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


**Washington,
      D.C. 20549**








FORM
      10-QSB






**(Mark
      One)**


**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED September 30,
                2007**






**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   ̈





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




As
      of
      November 8, 2007, there were 9,472,636 shares of the registrant's common stock
      outstanding.




DOCUMENTS
      INCORPORATED BY REFERENCE: none





Transitional
      Small Business Disclosure Format    Yes |_| No
      |X|






-1-


**IBSG
      INTERNATIONAL, INC.**





**Part I.
      Financial Information**




Item
      1. Condensed Consolidated
      Financial Statements and Notes to Consolidated Financial
      Statements





(a)
            Consolidated
                Balance Sheet as of
                September 30, 2007
                (unaudited)





(b)
            Consolidated
                Statements of
                Operations for the Three and Nine Months ended September 30, 2007
                and 2006
                (unaudited)





(c)
            Consolidated
                Statements of Cash
                Flow for the Nine Months Ended September 30, 2007 and 2006
                (unaudited)





(d)
            Notes
                to Consolidated Financial
                Statements (unaudited)




Item
      2. Management's Discussion and
      Analysis of Financial Condition and Results
      of  Operations




Item
                3. Controls and
                Procedures




**Part
      II. Other
      Information**





Item
      1. Legal
      Proceedings




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




Item
      3. Defaults upon Senior
      Securities




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




Item
      5. Other
      Information




Item
      6.
      Exhibits




Signatures






-2-


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, 2006. In the opinion of management, all adjustments
      considered necessary for a fair presentation of the results of operations and
      financial position have been included and all such adjustments are of a normal
      recurring nature. Operating results for the quarter ended September 30, 2007
      are
      not necessarily indicative of the results that can be expected for the year
      ended December 31, 2007.








-3-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




**CONSOLIDATED
      FINANCIAL STATEMENTS**




**September
      30, 2007**


**(Unaudited)**









-4-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Consolidated
      Balance Sheet


(Unaudited)








ASSETS


CURRENT
                ASSETS
            
            **September
                30, 2007**Cash
            
            $
            3,281,388Accounts
                receivable net of allowance for bad debt
            
            
            23,014,831Prepaid
                expenses
            
            
            342,447Total
                Current Assets
            
            
            26,638,666FURNITURE,
                FIXTURES AND SOFTWARE, NET
            
            
            788,831OTHER
                ASSETSAccount
                receivable - long term
            
            
            1,802,324Deposits
            
            
            4,164Other
                assets
            
            
            234,900Deferred
                consulting services
            
            
            2,648,040Total
                Other Assets
            
            
            4,689,428TOTAL
                ASSETS
            
            $
            32,116,925




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








-5-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Consolidated
      Balance Sheet (Continued)


(Unaudited)







LIABILITIES
      AND STOCKHOLDERS’ EQUITY


CURRENT
                LIABILITIES
            
            **September
                30, 2007**Accounts
                payable and accrued expenses
            
            $
            776,065Accrued
                tax provision
            
            
            1,769,912Deferred
                revenue
            
            
            7,726,561Total
                Current Liabilities
            
            
            10,272,538COMMITMENTS
                AND CONTINGENCIESSTOCKHOLDERS’
                EQUITYCommon
                stock authorized 100,000,000 shares at $0.001par
                value; 9,456,636 shares issued and outstanding
            
            
            9,455Additional
                paid-in capital
            
            
            19,809,563Retained
                Earnings
            
            
            2,025,369Total
                Stockholders’ Equity
            
            
            21,844,387TOTAL
                LIABILTIES AND STOCKHOLDERS’ EQUITY
            
            $
            32,116,925




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






-6-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Consolidated
      Statements of Operations


(Unaudited)


**Three
                months ended**
              **September
                30,**
            
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****(restated)**
            
            
            
            
            
            **(restated)****Sales**
            
            $
            3,989,135
            
            
            $
            2,776,811
            
            
            $
            10,144,286
            
            
            $
            4,819,086**Cost
                of Sales**
            
            
            89,093
            
            
            
            68,042
            
            
            
            267,279
            
            
            
            204,129**Gross
                Profit**
            
            
            3,900,042
            
            
            
            2,708,769
            
            
            
            9,877,007
            
            
            
            4,614,957**Operating
                Expenses**Amortization
                and Depreciation
            
            
            6,792
            
            
            
            8,829
            
            
            
            21,611
            
            
            
            28,647Stock
                based compensation
            
            
            805,698
            
            
            
            595,292
            
            
            
            1,515,840
            
            
            
            1,243,213Bonus
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            25,000Bad
                debt expense
            
            
            -
            
            
            
            -
            
            
            
            286,000
            
            
            
            -Professional
                Fees
            
            
            207,010
            
            
            
            165,003
            
            
            
            470,140
            
            
            
            643,979Salary
                Expense
            
            
            261,315
            
            
            
            -
            
            
            
            735,810
            
            
            
            -General
                and Administrative
            
            
            1,109,650
            
            
            
            1,008,144
            
            
            
            1,426,013
            
            
            
            1,913,267**Total
                Operating Expenses**
            
            
            2,390,465
            
            
            
            1,777,268
            
            
            
            4,455,414
            
            
            
            3,854,106**Income
                from Operations**
            
            
            1,509,577
            
            
            
            931,501
            
            
            
            5,421,593
            
            
            
            760,851**Other
                Income (Expense)**Loss
                on debt settlement and warrants
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (470,897
            )Change
                in Fair Value of embedded options
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (18,683
            )Change
                in Fair Value of warrants
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (61,181
            )Liquidated
                damages expense
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Interest
                Income
            
            
            32,947
            
            
            
            -
            
            
            
            98,838
            
            
            
            -Tax
                Provision
            
            
            (722,195
            )
            
            
            (45,617
            )
            
            
            (2,166,585
            )
            
            
            (136,852
            )**Total
                Other Income (Expense), net**
            
            
            (689,248
            )
            
            
            (45,617
            )
            
            
            (2,067,747
            )
            
            
            (687,613
            )**Net
                Income**
            
            **$**
            **820,329**
            
            
            **$**
            **885,884**
            
            
            **$**
            **3,353,846**
            
            
            **$**
            **73,238****Net
                Income Per Share  Basic/Diluted**
            
            **$**
            **0.10**
            
            
            **$**
            **0.13**
            
            
            **$**
            **0.43**
            
            
            **$**
            **0.01****Weighted
                average number of shares outstanding**
              **during
                the period – Basic/Diluted**
            
            ****
            **7,845,131**
            
            
            ****
            **6,865,880**
            
            
            ****
            **7,740,306**
            
            
            ****
            **6,720,714**




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








-7-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**


Consolidated
      Statements of Cash Flows


(Unaudited)




**For
                the Nine Months Ended****September
                30,****2007**
            
            
            **2006****(restated)**CASH
                FLOW FROM OPERATING ACTIVITIES:Net
                Income
            
            $
            3,353,846
            
            
            $
            73,238Adjustments
                to reconcile net income (loss) to netcash
                used by operating activities:Recognition
                of deferred consulting fee
            
            
            892,996
            
            
            
            881,003Bad
                debt expense
            
            
            286,000
            
            
            
            -Amortization
                and depreciation expense
            
            
            288,890
            
            
            
            232,775Amortization
                of deferred interest
            
            
            (98,838
            )
            
            
            -Amortization
                of debt discount costs
            
            
            -
            
            
            
            335,677Equity
                instruments
            
            
            -
            
            
            
            20,000Loss
                on settlement of debt
            
            
            -
            
            
            
            470,897Stock
                issued for services 5
            
            
            775,599
            
            
            
            382,211Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (7,613,004
            )
            
            
            (1,041,621
            )Prepaids
            
            
            112,306
            
            
            
            122,957Decrease
                (increase) in other assets
            
            
            395,377
            
            
            
            (2,232,722
            )Increase
                (decrease) in accounts payable and accrued expenses
            
            
            (188,370
            )
            
            
            (663,336
            )Accrued
                interest payable
            
            
            -
            
            
            
            (55,425
            )Income
                tax provision
            
            
            1,769,912
            
            
            
            1,901,602Deferred
                revenue
            
            
            (467,900
            )
            
            
            414,402Net
                Cash Provided (Used) by Operating Activities
            
            
            (493,186
            )
            
            
            841,658CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of fixed assets
            
            
            (15,554
            )
            
            
            (26,480
            )Net
                Cash (Used) by Investing Activities
            
            
            (15,554
            )
            
            
            (26,480
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Capital
                Contribution
            
            
            25,000
            
            
            
            -Repurchase
                of stock from shareholders
            
            
            -
            
            
            
            (979,406
            )Payment
                of investor
            
            
            -
            
            
            
            (125,000
            )Payments
                on Note Payable
            
            
            -
            
            
            
            (250,000
            )Payments
                on capital leases
            
            
            (4,031
            )
            
            
            (8,712
            )Proceeds
                from stock subscription payable
            
            
            
            
            
            
            353,270Common
                stock issued for cash
            
            
            2,805,513
            
            
            
            18,533Net
                Cash Provided (Used) by Financing Activities
            
            
            2,826,482
            
            
            
            (991,315
            )NET
                INCREASE (DECREASE) IN CASH
            
            
            2,317,742
            
            
            
            (176,137
            )CASH
                AT BEGINNING OF PERIOD
            
            
            963,646
            
            
            
            1,297,448CASH
                AT END OF PERIOD
            
            $
            3,281,388
            
            
            $
            1,121,311




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









-8-


IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES


Consolidated
      Statements of Cash Flows (Continued)


(Unaudited)





**For
                the Nine Months Ended******
            
            **September
                30,****2007**
            ****
            ****
            **2006**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONInterest
                paid
            
            $
            -
            
            
            $
            -Income
                taxes paid
            
            $
            -
            
            
            $
            104,500SCHEDULE
                OF NON-CASH FINANCING ACTIVITIESCommon
                stock issued for services
            
            $
            758,810
            
            
            $
            -




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








-9-


**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notes
      to the Consolidated Financial Statements


September
      30, 2007





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, 2006 Annual Report
      on
      Form 10-KSB. Operating results for the nine months ended September 30, 2007
      are not necessarily indicative of the results that may be expected for the
      year
      ending December 31, 2007.





NOTE
      2
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




a.    Accounting
      Method




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





b.    Estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period.





c.    Cash
      and Cash Equivalents




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




NOTE
      2
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





d.    Revenue
      Recognition





**Revenue
      Recognition**





We
      derive
      our revenue from the sale of products and services that we classify into the
      following sources: (1) licenses, (2) post-contract customer support, (3)
      professional services.





*Background*





We
      sell
      our services and license our products thru master licensee arrangements with
      state operated Small Business Development Centers (“SBDC”) or their profit
      making equivalents, Fortune 1000 Corporations, Business Associations, Banking
      Institutions and International Economic Development Projects. These
      organizations represent our current domestic customer base, and focus on
      servicing or supporting small and medium sized enterprises (SME).
      Internationally the Company focuses its marketing efforts in offering the
      solution on a federal level and expands projects through the same types of
      entities with additional expansion through other federal government agencies
      in
      the area of procurement.   Satellite license are sold through the
      master license customers for a term of five (5) years domestically, four (4)
      years internationally. The first year is structured like the master license
      fee
      in that it is larger then the subsequent years license maintenance
      fees.  These licenses fall under the master license but, the company
      generally receives 90 to 95% of the year.  Our target market is
      comprised of emerging enterprises in need of a suite of Business-to-Business
      products or Web enabled capabilities, but lack the resources required for
      internal development or are focusing their resources on growth by outsourcing
      these capabilities. License arrangements currently produce the majority of
      our
      revenue. We utilize written contracts in the form of master satellite license
      arrangements as the means to establish the terms and conditions upon which
      our
      products and services are sold.





*Master/Satellite
      License Customer Characteristics*





As
      discussed above, Licensee’s represent our current customer base and generate the
      majority of our current revenue.  Licenses arrangements are
      characterized by the following;


o
            Master
                License arrangements typically represent larger value “multiple element”
                arrangements where a multi-year term license is delivered bundled
                with the
                first year of post contract support and certain professional services.
                Satellite licenses typically are less then a Master
                license.  Professional services are accounted for separately and
                are not considered essential to the functionality of the software.
                Master
                license holders can accept delivery either by electronic download
                to their
                system or by accessing their software residing on our system through
                the
                Internet. Only minimal installation and training are required. Revenue
                is
                recognized on master license or similar arrangements in accordance
                with
                the policies discussed below;


o
            the
                license element is recognized when the license becomes
                accessible,o
            the
                post-contract customer support element is recognized ratably over
                the
                support period,


o
            professional
                services are recognized as services are
                delivered.




*General*





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





As
      described below, significant management judgments and estimates are made and
      used to determine 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.








-10-


***IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES***




Notes
      to
      the Consolidated Financial Statements


September
      30, 2007





NOTE
      2
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




We
      recognize revenue on software related transactions on single element
      arrangements and on each element of a multiple element arrangement, when all
      of
      the following criteria are met:




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





2.
            The
                fee is fixed or determinable when we have a signed contract that
                states
                the agreed upon fee for our products and/or services, which specifies
                the
                related payment terms and conditions of the arrangement and it is
                not
                subject to refund or adjustment. We have standard payment terms,
                typically
                net 60 days, included in our
                contracts.





3.
            Delivery
                occurs,


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


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





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





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





For
      “multiple-element” arrangements we recognize revenue using the residual method
      in accordance with SOP 98-9. Under the residual method, a portion of the
      arrangement fee is allocated to the undelivered elements based on vendor
      specific objective evidence (“VSOE”) of the fair value of such undelivered
      elements, deferred and recognized over the initial service period, typically
      one
      year. The remaining portion of the arrangement fee is allocated to the delivered
      elements and recognized as revenue, provided all other revenue recognition
      criteria have been met. The undelivered elements in these arrangements typically
      consist of Post-contract Customer Support services and Professional Services.
      The VSOE for Post-contract Customer Support is based on the stated renewal
      rate
      in the license arrangements. The VSOE for Professional Services is based on
      the
      published rates for time and materials associated with such
      projects.





*License
      Revenue*





License
      revenues are primarily generated from the sale of master license agreements
      to
      SBDC’s (or their profit making equivalents) and other potential master
      licensees. License arrangements are typically sold with the first year of
      Post-contract Customer Support included. As such, the combination of these
      products and services represent a “multiple-element” arrangement for revenue
      recognition purposes.





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








-11-


***IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES***




Notes
      to
      the Consolidated Financial Statements


September
      30, 2007





NOTE
      2
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




d.
       Revenue Recognition (Continued)




*Post-contract
      Customer Support (“PCS”) Revenue*





Post-contract
      customer support includes technical support, maintenance, enhancements, upgrades
      and in some cases system access. License arrangements are typically sold with
      the first year of PCS included. The customers can also purchase annual PCS
      renewals over their arrangement term, which is typically 5 years domestically,
      4
      years internationally. Enhancements and upgrades are made available on a “when
      and if” basis and are rarely if ever based on specifically identified
      enhancements.





Our
      revenue recognition policy for multiple-element arrangements, as described
      above, generally results in 35% of the initial arrangement fee being allocated
      to PCS, the undelivered element at the time the license arrangement is entered
      into. The customers can also acquire additional annual PCS renewal contracts.
      The PCS renewal rate utilized in subsequent years is consistent with the 35%
      allocation to PCS in the initial year. Recognition of PCS revenue occurs ratably
      over the PCS service period, once all the recognition criteria discussed above
      are met.





*Professional
      Services Revenue*





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





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





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




*Factors
      for Government or Quasi-Government Agency Customers*





Most
      of
      our current customers are government or quasi-government agencies and are
      considered a low collection risk. However, due to the “slow pay” nature of these
      entities, payments could take as long as 12 months to be brought current,
      although management expects to reduce that time to no more than 9 months. As
      more fully discussed in SOP 97-2, the fees are determined to be fixed and
      determinable because;




·
            our
                software is not subject to obsolescence, any more than is typical
                for
                comparable software and we have not made concessions to effect
                collections,·
            our
                software is integral to the fundamental mission of our master license
                customers,


·
            our
                contracts are long term, generally greater then 12 months and collections
                on invoices are expected to be less than 12 months,·
            our
                contracts provide for normal collection terms which are substantially
                less
                than the term of our agreements and further permit the assessment
                of late
                fees and interest on delinquent
                balances,


·
            our
                contracts are with government entities, and by law, these entities
                are
                precluded from not disbursing funds that have been approved and allocated
                for the license agreement,·
            our
                contracts do not include any Fiscal Funding
                Clauses,


·
            our
                contracts do not include any Rights of Return or Cancellation Clauses,
                and·
            payment
                is not dependant on the number of SME’s
                engaged.






-12-






**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notes
      to
      the Consolidated Financial Statements


September
      30, 2007





d.
      Revenue Recognition (Continued)





*Deferred
      Revenue*





Deferred
      revenue results from fees billed to customers for which revenue has not yet
      been
      recognized. Deferred revenue generally represents PCS and training services
      not
      yet rendered and 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.




Allowance
      for Doubtful Accounts and Sales Returns




A
      considerable amount of judgment is required when we assessed the realization
      of
      accounts receivables, including assessing the probability of collection and
      the
      current credit-worthiness of each customer. If the financial condition of our
      customers were to deteriorate, resulting in an impairment of their ability
      to
      make payments, an additional provision for doubtful accounts might be required.
      A provision for doubtful accounts would initially be recorded based on our
      historical experience, and then adjusted at the end of each reporting period
      based on a detailed assessment of our accounts receivable and allowance for
      doubtful accounts. In estimating the provision for doubtful accounts, we
      consider (i) the type of entity (government, commercial, retail) and the aging
      of the accounts receivable; (ii) trends within and ratios involving the age
      of
      the accounts receivable; (iii) the customer mix in each of the aging categories
      and the nature of the receivable, such as whether it derives from license,
      professional services or maintenance revenue; (iv) our historical provision
      for
      doubtful accounts; (v) the credit worthiness of the customer; and (vi) the
      economic conditions of the customers industry, whether the entity is a national
      government, as well as general economic conditions, among other factors.
      National governments accounts are characterized as fully collectible but slow
      payers. The bulk of our historic client base is primarily composed of national
      governments; our periodic valuations do not indicate that an allowance for
      doubtful accounts was necessary at this time.




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




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






-13-






**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notes
      to
      the Consolidated Financial Statements


September
      30, 2007





NOTE
      2
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




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.





Our
      accounts receivable are as follows at September 30, 2007:





Current
                – Account ReceivableDepartment
                of Trade and Industry
            
            $
            11,291,993Kenya
            
            
            7,800,000$
            19,091,993Other
                Receivables
            
            
            4,208,838Less
                Allowance for Bad Debts
            
            
            (286,000)Total
                Current Account Receivable
            
            $
            23,014,831Accounts
                Receivable - Long termLong
                term account receivable  (net of discount)
            
            $
            1,802,324Total
                Long term receivable
            
            $
            1,802,324




We
      recognized revenue of the following amounts for the three months ended September
      30, 2007:




RevenueDepartment
                of Trade and Industry
            
            $
            1,058,748Kenya
            
            
            2,772,732Other
                Revenue
            
            
            157,655Total
                Recognized Revenue
            
            $
            3,989,135





Deferred
      revenue consisted of the following at September 30, 2007:




Department
                of Trade and Industry
            
            $
            3,373,236Kenya
            
            
            1,312,502Other
                Deferred Revenue
            
            
            3,040,823Total
                Deferred Revenue
            
            $
            7,726,561








Listed
      below is an example of the future values of some of the master
      agreements.





**Sample
      Contracts Table**





**Contract**
            **Number
                of Satellites**
            **Total
                Value (4 or 5 years)****
            **Number
                of SMEs in Database**Department
                of Trade and Industry
            3
            US
                $13.65 million
            2.1
                millionKenya
            5
            US
                $8.75 million
            1.1
                million


**
      Total
      estimated value for licenses and license maintenance for four years
      internationally, five years domestically.  No subscription revenue
      included in figures.







-14-






**IBSG
      INTERNATIONAL, INC. AND SUBSIDIARIES**




Notes
      to
      the Consolidated Financial Statements


September
      30, 2007





NOTE
      2
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)




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
      - EQUITY ISSUANCES





In
      February 2007, the Company retired 17,864 shares of common stock valued at
      $0.18.





In
      May
      2007 the Company issued 20,000 shares of common stock for cash valued at
      $1.50.





In
      May
      2007 the Company issued 12,500 shares of common stock for service valued at
      $2.18.





In
      May
      2007 the Company issued 2,000 shares of common stock for service valued at
      $2.18.





In
      May
      2007 the Company issued 1,562,500 shares of common stock for cash investment
      valued at $1.40.





In
      June
      2007 the Company issued 12,000 shares of common stock valued at
      $1.40.





In
      June
      2007 the Company issued 50,284 shares of common stock valued at
      $1.75.





In
      June
      2007 the Company issued 20,000 shares of common stock for service valued at
      $1.79.





In
      June
      2007 the Company issued 357,143 shares of common stock for cash investment
      valued at $1.40.





In
      July
      2007 the Company issued 384,111 shares of stock for the members of the board
      of
      directors and officers valued at $1.80.





NOTE
      4 –
      RESTATEMENT


As
          discussed below, certain restatements for filing with the SEC are in process
          for
          the quarters ended March 31, 2007, June 30, 2007 and for the year ended
          December
          31, 2006 and December 31, 2005. The net effect of the restatements is being
          recorded as of September 30, 2007 other assets, deferred revenue, accrued
          tax
          provision, tax expense and revenue.
  These
          amendments will reflect certain adjustments to revenue and deferred revenue.
          Previously recognized revenues associated with certain older contracts
          are
          required to be restated and deferred until such time as all SOP 97-2
          requirements have been satisfied.
  The
          effect at September 30, 2007 is to change beginning balances at January
          1, 2007
          of the following accounts:
  For
                        the 9 months endedSeptember
                        30, 2006
                    
                    
                    For
                        the 3 months endedSeptember
                        30, 2006As
                        Originally Reported
                    
                    
                    As
                        Restated
                    
                    
                    Difference
                    
                    
                    As
                        Originally Reported
                    
                    
                    As
                        Restated
                    
                    
                    DifferenceRevenue
                    
                    $
                    7,516,378
                    
                    
                    $
                    4,819,086
                    
                    
                    $
                    (2,697,292
                    )
                    
                    $
                    2,798,686
                    
                    
                    $
                    2,776,811
                    
                    
                    $
                    (21,875
                    )Net
                        Income
                    
                    $
                    1,749,180
                    
                    
                    
                    73,238
                    
                    
                    $
                    (1,675,942
                    )
                    
                    
                    484,918
                    
                    
                    
                    885,884
                    
                    
                    $
                    400,966Income
                        Per Share
                    
                    $
                    0.26
                    
                    
                    $
                    0.01
                    
                    
                    $
                    (0.25
                    )
                    
                    $
                    0.07
                    
                    
                    $
                    0.13
                    
                    
                    $
                    0.06


-15-


**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 2006 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. is a holding company for four software subsidiaries:
      Intelligent Business Systems Group, Inc. (IBSG), a provider of turn-key digital
      service center software; Secure Blue, Inc., a Sarbanes-Oxley and security
      software solution provider, and Intelligent Business Systems Development (IBSD),
      a software development, maintenance and data storage company and; IBSGI UK,
      LTD
      (formally A-Division IT), a consultant company focused on development of IT
      projects for multi-national corporations.





IBSGI
      UK,
      LTD. (IBSGI UK), a United Kingdom based subsidiary, provides business
      development and support to IBSG International’s (IBSGI) international
      projects.  IBSGI UK maintains relationships with several international
      government officials at the ministry/secretary level as well as international
      corporations’ offset programs and provides IT projects for these
      corporations.  IBSGI UK is engaged in international business
      development and consultancy in the Technology sector. IBSGI UK’s participation
      in e-commerce platform (BizWorld Pro, copyrighted and trade mark protected)
      projects for Small-Midsized Enterprises [SMEs] internationally in countries
      beyond South Africa.  IBSGI’s relationship with IBSGI UK has already
      brought the South African project and opportunities with similar projects in
      Africa and Europe (EU and UK) and India.





IBS Group
      offers BizWorld Pro as a solution to enhance the operating efficiency and create
      revenue for State Small Business Development Centers (or their profit making
      equivalents), business associations (e.g., Chambers of Commerce) and Fortune
      1000 corporations through the licensing of its unique turnkey digital service
      center software, 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.





Secure
      Blue, Inc. provides, in management’s opinion, an economical Sarbanes-Oxley (SOX)
      compliance and security software suite, 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.





IBSD,
      Inc. provides ongoing support of our other subsidiaries, IBS Group, Secure
      Blue, and IBSGI UK. The company provides development, system support and secure
      data storage, and maintains offices in the US and India, where its current
      offshore development and support team is located.





As
      software providers, system integrators and Application Service Providers, IBSG,
      Inc. and Secure Blue, Inc. generate revenue from license sales, system
      modifications, systems support, and a percentage of monthly customer fees if
      and
      when a license is sold.. The typical IBSG/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).








-16-


**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.




We
      derive
      our revenue from the sale of products and services that we classify into the
      following sources: (1) licenses, (2) post-contract customer support, (3)
      professional services.





*Background*





We
      sell
      our services and license our products thru master licensee arrangements with
      state operated Small Business Development Centers (“SBDC”) or their profit
      making equivalents, Fortune 1000 Corporations, Business Associations, Banking
      Institutions and International Economic Development Projects. These
      organizations represent our current domestic customer base, and focus on
      servicing or supporting small and medium sized enterprises (SME).
      Internationally the Company focuses its marketing efforts in offering the
      solution on a federal level and expands projects through the same types of
      entities with additional expansion through other federal government agencies
      in
      the area of procurement.   Satellite license are sold through the
      master license customers for a term of five (5) years domestically, four (4)
      years internationally. The first year is structured like the master license
      fee
      in that it is larger then the subsequent years license maintenance
      fees.  These licenses fall under the master license but, the company
      generally receives 90 to 95% of the fees in the first year.  Our
      target market is comprised of emerging enterprises in need of a suite of
      Business-to-Business products or Web enabled capabilities, but lack the
      resources required for internal development or are focusing their resources
      on
      growth by outsourcing these capabilities. License arrangements currently produce
      the majority of our revenue. We utilize written contracts in the form of
      master/satellite license arrangements as the means to establish the terms and
      conditions upon which our products and services are sold.




*Master/Satellite
      License Customer Characteristics*





As
      discussed above, Licensee’s represent our current customer base and generate the
      majority of our current revenue.  Licenses arrangements are
      characterized by the following;


o
            Master
                License arrangements typically represent larger value “multiple element”
                arrangements where a multi-year term license is delivered bundled
                with the
                first year of post contract support and certain professional services.
                Satellite licenses typically cost less then a Master
                license.  Professional services are accounted for separately and
                are not considered essential to the functionality of the software.
                Master
                license holders can accept delivery either by electronic download
                to their
                system or by accessing their software residing on our system through
                the
                Internet. Only minimal installation and training are required. Revenue
                is
                recognized on master license or similar arrangements in accordance
                with
                the policies discussed below;


o
            the
                license element is recognized when the license becomes
                accessible,o
            the
                post-contract customer support element is recognized ratably over
                the
                support period,


o
            professional
                services are recognized as services are
                delivered.











-17-






*General*





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





As
      described below, significant management judgments and estimates are made and
      used to determine the revenue recognized in any accounting period. Material
      differences may result in the amount and timing of our revenue for any period
      if
      our management made different judgments or utilized different
      estimates.





We
      recognize revenue on software related transactions on single element
      arrangements and on each element of a multiple element arrangement, when all
      of
      the following criteria are met:


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





2.
            The
                fee is fixed or determinable when we have a signed contract that
                states
                the agreed upon fee for our products and/or services, which specifies
                the
                related payment terms and conditions of the arrangement and it is
                not
                subject to refund or adjustment. We have standard payment terms,
                typically
                net 60 days, included in our
                contracts.





3.
            Delivery
                occurs,


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


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





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





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





For
      “multiple-element” arrangements we recognize revenue using the residual method
      in accordance with SOP 98-9. Under the residual method, a portion of the
      arrangement fee is allocated to the undelivered elements based on vendor
      specific objective evidence (“VSOE”) of the fair value of such undelivered
      elements, deferred and recognized over the initial service period, typically
      one
      year. The remaining portion of the arrangement fee is allocated to the delivered
      elements and recognized as revenue, provided all other revenue recognition
      criteria have been met. The undelivered elements in these arrangements typically
      consist of Post-contract Customer Support services and Professional Services.
      The VSOE for Post-contract Customer Support is based on the stated renewal
      rate
      in the license arrangements. The VSOE for Professional Services is based on
      the
      published rates for time and materials associated with such
      projects.





*License
      Revenue*





License
      revenues are primarily generated from the sale of master license agreements
      to
      SBDC’s (or their profit making equivalents) and other potential master
      licensees. License arrangements are typically sold with the first year of
      Post-contract Customer Support included. As such, the combination of these
      products and services represent a “multiple-element” arrangement for revenue
      recognition purposes.





Our
      revenue recognition policy for multiple-element arrangement, as described above,
      generally results in 65% of the first year arrangement fee being allocated
      to
      license revenue, the delivered element. Subsequent years are treated in a
      similar manner.  Recognition of license revenue occurs in the first
      month, once all the recognition criteria discussed above are met.






-18-






*Post-contract
      Customer Support (“PCS”) Revenue*





Post-contract
      customer support includes technical support, maintenance, enhancements, upgrades
      and in some cases system access. License arrangements are typically sold with
      the first year of PCS included. The customers can also purchase annual PCS
      renewals over their arrangement term, which is typically 5 years domestically,
      4
      years internationally. Enhancements and upgrades are made available on a “when
      and if” basis and are rarely if ever based on specifically identified
      enhancements.





Our
      revenue recognition policy for multiple-element arrangements, as described
      above, generally results in 35% of the initial arrangement fee being allocated
      to PCS, the undelivered element at the time the license arrangement is entered
      into. The customers can also acquire additional annual PCS renewal contracts.
      The PCS renewal rate utilized in subsequent years is consistent with the 35%
      allocation to PCS in the initial year. Recognition of PCS revenue occurs ratably
      over the PCS service period, once all the recognition criteria discussed above
      are met.





*Professional
      Services Revenue*





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





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





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





*Factors
      for Government or Quasi-Government Agency Customers*





Most
      of
      our current customers are government or quasi-government agencies and are
      considered a low collection risk and irrevocable due to the budgetary nature
      of
      governments. However, due to the “slow pay” nature of these entities, payments
      could take as long as 12 months to be brought current, although management
      expects to reduce that time to no more than 9 months. As more fully discussed
      in
      SOP 97-2, the fees are determined to be fixed and determinable
      because;




·
            our
                software is not subject to obsolescence, any more than is typical
                for
                comparable software and we have not made concessions to effect
                collections,·
            our
                software is integral to the fundamental mission of our master and
                their
                satellite license customers,


·
            our
                contracts are long term, greater then 12 months, and collections
                on
                invoices are expected to be less than 12 months,·
            our
                contracts provide for normal collection terms which are substantially
                less
                than the term of our agreements and further permit the assessment
                of late
                fees and interest on delinquent
                balances,


·
            our
                contracts are with government entities, and by law, these entities
                are
                precluded from not disbursing funds that have been approved and allocated
                for the license agreement,·
            our
                contracts do not include any Fiscal Funding
                Clauses,


·
            our
                contracts do not include any Rights of Return or Cancellation Clauses,
                and·
            payment
                is not dependant on the number of SME’s
                engaged.




*Deferred
      Revenue*




Deferred
      revenue result from fees billed to customers for which revenue has not yet
      been
      recognized. Deferred revenue generally represents PCS and training services
      not
      yet rendered and 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.




-19-






**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 or companies that require tracking of
      sensitive files.  All current and projected revenues for the Company
      are associated with the digital commerce platform, BizWorld Pro and the
      recurring revenues projected from both license revenues and on going monthly
      subscription fees from small to mid sized enterprises.  The projected
      market size for BizWorld Pro is greater than $15 billion annually.  No
      assurances can be made that such market shall be realized or result in
      profitability.




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




**Small
      Business Development Centers (SBDCS):**


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. Many of the SBDCs have a profit making equivalent or are
      partners in a profit making entity.  We currently have a license
      agreement with 11 such entities.




**Fortune
      1000 Corporations:**


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




**Government
      Agencies**


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





**Business
      Associations:**


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.





**Banking
      Institutions**


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




**Economic
      Development Projects**


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






-20-






**Foreign
      Markets**


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





**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, both in the US and abroad, must be SOX compliant
      for those records dealing with that business. This market represents a projected
      value of $3-$4 billion.  Currently in the US there are an estimated
      10,000 small cap companies and over 10,000 private companies doing business
      with
      public companies.  No assurances can be made that such market shall be
      realized or result in profitability.





**International
      Markets**


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




**Sales
      & Market Strategy**


Intelligent
      Business Systems Group, Inc. is focused on the US markets and it’s current
      marketing efforts primarily consists of “word of mouth” referrals from existing
      or potential customers, targeted prospect awareness campaigns, various
      conventions and trade shows and cold calling entities with resources and
      marketing research. The most effective and powerful marketing tool is the
      demonstration of the system and its comprehensive features. 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 publicly traded
      companies. These include investor relations firms, law firms, accountancy firms,
      banks, compliance consultancies, corporate finance advisors, venture capital
      companies and other strategically important organizations. We are approaching
      these potential channel partners individually and demonstrating SOX Pro live
      online to create a dialogue leading to long-term business partnerships. We
      will
      continue to focus our sales activity on third-party channels until we are
      satisfied we can achieve significant traction in the market place. Our
      third-party channels will attack the end-user market through their existing
      client base.





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




**Marketing,
      Sales and Support**


We
      market
      our products primarily through direct contact of potential customers, referrals
      from existing customers or potential customers and conferences that are market
      specific. The key to the marketing of the various products is the ability under
      the BizWorld product to enable customers to act as channel partners through
      the
      ability to sell sub-licenses of the system and provide revenue generating
      digital service center to their customers. This makes us dependent on the
      efforts of our customers since we have no direct way to communicate with those
      parties which may be potential ultimate users of the BizWorld
      product.




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





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





**Customer
      Support**


Our
      management believes that strong customer support is crucial to both the initial
      marketing of its products and maintenance of customer satisfaction, which in
      turn will enhance our reputation and generate repeat orders. In addition, we
      believe that customer interaction and feedback involved in our ongoing support
      functions provide us with information on market trends and customer requirements
      that is critical to future product development 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 virtual trainer and 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. The virtual
      trainer describes the purpose of each page to the end user, how to complete
      the
      page by animating the page as a window in a window and makes suggestions on
      where to go to next in the system.  This should provide for minimum
      end user confusion which statistically makes up the majority of on-line help
      calls (Microsoft 2005; Oracle 2006).




Secure
      Blue believes that effective and speedy customer support is crucial to the
      long-term success of SOX Pro. As a mission-critical application, SOX Pro must
      be
      totally reliable and the support available must be of the highest order. We
      will
      be including 24/7 support as an integral part of the SOX Pro package with an
      ongoing annual fee of 35% of the first years license cost. Our team based in
      Florida will provide technical support for end users and channel
      partners






-21-






**Research
      and Development**


We
      believe that our success will depend in large part on our ability to maintain
      and enhance our current product lines, develop new products, maintain
      technological competitiveness and meet an expanding range of customer
      requirements. Our management constantly requests and receives comments on
      desired functionality or system changes from not only the company's customers
      but the customer's, customer. Our management also intends to hold focus groups
      taking a sample population of customers and discussing in an open forum the
      potential revisions of the various systems.




**Competition**


Our
      management believes that we are the leading provider of digital commerce and
      management systems for small and medium businesses provided over the internet.
      However our products compete against a variety of individual software programs
      designed to provide similar functions for small and medium sized business
      users.  Additionally, many digital commerce solutions are available to
      small businesses through established internet portals such as
      Yahoo.  Many internet hosting providers’ help their customers set up
      e-commerce sites and provide software for such sites.  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 corporation. Secure
      Blue has a major cost advantage over the competition and is a more comprehensive
      SOX solution. We have built the solution on a comprehensive and proven security
      software solution and added sophisticated enhancements such as the PDA access
      for compliant and sub compliant officers to have access to data on activity
      of
      sensitive information. This provides our customer with the required base
      criteria of SOX which is a secure network with sophisticated functionality
      of
      SOX specific monitoring. The majority of the competition has established
      distribution infrastructures built on a range of existing and complementary
      products. We are confident that we can leverage the success of the other
      subsidiary, IBS Group, and their network. Once our third-party channel network
      is established we will focus on attempting take a significant share of the
      small-mid cap company market.





**Results
      of Operations for the Three and Nine Months ended September 30, 2007 and
      2006**




The
      Company reflected an increase in sales revenues for the three months ended
      September 30, 2007 to $3,989,135 compared to sales revenues for the three months
      ended September 30, 2006 of $2,776,811, an increase of $1,212,324. The company
      also recorded higher sales revenues for the nine months ended September 30,
      2007
      of $10,144,286 compared to September 30, 2006 sales revenues of $4,819,086.
      The
      contract values were higher in 2007. The Company had deferred revenues for
      the nine months ended September 30, 2007 of $7,726,561(deferred pending
      recognition based on revenue recognition policies previously stated;
      See Note 2 of the Financial Statements).




**Operating
      Expenses for the Three and Nine Months ended September 30, 2007 and
      2006**




The
      Company had operating expenses of $2,390,465 for the three months ended
      September 30, 2007 compared to operating expenses of $1,777,268 for the three
      months ended September 30, 2006, an increase of $613,197.  This
      increase is a reflection of stock based compensation for the three months ended
      September 30,2007. The Company had an operating profit for the three months
      ended September 30, 2007 of $1,509,577 as compared to $931,501 for the three
      months ending September 30, 2006.   Operating profits for the
      nine months ended September 30, 2007 was $5,421,593 as compared to operating
      profits of $760,851 for the nine months ended September 30,
      2006.  This increase of $4,660,742 was due primary from the additional
      sales for 2007.




**Other
      Expense for the Three and Nine Months ended September 30, 2007 and
      2006**





The
      company had other expenses for the three months ended September 30, 2007 of
      $689,248 compared to other expenses of 45,617 for the three
      months ended September 30, 2006. The increase in other expenses for 2007 was
      the
      accrual of additional taxes.  The Net Income reported for the three
      months ending September 30, 2007 was $820,329 as compared to net income of
      $885,884 for the three months ending September 30, 2006.  The company
      Net Income for the nine months ended September 30, 2007 was $3,353,846 as
      compared to $73,238 for September 30, 2006.






-22-






**Liquidity
      and Capital Resources**




We
      believe the proceeds from the receivables and the reserves will generate
      sufficient cash in assisting with the operating needs of the company. The
      company is continuing to inquire into new investments to provide for further
      research and development capital and assisting further acquisitions over the
      next twelve months.




Our
      current accounts receivable are as follows at September 30, 2007:





Department
                of Trade and Industry
            
            $
            11,291,993Kenya
            
            
            7,800,000Other
                Receivables
            
            
            4,208,838$
            23,300,831Allowance
                for bad debt
            
            
            (286,000)Current
                Accounts Receivable, net of bad debt
            
            $
            23,014,831




Management
      expects to close an offering of $2,500,000 securities in which the Company
      shall
      use the proceeds to fund its business plan. All funds raised will go into
      operation.




**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







-23-






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





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





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




A
      considerable amount of judgment is required when we assessed the realization
      of
      accounts receivables, including assessing the probability of collection and
      the
      current credit-worthiness of each customer. If the financial condition of our
      customers were to deteriorate, resulting in an impairment of their ability
      to
      make payments, an additional provision for doubtful accounts might be required.
      A provision for doubtful accounts would initially be recorded based on our
      historical experience, and then adjusted at the end of each reporting period
      based on a detailed assessment of our accounts receivable and allowance for
      doubtful accounts. In estimating the provision for doubtful accounts, we
      consider (i) the type of entity (government, commercial, retail) and the aging
      of the accounts receivable; (ii) trends within and ratios involving the age
      of
      the accounts receivable; (iii) the customer mix in each of the aging categories
      and the nature of the receivable, such as whether it derives from license,
      professional services or maintenance revenue; (iv) our historical provision
      for
      doubtful accounts; (v) the credit worthiness of the customer; and (vi) the
      economic conditions of the customers industry, whether the entity is a national
      government, as well as general economic conditions, among other factors.
      National governments accounts are characterized as fully collectible but slow
      payers. The bulk of our historic client base is primarily composed of national
      governments; our periodic valuations do not indicate that an allowance for
      doubtful accounts was necessary at this time.





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




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




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




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








**ITEM
      3. CONTROLS AND PROCEDURES**




a)
            Evaluation
                of Disclosure Controls and
                Procedures.





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, we evaluated the effectiveness
      of
      the design and operation of our disclosure controls and procedures (as such
      term
      is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
      “Exchange Act”). Disclosure controls and procedures are the controls and other
      procedures that we designed to ensure that we record, process, summarize and
      report in a timely manner the information we must disclose in reports that
      we
      file with or submit to the Securities and Exchange Commission under the Exchange
      Act. Based on this evaluation, our Chief Executive Officer and our Chief
      Financial Officer concluded that our disclosure controls and procedures were
      effective as of the end of the period covered by this report.





Disclosure
      controls and procedures are controls and procedures that are designed to ensure
      that information required to be disclosed in our reports filed or submitted
      under the Securities Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in our reports filed under the Exchange Act is
      accumulated and communicated to management, including our principal executive
      officer and our principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.





b)
            Changes
                in Internal Control over Financial
                Reporting




During
      the Quarter ended September 30, 2007, there was no change in our internal
      control over financial reporting (as such term is defined in Rule 13a-15(f)
      under the Exchange Act) that has materially affected, or is reasonably likely
      to
      materially affect, our internal control over financial reporting.







-24-






**PART
        II**
  **OTHER
        INFORMATION**
  
 **Item
        1.                      Legal
        Proceedings**
 
 There
        are
        no material currently pending legal proceedings to which the Company is a
        party
        and, to the Company's knowledge, no proceedings are contemplated against
        the
        Company.
 
 **Item
        2.                      Unregistered
        Sales of Securities and Use of Proceeds**
 
 There
        were no changes in securities or purchase or sales of
        securities****during the period ended September 30,
        2007.
 
 **Item
        3.                      Defaults
        upon Senior Securities**
 
 There
        were no defaults upon senior securities during the period ended September
        30,
        2007.
  **Item
        4.                      Submission
        of Matters to a Vote of Security Holders**
  There
        were no matters submitted to the vote of securities holders during the period
        ended September 30, 2007.
 
 **Item
        5.                      Other
        Information:**
 
 There
        is
        no information with respect to which information is not otherwise called
        for by
        this form.
  **Item
        6.         
Exhibits**





A.
                Exhibits:




31.1
            Certification
                of Chief Executive
                Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act31.2
            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.






-25-







**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(b) of the Securities Exchange Act of
      1934, the registrant caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized, in the City of Celebration, Florida,
      on
      November 16, 2007.






**IBSG
                INTERNATIONAL, INC.**Date: November
                16, 2007
            By:
            /s/ Michael
                RiversMichael
                RiversPresident,
                Chief Executive Officer





**IBSG
                INTERNATIONAL, INC.**Date: November
                16, 2007
            By:
            /s/ Geoffrey
                BirchGeoffrey
                BirchPrincipal
                Accounting Officer







-26-