      |   | (1,192,600 | )
|                                                                              |  |                                        |            |   |      |   |            |  
|Net Cash Provided by in Operating Activities                                  |  |                                        | 6,295,205  |   |      |   | (493,186   | )
|                                                                              |  |                                        |            |   |      |   |            |  
|CASH FLOWS FROM USED INVESTING ACTIVITIES:                                    |  |                                        |            |   |      |   |            |  
|Purchase of fixed assets                                                      |  |                                        | (4,560     | ) |      |   | (15,554    | )
|                                                                              |  |                                        |            |   |      |   |            |  
|Net Cash Used in Investing Activities                                         |  |                                        | (4,560     | ) |      |   | (15,544    | )
|                                                                              |  |                                        |            |   |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                         |  |                                        |            |   |      |   |            |  
|Contribution of capital                                                       |  |                                        |           |   |      |   | 25,000     |  
|Payments on capital leases                                                    |  |                                        |           |   |      |   | (4,031     | )
|Common stock issued for cash                                                  |  |                                        | 523,274    |   |      |   | 2,805,513  |  
|                                                                              |  |                                        |            |   |      |   |            |  
|Net Cash Provided by Financing Activities                                     |  |                                        | 523,274    |   |      |   | 2,826,482  |  
|                                                                              |  |                                        |            |   |      |   |            |  
|NET INCREASE IN CASH                                                          |  |                                        | 6,813,919  |   |      |   | 2,317,742  |  
|CASH AT BEGINNING OF PERIOD                                                   |  |                                        | 2,138,496  |   |      |   | 963,646    |  
|                                                                              |  |                                        |            |   |      |   |            |  
|CASH AT END OF PERIOD                                                         |  | $                                      | 8,952,415  |   |      | $ | 3,281,388  |  
|                                                                              |  |                                        |            |   |      |   |            |  
|                                                                              | 
|                                                                              |  | For the Nine Months EndedSeptember 30, |           
|                                                                              |  | 2008                                   |            |   | 2007 |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                              |  |                                        |            |   |      |   |            |  
|Interest paid                                                                 |  | $                                      |           |   |      | $ |           |  
|Income taxes paid                                                             |  | $                                      |           |   |      | $ |           |  

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



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IBSG INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

September 30, 2008

NOTE 1 - INTERIM FINANCIAL STATEMENTS

The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and
Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2008. For further information, refer to the financial statements and footnotes thereto included in our Form 10-KSB Report for the fiscal year ended December 31, 2007.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



| | a. | Accounting Method
| | -- | -----------------

The consolidated financial statements
are prepared using the accrual method of accounting. The Company has elected a calendar year end.



| | b. | Estimates
| | -- | ---------

The preparation of 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 disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.



| | c. | Cash and Cash Equivalents
| | -- | -------------------------

The Company considers all
highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.



| | d. | Reclassification
| | -- | ----------------

Certain amounts in the prior period
consolidated financial statements have been reclassified for comparative purposes to conform to the presentation in the current period consolidated financial statements



| | e. | Revenue Recognition
| | -- | -------------------

General

The Company recognizes revenue in accordance with the American Institute of Certified Public Accountants Statement of Position (SOP) 97-2,
Software Revenue Recognition, as modified by SOP 98-9 Modifications of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions, and interpreted by the Securities and Exchange Commission Staff Accounting
Bulletin (SAB) No. 104 Revenue Recognition. The Company has also adopted Emerging Issues Task Force (EITF) Issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.

Deferred Revenue

Deferred revenue results from fees billed to customers for which revenue has not yet been recognized or for which the conditions of the arrangement have been modified. Current deferred revenue generally represents post contract support
(PCS) and training services not yet rendered and deferred until all revenue recognition requirements are satisfied. Deferred revenue, net of current portion represents license fees for which the conditions of the arrangements have been modified, and
which represent previously recognized revenues specifically associated with certain older contracts which have been restated and will be deferred until such time as all revenue recognition requirements have been satisfied.



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Our accounts receivables from customers are as follows at September 30, 2008:



|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|-------------------------------------------------------------------- |  | ----------- | ---------- | - | ----- | - | ---------- | ----- |  | - | --------- | - |  | ----- | -------- | - |  | - | ---------- | -
|                                                                     |  | SouthAfrica |            |   | Kenya |   |            | Other |  |   | Allowance |   |  | Total |         
|Balance as of December 31, 2007                                      |  | $           | 16,239,493 |   |       | $ | 6,650,000  |       |  | $ | 4,265,338 |   |  | $     | (286,000 | ) |  | $ | 26,868,831 |  
|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|Increases to accounts receivable:                                    |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|Recognition of revenue in the current period                         |  |             | 10,654,808 |   |       |   | 1,586,507  |       |  |   | 691,389   |   |  |       |         |   |  |   | 12,932,704 |  
|Realization of revenue (from deferred revenue) in the current period |  |             | (2,654,459 | ) |       |   | (486,507   | )     |  |   | 219,850   |   |  |       |         |   |  |   | (2,921,116 | )
|Recognition of deferred revenue in the current period                |  |             | 1,798,151  |   |       |   |           |       |  |   | 200,000   |   |  |       |         |   |  |   | 1,998,151  |  
|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|Total increases to accounts receivable                               |  |             | 9,798,500  |   |       |   | 1,100,000  |       |  |   | 1,111,239 |   |  |       |         |   |  |   | 12,009,739 |  
|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|Total reductions to accounts receivable                              |  |             | (4,893,275 | ) |       |   | (4,415,000 | )     |  |   | (104,040  | ) |  |       |         |   |  |   | (9,412,315 | )
|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|Accounts receivable as of September 30, 2008                         |  |             | 21,144,718 |   |       |   | 3,335,000  |       |  |   | 5,272,537 |   |  |       | (286,000 | ) |  |   | 29,466,255 |  
|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|Less current portion of accounts receivable, net                     |  |             | 18,782,218 |   |       |   | 3,335,000  |       |  |   | 2,640,037 |   |  |       | (286,000 | ) |  |   | 24,471,255 |  
|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  
|Accounts receivable, net of current portion                          |  | $           | 2,362,500  |   |       | $ |           |       |  | $ | 2,632,500 |   |  | $     |         |   |  | $ | 4,995,000  |  
|                                                                     |  |             |            |   |       |   |            |       |  |   |           |   |  |       |          |   |  |   |            |  

NOTES 3 - RECENT ACCOUNTING PRONOUNCEMENTS

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

In
June 2008, the Financial Accounting Standards Board (FASB) issued Emerging Issues Task Force (EITF) Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities. The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under
the two-class method. The FSP affects entities that accrue dividends on share-based payment awards during the awards service period when the dividends do not need to be returned if the employees forfeit the award. This FSP is effective for
fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of FSP EITF 03-6-1 on its consolidated financial position and results of operations.

Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own Stock

In June 2008,
the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate
whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated
strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of EITF 07-5 on its
consolidated financial position and results of operations.

Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)

In May 2008, the FASB issued FSP Accounting Principles Board (APB) Opinion No. 14-1,
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The FSP clarifies the accounting for convertible debt instruments that may be settled in cash (including
partial cash settlement) upon conversion. The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's nonconvertible debt (unsecured debt)
borrowing rate when interest cost is recognized. The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be



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recognized as part of interest expense in our consolidated statement of operations. The FSP requires retrospective application to the terms of instruments as
they existed for all periods presented. The FSP is effective for us as of January 1, 2009 and early adoption is not permitted. The Company is currently evaluating the potential impact of FSP APB 14-1 upon its consolidated financial statements.

The Hierarchy of Generally Accepted Accounting Principles

In May 2008, the FASB issued Statement of Financial Accounting Standards (SFAS) No.162, The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162). SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SECs approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The implementation of this standard will not have a material impact on the Companys consolidated
financial position and results of operations.

Determination of the Useful Life of Intangible Assets

In April 2008, the FASB issued FASB Staff Position on Financial Accounting Standard (FSP FAS) No. 142-3, Determination of the Useful Life of
Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under SFAS No. 142 Goodwill and Other Intangible
Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of the expected cash flows used to measure the fair value of the asset under SFAS
No. 141 (revised 2007) Business Combinations and other U.S. generally accepted accounting principles. The Company is currently evaluating the potential impact of FSP FAS No. 142-3 on its consolidated financial statements.

Disclosure about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133, (SFAS 161). This statement requires that
objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The Company is required to adopt SFAS No. 161 on January 1, 2009. The Company is currently evaluating the potential impact of
SFAS No. 161 on the Companys consolidated financial statements.

Delay in Effective Date

In February 2008, the FASB issued FSP FAS No. 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of SFAS
No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. The impact of adoption was not material to the Companys consolidated financial condition or results of operations.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R) Business Combinations (SFAS 141(R)). This
Statement replaces the original SFAS No. 141. This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business combination. The objective of SFAS No. 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial
reports about a business combination and its effects. To accomplish that, SFAS No. 141(R) establishes principles and requirements for how the acquirer:



| | a. | Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase.
| | -- | ------------------------------------------------------------------------------------------------------------



| | c. | Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



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This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company is unable at this time to determine the effect that its adoption of SFAS No. 141(R) will have on its
consolidated results of operations and financial condition.

Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51

In December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statements  an
amendment of ARB No. 51 (SFAS No. 160). This Statement amends the original Accounting Review Board (ARB) No. 51 Consolidated Financial Statements to establish accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. The Company is unable at this time to determine the effect
that its adoption of SFAS No. 160 will have on its consolidated results of operations and financial condition.

Fair Value Option for Financial
Assets and Financial Liabilities

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of SFAS No. 115 (SFAS No. 159), which becomes effective for the Company on February 1, 2008, permits companies to choose to measure many financial instruments and certain other
items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The Company does not anticipate that the election, of this fair-value option will have a
material effect on its consolidated financial condition, results of operations, cash flows or disclosures.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 provides guidance
for using fair value to measure assets and liabilities. SFAS No. 157 addresses the requests from investors for expanded disclosure about the extent to which companies measure assets and liabilities at fair value, the information used to
measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new
circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of fiscal year 2008. The Company is unable at this time to
determine the effect that its adoption of SFAS No. 157 will have on its consolidated results of operations and financial condition.

NOTE 4
- EQUITY ISSUANCES

In 2008 the Company issued:



| |  |  | 183,333 shares of common stock for service valued at $333,666, and
| | - |  | ------------------------------------------------------------------



| |  |  | 410,999 shares of common stock for services valued at $748,018.
| | - |  | ---------------------------------------------------------------



| |  |  | 92,174 shares of common stock for cash valued at $123,275.
| | - |  | ----------------------------------------------------------



| |  |  | 584,111 shares of common stock for services valued at $700,933.
| | - |  | ---------------------------------------------------------------



| |  |  | 1,100,000 shares of common stock for service valued at $1,166,000.
| | - |  | ------------------------------------------------------------------



| |  |  | 380,952 shares of common stock in cash valued at $400,000.
| | - |  | ----------------------------------------------------------



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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Managements Discussion and Analysis of Consolidated Results of Financial Condition and Results of Operations (MD&A)
should be read in conjunction with the consolidated financial statements included herein. Further, this quarterly report on Form 10-Q should be read in conjunction with the Company's Consolidated Financial Statements and Notes to Consolidated
Financial Statements included in its 2007 Annual Report on Form 10-KSB. In addition, you are urged to read this report in conjunction with the risk factors described herein.

Overview

IBSG International, Inc. (IBSGI) is a holding company for four software subsidiaries: Intelligent Business
Systems Group, Inc. (IBSG), a provider of turn-key digital service center software; Secure Blue, a Sarbanes-Oxley (SOX) and security software solution provider, and Intelligent Business Systems Development Inc. (IBSD), a software development,
maintenance and data storage company and IBSGI UK, LTD. (IBSGI UK), a consultant company focused on development of informational technology (IT) projects for multi-national corporations.

IBSG offers BizWorld Pro, a copyrighted and trademarked e-commerce platform, as a solution to enhance the operating efficiency and create revenue for State Small Business Development Centers (or their profit making
equivalents), business associations (e.g., Chambers of Commerce) and Fortune 1000 corporations through the licensing of its unique turnkey digital service center software. This software provides a broad range of digital budgetary,
administrative and commercial services (B2B, e-commerce, government to business and enterprise business services) on a single platform.

Secure Blue
provides an economical SOX compliance and security software suite product called Secure Blue Pro. This product is targeted to small and mid cap public companies as well as private companies that work with public companies that therefore must comply
with SOX requirements.

IBSD provides ongoing support for our other subsidiaries; IBSG, Secure Blue, and IBSGI UK. The subsidiary provides
development, system support and secure data storage, and maintains offices in both the US and India, where its current offshore development and support team is located.

IBSGI UK, a United Kingdom based subsidiary, provides business development and support to IBSGIs international projects. IBSGI UK maintains relationships with several international government officials at
the ministry/secretary level as well as international corporations offset programs and provides IT projects for these corporations. IBSGI UK is engaged in international business development and consultancy in the technology sector. IBSGI
UKs participates in international e-commerce platform (BizWorld Pro, copyrighted and trade mark protected) projects for Small-Midsized Enterprises SMEs. IBSGIs relationship with IBSGI UK has already produced a project in
South Africa along with opportunities for similar projects in Africa, Europe, and India.

As software providers, system integrators and application service
providers, IBSG generates revenue from license sales, system modifications, systems support, and a percentage of monthly customer fees if and when a license is sold. The typical IBSG license agreement has a five-year term; however, the agreements
are updated annually and have historically been renewed upon expiration. Secure Blue is currently a dormant subsidiary and the SOX solution is anticipated to be incorporated into the BizWorld Solution and offered as a Sarbanes-Oxley solution for an
additional monthly cost per business as an optional feature. IBSGI UK, in conjunction with IBSGI, generates all international contract revenues. IBSD supports the business initiatives of all other subsidiaries and IBSGI and does not generate
revenue.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount 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 reported period. A critical accounting policy is one that is both very important to the portrayal of

Our financial condition and results, and requires management's most difficult, subjective or complex judgments. Typically, the circumstances that make these judgments difficult, subjective and/or complex have to do with the need to make
estimates about the



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effect of matters that are inherently uncertain. We believe the accounting policies below represent our critical accounting policies:



| |  |  | Revenue recognition;
| | - |  | --------------------



| |  |  | Deferred revenue; and
| | - |  | ---------------------



| |  |  | Accounts receivable, allowance for doubtful accounts and sales returns
| | - |  | ----------------------------------------------------------------------

General

The Company recognizes revenue in accordance with the American Institute of Certified Public
Accountants Statement of Position (SOP) 97-2, Software Revenue Recognition, as modified by SOP 98-9 Modifications of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions, and interpreted by
the Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 104 Revenue Recognition. The Company has also adopted Emerging Issues Task Force (EITF) No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables.

The Company does not recognize revenue on software related transactions on single element arrangements and
on each element of a multiple element arrangement until all of the following criteria are met:



|1. | Persuasive evidence of an arrangement exists, which consists of a written, non-cancelable contract signed by both the customer and us;
|-- | --------------------------------------------------------------------------------------------------------------------------------------



|2. | The fee is fixed or determinable when we have a signed contract that states the agreed upon fee for our products and/or services, which specifies the related payment terms and
conditions of the arrangement and it is not subject to refund or adjustment;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. | Delivery Occurs:
|-- | ----------------



| | a. | For licensesdue to the Web nature of our software, when access to the software is made available to our customer through the Internet or the software is delivered
electronically. Our arrangements are typically not contingent upon the customer providing the hardware, staff for training or scheduling conflicts in general nor do our arrangements contain acceptance clauses.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | For post-contract customer supportratably over the annual service period.
| | -- | --------------------------------------------------------------------------



| | c. | For professional servicesas the services are performed for time and materials contracts or upon achievement of milestones on fixed price contracts.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------



|4. | Collection is probable as determined by a credit evaluation, the customers payment history (either with other vendors or with us in the case of follow-on sales and renewals)
and financial position.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Master license arrangements typically represent large value multiple element arrangements where the
multi-year term license is packaged only in the first year with post contract support (PCS) and certain professional services. PCS includes technical support, maintenance, enhancements, upgrades and, in some cases system access. Satellite
license arrangements are typically structured similarly to the corresponding master license but the fees are less as it is technically a sub-contract of the master license. Master license holders can accept delivery either by electronic
download to their system or by accessing their software residing on our system through the Internet. Only minimal installation and training is required. PCS subsequent to year one is optional and renewable at a customers discretion on an
annual basis. Professional services include training and installation services are accounted for separately as they are not considered essential to the functionality of the software.

License Revenue

License revenues are primarily generated from
the sale of multi-year master license agreements to SBDCs (or their profit making equivalents) and other potential master licensees. License arrangements are typically sold with the PCS being delivered in the first year only. PCS subsequent to year
one is optional and renewable at a customers discretion on an annual basis. As such, the combination of these products and services represent a multiple-element arrangement for revenue recognition purposes in year one only.

Our revenue recognition policy for multiple-element arrangements, as described above, generally results in 65% of arrangement fee in year one being
allocated to license revenue, the delivered element. Recognition of license revenue occurs in the first month, once all the recognition criteria discussed above are met. License revenue is intended to cover the initial development cost and testing
of the software and the system.



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Post-Contract Support (PCS) Revenue

Post-contract support includes technical support, maintenance, enhancements, upgrades and in some cases system access. License arrangements are typically sold with only
the first year of PCS included. Subsequent to year one, customers can purchase annual PCS renewals over their arrangement term, which is typically five years domestically, four years internationally. Enhancements and upgrades are made available on a
when and if basis and are rarely if ever based on specifically identified enhancements.

Our revenue recognition policy for multiple-element
arrangements, as described above, generally results in 35% of the initial arrangement fee being allocated to PCS in year one, the undelivered element at the time the license arrangement is entered into. Customers can elect, subsequent to year one,
to acquire PCS on an annual basis. The combination of these products and services represent a multi-element arrangement for revenue recognition purposes in year one only. Recognition of PCS revenue occurs ratably over the PCS service
period, once all the recognition criteria discussed above are met.

Professional Services Revenue

Professional services include training and installation services. Training and installation are separately described and priced in the license arrangement and can be
delivered at any time after the license has been conveyed.

Because of the Web nature of product delivery, little installation support is required. The
System also includes extensive on-line training capabilities (Virtual Trainer) at the time the license is conveyed and is available for every page in the System. No additional formal training on System use is required or provided. Supplemental
training, if required, is generally restricted to System administration training. Training revenues are recognized as the services are performed.

Professional services are not considered essential to the functionality of the other elements of the arrangement and are accounted for as a separate element. Professional services are recognized as the services are performed for time and
materials contracts or upon achievement of milestones on fixed price contracts. A provision for estimated losses on fixed-price professional services contracts is recognized in the period in which the loss becomes known. No losses have been recorded
to date.

Deferred Revenue

Deferred revenue
result from fees billed to customers for which revenue has not yet been recognized or for which the conditions of the arrangement have been modified. Current deferred revenue generally represents PCS and training services not yet rendered and
deferred until all requirements under SOP 97-2 are satisfied. Deferred revenue, net of current portion represents license fees for which the conditions of the arrangements have been modified, and which represent previously recognized revenues
specifically associated with certain older contracts which have been restated and will be deferred until such time as all SOP 97-2 requirements have been satisfied.

Market for our products

The potential market for the BizWorld Pro includes any entity that has a customer, vendor or
membership base comprised of small to mid size business enterprises. Alternatively, the potential markets for Secure Blue are public companies which are required to establish internal control systems or companies that require tracking of sensitive
files. All current and projected revenues for the Company are associated with the digital commerce platform, BizWorld Pro and the recurring revenues projected from both license revenues and ongoing monthly subscription fees from small to
mid-sized enterprises. The projected market size for BizWorld Pro is greater than $15 billion annually. No assurances can be made that such market shall be realized or result in profitability.

The market for the BizWorld Pro includes state operated small business development centers (or their profit making equivalents), business organizations such as chambers
of commerce, large corporations, and other entities which seek to help small and medium size businesses succeed. When IBSG sells a master license to a state small business development center or business association (i.e. chambers of commerce), that
entity can sell satellite-licenses to the other vertical markets in their respective states or markets, from



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which IBSG, Inc. or IBSGI UK may derive incremental revenue. This market represents a projected $2.5-$3.5 billion exclusive of international application. No
assurances can be made that such market shall be realized or result in profitability.

Small Business Development Centers (SBDCs)

Many states, in the United States (US), operate Small Business Development Centers funded by a combination of US Small Business Administration and state resources. The
purpose of these centers is to provide a range of assistance and training to the small and mid-size business sector. Many of the SBDCs have a profit making equivalent or are partners in a profit making entity. We currently have a license
agreement with 11 such entities.

Fortune 1000 Corporations

Master license holders seek to sell Corporate Sponsor satellite licenses to Fortune 1000 corporations for procurement purposes (i.e. RFPs or Tenders thru award of a bid). The license price is dependent on the size of the corporation
and the number of RFPs/Tenders issued. The license provides the Corporation with unlimited access to the constituents pool of SMEs in order to facilitate the large corporation's recruitment of small businesses as vendors. The System
platform permits end users to interact not only with these large corporations, but also among each other.

Government Agencies

Other government agencies routinely purchase a satellite license to use the system for procurement purposes. When these licenses are sold they are primarily for use
of the Bid Management functions of the system. This is/has been viewed by many local government municipalities and ministries (internationally) as a means of centralizing all procurements activities. As such, any government vendor or
vendor of a municipality would be compelled to join the platform as a subscriber in order to be positioned for future government RFPs/tenders.

Business
Associations

The BizWorld Pro is licensed to other business associations such as local Chambers of Commerce, which has membership or offer services to
small and medium size businesses as a way of providing additional services and generates additional revenues.

Banking Institutions

Many major banking institutions maintain divisions specializing in providing banking services to small-to-medium sized businesses. These banks can add BizWorld access
to their customers to encourage their use of the internet to grow their businesses, add another revenue stream to their own business services offerings, and create an excellent new communication tool whereby the bank can pursue enhanced revenue
relationships for their existing service offerings.

Economic Development Projects

These markets reflect a combination of the above market needs. The BizWorld Data System can provide them with similar benefits and the ability to create multiple associations with the other markets in a similar
fashion as previously described.

Foreign Markets

In
2004 we signed a license agreement with an agency of the country of Nigeria. We have since positioned the product as a national solution for the support and development of the small to mid size business community (SMEs), as a centralized procurement
center not only for government but large corporations and provide access to the same by larger corporations and government entities. By providing the ability to manage developing businesses on the internet while creating a robust internet presence,
small to mid size businesses will be enabled for domestic and international business. Additional business development efforts through IBSGI UK are underway with various foreign governments although no assurances can be given that any new
business will materialize from these efforts.



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Secure Blue Markets

Secure Blue targets small to mid size cap public companies. Because of the broad encompassing nature of the SOX legislation, any private company doing business with a public company, both in the US and abroad, must be SOX compliant for
those records dealing with that business. This market represents a projected value of $3-$4 billion. Currently in the US there are an estimated 10,000 small cap companies and over 10,000 private companies doing business with public
companies. No assurances can be made that such market shall be realized or result in profitability.

International Markets

Many aspects of the Sarbanes-Oxley Act have been incorporated into new European legislation which led to a large global market for SOX solutions that far exceeded US
projections. Additionally, foreign companies doing business with US public companies are also required to be SOX compliant as well. It is our objective to establish Secure Blue in the US before expanding into European and Asian markets.

Sales & Market Strategy

IBSGs marketing efforts
primarily consists of word of mouth referrals from existing or potential customers, targeted prospect awareness campaigns, various conventions and trade shows and cold calling entities with resources and marketing research. The most
effective and powerful marketing tool is the demonstration of the system and its comprehensive features. We have determined that demonstrations and contract negotiations are most effective when handled on a personal basis.

To achieve our growth plans, IBSG and IBSGI UK needs to employ more business developers, present a more visible presence at conventions, accelerate contract
implementation, and acquire and import database information of SMEs/vendors from license holding entities. We also anticipate the need to provide enhanced training and marketing services to our customers, which can best be achieved by acquiring
existing service companies with expertise in that field. Additional technical staff will accelerate contract implementation and add-on work (system modifications) as the customer base is extended. There can be no assurance that we will be able to
meet our growth plans or have sufficient financial resources to provide the enhanced services.

Secure Blue was launched in mid-April of 2005. One month
later in May 2005, we began a series of online, live demonstrations to potential channel partners (i.e. accounting and law firms, brokerage firms and potential end users). Our distribution strategy has been to develop third-party channels to
publicly traded companies through professional advisors. These include investor relations firms, law firms, accountancy firms, banks, compliance consultancies, corporate finance advisors, venture capital companies and other strategically important
organizations. We are approaching these potential channel partners individually and demonstrating SOX Pro live online to create a dialogue leading to long-term business partnerships. We will continue to focus our sales activity on third-party
channels until we are satisfied we can achieve significant traction in the market place.

We continue to promote and demonstrate SOX Pro to potential
end-users where appropriate. In the longer term we have plans to build a specialist direct sales team focused on specific target sectors within the small/mid cap market selling direct or providing qualified leads to our channel partners. There can
be no assurance that Secure Blue will be able to establish satisfactory channels of distribution for its product or that the product will generate success in the marketplace.

Marketing, Sales and Support

We market our products primarily through direct contact of potential customers,
referrals from existing customers or potential customers and conferences that are market specific. The key to the marketing of the various products is the ability under the BizWorld product to enable customers to act as channel partners through the
ability to sell satellite-licenses of the system and provide revenue generating digital service centers to their customers or members. By utilizing the existing relationships between the various government agencies and/or corporate and business
associations and the end user, individual small-mid size businesses (enterprises), referred to as SMEs, the Company market through the licensing entities existing marketing or public relations communication lines rather than directly to the
SMEs. This is marketing practice is critical to the long term revenue stream established by the Company. End user pay a monthly subscription fee which are based on a minimum of $20/month/SME (20 /month in the European countries) of which
the Company average revenue share is 50%-55%.



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Secure Blue uses a direct market application focusing primarily on the small cap public companies. Secure Blue seeks to
establish channel partner arrangements with investor relation firms that primarily target the small cap market. Secure Blue also seeks to expand its marketing efforts to include telemarketing, and direct target contact through telemarketing firms
that specializes in software sales. There can be no assurance that Secure Blue will be able to establish satisfactory channels of distribution for its product, or that the product will generate success in the marketplace. Secure Blue also seeks to
expand its marketing efforts to include marketing support for both channel partners and direct sales using PR, advertising, and direct marketing techniques, once the basic distribution infrastructure is in place. Our aim is to make SOX Pro the
preferred SOX solution within the small/mid cap market, to prepare the marketplace for our channel partners, and to generate good quality, qualified leads for the sales teams.

IBSG will employ several consultant services to secure independent programming contracts. The Company will also employ a small force of business developers to develop direct business for the Company. Most of
IBSDs revenue is derived from sub contracting opportunities in the areas of maintenance, hosting, and support for IBSGI's other subsidiaries.

Customer Support

Our management believes that strong customer support is crucial to both the initial marketing of its products and
maintenance of customer satisfaction, which in turn will enhance our reputation and generate repeat orders. In addition, we believe that customer interaction and feedback involved in our ongoing support functions provide us with information on
market trends and customer

Requirements that is critical to future product development. IBSG and IBSGI UK provides toll free and web site support.
However, the first line of support is built into the systems through a virtual trainer and self diagnostic feature which is enhanced by the systems ability to provide instructions to navigate a user error or auto report a potential system
bug. When a system bug is detected, it is directed to the technical centers program team which can correct the anomaly on-line and auto down load the correction to all systems. The virtual trainer describes the purpose
of each page to the end user, uses animation to instruct the end user on how to complete the page, and provides suggestions on where to go to next in the system. This should provide for minimum end user confusion which statistically makes up
the majority of on-line help calls (Microsoft 2005; Oracle 2006).

Secure Blue believes that effective and speedy customer support is crucial to the
long-term success of SOX Pro. As a mission-critical application, SOX Pro must be totally reliable and the support available must be of the highest order, including 24/7 support as an integral part of the SOX Pro package with an ongoing annual fee
based upon a percentage of the first years license cost. Our team, based in Florida, will provide technical support for end users and channel partners.

Research and Development

We believe that our success will depend in large part on our ability to maintain and enhance our current product
lines, develop new products, maintain technological competitiveness and meet an expanding range of customer requirements. Our management and technical team under IBSD are constantly searching for frontier technology from numerous sources and
maintain relationships with several larger technology firms, such as Microsoft, as a test bed for emerging technologies. Additionally, the business development and project implementation teams from both IBSG and IBSGI UK request and receive comments
on desired functionality or system changes from not only the Companys customers but the customers customer. Our management also intends to hold focus groups by taking a sample population of customers and discussing in an open forum the
potential revisions of the various systems.

Competition

Our management believes that we are the leading provider of digital commerce and management systems for small and medium businesses (enterprises; SMEs) provided over the internet. However our products compete against a variety of
niche individual software programs designed to provide a small percentage of similar functions for small and medium sized business users (i.e. web site builders). Additionally, various limited functions can be found through internet
portals such as Yahoo. Many internet hosting providers help their customers set up e-commerce sites and provide software for such sites.



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The marketplace is full of so-called point products offering solutions to various elements of Sarbanes-Oxley compliance.
Virtually all of these solutions are heavily biased in price and complexity toward the larger corporation. Secure Blue has a major cost advantage over the competition and is a more comprehensive SOX solution. We have built the solution on a
comprehensive and proven security software solution and added sophisticated enhancements such as the PDA access for compliant and sub compliant officers to have access to data on activity of sensitive information. This provides our customer with the
required base criteria of SOX which is a secure network with sophisticated functionality of SOX specific monitoring. The majority of the competition has established distribution infrastructures built on a range of existing and complementary
products. We are confident that we can leverage the success of the other subsidiary, IBSG, and their network. Once our third-party channel network is established we will focus on attempting take a significant share of the small-mid cap company
market.

Results of Operations for the three and nine months ended September 30, 2008 and 2007

The Company had $3,728,152 of revenue for the three months ended September 30, 2008 compared to $3,989,135 for the three months ended September 30, 2007, a
decrease of $260,983. The Company reflected revenues for the nine months ended September 30, 2008 of $12,932,704 compared to sales revenues for the nine months ended September 30, 2007 of $10,144,286, an increase of $2,788,418. The
increase was due to additional satellite contracts closing in 2008. The Company had deferred revenues as of September 30, 2008 of $8,248,192 of which $3,253,192 is classified as current.

Operating Expenses for the three and nine months ended September 30, 2008 and 2007

The Company had general and administrative expenses of $2,471,094 for the three months ended September 30, 2008 compared to $2,390,463 for the three months ended September 30, 2007, an increase of $80,631 or
3%. The primary reason for this increase was due to an increase of consulting services. The Company had general and administrative expenses of $7,712,386 for the nine months ended September 30, 2008 compared to $4,455,414 for the nine months
ended September 30, 2007, an increase of $3,256,972, or 73%. This increase is a reflection of increased stock based compensation of $1,777,081 as well as additional costs associated with European Stock Exchange of $1,200,000 for the nine
months ended September 30, 2008.

The Company had net income for the three months ended September 30, 2008 of $712,024 compared to $820,329 for
the three months ended September 30, 2007, a decrease of $108,305 or 13%. The decrease was due primarily from the decrease in revenue as well as increases in general and administrative costs. The Company had net income for the nine months ended
September 30, 2008 of $3,108,282 as compared to $3,353,846 for the nine months ending September 30, 2007, a decrease of $245,564 or 7%. The decrease was due primarily from the additional increases in general and administrative costs
offset somewhat by increases in revenues.

Other Expense for the Nine months ended September 30, 2008 and 2007

The Company had no other income for the three months ended September 30, 2008 and other interest income for the three months ended September 30, 2007 of
$32,947. The Company had no other income for the nine months ended September 30, 2008 and other interest income for the nine months ended September 30, 2007 of $98,838.

Liquidity and Capital Resources

We believe the proceeds from accounts receivables and cash reserves will be
sufficient in assisting with the operating needs of the Company. The Company allocates, informally, approximately $6 million in reserve with the balance of cash equal to the average quarterly operational cash expenses. This reserve is
anticipated to be used for contract acquisition, expansion of operations (inclusive of possible acquisitions) and implementing a stock buyback plan. The Company is continuing to inquire into new investments to provide for further research and
development capital and assisting further acquisitions over the next twelve months.



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Our current accounts receivable are as follows at September 30, 2008:



|                                     |  |   |            |  
|------------------------------------ |  | - | ---------- | -
|South Africa                         |  | $ | 21,144,718 |  
|Kenya                                |  |   | 3,335,000  |  
|Other                                |  |   | 5,272,537  |  
|                                     |  |   |            |  
|                                     |  |   | 29,752,255 |  
|Allowance for bad debt               |  |   | (286,000   | )
|                                     |  |   |            |  
|Accounts receivable, net of bad debt |  | $ | 29,466,255 |  
|                                     |  |   |            |  

Factors That Could Affect Future Results

Because of the following factors, as well as other variables affecting our operating results, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used
to anticipate results or trends in future periods. We have no arrangements or sources of additional capital and may have to curtail our operations if additional capital is needed but is not available.

Our contracts with customers who are state government agencies or quasi government business associations and revenue recognition policies accommodate their protracted
payment process. We may have to curtail our operations if we do not have sufficient funds to pay for the expenses of operating our business. The Company will use additional commercial market opportunities to offset the slow pay nature of the
lucrative government contract market. The Companys current and projected acquisitions will expand the Companys retail and private sector markets which should create a blend of payment cycles between the secured government markets and the
commercial markets.

We acquired our enterprise software and began servicing licensees of such software in 2004. Prior financial information reflects
a profitable operation. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in relatively new and rapidly evolving markets. These risks may include:



| |  |  | Uncertain commercial acceptance of our products;
| | - |  | ------------------------------------------------



| |  |  | Technological obsolescence; and
| | - |  | -------------------------------



| |  |  | Competition
| | - |  | -----------

We cannot assure you that we will
succeed in addressing these risks. If we fail to do so, our revenue and operating results could be materially harmed.

Our software products are subject to
rapid technological change and to compete, we must offer products that achieve market acceptance.

The software industry is characterized by rapid
technological change. To remain competitive, we must continue to improve our existing products to meet the needs of our customers. We cannot assure you that new products offered by our competitors may not prove attractive to our clients
and potential clients and adversely affect our future revenues. Our failure to adequately protect our proprietary rights could adversely affect our ability to compete effectively. We rely on a combination of contracts, copyrights, continued
evolution of our core product(s) and other security measures in order to establish and protect our proprietary rights. We can offer no assurance that the measures we have taken or may take in the future will prevent misappropriation of our
technology or that others will not independently develop similar products, design around our proprietary technology or duplicate our products.

A
considerable amount of judgment is required when we assessed the realization of accounts receivables, including assessing the probability of collection and the current credit-worthiness of each customer. If the financial condition of our customers
were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision for doubtful accounts might be required. A provision for doubtful accounts would initially be recorded based on our historical experience, and
then adjusted at the end of each reporting period based on a detailed assessment of our accounts receivable and allowance for doubtful accounts. In



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estimating the provision for doubtful accounts, we consider (i) the type of entity (government, commercial, retail) and the aging of the accounts
receivable; (ii) trends within and ratios involving the age of the accounts receivable; (iii) the customer mix in each of the aging categories and the nature of the receivable, such as whether it derives from license, professional services
or maintenance revenue; (iv) our historical provision for doubtful accounts; (v) the credit worthiness of the customer; and (vi) the economic conditions of the customers industry, whether the entity is a national government, as well
as general economic conditions, among other factors. National governments accounts are characterized as fully collectible and for which our contract terms and revenue recognition policies accommodate their protracted payment process. The bulk of our
historic client base is primarily composed of national governments; our periodic valuations do not indicate that an allowance for doubtful accounts was necessary at this time.

Licenses held by satellite license holders that are non-government entities are mandated to adhere to a wide range of government compliance regulations. As such, should a satellite license holder of a government
master license holder fall into a non compliance state, payments may, without previous knowledge or forewarning, be interrupted. The myriad of possible domestic or international compliance regulations makes it impossible to determine if a satellite
license holder is compliant or sufficiently compliant. As such, if a satellite license holder falls into a non compliance status with their respective governments, it could affect payments due to the Company.

In the first quarter of 2007, the Company expanded its customer base outside of national governmental accounts. Due to this expansion, management reevaluated its
policies for establishing an allowance for doubtful accounts and sales return allowance specific to this customer. This customer base includes state sponsored economic development councils and other quasi-governmental agencies along with corporate
based SBDCs and SMEs. The addition of these customer types generally represents a higher level of business risk than do national government customers. Management has modified its estimates specific to this customer base to use a percentage of sales
revenue as the basis for its allowance. Management believes that this change better addresses the diverse nature of its future customer base. This allowance is not established for any particular customer but is applied to the new customer types. The
percentage is applied consistently among all contracts generated from new customer types. Management has determined that 5% of sales should provide an adequate allowance. As of September 30, 2008 that amount was $286,000.

In summary, estimates for establishing an allowance for doubtful accounts and sales returns applicable to national government account will be based on our existing
method referred to above. Estimates for allowance for doubtful accounts and sales returns applicable to the new customer types will be based on the percentage of sales method.

Should any of these factors change, the estimates that we make may also change, which could impact our future provision for doubtful accounts. For example, if the financial condition of our customers were to
deteriorate, affecting their ability to make payments, an additional provision for doubtful accounts could be required.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative instruments
and do not engage in any hedging activities.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of
1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within a company have been detected.

Our Chief Executive Officer and Chief Financial Officer is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a



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process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face
additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Companys operation and are in a position to override any
system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Companys internal control over financial reporting as of September 30, 2008. In making this assessment, our Chief
Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control  Integrated Framework. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer, concluded that, as of September 30, 2008, our internal control over financial reporting was effective.

(b) Changes in Internal Control over Financial Reporting.

During the Quarter ended September 30, 2008, there was no change in our
internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

LACK OF INDEPENDENT BOARD OF DIRECTORS AND AUDIT COMMITTEE

Management is aware that an audit committee composed of the requisite number of independent members along with a qualified financial expert has not yet been established. Considering the costs associated with procuring and providing the
infrastructure to support an independent audit committee and the limited number of transactions, Management has concluded that the risks associated with the lack of an independent audit committee are not justified. Management will periodically
reevaluate this situation. The Board of Directors has determined that Director Geoffrey Birch has the expertise to be financial expert as defined by Item 401(e)(2) of Regulation S-B of the Securities exchange Act of 1934. Mr. Birch is not
independent within the meaning of Item 7(d)(iv) of Schedule 14A under the Exchange Act. The Board of Directors anticipates when an audit committee is impaneled; Mr. Birch will serve on that committee in that capacity.

LACK OF SEGREGATION OF DUTIES

Management is aware that there is a
lack of segregation of duties at the Company due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved
and the control procedures in place, the risks associated with such lack of segregation are low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases.
Management will periodically reevaluate this situation.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

We are currently not involved in any litigation that we believe could have a
material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to
the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries officers or directors in their
capacities as such, in which an adverse decision could have a material adverse effect.



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Item 1A - Risk Factors

We have reviewed the risk factors previously disclosed in our Annual Report on Form 10KSB for the year ended December 31, 2007 and in earlier filings. We believe there are no changes that constitute
material changes from the risk factors previously disclosed. In Addition, please see Factors That Could Affect Future Results above.

Item 2. Unregistered Sales of Securities and Use of Proceeds

There were no changes in securities or purchase or sales of
securities during the period ended September 30, 2008.

Item 3. Defaults upon Senior Securities

There were no defaults upon senior securities during the period ended September 30, 2008.

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

There were no matters
submitted to the vote of securities holders during the period ended September 30, 2008.

Item 5. Other Information:

There is no information with respect to which information is not otherwise called for by this form.

Item 6. Exhibits

A. Exhibits:



|     |  |                                                                                                               
|---- |  | --------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                    
|31.2 |  | Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
|32.1 |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.                   
|32.2 |  | Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |                          |  |                                                       |  |  |  | 
|----------------------- |  | ------------------------ |  | ----------------------------------------------------- |  |  |  | 
|                        |  | IBSG INTERNATIONAL, INC.
|                        |  |                         
|Date: November 14, 2008 |  | By:                      |  | /s/    Michael Rivers, PhD                           
|                        |  |                          |  | Michael Rivers, PhD Chairman, Chief
Executive Officer



|                        |  |                          |  |                                        |  |  |  | 
|----------------------- |  | ------------------------ |  | -------------------------------------- |  |  |  | 
|                        |  | IBSG INTERNATIONAL, INC.
|                        |  |                         
|Date: November 14, 2008 |  | By:                      |  | /s/    Geoffrey Birch                 
|                        |  |                          |  | Geoffrey Birch Chief Financial
Officer



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Exhibit Index



|            |  |                                                                                                               
|----------- |  | --------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                   
|31.1        |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                    
|            | 
|31.2        |  | Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
|            | 
|32.1        |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.                   
|            | 
|32.2        |  | Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.



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