**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 JUNE 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
        August 8, 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 June
                    30, 2005 (unaudited)
                4(b)
                    Consolidated Statements of Operations
                    for the Three and Six Months Ended June 30, 2005 and 2004
                    (unaudited)
                5(c)
                    Consolidated Statement of Cash Flow for the Three
                    Months Ended June 30, 2005 and 2004 (unaudited)
                6(d)
                    Notes to Consolidated Financial Statements
                    (unaudited)
                7Item
                    2.
                Managements
                    Discussion and Analysis of
                    Financial Condition and Result of Operations
                20Item
                    3.
                Controls
                    and Procedures
                32**Part
                    II.**
                Other
                    InformationItem
                    1.
                Legal
                    Proceedings
                33Item
                    2.
                Changes
                    in Securities and Small Business Issuer
                    Purchases of Equity Securities
                33Item
                    3.
                Defaults
                    Upon Senior Securities
                33Item
                    4.
                Submission
                    of Matters to a Vote of Security
                    Holders
                33Item
                    5.
                Other
                    Information
                33Item
                    6.
                Exhibits
                    and Reports on Form 8-K
                33Signatures
                35
  -1-
 *Table
            of Contents*
 PART
        I FINANCIAL INFORMATION
 
 General
 
 The
        accompanying reviewed 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 June 30, 2005are
        not
        necessarily indicative of the results that can be expected for the year ended
        December 31, 2005.
 -2-
 *Table
              of Contents*
 
 
 **IBSG
          INTERNATIONAL, INC. AND SUBSIDIARIES**
 
  **CONSOLIDATED
          FINANCIAL
          STATEMENTS**
 
 **June
          30, 2005**
 
    -3-
 *Table
              of
              Contents*
 IBSG
        International, Inc. and Subsidiaries
 Consolidated
        Balance
        Sheet
 June
        30, 2005
 (Unaudited)
 ASSETS **Current
                      Assets**Cash
                  
                  $
                  309,209Accounts
                      receivable
                  
                  
                  5,785,575Prepaids
                  
                  
                  248,771**Total
                      Current Assets**
                  
                  
                  **6,343,555****Equipment,
                      net**
                  
                  
                  **1,093,275****Other
                      Assets**Prepaids
                  
                  
                  725,000Debt
                      issue costs
                  
                  
                  12,884Deposits
                  
                  
                  2,780**Total
                      Other Assets**
                  
                  
                  **740,664****Total
                      Assets**
                  
                  **$**
                  **8,177,494**
 LIABILITIES
        AND STOCKHOLDERS' EQUITY
 **Current
                  Liabilities**Accounts
                  payable and accrued expenses
              
              $
              169,145Accrued
                  interest payable
              
              
              31,802Deferred
                  revenue
              
              
              940,505Capital
                  leases payable
              
              
              7,224Notes
                  payable - related party
              
              
              157Convertible
                  promissory note payable, net
              
              
              143,835**Total
                  Current Liabilities**
              
              
              **1,292,668****Commitments
                  and Contingencies****Stockholders'
                  Equity**Common
                  stock, $0.001 par value, 100,000,000 shares authorized45,682,857
                shares issued and outstanding
              
              
              45,683Additional
                  paid
                  in capital
              
              
              14,486,833Accumulated
                  deficit
              
              
              (2,612,441
              )11,920,075Less:
                  Deferred consulting
              
              
              (5,035,249
              )**Total
                  Stockholders' Equity**
              
              
              **6,884,826****Total
                  Liabilities and Stockholders' Equity**
              
              **$**
              **8,177,494**
 The
            accompanying notes are an integral part of these consolidated financial
            statements
 -4-
 *Table
            of Contents*
 IBSG
          International, Inc. and Subsidiaries
 Consolidated
          Statement of
          Operations
 (Unaudited)
 **Three
                    months ended June 30,**
                
                **Three
                  months ended June 30,**
                
                **Six
                    months ended June 30,**
                
                **Six
                  months ended June 30,****2005**
                
                **2004**
                
                **2005**
                
                **2004****Sales**
                
                $
                1,330,937
                
                
                838,074
                
                $
                2,439,481
                
                $
                838,074**Cost
                    of Sales**
                
                
                137,691
                
                
                10,980
                
                
                226,575
                
                
                10,980**Gross
                    Profit**
                
                
                1,193,246
                
                
                827,094
                
                
                2,212,906
                
                
                827,094**Operating
                    Expenses**Amortization
                    and Depreciation
                
                
                148,256
                
                
                129,024
                
                
                149,278
                
                
                170,583Stock
                    based compensation
                
                
                316,948
                
                
                268,809
                
                
                798,895
                
                
                3,124,502Bonus
                    shares expense
                
                
                -
                
                
                -
                
                
                19,200
                
                
                -Bad
                    debt expense
                
                
                -
                
                
                77,523
                
                
                -
                
                
                -Bad
                    debt expense - related party
                
                
                3,998
                
                
                -
                
                
                9,007
                
                
                264,539General
                    and Administrative
                
                
                467,970
                
                
                291,977
                
                
                798,749
                
                
                582,531**Total
                    Operating Expenses**
                
                
                937,172
                
                
                767,333
                
                
                1,775,129
                
                
                4,142,155**Income
                    (Loss) from Operations**
                
                
                256,074
                
                
                59,761
                
                
                437,777
                
                
                (3,315,061
                )**Other
                    Income (Expense)**Gain
                    on
                    debt settlement
                
                
                -
                
                
                -
                
                
                52,317
                
                
                -Loss
                    on
                    extinguishment of debt - related party
                
                
                -
                
                
                (156,765
                )
                
                -
                
                
                (156,765
                )Interest
                    expense
                
                
                (146,537
                )
                
                (12,505
                )
                
                (167,074
                )
                
                (28,250
                )**Total
                    Other Income (Expense), net**
                
                
                (146,537
                )
                
                (169,270
                )
                
                (114,757
                )
                
                (185,015
                )**Net
                    Income (Loss)**
                
                **$**
                **109,537**
                
                **$**
                **(109,509**
                **)**
                **$**
                **323,020**
                
                **$**
                **(3,500,076**
                **)****Net
                    Income (Loss) Per Share - Basic**
                
                **$**
                **0.00**
                
                **$**
                **(0.00**
                **)**
                **$**
                **0.01**
                
                **$**
                **(0.13**
                **)****Net
                    Income (Loss) Per Share - Diluted**
                
                **$**
                **0.00**
                
                **$**
                **(0.00**
                **)**
                **$**
                **0.01**
                
                **$**
                **(0.13**
                **)****Weighted
                    average number of shares outstanding****during
                  the period - Basic**
                
                
                **45,690,919**
                
                
                **32,652,615**
                
                
                **41,520,539**
                
                
                **27,795,623****Weighted
                    average number of shares outstanding****during
                  the period - Diluted**
                
                
                **49,241,726**
                
                
                **32,652,615**
                
                
                **43,458,443**
                
                
                **27,795,623**
 The
            accompanying notes are an integral part of these consolidated financial
            statements
 -5-
 *Table
            of Contents*
 IBSG
        International, Inc. and Subsidiaries
 Consolidated
          Statement of Cash
          Flows
 (Unaudited)
 **Six months ended June
                    30,**
                
                **Six
                  months ended June
                  30,****2005**
                
                **2004****Cash
                    Flows from Operating Activities:**Net
                    income (loss)
                
                $
                323,020
                
                $
                (3,500,576
                )Adjustments
                    to
                    reconcile net income (loss) to net cash used in operating
                    activities:Amortization
                    and depreciation
                
                
                149,278
                
                
                170,583Amortization
                    of
                    debt issue costs
                
                
                2,166
                
                
                -Amortization
                    of
                    debt discount costs
                
                
                143,835
                
                
                -Bad
                    debt expense
                
                
                -
                
                
                264,339Bad
                    debt expense - related party
                
                
                9,007
                
                
                -Gain
                    on
                    debt settlement
                
                
                (52,317
                )
                
                -Loss
                    on
                    debt extinguishment
                
                
                -
                
                
                156,765Recognition
                    of
                    deferred stock based consulting fee
                
                
                693,894
                
                
                -Reduction
                    of
                    stock subscription payable
                
                
                (59,500
                )
                
                -Stock
                    issued for services
                
                
                703,700
                
                
                3,124,502Changes
                    in operating assets and liabilities:(Increase)
                    decrease in:Accounts
                    receivable
                
                
                (1,170,500
                )
                
                (1,730,000
                )Prepaids
                
                
                (966,796
                )
                
                (32,943
                )Deposits
                
                
                (1,400
                )
                
                (1,380
                )Increase
                    (decrease) in:Accounts
                    payable and accrued expenses
                
                
                (127,543
                )
                
                117,066Accrued
                    interest payable
                
                
                31,802
                
                
                -Deferred
                    revenue
                
                
                (406,981
                )
                
                904,426**Net
                    Cash Used In Operating Activities**
                
                
                (728,335
                )
                
                (527,218
                )**Cash
                    Flows from Investing Activities:**Disbursement
                    for loan - related party
                
                
                (9,007
                )
                
                (149,308
                )Purchase
                    of
                    equipment
                
                
                (3,111
                )
                
                (106,218
                )Advances
                    to
                    parent prior to consolidation
                
                
                -
                
                
                (203,753
                )**Net
                    Cash Used In Investing Activities**
                
                
                (12,118
                )
                
                (459,279
                )**Cash
                    Flows from Financing Activities:**Proceeds
                    from
                    investmentCosts
                    related to investmentProceeds
                    from
                    convertible promissory note, net of issue costs
                
                
                965,225
                
                
                -Repayments
                    of
                    related party borrowings
                
                
                (238,803
                )
                
                (190,424
                )Repayments
                    of
                    capital leases - principal portion
                
                
                (4,756
                )
                
                (6,856
                )Proceeds
                    from
                    issuance of common stock, net of offering costs
                
                
                319,575
                
                
                1,537,072**Net
                    Cash Provided by Financing Activities**
                
                
                1,041,241
                
                
                1,339,792Net
                    Increase in Cash
                
                $
                300,788
                
                $
                353,295Cash
                    at
                    Beginning of Period
                
                
                8,421
                
                
                5,559**Cash
                    at End of Period**
                
                **$**
                **309,209**
                
                $
                358,854Supplemental
                    Disclosure of Cash Flow InformationCash
                    Paid for:Interest
                
                $
                -
                
                $
                -Taxes
                
                $
                -
                
                $
                -
 The
            accompanying notes are an integral part of these consolidated financial
            statements
 -6-
 *Table
            of Contents*
   IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES
 Notes
        to the Consolidated Financial Statements
 June
        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 six months ended June 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-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        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-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        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-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        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 six months ended June 30, 2005 we activated 12 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.
 
  -10-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        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.
 
 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.
 
 We
        currently have four (4) customers, the State of California, the Government
        of
        Nigeria, BuzGate, and the state of Connecticut. Our accounts receivable are
        as
        follows at June 30, 2005:
  Corporate
                  Affairs Commission (Nigeria)
              
              $
              3,340,575State
                  of California
              
              
              2,295,000BuzGate
              
              
              100,000Connecticut
              
              
              50,000$
              5,785,575
  -11-
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            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 March
        31,
        2005 and 2004
 
 NOTE
        2
        -  SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 We
        recognized revenue of the following amounts for the six months ended June
        30,
        2005:
 
 Corporate
                  Affairs Commission (Nigeria)
              
              $
              1,517,814State
                  of California
              
              
              813,622BuzGate
              
              
              75,545Connecticut
              
              
              32,500$
              2,439,481
 
 Deferred
        revenue consisted of the following at June 30, 2005:
 
 Corporate Affairs Commission (Nigeria)
              
              $
              649,886State
                  of California
              
              
              247,664BuzGate
              
              
              25,455Connecticut
              
              
              17,500$
              940,505
 
 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 June 30, 2005, the Company made cash payments of $238,803
        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.
  -12-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        30,
        2005
 
 NOTE
        3 -  RELATED
        PARTY TRANSACTIONS (Continued)
 
 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.
 
 At
        June 30, 2005, the Company owed the M&K Trust $156, the Company expects to
        pay this amount off in 2005.
 
 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.
 
 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.
  -13-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
  Notes
        to
        the Consolidated Financial Statements
 June
        30,
        2005
 
 NOTE
        4 -  EQUITY
        ISSUANCES (Continued)
 
 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 $0.00
        per
        share.
  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.
  -14-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        30,
        2005
 
 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 June 30, 2005 of $2,612,441.
        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.
 
 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.
 
  -15-
 *Table
            of Contents*
 
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        30,
        2005
 
 NOTE
        8 -  NOTE
        PAYABLE: LH ASSOCIATES (Continued)
 
 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.
 
 
 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
 -16-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to
        the Consolidated Financial Statements
 June
        30,
        2005
 
 NOTE
        8 -  NOTE
        PAYABLE: LH ASSOCIATES (Continued)
 
 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.
 
 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.
 
 -17-
 *Table
            of Contents*
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to the Consolidated Financial Statements
 June
        30, 2005
 
 NOTE
        8 -  NOTE
        PAYABLE: LH ASSOCIATES (Continued)
 
 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.
 
 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.
  -18-
 *Table
            of Contents*
 
 ***IBSG
        INTERNATIONAL, INC. AND SUBSIDIARIES***
 Notes
        to the Consolidated Financial Statements
 June
        30, 2005
 
 NOTE
        8 -  NOTE
        PAYABLE: LH ASSOCIATES (Continued)
 
 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 six months ended March 31, 2005 was $143,835. The net value of the
        note
        payable as of June 30, 2005 was $17,807.
  -19-
 *Table
            of Contents*
 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: 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.
  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).
  -20-
 *Table
            of Contents*
 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).
  This
        software is currently in development and has not been released for sale.
        No
        revenue was generated by Secure Blue in 2004.
  **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.
  -21-
 *Table
            of Contents*
 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.
  -22-
 *Table
            of Contents*
 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.
  -23-
 *Table
            of Contents*
 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.
 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.
  -24-
 *Table
            of Contents*
 **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.
  **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.
  -25-
 *Table
            of Contents*
 **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.
  **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.
  -26-
 *Table
            of Contents*
 **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.
 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.
  -27-
 *Table
            of Contents*
 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
  **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.
  -28-
 *Table
            of Contents*
 **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 Six Months ended June 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 June 30, 2005 to $1,330,937 compared to sales revenues
        for
        the three months ended June 30, 2004 of $838,074, an increase of $492,863.
        The
        Company reflected an increase in sales revenues for the six months ended
        June
        30, 2005 to $2,439,481 compared to sales revenues for the six months ended
        June
        30, 2004 of $838,074, an increase of $1,601,407. The Company had deferred
        revenues for the six months ended June 30, 2005 of $940,505 (deferred pending
        recognition based on amortization policies previously stated; See Note 2
        of the
        Financial Statements).
  -29-
 *Table
            of Contents*
 **Operating
        Expenses for the Three and Six Months ended June 30, 2005 and
        2004**
  The
        Company had operating expenses of $937,172 for the three months ended June
        30,
        2005 compared to operating expenses of $767,333 for the three months ended
        June
        30, 2004, an increase of $169,839, primarily as a result of the increase
        of
        general and administrative expenses. The Company had operating expenses of
        $1,775,129 for the six months ended June 30, 2005 compared to operating expenses
        of $4,142,155 for the six months ended June 30, 2004, a decrease of $2,367,026,
        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 June 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 June 30, 2005 of
        $109,537 and an operating profit for the six months ended June 30, 2005 of
        $323,020.
  **Liquidity
        and Capital Resources**
 W e
        incurred cumulative operating losses through June 30, 2005 of $2,612,441.
        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
        June
        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 June 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.
  -30-
 *Table
            of Contents*
 **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.
  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.
  -31-
 *Table
            of Contents*
 
 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.







We
      currently have four (4) customers, the State of California, the Government
      of
      Nigeria, BuzGate, and the state of Connecticut. Our accounts receivable are
      as
      follows at June 30, 2005:





Corporate
                Affairs Commission (Nigeria)
            
            $
            3,340,575State
                of California
            
            
            2,295,000BuzGate
            
            
            100,000Connecticut
            
            
            50,000$
            5,785,575







***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 June 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
      March 31, 2005.





-32-
 *Table
          of Contents*





PART
      II OTHER INFORMATION








Item
      1. Legal
      Proceedings




Not
      applicable





Item
      2. Changes
      in Securities And Small Business Issuer Purchases Of
      Equity Securities





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 $0.00 per
      share. These
      shares were issued in a private placement transaction pursuant to Section 4(2)
      and Regulation D under the Securities Act of 1933, as amended. No underwriters
      were involved in this transaction.







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.
Exhibitsand Reports on Form 8-K




A.
      Exhibits:




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




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B.  Reports
      on Form 8-K





On
      February 13, 2004, the Company issued a press release and filed a Current Report
      on Form 8-K announcing the acquisition of its subsidiary, Intelligent Business
      Systems Group, Inc. In such press release and Form 8-K the Company stated that
      Intelligent Business Systems Group, Inc. "...commenced business in 1997, and
      is
      now in its sixth straight year of profitable operations..." On April 14, 2005,
      the announced that it had determined that this statement did not correctly
      report historic facts concerning its Intelligent Business Systems Group, Inc.
      subsidiary and filed an amendment to its Current Report on Form 8-K filed on
      February 13, 2004 to correct such statement. Intelligent Business Systems Group,
      Inc. was incorporated on January 9, 2003.




On
      April
      14, 2005, the Company filed an Amendment dated April 14, 2005 to Subscription
      Agreement dated March 17, 2005 and Class A Stock Purchase Warrants in which
      the
      Company and the investors have agreed that 2005 gross revenues will include
      the
      Company’s reported sales and deferred revenues for such period in the
      calculation of any such discounted purchase price for the Class A Warrants.
      The
      Company and the investors have also agreed that the Closing Date of the
      transaction was March 25, 2005.


On
      April
      14, 2005, the Company issued a press release reporting announcing the filing
      of
      its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004
      and
      certain results of its operations for such fiscal year.




On
      May
      10, 2005, the Company announced that its subsidiary Secure Blue, Inc., will
      be
      launching online demonstrations of the latest version of its revolutionary
      Sarbanes-Oxley solution, SOX Pro, to potential resellers, brokers, small caps
      and medium caps commencing May 9, 2005.




On
      May
      20, 2005, the Company announced an investor conference call that will take
      place
      at 4:15 PM Eastern Daylight Time, on May 23, 2005, where key management will
      discuss the results for this reported quarter, revenue and earnings guidance
      for
      the second quarter and the rest of the year, and the introduction of the Secure
      Blue.




On
      June
      29, 2005, the Company announced certain material facts that were disclosed
      on
      its investor conference call, which was held on May 23, 2005.




On
      June
      29, 2005, the Company announced that it has appointed Mr. Jeffery F.
      Willmott as a new board member, bringing the current board to four
      members.










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**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(b) of the Securities Exchange Act of
      1934, the registrant caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized, in the City of Celebration, Florida,
      on
      August 8, 2005.







**IBSG
                INTERNATIONAL, INC.**Date: August
                  8, 2005
              By:
              /s/ Michael
                RiversMichael
                RiversPresident,
                  Chief Executive Officer








**IBSG
              INTERNATIONAL, INC.**Date: August
                8, 2005
            By:
            /s/ Geoffrey
              BirchGeoffrey
              BirchPrincipal
                Accounting Officer


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