**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**








**FORM
      10-QSB**








**(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,
                2005**






**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)









Check
      whether the issuer: (i) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (ii) has been
      subject to such filing requirements for the past 90
      days.    Yes x No  ̈




As
      of
      November 14, 2005, there were 45,682,857  shares
      of
      the registrant's common stock outstanding.








**IBSG
      INTERNATIONAL, INC.**





**Part
                I.**
            **Financial
                Information**
            **Page**Item
                1.
            Condensed
                Consolidated Financial Statements and Notes to
                Consolidated Financial Statements(a)
                Condensed Consolidated Balance Sheets as of September 30, 2005 (unaudited)
            4(b)Consolidated
                Statements of Operations for the Three and Nine Months Ended September
                30,
                2005 and 2004 (unaudited)
            5(c)Consolidated
                Statement of Cash Flow for the Nine Months Ended September 30, 2005
                and
                2004 (unaudited)
            6(d)Notes to Consolidated Financial Statements (unaudited)
            7Item  2
            Management's
                Discussion and Analysis of Financial Condition and Results
                Operations
            20Item
                3.
            Controls
                and Procedures
            28**Part
                II.**
            **Other
                Information**Item
                1.
            Legal
                Proceedings
            29Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            29Item
                3.
            Defaults
                upon Senior Securities
            29Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            29Item
                5.
            Other
                Information
            29Item
                6.
            Exhibits
            29Signatures
            30


-1-


PART
      I FINANCIAL INFORMATION





General





The
      accompanying financial statements have been prepared in accordance with the
      instructions to Form 10-QSB. Therefore, they do not include all information
      and
      footnotes necessary for a complete presentation of financial position, results
      of operations, cash flow, and stockholders’ equity in conformity with generally
      accepted accounting principles. Except as disclosed herein, there has been
      no
      material change in the information disclosed in the notes to the financial
      statements included in the company’s annual report on Form 10-KSB for the year
      ended December 31, 2004. In the opinion of management, all adjustments
      considered necessary for a fair presentation of the results of operations and
      financial position have been included and all such adjustments are of a normal
      recurring nature. Operating results for the quarter ended September 30, 2005
      are
      not necessarily indicative of the results that can be expected for the year
      ended December 31, 2005.








-2-



















**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**





**CONSOLIDATED
      FINANCIAL STATEMENTS**





**September
      30, 2005**


-3-





**IBSG
                International, Inc. and
                Subsidiaries****Consolidated
                Balance Sheet****September
                30, 2005****(Unaudited)****ASSETS****Current
                Assets**Cash
            
            $
            645,411Accounts
                receivable
            
            
            6,
                508,279Prepaids
            
            
            151,442**Total
                Current Assets**
            
            
            **7,305,132****Equipment,
                net**
            
            
            **1,008,217****Other
                Assets**Prepaids
            
            
            582,336Debt
                issue costs
            
            
            11,261Deposits
            
            
            2,780**Total
                Other Assets**
            
            
            **596,377****Total
                Assets**
            
            $
            8,909,726**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                Liabilities**Accounts
                payable and accrued expenses
            
            $
            195,982Accrued
                interest payable
            
            
            37,781Deferred
                revenue
            
            
            980,968Capital
                leases payable
            
            
            4,777Convertible
                promissory note payable, net
            
            
            251,736**Total
                Current Liabilities**
            
            
            **1,471,244****Commitments
                and Contingencies****Stockholders'
                Equity**Common
                stock, $0.001 par value, 100,000,000 shares authorized45,682,857
                shares issued and outstanding
            
            
            46,772Additional
                paid in capital
            
            
            14,518,470Accumulated
                deficit
            
            
            (2,338,458
            )12,226,784Less:
                Deferred consulting
            
            
            (4,788,302
            )**Total
                Stockholders' Equity**
            
            
            **7,438,482****Total
                Liabilities and Stockholders' Equity**
            
            $
            8,909,726


-4-


**IBSG
                  International, Inc. and
                  Subsidiaries****Consolidated
                  Statements of Operations****(Unaudited)****Three
                  months ended September 30,**
              
              **Nine
                  months ended September 30,****2005**
              
              **2004**
              
              **2005**
              
              **2004****Sales**
              
              $
              1,379,537
              
              $
              1,017,147
              
              $
              3,819,018
              
              $
              1,855,221**Cost
                  of Sales**
              
              
              119,162
              
              
              4,388
              
              
              321,842
              
              
              15,368**Gross
                  Profit**
              
              
              1,260,375
              
              
              1,012,759
              
              
              3,497,176
              
              
              1,839,853**Operating
                  Expenses**Amortization
                  and Depreciation
              
              
              77,066
              
              
              123,956
              
              
              231,633
              
              
              294,539Stock
                  based compensation
              
              
              351,724
              
              
              511,101
              
              
              1,150,619
              
              
              3,635,603Bonus
                  shares expense
              
              
              -
              
              
              -
              
              
              19,200
              
              
              -Bad
                  debt expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -Bad
                  debt expense - related party
              
              
              -
              
              
              -
              
              
              9,007
              
              
              -Professional
                  Fees
              
              
              189,028
              
              
              27,103
              
              
              508,150
              
              
              75,163Salary/Wages
              
              
              183,521
              
              
              138,769
              
              
              532,114
              
              
              418,863General
                  and Administrative
              
              
              54,443
              
              
              9,501
              
              
              207,670
              
              
              717,337**Total
                  Operating Expenses**
              
              
              855,782
              
              
              810,430
              
              
              2,658,394
              
              
              5,141,505**Income
                  (Loss) from Operations**
              
              
              404,594
              
              
              202,329
              
              
              838,782
              
              
              (3,301,652
              )**Other
                  Income (Expense)**Gain
                  on debt settlement
              
              
              -
              
              
              -
              
              
              52,317
              
              
              -Loss
                  on extinguishment of debt - related party
              
              
              -
              
              
              -
              
              
              -
              
              
              (156,765
              )Interest
                  expense
              
              
              (126,792
              )
              $
              (3,905
              )
              
              (294,096
              )
              
              (32,155
              )**Total
                  Other Income (Expense), net**
              
              
              (126,792
              )
              
              (3,905
              )
              
              (241,779
              )
              
              (188,920
              )**Net
                  Income (Loss)**
              
              **$**
              **277,802**
              
              **$**
              **198,424**
              
              **$**
              **597,003**
              
              **$**
              **(3,490,572**
              **)****Net
                  Income (Loss) Per Share - Basic**
              
              **$**
              **0.01**
              
              **$**
              **0.01**
              
              **$**
              **0.01**
              
              **$**
              **(0.10**
              **)****Net
                  Income (Loss) Per Share - Diluted**
              
              **$**
              **0.01**
              
              **$**
              **0.01**
              
              **$**
              **0.01**
              
              **$**
              **(0.10**
              **)****Weighted
                  average number of shares outstanding during the period -
                  Basic**
              
              
              **46,585,740**
              
              
              **36,098,130**
              
              
              **45,686,791**
              
              
              **35,903,892****Weighted
                  average number of shares outstanding during the period -
                  Diluted**
              
              
              **49,477,301**
              ****
              ****
              **36,098,130**
              ****
              ****
              **45,686,791**
              ****
              ****
              **35,903,892**
              ********
              ****
              ****




-5-





**IBSG
                International, Inc. and
                Subsidiaries****Consolidated
                Statements of Cash Flows****(Unaudited)****Nine
                months ended September 30,****2005**
            
            **2004****Cash
                Flows from Operating Activities:**Net
                income (loss)
            
            $
            597,003
            
            $
            (3,301,652
            )Adjustments
                to reconcile net income (loss) to net cash used inoperating
                activities:Amortization
                and depreciation
            
            
            231,633
            
            
            294,539Amortization
                of debt discount costs
            
            
            251,736Bad
                debt expense
            
            
            
            
            
            162,820Loss
                on debt extinguishment
            
            
            
            
            
            156,765Recognition
                of deferred stock based consulting fee
            
            
            940,842
            
            
            -Stock
                issued for services
            
            
            535,114
            
            
            3,599,902Changes
                in operating assets and liabilities:(Increase)
                decrease in:Accounts
                receivable
            
            
            (1,893,204
            )
            
            (3,005,075
            )Contributed
                services by officers, directors, or shareholders
            
            
            141,812Prepaids
            
            
            (726,803
            )
            
            (23,069
            )Deposits
            
            
            (1,400
            )
            
            (1,380
            )Other
                Assets
            
            
            (11,261
            )Increase
                (decrease) in:Accounts
                payable and accrued expenses
            
            
            (142,742
            )
            
            94,834Accrued
                interest payable
            
            
            37,781
            
            
            -Deferred
                revenue
            
            
            (366,518
            )
            
            1,177,280**Net
                Cash Used In Operating Activities**
            
            
            (406,007
            )
            
            (845,036
            )**Cash
                Flows from Investing Activities:**Disbursement
                for loan - related party
            
            
            
            
            
            (162,820
            )Purchase
                of equipment
            
            
            (10,689
            )
            
            (102,522
            )Advances
                to parent prior to consolidation
            
            
            -
            
            
            (185,513
            )**Net
                Cash Used In Investing Activities**
            
            
            (10,689
            )
            
            (450,855
            )**Cash
                Flows from Financing Activities:**Proceeds
                from investmentCosts
                related to investmentProceeds
                from convertible promissory note, net of issue costs
            
            
            980,275
            
            
            -Repayments
                of related party borrowings
            
            
            (238,960
            )
            
            -Payments
                on Notes Payable
            
            
            
            
            
            (244,725
            )Stock
                Offering Costs
            
            
            
            
            
            (209,483
            )Repayments
                of capital leases - principal portion
            
            
            (7,203
            )
            
            (8,566
            )Proceeds
                from issuance of common stock, net of offering costs
            
            
            319,575
            
            
            1,786,555**Net
                Cash Provided by Financing Activities**
            
            
            1,053,687
            
            
            1,323,781Net
                Increase in Cash
            
            $
            636,990
            
            $
            27,890Cash
                at Beginning of Period
            
            
            8,421
            
            
            5,559**Cash
                at End of Period**
            
            $
            645,411
            
            $
            33,449





-6-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      1
      -  BASIS
      OF
      FINANCIAL STATEMENT PRESENTATION





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared by the Company pursuant to the rules and regulations of the Securities
      and Exchange Commission. Certain information and footnote disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted in accordance with such rules and regulations. The
      information furnished in the interim condensed consolidated financial statements
      includes normal recurring adjustments and reflects all adjustments, which,
      in
      the opinion of management, are necessary for a fair presentation of such
      financial statements. Management believes the disclosures and information
      presented are adequate to make the information not misleading, it is suggested
      that these interim condensed consolidated financial statements be read in
      conjunction with the Company’s most recent 8-K filings and audited financial
      statements and notes thereto included in its December 31, 2004 Annual Report
      on
      Form 10-KSB. Operating results for the three and nine months ended September
      30,
      2005 are not necessarily indicative of the results that may be expected for
      the
      year ending December 31, 2005.





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.





-7-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.  Revenue
      Recognition





Our
      license agreements typically run for five years. A first year license fee,
      inclusive of installation, integration and training, is payable at the
      initiation of the license. However, neither of our customers paid at the
      initiation of the license. License maintenance is payable on the second through
      fifth anniversary date of the license. Each fee covers the license/maintenance
      fee for one year. Such fees are accounted as unearned revenue and recognized
      as
      revenue ratably over each annual period. We recognize revenue in accordance
      with
      Statement of Position, or SOP 97-2, “Software Revenue Recognition,” as amended,
      by Staff Accounting Bulletin No. 104, *Revenue Recognition* .
      The
      Company adopted Emerging Issues Task Force Issue No. 00-21, *Revenue
      Arrangements with Multiple Deliverables* .
      We
      recognize license revenues when all of the following criteria are met:
      persuasive evidence of an arrangement exists, the fee is fixed or determinable,
      collection of the related receivables is probable, delivery of the license
      has
      occurred and the customer has accepted the license (including the expiration
      of
      an acceptance period) if the terms of the contract include an acceptance
      requirement. Licenses are considered delivered once a license agreement has
      been
      entered into between the customer and the Company. Actual access to the
      software, due to the web nature of the software, is provided upon a mutually
      agreed schedule but the license fee due at time of conveyance and is not
      contingent upon the customer providing the hardware, staff for training or
      scheduling conflicts in general. Training and installation are included in
      the
      license fee and can be delivered at any time after the license has been
      conveyed. A portion of the year one license revenue and any subsequent years
      licenses are amortized on an annual basis commensurate with the start of the
      license agreement and then each subsequent anniversary date of the license
      and
      recognized generally in 12 periods (months) per year. In the event that we
      grant
      a customer the right to specified upgrades and vendor-specific objective
      evidence of fair value exists for such upgrades, value to the customer is
      determined on a stand-alone basis and there is objective and reliable evidence
      of fair value of the undelivered elements. Professional services and other
      revenues, when sold with subscription and support offerings, are accounted
      for
      separately until we have delivered the specified upgrade or additional service.
      If professional services are essential to the functionality of the other
      elements of the arrangement, we defer recognition of revenue until we have
      satisfied our professional services obligations. To date, professional services
      have not been essential to the functionality of the other elements, and thus
      have been accounted for separately.





-8-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.  Revenue
      Recognition (Continued)





We
      consider a non-cancelable agreement signed by the customer and us to be evidence
      of an arrangement. Delivery is considered to occur when media containing the
      licensed programs is provided to a common carrier, or the customer is given
      electronic access to the licensed software. Our typical end user license
      agreements do not contain acceptance clauses. We consider the fee to be fixed
      or
      determinable if the fee is not subject to refund or adjustment. If the fee
      is
      not fixed or determinable, we recognize revenue as the amounts become due and
      payable. Probable assurance of collection is based upon our assessment of the
      customer’s financial condition through review of their current financial
      statements or credit reports. Additional consideration is given to the type
      of
      customer. Most of our customers are government or quasi-government agencies
      and
      are thus considered low collection risk although payments could take as long
      as
      12 months to be brought current by the customer due to the slow pay nature
      of
      such entities. Late payments and interest can be assessed based on unpaid
      balances on a monthly basis. Contracts do not include Rights of Return. They
      do
      include cancellation clauses available to both parties for material breaches
      of
      contracts.





For
      follow-on sales to existing customers, prior payment history is also used to
      evaluate probability of collection. If we determine that collection is not
      probable, we will defer the revenue and recognize the revenue upon cash
      collection. When our software licenses contain multiple elements, we allocate
      revenue to each element based on the relative fair values of the elements.
      Multiple element arrangements generally include post-contract support (PCS
      or
      maintenance), software products, and end-user subscriptions with billings
      recorded as received and in some cases, other professional services. Revenue
      from multiple-element arrangements is allocated to undelivered elements of
      the
      arrangement, such as PCS, based on the relative fair values of the elements
      specific to us. Our determination of fair value of each element in multi-element
      arrangements is based on vendor-specific objective evidence, which is generally
      determined by sales of the individual element to third parties or by reference
      to a renewal rate specified in the related arrangement.





Where
      vendor-specific objective evidence of fair-value exists for all undelivered
      elements, but evidence does not exist for one or more delivered elements, we
      account for the delivered elements in accordance with the Residual Method
      prescribed by SOP 98-9. Under the residual method, the fair value of the
      undelivered elements is deferred and the remaining portion of the arrangement
      fee is recognized as revenue. In most cases, the bundled multiple elements
      include PCS and the software product. In such cases, when vendor-specific
      objective evidence of fair value exists for all of the undelivered elements
      (most commonly PCS), the residual or remaining amount is recognized as revenue
      and the PCS is recognized ratably over the PCS term, which is typically 12
      months.





-9-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.  Revenue
      Recognition (Continued)





Revenues
      from professional services consist of training and implementation services.
      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.





Deferred
      revenues include amounts billed to customers for which revenue has not yet
      been
      recognized that generally results from deferred maintenance, consulting or
      training services not yet rendered and license revenue deferred until all
      requirements under SOP 97-2 are met. Deferred revenue is recognized upon
      delivery of our products, as services are rendered, or as other requirements
      requiring deferral under SOP 97-2 are satisfied.





Our
      licenses for the state of California for each regional office are sold for
      $50,000 each for the first year. The Company recognizes 65% of the license
      fee
      or $32,500 as revenue upon the activation of the license by a regional office.
      The balance of 35% is amortized on a straight line basis over a one year period.
      During the nine months ended September 30, 2005 we activated 19 licenses for
      regional offices.





Our
      licenses for the Corporate Affairs Commission (Government of Nigeria) consisted
      of the following: 1) 1 st year
      license fee of a 5 year term effective from June 1, 2004 to June 1, 2005 for
      $250,000. Of this amount $162,500 was recognized upon the activation of the
      license and the balance of $87,500 is being amortized on a straight line basis
      over the 1 year period. 2) A subscription fee for 35,000 businesses at $6.00
      per
      business per month for a period of three (3) months total invoice of $630,000.
      All of this revenue was recognized in the period of June 1, 2004 to September
      1,
      2004. 3) A subscription fee for 35,000 businesses for the next three months
      which is being recognized on a straight line basis for the period from September
      2004 to November 1, 2004 total invoice of $840,000, and 4) a subscription fee
      for 35,000 businesses for the six months ended June 1, 2005. The invoice was
      for
      $1,260,000 of which $210,000 was recognized for December 2004 and the balance
      of
      $1,020,000 is deferred for 2005. In the period of January 1, 2005 to June 30,
      2005, $1,020,000 was recognized on the balance of $1,020,000 that was deferred
      the prior period, leaving a deferred balance of $0.00. There was also $22,055
      from the invoicing of the 1 year license was also recognized in the period
      ending June 30, 2005, leaving a deferred balance of $20,136.00 which was
      recognized in the 2 nd quarter
      for the balance of the contract. A subscription fee for 35,000 businesses for
      the period of July 1, 2005 to September 30, 2005 of $630,000 was recognized.


-10-




**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**Notes
      to the Consolidated Financial Statements**


**September
      30, 2005**





NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.  Revenue
      Recognition (Continued)





Our
      licenses for the organization, Buzgate for the first year contract at $100,000.
      The Company recognizes 65% of the license fee or $65,000 as revenue upon the
      activation of the agreement. The balance of 35% is amortized on a straight
      line
      basis over a one year period. This contract will be financed by the Company.
      Per
      the contract the Company will receive 60% instead of the standard 30% of all
      Subscription Fees from here on.





Our
      licenses for the state of New Hampshire SBDC were sold for $40,000 for the
      first
      year which is a direct linkage to Buzgate. The Company recognizes 65% of the
      license fee or $26,000 as revenue upon the activation of the agreement. The
      balance of 35% is amortized on a straight line basis over a one year period.
      Under this arrangement, the Company will receive 60% instead of the standard
      30%
      of all Subscription Fees.





Our
      licenses for the Veterans Corporation were sold for $40,000 for the first year
      license which is a direct linkage to Buzgate. The Company recognizes 65% of
      the
      license fee or $26,000 as revenue upon the activation of the agreement. The
      balance of 35% is amortized on a straight line basis over a one year period.
      Under this arrangement, the Company will receive 60% instead of the standard
      30%
      of all Subscription Fees.










Allowance
      for Doubtful Accounts and Sales Returns





We
      maintain an allowance for doubtful accounts and a sales return allowance to
      reduce amounts to their estimated realizable value. A considerable amount of
      judgment is required when we assess 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 may be required. We
      initially record a provision for doubtful accounts based on our historical
      experience, and then adjust this provision at the end of each reporting period
      based on a detailed assessment of our accounts receivable and allowance for
      doubtful accounts. In 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 government, as well as general economic conditions, among
      other factors.


-11-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


**Notes
      to the Consolidated Financial Statements**


**September
      30, 2005**





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.





We
      currently have six (6) customers, the State of California, the Government of
      Nigeria, BuzGate, the state of Connecticut, the state of New Hampshire and
      the
      Veterans Corporations. This does not reflect sub-licenses of our customers.
      Our
      accounts receivable are as follows at September 30, 2005:





Corporate
                Affairs Commission (Nigeria)
            
            $
            3,731,729State
                of California
            
            
            2,545,000BuzGate
            
            
            101,550Connecticut
            
            
            50,000New
                Hampshire
            
            
            40,000Veterans
                Corporation
            
            
            40,000$
            6,508,279

















NOTE
      2
      -  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





We
      recognized revenue of the following amounts for the nine months ended September
      30, 2005:





Corporate
                Affairs Commission (Nigeria)
            
            $
            2,364,327State
                of California
            
            
            1,282,413BuzGate
            
            
            83,367Connecticut
            
            
            36,911New
                Hampshire
            
            
            26,000Veterans
                Corporation
            
            
            26,000$
            3,819,018





Deferred
      revenue consisted of the following at September 30, 2005:





Corporate
                Affairs Commission (Nigeria)
            
            $
            644,373State
                of California
            
            
            278,874BuzGate
            
            
            16,632Connecticut
            
            
            13,089New
                Hampshire
            
            
            14,000Veterans
                Corporation
            
            
            14,000$
            980,968








-12-





**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





e.  Equity
      Transactions





Equity
      transactions for consideration other than cash are valued at the closing trading
      price of the Company’s common stock on the date of authorization.





f.  Depreciation
      and Amortization





The
      Company is depreciating its furniture on a straight-line basis over 5 years
      and
      equipment on a straight-line basis over a three-year period. The software
      acquired is being amortized on a straight line over a five-year
      period.





NOTE
      3 -  RELATED
      PARTY TRANSACTIONS





During
      the period ended September 30, 2005, the Company made cash payments of $243,648
      on the notes payable to related parties.





The
      President of the Company is being compensated at $150,000 per the year ended
      December 31, 2004 and $180,000 for 2005. No formal employment agreement exists.
      The President of the Company contributed accrued salary of $120,000 to capital
      as of June 30, 2005. The President of the Company contributed $26,500 to
      additional paid in capital as of September 30,2005.





The
      Company loaned $9,007 in the period ended June 30, 2005, $171,072 in the year
      ended December 31, 2004 and $115,231 in the year ended December 31, 2003 to
      Commerce, Inc. These amounts were deemed to be uncollectible due to Commerce’s
      bankruptcy filing. Accordingly the Company recorded a bad debt expenses of
      $171,072 and $115,231 for the years ended December 31, 2004 and 2003,
      respectively. In the period ended June 30, 2005 the Company will record a bad
      debt of $9,007. The company’s president is a former officer and director of
      Commerce. He served as Commerce’s president and as a director for seven years
      prior to his extended personal leave in September of 2002 and resignation in
      February 2003.




NOTE
      4
      -  EQUITY
      ISSUANCES





In
      January 2005, the Company issued 996,667 shares of common stock for cash valued
      at $0.15 per share.





In
      January 2005, the Company issued 28,571 shares of common stock for cash valued
      at $0.175 per share.





In
      January 2005, the Company issued 125,000 shares of common stock for fund raising
      valued at $0.51 per share, which was the closing price on the date of
      issue.





-13-




**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      4 -  EQUITY
      ISSUANCES (Continued)





Pursuant
      to the private placements for cash mentioned previously, the Company was
      required to issue additional shares of common stock to the various parties
      because the closing bid price of the Company’s stock was not $1.00 at the time
      of the SB-2 filing. Accordingly, the Company issued an additional 2,222,779
      shares of common stock to the private placement investors for their cash
      purchases. These individuals did not contribute any services or other items
      to
      the Company. These shares were valued at $0.00 per share.





In
      February 2005, the Company issued 1,466,666 shares of common stock for cash
      valued at $0.15 per share.





In
      February 2005, the Company issued 30,149 shares of common stock for fund raising
      valued at $0.33 per share, which was the closing price on the date of
      issue.





In
      February 2005, the Company issued 300,000 shares of common stock for fund
      raising valued at $0.35 per share, which was the closing price on the date
      of
      issue.





In
      February 2005, the Company issued 100,000 shares of common stock under Bonus
      Shares, valued at $0.36 per share, which was the closing price on the date
      of
      issue.





In
      February 2005, the Company issued 85,714 shares of common stock for cash valued
      at $0.175 per share.





In
      March
      2005, the Company issued 130,000 shares of common stock for services rendered
      valued at $0.36 per share, which was the closing price on the date of
      issue.





In
      March
      2005, the Company issued 3,100 shares of common stock for fund raising valued
      $0.29 per share, which was the closing price on the date of issue.





In
      March
      2005, the Company canceled (30,000) shares of common stock, which was originally
      issued on June 10, 2004 as Bonus Shares valued at $0.56 per share, which was
      the
      closing price on the date of issue.





In
      May
      2005, the Company issued 2,000,000 shares of common stock for Board of Directors
      compensation for services for the entire year of 2005, part was recorded as
      an
      expense and part was deferred, valued at $0.20 per share, which was the closing
      price on the date of issue.





In
      June
      2005, additional shares were issued due to a calculation error on the original
      shares issued in January 2005 for the pursuant to private placement for cash
      mentioned previously, the Company was required to issue additional shares of
      common stock to various parties because the closing price of the Company’s stock
      was not $1.00 at time of original SB2 filing. Accordingly, the Company issued
      an
      additional 619,009 shares of common stock to the private placement investors
      for
      their cash purchases. These individuals did not contribute any services or
      other
      items to the Company. These shares were valued at $0.01 per share.


-14-





**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      4 -  EQUITY
      ISSUANCES (Continued)





In
      August
      2005, the Company issued 40,000 shares of common stock for services rendered
      valued at $.124 per share which was the closing price on the date of issue.





In
      August
      2005, the Company issued 45,000 shares of common stock for services, valued
      at
      $0.11 per share, which was the closing price on the date of issue.





NOTE
      5 -  COMMITMENTS
      AND CONTINGENCIES





The
      Company in April 2005 made a settlement agreement with American Express for
      payment of $52,317 of the $105,000 owed, which has been paid and forgiveness
      of
      the balance, recorded under “Gain on Debt Settlement”.





NOTE
      6 -  WARRANTS





On
      September 7, 2004 the Company entered into a consulting agreement with Redwood
      Consultants, LLC. As consideration for the consulting agreement, the Company
      granted 325,000 warrants exercisable at $0.55 per warrant, 325,000 warrants
      exercisable at $0.75 per warrant, 325,000 warrants exercisable at $1.00 per
      warrant and 500,000 warrants exercisable at $1.75 per warrant. The Company
      calculated the fair value of the warrants using the Black-Scholes fair value
      model and determined that the fair value of the warrants was $216,366. The
      Company expensed the warrants immediately because the warrants are
      non-refundable and are not a prepayment for future services.





NOTE
      7
      -  GOING
      CONCERN





The
      Company’s condensed consolidated financial statements are prepared using
      accounting principles generally accepted in the United States of America
      applicable to a going concern which contemplates the realization of assets
      and
      liquidation of liabilities in the normal course of business. The Company has
      incurred cumulative operating losses through September 30, 2005 of $2,338,458.
      Revenues had not been sufficient to cover its operating costs and to allow
      it to
      continue as a going concern. The potential proceeds from the sale of common
      stock, other contemplated debt and equity financing, and increases in operating
      revenues from new development would enable the Company to continue as a going
      concern. There can be no assurance that the Company can or will be able to
      complete any debt or equity financing. If these are


not
      successful, management is committed to meeting the operational cash flow needs
      of the Company.


-15-





**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005








NOTE
      8
      -  NOTE
      PAYABLE: LH ASSOCIATES





In
      the
      period ended March 31, 2005, the Company secured a $1 Million
      Investment.





Securities
                Issued:
            •
                $1 million Senior Secured Convertible Notes (the "Notes") and
              •
                Class A and Class B common stock purchase warrants.








Coupon:
            7%
                annual, payable semiannually in cash or at the option of the investor
                in
                common stock. If an event of default occurs at any time after the
                Issue
                Date and is not cured within 20 days, the Default Rate of 15% per
                annum
                applies.





Principal
                Repayments:
            On
                the 12thmonth
                anniversary of the Closing Date, the Company shall be required to
                make
                principal repayments based on the following schedule: o Equal monthly
                installments for the remainder of the note in cash or at the option
                of the
                Company in stock at a price equal to a 15% discount of the company’s
                common stock price at time of repayment with a maximum price of a
                discount
                of 15% off the company’s common stock price at the Issue Date.





Maturity:
            The
                Notes will mature 24 months after the Issue Date.





Seniority
                and Security:
            The
                Notes will be senior to any and all indebtedness of The Company except
                for
                a bank line currently being negotiated for up to $500,000 and will
                be
                secured substantially by all assets of the Company and its subsidiaries.
                At the option of the investor this may be waived. Notwithstanding
                the
                foregoing, Investor agrees to sign the appropriate subordination
                documents
                requested by the bank.








Conversion
                Price:
            The
                Notes issued will be convertible at the option of the holder, at
                a fixed
                price of Price $.29, however, if the Company’s revenues for fiscal 2004
                were not at least $5,000,000 and revenue results for the first quarter
                of
                fiscal 2005 are not at least $2,000,000 then the conversion price
                will be
                reduced by one third. For the purposes of this transaction only,
                revenue
                is defined as both recognized and deferred revenue.





Effective
                Date:
            The
                day the Registration Statement is declared effective.





-16-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      8 -  NOTE
      PAYABLE: LH ASSOCIATES (Continued)








Class
                A Warrants:
            The
                investors received Class A Warrants to purchase 3,225,807 shares.
                The
                Class A Warrants: warrants shall have a 5-year life and an exercise
                price
                of $.312. The warrants shall be re-priced if the Company does not
                have
                revenues of at least $20 million for 2005 based on the following
                schedule:
              
              Less
                than $20m — 15% discounted
              Less
                than $15m - 30% discounted
              Less
                than $10m - 45% discounted





Forced
                Conversion Feature:
            If,
                following the Effective Date, all of the Milestones specified below
                are
                satisfied on each trading day occurring during any period of ten
                consecutive trading days, then the Company may force conversion of
                the
                Notes by delivering to the Investors written notice thereof (a “Forced
                Conversion Notice”) on the business day immediately following the last day
                of such period (the “Forced Conversion Date”). The Forced Conversion
                Notice will specify the aggregate principal amount of the Notes that
                is
                subject to the forced conversion, which amount (i) shall not exceed
                35% of
                the aggregate dollar volume traded on the Company’s principal market
                during the seven (7) trading days immediately preceding the Forced
                Conversion Date and (ii) shall be allocated among the Investors on
                a pro
                rata basis. On the Forced Conversion Date, each Investor will be
                deemed to
                have converted an amount of principal of its Debenture equal to (A)
                its
                pro rata share of the aggregate principal amount specified in the
                Forced
                Conversion Notice minus (B) the amount of principal converted by
                such
                Investor during the twenty trading days immediately preceding the
                Forced
                Conversion Date.





Milestones:
            (a)
                The Registration Statement must be effective and available for resale
                of
                the Conversion Shares and Warrant Shares by the Investors.
              (b)
                The closing bid price for the common stock must be above $.60.
              (c)
                No event of default, or event that could become an event of default,
                shall
                have occurred.
              (d)
                The issuance pursuant to the Forced Conversion does not cause (i)
                the
                number of shares beneficially owned by any Investor to exceed 4.9%
                of the
                number of shares then outstanding.





-17-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      8
      -  NOTE
      PAYABLE: LH ASSOCIATES (Continued)





Anti-dilution
                Rights:
            Should
                the company sell any Common shares or any instrument convertible
                into
                such, at a price per share that is less than the conversion price,
                then
                the conversion price shall automatically be lowered to that new price.








Restrictions
                on other financing:
            The
                Company will be restricted from borrowing money or issuing debt securities
                in the public or private markets until the Effective Date except
                for the
                Bank line disclosed in Seniority.








Insider
                Lock -up:
            The
                insiders will be locked up to sell their shares in the company unless
                the
                stock price is over $.65 and then subject to Regulation 144 selling
                rules,
                However, they may sell if the stock is below $.65 only after 9 months
                of
                the registration being effective, subject to rule 144.





Future
                Offerings:
            For
                a period of up to 1 year from the Effective Date, the investor will
                retain
                the right to participate in public or private offerings of The Company’s
                equity and equity linked securities (including anything convertible
                into
                equity) and will be eligible to participate in up to at least 20%.





Fundamental
                Change:
            Upon
                a Fundamental Change, the Investor(s) will have the right to put
                the
                security to The Company at 105% of outstanding principal, plus unpaid
                accrued unpaid interest. A merger or other change of control transaction
                shall constitute a Fundamental Change.








Registration
                Rights:****
            Registrant
                shall file a registration statement with the SEC covering the resale
                and
                distribution by the investors of all shares which may be received
                by the
                investors upon conversion of Notes and exercise of the Warrants within
                40
                days of the Closing Date, which Registration Statement shall be declared
                effective within 135 days of such Closing Date. Penalties: If the
                Registration Statement is not effective within 135 days from the
                Issue
                Date or if the Company does not respond to an SEC comment within
                10
                business days or if the effective registration is unavailable to
                the
                Investors for more than twenty (20) days during a 365-day period,
                a 2%
                penalty per month will be assessed until the Registration Statement
                is
                declared effective or becomes available. The penalty will be payable
                monthly in cash.





-18-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Notes
      to
      the Consolidated Financial Statements


September
      30, 2005





NOTE
      8
      -  NOTE
      PAYABLE: LH ASSOCIATES (Continued)





Class
                B Warrants:
            The
                investors received Class B Warrants to purchase 322,581 shares. The
                Class
                B Warrants have a 180-day life post effective registration and an
                exercise
                price of $.26 per share.








Due
                Diligence Fee:
            2%
                (two percent) of investment payable out of the escrow account upon
                closing.





The
      Company has valued the warrants granted at $882,103 using the Black Scholes
      model. The Company has valued the beneficial conversion feature of the note
      at
      $97,172. These amounts along with $19,725 have been presented as contra debt
      accounts. The value of the warrants, beneficial feature, other costs are being
      amortized to interest expense over the life of the loan. Amortization expense
      for the nine months ended September 30, 2005 was $251,736. The net value of
      the
      note payable as of September 30, 2005 was $251,736.








-19-




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





Management’s
      Discussion and Analysis contains various “forward looking statements” within the
      meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
      regarding future events or the future financial performance of the Company
      that
      involve risks and uncertainties. Certain statements included in this Form
      10-QSB, including, without limitation, statements related to anticipated cash
      flow sources and uses, and words including but not limited to “anticipates”,
“believes”, “plans”, “expects”, “future” and similar statements or expressions,
      identify forward looking statements. Any forward-looking statements herein
      are
      subject to certain risks and uncertainties in the Company’s business, including
      but not limited to, reliance on key customers and competition in its markets,
      market demand, product performance, technological developments, maintenance
      of
      relationships with key suppliers, difficulties of hiring or retaining key
      personnel and any changes in current accounting rules, all of which may be
      beyond the control of the Company. The
      Company adopted at management’s discretion, the most conservative recognition of
      revenue based on the most astringent guidelines of the SEC in terms of
      recognition of software licenses and recurring revenue. Management will elect
      additional changes to revenue recognition to comply with the most conservative
      SEC recognition on a forward going accrual basis as the model is replicated
      with
      other similar markets (i.e. SBDC). The
      Company’s actual results could differ materially from those anticipated in these
      forward-looking statements as a result of certain factors, including those
      set
      forth therein.





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-QSB should be read in conjunction with the Company’s
      Consolidated Financial Statements and Notes to Consolidated Financial Statements
      included in its 2004 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" or the "Company") is a holding company for two
      software subsidiaries and one system development subsidiary: Intelligent
      Business Systems Group, Inc. ("IBSG"), a provider of turn-key digital service
      center software; and Secure Blue, Inc., a Sarbanes-Oxley and security software,
      Intelligent Business Systems Development, Inc. (IBSD) a provider of IT
      services




The
      IBSG
      offers enterprise solutions designed to enhance the operating efficiency and
      create revenue for State Small Business Development Centers, business
      associations (e.g., Chambers of Commerce) and Fortune 1000 corporations through
      the licensing of its unique turnkey digital service center software, which
      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 known as the Biz World Pro (copyrighted).




The
      Company’s other subsidiary, Secure Blue, Inc. provides, in management’s opinion,
      an economical Sarbanes-Oxley (SOX) compliant and security software 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 and must be in compliance
      with SOX as a result of working with a public company.


As
      software providers, system integrators and Application Service Provider, IBSG,
      Inc. and Secure Blue, Inc. generate their revenue from license sales, system
      modifications, and system support and a percentage of monthly customer fees.
      The
      typical IBSG/Secure Blue license agreement has a five-year term, but, being
      updated on an annual basis, has historically been renewed upon expiration (to
      date the Company has had only one licensee not renew, due to the expiration
      of
      the licensee's contract with their client).






-20-


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




•
      Revenue recognition;


•
      Estimating sales returns and the allowance for doubtful accounts;


•
      Value of long lived assets including purchased software;


•
      Valuation of services paid for with common stock.




Revenue
      Recognition. As described below, significant management judgments and estimates
      must be made and used in connection with the revenue recognized in any
      accounting period. Material differences may result in the amount and timing
      of
      our revenue for any period if our management made different judgments or
      utilized different estimates.




We
      recognize revenue in accordance with Statement of Position, or SOP 97-2,
“Software Revenue Recognition,” as amended, by Staff Accounting Bulletin No.
      104, Revenue Recognition. The Company adopted Emerging Issues Task Force Issue
      No. 00-21, Revenue Arrangements with Multiple Deliverables. We recognize license
      revenues when all of the following criteria are met: persuasive evidence of
      an
      arrangement exists, the fee is fixed or determinable, collection of the related
      receivables is probable, delivery of the license has occurred and the customer
      has accepted the license (including the expiration of an acceptance period)
      if
      the terms of the contract include an acceptance requirement. Licenses are
      considered delivered once a license agreement has been entered into between
      the
      customer and the Company. Actual access to the software, due to the web nature
      of the software, is provided upon a mutually agreed schedule but the license
      fee
      due at time of conveyance and is not contingent upon the customer providing
      the
      hardware, staff for training or scheduling conflicts in general. Training and
      installation are included in the license fee and can be delivered at any time
      after the license has been conveyed. A portion of the year one license revenue
      and any subsequent years licenses are amortized on an annual basis commensurate
      with the start of the license agreement and then each subsequent anniversary
      date of the license and recognized generally in 12 periods (months) per year.
      The revenue recognition policy is as follows; 65% of the year one license
      recognized upfront to cover the costs related to the installation, testing,
      training and the initial investment/purchase of the license of the System.
      This
      revenue is recognized in month one. The original agreement on the purchase
      of
      the license of System was to be paid within a payment schedule over a period
      of
      time in order to recoup implementation costs. It was agreed that on an average
      taking 65% license fee would cover this cost, the initial expenses of the
      employees’ time on business development which includes assisting the customer
      with public awareness and providing initial marketing assistance and guidance
      in
      developing a list of prospect sub-license candidates as well as presentation
      assistance for the same and initial profit for the license sale. The balance
      in
      deferred would be maintenance costs for the remainder of the first year and
      gross profit. The average contract length is five years. As stated in paragraph
      27 of SOP 97-2, the customer intends to utilize the system over that period
      of
      time as an integral part of their overall operation and as such can continue
      to
      be reflected as fixed or determinable. The length of time that a customer is
      projected to bring invoices current is 12 months and believed to be atypical
      for
      these types of contracts but is expected by management to reduce in time to
      no
      more then 9 months to be brought current at such time as our receivables become
      part of the customers’ accounts payable system. Based on paragraph 28 of SOP
      97-2, our contracts are generally long term (greater then 12 months


and
      payments on invoices are not expected to be longer than 12 months, the fee
      is
      therefore recognized as fixed and determinable as set forth in paragraph
      28.




In
      the event that we grant a customer the right to specified upgrades and
      vendor-specific objective evidence of fair value exists for such upgrades,
      value
      to the customer is determined on a stand-alone basis and there is objective
      and
      reliable evidence of fair value of the undelivered elements. Professional
      services and other revenues, when sold with subscription and support offerings,
      are accounted for separately until we have delivered the specified upgrade
      or
      additional service. If professional services are essential to the functionality
      of the other elements of the arrangement, we defer recognition of revenue until
      we have satisfied our professional services obligations. To date, professional
      services have not been essential to the functionality of the other elements,
      and
      thus have been accounted for separately.


-21-


We
      consider a non-cancelable agreement signed by the customer and us to be evidence
      of an arrangement. Delivery is considered to occur when media containing the
      licensed programs is provided to a common carrier, or the customer is given
      electronic access to the licensed software. Our typical end user license
      agreements do not contain acceptance clauses. We consider the fee to be fixed
      or
      determinable if the fee is not subject to refund or adjustment. If the fee
      is
      not fixed or determinable, we recognize revenue as the amounts become due and
      payable. The possibility of cancellation is considered “remote” as stated in
      paragraphs 33, of SOP 97-2. As directed per paragraph 33, no contingency for
      cancel ability is required. Therefore there are no funding clauses in our
      agreements and therefore the Company has not adopted any accounting policies
      for
      such conditions. If, in the future, such clauses are added to any license
      agreements, the Company will develop the appropriate policies as described
      in
      paragraphs 32 and 33 of SOP 97-2.





Probable
      assurance of collection is based upon our assessment of the customer’s financial
      condition through review of their current financial statements or credit
      reports. Additional consideration is given to the type of customer. Most of
      our
      customers are government or quasi-government agencies and are thus considered
      low collection risk although payments could take as long as 12 months to be
      brought current by the customer due to the slow pay nature of such entities.
      As
      stated in paragraph 27 of SOP 97-2, the customer intends to utilize the system
      over that period of time as an integral part of their overall operation and
      as
      such can continue to be reflected as fixed or determinable. The length of time
      that a customer is projected to bring invoices current is 12 months and believed
      to be atypical for these types of contracts but is expected by management to
      reduce in time to no more then 9 months to be brought current at such time
      as
      our receivables become part of the customers’ accounts payable system. Based on
      paragraph 28 of SOP 97-2, our contracts are generally long term (greater then
      12
      months and payments on invoices are not expected to be longer than 12 months,
      the fee is therefore recognized as fixed and determinable as set forth in
      paragraph 28. Late payments and interest can be assessed based on unpaid
      balances on a monthly basis. Contracts do not include Rights of Return. They
      do
      include cancellation clauses available to both parties for material breaches
      of
      contracts.




For
      follow-on sales to existing customers, prior payment history is also used to
      evaluate probability of collection. If we determine that collection is not
      probable, we will defer the revenue and recognize the revenue upon cash
      collection. When our software licenses contain multiple elements, we allocate
      revenue to each element based on the relative fair values of the elements.
      Multiple element arrangements generally include post-contract support (PCS
      or
      maintenance), software products, and end-user subscriptions with billings
      recorded as received and in some cases, other professional services. Revenue
      from multiple-element arrangements is allocated to undelivered elements of
      the
      arrangement, such as PCS, based on the relative fair values of the elements
      specific to us. Our determination of fair value of each element in multi-element
      arrangements is based on vendor-specific objective evidence, which is generally
      determined by sales of the individual element to third parties or by reference
      to a renewal rate specified in the related arrangement.




Where
      vendor-specific objective evidence of fair-value exists for all undelivered
      elements, but evidence does not exist for one or more delivered elements, we
      account for the delivered elements in accordance with the Residual Method
      prescribed by SOP 98-9. Under the residual method, the fair value of the
      undelivered elements is deferred and the remaining portion of the arrangement
      fee is recognized as revenue. In most cases, the bundled multiple elements
      include PCS and the software product. In such cases, when vendor-specific
      objective evidence of fair value exists for all of the undelivered elements
      (most commonly PCS), the residual or remaining amount is recognized as revenue
      and the PCS is recognized ratably over the PCS term, which is typically 12
      months.




Revenues
      from professional services consist of training and implementation services.
      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.


-22-


Deferred
      revenues include amounts billed to customers for which revenue has not yet
      been
      recognized that generally results from deferred maintenance, consulting or
      training services not yet rendered and license revenue deferred until all
      requirements under SOP 97-2 are met. Deferred revenue is recognized upon
      delivery of our products, as services are rendered, or as other requirements
      requiring deferral under SOP 97-2 are satisfied.


In
      December 2004, the FASB revised Statement of Financial Accounting Standards
      No.
      123 Accounting for Stock-Based Compensation. This statement supersedes APB
      Opinion No. 25, Accounting for Stock Issued to Employees, and the related
      implementation guidance. This statement establishes standards for the accounting
      for transactions in which an entity exchanges its equity instruments for goods
      and services. It also addresses transactions in which an entity incurs
      liabilities in exchange for goods and services that are based on the fair value
      of the entity’s equity instruments or that may be settled by the issuance of
      those equity instruments. This Statement focuses primarily on accounting for
      transactions in which an entity obtains employee services in share-based payment
      transactions. For public entities that are not small business issuers, the
      implementation of this Statement is required as of the beginning of the first
      interim or annual reporting period after June 15, 2005. For public entities
      that
      are small business issuers, like Coach, the implementation of this Statement,
      is
      required as of the beginning of the first interim or annual reporting period
      after December 15, 2005. Management is required to implement this Statements
      beginning in fiscal year beginning on January 1, 2006 and they are currently
      evaluating the impact of implementation of this Statement on the Company.




**Market
      for our products**




The
      potential market for the BizWorld Data System includes any entity that has
      a
      customer, vendor or membership base comprised of small to mid size business
      enterprises. The potential markets for Secure Blue are public companies required
      to establish internal control systems. The projected combined market size for
      both products is greater than $5 billion annually. No assurances can be made
      that such market shall be realized or result in profitability.




The
      market for the BizWorld Data System includes state operated Small Business
      Development Centers, business organizations such as chambers of commerce, large
      corporations, and other entities which seek to help small and medium size
      businesses succeed. When Intelligent Business Systems Group, Inc. sells a master
      “host” license to a state Small Business Development Center or business
      associations (i.e. chambers of commerce), that entity can sell “sub-licenses’ to
      the other vertical markets in their respective states or markets, from which
      Intelligent Business Systems Group, Inc. may receive incremental revenue. This
      market represents a projected $2.5-$3.5 billion NOT including international
      application. No assurances can be made that such market shall be realized or
      result in profitability.




**Small
      Business Development Centers**




Many
      states 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. We currently have a license agreement with California’s small
      business development center system which has fifty regional offices, and an
      agreement with the state of Connecticut to install such a system for their
      12
      regional offices.




**Fortune
      1000 Corporations**




Intelligent
      Business Systems Group, Inc. suggests that Small Business Development Centers
      seek to sell Corporate Sponsor subscription licenses to Fortune 1000
      corporations for an average of $75,000/year. This license would provide the
      sponsor with unlimited access to the constituent pool of the Small business
      development centers small-mid size businesses of which a significant percentage
      are minority owned in order to facilitate the large corporation’s recruitment of
      small and minority owned businesses as vendors. The System platform permits
      end
      users to interact not only with these large corporations, but also among each
      other. Intelligent Business Systems Group, Inc. anticipates receiving 60% of
      all
      such licenses sold. To date no such sponsorship licenses have been sold.




**Business
      Associations**




Other
      business associations such as local chambers of commerce have membership or
      offer services to small and medium size businesses. We seek to license the
      BizWorld Data System to these organizations as a way of providing additional
      services and generate additional revenues. We currently are in the process
      of
      implementing a BizWorld Data System for The Knowledge Institute’s Virtual
      Business Incubator project called ‘myVBI” which will be offered to its more than
      720,000 small business memberships.


-23-


**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
      are
      positioning the product as a national solution for the support and development
      of the small to mid size business community 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. The Company continues its efforts to develop other international
      opportunites.




**Secure
      Blue Markets**




Secure
      Blue will be targeting 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 must be SOX compliant for those records dealing
      with that business. This market represents a projected value of $3-$4 billion.
      The market for SOX solutions in the US is projected to grow to $6.9 billion
      in
      2006. Secure Blue is currently targeting sales activity at small and mid-cap
      public companies with a market valuation of less than $75 million. This is
      a
      market sector largely ignored by other vendors. Also, in order for many public
      companies to ensure that they stay SOX compliant they are demanding that private
      companies doing business with them are also compliant with many of the major
      SOX
      requirements and in particular Sections 404 and 302 relating to internal
      controls on financial reporting. Currently in the US there are an estimated
      10,000 small cap companies and over 100,000 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 are to be incorporated into new European
      legislation later in 2005 and this will lead to rapid growth and a huge global
      market for SOX solutions well in excess of the US projection. Additionally,
      foreign companies doing business with US public companies will be 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**




Intelligent
      Business Systems Group, Inc. current marketing effort 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. Demonstrations and contract negotiations are handled on a personal
      basis.




To
      achieve our growth plans Intelligent Business Systems Group, Inc. needs to
      employ more business developers, present a more visible presence at conventions
      and accelerate contract implementation. We also anticipate the need to provide
      enhanced training and marketing services to its customers, which can best be
      achieved by acquiring existing service companies with expertise in that field.
      The addition of more 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.


-24-


Secure
      Blue was launched in mid-April of 2005 and in May 2005 we began a series of
      online, live demos to potential channel partners (i.e. accounting and law firms,
      brokerage firms and potential end users). Our distribution strategy is to
      develop third-party channels through professional advisors to small/mid cap
      companies. These include investor relations firms, law firms, accountancy firms,
      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. Our third-party channels
      will attack the end-user market through their existing client base.





In
      addition we will continue to promote and demonstrate SOX Pro to potential
      end-users where appropriate. In the longer term we will 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 sub-licenses of the system and provide
      revenue generating digital service center to their customers. This makes us
      dependent on the efforts of our customers since we have no direct way to
      communicate with those parties which may be potential ultimate users of the
      BizWorld product.




Secure
      Blue has direct market application focusing primarily on the small cap public
      companies. Secure Blue is currently seeking to establish channel partner
      arrangements with Investor Relation firms that primarily target the small cap
      market. Secure Blue will also seek 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 will also seek 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 aims are 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.




**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 efforts. Intelligent Business
      Systems Group, Inc. provides toll free and web site support. However, the first
      line of support is built into the systems through a self diagnostic feature
      which is enhanced by the system being capable of providing instructions to
      navigate a user error or auto report a potential system “bug” which 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.




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. We
      will
      be including 24/7 support as an integral part of the SOX Pro package with an
      ongoing annual fee of 20% of the first years license cost. Our team based in
      Florida will provide technical support for end users and channel
      partners


-25-


**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 constantly requests and receives 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
      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 provided over the internet.
      However our products compete against a variety of individual software programs
      designed to provide similar functions for small and medium sized business users.
      Additionally, many digital commerce solutions are available to small businesses
      through established internet portals such as Yahoo. Many internet hosting
      providers help their customers set up e-commerce sites and provide software
      for
      such sites. Internet based service providers are increasingly targeting the
      small and medium business market. A wide variety of consultants market
      e-commerce solutions to small businesses and offer a more personalized service
      than are available through small business development centers.


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 corporat ion.
      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, IBS Group, 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, 2005 and
      2004**




The
      Company maintained a conservative revenue recognition policy related to
      previously held contracts but has recognized new business or new licenses
      activated under previous contracts according to conservative recognition
      policies under GAAP. The Company reflected an increase in sales revenues for
      the
      three months ended September 30, 2005 to $1,379,537 compared to sales revenues
      for the three months ended September 30, 2004 of $1,017,147, an increase of
      $362,120. The Company reflected an increase in sales revenues for the nine
      months ended September 30, 2005 to $3,819,018 compared to sales revenues for
      the
      nine months ended September 30, 2004 of $1,855,221, an increase of $1,963,797.
      The Company had deferred revenues for the nine months ended September 30, 2005
      of $980,968 (deferred pending recognition based on amortization policies
      previously stated; See Note 2 of the Financial Statements).




**Operating
      Expenses for the Three and Nine Months ended September 30, 2005 and
      2004**




The
      Company had operating expenses of $855,740 for the three months ended September
      30, 2005 compared to operating expenses of $810,430 for the three months ended
      September 30, 2004, an increase of $45,310, primarily as a result of the
      increase of general and administrative expenses. The Company had operating
      expenses of $2,650,417 for the nine months ended September 30, 2005 compared
      to
      operating expenses of $4,952,585 for the nine months ended September 30, 2004,
      a
      decrease of $2,302,168, primarily as a result of a decrease in stock based
      compensation and bad debt expense to a related party ( Commerce,
      Inc.; see Note 3), offset
      by
      an increase of general and administrative expenses. The expenses we incurred
      in
      the quarter ended September 30, 2005, were primarily amortization of consulting
      services, stock based compensation, depreciation, bad debt expense and general
      and administrative expenses. This reflects an operating profit for the three
      months ended September 30, 2005 of $277,843 and an operating profit for the
      nine
      months ended September 30, 2005 of $597,043.


-26-


**Liquidity
      and Capital Resources**





W e
      incurred cumulative operating losses through September 30, 2005 of $2,338,418.
      Revenues had not been sufficient to cover its operating costs and to allow
      it to
      continue as a going concern .
      The
      notes in the unaudited financial statements at and for the quarter ended
      September 30, 2005, contain an explanatory paragraph raising substantial doubt
      of the Company’s ability to continue as a going concern. Note 7 to the unaudited
      financial statements at and for the quarter ended September 30, 2005 describe
      the conditions which raise this doubt and management’s plans.




We
      addressed our capital requirements in March 2005 by sale of $1,000,000 of Senior
      Secured Convertible Notes (See Note 8 of the unaudited financial statement).
      We
      believe the proceeds of the notes as well as the cash we expect to


generate
      from operations will enable us to meet our capital needs for at least the next
      twelve months except as disclosed below.




We
      currently expect to incur substantial expenditures in 2005 for the commercial
      introduction of Secure Blue’s software products, to revise our BizWorld Pro
      software to add additional functions and improve ease of use, and implementation
      and compliance with the requirements of Section 404 of the Sarbanes-Oxley Act
      of
      2002. The ultimate costs and benefits of these additional expenditures are
      not
      fully known. We may seek to raise additional funds through public or private
      equity financing, or through other sources such as credit facilities. The sale
      of additional equity securities could result in dilution to our shareholders.
      In
      addition, in the future, we may enter into cash or stock acquisition
      transactions or other strategic transactions that could reduce cash available
      to
      fund our operations or result in dilution to shareholders.





We
      currently have four (6) customers, the State of California, the Government
      of
      Nigeria, BuzGate, the State of Connecticut, the State of New Hampshire and
      Veteran Corporation. Our accounts receivable are as follows at September 30,
      2005:




Corporate
                Affairs Commission (Nigeria)
            
            $
            3,731,729State
                of California
            
            
            2,545,000BuzGate
            
            
            101,500Connecticut
            
            
            50,000New
                Hampshire
              Veteran
                Corporation
            
            
            40,00040,000$
            6,508,279


**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
      customers who are generally state government agencies or quasi government
      business associations can be exceedingly tardy in paying their obligations
      to
      us.  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.


-27-


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.




Allowance
      for Doubtful Accounts and Sales Returns. We maintain an allowance for doubtful
      accounts and a sales return allowance to reduce amounts to their estimated
      realizable value. A considerable amount of judgment is required when we assess
      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
      may be required. We initially record a provision for doubtful accounts based
      on
      our historical experience, and then adjust this provision at the end of each
      reporting period based on a detailed assessment of our accounts receivable
      and
      allowance for doubtful accounts. In 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 government, as well as general economic conditions, among other
      factors.




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. CONTROLS AND PROCEDURES**




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our Chief Executive Officer and Principal Financial
      Officer, of the effectiveness of our disclosure controls and procedures, as
      defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
      1934
      as of the end of the period covered by this report. Based on that evaluation,
      our Chief Executive Officer and Principal Financial Officer have concluded
      that
      our disclosure controls and procedures as of September 30, 2005were effective
      to
      ensure that information required to be disclosed by us in reports that we file
      or submit under the Securities Exchange Act of 1934 is recorded, processed,
      summarized and reported within the time periods specified in the Securities
      and
      Exchange Commission’s rules and forms.




There
      have been no material changes in our internal controls over financial reporting
      or in other factors that could materially affect, or are reasonably likely
      to
      affect, our internal controls over financial reporting during the quarter ended
      September 30, 2005.


-28-


**PART
      II OTHER INFORMATION**








Item
      1. Legal
      Proceedings




Not
      applicable





Item
      2.
      Unregistered Sales of Equity Securities and Use of Proceeds





In
      August
      2005, the Company issued 40,000 shares of common stock for services rendered
      valued at $.124 per share which was the closing price on the date of issue.





In
      August
      2005, the Company issued 45,000 shares of common stock for services, valued
      at
      $0.11 per share, which was the closing price on the date of issue.




Item
      3.
      Defaults upon Senior Securities





Not
      applicable





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




None.





Item
      5.
      Other Information





Not
      applicable





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.







-29-







**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, in the City of Celebration, Florida,
      on
      November 14, 2005.






IBSG
                INTERNATIONAL, INC.Date: November
                14, 2005
              By:
              /s/ Michael
                RiversMichael
                RiversPresident,
                  Chief Executive Officer







IBSG
              INTERNATIONAL, INC.Date: November
              14, 2005
            By:
            /s/ Geoffrey
              BirchGeoffrey
              BirchPrincipal
              Accounting Officer


-30-